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Auditing Multiple Choice Questions (MCQS) Page-7. These Mcqs are very helpful for preparation of various posts i.e. Senior Auditor, Junior Auditor,Accountant. These Mcqs are also Important for Punjab Public Service Commission, National Testing Service, Federal Public Service Commission Tests/examinations.
AUDIT PREPARATION
1. WHICH OF THE FOLLOWING AUDITING ASSURANCE STANDARD DEALS WITH AUDIT PLANNING?
A) AAS7 B) AAS8 C) AAS9 D) AAS3
2. AUDIT PROGRAMME IS PREPARED BY
A) THE AUDITOR
B) THE CLIENT
C) THE AUDIT ASSISTANTS
D) THE AUDITOR AND HIS AUDIT ASSISTANTS
3. THE WORKING PAPERS WHICH AUDITOR PREPARES FOR FINANCIAL STATEMENTS AUDIT ARE _
A) EVIDENCE FOR AUDIT CONCLUSIONS
B) OWNED BY THE CLIENT
C) OWNED BY THE AUDITOR
D) RETAINED IN AUDITOR’S OFFICE UNTIL A CHANGE IN AUDITORS
4. THE QUANTITY OF AUDIT WORKING PAPERS COMPLIED ON ENGAGEMENT WOULD MOST BE AFFECTED BY
A) MANAGEMENT’S INTEGRITY
B) AUDITOR’S EXPERIENCE AND PROFESSIONAL JUDGMENT
C) AUDITOR’S QUALIFICATION
D) CONTROL RISK
5. WHICH OF THE FOLLOWING BEST DESCRIBES THE PRIMARY PURPOSE OF AUDIT PROGRAMME PREPARATION?
A) TO DETECT ERRORS OR FRAUD.
B) TO COMPLY WITH GAAP
C) TO GATHER SUFFICIENT APPROPRIATE EVIDENCE
D) TO ASSESS AUDIT RISK
6. WHICH OF THE FOLLOWING IS NOT AN ADVANTAGE OF THE PREPARATION OF WORKING PAPER?
A) TO PROVIDE A BASIS FOR REVIEW OF AUDIT WORK
B) TO PROVIDE A BASIS FOR SUBSEQUENT AUDITS
C) TO ENSURE AUDIT WORK IS BEING CARRIED OUT AS PER PROGRAMME
D) TO PROVIDE A GUIDE FOR ADVISING ANOTHER CLIENT ON SIMILAR ISSUES
6. WHICH OF THE FOLLOWING IS NOT AN ADVANTAGE OF THE PREPARATION OF WORKING PAPER?
A) TO PROVIDE A BASIS FOR REVIEW OF AUDIT WORK
B) TO PROVIDE A BASIS FOR SUBSEQUENT AUDITS
C) TO ENSURE AUDIT WORK IS BEING CARRIED OUT AS PER PROGRAMME
D) TO PROVIDE A GUIDE FOR ADVISING ANOTHER CLIENT ON SIMILAR ISSUES
8. FOR WHAT MINIMUM PERIOD SHOULD AUDIT WORKING PAPERS BE RETAINED BY AUDIT FIRM?
A) FOR THE TIME PERIOD THE ENTITY REMAINS A CLIENT OF THE AUDIT FIRM.
A) THE AUDITOR
B) THE CLIENT
C) THE AUDIT ASSISTANTS
D) THE AUDITOR AND HIS AUDIT ASSISTANTS
3. THE WORKING PAPERS WHICH AUDITOR PREPARES FOR FINANCIAL STATEMENTS AUDIT ARE _
A) EVIDENCE FOR AUDIT CONCLUSIONS
B) OWNED BY THE CLIENT
C) OWNED BY THE AUDITOR
D) RETAINED IN AUDITOR’S OFFICE UNTIL A CHANGE IN AUDITORS
4. THE QUANTITY OF AUDIT WORKING PAPERS COMPLIED ON ENGAGEMENT WOULD MOST BE AFFECTED BY
A) MANAGEMENT’S INTEGRITY
B) AUDITOR’S EXPERIENCE AND PROFESSIONAL JUDGMENT
C) AUDITOR’S QUALIFICATION
D) CONTROL RISK
5. WHICH OF THE FOLLOWING BEST DESCRIBES THE PRIMARY PURPOSE OF AUDIT PROGRAMME PREPARATION?
A) TO DETECT ERRORS OR FRAUD.
B) TO COMPLY WITH GAAP
C) TO GATHER SUFFICIENT APPROPRIATE EVIDENCE
D) TO ASSESS AUDIT RISK
6. WHICH OF THE FOLLOWING IS NOT AN ADVANTAGE OF THE PREPARATION OF WORKING PAPER?
A) TO PROVIDE A BASIS FOR REVIEW OF AUDIT WORK
B) TO PROVIDE A BASIS FOR SUBSEQUENT AUDITS
C) TO ENSURE AUDIT WORK IS BEING CARRIED OUT AS PER PROGRAMME
D) TO PROVIDE A GUIDE FOR ADVISING ANOTHER CLIENT ON SIMILAR ISSUES
6. WHICH OF THE FOLLOWING IS NOT AN ADVANTAGE OF THE PREPARATION OF WORKING PAPER?
A) TO PROVIDE A BASIS FOR REVIEW OF AUDIT WORK
B) TO PROVIDE A BASIS FOR SUBSEQUENT AUDITS
C) TO ENSURE AUDIT WORK IS BEING CARRIED OUT AS PER PROGRAMME
D) TO PROVIDE A GUIDE FOR ADVISING ANOTHER CLIENT ON SIMILAR ISSUES
8. FOR WHAT MINIMUM PERIOD SHOULD AUDIT WORKING PAPERS BE RETAINED BY AUDIT FIRM?
A) FOR THE TIME PERIOD THE ENTITY REMAINS A CLIENT OF THE AUDIT FIRM.
B) FOR A PERIOD OF TEN YEARS
C) FOR A PERIOD AUDITOR OPINES THEM TO BE USEFUL IN SERVICING THE CLIENT
D) FOR THE PERIOD THE AUDIT FIRM IS IN EXISTENCE.
9. WHICH OF THE FOLLOWING FACTORS WOULD LEAST LIKELY AFFECT THE QUANTITY AND CONTENT OF AN AUDITOR’S WORKING PAPERS
A) THE ASSESSED LEVEL OF CONTROL RISK
B) THE POSSIBILITY OF PEER REVIEW
C) THE NATURE OF AUDITOR’S REPORT
D) THE CONTENT OF MANAGEMENT REPRESENTATION LETTER
10. WHICH OF THE FOLLOWING STATEMENT IS TRUE REGARDING AN AUDITOR’S WORKING PAPERS?
A) THEY DOCUMENT THE LEVEL OF INDEPENDENCE MAINTAINED BY THE AUDITOR
B) THEY SHOULD BE CONSIDERED AS THE PRINCIPLE SUPPORT FOR THE AUDITOR’S REPORT
C) THEY SHOULD NOT CONTAIN DETAILS REGARDING WEAKNESSES IN THE INTERNAL CONTROL SYSTEM
D) THEY HELP THE AUDITOR TO MONITOR THE EFFECTIVENESS OF THE AUDIT FIRM’S QUALITY CONTROL
11. WHICH OF THE FOLLOWING STATEMENT BEST DESCRIBES THE UNDERSTANDING WITH RESPECT TO?
OWNERSHIP AND CUSTODY OF WORKING PAPERS PREPARED BY AN AUDITOR?
A) THE WORKING PAPERS MAY BE OBTAINED BY THIRD PARTIES WHEN THEY APPEAR TO BE RELEVANT TO
ISSUES RAISED IN LITIGATION
B) THE SAFE CUSTODY OF WORKING PAPERS IS THE RESPONSIBILITY OF CLIENT, IF KEPT AT HIS PREMISES
C) THE WORKING PAPERS MUST BE RETAINED BY AN AUDIT FIRM FOR A PERIOD OF 10 YEARS
D) SUCCESSOR AUDITORS MAY HAVE ACCESS TO WORKING PAPERS OF THE PREDECESSOR AUDITORS. THE
APPROVAL OF CLIENT IS NOT REQUIRED.
12. THE CURRENT FILE OF THE AUDITOR’S WORKING PAPERS, GENERAL Y, SHOULD INCLUDE
A) A FLOWCHART OF THE INTERNAL CONTROLS
B) ORGANIZATION CHARTS
C) A COPY OF FINANCIAL STATEMENTS
D) COPIES OF BOND AND DEBENTURES
13. KNOWLEDGE OF THE ENTITY’S BUSINESS DOES NOT HELP THE AUDITOR TO
A) REDUCE INHERENT RISK
B) IDENTIFY PROBLEM AREAS
C) EVALUATE REASONABLENESS OF ESTIMATES
D) EVALUATE APPROPRIATES OF GAAP.
14. THE MAIN ADVANTAGE OF USING STATISTICAL SAMPLING TECHNIQUES IS THAT SUCH TECHNIQUES:
A) MATHEMATICALLY MEASURE RISK
B) ELIMINATE THE NEED FOR JUDGMENTAL SAMPLING
C) DEFINES THE VALUES OF TOLERABLE ERROR
D) ALL OF THE THEM.
15. WHICH OF THE FOLLOWING METHODS OF SAMPLE SELECTION IS LEAST SUITABLE FOR EXTRAPOLATING RESULTS TO THE POPULATION?
A) SYSTEMATIC SAMPLING
B) RANDOM SAMPLING
C) HAPHAZARD SAMPLING
D) NONE
16. WHICH OF THE FOLLOWING STATEMENTS IS CORRECT?
A) LOWER THE SAMPLING RISK GREATER THE SAMPLE SIZE
B) SMALLER THE TOLERABLE ERROR, GREATER THE SAMPLE SIZE
C) LOWER THE EXPECTED ERROR, SMALLER THE SAMPLE SIZE D) ALL ARE CORRECT
17. WHICH OF THE FOLLOWING FEATURES IS MOST IMPORTANT FOR RANDOM BASED SELECTION?
A) SAMPLE SHOULD BE DRAWN FROM POPULATION
B) EVERY STRATA OF POPULATION SHOULD BE REPRESENTED IN THE SAMPLE
C) EVERY ITEM IN THE POPULATION HAS AN EQUAL CHANCE OF BEING SELECTED IN THE SAMPLE
D) ITEMS SHOULD BE SELECTED AT ‘N’ THE INTERVAL
18. RISK OF UNDER RELIANCE IS THE RISK THAT THE SAMPLE SELECTED TO TEST CONTROLS___
A) DOES NOT SUPPORT THE AUDITOR’S PLANNED ASSESSED LEVEL OF CONTROL RISK WHEN THE TRUE
OPERATING EFFECTIVENESS OF THE CONTROL STRUCTURE JUSTIFIES SUCH AN ASSESSMENT
B) SUPPORTS THE AUDITOR’S PLANNED ASSESSED LEVEL OF CONTROL RISK WHEN THE ACTUAL POSITION
DOES NOT WARRANT SUCH RELIANCE
C) IS NOT SUPPORTED BY ADEQUATE DOCUMENTS
D) BOTH (A) & (C)
19. WHICH OF THE FOLLOWING FACTORS IS (ARE) CONSIDERED IN DETERMINING THE SAMPLE SIZE FOR TESTS OF CONTROL?
A) PROJECTED ERROR
B) TOLERABLE ERROR
C) EXPECTED ERROR
D BOTH (B) AND (C)
20.TOLERABLE ERROR, IS THE MAXIMUM MONETARY ERROR THAT THE AUDITOR IS PREPARED TO ACCEPT IN THE POPULATION AND STILL CONCLUDE THAT AUDIT OBJECTIVE HAS BEEN ACHIEVED, IS DIRECTLY RELATED TO
A) SAMPLE SIZE B) AUDIT RISK C) MATERIALITY D) EXPECTED ERROR
AUDIT PREPARATION
1. B 2. D 3. C 4. B 5. C 6. D 7. A 8. C 9. D 10. B
11. A 12. C 13. A 14. A 15. C 16. D 17. C 18. A 19. D 20. C
C) FOR A PERIOD AUDITOR OPINES THEM TO BE USEFUL IN SERVICING THE CLIENT
D) FOR THE PERIOD THE AUDIT FIRM IS IN EXISTENCE.
9. WHICH OF THE FOLLOWING FACTORS WOULD LEAST LIKELY AFFECT THE QUANTITY AND CONTENT OF AN AUDITOR’S WORKING PAPERS
A) THE ASSESSED LEVEL OF CONTROL RISK
B) THE POSSIBILITY OF PEER REVIEW
C) THE NATURE OF AUDITOR’S REPORT
D) THE CONTENT OF MANAGEMENT REPRESENTATION LETTER
10. WHICH OF THE FOLLOWING STATEMENT IS TRUE REGARDING AN AUDITOR’S WORKING PAPERS?
A) THEY DOCUMENT THE LEVEL OF INDEPENDENCE MAINTAINED BY THE AUDITOR
B) THEY SHOULD BE CONSIDERED AS THE PRINCIPLE SUPPORT FOR THE AUDITOR’S REPORT
C) THEY SHOULD NOT CONTAIN DETAILS REGARDING WEAKNESSES IN THE INTERNAL CONTROL SYSTEM
D) THEY HELP THE AUDITOR TO MONITOR THE EFFECTIVENESS OF THE AUDIT FIRM’S QUALITY CONTROL
11. WHICH OF THE FOLLOWING STATEMENT BEST DESCRIBES THE UNDERSTANDING WITH RESPECT TO?
OWNERSHIP AND CUSTODY OF WORKING PAPERS PREPARED BY AN AUDITOR?
A) THE WORKING PAPERS MAY BE OBTAINED BY THIRD PARTIES WHEN THEY APPEAR TO BE RELEVANT TO
ISSUES RAISED IN LITIGATION
B) THE SAFE CUSTODY OF WORKING PAPERS IS THE RESPONSIBILITY OF CLIENT, IF KEPT AT HIS PREMISES
C) THE WORKING PAPERS MUST BE RETAINED BY AN AUDIT FIRM FOR A PERIOD OF 10 YEARS
D) SUCCESSOR AUDITORS MAY HAVE ACCESS TO WORKING PAPERS OF THE PREDECESSOR AUDITORS. THE
APPROVAL OF CLIENT IS NOT REQUIRED.
12. THE CURRENT FILE OF THE AUDITOR’S WORKING PAPERS, GENERAL Y, SHOULD INCLUDE
A) A FLOWCHART OF THE INTERNAL CONTROLS
B) ORGANIZATION CHARTS
C) A COPY OF FINANCIAL STATEMENTS
D) COPIES OF BOND AND DEBENTURES
13. KNOWLEDGE OF THE ENTITY’S BUSINESS DOES NOT HELP THE AUDITOR TO
A) REDUCE INHERENT RISK
B) IDENTIFY PROBLEM AREAS
C) EVALUATE REASONABLENESS OF ESTIMATES
D) EVALUATE APPROPRIATES OF GAAP.
14. THE MAIN ADVANTAGE OF USING STATISTICAL SAMPLING TECHNIQUES IS THAT SUCH TECHNIQUES:
A) MATHEMATICALLY MEASURE RISK
B) ELIMINATE THE NEED FOR JUDGMENTAL SAMPLING
C) DEFINES THE VALUES OF TOLERABLE ERROR
D) ALL OF THE THEM.
15. WHICH OF THE FOLLOWING METHODS OF SAMPLE SELECTION IS LEAST SUITABLE FOR EXTRAPOLATING RESULTS TO THE POPULATION?
A) SYSTEMATIC SAMPLING
B) RANDOM SAMPLING
C) HAPHAZARD SAMPLING
D) NONE
16. WHICH OF THE FOLLOWING STATEMENTS IS CORRECT?
A) LOWER THE SAMPLING RISK GREATER THE SAMPLE SIZE
B) SMALLER THE TOLERABLE ERROR, GREATER THE SAMPLE SIZE
C) LOWER THE EXPECTED ERROR, SMALLER THE SAMPLE SIZE D) ALL ARE CORRECT
17. WHICH OF THE FOLLOWING FEATURES IS MOST IMPORTANT FOR RANDOM BASED SELECTION?
A) SAMPLE SHOULD BE DRAWN FROM POPULATION
B) EVERY STRATA OF POPULATION SHOULD BE REPRESENTED IN THE SAMPLE
C) EVERY ITEM IN THE POPULATION HAS AN EQUAL CHANCE OF BEING SELECTED IN THE SAMPLE
D) ITEMS SHOULD BE SELECTED AT ‘N’ THE INTERVAL
18. RISK OF UNDER RELIANCE IS THE RISK THAT THE SAMPLE SELECTED TO TEST CONTROLS___
A) DOES NOT SUPPORT THE AUDITOR’S PLANNED ASSESSED LEVEL OF CONTROL RISK WHEN THE TRUE
OPERATING EFFECTIVENESS OF THE CONTROL STRUCTURE JUSTIFIES SUCH AN ASSESSMENT
B) SUPPORTS THE AUDITOR’S PLANNED ASSESSED LEVEL OF CONTROL RISK WHEN THE ACTUAL POSITION
DOES NOT WARRANT SUCH RELIANCE
C) IS NOT SUPPORTED BY ADEQUATE DOCUMENTS
D) BOTH (A) & (C)
19. WHICH OF THE FOLLOWING FACTORS IS (ARE) CONSIDERED IN DETERMINING THE SAMPLE SIZE FOR TESTS OF CONTROL?
A) PROJECTED ERROR
B) TOLERABLE ERROR
C) EXPECTED ERROR
D BOTH (B) AND (C)
20.TOLERABLE ERROR, IS THE MAXIMUM MONETARY ERROR THAT THE AUDITOR IS PREPARED TO ACCEPT IN THE POPULATION AND STILL CONCLUDE THAT AUDIT OBJECTIVE HAS BEEN ACHIEVED, IS DIRECTLY RELATED TO
A) SAMPLE SIZE B) AUDIT RISK C) MATERIALITY D) EXPECTED ERROR
AUDIT PREPARATION
Answers
1. B 2. D 3. C 4. B 5. C 6. D 7. A 8. C 9. D 10. B
11. A 12. C 13. A 14. A 15. C 16. D 17. C 18. A 19. D 20. C
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