300+ Auditing Solved MCQs

201.

Civil liability of an auditor implies liability for

A. misappropriation of cash
B. misappropriation of goods
C. fraud
D. misfeasance
Answer» D. misfeasance
202.

An auditor is held criminally liable for

A. Loss to his client
B. Neglect of his duty
C. Offence against statutory provisions
D. Frauds
Answer» C. Offence against statutory provisions
203.

An auditor is held liable under C.A Act 1949 for

A. negligence
B. misfeasance
C. Professional misconduct
D. breach of contract.
Answer» C. Professional misconduct
204.

__________ is a systematic examination of the books and records or a business.

A. Auditing
B. Vouching
C. Verification
D. Checking
Answer» A. Auditing
205.

An audit which is compulsory by the law is __________.

A. Government Audit
B. Internal Audit
C. Cost Audit
D. Statutory Audit
Answer» D. Statutory Audit
206.

.Instruction of audit issued by controller and auditor general of India ________.

A. Statutory audit
B. Final Audit.
C. Management audit
D. Government audit
Answer» D. Government audit
207.

Audit done by the employees of the business undertaking is called _______.

A. Final audit
B. Management Audit
C. Government Audit
D. Internal Audit
Answer» D. Internal Audit
208.

This kind of audit is conducted generally between two annual audit ______.

A. Internal Audit
B. Interim audit
C. Final Audit
D. Continuous Audit
Answer» B. Interim audit
209.

Management audit otherwise called as _______.

A. Final audit
B. Efficiency Audit
C. Cost Audit
D. Cash audit
Answer» B. Efficiency Audit
210.

Before the work of audit is commenced, the auditor plans out the whole of audit work is called _________.

A. Audit Plan
B. Audit Note
C. Audit Programme
D. Audit Control
Answer» C. Audit Programme
211.

A number of checks and controls exercised in a business to ensure its efficient working are known as ________.

A. Internal Check
B. Internal Control
C. Internal Audit
D. Interim Check
Answer» B. Internal Control
212.

A Voucher is a _______.

A. Document is support of an entry made in books of accounts
B. Invoice received from suppliers
C. Receipt issued to a customer for cash
D. Dispatch Receipt
Answer» A. Document is support of an entry made in books of accounts
213.

Voucher relates to _________.

A. Cash receipt & payments, credit transactions
B. Cash payment only
C. Credit transactions only
D. Cash receipt only
Answer» A. Cash receipt & payments, credit transactions
214.

Internal check is meant for ___________.

A. Prevention of frauds
B. Detection of frauds
C. Helping audit is depth
D. Detection of errors
Answer» A. Prevention of frauds
215.

Purchase of machinery is a ____________.

A. revenue receipt
B. capital receipt
C. capital expenditure
D. revenue expenditure
Answer» C. capital expenditure
216.

Sale of land is a __________.

A. revenue receipt
B. capital receipt
C. capital expenditure
D. revenue expenditure
Answer» B. capital receipt
217.

When a transaction has not been recorded in the books of account either wholly or partially such errors are called as _________.

A. errors of commission
B. errors of omission
C. compensating error
D. error of principle
Answer» B. errors of omission
218.

Verification of the value of assets, liabilities, the balance of reserves, provision and the amount of profit earned or loss suffered a firm is called _________.

A. continuous audit
B. balance sheet audit.
C. interim audit
D. partial audit
Answer» B. balance sheet audit.
219.

A sale of Rs. 50000 to Mr. A was entered as a sale to Mr. B. This is an example of what?

A. Error of omission
B. Error of commission
C. Compensating error
D. Error of principle
Answer» B. Error of commission
220.

Recording a transaction twice in the books of original entry is an error of __________.

A. principle
B. commission
C. duplication
D. omission
Answer» C. duplication
221.

Errors and frauds already committed can be discovered under the system of ________.

A. internal audit, internal check, internal control
B. external check
C. statutory audit
D. interim audit
Answer» A. internal audit, internal check, internal control
222.

Treating revenue expenditure as capital expenditure is a case of _________.

A. fraud
B. misappropriation of cash
C. misappropriation of goods
D. manipulation of accounts
Answer» D. manipulation of accounts
223.

/. Special audit is necessary for _________.

A. inefficient concern
B. processing concern
C. trading concern
D. manufacturing concern
Answer» A. inefficient concern
224.

The first auditors appointed by head office ____________.

A. for a period of one year
B. for a period of two years
C. for a period of three years
D. till the conclusion of the first annual general meeting
Answer» D. till the conclusion of the first annual general meeting
225.

Audit Note Book contains: ---------------------------------------------------------

A. Various dates of reference.
B. Details of work done.
C. Notes regarding item requiring clarification, explanations, etc.
D. All of the above.
Answer» D. All of the above.
226.

Which of the following has a broader scope?

A. Internal Control.
B. Internal Audit.
C. Internal Checking.
D. None of the above.
Answer» D. None of the above.
227.

An internal auditor is :

A. Temporary Employee.
B. Permanent Employee.
C. Daily Wager.
D. None of the above.
Answer» B. Permanent Employee.
228.

The main object of vouching is :

A. To prepare trial balance.
B. Conduct routine checking.
C. Verify authenticity & authority of transactions.
D. Checking of vouchers
Answer» D. Checking of vouchers
229.

Valuation is the base of:

A. Verification.
B. Marketing.
C. Internal checking.
D. Vouching.
Answer» A. Verification.
230.

The first auditor or auditors are appointed by :

A. Central Government.
B. Company Law Board.
C. Board of Directors.
D. Shareholders.
Answer» C. Board of Directors.
231.

A number of checks & controls exercised in a business to ensure its efficient working is known as :

A. Internal check.
B. Internal control.
C. Internal audit.
D. Interim check.
Answer» A. Internal check.
232.

Voucher relates to :

A. Cash receipt.
B. Cash payment.
C. Credit transactions.
D. All the above.
Answer» D. All the above.
233.

Internal check is meant for :

A. Prevention of frauds.
B. Detection of frauds.
C. Helping audit in depth.
D. Detection of errors.
Answer» C. Helping audit in depth.
234.

Internal auditor is appointed by :

A. The management.
B. The shareholders.
C. The government.
D. The statutory body.
Answer» A. The management.
235.

Auditing begins where -------- ends.

A. Selling.
B. Inventory valuation.
C. Accounting.
D. Purchases.
Answer» C. Accounting.
236.

A good audit report must at least meet one of the following qualifications:

A. It should offer constructive and timely suggestions to the management.
B. It should not point out mistakes.
C. It should not be based on factual information.
D. It should not be based on balance sheet.
Answer» A. It should offer constructive and timely suggestions to the management.
237.

The work of one clerk is automatically check by another clerk is called :

A. Internal control.
B. Internal check.
C. Internal audit.
D. None of the above.
Answer» B. Internal check.
238.

The owners of the company are called:

A. Debenture holders.
B. Debtors.
C. Shareholders.
D. None of the above.
Answer» C. Shareholders.
239.

Verification is :

A. The art of recording the business transactions.
B. An examination of the books of accounts.
C. The act of establishing the accuracy of entries in the books of accounts.
D. none
Answer» C. The act of establishing the accuracy of entries in the books of accounts.
240.

The main object of investigation is :

A. To discover errors and frauds.
B. To prevent errors and frauds.
C. To verify statements.
D. All the above.
Answer» D. All the above.
241.

Internal controls and internal check are :

A. One and the same.
B. Different.
C. Internal control includes internal check.
D. None of the above.
Answer» C. Internal control includes internal check.
242.

An auditor is like a :

A. Watchman.
B. Foolish dog.
C. Mad dog.
D. Watch dog.
Answer» D. Watch dog.
243.

Special audit is necessary for:

A. Inefficient concern.
B. Processing concern.
C. Trading concern.
D. Manufacturing concern.
Answer» A. Inefficient concern.
244.

The company’s auditor is expected to give:

A. His expert opinion about the accounts.
B. A factual position about the accounts.
C. A critical review of the accounts.
D. Financial assistance.
Answer» B. A factual position about the accounts.
245.

Auditors of a joint stock company are appointed by :

A. Directors of the company.
B. Annual general meeting.
C. Election at the annual general meeting.
D. Debenture holders.
Answer» C. Election at the annual general meeting.
246.

A company auditor can be removed by :

A. Board of directors.
B. Managing director.
C. Any director.
D. General Meeting.
Answer» D. General Meeting.
247.

A vacancy caused by resignation of an auditor is filled by :

A. Board of directors.
B. Managing director.
C. General meeting.
D. Central government.
Answer» C. General meeting.
248.

Audit in depth means :

A. Audit of each and every item.
B. Intensive audit of each and every item.
C. Intensive audit of few items.
D. Audit of a few selected items.
Answer» B. Intensive audit of each and every item.
249.

Concurrent audit is a part of :

A. Internal check system.
B. Continuous audit.
C. Internal audit system.
D. Final audit.
Answer» C. Internal audit system.
250.

Audit in depth is synonymous for:

A. Complete audit.
B. Completed audit.
C. Final audit.
D. Detailed audit.
Answer» D. Detailed audit.
251.

Balance sheet audit included verification of :

A. Assets.
B. Liabilities.
C. Income & expenditure accounts where appropriate.
D. All of the above.
Answer» D. All of the above.
252.

Which of the following statements is not true about continuous audit?

A. It is conducted at regular interval.
B. It may be carried out on daily basis.
C. It is needed when the organization has a good internal control system.
D. It is expensive.
Answer» C. It is needed when the organization has a good internal control system.
253.

Which of the following is not a fact of EPA ?

A. Economic audit.
B. Efficiency audit.
C. Expenditure audit.
D. Effectiveness audit.
Answer» C. Expenditure audit.
254.

Balance sheet does not include :

A. Verification of assets & liabilities.
B. Vouching of income & expense accounts related to assets and liabilities.
C. Examination of adjusting and auditing & closing entries.
D. Routine checks.
Answer» D. Routine checks.
255.

When issuing unqualified opinion the auditor who evaluates the audit findings should be satisfied that the :

A. Amount of known miss-statement is documented in working papers.
B. Estimates of the total likely misstatement are less than materiality level.
C. Estimated of the total likely misstatement is more than materiality level.
D. Estimates of the total likely misstatement cannot be made.
Answer» B. Estimates of the total likely misstatement are less than materiality level.
256.

Under check system principle of_________ is followed.

A. Division of labour
B. Division of work
C. Principle of scalar chain
D. Accountancy
Answer» A. Division of labour
257.

This kind of audit is generally conducted between two annual audits.

A. Internal audit
B. Interim audit
C. Final audit
D. Continuous audit
Answer» B. Interim audit
258.

Before the work of audit is commenced, the auditor plans out the whole of audit work is known as –

A. Audit plan
B. Audit note
C. Audit risk
D. Audit program
Answer» D. Audit program
259.

Internal auditor is appointed by –

A. The management
B. The shareholders
C. The government
D. statutory body
Answer» A. The management
260.

The audit that is made compulsory under the statute is called –

A. Statuary audit
B. Partial audit
C. Complete audit
D. Continues audit
Answer» A. Statuary audit
261.

Who among the following can be appointed as the auditor of company?

A. A partner or the director of the company
B. A person of unsound mind
C. Mr. ‘Y’ who owes Rs.500 to company
D. Mr. ‘Z’ who holds the ‘CA’ Certificate
Answer» D. Mr. ‘Z’ who holds the ‘CA’ Certificate
262.

___ is documentary evidence by which the accuracy in the books of accounts may be proved.

A. Cheque
B. Receipt
C. Voucher
D. Statement
Answer» C. Voucher
263.

Sale of Rs.50,000 to ‘A’ was entered as a sale to ‘B’. This is an example of –

A. Error of omission
B. Error of commission
C. Compensating error
D. Error of Principle.
Answer» B. Error of commission
264.

In comparison to the independent auditor an internal auditor is more likely to be concerned with –

A. Cost accountancy system
B. Internal control system
C. Legal compliance
D. Accounting system
Answer» B. Internal control system
265.

The audit program is prepared by –

A. The auditor
B. The client
C. The audit assistants
D. Auditor & his assistants
Answer» D. Auditor & his assistants
266.

Interim audit refers to –

A. Examination of accounts continuously
B. Examination of accounts intermittently
C. Audit work to find out & check interim profits of a company
D. Carrying on audit for bonus purposes at the end of year
Answer» C. Audit work to find out & check interim profits of a company
267.

A company auditor should see that the dividend is paid –

A. After charging depreciation
B. Without charging depreciation
C. Out of capital
D. None of the above.
Answer» A. After charging depreciation
268.

Errors of omission are –

A. Technical errors
B. Error of principle
C. Compensating error
D. none of these
Answer» A. Technical errors
269.

Vouching implies –

A. Inspection of receipts
B. Examination of vouchers to check authenticity of records
C. Surprise checking of accounting records
D. Examining the various assets
Answer» B. Examination of vouchers to check authenticity of records
270.

Undervaluation of stock is –

A. Technical error
B. Compensatory error
C. Error of principle
D. none of these
Answer» C. Error of principle
271.

Verification refers to –

A. Examination of journal & ledger
B. Examination of vouchers related to assets
C. Examining the physical existence & valuation of assets
D. Calculation of valuation of assets
Answer» C. Examining the physical existence & valuation of assets
272.

Valuation of fixed assets is based on the concept –

A. Going concern
B. Money measurement
C. Dual aspect
D. Cost concept.
Answer» A. Going concern
273.

“Auditor is not valuer.” This statement was stated in –

A. Kingston Cotton Mill Case
B. London & General Bank Case
C. Lee VS Neuchatel Co. LTD Case
D. London Oil Storage Co.LTDCase
Answer» A. Kingston Cotton Mill Case
274.

Floating assets are valued at –

A. Cost
B. Market price
C. Cost price or market price whichever is less
D. Cost less than depreciation
Answer» C. Cost price or market price whichever is less
275.

Outstanding expenses should be verified with the help of –

A. Cashbook
B. Balance book
C. Journal proper
D. None of above.
Answer» C. Journal proper
276.

First auditor of the company is appointed by the –

A. Shareholders
B. Central government
C. Company law board
D. Board of directors
Answer» D. Board of directors
277.

The vacancy caused by resignation at a auditor is filled by –

A. Board of directors
B. At the general meeting of shareholders
C. By the central government
D. By the company law board
Answer» B. At the general meeting of shareholders
278.

A special auditor is appointed by the –

A. Shareholders
B. Board of directors
C. Central government
D. CAG
Answer» C. Central government
279.

A remuneration of a company auditor is fixed by the –

A. Shareholders
B. Board of directors
C. Central Government
D. Appointing authority
Answer» D. Appointing authority
280.

Internal auditor has to submit report to –

A. Shareholders
B. Government
C. Company law board
D. none of above
Answer» D. none of above
281.

Auditor in general is –

A. Employee of the company
B. Agent of the company
C. Agent of the shareholders
D. None of the above
Answer» C. Agent of the shareholders
282.

Shares issued for consideration other than cash should be vouched with help of –

A. Directors minutes book
B. Shareholders minute’s book
C. Contract with the party concerned
D. Cash book
Answer» C. Contract with the party concerned
283.

The term Standard Auditing Practices refers –

A. Auditing techniques adopted by auditor for collecting & vouching evidences
B. Test checking
C. Standards of auditing
D. True & fair view
Answer» A. Auditing techniques adopted by auditor for collecting & vouching evidences
284.

AAS refers to –

A. Audit evidence
B. Audit Planning
C. Risk assessments &Internal control
D. Knowledge of business
Answer» D. Knowledge of business
285.

The panel of Auditors of cooperative society is maintained by –

A. Charted Accountant
B. Central Government
C. Registrar
D. Shareholders
Answer» C. Registrar
286.

Banking Regulation Act was passed in the year–

A. 1912
B. 1949
C. 1956
D. 1955.
Answer» B. 1949
287.

Which of the following statements is not correct regarding removal of first auditor before expiry of the term?

A. He is removed at general meeting
B. Shareholders are authorized to do so
C. The approval of central government is required for such removal
D. The provision for such removal is contained in Section 224 (7)
Answer» C. The approval of central government is required for such removal
288.

Retiring auditor does not have right to –

A. Make written representations
B. Get his representation circulated
C. Be heard at the meeting
D. Speak as member of company
Answer» A. Make written representations
289.

According to Section ___ Special Audit is conducted at the central government

A. Section 233(A)
B. Section 233(B)
C. Section 242(A)
D. Section 242(B)
Answer» C. Section 242(A)
290.

Audit of Banks is an example of –

A. Statutory Audit
B. Balance Sheet Audit
C. Concurrent Audit
D. All of above
Answer» D. All of above
291.

Auditor of a _____ company does not have right to visit foreign branches of company.

A. Unlimited Company
B. Manufacturing Company
C. Banking Company
D. Non-Profit making company
Answer» B. Manufacturing Company
292.

Cost Audit under Section 233(B) of The Company Act is _____

A. Voluntary
B. Compulsory
C. Advisable.
D. Avoidable
Answer» C. Advisable.
293.

Internal Auditing Standards are issued by the –

A. International Accounting Standard Board
B. Financial Accounting Standard Board
C. International Audit & Assurance Standard Board
D. Auditing Practices Board
Answer» C. International Audit & Assurance Standard Board
294.

Which of the following is not a duty of an auditor?

A. Duty to report company’s banker
B. Duty to report to the members
C. Duty to sign the audit report
D. Duty to report on any violation of law
Answer» A. Duty to report company’s banker
295.

The main object of vouching is :

A. To prepare trial balance.
B. Conduct routine checking.
C. Verify authenticity & authority of transactions.
D. Checking of vouchers.
Answer» C. Verify authenticity & authority of transactions.
296.

Valuation is the basis of :

A. Verification.
B. Marketing.
C. Internal checking.
D. Vouching.
Answer» A. Verification.
297.

Voucher relates to:

A. Cash receipt.
B. Cash payment.
C. Credit transactions.
D. All the above.
Answer» A. Cash receipt.
298.

Sale of Rs.50,000 to ‘A’ was entered as a sale to ‘B’. This is an example of –

A. Error of omission
B. Error of commission (
C. Compensating error
D. Error of Principle.
Answer» B. Error of commission (
299.

“Auditor is not valuer.” This statement was stated in –

A. Kingston Cotton Mill Case
B. London & General Bank Case
C. Lee VS Neuchatel Co. LTD Case
D. London Oil Storage Co.LTD Case
Answer» A. Kingston Cotton Mill Case
300.

Thevacancy caused by resignation of an auditor is filled by –

A. Board of directors
B. At the general meeting of shareholders
C. By the central government
D. By the company law board
Answer» B. At the general meeting of shareholders
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