Which of the following statement is not true regarding appointment of statutoryauditor by the Central Government?

If an auditor refuses to accept appointment, the powers of the Central

Such powers have been conferred upon it by section 224(3)

If a company fails to appoint an auditor at a general meeting

If an auditor refuses to accept appointment, the powers of the Central

Mr. A, a Charted Accountant, has nineteen audits, Out of following audits whichaudits should he accept to ensure he doesn’t violate provisions of section 224(IB) __

Audit of branch of a foreign company

Audit of two branches of an Indian company

Which audit out of the following would not be regarded as one audit for the purposesof section 224(IB)?

Audit of one branch each of two different companies

Audit of one or more branches of a company

The auditor of a Government company is appointed by the C & AG. His remunerationis fixed by__

The shareholders at an annual general meeting

Which of the following statements is not correct regarding removal of first auditorbefore expiry of the term?

The provisions for such removal are contained in section 224(7)

He is removed at a general meeting

The shareholders are authorized to do so

The approval of the Central Government is required for such removal

The provisions for such removal are contained in section 224(7)

The authority to remove the first auditor before the expiry of term is with_

The shareholders in the first annual General meeting

The shareholders in a general meeting

The shareholders in the first annual General meeting

A statutory auditor has a right of access at all times to

Notices and documents of the company

Books and accounts of a company

Books, accounts and documents of the company

Books, accounts and vouchers of the company

Notices and documents of the company

The retiring auditor does not have a right to___

get his representations circulated.

speak as a member of the company

The auditor has a right to

Obtain information and explanation

Obtain information and explanation from the employees and officers

Obtain information and explanation necessary for the purpose of audit

The principal auditor, as per clarification issued by the ICAI, does not have any rightto

Inspect working papers of the branch auditor

Seek information necessary for audit purposes

Incorporate the branch audit report in his audit report

The auditor has to enquire, under section 227 (IA) into different aspects, related toshares allotted for cash for the purpose of auditor include

Shares against whose allotment cash has actually been received

Shares allotted for consideration other than cash

Shares allotted against a debt payable

Which of the following statements with regard to rules regarding exemptionfrom branch audit is not true?

Cost consideration should be considered as an important factor/ground for exemption from branch audit

A branch office of a company can be granted exemption on the basis of quantum of activity criterion

If a satisfactory arrangement of scrutiny check of the books of account of a branch office of a manufacturing company has been made, it can be exempted from branch audit

Cost consideration should be considered as an important factor/ground for exemption from branch audit

The auditor should state in his audit report that branch office is exempted by virtue of quantum of activity or any other basis

The branch auditor is appointed by –

Board of directors in board meeting

Shareholders in an annual general meeting

Shareholders in general meeting

Board of directors in board meeting

Who among the following can be appointed as special auditor by the CentralGovernment?

chartered accountant in practice

Any chartered accounted who is not in practice

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 hedetermine their eligibility :

He obtains a management representation

He obtains a representation from each director

He obtains a management representation

He enquiries from Registrar of Companies

As per the ‘Statement on Qualification in Auditor’s Report’s issued by theICAI, the auditor, Under section 227(3) has to gave a statement of fact on_

Cess payable under section 441A

Section 227(2) of the Companies Act, requires the auditor to give his report tothe members of the company on certain matters. Which of the following is not included in the above?

Every balance sheet and profit and loss account laid before a general meeting during his tenure

Every document that is a part of or ‘annexed to’ the balance sheet

Every document which is attached to the profit and loss account

When restrictions that significantly affect the scope of the audit are imposed bythe client, the auditor generally should issue which of the following opinion?

Unqualified report with ‘an emphasis of matter’ paragraph;

The date on auditor’s report should not be__

Later than the date on which the accounts are approved in board’s meeting

Earlier than the date on which the accounts are approved by the management

Which of the following report not result in qualification of the auditor’s opinion due to a scope limitation?

Inability to obtain sufficient appropriate evidential matter

Restrictions the client imposed

Reliance on the report of other auditor

Inability to obtain sufficient appropriate evidential matter

Inadequacy of accounting records

The auditor has serious concern about the going concern of the company. It isdependent 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_

Unqualified opinion with reference to notes to the accounts

Which of the following is true about explanatory notes?

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

These are given by the directors of the company

These are given to adhere to requirements of section 211.

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

Which of the following is not true regarding requirements under section 227(3) (f) of the Companies Act, 1956?

The auditor has to satisfy himself whether any of the directors of the company, whether public or private, are disqualified from being appointed as directors as per section 274(1) (g).

Section 274(1) (g) is applicable to appointment of directors both in public and private companies but reporting is limited to only those directors of a company who are also directors of a public company

The auditor requires every director to submit a written representation in respect of each Public company, of which the is a director, as to whether such company has defaulted in terms of provisions of sections 274(1) (g)

The disqualification should be considered on the date of audit report.

The management of a company, to which AS3 is not applicable, does not includestatement of cash flows in its annual report. The auditor should express

Any of these depending upon materiality and pervasiveness and adequacy of disclosure

In case the auditor gives a disclaimer of opinion in the audit report which of thefollowing paragraph(s) of a standard unqualified audit report are modified?

Introductory, scope and opinion paragraph

A departure from recognized accounting principle is disclosed in a note to thefinancial statements. The auditor should

Issue an unqualified report with ‘emphasis of matter’ paragraph

Issue a standard unqualified audit report

Issue an unqualified report with ‘emphasis of matter’ paragraph

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

Monthly statements sent to customers

The auditor should examine subsequent realization of revenue such asdividends, interest, commission, etc to

Ensure proper disclosure in the balance sheet

Identify cases of unrecorded revenue

Ensure proper disclosure in the balance sheet

Recomputed accrued income on the data of balance sheet

The “Guidance Note on Revenue” issued by the ICAI does not deal with

Revenue from sale of fixed assets

An auditor conducts a surprise check on the pay day (i.e) the day wages andsalaries are paid. The primary purpose of this audit procedure is

To obtain understanding of internal control system

To ensure that there are no ghost workers

To ensure the casual workers employed are authorized by the supervisor

To test procedures for distributing pay cheques

To obtain understanding of internal control system

Which of the following would prevent double payment of the same voucher?

Cheques should be signed by at best two persons

The person signing the cheque should cancel the supporting documents

Cheques should be signed by at best two persons

The data of payment of vouchers of similar nature should be the same or close to each other

While vouching wages, auditor should examine whether there is proper segregation of duties. Which of the following activities should not be done by same department?

Making salary statements and filing tax returns

Maintaining personnel records and approving changing in wages rates

Proposing pay roll summary and disbursement of wages

Making salary statements and filing tax returns

Comparing time clock records with time reports prepared by supervisors and preparing list of workers employed along with the units of production for each one of them

In case of unclaimed wages, the auditor should examine whether

The amount has been deposited in a separate bank account

While vouching, how will the auditor ensure himself that all credit salestransactions have been recorded by the entity?

Matching entries in the sales book against renumbered sales invoices and goods outward notes

Counting the number of invoices and matching the number with entries on sales book

267 + Mcqs in Auditing in Finance & Accounting Page 2 McqOptions

51.	In case the directions fail to appoint first auditor (s), the shareholders shall appointthem 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

53.	Which of the following is counted for the purposes of section 224(IB) the number ofpartners of a firm which shall be taken into account would be as on the data of ___
A.	Joint audit
B.	Audit to non-profit companies
C.	Audit of unlimited companies
D.	All of the above
Answer» E.

54.	If a casual vacancy in the office of auditor arises by his resignation it should only befilled by the company in a……..
A.	Board meeting
B.	Extraordinary general meeting
C.	General meeting
D.	Annual general meeting
Answer» D. Annual general meeting

55.	For the purposes of section 224(IB) the number of partners of a firm which shall betaken into account would be as on the date of _
A.	Completion of audit
B.	Auditor’s report
C.	Acceptance of audit
D.	Starting of audit work
Answer» D. Starting of audit work

56.	Mr. A, a Charted Accountant, has nineteen audits, Out of following audits whichaudits should he accept to ensure he doesn’t violate provisions of section 224(IB) __
A.	Audit of a private company
B.	Audit of branch of a foreign company
C.	Audit of two branches of an Indian company
D.	All of them
Answer» E.

58.	The auditor of a Government company is appointed by the C & AG. His remunerationis fixed by__
A.	The C & AG
B.	The shareholders
C.	The shareholders at an annual general meeting
D.	The board of directors
Answer» C. The shareholders at an annual general meeting

59.	The section which contains provisions regarding remuneration of the auditor is_
A.	Section 224(9)
B.	Section 224(7)
C.	Section 224(8)
D.	Section 224(6)
Answer» D. Section 224(6)

63.	The retiring auditor does not have a right to___
A.	make written representations
B.	get his representations circulated.
C.	be heard at the meeting
D.	speak as a member of the company
Answer» E.

64.	Who out of the following cannot be appointed as a statutory auditor of the company?
A.	Erstwhile director
B.	Internal auditor
C.	Relative of a director
D.	Only (b) and (c)
Answer» C. Relative of a director

66.	The principal auditor, as per clarification issued by the ICAI, does not have any rightto
A.	Inspect working papers of the branch auditor
B.	Visit branches
C.	Seek information necessary for audit purposes
D.	Incorporate the branch audit report in his audit report
Answer» B. Visit branches

67.	Under which of the following section auditor has a duty to enquire into six specifiedmatters and report by exception?
A.	Section 227(4A)
B.	Section 227 (IA)
C.	Section 227 (2)
D.	Section 227(3)
Answer» B. Section 227 (IA)

72.	Special audit is conducted at the order of the Central Government. Whichsection gives such powers?
A.	Section 233(A)
B.	Section 233A
C.	Section 242(A)
D.	Section 242A
Answer» D. Section 242A

69.	Right to visit branches has been given to the auditor under which section?
A.	Section 222(3)
B.	Section 228(2)
C.	Section 228(4)
D.	Section 228(3)
Answer» E.

73.	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 report ii) engagement letter iii) 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)

74.	Who among the following can be appointed as special auditor by the CentralGovernment?
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.

76.	As per the ‘Statement on Qualification in Auditor’s Report’s issued by theICAI, 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

77.	Section 227(2) of the Companies Act, requires the auditor to give his report tothe 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.

78.	When restrictions that significantly affect the scope of the audit are imposed bythe 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

79.	The date on auditor’s report should not be__
A.	The data of AGM
B.	Later than the date on which the accounts are approved in board’s meeting
C.	Earlier than the date on which the accounts are approved by the management
D.	Both (a) and (b)
Answer» D. Both (a) and (b)

81.	The inventory consists of about one per cent of all assets. The client hasimposed 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

83.	The client changed method of depreciation from straight line to written downvalue 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

87.	In case the auditor gives a disclaimer of opinion in the audit report which of thefollowing 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

Explore topic-wise MCQs in Finance & Accounting.

In case the directions fail to appoint first auditor (s), the shareholders shall appointthem at…..by passing a resolution