Auditing Set 7
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This set of Auditing Multiple Choice Questions & Answers (MCQs) focuses on Auditing Set 7
Q1 | Which of the following would prevent double payment of the same voucher?
- The person signing the cheque should cancel the supporting documents
- Cheques should be signed by at best two persons
- The data of payment of vouchers of similar nature should be the same or close to each other
- All of the above
Q2 | In case of unclaimed wages, the auditor should examine whether
- The amount has been deposited in a separate bank account
- Deposited with the cashier
- Held in a safe deposit box
- All of these
Q3 | While vouching wages, auditor should examine whether there is proper segregation of duties. Which of the following activities should not be done by same department?
- Maintaining personnel records and approving changing in wages rates
- Proposing pay roll summary and disbursement of wages
- Making salary statements and filing tax returns
- Comparing time clock records with time reports prepared by supervisors and preparing list of workers employed along with the units of production for each one of them
Q4 | In order to vouch, which of the expenses, the auditor will examine Bill ofEntry?
- Custom
- Excise duties
- Sales tax
- Income tax
Q5 | While vouching, how will the auditor ensure himself that all credit salestransactions have been recorded by the entity?
- Examining cut-off points
- Matching entries in the sales book against renumbered sales invoices and goods outward notes
- Counting the number of invoices and matching the number with entries on sales book
- Both (a) and (b)
Q6 | In case of sales return, the auditor should examine which documents?
- Credit notes, advice notes and inward return notes
- Debit notes, advice notes and inward return notes
- Purchase invoices, advice notes and inward return notes
- Credit notes, inspection report and inward return notes
Q7 | An internal auditor discovered that fictitious purchases have been recorded bythe purchase clerk. This indicates absence of which control?
- Purchase invoices are independently matched with purchase orders and goods received notes
- Goods received notes requires the signature of individual who authorized the purchase
- Routine checks are performed by internal auditor fortnightly.
- Purchase function and production function are clubbed in one department
Q8 | Which of the following is most crucial to a purchase department?
- Reducing the cost of acquisition
- Selecting supplies
- Authorizing the acquisition of goods
- Assuring the quality of goods
Q9 | The auditor is most likely to examine related party transactions very carefullywhile vouching
- Credit sales
- Sales returns
- Credit purchases
- Cash purchases
Q10 | In order to vouch bought ledger, the auditor obtain confirmations from creditors. The principal reason for the auditor to examine suppliers statements at balance sheet date is to obtain evidence that
- The supplier exist
- There are no unrecorded liabilities
- Recorded purchases actually occurred
- To link creditors with cash book entries
Q11 | The creditor’s accounts, generally, have credit balance. Debit balance may be due to
- Advance paid against an order
- Goods returned
- Wrong debit to supplier account
- Any of these
Q12 | In case of vouching, the auditor is least likely to examine authorization byappropriate authority in case of –
- Bad debts written off
- Sales return
- Purchase return
- Discount allowed to customers as per organizational policy
Q13 | Vendors should be approved by Management before purchase departmentexecutes an order. If this is not done, then which of the following situations may arise?
- Purchases could be made from vendors whose product quality may not be good
- Purchases may be made from related parties without management’s knowledge
- Purchases could be made from vendors who may have offered price to manager purchases
- Any of these
Q14 | Which of the following is not true with regard to verification of assets?
- It invoices substantiation of occurrence of transactions
- Its objective is to establish existence, ownership, possession, valuation and disclosure of assets
- The auditor has to form an opinion on different aspects
- All are true
Q15 | Which of the following statements is not true?
- Valuation of assets is the responsibility of management
- The auditor can rely on a certificate issued by an authorized valuationer as to the valuation of assets in the balance sheet
- The auditor should value the asset as per generally accepted accounting principle
- Valuation is no part of auditor’s duty
Q16 | An auditor is verifying valuation of building which has been self constructed bythe client. Which of the following documents is least relevant to the auditor for verification purposes?
- Bills of contractor
- Minutes of meeting of board of directors
- Certificates of engineer and architect
- Loan agreement
Q17 | Which of the following assets is least likely to be subjected to lien?
- Freehold land
- Plant and machinery
- Leasehold property
- Motor vehicles
Q18 | An analysis of fixed assets account has revealed possibility of unrecorded sale of plant and machinery. Which of the following audit procedures may be adopted to discover it?
- Examination of property tax files
- Inquiry of plant manager
- Examination of debits to accumulated depreciation
- All of the above
Q19 | The auditor has noticed existence of recurring losses sale of fixed assets thisindicates
- Depreciation charges are insufficient
- Policy of sale or disposal of fixed assets needs to be reviewed
- The sale of assets have not been properly authorized
- Accounting errors
Q20 | Which of the following financial statements assertions are addressed by testingthe cut off for plant asset addition?
- Existence and ownership
- Valuation and disclosure
- Possession and ownership
- Completeness and valuation
Q21 | The auditor while verifying prepaid insurance has concluded that there isinadequate insurance of building, He should__
- Modify his audit report
- Insist it should be disclosed in the notes to financial statements
- Write it in letter of weakness
- Both (b) and (c)
Q22 | While verifying intangible assets, an auditor would recomputed amortizationcharges and determines whether amortization period is reasonable. The auditor tries to establish ….by doing it
- Valuation
- Existence
- Disclosure
- Possession
Q23 | When auditing prepaid insurance, an auditor discovers that the insurancepolicy bond on building is not available for inspection. This may indicate__
- No insurance has been undertaken for building
- Lien on building
- Insurance premium has not been paid
- Insurance premium paid but not recorded
Q24 | Which of the following controls would ensure that securities are not lost,stolen or diverted?
- Establish physical barriers over investment securities
- Maintain files of authorized signatures
- Segregate investment approval from accounting and from custody of securities
- All of the above
Q25 | Which of the following would give the assurance that debtors mentioned on thedate of balance sheet actually exist?
- Sending debtor’s confirmation letters
- Reviewing subsequent collection
- Verify debtors against sales document
- Both (a) and (b)