Auditing MCQs

Page No. 2

Which one of the following is part of the auditor’s function?


aConducting the inventory count

✖


bObtaining and evaluating audit evidence on the financial statements

✓


cCalculating the year-end accruals figure for inclusion in the accounts

✖


dProviding representations to management

✖



What sort of assurance is provided in a review engagement?


aPositive assurance

✖


bNegative assurance

✓


cHigh level of assurance

✖


dNo assurance

✖


View Answer Negative assurance

Which of the following statements is correct?


aWhen a company negotiates a ‘friendly’ takeover, it usually appoints a firm of accountants to carry out due diligence on the takeover target.

✓


bIn an attestation engagement, the accountant is required to report on the quality of work performed.

✖


cIn a review engagement, evidence is gathered mainly by means of computation and inspection.

✖


d In an engagement to review financial statements, the amount of work required is the same as for an audit

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For companies required to produce interim financial statements (IFI):


aone audit firm should audit the IFI and a different firm should audit the financial statements for the year as a whole.

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bone accountancy firm should review the IFI and a different firm should audit the financial statements for the year as a whole.

✖


cthe same firm should audit the IFI and the financial statements for the year as a whole.

✖


dthe same firm should review the IFI and the financial statements for the year as a whole.

✓



What is meant by negative assurance?


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

✖


bThe client’s financial statements were found to be materially misstated.

✖


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

✖


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

✓



The auditor should examine subsequent realization of revenue such as dividends, interest,commission, etc to:­_____________?


aidentify cases of unrecorded revenue

✓


bensure proper disclosure in the balance sheet

✖


crecompute accrued income on the data of balance sheet

✖


dAny of these

✖



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


apurchase orders

✖


bsales orders

✖


csales invoices

✓


dbill of loading

✖


View Answer sales invoices

Which of the following documents is not relevant for vouching cash sales?


aDaily cash sales summary

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b Salesmen’s summary

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cMonthly statements sent to customers

✓


dBank statement

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The client changed method of depreciation from straight line to written down value method. This has been disclosed as a note to the financial statements. It has an immaterial effect on the current financial statements. It is expected, however, that the change will have a significant effect on future periods. Which of the following option should the auditor express?


aUnqualified opinion

✓


b Qualified opinion

✖


cDisclaimer of opinion

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dAdverse opinion

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View Answer Unqualified opinion

Which of the following is true about explanatory notes?


aThese are given by the directors of the company

✓


bThese are given to adhere to requirements of section 211.

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cThese are given by auditors of the company in auditor’s report

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dAll of the above

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