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Auditing Multiple Choice Questions (MCQS) Page-2. 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.
16.
WHICH OF THE FOLLOWING IS THE MOST APPROPRIATE POTENTIAL REACTION OF THE
AUDITOR TO HIS?
ASSESSMENT THAT THE RISK OF MATERIAL MISSTATEMENT DUE TO
FRAUD IS HIGH IN RELATION TO
EXISTENCE OF INVENTORY?
A) VISIT LOCATION ON SURPRISE BASIS TO OBSERVE TEST COUNTS
B) REQUEST INVENTORY COUNT AT A DATE CLOSE TO YEAREND
C) VOUCH GOODS SENT ON APPROVAL VERY CAREFUL Y
D) PERFORM ANALYTICAL PROCEDURES.
17.
WHICH OF THE FOLLOWING IS NOT LIKELY TO BE A FRAUD RISK FACTOR RELATING TO
MANAGEMENT’S? CHARACTERISTICS
A) TAX EVASION B) FAILURE TO CORRECT KNOWN WEAKNESS IN
INTERNAL CONTROL SYSTEM
C) ADOPTION OF CONSERVATIVE ACCOUNTING PRINCIPLES
D) HIGH MANAGEMENT TURNOVER
18.
PROFESSIONAL SKEPTICISM REQUIRES THAT THE AUDITOR ASSUME THAT MANAGEMENT IS
A) REASONABLY HONEST
B) NEITHER HONEST NOR DISHONEST
C) NOT NECESSARILY HONEST
D) DISHONEST UNLESS PROVED OTHERWISE
19.
WHICH OF THE FOLLOWING INFORMATION SHOULD A SUCCESSOR AUDITOR OBTAIN DURING THE
INQUIRY OF?
THE PREDECESSOR AUDITOR BEFORE ACCEPTING ENGAGEMENT?
I) INFORMATION ABOUT INTEGRITY OF MANAGEMENT
II) DISAGREEMENT WITH MANAGEMENT CONCERNING AUDITING
PROCEDURES
II) REVIEW OF INTERNAL CONTROL SYSTEM.
IV) ORGANIZATION STRUCTURE
A) (I) AND (I) B) (I) AND (I I) C) (I), (I) AND (I I) D) I)
AND (I I)
20. THE
AUDIT ENGAGEMENT LETTER, GENERAL Y, SHOULD INCLUDE A REFERENCE TO EACH OF THE
FOLLOWING EXCEPT
A) LIMITATIONS OF AUDITING
B) RESPONSIBILITIES OF MANAGEMENT WITH RESPECT TO AUDIT WORK
C) EXPECTATION OF RECEIVING A WRITTEN MANAGEMENT
REPRESENTATION LETTER.
D) A DESCRIPTION OF THE AUDITOR’S METHOD OF SAMPLE SELECTION.
21. THE
USE OF AN AUDIT ENGAGEMENT LETTER IS THE BEST METHOD OF ASSURING THE AUDITOR
WILL HAVE WHICH OF THE FOLLOWING?
A) AUDITOR WILL OBTAIN SUFFICIENT APPROPRIATE AUDIT EVIDENCE.
B) MANAGEMENT REPRESENTATION LETTER
C) ACCESS TO ALL BOOKS, ACCOUNTS AND VOUCHERS REQUIRED FOR
AUDIT PURPOSE
D) COOPERATION FROM OTHER AUDITORS
22. THE
USE OF AN AUDIT ENGAGEMENT LETTER IS THE BEST METHOD OF DOCUMENTING
I) THE REQUIRED COMMUNICATION OF SIGNIFICANT DEFICIENCIES IN
INTERNAL CONTROL
II) SIGNIFICANTLY HIGHER CONTROL RISK THAN THAT ASSESSED IN
PRIOR AUDIT.
II) OBJECTIVE AND SCOPE OF AUDITOR’S WORK
IV) NOTIFICATION OF ANY CHANGES IN THE ORIGINAL ARRANGEMENTS
OF THE AUDIT.
A) (I) AND (I) B) (I) AND (II) C) I AND (IV) D) (I I AND (IV)
23. AN
AUDITOR WHO ACCEPTS AN AUDIT BUT DOES NOT POSSESS THE INDUSTRY EXPERTISE OF THE
BUSINESS ENTITY SHOULD
A) ENGAGE EXPERTS
B) OBTAIN KNOWLEDGE OF MATTERS THAT RELATE TO THE NATURE OF
ENTITY’S BUSINESS
C) INFORM MANAGEMENT ABOUT IT
D) TAKE HELP OF OTHER AUDITORS
24. THE
LEAST IMPORTANT ELEMENT IN THE EVALUATION OF AN AUDIT FIRM’S SYSTEM OF QUALITY
CONTROL WOULD RELATE TO
A) ASSIGNMENT OF AUDIT ASSISTANTS
B) SYSTEM OF DETERMINING AUDIT FEES
C) CONSULTATION WITH EXPERTS
D) CONFIDENTIALITY OF CLIENT’S INFORMATION
25. THE
PRIMARY PURPOSE OF ESTABLISHING QUALITY CONTROL POLICIES AND PROCEDURES FOR
DECIDING ON CLIENT EVALUATION IS TO
A) ENSURE ADHERENCE TO GENERAL Y ACCEPTED AUDITING STANDARDS
B) ACCEPTANCE OR RETENTION OF CLIENTS WHOSE MANAGEMENT DOES
NOT LACK INTEGRITY
C) ENSURE AUDIT FEES IS CHARGED ACCORDING TO THE TYPE OF
AUDIT WORK ASSIGNED
D) ALL OF THE ABOVE
26.
WHICH OF THE FOLLOWING IS NOT A QUALITY CONTROL CONSIDERATION ON ACCEPTING A
NEW CLIENT?
A) AVAILABILITY OF AUDIT ASSISTANTS WITH NECESSARY SKILL AND
COMPETENCE.
B) PROVISION OF OTHER SERVICES TO THE CLIENT WHICH MAY IMPAIR
INDEPENDENCE
C) PREDECESSOR AUDITOR’S ADVICE AS TO WHETHER AUDIT FEES WERE
PAID PROMPTLY
D) REVIEW OF AUDIT WORK DONE BY ONE PARTNER BY THE OTHER
27. AN
AUDITOR OBTAINS KNOWLEDGE ABOUT A NEW CLIENT’S BUSINESS AND ITS INDUSTRY
TO
A) MAKE CONSTRUCTIVE SUGGESTIONS CONCERNING IMPROVEMENTS TO THE CLIENT’S INTERNAL CONTROL SYSTEM
B) EVALUATE THE
APPROPRIATENESS OF AUDIT EVIDENCE OBTAINED
C) UNDERSTAND THE EVENTS AND TRANSACTIONS THAT MAY HAVE AN
EFFECT ON CLIENT’S FINANCIAL STATEMENTS.
D) ALL OF THE ABOVE
INTRODUCTION TO AUDITING
Answers
16. A 17. C 18. B 19. A 20. D 21. C 22. D 23. B 24. B 25. B 26. C 27. c
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