Auditing MCQs With Answers

1, Which country gave recognition to Auditing first in the Companies Act –

(a) America

(b) Britain

(d) England (✓)

2, Auditing is derived from the Latin Word –

(a) Audire (✓)

(b) Auditor

(d) None of these

3, When the audit of Company Accounts was made compulsory in India.

(a) 1894

(b) 1914 (✓)

(d) 1952

4, Which of the following governments in India followed the education of Accountancy first –

(a) Government of Delhi

(b) Government of Bihar

(d) None of these

5, When the Chartered Accountant Act of India was made:

(a) 1947

(b) 1949 (✓)

(d) 1965

6, When the audit of Company Accounts was made compulsory in England –

(a) 1802

(b) 1840

(d) 1850

7, When Institute of Chartered Accountant of India established?

(a) 1 July, 1949 (✓)

(b) 1 July, 1950

(d) 1 July, 1957

8, When Double Entry System was invented –

(a) 1444

(b) 1490

(d) 1949

9, The principle of double entry book-keeping system published by –

(a) Lucas Passioli (✓)

(b) Davar

(d) None of these

10, Auditing is –

(a) An art

(b) A science

(d) None of these

11, Who can be an Auditor

(a) Commerce Graduate

(b) Law Graduate

(d) Chartered Accountant (✓)

12, The function of an Auditor is –

(a) To examine the arithmetical accuracy of accounts

(b) To detect and prevent the errors

(d) All the above (✓)

13, An auditor is like a ………. dog.

(a) Pet

(b) Watch (✓)

(d) Thirsty

14, “Auditor is a watch dog and not a blood-hound.” decision was given in the case of –

(a) London and General Bank, 1895

(b) Kingston Cotton Mills Company, 1896 (✓)

(d) None of these.

15, Chartered Accountants are –

(a) Amateur auditor

(b) Government auditor

(d) None of these.

16, An auditor should be –

(a) Fearless

(b) Honest

(d) All of the above (✓)

17, An auditor should have –

(a) Tactfulness

(b) Honesty

(d) All of the above (✓)

18, An auditor should not be

(a) Tactful

(b) Honest

(d) Patient

19, Technical knowledge of Auditing is –

(a) Born

(b) Acquired (✓)

(d) None of these

20, High moral character of an auditor is –

(a) Born Qualities (✓)

(b) Acquired Knowledge

(d) None of these

21, ‘Auditing Practice Committee’ is now renamed –

(a) Auditing and Assurance Standards Board (✓)

(b) Auditing Board

(d) None of these

22, Number of standards issued by Institute of Chartered Accountant of India is –

(a) 20

(b) 25

(d) 40

23, Institute of Chartered Accountants of India (ICAI) is a…….

(a) Autonomous body (✓)

(b) Co-operative body

(d) None of these

24, Head office of ICAI is situated at –

(a) Mumbai

(b) Chennai

(d) Kolkatta

25, International Federation of Accountants (IFAC) was set up in –

(a) 1978

(b) 1977 (✓)

(d) 1957

26, Auditing Practising Committee (APC) was set-up in –

(a) 1992

(b) 1982 (✓)

(d) 1974

27, Auditing Practising Committee (APC) was established by

(a) Central Government

(b) ICAI (✓)

(d) None of these

28, Basic principles governing an audit are described in –

(a) AAS-1 (✓)

(b) AAS-5

(d) AAS-6

29, Standard Auditing Practice related by objective and scope of the Audit of Financial Statement is –

(a) AAS-1

(b) AAS-2 (✓)

(d) AAS-4

30, Which of the following Auditing Standard is related with the auditor’s responsibility to consider Fraud and Error in an audit of Financial Statement –

(a) AAS-3

(b) AAS-4 (✓)

(d) AAS-6

31, Fellow members of ICAI can write….. name –

(a) FCS

(b) MBA

(d) None of these

32, Auditing is related with –

(a) Accountancy

(b) Economics

(d) All above (✓)

33, Auditing can be defined as –

(a) Preparation of books of accounts

(b) An independent examination of books of accounts (✓)

(d) None of these

34, Auditor examines and verifies the –

(a) Costing records and cost statements.

(b) Financial records (✓)

(d) Managers records

35, Under which Act Audit is compulsory

(a) Partnership Act, 1932

(b) Indian Companies Act, 1956 (✓)

(d) None of the above

36, The principal object of auditing is –

(a) To exhibit a true and fair view of the state of affairs of the undertaking (✓)

(b) Detection of errors

(d) None of these

37, Which of the following is the function of Auditor –

(a) To examine the arithmetical accuracy of accounts

(b) To detect and prevent the errors

(d) All of these (✓)

38, Prevention of fraud is……….. Object of auditing.

(a) Primacy

(b) Subsidiary (✓)

(d) None of these

39, Where Book-keeping ends, there……….

(a) Auditing begins

(b) Accountancy begins (✓)

(d) None of these

40, Accountancy begins where………..

(a) Book-keeping ends (✓)

(b) Auditing ends

(d) All the above

41, Auditing beings where……….

(a) Book-keeping ends

(b) Accountancy ends (✓)

(d) Vouching ends

42, Where Investigation begins, there………

(a) Auditing ends (✓)

(b) Book-keeping ends

(d) None of these

43, For every business Accountancy is –

(a) Luxury

(b) Necessity (✓)

(d) None of these.

44, In an Auditor the knowledge of Book-keeping and Accountancy is –

(a) Acquired Knowledge (✓)

(b) Born Qualities

(d) All the above

45, For a Retailer, Auditing is –

(a) Necessity

(b Luxury (✓)

(d) None of these

46, To examine the books of accounts is the ………. object of auditing –

(a) Primary (✓)

(b) Social

(d) None of these

47, Verification of annual statement is………. object of auditing –

(a) Primary (✓)

(b) Social

(d) None of these

48, To render suggestions to the manager is ………. object of the auditor –

(a) Primary

(b) Secondary (✓)

(d) None of these

49, Protection from evasion of Tax is………. object of auditing:

(a) Primary

(b) Social (✓)

(d) None of these

50, Protection of investors is……….. object of auditing –

(a) Social (✓)

(b) Economic

(d) Subsidiary

51, For Reliance Company Auditing is –

(a) Necessity (✓)

(b) Luxury

(d) None of these

52, For every business Accountancy is –

(a) Luxury

(b) Necessity (✓)

(d) None of these

53, For a betel shopkeeper, Auditing is –

(a) Necessity

(b) Luxury (✓)

(d) None of these

54, Generally auditing is not necessary for small sole trading business because –

(a) Legally it is not necessary

(b) Its scope is limited

(d) None of these

55, Audit of public company is –

(a) Compulsory (✓)

(b) Luxury

(d) Optional

56, Auditing is mandatory for –

(a) Religious trusts

(b) Joint stock companies

(d) All of the above (✓)

57, Audit for business of sole trading is -s

(a) Compulsory

(b) Essential

(d) Not any of them

58, Audit is compulsory in –

(a) Sole trading concern

(b) Partnership firm

(d) None of them.

59, If a partnership firm makes its audit, it is called –

(a) Statutory

(b) Compulsory audit

(d) None of these

60, Audit of Trust is –

(a) Compulsory (✓)

(b) Voluntary

(d) None of these

61, Audit of Co-operative Firm is –

(a) Voluntary

(b) Compulsory (✓)

(d) None of these

62, Audit of Insurance Companies is –

(a) Compulsory (✓)

(b) Voluntary

(d) None of these

63, The art of writing business transactions in books of accounts is termed as –

(a) Accountancy

(b) Book-keeping (✓)

(d) None of these

64, Which of the following is not a function of Book-keeping –

(a) Entry in main journal

(b) Posting in ledger

(d) All of these

65, Which of the following is not true in case of Book keeping?

(a) Simple training

(b) Mechanised work

(d) None of these

66, Auditing is an examination of books of accounts

(a) General

(b) Specific

(d) Both above (b) and (c) (✓)

67, Subsidiary object of Auditing is –

(a) Detection of Errors

(b) Detection of Frauds

(d) All of these (✓)

68, Main types of errors are –

(a) 4

(b) 5 (✓)

(d) 2

69, Main cause of errors is –

(a) Negligence

(b) Ignorance of Accountant

(d) Both above (a) and (b) (✓)

70, Entering capital expenses as revenue expenses in the books of accounts is –

(a) Error of principle (✓)

(b) Error of omission

(d) Compensatory error

71, Errors arise due to ignorance of fundamental principles of accounting is termed as –

(a) Errors of omission

(b) Errors of principle (✓)

(d) Errors of commission

72, When there are two or more errors, which exactly counter balance each other, are termed as –

(a) Errors of omission

(b) Errors of principle

(d) Errors of commission

73, When incorrect entries are made in the books of accounts either wholly or partially, the error is –

(a) Errors of omission

(b) Errors of principle

(d) Errors of commission (✓)

74, When a transaction is recorded with a wrong amount in the books of accounts, it is termed as-

(a) Errors of omission

(b) Errors of principle

(d) Errors of commission (✓)

75, Errors which arise on account of transactions not being recorded in the books of accounts, either wholly or partially are termed as –

(a) Errors of omission (✓)

(b) Errors of principle

(d) Errors of commission books

76, Purchase of Rs. 4,100 is entered as Rs. 1,400 in of accounts is a –

(a) Error of commission (✓)

(b) Errors of principle

(d) Compensatory error

77, Furniture purchased for 50,000 but Purchase Ale debited. The error committed here is –

(a) Compensating error

(b) Clerical error

(d) None of these

78, Received 800 from Vibhav but credited his account 8,000 is…………

(a) Error of Principle

(b) Clerical Error (✓)

(d) None of these

79, Ram’s account was excess debited by 500 where Shyam’s account was under debited by 500 is……..

(a) Compensating Error ()

(b) Clerical Error

(d) None of these

80, Goods sold to Shyam of Rs. 600 and entry for sales is made in the sales book but is omitted from the accounts of the Shyam, the error is –

(a) Error of commission

(b) Errors of principle

(d) Compensatory error

81, The amount of Rs. 232 is entered as Rs. 322 in the bo of original entry, the error is –

(a) Error of commission (✓)

(b) Errors of principle

(d) Compensatory error

82, The error which affect both the sides of Trial Balan equally termed as –

(a) Error of commission

(b) Errors of principle

(d) Compensatory error (✓)

83, The error which can be detected by the Trial Balance is –

(a) Error of commission (✓)

(b) Errors of principle

(d) Compensatory error

84, Which of the following does not affect the agreement of Trial Balance –

(a) Error of principle

(b) Error of complete omission

(d) All above (✓)

85, Old machinery sold for Rs. 10,000 but credited to sales account is –

(a) Error of principle (✓)

(b) Error of commission

(d) Compensating error

86, Hari’s account was credited by Rs. 900 instead of Rs 90 whereas Ram’s account was over debited by Rs. 810. This is a –

(a) Error of principle

(b) Error of commission

(d) Compensating error (✓)

87, Goods sold to Ram of Rs. 200 but no entry is made in the sales book. This is a –

(a) Error of principle

(b) Error of commission

(d) Compensating error

88, Which of the following is a type of fraud?

(a) Misappropriation of cash

(b) Manipulation of accounts

(d) All of these (✓)

89, Which of the following is a misappropriation of cash?

(a) Cash sales not being fully accounted for

b) Teaming and lading

(d) All of these (✓)

90, Which of the following is a misappropriation of Goods?

(a) Pilfer away goods from stock

(b) Using goods for personal purposes

(d) Both above (a) and (b) (✓)

90, Generally manipulation of accounts is done by

(a) Accountant

(b) Clerks

(d) Shareholders

91, Allocation of labourers in the construction of personal building engaged in the construction of official building is………….

(a) Embezzlement of property

(b) Embezzlement of labour (✓)

(d) None of these.

92, Domestic use of official sopha is –

(a) Embezzlement of Goods

(b) Embezzlement of Labour

(d) None of these.

93, Domestic use of official telephone is –

(a) Embezzlement of labour

(b) Embezzlement of property

(d) None of these

94, Main object of manipulation in accounts by the owner or management is –

(a) To cover their errors

(b) To cover misappropriation of cash and goods

(d) None of above

95, Which of the following is the object of investigation?

(a) For purchasing business

(b) For granting loan

(d) All above (✓)

96, Investigation is initiated by –

(a) Owner of the concern

(b) A person who wants to lend money to that concern

(d) All above (✓)

97, Auditing is done on the basis of –

(a) Entries of accounts

(b) Vouchers

(d) All above (✓)

98, Auditing is compulsory for –

(a) Companies

(b) Trusts

(d) All of these (✓)

Which one of the following is not an advantage of auditing?

(a) It provides satisfaction for owners

(b) It helps in getting loans

(d) It detects errors and frauds

In comparison to book-keeping, accountancy is a ……… concept.

(a) Broader (✓)

(b) Narrower

(d) None of these

Auditing is useful –

(a) To detect fraud and errors

(b) To increase goodwill of the concern

(d) All of these (✓)

Basic principles which govern auditing is –

(a) Independence

(b) Secrecy

(d) All of these (✓)

Auditing safeguards the interests of the –

(a) Owners

(b) Creditors

(d) All of these (✓)

104, Which of the following is objective of showing of profits more than actual –

(a) To show off their exaggerated efficiency

(b) To convert black money into white

(d) All of these (✓)

105, Which of the following is objective of showing profit less than actual –

(a) To deceive the competitors

(b) To evade taxes

(d) All of the above (✓)

106, Which of the following is a tactic of manipulation in accounts –

(a) Showing the liabilities and assets less or more than actual

(b) By not making essential provisions

(d) All of these ()

107, Which of the following is not correct about fraud?

(a) It is backed by intention

(b) It can never be condoned

(d) In it person is fully aware of his activity

108, Which of the following is a limitation of Auditing?

(a) Audit is not a guarantee of cent percent truth

(b) The auditor only expresses his opinion

(d) All of these ()

109, Cost Audit is……… object of Auditing.

(a) Primary

(b) Subsidiary

(d) None of these

110, Showing profits more than actual profits is termed as –

(a) Embezzlement of property

(b) Embezzlement of labour

(d) Manipulation of accounts (✓)

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