Auditing Quiz 2

1 / 50

In Pakistan, balance sheet audit is synonymous to___________?

Detailed audit

Continuous audit

Statutory audit

Annual audit

2 / 50

Pick the odd one:

Evaluation of internal control

Preparation of vouchers

None of the above

Checking the vouchers

3 / 50

Concurrent audit is a part of____________?

None of these

Internal audit system

Internal check system

Continuous audit

4 / 50

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

Prior year?s financial statements

Prior year?s errors

The auditor?s remuneration

Adjusted interim financial statements

5 / 50

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

Undervaluation of closing stock

Charging capital expenditure to revenue

Goods sent on consignment being shown as actual sales

Charging higher rates of depreciation on fixed assets than actually required

6 / 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

7 / 50

Auditing engagement can be performed w.r.t.

Corporate entity only

Non-profit making entity

Profit making entity

Any entity

8 / 50

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

The shareholders in a general meeting

The board of directors in a board meeting

The managing director

The audit committee

9 / 50

Which of the following is true about explanatory notes?

These are given by the directors of the company

All of the above

These are given to adhere to requirements of section 211.

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

10 / 50

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

Taking management decisions

Preparing tax computations

Preparation of accounting records

Advising on weaknesses in the internal control systems

11 / 50

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

Last year?s written representation letter

Obtaining written representations

The timing of the audit

Analytical review

12 / 50

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

It is conducted at regular interval

It is expensive

It may be carried out on daily basis

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

13 / 50

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

Checking

Auditing

Vouching

Verification

14 / 50

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

None of the above

The auditor has rejected an item for sample which was material

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

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

15 / 50

The branch auditor is appointed by___________?

Shareholders in an annual general meeting

Any of the above

Shareholders in general meeting

Board of directors in board meeting

16 / 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?

Unqualified report with ?an emphasis of matter? paragraph?

Disclaimer of opinion

Adverse opinion

Qualified opinion

17 / 50

When is evidential matter, generally, considered sufficient?

When it is objective and relevant

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

When auditor collects and evaluates it independently

When it constitutes entire population

18 / 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 study relationship among balance sheet accounts

It helps to identify possible oversights

19 / 50

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

statutory meeting

a general meeting

first annual general meeting

annual general meeting

20 / 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

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

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

21 / 50

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

Prior year?s errors

Prior year?s financial statements

The auditor?s remuneration

Adjusted interim financial statements

22 / 50

Auditing is compulsory for____________?

Joint stock Companies

Partnership firms

Proprietary Concerns

Small scale business

23 / 50

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

inversely

randomly

directly

disproportionately

24 / 50

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

To investigate

To inspect

To hear

To examine

25 / 50

Which of the following statements is INCORRECT?

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

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

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

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

26 / 50

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

bill of loading

purchase orders

sales orders

sales invoices

27 / 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 did not find anything to indicate that a material misstatement exists.

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

28 / 50

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

indicates important aspects of business

directs attention to potential risk areas

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

All of the above

29 / 50

Window dressing implies_______________?

Over Valuation of assets

Curtailment of expenses

Under valuation of assets

Checking of Wastages

30 / 50

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

Debt agreements

Attorney?s letters

Extracts from client?s bank statements

Past year?s financial statements

31 / 50

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

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

They document the level of independence maintained by the auditor

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

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

32 / 50

Which of the following is not a corroborative evidence?

Information gathered by auditor through observation

Confirmations from debtors

Worksheet supporting consolidated financial statements

Minutes of meetings

33 / 50

Internal audit is undertaken:

By a government auditor

By a person appointed by the management

By independent auditor

Statutorily appointed auditor

34 / 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

None

the data of AGM

35 / 50

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

the date of removal

the conclusion of next annual general meeting

the conclusion of statutory meeting

the conclusion of first annual general meeting

36 / 50

Verification refers to_________?

Examining the physical existence and valuation of assets.

Examining the journal and ledger

None of the above.

Examination of vouchers related to assets.

37 / 50

Which of the following is a revenue reserve?

Capital reserve

Security premium account

Debenture redemption reserve

Capital redemption reserve

38 / 50

Which of the following statements is correct?

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

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

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

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

39 / 50

At the planning stage you would NOT consider____________?

the potential use of internal audit

the timing of the audit

last year?s audit

whether corrections from the inventory count have been implemented

40 / 50

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

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

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

None of the above.

Analytical procedures will not be able to detect unusual relationships

41 / 50

Floating assets are valued at____________?

Market price

cost

Cost or market price whichever is lower

Cost less depreciation

42 / 50

Depreciation does not arise form _______

effluxion of time

remarket expectation

obsolescence through technology be market changes

use

43 / 50

Scope of financial audit is__________?

None of these

Non-financial information

Both (a) and (b)

Financial information

44 / 50

What are analytical procedures?

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

All of the above

45 / 50

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

Carbon copies of sales invoices inspected by the auditor

Bank statements obtained from the client

Documents obtained by auditor from third parties directly.

Computations made by the auditor

46 / 50

What is meant by the expression ?expectation gap??

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 shareholders expect them to perform

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 general public expects them to perform

47 / 50

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

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

It should be addressed to the auditor

It should always be in working

It may be dated prior to the report date

48 / 50

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

Because the directors have asked for it

Because it reduces the audit time

Because they are easier to audit

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

49 / 50

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

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

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

50 / 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

Background i.e. industry

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

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