Top 250+ Solved Auditing MCQ Questions Answer
Q. The overall attitude and awareness of an entity’s board of directors concerningthe importance of internal control is reflected in
a. Accounting controls
b. Control environment
c. Control procedures
d. Supervision
Q. Which of the following are included in test of control?
a. Reperformance and observation
b. Inquiry and analytical procedures
c. Comparison and conformation
d. Inspection and verification
Q. Control risk is assessed at
a. Overall financial statements level
b. Fraud risk factor level
c. Financial statement assertion level
d. Control environment level
Q. An auditor assesses control risk because it
a. Affects the audit risk
b. Affects the level of detection risk that auditor may accept
c. Helps him to fix materiality level for each financial assertion
d. Is directly related to inherent risk
Q. A flow chart, made by the auditor, of an entity’s internal control system is a graphic representation that depicts the auditor’s.
a. Understanding of the system
b. Understanding of fraud risk factors
c. Documentation of assessment of control risk
d. Both (a) and (c)
Q. The performance of tests of control is documented in
a. Audit programme
b. Flow charts
c. Working papers
d. Any of the above
Q. The independence of an internal auditor will most likely be assured if he reportsto the
a. President Finance
b. President System
c. Managing Director
d. CEO
Q. In comparison to the independent auditor, an internal auditor is more likely tobe concerned with
a. Cost accounting system
b. Internal control system
c. Legal compliance
d. Accounting system
Q. When an independent auditor relies on the work of an internal auditor, he orshe should
a. Examine the scope of internal auditor’s work
b. Examine the system of supervising review and documentation of internal auditor’s work
c. Adequacy of related audit programme
d. all of the above
Q. Proper segregation of duties reduces the opportunities in which a person wouldboth
a. Establish controls and executes them
b. Records cash receipts and cash payments
c. Perpetuate errors and frauds and conceals them
d. Record the transaction in journal and ledger
Q. Analytical procedures are least likely to be use in the audit of –
a. Cash balance
b. Investments
c. Bills receivables
d. Debtors
Q. Which of the following statements is not true with regard to teeming andlading ?
a. It results in the deliberate misappropriation of cash receipts
b. It is associated with cash receipts
c. If same individual maintains cash receipts and cash payments teeming and lading is likely to exist
d. To conceal the shortage, the defraud, usually, tries to keep bank and book amounts in daily agreement so that a bank reconciliation will not detect the irregularity.
Q. The balance of cash in often between one to five percent of total assets. Tickthe most appropriate statement with regard to verification of cash in context of this
a. Cash in always material as materiality is qualitative concept
b. No audit of cash is needed when, in auditor’s opinion, cash is immaterial. Materiality is a relative concept
c. The cash balance need only be audited if the balance is in overdraft
d. Cash is to be verified if control risk is assessed as high
Q. When counting cash on hand the auditor should ___
a. Ensure presence of somebody from management
b. Obtain a receipt from custodian as to its return
c. Ensure postage and revenue stamps are not counted in physical count
d. Temporary advances to employees are counted to calculate balance of cash in hand
Q. Which of the following statement is not true regard to auditor’s attendance atstock taking?
a. Auditor should attend physical stock taking only if inventory is material
b. Auditor may not attend physical verification of stock by management, if he does not find it appropriate to rely on it
c. If inventory is material, even when the auditor is not placing reliance on the physical verification by the management, he should attend it
d. The primary objective of an auditor’s observation of an entity’s observation of an entity’s stock take is to obtain direct knowledge that the stock and has been property counted