MCQs on Audit & Assurance (Part-9) (251 to 300)

 

251.Which of the following SAs deals with auditor’s responsibilities w.r.t. risk assessment 

a) SA 315 

b) SA 320 

c) SA 330 

d) SA 450 

252.Risk assessment procedures are performed by auditor 

 a) To detect material misstatements in the financial statements 

b) To identify and assess material misstatements in the financial statements 

c) To identify and assess operational risk in the operations of the entity 

d) All of these 

253.Components of risk of material misstatements are 

a) Inherent Risk and Control Risk 

b) Inherent Risk and Detection Risk 

c) Control Risk and Detection Risk 

d) Inherent Risk, Control Risk and Detection Risk 

254.Audit Risk refers to risk that 

a) If financial statements are materially misstated then auditor may express an inappropriate opinion. 

b) Audit sample may be inappropriate 

c) Auditor may be unable to complete auditing engagement in timely manner 

d) All of these 

255.The risk for the company that an auditor may issue an unqualified report due to auditor’s failure to detect some misstatement either due to fraud or error is 

a) Financial accounting risk 

b) Analytical risk 

 c) Taxation risk 

d) Audit risk 

256.Components of audit risk are 

a) Inherent Risk, Control Risk and Sampling Risk 

b) Inherent Risk, Control Risk and Detection Risk 

c) Inherent Risk and Control Risk 

d) None of these 

257.An identified and assessed risk of material misstatement that, in the auditor’s professional judgement, requires special audit consideration is called as 

a) Inherent Risk 

b) Audit Risk 

c) Sampling Risk 

d) Significant Risk 

258.Inherent Risk refers to 

a) Risk of an inappropriate opinion 

b) Risk of failure of internal control in the prevention or detection of material misstatements 

c) Susceptibility of account balances or class of transaction to be materially misstated, assuming there were no internal controls 

d) Risk of non-detection of material misstatements in financial statements 

259.Control Risk refers to 

 a) Risk of an inappropriate opinion 

b) Risk of failure of internal control in the prevention or detection of material misstatements 

c) Susceptibility of account balances or class of transaction to be materially misstated, assuming there were no internal controls 

d) Risk of non-detection of material misstatements in financial statements 

260.If before considering the internal controls at the audited entity, there is a high probability of certain errors in the financial statements, we particularly speak of 

a) a high sampling risk. 

b) a high inherent risk 

c) a high control risk 

d) a high detection risk 

261.Detection Risk refers to 

a) Risk of an inappropriate opinion 

b) Risk of failure of internal control in the prevention or detection of material misstatements 

c) Susceptibility of account balances or class of transaction to be materially misstated, assuming there were no internal controls 

d) Risk of non-detection of material misstatements in financial statements 

262.The risk that an auditor’s procedures will lead to the conclusion that a material misstatement does not exist in an account balance when, in fact, such misstatement actually does exist is 

a) Audit risk 

b) Sampling risk 

c) Control risk 

 d) Detection risk 

263.There is inverse relationship between 

a) Inherent risk and control risk 

b) Combined risk of inherent and control risk with risk of material misstatements 

c) Materiality and Audit Risk 

d) Detection Risk and Audit Risk 

264.There is inverse relationship between 

a) Inherent Risk and Control Risk 

b) Combined risk of inherent and control risk with risk of material misstatements 

c) Combined risk of inherent and control risk with detection risk 

d) Sampling Risk and Non-Sampling Risk 

265.Which of the following in not an assertion about classes of transactions and events for the period under audit: 

a) Occurrence 

b) Accuracy 

c) Classification 

d) Existence 

266.Which of the following is not an assertion about classes account balances at the period end 

a) Existence 

b) Valuation 

c) Accuracy 

d) Rights and Obligations 

267.XYZ Limited decided that it wanted to improve earnings. To do this, they understated their expenses by omitting unpaid expenses from the accrued liabilities account at year end. Which management assertion has been violated? 

a) Rights and obligations 

b) Completeness 

c) Existence 

d) Disclosure 

268.Pick the odd one 

a) Occurrence 

b) Existence 

c) Right and obligation 

d) Valuation 

269.Pick the odd one 

a) Occurrence 

b) Accuracy 

c) Cut-off 

d) Valuation 

270.Which of the following are performed as risk assessment procedures 

a) Observation 

b) Inquiry 

c) Analytical Review 

d) All of these 

271.Significant risk refers to 

a) Audit Risk 

b) Sampling Risk 

c) Risk of material misstatements 

d) Risk of material misstatements requiring special audit considerations 

272.Which of the following is not a component of Internal Control 

a) Information system 

b) Control environment 

c) Entity’s risk assessment procedures 

d) Quality review 

273.The auditor must have a thorough understanding of the entity, the client’s business strategies, processes, and measurement indicators for critical success. This analysis helps the auditor 

a) Decide if they want to accept the engagement 

b) Identify risks associated with the client’s strategy that could affect the financial statements 

c) Assess the level of materiality that is appropriate for the audit 

d) Identify the potential for fraud in the financial reporting process 

274.Which of the following SA deals with auditor’s responsibility to design and perform further audit procedures as a response on assessed risk 

a) SA 330 

b) SA 315 

c) SA 320 

d) SA 450 

275.Which of the following is a further audit procedure as per SA 330 

a) Risk assessment procedure 

b) Internal check 

c) Substantive audit procedures 

d) Internal audit 

276.Test of controls is performed by auditor 

a) To evaluate operating effectiveness of internal controls 

b) To detect material misstatements in financial statements 

c) To identify and assess risk of material misstatements in financial statements 

d) All of above 

277.The auditor shall test controls 

 a) For particular time 

b) Throughout the period 

c) (a) or (b) 

d) None of these 

278.The auditor shall design and perform tests of controls to obtain sufficient appropriate audit evidence as to operating effectiveness of relevant controls when: 

a) The auditor’s assessment of risks of material misstatements includes an expectation that controls are operating effectively 

b) Substantive procedures alone cannot provide sufficient appropriate audit evidence 

c) (a) or (b) 

d) None of these 

279.In case of recurring audit engagement, it is a matter of professional judgment of auditor to determine whether it is appropriate to use audit evidence about the operating effectiveness of controls obtained in previous audit but auditor shall test the controls at least once in every 

a) Third audit 

b) Fourth audit 

c) Fifth audit 

d) Sixth audit 

280.Factors which may warrant re-testing of controls in recurring audit engagement are 

a) Deficient general IT controls 

b) Deficient monitoring controls 

c) A deficient control environment 

d) All of these 

281.Substantive audit procedures are performed by auditor 

a) To determine nature, timing and extent of test of controls 

b) To determine nature, timing and extent of substantive analytical procedures 

c) To detect material misstatements. 

d) To identify and assess detection risk 

282.Substantive audit procedure comprises: 

a) Substantive analytical procedures 

b) Test of details 

c) Both (a) and (b) 

d) None of these 

283.Nature, timing and extent of substantive audit procedures are determined by auditor on the basis of 

a) Test of controls performed

b) Understanding of entity and its related environment 

c) Test of details 

d) All of these 

284.Substantive procedures related to the financial statements closing process are 

a) Verification of assets and liabilities 

b) Agreeing or reconciling the financial statements with the underlying records 

c) Examining material journal entries and other adjustments made during the course of preparing the financial statements 

d) Both (b) and (c) 

285.Which statement best describes the interaction of the systems and substantive approaches in the audit plan? 

a) The systems approach focuses on testing controls to make sure they are effective, while the substantive approach is the detailed testing of specific accounts for accuracy 

b) The systems approach focuses on detailed testing of specific accounts for accuracy, while the substantive approach is the testing controls to make sure they are effective 

c) The systems approach focuses on the use of computer systems to aid in the audit while the substantive approach focuses on more manual tests 

d) A thoroughly designed systems approach to auditing can eliminate 

286.After testing a client’s internal control activities, an auditor discovers a number of significant deficiencies in the operation of a client’s internal controls. Under these circumstances the auditor most likely would 

a) Issue a disclaimer of opinion about the internal controls as part of the auditor’s report 

b) Increase the assessment of control risk and increase the extent of substantive tests 

c) Issue a qualified opinion of this finding as part of the auditor’s report 

d) Withdraw from the audit because the internal controls are ineffective 

287.What is not included under the audit term “substantive procedures”? 

a) Test made to obtain evidence of material errors 

b) A general strategy and detained concerning the nature, timing and extent of audit procedures to be performed. 

c) Analytical procedures to analyze trends and fluctuations 

d) Test of the details of the transactions 

288.The auditor shall apply procedures to examine overall presentation of financial statements and their compliance with relevant FRF, these are called as 

a) Audit procedures responsive to risk assessed at assertion level 

b) Overall response 

c) Both (a) and (b) 

d) Either (a) or (b) 

289.Which of following SA deals with auditor’s responsibility to design and perform audit procedures in such a way to enable the auditor to obtain sufficient and appropriate audit evidence to be able to draw reasonable conclusions on which to base the auditor’s opinion 

a) SA 500 

b) SA 501 

c) SA 330 

d) SA 315 

290.Sufficient audit evidence is a measurement of 

a) Quality of audit evidence 

b) Quantity of audit evidence 

c) Both of (a) and (b) 

d) None of these 

291.Appropriate audit evidence is a measurement of 

a) Quality of audit evidence 

b) Quantity of audit evidence 

c) Both of (a) and (b) 

d) None of these 

292.The auditor must obtain following audit evidence to draw reasonable conclusion 

a) Sufficient audit evidence 

b) Appropriate audit evidence 

c) Sufficient and appropriate audit evidence 

d) None of these 

293.Which of the following is the least persuasive type of audit evidence? 

a) Bank statements obtained from the client 

b) Documents obtained by auditor from third parties directly 

c) Carbon copies of sales invoices inspected by the auditor 

d) Computations made by the auditor. 

294.Following audit procedures are performed by auditor to obtain sufficient appropriate audit evidence a) Risk assessment procedures 

b) Test of controls 

c) Substantive audit procedures 

d) Both (b) and (c) 

295.Which of the following is not a factor to determine sufficient audit evidence 

a) Reliability of information 

b) Materiality of item 

c) Risk of material misstatements 

d) Size and characteristics of the population 

296.Which of the following is a factor to determine sufficient audit evidence 

a) Materiality of item involved 

b) Risk of material misstatements 

c) Size and characteristics of the population 

d) All of these 

297.Which of the following is a factor to determine appropriate audit evidence 

a) Reliability of information 

b) Relevancy of information 

c) Both (a) and (b) 

d) None of these 

298.Depending upon nature audit evidence can be classified as 

a) Visual evidence 

b) Oral evidence 

c) Documentary evidence 

d) All of these 

299.Depending upon source audit evidence can be classified as 

a) Internal audit evidence 

b) External audit evidence 

c) Both (a) and (b) 

d) None of these 

300.Which of the following is not internal audit evidence 

a) Bank Reconciliation Statement 

b) Bank Statement 

c) Copy of Sales Invoice 

d) Voucher