MCQs on Auditing (Part-8) (201 to 250)

MCQs on Auditing

 

201. Primarily prevention and detection of fraud are the responsibilities of 

a) TCWG and Management of entity 

b) Internal Auditor of entity 

c) External Auditor of entity 

d) All of above

 202. Which of the following in not a fraud through suppressing cash receipts: 

a) Not accounting for cash sales fully 

b) Not accounting for miscellaneous receipts 

c) Not accounting for bad debt recovered 

d) Making payment against fictitious vouchers. 

203. Teeming and lading is a technique of fraud through 

 a) Inflating cash payment 

b) Wrongs casting in cash book

 c) Suppressing cash receipts 

d) None of these 

204. Which of the following error will affect the trial balance 

a) Error of partial omission 

b) Error of principles 

c) Error of complete omission 

d) Compensatory errors 

205. Which of the following SAs deals with auditor’s responsibilities in agreeing the terms of audit engagement

 a) SA 210 

b) SA 220

 c) SA 230

 d) SA 240 

206.The primary purpose of establishing quality control policies and procedures for deciding on client evaluation to 

a) Ensure adherence to generally accepted auditing standards 

b) Acceptance or continuance of client’s relationship 

c) Ensure audit fees is charged according to the type of audit work assigned 

d) All of above 

207. The auditor shall establish existence of preconditions for an audit of financial statements 

a) Before confirming common understanding between the auditor and management of the terms of audit engagement. 

b) After confirming common understanding between the auditor and management of the terms of audit engagement. 

c) Before appointment of auditor 

d) After the date of auditor’s report. 

208. Terms of auditing engagement are discussed through

 a) Letter of appointment 

b) Letter of acceptance

 c) Engagement letter 

d) Letter of weakness

 209. Engagement letter is provided by 

a) Management to auditor 

b) Auditor to Management/TCWG 

c) Internal auditor to External Auditor

 d) CG to Auditor 

210. Engagement letter is 

 a) Always required when auditor is appointed 

b) Always required when auditor is reappointed 

c) Not always required when auditor is reappointed but except for certain exceptions 

d) (a) and (C) 

211. Which of the following is not a term of engagement letter 

a) Object and Scope of audit

 b) Responsibilities of management and TCWG of the entity 

c) Fact that audit process may be subject to peer review under Chartered Accountants Act, 1949 

d) Audit Planning 

212.The audit engagement letter generally should include to each of the following except 

a) Limitation of auditing 

b) Responsibilities of management with respect to audit work 

c) Expectation of receiving a written representation letter 

d) A description of the auditor’s method of sample selection.. In which of the following circumstances a new engagement letter is required in recurring audit engagement

 a) Any change in the senior management of the entity

 b) Any change in the nature of business of the entity 

c) Any change in legal requirement 

d) All of the above 

214. If auditor is requested by management to change the audit engagement to an engagement that conveys a lower level of assurance, then the auditor shall

 a) Reject the management’s request 

b) Accept the management’s request 

c) Determine that there is a reasonable justification for doing so 

d) Shall not entertain any such request 

 215. SA 260 deals with auditor’s responsibilities w.r.t.

a) Communication with Those Charged with Governance of the entity 

b) Communication with Owners of the entity 

c) Communication with Management of the entity 

d) All of these 

216. The auditor shall communicate with TCWG a statement w.r.t. auditor’s independence in case of audit of financial statements of 

a) Any entity 

b) Listed entities

 c) Any entity except One Person Company and Small Company 

d) None of these 

217. Which of the following SAs deals with responsibilities of auditor regarding quality control procedures for an audit of financial statements 

a) SA 200 

b) SA 210 

c) SA 220

 d) SA 260 

218. The objective of SA 220 is to implement quality control procedures at the engagement level that provide the auditor with reasonable assurance that 

a) The audit complies with professional standards and regulatory requirements 

b) The auditor’s report issued is appropriate in the circumstances 

c) Both (a) and (b) 

d) None of these 

219. The partner who is responsible for the auditing engagement and its performance and for the report that is issued on behalf of the firm is called as: 

a) Active partner 

b) Performing partner 

c) Engagement Partner 

 d) Working Partner 

220. Which of the following partner can act as engagement partner 

a) Any Partner 

b) Any CA Partner 

c) Any CA Partner in full time or part time practice 

d) Any CA Partner in full time practice 

221.Who will take responsibility for overall quality in an audit of financial statements 

a) All the partners of firm 

b) All CA partners of firm 

c) Engagement partner 

d) Engagement team 

222.Which of the following information assist the auditor in accepting and continuing of client relationship 

a) The integrity of the principal owners, key management and TCWG of the entity 

b) Whether the firm and the engagement partner can comply with the relevant ethical requirements 

c) Whether the engagement team is competent to perform the audit engagement and has the necessary capabilities, including time and resources 

d) All of these 

223.Appointment of engagement quality control reviewer is mandatory in case of audit of financial statements of 

a) Any entity 

b) Any entity except One Person Company and Small Company 

c) Listed Entity 

d) None of these 

224.Which of the following in not element of quality control in an audit of financial statements 

a) Leadership Responsibilities 

b) Assignment of Engagement Team 

c) Acceptance and Continuance of Client Relationship and Audit Engagements 

d) Signing on Audit Report 

225.If any difference of opinion arise within engagement team or between engagement partner and quality control reviewer, the engagement team follow 

a) Engagement partner 

b) Engagement quality control reviewer 

c) Firm’s policies and procedures 

d) Majority of members of engagement team 

226.Auditing firms should establish quality control policies and procedures for personnel management in order to provide reasonable assurance that 

a) Employees promoted possess the appropriate characteristics to perform competently 

b) Personnel will have the knowledge required to fulfill responsibilities assigned 

c) The extent of supervision and review in a given instance will be appropriate 

d) All of the above are reasons 

227.The least important element in the evaluation of an audit firm’s system of quality control would relate to 

a) Assignment of audit assistants 

b) Consultation with experts 

c) System for determining audit fees 

d) Confidentiality of client’s information 

228.In pursuing its quality control objectives with respect to independence, an auditing firm may use policies and procedures such as 

 a) Emphasizing independence of mental attitude in firm training programs and in supervision and review of work 

b) Prohibiting employees from owning stock of public companies 

c) Suggesting that employees conduct their banking transactions with banks that do not maintain accounts with client firms 

d) Assigning employees who may lack independence to research positions that do not require participation in field audit work 

229.Policies and procedures w.r.t human resources address which of the following issues 

a) Recruitment 

b) Capabilities 

c) Competence 

d) All of above 

230.Which of the following SAs deals with auditor’s responsibilities w.r.t. audit planning in an audit of financial statements 

a) SA 300 

b) SA 315 

c) SA 320 

d) SA 330 

231.The auditor shall 

a) Establish audit strategy on the basis of overall audit plan. 

b) Develop overall audit plan on the basis of audit strategy 

c) Both (a) and (b) 

d) None of these 

232.The audit plan is ______________ detailed than the overall audit strategy. 

a) Less 

b) More 

c) Equal 

233.Planning is _______________ process of an audit that often begins shortly after (or in connection with) the completion of the previous audit and continues until the completion of the current audit engagement. 

a) Continuous 

b) Discreet 

c) Neither continuous nor discreet. 

234.The auditor shall develop an audit plan that include a description of: 

a) The nature, timing and extent of planned risk assessment procedures. 

b) The nature, timing and extent of planned further audit procedures at the assertion level. 

c) Other planned audit procedures that are required to be carried out so that the engagement complies with SAs. 

d) All of the above 

235.An auditor who accepts an audit but does not possess the industry expertise of the business entity should 

a) Engage experts 

b) Obtain knowledge of matters that relate to the nature of entity’s business 

c) Inform management about it 

d) Take help of other auditors 

236.Auditor can obtain knowledge of client’s business from 

a) Discussion with people within client entity 

b) Publication relating to industry 

c) Previous experience 

 d) All of these 

237.Benefit(s) of audit planning is 

a) Helping auditor to devote appropriate attention on important areas of the audit 

b) Better preparation of engagement letter 

c) Effective communication with retiring auditor 

d) It ensure compliance with applicable law and regulation 

238.Planning should be made to cover, among other things: 

a) acquiring knowledge of the client’s accounting system, policies and internal control procedures 

b) establishing the expected degree of reliance to be placed on internal control 

c) coordinating the work to be performed 

d) all of above 

239.Which of the following is incorrect 

a) In establishing the audit strategy the auditor shall identify characteristics of the engagement that define its scope. 

b) The auditor shall develop an audit plan that shall include a description of the nature, timing and extent of risk assessment procedures and further audit procedures which are proposed to be performed. 

c) The auditor shall establish audit strategy on the basis of overall audit plan. 

d) The auditor shall update and change the audit strategy and audit plan as necessary during course of the audit. 

240.The overall audit strategy and the audit plan remain the _____________ responsibility. 

a) Auditor’s 

b) Management’s  

c) Those charged with governance 

d) All of the above 

241.Prior to commencing field work, an auditor usually discusses the general audit strategy with the client’s management. Which of the following details do management and the auditor usually agree upon at this time? 

a) The specific matters to be included in the communication with the audit committee 

b) The minimum amount of misstatements that may be considered to be reportable conditions 

c) The schedules and analyses that the client’s staff should prepare 

d) The effects that inadequate controls may have over the safeguarding of assets 

242.Which of the following is not a source of obtaining knowledge of client’s business 

a) Annual reports circulated among the shareholders 

b) Communication from previous auditor 

c) Client’s policy and procedure manual 

d) Discussion with client 

243.The methodology of audit planning is 

a) Not prescribed in any law 

b) Prescribed in Companies Act, 2013 

c) Prescribed in Chartered Accountants Act, 1949 

d) Prescribed by the appointing authority. 

244. _____________ shall be involved in the planning of audit 

a) Engagement partner 

b) Other key members of engagement team 

c) Both (a) and (b) 

d) Either (a) or (b) 

245.Which of the following in incorrect w.r.t audit programme 

a) An audit programme consists of a series of verification procedures to be applied. 

b) It is desirable in respect of each audit and more particularly for bigger audits an audit programme should be drawn up. 

c) An audit programme is a summarized plan 

d) There should be periodic review of the audit programme to assess whether the same continues

 246.While determining materiality of any item financial statements, the auditor considers 

a) Quantity of item 

b) Quality of item 

c) Legal or Regulatory consideration of item 

d) All of these 

247.Materiality in terms of amount or amounts set by the auditor for particular classes of transactions, account balances or disclosures is called as 

a) Materiality for financial statement as a whole 

b) Performance Materiality  

c) Item Materiality 

d) None of these 

248.Determining a percentage to be applied to a chosen benchmark (in relation to materiality) involves the exercise of ___________________ 

a) Independence 

b) Professional judgement 

c) Professional skepticism 

d) All of the above 

249.In determining the level of materiality for an audit, what should not be considered? 

a) Prior year’s errors 

b) The auditor’s remuneration 

c) Adjusted interim financial statements 

d) Prior year’s financial statements. 

250.Which of the following is a type of audit procedure 

a) Risk Assessment Procedures 

b) Further Audit Procedures 

c) Both (a) and (b) 

d) None of these