Auditing Quiz 1

1 / 50

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

Carbon copies of sales invoices inspected by the auditor

Documents obtained by auditor from third parties directly.

Computations made by the auditor

Bank statements obtained from the client

2 / 50

Which of the following statements is not true?

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

Management fraud is more difficult to detect than employee fraud

All statements are correct.

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

3 / 50

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

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

the same firm should review 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.

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

4 / 50

Which of the following is not type of engagement standard?

Standards on Auditing

Standards on Review Engagement

Standard on Quality Control

Standards on Assurance Engagement

5 / 50

The independent auditor?s primary responsibility is to______________?

the company?s creditors (payables)

the shareholders

the company?s bank

the directors

6 / 50

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

The independence of the source of evidence

The quantity of audit evidence

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

The objectivity and integrity of the auditor

7 / 50

Which of the following is not an analytical procedure?

Comparing aggregate wages paid to number of employees

All of them are analytical procedure

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

Comparing the actual costs with standard costs

8 / 50

How many Standards on Auditing have been issued?

9 / 50

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

Daily cash sales summary

Salesmen?s summary

Monthly statements sent to customers

Bank statement

10 / 50

Test Checking refers to___________?

Testing of accounts and records

Checking of selected number of transactions

Examination of adjusting and closing entries

Checking of all transactions recorded

11 / 50

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

Error of omission

Error of duplication

Error of principle

Error of commission

12 / 50

Pick the odd one:

Evaluation of internal control

Preparation of vouchers

None of the above

Checking the vouchers

13 / 50

Which of the following is not a revenue expense?

Cost of raising a loan

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

Expenses incurred for laying of sewers on land purchased

Insurance premium paid at the time of registration of the ship

14 / 50

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

Keeping proper accounting records

Reporting to the shareholders on the accuracy of the accounts

Supplying information and explanations to the auditor

Establishment of internal controls

15 / 50

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

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

are designed to discover significant subsequent events

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

may be eliminated for an account balance under certain conditions

16 / 50

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

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

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

17 / 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

18 / 50

_______the audit risk,_______the materiality and _______the audit effort?

Lower, Lower, Higher

Lower, Higher, Higher

Higher, Lower, Lower

Lower, Higher, Lower

19 / 50

Balance sheet does not include?:_____________?

Vouching of income and expense accounts related to assets and liabilities

Examination of adjusting and closing entries

Routine checks

Verification of assets and liabilities

20 / 50

Internal check is carried on by___________?

Members of the staff

Supervisor of the staff

Staff specially appointed for the purpose

Internal auditor

21 / 50

How long is the auditor?s term of office?

Until the next AGM (Annual General Meeting)

Until the financial statements are complete

Until the directors remove them

Until the audit is complete

22 / 50

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

Other companies in the same industry

Budget

Other audit clients

Previous years

23 / 50

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

To assess audit risk

To gather sufficient

To detect errors or fraud

To comply with GAAP appropriate evidence

24 / 50

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

Effective internal control system provides reliable audit evidence

All are correct.

To be reliable, evidence should conclusive rather than persuasive

Evidence obtained from outside sources routed through the client

25 / 50

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

A flowchart of the internal controls

A copy of financial statements

Organisation charts

Copies of bond and debentures

26 / 50

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

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

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

27 / 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

Audit planning memorandum

Memorandum & articles of association

Summary of unadjusted errors

28 / 50

The main object of an audit is _____________?

Detection and Prevention of fraud and error

Depends on the type of audit.

Both (A) and (B)

Expression of opinion

29 / 50

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

Estimate of the total likely misstatement is more than materially level

Amount of known misstatement is documented in working papers

Estimates of the total likely misstatement cannot be made

Estimates of the total likely misstatement is less than materiality level

30 / 50

What sort of assurance is provided in a review engagement?

Positive assurance

High level of assurance

No assurance

Negative assurance

31 / 50

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

It is conducted at regular interval

It may be carried out on daily basis

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

It is expensive

32 / 50

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

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

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

33 / 50

Institute of Chartered Accountants of Pakistan was established in____________?

1972

1949

1961

1956

34 / 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 is a relative concept

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 judgments involve both quantitative and qualitative judgments

35 / 50

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

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

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

36 / 50

IFRS 9 explains about?

Accounts Receivable

Inventory

Accounts Payable

Expenses

37 / 50

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

Manufacturing

Banking

Unlimited liability

Non?profit making

38 / 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

client?s unedited account balance

Prior year audited balance

Prior year audited balance adjusted for trends in the industry

39 / 50

International auditing standards are issued by the______________?

Auditing Practices Board

International Accounting Standards Board

International Federation of Accountants

International Standards Board

40 / 50

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

The auditor should express an 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

41 / 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 assessed level of control risk

The content of management representation letter

The nature of auditor?s report

42 / 50

Lapping is also known as___________?

Looping

Hacking

Embezzlement

Teeming and lading

43 / 50

Audit fess is a part of__________.

works on cost.

selling overhead.

administration overhead

distribution overhead.

44 / 50

Which of the following is not corroborative evidence?

Information gathered by auditor through observation

Minutes of meetings

Confirmations from debtors

Worksheet supporting consolidated financial statements

45 / 50

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

Performance reviews

Segregation of duties

Organizational structure

Physical controls

46 / 50

The scope of internal audit is decided by the___________?

Law

Government

Management

Shareholders

47 / 50

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

Statement of responsibilities of directors and auditors

Involvement of any specialist

Basis of the opinion

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

48 / 50

Audit of banks is an example of_____________?

Concurrent audit

Statutory audit

All of the above

Balance sheet audit

49 / 50

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

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

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

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

Obtain the existing auditor?s working papers

50 / 50

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

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.

For a period of ten years

For the period the audit firm is in existence.

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