Auditing Set 4
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This set of Auditing Multiple Choice Questions & Answers (MCQs) focuses on Auditing Set 4
Q1 | Audit programme is prepared by
- The auditor
- The client
- The audit assistants
- The auditor and his audit assistants
Q2 | The working papers which auditor prepares for financial statements audit are: _
- Evidence for audit conclusions
- Owned by the client
- Owned by the auditor
- Retained in auditor’s office until a change in auditors
Q3 | The quantity of audit working papers complied on engagement would most be affectedby
- Management’s integrity
- Auditor’s experience and professional judgment
- Auditor’s qualification
- Control risk
Q4 | Which of the following best describes the primary purpose of audit programmepreparation?
- To detect errors or fraud.
- To comply with GAAP
- To gather sufficient appropriate evidence
- To assess audit risk
Q5 | Which of the following is not an advantage of the preparation of working paper?
- To provide a basis for review of audit work
- To provide a basis for subsequent audits
- To ensure audit work is being carried out as per programme
- To provide a guide for advising another client on similar issues
Q6 | The auditor’s permanent working paper file should not normally, include
- Extracts from client’s bank statements
- Past year’s financial statements
- Attorney’s letters
- Debt agreements
Q7 | For what minimum period should audit working papers be retained by audit firm?
- For the time period the entity remains a client of the audit firm.
- For a period of ten years
- For a period auditor opines them to be useful in servicing the client
- For the period the audit firm is in existence.
Q8 | Which of the following factors would least likely affect the quantity and content of anauditor’s working papers
- The assessed level of control risk
- The possibility of peer review
- The nature of auditor’s report
- The content of management representation letter
Q9 | Which of the following statement is true regarding an auditor’s working papers?
- They document the level of independence maintained by the auditor
- They should be considered as the principle support for the auditor’s report
- They should not contain details regarding weaknesses in the internal control system
- They help the auditor to monitor the effectiveness of the audit firm’s quality control
Q10 | Which of the following statement best describes the understanding with respect toownership and custody of working papers prepared by an auditor?
- The working papers may be obtained by third parties when they appear to be relevant to issues raised in litigation
- The safe custody of working papers is the responsibility of client, if kept at his premises
- The working papers must be retained by an audit firm for a period of 10 years
- Successor auditors may have access to working papers of the predecessor auditors. The approval of client is not required.
Q11 | The current file of the auditor’s working papers, generally, should include
- A flowchart of the internal controls
- Organisation charts
- A copy of financial statements
- Copies of bond and debentures
Q12 | Knowledge of the entity’s business does not help the auditor to
- Reduce inherent risk
- Identify problem areas
- Evaluate reasonableness of estimates
- Evaluate appropriates of GAAP.
Q13 | Payment for wage should be vouched with the help of
- Piece Work Statement.
- Wage sheets
- Minutes book
- Bank pass book.
Q14 | Payment for building purchased should be vouched with the help of
- Title Deed
- Correspondence with the brokers
- Building Account
- Cash book
Q15 | Purchase returns should be vouched with the help of
- Bought notes
- Credit notes
- Goods inward book
- Cash book
Q16 | Receipts from sale of investments should be vouched with the help of
- Brokers bought notes
- Brokers Sold notes
- Minutes book
- Inventory of investment
Q17 | Which of the following expenses should not be treated as capital expenditure?
- Expenses paid on installation of a plant.
- Cost of dismantling a building in case a new building is to be constructed on the land
- Legal expenses incurred to defend a suit related to title of patent. The suit has been lost
- The fees paid to engineer who constructed the plant.
Q18 | Which of the following is not a revenue expense?
- Cost of raising a loan
- Cost of accessories of motor vehicles spent at the time of purchase
- Expenses incurred for laying of sewers on land purchased
- Insurance premium paid at the time of registration of the ship
Q19 | Depreciation does not arise form _______
- Effluxion of time
- Use
- Obsolescence through technology be market changes
- Remarket expectation
Q20 | Which of the following Schedule of the Companies Act, 1956 deals with depreciations?
- Schedule XIV
- Schedule V
- Schedule XIII
- Schedule X
Q21 | Schedule XIV has prescribed rates of depreciation for double shift and triple shiftworking for which one of the following assets?
- Building
- Plant and Machinery
- Furniture and fittings
- Ships
Q22 | A company has bought patents. Which of the following methods is most suitable forproviding depreciation on them?
- SLM
- WDV
- Sum of year digits
- Any of the above
Q23 | Which of the following is a revenue reserve?
- Capital redemption reserve
- Security premium account
- Debenture redemption reserve
- Capital reserve
Q24 | Which of the following will not lead to creation of secret reserve?
- Undervaluation of closing stock
- Charging capital expenditure to revenue
- Goods sent on consignment being shown as actual sales
- Charging higher rates of depreciation on fixed assets than actually required
Q25 | Who is responsible for the appointment of statutory auditor of a limited company?
- Directors of the company
- Members of the company
- The Central Government
- All of the above