Auditing Set 3
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This set of Auditing Multiple Choice Questions & Answers (MCQs) focuses on Auditing Set 3
Q1 | Test Checking refers to
- Testing of accounts and records
- Checking of selected number of transactions
- Examination of adjusting and closing entries
- Checking of all transactions recorded
Q2 | Which of the following statements is not correct about materiality?
- Materiality is a relative concept
- Materiality judgments involve both quantitative and qualitative judgments
- Auditor’s consideration of materiality is influenced by the auditor’s perception of the needs of an informed decision maker who will rely on the financial statements
- At the planning state, the auditor considers materiality at the financial statement level only
Q3 | …...the audit risks… the materiality and ……the audit effort
- Lower, Higher, Lower
- Lower, Lower, Higher
- Higher, Lower, Lower
- Lower, Higher, Higher
Q4 | When issuing unqualified opinion, the auditor who evaluates the audit findings shouldbe satisfied that the
- Amount of known misstatement is documented in working papers
- Estimates of the total likely misstatement is less than materiality level
- Estimate of the total likely misstatement is more than materially level
- Estimates of the total likely misstatement cannot be made
Q5 | In determining the level of materiality for an audit, what should not be considered?
- Prior year’s errors
- The auditor’s remuneration
- Adjusted interim financial statements
- Prior year’s financial statements
Q6 | Analytical procedures issued in the planning stage of an audit, generally
- Helps to determine the nature, timing and extent of other audit procedures
- Directs attention to potential risk areas
- Indicates important aspects of business
- All of the above
Q7 | Which of the following statements is most closely associated with analytical procedureapplied at substantive stage?
- It helps to study relationship among balance sheet accounts
- It helps to discover material misstatements in the financial statements
- It helps to identify possible oversights
- It helps to accumulate evidence supporting the validity of a specific account balance
Q8 | For all audits of financial statements made in accordance with AAS14, the use ofanalytical procedures is at the discretion of the auditor in which stage?
- Substantive testing
- Planning stage
- Overall review stage
- All of the above
Q9 | Verification refers to :
- Examining the physical existence and valuation of assets.
- Examining the journal and ledger
- Examination of vouchers related to assets.
- None of the above.
Q10 | Stock should be valued at
- Cost
- Market price
- Cost or Market price whichever is lower.
- Cost less depreciation.
Q11 | ‘Auditor is not a valuer’, was stated in
- Kingston Cotton Mills case
- London Oil Storage Co. Case
- London and General Bank case
- None of the above
Q12 | Floating assets are valued at
- cost
- Market price
- Cost or market price whichever is lower
- Cost less depreciation
Q13 | Goods sold on the basis of ‘sales or return ‘ should
- Be included in the stock
- Not be included in the stock
- Not be checked by auditor
- None of the above
Q14 | Of the following, which is the least persuasive type of audit evidence?
- Bank statements obtained from the client
- Documents obtained by auditor from third parties directly.
- Carbon copies of sales invoices inspected by the auditor
- Computations made by the auditor
Q15 | Which of the following statements is, generally, correct about the reliability of auditevidence?
- To be reliable, evidence should conclusive rather than persuasive
- Effective internal control system provides reliable audit evidence
- Evidence obtained from outside sources routed through the client
- All are correct.
Q16 | In an audit of financial statements, substantive tests are audit procedures that __
- May be eliminated for an account balance under certain conditions
- Are designed to discover significant subsequent events
- Will increase proportionately when the auditor decreases the assessed level of control risk
- May be test of transactions, test of balance and analytical procedures
Q17 | The nature, timing and extent of substantive procedures is related to assessed level ofcontrol risk
- Randomly
- Disproportionately
- Directly
- Inversely
Q18 | Which of the following factors is most important in determining the appropriations ofaudit evidence?
- The reliability of audit evidence and its relevance in meeting the audit objective
- The objectivity and integrity of the auditor
- The quantity of audit evidence
- The independence of the source of evidence
Q19 | When is evidential matter, generally, considered sufficient?
- When it constitutes entire population
- When it is enough to provide a basis for giving reasonable assurance regarding truthfulness
- When it is objective and relevant
- When auditor collects and evaluates it independently
Q20 | Which of the following is not corroborative evidence?
- Minutes of meetings
- Confirmations from debtors
- Information gathered by auditor through observation
- Worksheet supporting consolidated financial statements
Q21 | Which of the following statements is not true with respect to managementrepresentations obtained as per AAS11?
- Authenticated copy of relevant minutes of meetings may be regarded as management representation
- It should always be in working
- It may be dated prior to the report date
- It should be addressed to the auditor
Q22 | What would most appropriately describe the risk of incorrect rejection in terms ofsubstantive testing?
- The auditor concludes balance is materially correct when in actual fact it is not
- The auditor concludes that the balance is materially misstated when in actual fact it not
- The auditor has rejected an item for sample which was material
- None of the above
Q23 | Which of the following affects audit effectiveness?
- Risk of over reliance
- Risk of incorrect rejection
- Risk of incorrect acceptance
- Both (a) and (c)
Q24 | What would most effectively describe the risk of incorrect acceptance in terms ofsubstantive audit testing?
- The auditor has ascertained that the balance is materially correct when in actual fact it is not
- The auditor concludes the balance is materially misstated when in actual fact is not
- The auditor has rejected an item from sample which was not supported by documentary evidence
- He applies random sampling on data which is inaccurate and inconsistent
Q25 | Which of the following Auditing Assurance Standard deals with Audit Planning?
- AAS7
- AAS8
- AAS9
- AAS3