AUDITING

QUIZ

RULES OF THE QUIZ

Quiz contains Multiple Choice questions.

The Quiz contains 60 questions based on
various concepts.
Three teams will be created
For every correct answer +10 and -5 for wrong
answer. Pass on will be allowed to next team
and +5 for right answer and -5 for wrong answer.
Time allowed is 20 Seconds/question to answer.

1.Financial statements need not

to be prepared in accordance
with:
a)Relevant statutory requirements
b) Accounting standards issued by the
Institute of Chartered Accountants of
India
c) Guidance Notes issued by the
Institute of Chartered Accountants of
India
d) Internal policies laid down by the
management of the company.

ANSWER
D) Internal
policies laid down
by the
management of

2) If the financial statements

are prepared in accordance
with the required financial
reporting framework, the
auditor gives an opinion
that the financial
statements are :
a) Are reliable and dependable
b) Are correct and fair
c) Presenting "a true and fair view"
d) Are perfectly right

ANSWER
C) Give "a true
and fair
view"

3. The term "General

Purpose Financial
Statements" never
includes.
a)A cash flow statement
b) Statements and explanatory
notes which form part thereof
c)Statement from the
accountant of the company.
d) Supplementary schedules and
information based on such
statements.

ANSWER
C) Statement
from the
accountant of the
company.

4. Which of the
following errors is an
error of principle?
a)Repairs to vehicle have been
debited to Motor Car Account
b)b) Sale of Rs. 21,342 has
been recorded as Rs. 21,324
c)Repairs to vehicle have been
credited to Motor Car Account
d)None of these

ANSWER
A) Repairs to
vehicle have been
debited to Motor
Car Account

5. Which of the following

errors will affect the Trial
Balance?
a)Installation charges paid on new
machinery have been debited to
Repairs Account.
b)The total of sales journal is
Rs.21,000 short
c) Repairs to building have been
capitalized and debited to Building
A/c.
d) None of these

ANSWER
B) The total of
sales journal is
Rs.21,000 short

6. The total of Purchase Book was not

posted to the ledger. This is
a)Error of Omission
b)b) Error of Principle
c)c) Error of Commission d
d)) None of the above

ANSWER
a) Error of
Omission

7. Sales to SRK of Rs.12311

posted to his account as
Rs.13211. This is
a)Error of Principle
b) Error of Commission
c) Error of Omission
d) None of the above

ANSWER
B) Error of
Commission

8. Goods of value of Rs.2311 were

returned by SRK and were taken into
stock on the same date but no entry
was made in the books. This is

a)Error of Omission
b)Error of Principle
c) Error of Commission
d) None of the above

ANSWER

A) Error of Omissio

9. 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

ANSWER
A) specified
standards and
plans

10. Which of the following is

incorrect about auditor opinion on
financial statements?
a)His opinion is no indication to future
viability of business.
b) The auditor should express as opinion
on financial statements.
c)) He is responsible for detection and
prevention of frauds and errors in
financial statements.
d) He should verify if recognized

ANSWER
C) He is
responsible for
detection and
prevention of
frauds and errors

11. As per SA 240, if auditor detects an

errors then
a) He should communicate it to the shareholders.
b) He should submit his resignation.
c) The auditor should ensure financial statements
are adjusted for detected errors
d) He should call a meeting of board of directors .

ANSWER
C) The auditor
should ensure
financial
statements are
adjusted for

12. Which of the following is not a

limitation of audit as per SA 240?
a)An auditor cannot rely upon experts.
b)c) Audit evidence is not conclusive.
c)b) Auditor cannot discover all frauds
d)d) Auditor cannot audit all transactions

ANSWER
A) An auditor
cannot rely upon
experts

13. The risk of fraud increases when

(a) The size of the company is very big.
(b) Auditors remain the same for many
years.
(c) There are many people in the accounts
department.
(d) Management is in the hands of a single
person.

ANSWER
D) Management
is in the hands of
a single person.

14. Audit of banks is an

example of
(a) Statutory audit
(b) Balance sheet audit
(c) Internal Audit
(d) All of the above

ANSWER
B) Balance sheet
audit

15. Which of the following

statements is not correct
about materiality?
a) Materiality provides a
quantitative cut-off point.
b) SA 320 deals with materiality.
c) Materiality is a matter of
professional judgment.
d) Auditor should consider
materiality when drafting the
audit report.

ANSWER
D) Auditor should
consider
materiality when
drafting the audit

16) Internal Auditor is

appointed by
a) the management
b) the government
c) The statutory auditor
d) the shareholders

ANSWER
A)the
management

17) Which of the following is

an objective of internal audit:
a) Ensure proper accounting
controls
b) Detection and prevention of
errors and frauds
c) Physical verification of assets
d) All of the above.

ANSWER
D) All of the
above.

18)Which of the following are

benefits of audit planning
(a) Appropriate attention to all
important areas
(b) Proper control of audit
(c) Proper allocation of work
(d) All of the above.

ANSWER
D) All of the
above.

19) Each of the three parties

involved in an
audit ......................... plays a role
that contributes to its success.
A) the client, the auditor, and the auditeer
B) the client, the auditor, and the audite
C) the client, the moderator, and the auditee
D) the client, the auditor, and the auditee

ANSWER
D) the client,
the auditor, and
the auditee

Fill in the
blanks

20)
.audit is suitable when
number of transactions is very
large
1- Final
2-Statutory
3-Continuous
4-Internal

ANSWE
R
Continuous

21) __________ audit means an audit at

regular intervals throughout the
accounting year
1- Final
2-Regular
3-Continuous
4-Internal

ANSWE
R
. Continuous

22) _________audit means an audit taken

up after the end of the accounting
year.
1- Final
2-Statutory
3-Continuous
4-Internal

ANSWER
Final

23) SA ________ deals with the concept of

materiality.
1-520
2-320
3-210
4-125

ANSWE
R
320

24) SA _______ deals with the concept

of going concern.
1-520
2-320
3-570
4-125

ANSWER
570

25. Audit of company is

___________ audit.
1- Final
2-Statutory
3-Continuous
4-Internal

ANSWER
. statutory

26)_________ refers to presentation of

accounts in a way that it shows a better
positional than the actual position.
1-Window dressing
2-Interim presentation
3-Both 1 and 2
4-None of the above

ANSWER
. Window dressing

27) Public Limited Companies listed on

the stock exchange have to declare
their results on a . basis.
1-Annually
2-Quarterly
3-Monthly
4-Half yearly

ANSWER
quarterly

28) The primary object of an audit is to

enable the auditor to express an ..
1-decision
2-view
3-opinion
4-none of the above

ANSWER
opinion

29) .audit is the most common

type of audit
1- Final
2-Statutory
3-Continuous
4-Internal

ANSWE
R
Final

30) THE word 'Audit' is

originated from the Latin
word which means
'to hear'.
1- Audire
2-Adire
3-Auduire
4- Auditar

ANSWER

'audire'

31) is the "father " of the

curriculum management audit
and curriculum mapping.
1-Fenwrck w. English
2-Spicer and Pegler
3-Maritona Mayer
4- Jeff Bezoz

ANSWER

Fenwrck w. english

32)........is really a false

representation or entry which is
made always intentionally with
some mischievous objectives.
1-Error
2- Fraud
3-Crime
4-Mistake

ANSWER
Fraud

33) Auditing shows the profitability

and financial position of an
organization which creates faith of
public over the business. Thus,
auditing helps to increase
..............of an organization?
1- Worthiness
2-Returns
3-Goodwill
4-Income

ANSWER

Goodwill

State whether
true or false,
giving
reasons, in

34) It is not the objective of the

audit to give an
opinion on the future prospect
of business.
A) TRUE
B) FALSE

Answer :
TRUE

35)
A unqualified audit report
means that the
business will be profitable in
future

A) TRUE
B) FALSE

ANSW
ER

False;

According to SA 200, it is not the objective of

the audit to give an opinion on the future
prospects of business. Therefore, even if audit
report is an unqualified audit report, it does not
indicate whether the business will continue to
be profitable in future.

36) Error of duplication causes

difference in the trial balance.

A) TRUE
B) FALSE

NSWE
R:

False;

Difference in trial balance can be caused

only by one-sided error like error of partial
omission, error of posting and casting. Error of
duplication is a two sided error. Hence, it does
not cause difference in the Trial Balance.

37) If the amount is posted in the wrong

account or it is written on the wrong
side of an account, it is called as an
error of commission.
A) TRUE
B) FALSE

ANSWE
R:
TRUE

38) A secret reserve is legally

allowed to be created by banks.
A) TRUE
B) FALSE

ANSWE
R:
TRUE

39) Balance sheet Audit does not

involve an examination of the
various items in the Profit and Loss
Account

A) TRUE
B) FALSE

ANSWER
:
False;

Balance sheet Audit involves

examination of
significant items which affect the
balance sheet.

40) Auditing of accounts is

compulsory in a sole
proprietorship firm
A) TRUE
B) FALSE

ANSWE
R:
False;

There is no law specifically governing

a sole
proprietorship firm and no other law
makes the audit of
sole proprietorship firms compulsory.
Hence, it is not
compulsory.

41) The auditor must not disclose any

information acquired by him in the
course of his work without the written
permission of the Institute of Chartered
Accountant of India.
A) TRUE
B) FALSE

ANSWER
:
False;

As per SA 200, the auditor must not

disclose any
information acquired by him in the
course of his work
to any third party. However, he may
disclose
information to a third party only with
consent of the
auditee. He need not consult the
Institute of Chartered
Accountants of India.

42) The opinion of the auditor should

be unbiased and independent.
A) TRUE
B) FALSE

ANSWE
R:) TRUE
A

43) Window dressing can be done by

overstatement of assets and
understatement of liabilities.
A) TRUE
B) FALSE

ANSWER
:
A) TRUE

44) The auditor should act like a

bloodhound and not a watchdog

A) TRUE
B) FALSE

ANSWE
R:
False;

The auditor should act like a

watchdog and not a
bloodhound

45) Interim audit of a company is

compulsory under the Companies Act,
1956.

A) TRUE
B) FALSE

ANSWER
:
False;

Interim audit is conducted

between the annual
audits. Annual audits are
compulsory under the
Companies Act, 1956. However,
interim audit is
not compulsory.

46) 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

ANSWE
R
True

Feature based
questions

47) These features highlight

the characteristics of which
error
? items like purchases or sales which
There are
ought to have been recorded in the books of
accounts but due to oversight or carelessness,
they have been wholly omitted from being
recorded.
The errors which arise due to non-recording of
certain items will not affect the Trial Balance
and, the omission can be detected by careful
scrutiny
1-Error of commission
2-Error of ommission
3-Error of compensation
4-Error of principle

ANSWER

Error of ommission

48) These features

highlight the
characteristics of which
Usually arise through negligence in the
error
?recording some business
matter of

transactions in the books of accounts.

When a transaction though recorded in the
journal has been wrongly entered in the books
of original entry, error of commission is said to
arise, e.g., a sale of Rs. 100 is entered in the
sales book as Rs. 10. Such an error does not
affect the Trial Balance.
1-Error of commission
2-Error of ommission
3-Error of compensation
4-Error of principle

ANSWER
Error of commission

49) These features

highlight the
characteristics of which
when an?error is counterbalanced or
error

compensated by any other error or errors so

that the adverse effect of one on debit or
credit side is neutralised by that of another
on credit or debit side
Such errors also creep up when an under
casting of an account is counterbalanced by
the overcastting of another account to the
same extent and on the same side.
1-Error of commission
2-Error of ommission
3-Error of compensation
4-Error of principle

ANSWER
Error of compensation

50) These features

highlight the
characteristics of which
generally
error
? arise out of a disregard for the
principles of accountancy. Such errors
are sometimes committed intentionally
to falsify and manipulate accounts with
an objective of showing more or less
profits than their actual figures.

1-Error of commission
2-Error of ommission
3-Error of compensation
4-Error of principle

ANSWER

Error of principle

51) These features

highlight the
characteristics of which
error
? of cash receipts and petty
The theft

cash.
The theft of cheques and other
negotiable instruments.
Payments made to fictitious creditors
or workmen
1-Missappropriation of accounts
2- Missappropriation of cash
3- Error of principle
4- Error of compensation

ANSWER

Missappropriation of cash

SOME MORE
MCQ

52. Audit is :
A)Science
B)Art
C)Both
D)None of these

ANSWER
C- both

53.The Double entry

system of Book-keeping
was evolved by:
Stevenson
B) Wilson
C) Luca Paciolo
D)Churchill
A)

ANSWER
C) Luca Paciolo

54. Which of the following is

responsible for establishing a private
companys internal control?
a. Management.
b. Auditors.
c. Management and auditors.
D . Committee of Sponsoring
Organizations.

ANSWER
a. Management.

55. Which of the following is not one of

the three primary objectives of
effective internal control?
a. Reliability of financial reporting
b. Efficiency and effectiveness of
operations
c. Compliance with laws and
regulations
d. Assurance of elimination of
business risk

ANSWER
d. Assurance of

elimination of
business risk

56.Two key concepts that underlie

managements design and
implementation of internal control
are:
a. Costs and materiality.
b. Absolute assurance and costs.
c. Inherent limitations and
reasonable assurance.
d. Collusion and materiality.

ANSWER
C. Inherent limitations and

reasonable assurance.

57. Internal controls can never be

considered as absolutely effective
because
a. Their effectiveness is limited by the
competency and dependability of
employees.
b. Not all organizations have internal audit
departments.
c. Controls are designed to prevent and
detect only material misstatements.
d. Internal controls prevent separation of
duties.

ANSWER
a. Their effectiveness is

limited by the competency

and dependability of
employees

58.A major control available in a small

company, which might not be
feasible in a big company, is:
a- wider segregation of duties.
b. a voucher system.
c. fewer transactions to process.
d. The owner-managers personal
interest and close relationship with
personnel.

ANSWER
d. The owner-managers

personal interest and close

relationship with personnel.

59. Which of the following is

responsible for establishing internal
controls for a public company?
a. Management.
b. The PCAOB
c. Management and auditors.
d. Committee of Sponsoring
Organizations.

ANSWER
a. Management.

60-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

ANSWER
A) specified standards and plans

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