AUDITING
CONCEPT OF AUDITING
1. The term “Audit” originated from the Latin word
a) Audire
b) Adhere
c) Adihere
d) None of the above
2. The basis for decision making by the management is
a) Accounting statements
b) Financial Statement
c) Bank statements
d) None of the above
3. The management takes so many decisions on the basis of
a) Accounting statement
b) Financial statements
c) Bank statements
d) None of the above
4. The authenticity of financial statements is very essential and such authenticity of accounts can
be assured with the help of an
a) Internal Audit
b) Performance Audit
c) Independent Audit
d) None of the above
5. Examination of books of accounts with supporting vouchers and documents in order to detect and prevent error and fraud is the main function of
a) Accountant
b) Management
c) Company Director
d) Auditing
6. Express an opinion on the
financial or non financial areas is
the goal ofa)
Accounting
b) Managing
c) Auditing
d) None of the above
7. In the case of financial
audit, a set of financial statements
are said to be true and fair when
they are free
a) Error
b) Fraud
c) Material Misstatements
d) None of the above
8. Audit deals with checking,
verification and examination ofa)
Accounts
b) Finance
c) Management
d) None of the above
9. Time, extent and nature of audit
depend upon effectiveness ofa)
Environmental Control System
b) Management Control System
c) Both (a) and (b) above
d) Internal Control System
10._____is responsible for
„Maintenance of accounts”
a) Auditing
b) Accounting
c) Both (a) and (b) above
d) Management
11. Auditor has to report that
accounts have been prepared as
per GAAP and presents a
a) Correct view of business
operations
b) Authentic view of business
operations
c) Both (a) and (b) above
d) True and fair view of business
operate
12. Auditing can be defined as an
independent examination of–
a) Financial records
b) Non financial records
c) Both (a) and (b) above
d) None of the above
13. The objective of an audit of
financial statements is to enable
an auditor to on financial
statements
a) Completion of an audit
b) Express on opinion
c) Check the transaction
d) Check frauds
14. Accounts maintenance is the
function of.......
a) Auditor
b) Accountant
c) Auditor staff
d) Practicing Professionals
15. The main object of an audit isa)
Expression of opinion
b) Detection and prevention of fraud
and error
c) Both (a) and (b) above
d) Depends on the type of audit
16. Review of system and
procedure is the primary function
ofa)
Accounting
b) Management
c) Auditing
d) None of the above
17. Review of internal control
system is very important for the
auditor as the effectives of internal
control system will determine the
extent of checking to be done by
thea)
Accountant
b) Management
c) Both accountant and
management
d) Auditor
18. The compliance test and
substantive procedures performed
by the auditor will determine the
effectiveness of
a) Management Accounting
System
b) Cost Accounting system
c) Internal Audit system
d) Internal Control system
19. Auditor has to compare the
balance sheet and Profit and loss
account or other statement with
thea)
Bank statement
b) Cash Book
c) Both (a) and (b) above
d) Books of Accounts and
supporting vouchers
20. The auditor has to give its
opinion whether the financial
statements depicts
a) Correct view of the accounts
b) Acceptable view of the accounts
c) True and fair view of the state of
affairs of organization
d) None of the above
21. It is because of audit the owner
will be satisfied about the
a) Profits of the organisation
b) Employees, customers and
suppliers of the organization
c) Business operations and working
of its various departments
d) None of the above
22. No one will try to commit an
error or fraud as the accounts are
subject toa)
Scrutiny
b) Internal control
c) Audit
d) None of the above
23. Auditing is very useful in
obtaining the independent opinion
of the auditor abouta)
Financial condition
b) Business condition
c) Profits/losses
d) Business condition
24. Audit helps in protecting the
interests ofa)
Employees
b) Government
c) Management
d) Shareholders in case of joint
stock company
25. Money can be borrowed easily
on the basis of audited balance
sheet froma)
Private sources
b) Creditors
c) Financial institutions
d) Government
26. Generally auditing exercise on
is based on test checking,
Inferring a result on the basis of
test check always need not to bea)
Fair
b) Apparently correct
c) True
d) None of the above
27. Generally an auditor needs to
release the report up toa)
A specified timeline
b) Unspecified timeline
c) Infinite timeline
d) End of the next accounting
period
28. The evidences obtained by an
auditor are persuasive rather
thana)
Correct
b) Reliable
c) Conclusive
d) All of the above
29. An audit cannot add exactness
and certainty to financial
statements when these factors _
a) Do not exist
b) Exists
c) Are not known
d) None of the above
30. The audit opinion is based on
the information provided by the –
a) Employees
b) Government
c) Management
d) All of the above
31. The investigation is related to
critical checking ofa)
Internal records
b) Particular records
c) Accounting records
d) External records
32. Which of the following is not
the objective of internal audit-?
a) To keep proper control over
business activities
b) To evaluate accounting system
c) To report to the owner and
outsiders
d) To evaluate the internal check
system
33. Primary responsibility for the
adequacy of financial statement
disclosures rest with the
a) Auditor
b) Management
c) Auditor’s Staff
d) Central Government
34 .One of the following not an
advantage of audit
a) It provides satisfaction for owner
b) It helps in getting loans
c) It reduces cost burden
d) It detects errors and frauds
35. The purpose of audit and
investigation is
a) Same
b) Different
c) Sometimes same and sometimes
different
d) None of the above
36. Investigation implies
systematic, critical and special
examination of the records of a
business for aa)
General purpose
b) Unspecified purpose
c) Specific purpose
d) None of the above
37. Investigation is conducted bya)
Cost Accountant
b) Company Secretary
c) Chartered Accountant
d) Any person
38. Audit is conducted bya)
Cost Accountant
b) Company Secretary
c) Chartered Accountant
d) Any person
39. Investigation seeksa)
Conclusive evidence
b) Corroborative evidence
c) Both (a) and (b) above
d) Persuasive evidence
40. Auditing seeksa)
Conclusive evidence
b) Corroborative evidence
c) Both (a) and (b) above
d) Persuasive evidence
Answers: