Q.1
What would most effectively describe the risk of incorrect acceptance in terms ofsubstantive 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
  • 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
Q.2
What would most appropriately describe the risk of incorrect rejection in terms ofsubstantive testing?
  • 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
  • The auditor has rejected an item for sample which was material
  • None of the above
Q.3
Which of the following is not true about opinion on financial statements?
  • The auditor should express an opinion on financial statements.
  • His opinion is no guarantee to future viability of business
  • He is responsible for detection and prevention of frauds and errors in financial statements
  • He should examine whether recognised accounting principle have been consistently
Q.4
Internal check is carried on by
  • Staff specially appointed for the purpose
  • Internal auditor
  • Supervisor of the staff
  • Members of the staff
Q.5
Institute of Chartered Accountants of India was established
  • 1956
  • 1949
  • 1956
  • 1948
Q.6
An auditor is held criminally liable for
  • Loss to his client
  • Neglect of his duty
  • Offence against statutory provisions
  • Frauds
Q.7
Which of the following statement is not true regard to auditor’s attendance atstock taking?
  • Auditor should attend physical stock taking only if inventory is material
  • Auditor may not attend physical verification of stock by management, if he does not find it appropriate to rely on it
  • If inventory is material, even when the auditor is not placing reliance on the physical verification by the management, he should attend it
  • The primary objective of an auditor’s observation of an entity’s observation of an entity’s stock take is to obtain direct knowledge that the stock and has been property counted
Q.8
Which of the following financial statements assertions are addressed by testingthe cut off for plant asset addition?
  • Existence and ownership
  • Valuation and disclosure
  • Possession and ownership
  • Completeness and valuation
Q.9
Which of the following report not result in qualification of the auditor’s opinion due to a scope limitation?
  • Restrictions the client imposed
  • Reliance on the report of other auditor
  • Inability to obtain sufficient appropriate evidential matter
  • Inadequacy of accounting records
Q.10
Which of the following is true about explanatory notes?
  • These are given by the directors of the company
  • These are given to adhere to requirements of section 211.
  • These are given by auditors of the company in auditor’s report
  • All of the above
Q.11
Which of the following would give the assurance that debtors mentioned on thedate of balance sheet actually exist?
  • Sending debtor’s confirmation letters
  • Reviewing subsequent collection
  • Verify debtors against sales document
  • Both (a) and (b)
Q.12
The sequence of steps in the auditor’s consideration of internal control is asfollows –
  • Obtain an understanding, design substantive test, perform tests of control, and make a preliminary assessment of control risk
  • Design substantive tests, obtain an understanding, perform tests of control, and make a preliminary assessment of control risk
  • Obtain an understanding, make a preliminary assessment of control risk, perform tests of control, design substantive procedures.
  • Perform tests of control, obtain and understanding, make a preliminary assessment of control risk, design
Q.13
The overall attitude and awareness of an entity’s board of directors concerningthe importance of internal control is reflected in
  • Accounting controls
  • Control environment
  • Control procedures
  • Supervision
Q.14
Proper segregation of duties reduces the opportunities in which a person wouldboth
  • Establish controls and executes them
  • Records cash receipts and cash payments
  • Perpetuate errors and frauds and conceals them
  • Record the transaction in journal and ledger
Q.15
Analytical procedures are least likely to be use in the audit of –
  • Cash balance
  • Investments
  • Bills receivables
  • Debtors
Q.16
Which of the following statements is not true with regard to teeming andlading ?
  • It results in the deliberate misappropriation of cash receipts
  • It is associated with cash receipts
  • If same individual maintains cash receipts and cash payments teeming and lading is likely to exist
  • To conceal the shortage, the defraud, usually, tries to keep bank and book amounts in daily agreement so that a bank reconciliation will not detect the irregularity.
Q.17
The independence of an internal auditor will most likely be assured if he reportsto the
  • President Finance
  • President System
  • Managing Director
  • CEO
Q.18
The auditor has noticed existence of recurring losses sale of fixed assets thisindicates
  • Depreciation charges are insufficient
  • Policy of sale or disposal of fixed assets needs to be reviewed
  • The sale of assets have not been properly authorized
  • Accounting errors
Q.19
The auditor is most likely to examine related party transactions very carefullywhile vouching
  • Credit sales
  • Sales returns
  • Credit purchases
  • Cash purchases
Q.20
The first auditor of a company will hold office
  • For a period of one year
  • Till holding of statutory meeting
  • Till the conclusion of first annual general meeting
  • Till a new auditor is appointed
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