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MCQs 1: Window dressing implies_______________?

Curtailment of expenses Checking of Wastages Under valuation of assets Over Valuation of assets
Answer Explanation

MCQs 2: 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
Answer Explanation

MCQs 3: Which of the following statements is not correct about materiality?

Materiality is a relative concept 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 f At the planning state, the auditor considers materiality at the financial statement level only
Answer Explanation

MCQs 4: ______the audit risks_______the materiality and_________the audit effort.

Lower, Higher, Lower Lower, Lower, Higher Higher, Lower, Lower Lower, Higher, Higher
Answer Explanation

MCQs 5: 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 Estimates of the total likely misstatement is less than materiality level Estimate of the total likely misstatement is more than materially level Estimates of the total likely misstatement cannot be made
Answer Explanation

MCQs 6: In determining the level of materiality for an audit, what should not be considered?

Prior year’s errors The auditor’s remuneration Adjusted interim financial statements Prior year’s financial statements
Answer Explanation

MCQs 7: Analytical procedures issued in the planning stage of an audit, generally

Helps to determine the nature, timing and extent of other audit procedures Directs attention to potential risk areas Indicates important aspects of business All of the above
Answer Explanation

MCQs 8: Which of the following statements is most closely associated with analytical procedure applied at substantive stage?

It helps to study relationship among balance sheet accounts It helps to discover material misstatements in the financial statements It helps to identify possible oversights It helps to accumulate evidence supporting the validity of a specific account balance
Answer Explanation

MCQs 9: Verification refers to_________?

Examining the physical existence and valuation of assets Examining the journal and ledger Examination of vouchers related to assets None of the above
Answer Explanation

MCQs 10: Stock should be valued at_________?

Cost Market price Cost or Market price whichever is lower Cost less depreciation
Answer Explanation

MCQs 11: Floating assets are valued at____________?

cost Market price Cost or market price whichever is lower Cost less depreciation
Answer Explanation

MCQs 12: Goods sold on the basis of ‘sales or return ‘ should:

Be included in the stock Not be included in the stock Not be checked by auditor None of the above
Answer Explanation

MCQs 13: Of the following, which is the least persuasive type of audit evidence?

Bank statements obtained from the client Documents obtained by auditor from third parties directly Carbon copies of sales invoices inspected by the auditor Computations made by the auditor
Answer Explanation

MCQs 14: Which of the following statements is, generally, correct about the reliability of audit evidence?

To be reliable, evidence should conclusive rather than persuasive Effective internal control system provides reliable audit evidence Evidence obtained from outside sources routed through the client All are correct
Answer Explanation

MCQs 15: In an audit of financial statements, substantive tests are audit procedures that __________?

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 May be test of transactions, test of balance and analytical procedures
Answer Explanation

MCQs 16: The nature, timing and extent of substantive procedures is related to assessed level of control risk

Randomly Disproportionately Directly Inversely
Answer Explanation

MCQs 17: Which of the following factors is most important in determining the appropriations of audit evidence?

The reliability of audit evidence and its relevance in meeting the audit objective The objectivity and integrity of the auditor The quantity of audit evidence The independence of the source of evidence
Answer Explanation

MCQs 18: When is evidential matter, generally, considered sufficient?

When it constitutes entire population When it is enough to provide a basis for giving reasonable assurance regarding truthfulness When it is objective and relevant When auditor collects and evaluates it independently
Answer Explanation

MCQs 19: Which of the following is not corroborative evidence?

Minutes of meetings Confirmations from debtors Information gathered by auditor through observation Worksheet supporting consolidated financial statements
Answer Explanation

MCQs 20: What would most appropriately describe the risk of incorrect rejection in terms of substantive 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
Answer Explanation

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