Auditing Quiz 2

1 / 50

Which of the following statements is most closely associated with analytical procedure applied at substantive stage?

It helps to identify possible oversights

It helps to accumulate evidence supporting the validity of a specific account balance

It helps to study relationship among balance sheet accounts

It helps to discover material misstatements in the financial statements

2 / 50

Auditing engagement can be performed w.r.t.

Corporate entity only

Non-profit making entity

Profit making entity

Any entity

3 / 50

In Pakistan, balance sheet audit is synonymous to___________?

Annual audit

Detailed audit

Statutory audit

Continuous audit

4 / 50

At the planning stage you would NOT consider____________?

last year?s audit

the potential use of internal audit

whether corrections from the inventory count have been implemented

the timing of the audit

5 / 50

Analytical procedures issued in the planning stage of an audit, generally?

directs attention to potential risk areas

indicates important aspects of business

helps to determine the nature, timing and extent of other audit procedures

All of the above

6 / 50

Which of the following statement is true regarding an auditor?s working papers?

They should not contain details regarding weaknesses in the internal control system

They help the auditor to monitor the effectiveness of the audit firm?s quality control

They should be considered as the principle support for the auditor?s report

They document the level of independence maintained by the auditor

7 / 50

Scope of financial audit is__________?

Financial information

Non-financial information

Both (a) and (b)

None of these

8 / 50

What would most appropriately describe the risk of incorrect rejection in terms of substantive testing?

The auditor concludes balance is materially correct when in actual fact it is not

None of the above

The auditor concludes that the balance is materially misstated when in actual fact it not

The auditor has rejected an item for sample which was material

9 / 50

Window dressing implies_______________?

Checking of Wastages

Curtailment of expenses

Over Valuation of assets

Under valuation of assets

10 / 50

Concurrent audit is a part of____________?

Internal check system

Continuous audit

Internal audit system

None of these

11 / 50

Verification refers to_________?

None of the above.

Examination of vouchers related to assets.

Examining the journal and ledger

Examining the physical existence and valuation of assets.

12 / 50

What is meant by the expression ?expectation gap??

The gap between the auditors? own perception of their duties and how they are set out in the Companies Act

The gap between how the directors of a company perform their duties and how the shareholders expect them to perform

The gap between the public perception of the role of company auditors and their statutory role and responsibilities

The gap between how the directors of a company perform their duties and how the general public expects them to perform

13 / 50

Which of the following is true about explanatory notes?

These are given by auditors of the company in auditor?s report

These are given to adhere to requirements of section 211.

These are given by the directors of the company

All of the above

14 / 50

The nature, timing and extent of substantive procedures is _________ related to assessed level of control risk?

disproportionately

randomly

directly

inversely

15 / 50

Which of the following statements is INCORRECT?

Purchasing goods from an audit client on normal commercial terms does not create a threat to the auditor?s independence.

An auditor who was recently a director of an audit client must not be assigned to the audit team for that client.

An auditor who is an immediate family member of the director of an audit client must not be assigned to the audit team.

An auditor may serve on the board of directors of an audit client.

16 / 50

When is evidential matter, generally, considered sufficient?

When auditor collects and evaluates it independently

When it is objective and relevant

When it is enough to provide a basis for giving reasonable assurance regarding truthfulness

When it constitutes entire population

17 / 50

In case the directions fail to appoint first auditor (s), the shareholders shall appoint them at_________by passing a resolution.

statutory meeting

annual general meeting

a general meeting

first annual general meeting

18 / 50

Of the following, which is the least persuasive type of audit evidence?

Computations made by the auditor

Documents obtained by auditor from third parties directly.

Bank statements obtained from the client

Carbon copies of sales invoices inspected by the auditor

19 / 50

Internal audit is undertaken:

By independent auditor

Statutorily appointed auditor

By a government auditor

By a person appointed by the management

20 / 50

____________ is a systematic examination of the books and records or a business?

Checking

Auditing

Verification

Vouching

21 / 50

Which of the following is not a corroborative evidence?

Confirmations from debtors

Worksheet supporting consolidated financial statements

Information gathered by auditor through observation

Minutes of meetings

22 / 50

Which of the following will not lead to creation of secret reserve?

Charging higher rates of depreciation on fixed assets than actually required

Goods sent on consignment being shown as actual sales

Undervaluation of closing stock

Charging capital expenditure to revenue

23 / 50

Which one of the following is NOT considered to be part of planning?

Considering whether the financial statements show a true and fair view

Previous year?s audit i.e. any qualifications in the report

Considering the work to be done by the client staff e.g. internal audit

Background i.e. industry

24 / 50

Why do auditors concentrate their efforts on material items in accounts?

Because they are easier to audit

Because it reduces the audit time

Because the risk to the accounts of their being incorrectly stated is greater

Because the directors have asked for it

25 / 50

The auditor?s permanent working paper file should not normally, include__________?

Extracts from client?s bank statements

Debt agreements

Past year?s financial statements

Attorney?s letters

26 / 50

Which of the following should NOT be considered at the planning stage?

Obtaining written representations

Analytical review

The timing of the audit

Last year?s written representation letter

27 / 50

What are analytical procedures?

All of the above

Substantive tests designed to study relationships between financial and non?financial

Substantive tests designed to assess control risk

Substantive tests designed to evaluate the validity of management?s representation letter

28 / 50

The term of the auditor ship of first auditor would be from the date of appointment till________?

the conclusion of first annual general meeting

the date of removal

the conclusion of next annual general meeting

the conclusion of statutory meeting

29 / 50

To test whether sales have been recorded, the auditor should draw a sample from a file of__________?

sales invoices

purchase orders

sales orders

bill of loading

30 / 50

Floating assets are valued at____________?

Market price

Cost less depreciation

cost

Cost or market price whichever is lower

31 / 50

The basic assumption underlying the use of analytical procedures is:____________?

Analytical procedures will not be able to detect unusual relationships

Relationship among data exist and continue in the absence of known condition to the contrary

None of the above.

It helps the auditor to study relationship among elements of financial information

32 / 50

Assuming that it is not the first appointment of the auditor, who is responsible for the appointment of the auditor?

The managing director

The board of directors in a board meeting

The audit committee

The shareholders in a general meeting

33 / 50

The term ?Audit? is derived from a Latin word ?audire? which means___________?

To examine

To investigate

To hear

To inspect

34 / 50

Auditing is compulsory for____________?

Joint stock Companies

Proprietary Concerns

Partnership firms

Small scale business

35 / 50

Pick the odd one:

Evaluation of internal control

Preparation of vouchers

Checking the vouchers

None of the above

36 / 50

When restrictions that significantly affect the scope of the audit are imposed by the client, the auditor generally should issue which of the following opinion?

Disclaimer of opinion

Adverse opinion

Unqualified report with ?an emphasis of matter? paragraph?

Qualified opinion

37 / 50

The branch auditor is appointed by___________?

Board of directors in board meeting

Any of the above

Shareholders in an annual general meeting

Shareholders in general meeting

38 / 50

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

It is expensive

It is needed when the organization has a good internal control system

It is conducted at regular interval

It may be carried out on daily basis

39 / 50

Which of the following statements is not true with respect to management representations obtained as per AAS?11?

It should always be in working

Authenticated copy of relevant minutes of meetings may be regarded as management representation

It should be addressed to the auditor

It may be dated prior to the report date

40 / 50

Which of the following is a revenue reserve?

Capital redemption reserve

Security premium account

Debenture redemption reserve

Capital reserve

41 / 50

What would most effectively describe the risk of incorrect acceptance in terms of substantive audit testing?

The auditor concludes the balance is materially misstated when in actual fact is not

The auditor has rejected an item from sample which was not supported by documentary evidence

He applies random sampling on data which is inaccurate and inconsistent

The auditor has ascertained that the balance is materially correct when in actual fact it is not

42 / 50

The date on auditor?s report should not be____________?

earlier than the date on which the accounts are approved by the management

later than the date on which the accounts are approved in board?s meeting

the data of AGM

None

43 / 50

In determining the level of materiality for an audit, what should not be considered?

Prior year?s errors

Adjusted interim financial statements

Prior year?s financial statements

The auditor?s remuneration

44 / 50

Depreciation does not arise form _______

remarket expectation

obsolescence through technology be market changes

effluxion of time

use

45 / 50

The concept of stewardship means that a company?s directors________________?

Safeguard the company?s assets and manage them on behalf of the shareholders

Are responsible for ensuring that the company complies with the law

Are responsible for ensuring that the company pays its tax by the due date

Report suspected fraud and money laundering to the authorities

46 / 50

Which one of the following may auditors NOT perform for their client?

Preparing tax computations

Advising on weaknesses in the internal control systems

Preparation of accounting records

Taking management decisions

47 / 50

In determining the level of materiality for an audit, what should not be considered?

Adjusted interim financial statements

Prior year?s financial statements

The auditor?s remuneration

Prior year?s errors

48 / 50

What is meant by negative assurance?

The auditor could not conduct any tests due to lack of controls.

The client?s financial statements were found to be materially misstated.

The auditor cannot give an opinion due to lack of evidence.

The auditor did not find anything to indicate that a material misstatement exists.

49 / 50

Which of the following statement best describes the understanding with respect to ownership and custody of working papers prepared by an auditor?

The working papers may be obtained by third parties when they appear to be relevant to issues raised in litigation

Successor auditors may have access to working papers of the predecessor auditors. The approval of client is not required.

The safe custody of working papers is the responsibility of client, if kept at his premises

The working papers must be retained by an audit firm for a period of 10 years

50 / 50

Which of the following statements is correct?

In a review engagement, evidence is gathered mainly by means of computation and inspection.

In an engagement to review financial statements, the amount of work required is the same as for an audit

When a company negotiates a ?friendly? takeover, it usually appoints a firm of accountants to carry out due diligence on the takeover target.

In an attestation engagement, the accountant is required to report on the quality of work performed.

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