Auditing Quiz 1

1 / 50

When applying analytical procedures, an auditor could develop independent estimate of an account balance to compare it to?___________?

client?s unedited account balance adjusted for trends in the industry

Prior year audited balance adjusted for trends in the industry

client?s unedited account balance

Prior year audited balance

2 / 50

How long is the auditor?s term of office?

Until the audit is complete

Until the financial statements are complete

Until the directors remove them

Until the next AGM (Annual General Meeting)

3 / 50

The current file of the auditor?s working papers, generally, should include____________?

A flowchart of the internal controls

Organisation charts

Copies of bond and debentures

A copy of financial statements

4 / 50

Internal check is carried on by___________?

Supervisor of the staff

Internal auditor

Staff specially appointed for the purpose

Members of the staff

5 / 50

_______the audit risk,_______the materiality and _______the audit effort?

Lower, Lower, Higher

Lower, Higher, Higher

Higher, Lower, Lower

Lower, Higher, Lower

6 / 50

The scope of internal audit is decided by the___________?

Management

Law

Government

Shareholders

7 / 50

Which of the following are you unlikely to see in the current file of auditors? working papers?

Details of the work done on the inventory count

Summary of unadjusted errors

Audit planning memorandum

Memorandum & articles of association

8 / 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

9 / 50

Which of the following would you not use as a benchmark for comparison when undertaking analytical procedures?

Previous years

Budget

Other audit clients

Other companies in the same industry

10 / 50

Balance sheet does not include?:_____________?

Verification of assets and liabilities

Routine checks

Examination of adjusting and closing entries

Vouching of income and expense accounts related to assets and liabilities

11 / 50

For companies required to produce interim financial statements (IFI):

the same firm should review the IFI and the financial statements for the year as a whole.

one audit firm should audit the IFI and a different firm should audit the financial statements for the year as a whole.

the same firm should audit the IFI and the financial statements for the year as a whole.

one accountancy firm should review the IFI and a different firm should audit the financial statements for the year as a whole.

12 / 50

Which of the following best describes the primary purpose of audit programme preparation?

To gather sufficient

To detect errors or fraud

To assess audit risk

To comply with GAAP appropriate evidence

13 / 50

Auditor of a___________company does not have right to visit foreign branches of the company?

Manufacturing

Banking

Unlimited liability

Non?profit making

14 / 50

Institute of Chartered Accountants of Pakistan was established in____________?

1956

1949

1972

1961

15 / 50

You have been proposed as auditor of a company. What is the first step that you should take?

Obtain a copy of the existing auditor?s letter of engagement

Obtain a copy of the company?s most recent board minutes

Obtain the client?s permission to communicate with the existing auditor

Obtain the existing auditor?s working papers

16 / 50

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

Documents obtained by auditor from third parties directly.

Computations made by the auditor

Carbon copies of sales invoices inspected by the auditor

Bank statements obtained from the client

17 / 50

The independent auditor?s primary responsibility is to______________?

the shareholders

the company?s bank

the company?s creditors (payables)

the directors

18 / 50

Which of the following statements is not true?

Management fraud is more difficult to detect than employee fraud

All statements are correct.

Internal control system reduces the possibility of occurrence of employee fraud and management fraud

The auditor?s responsibility for detection and prevention of errors and frauds is similar.

19 / 50

For what minimum period should audit working papers be retained by audit firm?

For a period of ten years

For the period the audit firm is in existence.

For a period auditor opines them to be useful in servicing the client

For the time period the entity remains a client of the audit firm.

20 / 50

How many Standards on Auditing have been issued?

21 / 50

In an audit of financial statements, substantive tests are audit procedures that___________?

may be eliminated for an account balance under certain conditions

will increase proportionately when the auditor decreases the assessed level of control risk

may be test of transactions, test of balance and analytical procedures

are designed to discover significant subsequent events

22 / 50

The main object of an audit is _____________?

Both (A) and (B)

Expression of opinion

Detection and Prevention of fraud and error

Depends on the type of audit.

23 / 50

Goods sent on approval basis? have been recorded as ?Credit sales?. This is an example of____________?

Error of principle

Error of commission

Error of omission

Error of duplication

24 / 50

Audit fess is a part of__________.

administration overhead

distribution overhead.

selling overhead.

works on cost.

25 / 50

Which of the following is not an analytical procedure?

All of them are analytical procedure

Comparing aggregate wages paid to number of employees

Comparing the actual costs with standard costs

Tracing of purchases recurred in the purchase book to purchase invoices.

26 / 50

Which of the following is not corroborative evidence?

Minutes of meetings

Confirmations from debtors

Worksheet supporting consolidated financial statements

Information gathered by auditor through observation

27 / 50

Which of the following is not type of engagement standard?

Standard on Quality Control

Standards on Review Engagement

Standards on Assurance Engagement

Standards on Auditing

28 / 50

The working papers which auditor prepares for financial statements audit are___________?

Evidence for audit conclusions

Owned by the client

Owned by the auditor

Retained in auditor?s office until a change in auditors

29 / 50

The degree of effectiveness of an internal control system depends on:

The design of the internal control system and the correctness of the accounting records

The design of the internal controls and the implementation of the control system

The implementation of the controls and the correctness of the accounting records

The design of the internal control system and the implementation of the controls

30 / 50

Which of the following statements is not correct about materiality?

Materiality judgments involve both quantitative and qualitative judgments

Auditor?s consideration of materiality is influenced by the auditor?s perception of the needs of an informed decision maker who will rely on the financial statements

Materiality is a relative concept

At the planning state, the auditor considers materiality at the financial statement level only

31 / 50

Which of the following does NOT belong in the auditors? report?

Statement of responsibilities of directors and auditors

Involvement of any specialist

Introductory paragraph specifying the pages to which the report relates and the accounting convention adopted

Basis of the opinion

32 / 50

Which of the following is NOT the responsibility of a company?s directors?

Establishment of internal controls

Keeping proper accounting records

Reporting to the shareholders on the accuracy of the accounts

Supplying information and explanations to the auditor

33 / 50

What sort of assurance is provided in a review engagement?

Positive assurance

Negative assurance

High level of assurance

No assurance

34 / 50

International auditing standards are issued by the______________?

International Federation of Accountants

Auditing Practices Board

International Accounting Standards Board

International Standards Board

35 / 50

Pick the odd one:

None of the above

Preparation of vouchers

Checking the vouchers

Evaluation of internal control

36 / 50

Which of the following documents is not relevant for vouching cash sales?

Salesmen?s summary

Bank statement

Monthly statements sent to customers

Daily cash sales summary

37 / 50

Which of the following is not a revenue expense?

Cost of accessories of motor vehicles spent at the time of purchase

Cost of raising a loan

Expenses incurred for laying of sewers on land purchased

Insurance premium paid at the time of registration of the ship

38 / 50

What is the primary objective of analytical procedures used in the overall review stage of an audit?

To help to corroborate the conclusions drawn from individual components of financial statements

To reduce specific detection risk

To direct attention to potential risk areas

To satisfy doubts when questions arise about a client?s ability to continue

39 / 50

Test Checking refers to___________?

Testing of accounts and records

Checking of selected number of transactions

Checking of all transactions recorded

Examination of adjusting and closing entries

40 / 50

According to ISA 315, which of the following is NOT a control activity?

Physical controls

Organizational structure

Segregation of duties

Performance reviews

41 / 50

Lapping is also known as___________?

Hacking

Teeming and lading

Embezzlement

Looping

42 / 50

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

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

It is expensive

It may be carried out on daily basis

It is conducted at regular interval

43 / 50

Audit of banks is an example of_____________?

Balance sheet audit

Statutory audit

All of the above

Concurrent audit

44 / 50

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

It helps to discover material misstatements in the financial statements

It helps to identify possible oversights

It helps to study relationship among balance sheet accounts

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

45 / 50

Which of the following statements is, generally, correct about the reliability of audit evidence?

To be reliable, evidence should conclusive rather than persuasive

All are correct.

Evidence obtained from outside sources routed through the client

Effective internal control system provides reliable audit evidence

46 / 50

Which of the following factors is most important in determining the appropriations of audit evidence?

The objectivity and integrity of the auditor

The quantity of audit evidence

The reliability of audit evidence and its relevance in meeting the audit objective

The independence of the source of evidence

47 / 50

Which of the following is not true about opinion on financial statements?

The auditor should express an opinion on financial statements.

He should examine whether recognised accounting principle have been consistently

His opinion is no guarantee to future viability of business

He is responsible for detection and prevention of frauds and errors in financial statements

48 / 50

When issuing unqualified opinion, the auditor who evaluates the audit findings should be satisfied that the___________?

Estimates of the total likely misstatement cannot be made

Amount of known misstatement is documented in working papers

Estimate of the total likely misstatement is more than materially level

Estimates of the total likely misstatement is less than materiality level

49 / 50

IFRS 9 explains about?

Inventory

Accounts Payable

Accounts Receivable

Expenses

50 / 50

Which of the following factors would least likely affect the quantity and content of an auditor?s working papers

The content of management representation letter

The possibility of peer review

The nature of auditor?s report

The assessed level of control risk

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