200+ Practical Auditing Solved MCQs

1.

Auditing refers to

A. Preparation and checking of account
B. Examination of accounts of business units only
C. Examination of accounts of professional accountants
D. Checking of vouchers
Answer» C. Examination of accounts of professional accountants
2.

Main object of auditing is

A. Detection of errors
B. To find out whether P&L a/c & B/S show true and fair state affairs
C. Detection of frauds
D. Detection and prevention of frauds and errors.
Answer» B. To find out whether P&L a/c & B/S show true and fair state affairs
3.

Auditing is luxury for a

A. Joint stock company
B. Partnership firm
C. Small shop-keeper
D. Government company
Answer» C. Small shop-keeper
4.

Auditing is compulsory for

A. Small scale business enterprises
B. All partnership firms
C. All joint stock companies
D. All proprietary concerns
Answer» C. All joint stock companies
5.

Propriety audit refers to

A. Verification of accounts
B. Examination accounts of propriety concerns
C. Enquiry against justification and necessity of expresses
D. Audit of Govt. companies
Answer» C. Enquiry against justification and necessity of expresses
6.

Propriety is normally undertaken in case of

A. Joint stock company
B. Government company
C. Statutory corporation
D. Govt. departments
Answer» D. Govt. departments
7.

Interim audit refers to

A. Examination of accounts continuously
B. Examination of accounts intermittently
C. Audit work to find out and check interim profits of a company
D. Carrying on audit for bonus purposes at the end of the year
Answer» C. Audit work to find out and check interim profits of a company
8.

Final audit implies

A. Audit of accounts at the end of the year
B. Finally checking of accounts to reveal frauds
C. Audit for submitting report immediately at the end of the year
D. Audit of banking companies
Answer» A. Audit of accounts at the end of the year
9.

A continuous audit is specially needed for

A. Any trading concern
B. Smaller concerns
C. Banking companies
D. Any manufacturing companies
Answer» C. Banking companies
10.

Joint audit implies

A. Audit of two concerns together
B. Audit of joint stock companies
C. Audit of joint sector companies
D. Audit by two firms of C.A
Answer» D. Audit by two firms of C.A
11.

Management audit means

A. Audit undertaken on behalf of the management
B. Evaluating performance of various management processes and functions
C. Audit undertaken on behalf of Govt. to punish management
D. Compulsory audit
Answer» B. Evaluating performance of various management processes and functions
12.

Systems audit implies

A. Systematic examination of accounts
B. Audit undertaken to improve auditing systems
C. Enquiring accounting and control systems
D. Checking the performance of management
Answer» C. Enquiring accounting and control systems
13.

Internal audit means

A. Audit undertaken to ascertain truth and fairness of state of affairs
B. Audit undertaken internally to evaluate management functions
C. Audit undertaken by employees of the organization to check financial irregularities
D. Audit by independent auditor to improve internal affairs
Answer» C. Audit undertaken by employees of the organization to check financial irregularities
14.

Internal audit is

A. Compulsory for a company with paid-up capital of Rs. 25 lakh and above
B. Voluntary for a company
C. Not necessary for a company
D. Necessary for a company
Answer» B. Voluntary for a company
15.

Internal audit is undertaken

A. By independent auditor
B. Statutorily appointed auditor
C. By a person appointed by the management
D. By Government auditor
Answer» C. By a person appointed by the management
16.

Internal auditor is appointed by the

A. Management
B. Shareholders
C. Government
D. C & A-G
Answer» A. Management
17.

The object of internal check is to

A. Control wastage of resources
B. Prevent errors and frauds
C. Verify the cash receipts and payments
D. Facilitate quick decision by the management
Answer» B. Prevent errors and frauds
18.

Effective internal check system reduces

A. The liability of auditor
B. Work of auditor
C. Both work as well as auditor
D. Responsibilities of an auditor
Answer» B. Work of auditor
19.

Internal check is a part of

A. Internal audit
B. Internal accounting
C. External audit
D. Internal control
Answer» D. Internal control
20.

Internal check is carried on by

A. Special staff
B. Internal auditor
C. Accountant
D. None of the above
Answer» D. None of the above
21.

Internal check is suitable for

A. Larger concerns
B. Smaller concerns
C. Petty shop- keepers
D. None of the above
Answer» A. Larger concerns
22.

Internal check is carried on by

A. Staff specially appointed for the purpose
B. Internal auditor
C. The members of the staff among themselves
D. Supervisor of the staff
Answer» C. The members of the staff among themselves
23.

Internal check is essential for

A. Petty traders
B. Cash transactions in a large concern
C. A concern using automatic equipments
D. None of the above
Answer» B. Cash transactions in a large concern
24.

Misappropriation of goods may be checked by

A. Proper supervision over stock
B. Checking of employees
C. Punishment of employees
D. None of the above
Answer» A. Proper supervision over stock
25.

Window dressing implies

A. Curtailment of expenses
B. Checking wastages
C. Under- valuation of assets
D. Over- valuation of assets
Answer» D. Over- valuation of assets
26.

Falsification of accounts is undertaken by

A. Auditors
B. Clerks
C. Accountants
D. Responsible officials
Answer» D. Responsible officials
27.

Errors of omission are

A. Technical errors
B. Error of principle
C. Compensating errors
D. None of the above
Answer» A. Technical errors
28.

Test checking refers to

A. Testing of accounting records
B. Testing of honesty of employees
C. Intensive checking of a selected number of transactions
D. Checking of all transactions recorded
Answer» C. Intensive checking of a selected number of transactions
29.

Test checking should not be applied to

A. Sales book
B. Purchase book
C. Bank reconciliation statement
D. Bills book
Answer» C. Bank reconciliation statement
30.

Test checking should not be applied to

A. Purchase book
B. Sales book
C. Stock book
D. Cash book
Answer» D. Cash book
31.

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
32.

Payment for goods purchased should be vouched with the help of

A. Creditors statement
B. Correspondence with suppliers
C. Cash memos
D. Ledger accounts
Answer» A. Creditors statement
33.

Payment for wages should be vouched with the help of

A. Piece work statement
B. Wage sheets
C. Minute book
D. Bank pass book
Answer» B. Wage sheets
34.

Payment for building purchased should be vouched with the help of

A. Title deed
B. Correspondence with Brokers
C. Building account
D. Cash book
Answer» A. Title deed
35.

Investment should be vouched with the help of

A. Commission book
B. Brokers book
C. Sales deeds
D. Minute book
Answer» B. Brokers book
36.

Receipt from debtors should be vouched with the help of

A. Counterfoil Receipts cash book
B. Suppliers statement
C. Sales Deeds
D. General Ledger
Answer» A. Counterfoil Receipts cash book
37.

Receipt from sale of investment should be vouched with the help of

A. Brokers Budget Notes
B. Brokers Sold Notes
C. Minute Book
D. Inventory of investment
Answer» B. Brokers Sold Notes
38.

Purchases returns should be vouched with the help of

A. Bought Notes
B. Credit Notes
C. Goods inward Book
D. Cash Book
Answer» B. Credit Notes
39.

Verification refers to

A. Examination of journal and ledger
B. Examination of vouchers related to assets
C. Examining the physical existence and valuation of assets
D. Calculation of value of assets
Answer» C. Examining the physical existence and valuation of assets
40.

Object of verification of assets

A. Physical verification of assets
B. Checking value of assets
C. Examining the authority of their acquisition
D. All of the above
Answer» D. All of the above
41.

Which of the following statements is correct?

A. Valuation is a part of verification
B. Verification is a part of valuation
C. Valuation has nothing to do with verification
D. Auditor is a valuer
Answer» A. Valuation is a part of verification
42.

Stock should be valued at

A. Cost
B. Market price
C. Cost price or market price whichever is lower
D. Cost less depreciation
Answer» C. Cost price or market price whichever is lower
43.

Valuation of Fixed Assets is based on the concept

A. Going concern
B. Conservation
C. Money measurement
D. Dual aspect
Answer» A. Going concern
44.

Valuation means

A. Calculating value of assets
B. Checking the value of assets
C. Checking the physical existence of assets
D. Examining the authenticity of assets
Answer» B. Checking the value of assets
45.

“ Auditor is not valuer” was stated in

A. Kingston Cotton Mills case
B. London & General Bank case
C. Lee . V . Neuchatel Co. Ltd case
D. London oil Storage Co. case
Answer» A. Kingston Cotton Mills case
46.

Fixed assets are valued at

A. Cost
B. Market price
C. Cost price or market price whichever is less
D. Cost less depreciation
Answer» D. Cost less depreciation
47.

Floating assets are valued at

A. Cost
B. Market price
C. Cost price or market price whichever is less
D. Cost less depreciation
Answer» C. Cost price or market price whichever is less
48.

The scope of work of internal audit is decided by the

A. Share holders
B. Management
C. To improve financial control
D. All of the above
Answer» D. All of the above
49.

Outstanding expenses should be verified with the help of

A. Cash book
B. Balance book
C. Journal proper
D. None of the above
Answer» C. Journal proper
50.

Book debts should be verified with the help of

A. Balance sheet
B. Amount received from Debtors
C. Debtors schedule
D. Certificate from the management
Answer» C. Debtors schedule
51.

Investments in hand should be verified with the help of

A. Schedule of investments
B. Balance sheet
C. Inspection of securities
D. Certificate from the bank
Answer» C. Inspection of securities
52.

First auditor of a company is appointed by the

A. Shareholders
B. Central Govt.
C. Company Law Board
D. Board of Directors
Answer» D. Board of Directors
53.

Which of the following persons is qualified to be a company auditor?

A. An employee of the company
B. A body corporate
C. A person who is indebted to the company for an amount exceeding Rs. 1000
D. A practicing chartered accountant
Answer» D. A practicing chartered accountant
54.

The first auditor of a company will hold office

A. For a period of one year
B. Till holding of statutory meeting
C. Till the conclusion of first annual general meeting
D. Till a new auditor is appointed
Answer» C. Till the conclusion of first annual general meeting
55.

Normally, a company auditor is appointed by the

A. Central Government
B. Shareholders
C. Board of Directors
D. Company Law board
Answer» B. Shareholders
56.

An auditor in a casual vacancy is appointed by the

A. Board of Directors
B. Shareholders
C. Central Government
D. Company Law board
Answer» A. Board of Directors
57.

If an auditor is not appointed at annual general meeting, he is appointed by the

A. The Central Government
B. Board of Directors
C. Shareholders
D. Company Law board
Answer» A. The Central Government
58.

A vacancy caused by resignation of the 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
59.

A special auditor is appointed by the

A. Shareholders
B. Board of Directors
C. Central Government
D. C & A - G
Answer» C. Central Government
60.

A government Co. auditor may be appointed by the

A. C & A – G
B. Shareholders
C. Central Government
D. None of the above
Answer» A. C & A – G
61.

A company auditor can be removed before expiry of his term by

A. Shareholders
B. Board of Directors
C. Central Government
D. State Government
Answer» A. Shareholders
62.

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
63.

A company auditor, in general has to submit his report to

A. Shareholders
B. Board of Directors
C. Central Government
D. C & A – G
Answer» A. Shareholders
64.

An auditor of Government company has to submit his report to the

A. Shareholders
B. Central Government
C. C & A – G
D. Ministry concerned
Answer» B. Central Government
65.

Internal auditor has to submit report to

A. Shareholders
B. Government
C. Company Law board
D. None of the above
Answer» D. None of the above
66.

Auditor should be dutiful like a

A. A watch dog
B. A blood hound
C. A detective
D. An insurer
Answer» A. A watch dog
67.

Auditor, in general is an

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
68.

While checking allotment of shares the auditor should see that it is made within

A. 100 days of issue of prospectus
B. 120 days of issue of prospectus
C. 150 days of issue of prospectus
D. 80 days of issue of prospectus
Answer» B. 120 days of issue of prospectus
69.

Which of the following percentage of nominal amount of shares should be received with application

A. 10
B. 15
C. 5
D. 6
Answer» C. 5
70.

While checking allotment, auditor should see that amount

A. Equal to estimated fixed capital is received
B. Equal to estimated working capital is received
C. Necessary for purchase of land & building has been received
D. None of the above
Answer» D. None of the above
71.

For restriction regarding allotment of shares, the auditor should refer to section

A. 25
B. 75
C. 64
D. 69
Answer» D. 69
72.

For checking that allotment of shares has been properly made, an auditor should refer to

A. Cash Book
B. Shares Ledger
C. Directors minutes book
D. Shareholders minutes Book
Answer» C. Directors minutes book
73.

Auditor should see that the return of allotment has been sent to Registrar within

A. 1 month
B. 2 months
C. 3 months
D. 40 days
Answer» A. 1 month
74.

Application money should not be withdrawn unless

A. Allotment is made
B. Cash book has been prepared
C. Certificate to commence business obtained
D. Certificate of incorporation obtained
Answer» C. Certificate to commence business obtained
75.

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

A. Directors minutes book
B. Shareholders minutes book
C. Contract with the party concerned
D. Cash book
Answer» C. Contract with the party concerned
76.

A company can issue Redeemable Preference shares, if authorized by

A. Memorandum of association
B. Articles of association
C. Companies Act, 1956
D. None of the above
Answer» B. Articles of association
77.

Auditor should see that amount received for premium on issue of shares should be shown in

A. Subscribed capital
B. Capital Reserve Account
C. Share Premium account
D. Paid- up capital account
Answer» C. Share Premium account
78.

Share premium account should be shown in the Balance sheet under

A. Paid-up capital
B. Subscribed capital
C. Reserves & surplus
D. Reserved capital
Answer» C. Reserves & surplus
79.

Amount of share premium may be utilized for

A. Payment of dividend
B. Writing of preliminary expenses
C. Routine expenses
D. Purchase of fixed assets
Answer» B. Writing of preliminary expenses
80.

Shares can be issued at discount under section

A. 76
B. 75
C. 79
D. 89
Answer» C. 79
81.

Interest on calls paid in advance, according to Table A, should not exceed

A. 6%
B. 5%
C. 10%
D. 14%
Answer» A. 6%
82.

Shares can be issued at premium, under section

A. 76
B. 75
C. 78
D. 79
Answer» C. 78
83.

A company can accept calls in advance from its shareholders under section

A. 82
B. 79
C. 92
D. 78
Answer» C. 92
84.

Shares can be issued at discount only after

A. 2 years of the commencement of the business
B. 1 year of the commencement of the business
C. 3 years of the commencement of the business
D. 5 years of the commencement of the business
Answer» B. 1 year of the commencement of the business
85.

With regard to issue of share warrants to the bearers, the auditor should see that is it

A. Permitted by Memorandum of Association
B. Sanctioned by the Central Government
C. Permitted by the Board of Directors
D. None of the above
Answer» B. Sanctioned by the Central Government
86.

For the for festure of shares, the auditor should check that it is permitted

A. by Memorandum of Association
B. by articles of association
C. under Companies Act, 1956
D. None of the above
Answer» B. by articles of association
87.

Premium received on issue of shares, later forfeited, should be transferred to

A. Capital reserve
B. Shares forfeited Account
C. Capital Account
D. None of the above
Answer» D. None of the above
88.

With regard to issue of share certificates, the auditor should refer to section

A. 110
B. 113
C. 114
D. 123
Answer» B. 113
89.

Increase in share capital is permitted by

A. Memorandum of Association
B. Articles of association
C. Court
D. Companies Act, 1956
Answer» B. Articles of association
90.

Divisible profit should not include

A. Interest on capital
B. Capital
C. Depreciation
D. None of the above
Answer» D. None of the above
91.

Dividend can not be paid out of

A. Capital profit
B. Capital receipts
C. Revenue receipts
D. None of the above
Answer» B. Capital receipts
92.

Capital profit imply profit earned

A. Through business transaction
B. From capital
C. From sale of fixed assets
D. From sale of current assets
Answer» C. From sale of fixed assets
93.

Capital profits

A. Can be paid by way of dividends
B. Cannot paid by way of dividends
C. Can be paid by way of dividend under certain conditions
D. None of the above
Answer» C. Can be paid by way of dividend under certain conditions
94.

If there is capital loss, the auditor should

A. Not allow payment of dividend
B. Allow payment of dividends
C. Allow payment of dividends after making such losses good
D. None of the above
Answer» B. Allow payment of dividends
95.

A company auditor should see that the dividend should be paid

A. After charging depreciation
B. Without charging depreciation
C. Out of capital
D. None of the above
Answer» A. After charging depreciation
96.

In his report, the auditor gives his

A. Judgment
B. Opinion
C. Guarantee to correctness of accounts
D. True state of affairs
Answer» B. Opinion
97.

Civil liability of an auditor implies liability for

A. Misappropriation of cash
B. Misappropriation of goods
C. Fraud
D. Misfeasance
Answer» D. Misfeasance
98.

An auditor can be held liable under companies Act 1949 for

A. Negligence
B. Criminal offence
C. Professional misconduct
D. Breach of contract
Answer» C. Professional misconduct
99.

Investigation of books of accounts and records is :

A. Not legally compulsory
B. Compulsory
C. Compulsory as per companies act
D. Compulsory as Income Tax Act
Answer» A. Not legally compulsory
100.

Investigation is carries on behalf of

A. Manager
B. Employee
C. Client
D. On behalf of owner and third parties
Answer» D. On behalf of owner and third parties
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