Auditing Quiz 2

1 / 50

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

the conclusion of statutory meeting

the date of removal

the conclusion of next annual general meeting

the conclusion of first annual general meeting

2 / 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 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

3 / 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 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

4 / 50

Auditing is compulsory for____________?

Proprietary Concerns

Partnership firms

Joint stock Companies

Small scale business

5 / 50

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

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

Are responsible for ensuring that the company complies with the law

6 / 50

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

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

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

7 / 50

Which of the following is a revenue reserve?

Debenture redemption reserve

Capital redemption reserve

Security premium account

Capital reserve

8 / 50

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

Checking

Auditing

Verification

Vouching

9 / 50

Internal audit is undertaken:

Statutorily appointed auditor

By a government auditor

By independent auditor

By a person appointed by the management

10 / 50

Scope of financial audit is__________?

Financial information

Both (a) and (b)

None of these

Non-financial information

11 / 50

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

Goods sent on consignment being shown as actual sales

Charging higher rates of depreciation on fixed assets than actually required

Undervaluation of closing stock

Charging capital expenditure to revenue

12 / 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 how the directors of a company perform their duties and how the general public expects them to perform

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

13 / 50

Pick the odd one:

Preparation of vouchers

None of the above

Checking the vouchers

Evaluation of internal control

14 / 50

In Pakistan, balance sheet audit is synonymous to___________?

Continuous audit

Statutory audit

Annual audit

Detailed audit

15 / 50

What is meant by negative assurance?

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

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

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

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

16 / 50

Auditing engagement can be performed w.r.t.

Non-profit making entity

Corporate entity only

Any entity

Profit making entity

17 / 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

18 / 50

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

Last year?s written representation letter

Analytical review

Obtaining written representations

The timing of the audit

19 / 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

Bank statements obtained from the client

Carbon copies of sales invoices inspected by the auditor

20 / 50

When is evidential matter, generally, considered sufficient?

When auditor collects and evaluates it independently

When it constitutes entire population

When it is objective and relevant

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

21 / 50

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

Extracts from client?s bank statements

Attorney?s letters

Past year?s financial statements

Debt agreements

22 / 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

23 / 50

What are analytical procedures?

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

Substantive tests designed to assess control risk

All of the above

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

24 / 50

Concurrent audit is a part of____________?

Continuous audit

Internal check system

None of these

Internal audit system

25 / 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

26 / 50

Which of the following is not a corroborative evidence?

Minutes of meetings

Worksheet supporting consolidated financial statements

Information gathered by auditor through observation

Confirmations from debtors

27 / 50

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

Adjusted interim financial statements

The auditor?s remuneration

Prior year?s errors

Prior year?s financial statements

28 / 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.

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

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

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

29 / 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 may be dated prior to the report date

It should always be in working

It should be addressed to the auditor

30 / 50

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

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

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

None of the above.

Analytical procedures will not be able to detect unusual relationships

31 / 50

The branch auditor is appointed by___________?

Any of the above

Shareholders in an annual general meeting

Board of directors in board meeting

Shareholders in general meeting

32 / 50

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

It is expensive

It is conducted at regular interval

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

It may be carried out on daily basis

33 / 50

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

inversely

disproportionately

randomly

directly

34 / 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?

Adverse opinion

Unqualified report with ?an emphasis of matter? paragraph?

Qualified opinion

Disclaimer of opinion

35 / 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

36 / 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 must be retained by an audit firm for a period of 10 years

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

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.

37 / 50

Depreciation does not arise form _______

remarket expectation

effluxion of time

obsolescence through technology be market changes

use

38 / 50

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

bill of loading

sales invoices

sales orders

purchase orders

39 / 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

Background i.e. industry

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

40 / 50

Window dressing implies_______________?

Over Valuation of assets

Curtailment of expenses

Checking of Wastages

Under valuation of assets

41 / 50

Floating assets are valued at____________?

Cost or market price whichever is lower

Market price

Cost less depreciation

cost

42 / 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

43 / 50

The date on auditor?s report should not be____________?

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

None

the data of AGM

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

44 / 50

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

To investigate

To examine

To hear

To inspect

45 / 50

Which of the following statements is correct?

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.

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.

46 / 50

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

The audit committee

The managing director

The shareholders in a general meeting

The board of directors in a board meeting

47 / 50

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

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

Because it reduces the audit time

Because the directors have asked for it

Because they are easier to audit

48 / 50

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

The auditor?s remuneration

Adjusted interim financial statements

Prior year?s errors

Prior year?s financial statements

49 / 50

Verification refers to_________?

Examining the physical existence and valuation of assets.

Examination of vouchers related to assets.

Examining the journal and ledger

None of the above.

50 / 50

Which of the following is true about explanatory notes?

These are given by the directors of the company

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

These are given to adhere to requirements of section 211.

All of the above

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