MCQOPTIONS
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MCQOPTIONS
This section includes 140 Mcqs, each offering curated multiple-choice questions to sharpen your Bachelor of Commerce (B Com) knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
Proper segregation of duties reduces the opportunities in which a person would both |
| A. | Establish controls and executes them |
| B. | Records cash receipts and cash payments |
| C. | Perpetuate errors and frauds and conceals them |
| D. | Record the transaction in journal and ledger |
| Answer» D. Record the transaction in journal and ledger | |
| 2. |
While vouching, how will the auditor ensure himself that all credit sales transactions have been recorded by the entity? |
| A. | Examining cut-off points |
| B. | Matching entries in the sales book against renumbered sales invoices and goods outward notes |
| C. | Counting the number of invoices and matching the number with entries on sales book |
| D. | Both (a) and (b) |
| Answer» E. | |
| 3. |
In order to vouch, which of the expenses, the auditor will examine Bill of Entry? |
| A. | Custom |
| B. | Excise duties |
| C. | Sales tax |
| D. | Income tax |
| Answer» B. Excise duties | |
| 4. |
An internal auditor discovered that fictitious purchases have been recorded by the purchase clerk. This indicates absence of which control? |
| A. | Purchase invoices are independently matched with purchase orders and goods received notes |
| B. | Goods received notes requires the signature of individual who authorized the purchase |
| C. | Routine checks are performed by internal auditor fortnightly. |
| D. | Purchase function and production function are clubbed in one department |
| Answer» B. Goods received notes requires the signature of individual who authorized the purchase | |
| 5. |
The auditor is most likely to examine related party transactions very carefully while vouching |
| A. | Credit sales |
| B. | Sales returns |
| C. | Credit purchases |
| D. | Cash purchases |
| Answer» D. Cash purchases | |
| 6. |
Vendors should be approved by Management before purchase department executes an order. If this is not done, then which of the following situations may arise? |
| A. | Purchases could be made from vendors whose product quality may not be good |
| B. | Purchases may be made from related parties without management s knowledge |
| C. | Purchases could be made from vendors who may have offered price to manager purchases |
| D. | Any of these |
| Answer» E. | |
| 7. |
In case of vouching, the auditor is least likely to examine authorization by appropriate authority in case of |
| A. | Bad debts written off |
| B. | Sales return |
| C. | Purchase return |
| D. | Discount allowed to customers as per organizational policy |
| Answer» E. | |
| 8. |
An auditor is verifying valuation of building which has been self constructed by the client. Which of the following documents is least relevant to the auditor for verification purposes? |
| A. | Bills of contractor |
| B. | Minutes of meeting of board of directors |
| C. | Certificates of engineer and architect |
| D. | Loan agreement |
| Answer» C. Certificates of engineer and architect | |
| 9. |
The auditor has noticed existence of recurring losses sale of fixed assets this indicates |
| A. | Depreciation charges are insufficient |
| B. | Policy of sale or disposal of fixed assets needs to be reviewed |
| C. | The sale of assets have not been properly authorized |
| D. | Accounting errors |
| Answer» B. Policy of sale or disposal of fixed assets needs to be reviewed | |
| 10. |
While verifying intangible assets, an auditor would recomputed amortization charges and determines whether amortization period is reasonable. The auditor tries to establish .by doing it |
| A. | Valuation |
| B. | Existence |
| C. | Disclosure |
| D. | Possession |
| Answer» B. Existence | |
| 11. |
Which of the following financial statements assertions are addressed by testing the cut off for plant asset addition? |
| A. | Existence and ownership |
| B. | Valuation and disclosure |
| C. | Possession and ownership |
| D. | Completeness and valuation |
| Answer» E. | |
| 12. |
The auditor while verifying prepaid insurance has concluded that there is inadequate insurance of building, He should__ |
| A. | Modify his audit report |
| B. | Insist it should be disclosed in the notes to financial statements |
| C. | Write it in letter of weakness |
| D. | Both (b) and (c) |
| Answer» E. | |
| 13. |
When auditing prepaid insurance, an auditor discovers that the insurance policy bond on building is not available for inspection. This may indicate__ |
| A. | No insurance has been undertaken for building |
| B. | Lien on building |
| C. | Insurance premium has not been paid |
| D. | Insurance premium paid but not recorded |
| Answer» C. Insurance premium has not been paid | |
| 14. |
Which of the following controls would ensure that securities are not lost, stolen or diverted? |
| A. | Establish physical barriers over investment securities |
| B. | Maintain files of authorized signatures |
| C. | Segregate investment approval from accounting and from custody of securities |
| D. | All of the above |
| Answer» E. | |
| 15. |
The quantity of audit working papers complied on engagement would most be affected by |
| A. | Management s integrity |
| B. | Auditor s experience and professional judgment |
| C. | Auditor s qualification |
| D. | Control risk |
| Answer» C. Auditor s qualification | |
| 16. |
Which of the following best describes the primary purpose of audit programme preparation? |
| A. | To detect errors or fraud. |
| B. | To comply with GAAP |
| C. | To gather sufficient appropriate evidence |
| D. | To assess audit risk |
| Answer» D. To assess audit risk | |
| 17. |
Which of the following factors would least likely affect the quantity and content of an auditor s working papers |
| A. | The assessed level of control risk |
| B. | The possibility of peer review |
| C. | The nature of auditor s report |
| D. | The content of management representation letter |
| Answer» E. | |
| 18. |
Which of the following statement best describes the understanding with respect to ownership and custody of working papers prepared by an auditor? |
| A. | The working papers may be obtained by third parties when they appear to be relevant to issues raised in litigation |
| B. | The safe custody of working papers is the responsibility of client, if kept at his premises |
| C. | The working papers must be retained by an audit firm for a period of 10 years |
| D. | Successor auditors may have access to working papers of the predecessor auditors. The approval of client is not required. |
| Answer» B. The safe custody of working papers is the responsibility of client, if kept at his premises | |
| 19. |
Schedule XIV has prescribed rates of depreciation for double shift and triple shift working for which one of the following assets? |
| A. | Building |
| B. | Plant and Machinery |
| C. | Furniture and fittings |
| D. | Ships |
| Answer» C. Furniture and fittings | |
| 20. |
Special audit is conducted at the order of the Central Government. Which section gives such powers? |
| A. | Section 233(A) |
| B. | Section 233A |
| C. | Section 242(A) |
| D. | Section 242A |
| Answer» D. Section 242A | |
| 21. |
The scope of the audit including reference to the pronouncements of the ICAI, which the auditor adheres to, generally is communicated to the client in the ____i) auditor s reportii) engagement letteriii) representation letter |
| A. | i) only |
| B. | Both (i) and (ii) |
| C. | Both (i) and (iii) |
| D. | All the above |
| Answer» C. Both (i) and (iii) | |
| 22. |
Who among the following can be appointed as special auditor by the Central Government? |
| A. | The statutory auditor |
| B. | chartered accountant in practice |
| C. | Any chartered accounted who is not in practice |
| D. | Both (a) and (b) |
| Answer» E. | |
| 23. |
A company has bought patents. Which of the following methods is most suitable for providing depreciation on them? |
| A. | SLM |
| B. | WDV |
| C. | Sum of year digits |
| D. | Any of the above |
| Answer» B. WDV | |
| 24. |
If any director is disqualified from being appointed under section 274(1) (g), the auditor should mention this fact in his audit report. For this purpose, how does he determine their eligibility : |
| A. | He obtains a representation from each director |
| B. | He obtains a management representation |
| C. | He enquiries from Registrar of Companies |
| D. | Any one of the above |
| Answer» B. He obtains a management representation | |
| 25. |
The inventory consists of about one per cent of all assets. The client has imposed restriction on auditor to prohibit observation of stock take. The auditor cannot apply alternate audit procedures. |
| A. | Unqualified opinion |
| B. | Qualified opinion |
| C. | Disclaimer of opinion |
| D. | Adverse opinion |
| Answer» D. Adverse opinion | |
| 26. |
Section 227(2) of the Companies Act, requires the auditor to give his report to the members of the company on certain matters. Which of the following is not included in the above? |
| A. | Accounts examined by him |
| B. | Every balance sheet and profit and loss account laid before a general meeting during his tenure |
| C. | Every document that is a part of or annexed to the balance sheet |
| D. | Every document which is attached to the profit and loss account |
| Answer» E. | |
| 27. |
When restrictions that significantly affect the scope of the audit are imposed by the client, the auditor generally should issue which of the following opinion? |
| A. | Qualified opinion |
| B. | Disclaimer of opinion |
| C. | Adverse opinion |
| D. | Unqualified report with an emphasis of matter paragraph |
| Answer» B. Disclaimer of opinion | |
| 28. |
As per the Statement on Qualification in Auditor s Report s issued by the ICAI, the auditor, Under section 227(3) has to gave a statement of fact on_ |
| A. | Proper books of account |
| B. | Accounting standards |
| C. | Cess payable under section 441A |
| D. | None of the above |
| Answer» D. None of the above | |
| 29. |
The auditor has serious concern about the going concern of the company. It is dependent on company s obtaining a working capital loan from a bank which has been applied for. Then management of the company has made full disclosure of these facts in the notes to the balance sheet. The auditor is satisfied with the level of disclosure. He should issue_ |
| A. | Unqualified opinion |
| B. | Unqualified opinion with reference to notes to the accounts |
| C. | Qualified opinion |
| D. | Disclaimer of opinion |
| Answer» C. Qualified opinion | |
| 30. |
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? |
| A. | Unqualified opinion |
| B. | Qualified opinion |
| C. | Disclaimer of opinion |
| D. | Adverse opinion |
| Answer» B. Qualified opinion | |
| 31. |
In case the auditor gives a disclaimer of opinion in the audit report which of the following paragraph(s) of a standard unqualified audit report are modified? |
| A. | Scope paragraph |
| B. | Opinion paragraph |
| C. | Scope and opinion paragraphs |
| D. | Introductory, scope and opinion paragraph |
| Answer» D. Introductory, scope and opinion paragraph | |
| 32. |
The management of a company, to which AS3 is not applicable, does not include statement of cash flows in its annual report. The auditor should express |
| A. | Unqualified opinion |
| B. | Qualified opinion |
| C. | Adverse opinion |
| D. | Any of these depending upon materiality and pervasiveness and adequacy of disclosure |
| Answer» B. Qualified opinion | |
| 33. |
A departure from recognized accounting principle is disclosed in a note to the financial statements. The auditor should |
| A. | Issue a standard unqualified audit report |
| B. | Issue a qualified report |
| C. | Issue an unqualified report with emphasis of matter paragraph |
| D. | Disclaim opinion |
| Answer» C. Issue an unqualified report with emphasis of matter paragraph | |
| 34. |
The auditor should examine subsequent realization of revenue such as dividends, interest, commission, etc to |
| A. | Identify cases of unrecorded revenue |
| B. | Ensure proper disclosure in the balance sheet |
| C. | Recomputed accrued income on the data of balance sheet |
| D. | Any of these |
| Answer» B. Ensure proper disclosure in the balance sheet | |
| 35. |
An auditor conducts a surprise check on the pay day (i.e) the day wages and salaries are paid. The primary purpose of this audit procedure is |
| A. | To ensure that there are no ghost workers |
| B. | To ensure the casual workers employed are authorized by the supervisor |
| C. | To test procedures for distributing pay cheques |
| D. | To obtain understanding of internal control system |
| Answer» D. To obtain understanding of internal control system | |
| 36. |
The auditor should state the reasons for his reservations in audit report and should try to quantify the effect on them. This should be done in case he has expressed _i) A qualified opinionii) an unqualified opinion with emphasis of matter paragraphiii) An adverse opinionIV) a disclaimer of opinion |
| A. | i) only |
| B. | i) and (iv) only |
| C. | i), iii) and (iv) only |
| D. | All of the above |
| Answer» B. i) and (iv) only | |
| 37. |
To test whether sales have been recorded, the auditor should draw a sample from a file of |
| A. | Purchase orders |
| B. | Sales orders |
| C. | Sales invoices |
| D. | Bill of loading |
| Answer» D. Bill of loading | |
| 38. |
The primary purpose of performing tests of control is to provide reasonable assurance that_ |
| A. | There are no material misstatements due to fraud or error in financial statement |
| B. | Accounting system is well documented |
| C. | Written evidence is there to support transactions |
| D. | if internal control is effective |
| Answer» E. | |
| 39. |
When issuing unqualified opinion, the auditor who evaluates the audit findings should be satisfied that the |
| A. | Amount of known misstatement is documented in working papers |
| B. | Estimates of the total likely misstatement is less than materiality level |
| C. | Estimate of the total likely misstatement is more than materially level |
| D. | Estimates of the total likely misstatement cannot be made |
| Answer» D. Estimates of the total likely misstatement cannot be made | |
| 40. |
For all audits of financial statements made in accordance with AAS14, the use of analytical procedures is at the discretion of the auditor in which stage? |
| A. | Substantive testing |
| B. | Planning stage |
| C. | Overall review stage |
| D. | All of the above |
| Answer» B. Planning stage | |
| 41. |
Which of the following statements is most closely associated with analytical procedure applied at substantive stage? |
| A. | It helps to study relationship among balance sheet accounts |
| B. | It helps to discover material misstatements in the financial statements |
| C. | It helps to identify possible oversights |
| D. | It helps to accumulate evidence supporting the validity of a specific account balance |
| Answer» E. | |
| 42. |
Which of the following statements is, generally, correct about the reliability of audit evidence? |
| A. | To be reliable, evidence should conclusive rather than persuasive |
| B. | Effective internal control system provides reliable audit evidence |
| C. | Evidence obtained from outside sources routed through the client |
| D. | All are correct. |
| Answer» C. Evidence obtained from outside sources routed through the client | |
| 43. |
Which of the following statements is not true with respect to management representations obtained as per AAS11? |
| A. | Authenticated copy of relevant minutes of meetings may be regarded as management representation |
| B. | It should always be in working |
| C. | It may be dated prior to the report date |
| D. | It should be addressed to the auditor |
| Answer» C. It may be dated prior to the report date | |
| 44. |
The nature, timing and extent of substantive procedures is related to assessed level of control risk |
| A. | Randomly |
| B. | Disproportionately |
| C. | Directly |
| D. | Inversely |
| Answer» D. Inversely | |
| 45. |
What would most appropriately describe the risk of incorrect rejection in terms of substantive testing? |
| A. | The auditor concludes balance is materially correct when in actual fact it is not |
| B. | The auditor concludes that the balance is materially misstated when in actual fact it not |
| C. | The auditor has rejected an item for sample which was material |
| D. | None of the above |
| Answer» C. The auditor has rejected an item for sample which was material | |
| 46. |
As per the requirements of section 226(3) and 226(4) a person is disqualified from being appointed as a statutory auditor if he holds |
| A. | Equity shares or debentures of the company |
| B. | Equity shares carrying voting of the company |
| C. | Shares carrying voting rights of the company |
| D. | Security carrying voting rights of the company |
| Answer» E. | |
| 47. |
The term of the auditor ship of first auditor would be from the date of appointment till__ |
| A. | the conclusion of statutory meeting |
| B. | the conclusion of first annual general meeting |
| C. | the conclusion of next annual general meeting |
| D. | the date of removal |
| Answer» C. the conclusion of next annual general meeting | |
| 48. |
Which of the following statement is not true regarding appointment of statutory auditor by the Central Government? |
| A. | Such powers have been conferred upon it by section 224(3) |
| B. | If a company fails to appoint an auditor at a general meeting |
| C. | If an auditor refuses to accept appointment, the powers of the Central |
| D. | None of the above |
| Answer» C. If an auditor refuses to accept appointment, the powers of the Central | |
| 49. |
In case the directions fail to appoint first auditor (s), the shareholders shall appoint them at ..by passing a resolution |
| A. | a general meeting |
| B. | first annual general meeting |
| C. | statutory meeting |
| D. | annual general meeting |
| Answer» B. first annual general meeting | |
| 50. |
If a casual vacancy in the office of auditor arises by his resignation it should only be filled by the company in a .. |
| A. | Board meeting |
| B. | Extraordinary general meeting |
| C. | General meeting |
| D. | Annual general meeting |
| Answer» D. Annual general meeting | |