AUDITING Multiple Choice Questions with Answers:-
1) Various types of quality audits are:
A) product
B) process
C) management (system)
D) registration (certification)
E) All of the above
ANS: E
2) When the auditor is an employee of the organization being audited (auditee), the audit is classified as an …….. quality audit.
A) internal
B) external
C) compliance
D) Both A & B
ANS: A
3) The most comprehensive type of audit is the ……… system audit, which examines the suitability and effectiveness of the system as a whole.
A) quantity
B) quality
C) Preliminary
D) sequential
ANS: B
4) Each of the three parties involved in an audit ……………………. plays a role that contributes to its success.
A) the client, the auditor, and the auditor
B) the client, the auditor, and the audience
C) the client, the moderator, and the auditee
D) the client, the auditor, and the auditee
ANS: D
5) An audit is usually conducted in three steps:
(1) A pre-examination or opening meeting with the auditee marks the beginning of the process.
(2) involves a suitability audit of the documented procedures against the selected reference standard.
(3) the auditor examines in depth the implementation of the quality system.
A) True
B) False
ANS: A
6) The audit final report should include, at a minimum, the following:
(choose the one NOT required)
1. Type of audit conducted
2. Characteristics of audit
3. Identification of involved parties: auditor, audited, and third party
4. Audit team members
5. Critical nonconformities and other observations
6. Audit standards and reference documents used
7. Determination of proper corrective action(s)
8. Duration of audit
A) 1
B) 2
C) 4
D) 8
ANS: B
7) The time required and costs involved in an external audit are much higher as compared to internal audits.
A) True
B) False
ANS: A
8) An audit is a fact-finding process that compares actual results with ………………….
A) specified standards and plans
B) expected results
C) premature results
D) preliminary results
ANS: A
9) The ……… is also expected to provide the resources needed and select staff members to accompany the auditors.
A) auditor
B) client
C) internal auditor
D) auditee
ANS: D
10) For the benefit of the organization, quality auditing should only report non-conformances and corrective actions, but should not highlight areas of good practice.
A) True
B) False
ANS: B
11) THE RISK OF MANAGEMENT FRAUD INCREASES IN THE PRESENCE OF:
A) FREQUENT CHANGES IN SUPPLIES
B) IMPROVED INTERNAL CONTROL SYSTEM
C) SUBSTANTIAL INCREASES IN SALES
D) MANAGEMENT INCENTIVE SYSTEM BASED ON SALES DONE IN A QUARTER
ANS: D
12. AUDITING STANDARDS DIFFER FROM AUDIT PROCEDURES IN THAT PROCEDURES RELATE TO
A) AUDIT ASSUMPTIONS
B) ACTS TO BE PERFORMED
C) QUALITY CRITERION
D) METHODS OF WORK
ANS: B
13. WHICH OF THE FOLLOWING FACTORS LIKELY TO BE IDENTIFIED AS A FRAUD FACTOR BY THE AUDITOR?
A) THE COMPANY IS PLANNING AN INITIAL PUBLIC OFFER OF QUALITY SHARES TO RAISE ADDITIONAL CAPITAL FOR EXPANSION.
B) BANK RECONCILIATION STATEMENT INCLUDES DEPOSITSINTRANSIT.
C) PLANT AND MACHINERY IS SOLD AT A LOSS.
D) THE COMPANY HAS MADE POLITICAL CONTRIBUTIONS.
ANS: A
14. THE MOST DIFFICULT TYPE OF MISSTATEMENT TO DETECT FRAUD IS BASED ON:
A) RELATED PARTY PURCHASES
B) RELATED PARTY SALES
C) THE RESTATEMENT OF SALES
D) OMISSION OF A SALES TRANSACTION FROM BEING RECORDED.
ANS: D
15. WHICH OF THE FOLLOWING STATEMENTS IS CORRECT CONCERNING THE REQUIRED DOCUMENTATION IN?
WORKING PAPERS OF FRAUD RISK ASSESSMENT UNDERTAKEN BY THE AUDITOR.
A) AL RISK FACTORS AS MENTIONED IN AAS4, SHOULD BE CONSIDERED AND DOCUMENTED ALONG WITH RESPONSE TO THEM.
B) DOCUMENT THE IDENTIFICATION OF FRAUD RISK FACTORS ALONG WITH RESPONSE TO THEM.
C) DOCUMENT MATERIAL FRAUD, RISK FACTORS AND RESPONSE TO THEM.
D) NO DOCUMENTATION IN REQUIRED.
ANS: B
AUDITING Objective Questions Pdf free download::
16. WHICH OF THE FOLLOWING IS THE MOST APPROPRIATE POTENTIAL REACTION OF THE AUDITOR TO HIS?
ASSESSMENT THAT THE RISK OF MATERIAL MISSTATEMENT DUE TO FRAUD IS HIGH IN RELATION TO EXISTENCE OF INVENTORY?
A) VISIT LOCATION ON SURPRISE BASIS TO OBSERVE TEST COUNTS
B) REQUEST INVENTORY COUNT AT A DATE CLOSE TO YEAREND
C) VOUCH GOODS SENT ON APPROVAL VERY CAREFUL Y
D) PERFORM ANALYTICAL PROCEDURES.
17. WHICH OF THE FOLLOWING IS NOT LIKELY TO BE A FRAUD RISK FACTOR RELATING TO MANAGEMENT’S? CHARACTERISTICS
A) TAX EVASION B) FAILURE TO CORRECT KNOWN WEAKNESS IN INTERNAL CONTROL SYSTEM
C) ADOPTION OF CONSERVATIVE ACCOUNTING PRINCIPLES
D) HIGH MANAGEMENT TURNOVER
18. PROFESSIONAL SKEPTICISM REQUIRES THAT THE AUDITOR ASSUME THAT MANAGEMENT IS
A) REASONABLY HONEST
B) NEITHER HONEST NOR DISHONEST
C) NOT NECESSARILY HONEST
D) DISHONEST UNLESS PROVED OTHERWISE
19. WHICH OF THE FOLLOWING INFORMATION SHOULD A SUCCESSOR AUDITOR OBTAIN DURING THE INQUIRY OF?
THE PREDECESSOR AUDITOR BEFORE ACCEPTING ENGAGEMENT?
I) INFORMATION ABOUT INTEGRITY OF MANAGEMENT
II) DISAGREEMENT WITH MANAGEMENT CONCERNING AUDITING PROCEDURES
II) REVIEW OF INTERNAL CONTROL SYSTEM.
IV) ORGANIZATION STRUCTURE
A) (I) AND (I) B) (I) AND (II) C) (I), (I) AND (II) D) I) AND (II)
20. THE AUDIT ENGAGEMENT LETTER, GENERAL Y, SHOULD INCLUDE A REFERENCE TO EACH OF THE FOLLOWING EXCEPT
A) LIMITATIONS OF AUDITING
B) RESPONSIBILITIES OF MANAGEMENT WITH RESPECT TO AUDIT WORK
C) EXPECTATION OF RECEIVING A WRITTEN MANAGEMENT REPRESENTATION LETTER.
D) A DESCRIPTION OF THE AUDITOR’S METHOD OF SAMPLE SELECTION.
21. THE USE OF AN AUDIT ENGAGEMENT LETTER IS THE BEST METHOD OF ASSURING THE AUDITOR WILL HAVE WHICH OF THE FOLLOWING?
A) AUDITOR WILL OBTAIN SUFFICIENT APPROPRIATE AUDIT EVIDENCE.
B) MANAGEMENT REPRESENTATION LETTER
C) ACCESS TO ALL BOOKS, ACCOUNTS, AND VOUCHERS REQUIRED FOR AUDIT PURPOSE
D) COOPERATION FROM OTHER AUDITORS
22. THE USE OF AN AUDIT ENGAGEMENT LETTER IS THE BEST METHOD OF DOCUMENTING
I) THE REQUIRED COMMUNICATION OF SIGNIFICANT DEFICIENCIES IN INTERNAL CONTROL
II) SIGNIFICANTLY HIGHER CONTROL RISK THAN THAT ASSESSED IN PRIOR AUDIT.
II) OBJECTIVE AND SCOPE OF AUDITOR’S WORK
IV) NOTIFICATION OF ANY CHANGES IN THE ORIGINAL ARRANGEMENTS OF THE AUDIT.
A) (I) AND (I) B) (I) AND (II) C) I AND (IV) D) (I I AND (IV)
23. AN AUDITOR WHO ACCEPTS AN AUDIT BUT DOES NOT POSSESS THE INDUSTRY EXPERTISE OF THE BUSINESS ENTITY SHOULD
A) ENGAGE EXPERTS
B) OBTAIN KNOWLEDGE OF MATTERS THAT RELATE TO THE NATURE OF ENTITY’S BUSINESS
C) INFORM MANAGEMENT ABOUT IT
D) TAKE HELP OF OTHER AUDITORS
24. THE LEAST IMPORTANT ELEMENT IN THE EVALUATION OF AN AUDIT FIRM’S SYSTEM OF QUALITY CONTROL WOULD RELATE TO
A) ASSIGNMENT OF AUDIT ASSISTANTS
B) SYSTEM OF DETERMINING AUDIT FEES
C) CONSULTATION WITH EXPERTS
D) CONFIDENTIALITY OF CLIENT’S INFORMATION
25. THE PRIMARY PURPOSE OF ESTABLISHING QUALITY CONTROL POLICIES AND PROCEDURES FOR DECIDING ON CLIENT EVALUATION IS TO
A) ENSURE ADHERENCE TO GENERAL Y ACCEPTED AUDITING STANDARDS
B) ACCEPTANCE OR RETENTION OF CLIENTS WHOSE MANAGEMENT DOES NOT LACK INTEGRITY
C) ENSURE AUDIT FEES IS CHARGED ACCORDING TO THE TYPE OF AUDIT WORK ASSIGNED
D) ALL OF THE ABOVE
26. WHICH OF THE FOLLOWING IS NOT A QUALITY CONTROL CONSIDERATION ON ACCEPTING A NEW CLIENT?
A) AVAILABILITY OF AUDIT ASSISTANTS WITH NECESSARY SKILL AND COMPETENCE.
B) PROVISION OF OTHER SERVICES TO THE CLIENT WHICH MAY IMPAIR INDEPENDENCE
C) PREDECESSOR AUDITOR’S ADVICE AS TO WHETHER AUDIT FEES WERE PAID PROMPTLY
D) REVIEW OF AUDIT WORK DONE BY ONE PARTNER BY THE OTHER
27. AN AUDITOR OBTAINS KNOWLEDGE ABOUT A NEW CLIENT’S BUSINESS AND ITS INDUSTRY TO
A) MAKE CONSTRUCTIVE SUGGESTIONS CONCERNING IMPROVEMENTS TO THE CLIENT’S INTERNAL CONTROL SYSTEM
B) EVALUATE THE APPROPRIATENESS OF AUDIT EVIDENCE OBTAINED
C) UNDERSTAND THE EVENTS AND TRANSACTIONS THAT MAY HAVE AN EFFECT ON CLIENT’S FINANCIAL STATEMENTS.
D) ALL OF THE ABOVE
ANS::
16. A 17. C 18. B 19. A 20. D 21. C 22. D 23. B 24. B 25. B 26. C 27. c