Auditing Quiz 1

1 / 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 accumulate evidence supporting the validity of a specific account balance

It helps to study relationship among balance sheet accounts

It helps to identify possible oversights

2 / 50

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

The possibility of peer review

The nature of auditor?s report

The assessed level of control risk

The content of management representation letter

3 / 50

How many Standards on Auditing have been issued?

4 / 50

The independent auditor?s primary responsibility is to______________?

the directors

the shareholders

the company?s bank

the company?s creditors (payables)

5 / 50

Which of the following statements is not correct about materiality?

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

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

6 / 50

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

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

Estimates of the total likely misstatement cannot be made

7 / 50

Lapping is also known as___________?

Teeming and lading

Hacking

Looping

Embezzlement

8 / 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

9 / 50

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

Establishment of internal controls

Supplying information and explanations to the auditor

Keeping proper accounting records

Reporting to the shareholders on the accuracy of the accounts

10 / 50

The scope of internal audit is decided by the___________?

Law

Shareholders

Management

Government

11 / 50

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

For the period the audit firm is in existence.

For a period of ten years

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.

12 / 50

Audit of banks is an example of_____________?

All of the above

Balance sheet audit

Concurrent audit

Statutory audit

13 / 50

Which of the following statements is not true?

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.

Management fraud is more difficult to detect than employee fraud

14 / 50

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

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

He should examine whether recognised accounting principle have been consistently

His opinion is no guarantee to future viability of business

The auditor should express an opinion on financial statements.

15 / 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 implementation of the controls and the correctness of the accounting records

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

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

16 / 50

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

Memorandum & articles of association

Details of the work done on the inventory count

Audit planning memorandum

Summary of unadjusted errors

17 / 50

Test Checking refers to___________?

Examination of adjusting and closing entries

Checking of all transactions recorded

Checking of selected number of transactions

Testing of accounts and records

18 / 50

Which of the following is not a revenue expense?

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

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

19 / 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

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

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

20 / 50

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

Unlimited liability

Banking

Non?profit making

Manufacturing

21 / 50

Audit fess is a part of__________.

selling overhead.

administration overhead

works on cost.

distribution overhead.

22 / 50

What sort of assurance is provided in a review engagement?

High level of assurance

Positive assurance

Negative assurance

No assurance

23 / 50

Balance sheet does not include?:_____________?

Examination of adjusting and closing entries

Verification of assets and liabilities

Routine checks

Vouching of income and expense accounts related to assets and liabilities

24 / 50

_______the audit risk,_______the materiality and _______the audit effort?

Lower, Lower, Higher

Lower, Higher, Lower

Lower, Higher, Higher

Higher, Lower, Lower

25 / 50

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

Error of omission

Error of commission

Error of principle

Error of duplication

26 / 50

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

Owned by the auditor

Owned by the client

Evidence for audit conclusions

Retained in auditor?s office until a change in auditors

27 / 50

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

Prior year audited balance

client?s unedited account balance

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

Prior year audited balance adjusted for trends in the industry

28 / 50

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

Monthly statements sent to customers

Daily cash sales summary

Salesmen?s summary

Bank statement

29 / 50

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

Documents obtained by auditor from third parties directly.

Bank statements obtained from the client

Computations made by the auditor

Carbon copies of sales invoices inspected by the auditor

30 / 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 is conducted at regular interval

It may be carried out on daily basis

31 / 50

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

To reduce specific detection risk

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

To direct attention to potential risk areas

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

32 / 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.

33 / 50

Which of the following is not corroborative evidence?

Minutes of meetings

Worksheet supporting consolidated financial statements

Confirmations from debtors

Information gathered by auditor through observation

34 / 50

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

Performance reviews

Physical controls

Segregation of duties

Organizational structure

35 / 50

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

The quantity of audit evidence

The independence of the source of evidence

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

The objectivity and integrity of the auditor

36 / 50

Institute of Chartered Accountants of Pakistan was established in____________?

1972

1961

1949

1956

37 / 50

IFRS 9 explains about?

Inventory

Accounts Receivable

Expenses

Accounts Payable

38 / 50

The main object of an audit is _____________?

Both (A) and (B)

Depends on the type of audit.

Detection and Prevention of fraud and error

Expression of opinion

39 / 50

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

Other audit clients

Previous years

Other companies in the same industry

Budget

40 / 50

Internal check is carried on by___________?

Members of the staff

Staff specially appointed for the purpose

Internal auditor

Supervisor of the staff

41 / 50

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

Copies of bond and debentures

Organisation charts

A copy of financial statements

A flowchart of the internal controls

42 / 50

International auditing standards are issued by the______________?

International Accounting Standards Board

Auditing Practices Board

International Standards Board

International Federation of Accountants

43 / 50

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

Obtain the existing auditor?s working papers

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

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

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

44 / 50

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

To be reliable, evidence should conclusive rather than persuasive

Evidence obtained from outside sources routed through the client

Effective internal control system provides reliable audit evidence

All are correct.

45 / 50

Which of the following is not an analytical procedure?

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

Comparing aggregate wages paid to number of employees

Comparing the actual costs with standard costs

All of them are analytical procedure

46 / 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)

47 / 50

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

To detect errors or fraud

To gather sufficient

To comply with GAAP appropriate evidence

To assess audit risk

48 / 50

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

Involvement of any specialist

Statement of responsibilities of directors and auditors

Basis of the opinion

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

49 / 50

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

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

may be eliminated for an account balance under certain conditions

are designed to discover significant subsequent events

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

50 / 50

Pick the odd one:

Checking the vouchers

Preparation of vouchers

None of the above

Evaluation of internal control

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