MCQs on Audit & Assurance (Part-14) (401 to 450)

 

401. In stratified random sampling

a) Sample is taken from whole of the population

b) It requires special attention to judge contents of stratum

c) There is application of different concept and not an extension of simple random sampling

d) All of these

402. Tolerable error is _______________ in population that auditor is willing to _______________ for a given sample size.

a) Minimum, Forego

b) Maximum, Forego

c) Minimum, Accept

d) Maximum, Accept

403. The kind of relationship between tolerable error and sample size is

a) Inverse

b) Direct

c) They both are same

d) There is no relationship as such

404. Which of the following SAs deals with auditor’s responsibilities to evaluate the effect of identified misstatements

a) SA 330

RATHORE INSTITUTE CA. NITIN GUPTA

b) SA 500

c) SA 505

d) SA 450

405. Misstatements may result from:

a) An inaccuracy in gathering or processing data from which financial statements are prepared

b) An omission of an amount or disclosure

c) An incorrect accounting estimate

d) All of above

406. SA 450 considers the mis-statements resulting from

a) Frauds

b) Errors

c) Frauds and errors both

d) Mistakes

407. Misstatements that the auditor has accumulated during the audit and have not been corrected are called as

a) Uncorrected misstatements

b) Material misstatements

c) Immaterial misstatements

d) Tolerable errors

408. If aggregate of uncorrected misstatements is material, auditor shall express

a) Unmodified Opinion

b) Qualified /Adverse Opinion

c) Disclaimer of opinion

d) None of these

409. __________________ means audit evidence obtained as direct written response from a third party in paper/electronic form.

a) Internal Confirmation

b) External Confirmation

c) Written Representation

d) All of above

410. Which of the following SAs deals with auditor’s responsibilities to design and perform external confirmation procedures to obtain relevant and reliable audit evidence

a) SA 580

b) SA 330

c) SA 500

d) SA 505

411. A request that the confirming party respond directly to the auditor indicating whether the confirming party agrees or disagrees with the information in the request, or providing the requested information, is

a) Negative Confirmation Request

b) Exception

c) Positive Confirmation Request

d) Non-Response

412. A request that the confirming party respond directly to the auditor only if the confirming party disagrees with the information provided in the request, is

a) Negative Confirmation Request

b) Positive Confirmation Request

c) Exception

d) Non Response

413. A response that indicates a difference between information requested to be confirmed, or contained in the entity’s records, and information provided by the confirming party, is

a) Error

b) Exception

c) Fraud

d) All of above

414. A failure of the confirming party to respond, or fully respond, to a positive confirmation request, or a confirmation request returned undelivered is called

a) Disagreement

b) Confirmation failure

c) Restriction on auditor’s scope

d) Non-Response

415. The auditor should use negative confirmation request if

a) Population comprises a large number of small, homogeneous account balances or transactions

b) The auditor has assessed the risk of material misstatement as low

c) A very low exception rate is expected

d) All of above

416. Factors to be considered when designing confirmation request:

a) Prior experience of auditor

b) Assertions being addressed

c) Information to be confirmed

d) All of above

417. In case any exception is identified by auditor by conducting external confirmation, he shall perform

a) Alternative audit procedures

b) Additional audit procedures

c) Test of Controls

d) Both (a) and (b)

418. In case of non-response in the process of external confirmation, the auditor shall perform

a) Alternative audit procedures

b) Additional audit procedures

c) Test of Controls

d) Both (a) and (b)

419. _______________ should carefully plan and control external confirmation

a) Management

b) TCWG

c) Auditor

d) All of these in consultation with one another

420. ________________ means evaluation of financial information through analysis of plausible relationships among both financial and non-financial data.

a) Risk assessment

b) Analytical Procedures

c) Substantive Procedures

d) Test of Controls

421. Which of the following SAs deals with auditor’s responsibilities to design and perform analytical procedures as substantive analytical procedure?

a) SA 315

b) SA 330

c) SA 520

d) SA 500

422. What are analytical procedures?

a) Substantive tests designed to assess control risk.

b) Substantive tests designed to evaluate the validity of management’s representative letter.

c) Substantive tests designed to study relationship between financial and non-financial.

d) All of the above.

423. Analytical procedures used in the planning stage of an audit, generally

a) helps to determine the nature, timing and extent of other audit procedures

b) Directs attention to potential risk areas

c) Indicate important aspects of business

d) All of above.

424. The basic assumption underlying the use of analytical procedures is

a) It helps the auditor to study relationship among elements of financial information

b) Relationship among data exist and continue in the absence of known condition to the contrary

c) Analytical procedures will not be able to detect unusual relationships

d) None of the above.

425. Which of the following is not an analytical procedure?

a) Tracing of purchases recurred in the purchase book to purchase invoices.

b) Comparing aggregate wages paid to number of employees.

c) Comparing the actual costs with standard costs.

d) All of them are analytical procedures.

426. Analytical procedures used in the planning stage of an audit, generally:

a) Helps to determine the nature, timing and extent of other audit procedures

b) Directs attention to potential risk areas

c) Indicates important aspects of business

d) All of the above

427. The basic assumption underlying the use of analytical procedures is:

a) It helps the auditor to study relationship elements of financial information.

b) Relationship among data exist and continue in the absence of known conditions to the contrary

c) Analytical procedures will not be able to detect unusual relationships.

d) None of the above.

428. What is the primary objective of analytical procedures used in the overall review stage of an audit?

a) To help to corroborate the conclusions drawn from individual components of financial statements

b) To reduce specific detection risk

c) To direct attention to potential risk areas

d) To satisfy doubts when questions arise about a client’s ability to continue

429. Which of the following is a technique available as substantive analytical procedure?

a) External confirmation

b) Ratio Analysis

c) Trend Analysis

d) Both (b) and (c)

430. Timing of analytical procedure is

a) At Planning stage only

b) Throughout the audit engagement

c) At planning stage and in addition these are also required during completion phase.

d) None of these

431. Reliability of data is influenced by

a) Its source

b) Its nature

c) Circumstances under which it is obtained

d) All of these

432. Which of the following is not a typical analytical procedure?

a) Study of relationships of the financial information with relevant nonfinancial information

b) Comparison of the financial information with similar information regarding the industry in which the entity operates

c) Comparison of recorded amounts of major disbursements with appropriate invoices

d) Comparison of the financial information with budgeted amounts

433. Which of the following SA deals with auditor’s responsibilities in relation to fraud in an audit of financial statements

a) SA 240

b) SA 250

c) SA 315

d) SA 330

434. Examples of fraudulent financial reporting

a) Inflating or suppressing purchases and expenses

b) Inflating or suppressing sales and other items of income

c) Overvaluation of assets

d) All of above

435. Which of the following is not an example of suppressing cash receipts

a) Teeming and Lading

b) Payment against fictitious vouchers

c) Not accounting for cash sales fully

d) Not accounting for miscellaneous receipts.

436. Which of the following is not self-revealing error

a) Wages paid for installation of machine debited in wages account.

b) Omission to post a part of a journal entry to ledger

c) A failure to record in the cash book, cash paid into or withdrawn from bank

d) Goods purchased from Mr. A omitted to be recorded.

437. Teeming and Lading is a technique for

a) Inflating cash payments

b) Wrong casting in the cash book

c) Suppressing cash receipts

d) None of these

438. Which of following is fraud risk factor

a) Incentive/Pressure

b) Opportunities

c) Attitude/Rationalization

d) All of above

439. Which of the following is an indicator of fraud due to problematic or unusual relationship between auditor and management

a) Unsupported or unauthorized transaction

b) Unusual delays by the entity in providing requested information

c) Last minute adjustments that significantly affect financial results

d) All of above.

440. Which of the following is least likely to be included in an auditor’s inquiry of management while obtaining information to identify the risks of material misstatement due to fraud?

a) Are financial reporting operations controlled by and limited to one location?

b) Does it have knowledge of fraud or suspect fraud?

c) Does it have programs to mitigate fraud risks?

d) Has it reported to the audit committee the nature of the company’s internal control?

441. Which of the following is most likely to be presumed to present a fraud risk on an audit?

a) Capitalization of repairs and maintenance expense into the property, plant and equipment asset account

b) Improper revenue recognition

c) Improper interest expense accrual

d) Introduction of significant new products

442. Degree of detection risk is generally high which respect to

a) Management’s Fraud

b) Employee’s Fraud

c) Error

d) All of above.

443. Due to inherent limitations of audit, there is ______________ that some mis-statements will __________

a) Reasonable assurance, not be detected

b) Unavoidable risk, not be detected

c) Avoidable risk, not be detected

d) Unavoidable risk , not be prevented

444. Fraud is an intentional act involving use of deception to obtain an unjust advantage and can be committed by

a) TCWG

b) Employees

c) Third parties

d) Any of these

445. In order to form an opinion, the auditor shall take into account:

a) Whether sufficient appropriate audit evidence has been obtained

b) Whether uncorrected misstatements are material, individually or in aggregate

c) Evaluations

d) All of above

446. In order to form the opinion, the auditor shall conclude as to whether the auditor has obtained ______________ about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error.

a) Reasonable assurance

b) Absolute assurance

c) Limited assurance

d) None of the above

447. Which of the following is a not a type of modified opinion

a) Qualified opinion

b) Adverse opinion

c) Disclaimer of opinion

d) None of these

448. The auditor shall express________________ opinion when the auditor, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are both material and pervasive to the financial statements.

a) Adverse

b) Qualified

c) Disclaimer

d) None of the above

449. When auditor concludes that financial statements as a whole are free from material misstatements and he has no reservation for any material item of the financial statements, he shall express

a) Qualified opinion

b) Unmodified opinion

c) Adverse opinion

d) Disclaimer of opinion

450. When auditor concludes that financial statements are not free from material misstatements and effect of material misstatements is not pervasive, he shall express

a) Unmodified opinion

b) Disclaimer of opinion

c) Qualified opinion

d) Adverse opinion