Top 250+ Solved Auditing MCQ Questions Answer
Q. Which of the following assets is least likely to be subjected to lien?
a. Freehold land
b. Plant and machinery
c. Leasehold property
d. Motor vehicles
Q. 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?
a. Examination of property tax files
b. Inquiry of plant manager
c. Examination of debits to accumulated depreciation
d. All of the above
Q. The auditor has noticed existence of recurring losses sale of fixed assets thisindicates
a. Depreciation charges are insufficient
b. Policy of sale or disposal of fixed assets needs to be reviewed
c. The sale of assets have not been properly authorized
d. Accounting errors
Q. Which of the following financial statements assertions are addressed by testingthe cut off for plant asset addition?
a. Existence and ownership
b. Valuation and disclosure
c. Possession and ownership
d. Completeness and valuation
Q. The auditor while verifying prepaid insurance has concluded that there isinadequate insurance of building, He should__
a. Modify his audit report
b. Insist it should be disclosed in the notes to financial statements
c. Write it in letter of weakness
d. Both (b) and (c)
Q. While verifying intangible assets, an auditor would recomputed amortizationcharges and determines whether amortization period is reasonable. The auditor tries to establish ….by doing it
a. Valuation
b. Existence
c. Disclosure
d. Possession
Q. When auditing prepaid insurance, an auditor discovers that the insurancepolicy bond on building is not available for inspection. This may indicate__
a. No insurance has been undertaken for building
b. Lien on building
c. Insurance premium has not been paid
d. Insurance premium paid but not recorded
Q. Which of the following controls would ensure that securities are not lost,stolen or diverted?
a. Establish physical barriers over investment securities
b. Maintain files of authorized signatures
c. Segregate investment approval from accounting and from custody of securities
d. All of the above
Q. Which of the following would give the assurance that debtors mentioned on thedate of balance sheet actually exist?
a. Sending debtor’s confirmation letters
b. Reviewing subsequent collection
c. Verify debtors against sales document
d. Both (a) and (b)
Q. Tests of control are not concerned with_
a. Existence of controls
b. Effectiveness of controls
c. Continuity of controls
d. Designing of controls
Q. The sequence of steps in the auditor’s consideration of internal control is asfollows –
a. Obtain an understanding, design substantive test, perform tests of control, and make a preliminary assessment of control risk
b. Design substantive tests, obtain an understanding, perform tests of control, and make a preliminary assessment of control risk
c. Obtain an understanding, make a preliminary assessment of control risk, perform tests of control, design substantive procedures.
d. Perform tests of control, obtain and understanding, make a preliminary assessment of control risk, design
Q. Which of the following is not an inherent limitation of internal control system?
a. Management override
b. Collusion among employees
c. Inefficiency of internal auditor
d. Abuse of authority
Q. An auditor should study and evaluate internal controls to
a. Determine whether assets are safeguarded
b. Suggest improvements in internal control
c. Plan audit procedures
d. Express and opinion
Q. The primary purpose of performing tests of control is to provide reasonableassurance that_
a. There are no material misstatements due to fraud or error in financial statement
b. Accounting system is well documented
c. Written evidence is there to support transactions
d. if internal control is effective
Q. If the auditor assesses control risk as high….
a. Document the conclusions
b. Documents the reasons along with conclusions
c. Perform tests of control
d. Perform walk through tests