Financial Attest Audit Manual Set 2 MCQs

Q1 | The point where the total value of errors in an account becomes unacceptable to audit is called

Unacceptable level

Materiality level

Qualifiable Level

None of these

Q2 | The materiality thresholds depend on the ____ of accounts and their _____.

Basis, Sensitivity

Sensitivity, relativity

Basis, accountablity

Basis, Value

Q3 | For accounts prepared on cash basis, in respect of gross receipts/expenditure, materiality percentage would be

For very sensitive accounts - 1 %, sensitive accounts - 1% to 2% and non sensitive accounts - 5%

For very sensitive accounts - 1/2 %, sensitive accounts - 1/2% to 2% and non sensitive accounts - 2%

For very sensitive accounts - 2 %, sensitive accounts - 5% and non sensitive accounts - 8%

none of these

Q4 | Planning materiality may be taken at a lower figure than reporting materiality.

TRUE

FALSE

none

all

Q5 | Which of the following statements is true about Precision

It is a range of error in an account between MLE & materiality

It is a range of error in an account between MLE & AMLE

It is a range of error in an account between Materiality & AMLE

None of these

Q6 | AMLE in the context of likely errors is used in this stage of audit

Reporting

Evaluation of results

Planning

Field Audit

Q7 | The formula for calculating precision is

(Materiality - Range of error possible) x AMLE

(Materiality - AMLE) x Range of error possible

(AMLE - Range of error possible) x Materiality

None of these

Q8 | There is a direct relationship between materiality level and the level of audit risk

TRUE

FALSE

none

all

Q9 | The three components of Audit Risk as per the risk model are

Inherent Risk, Control Risk, Mitigation Risk

Inherent Risk, Control Risk, Litigation Risk

Inherent Risk, Control Risk, Detection Risk

None of these

Q10 | If the desired overall assurance from audit is 95%, the inherent risk is 40% and the control risk is 50%, what would be the desired assurance from substantive tests

90%

95%

99%

75%

Q11 | what are the audit procedures commonly used to obtain audit assurance?

Analytical Procedures

Systems Based Audit

Direct Substantive Testing

All of the above

Q12 | Which of the following is not a part of analytical procedures?

System Analysis

Economic Analysis

Regression Analysis

Predictive Analysis

Q13 | When you are finding out the inventory-turnover ratio, you are doing

Comparison across components

Comparison involving a single component

Regression analysis

Economic analysis

Q14 | This is a technique that creates an equation to reveal how one variable is related to one or more other variables.

Comparison across components

Predictive Analysis

Regression analysis

Economic analysis

Q15 | Which of the audit procedures is a form of inductive reasoning where the reasonableness of the aggregate results is inferred from the evidence of reliability of the individual details that are tested?

Analytical Procedures

Systems Based Audit

Direct Substantive Testing

All of the above

Q16 | Which kind of audit sampling is generally used for testing controls?

Attribute Sampling

Random Sampling

Monetary Unit Sampling

Stratified Sampling

Q17 | Which method of sampling is expected to produce representative samples?

Block Selection

Judgmental Sampling

Random Sampling

Convenient Sampling

Q18 | Which method of sampling is not expected to produce representative samples?

Block Selection

Random Sampling

Systematic Sampling

Monetary Unit Sampling

Q19 | A pre-condition for any statistical sampling is the availability of a _______

Sampling unit

sampling frame

Sampling structure

All of the above

Q20 | Population is divided into groups, each being fairly homogenous with respect to value and riskin this kind of sampling

Block Selection

Random Sampling

Stratified Sampling

Monetary Unit Sampling

Q21 | Sampling interval is calculated in this kind of sampling

Simple Random Sampling

Systematic Sampling

Stratified Sampling

All of the above

Q22 | This method of sampling is also called probability proportionate to size (PPS) sampling

Block Selection

Random Sampling

Stratified Sampling

Monetary Unit Sampling

Q23 | Extrapolation of sampling results to the population is possible in the case of Judgmental Sampling.

TRUE

FALSE

none

all

Q24 | Risk assessment is primarily a part of which of these stages in the audit process?

Planning

Excecution

Reporting

Follow up

Q25 | Reflecting all the transactions relating to the period of the accounts without regard to the actualdate of payment or receipt is also called

Accrual system accounting

Mercantile system of accounting

Both

None of these