1. _________ is a systematic examination of books and records of a business.

a) Auditing b) Vouching
c) Verification d) Checking

2. The main object of an audit is ___________.

a) Expression of opinion b) Detection of error
c) Depends on the types of audit d) Prevention of error and fraud

3. Both auditing and accounting are concerned with __________.

a) Financial statements b) Accountant records
c) Accounting concepts and conventions d) Preparation of audit report

4. An auditor obtains ________ about a clients business and industry to understand the events
and transactions on client’s financial statements.
a) Suggestions b) Information
c) Records d) Knowledge

5. In India, balance sheet is synonymous to ______________.

a) Continuous Audit b) Annual Audit
c) Detailed audit d) Statutory audit

6. External audit is defined by the ____________________.

a) Governing Statute b) Management
c) Auditor d) Shareholders

7. Statutory audit is __________.

a) Optional b) Periodically
c) Regular d) Compulsory

8. Audit programme is prepared by ____________.

a) An auditor b) The client
c) The auditor and his assistants d) The office assistants

9. The primary purpose of preparation of audit programme is _____________.

a) To detect errors or fraud b) To comply with GAAP
c) To gather sufficient appropriate evidence d) To assess audit risk

10. The current file of the auditor’s working papers generally should include __________.
a) A flowchart of the internal controls b) Organization charts
 c) A copy of financial statements d) Copies of bonds and debentures

1. The main object of internal check is ________________.

a) Prevention and early detection of fraud or b) Detection of fraud
error
c) Prevention or fraud d) To help audit in depth

2. Internal check is a part of __________ system.

a) Internal Control b) Internal Audit
c) Statutory Audit d) Voluntary Audit

3. When audit is conducted at regular or irregular intervals throughout the year, it is called
________________.
a) Interim audit b) Internal audit
c) Continuous audit d) Statutory audit

4. Internal check means checking of __________ transactions which operate continuously as

a part of the routine system.
a) Fraud b) Error
c) Indepth audit d) Day-today

5. ______________ is defined as any documentary evidence in support of the transaction.

a) Cash receipt b) Records
c) Credit transactions d) Voucher

6. _____________ refers to the process of authentication of the transaction with regard to

validity, legality, accuracy and completeness.
a) Vouching b) Verification
c) Valuation d) Auditing

7. The receipt of goods must be entered in _________.

a) Goods Inward Book b) Goods Outward Book
c) Receipt of Stores d) Receipt Issue and Balance of Stores

8. The purpose of audit of the ___________ payment is to determine that the workers are
paid the correct amount of wages under proper authorization.
a) Wage b) Salary
c) Bonus d) Gratuity
9. _______________ refers to the expenditure incurred in relation to the formation or creation
of a limited company.
a) Capital expenditure b) Revenue expenditure
c) Miscellaneous expenses d) Preliminary Expenses

10. 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 lading

1. Legal expenses are considered as ___________ expenditure when incurred in conncection

with the purchase of land or building.
a) Revenue b) Capital
c) Deferred revenue d) Contingency

2. ___________ is an example for revenue expenditure.

a) Repairs and renewals of fixed assets b) Materials and Wages
c) Goodwill d ) Electrical installations

3. _________ is a type of revenue expenditure whose benefit extends to more than one
accounting year during which it is actually incurred.
a) Deferred revenue expenditure b) Capital expenditure
c) Revenue expenditure d) Land and Building expenses

4. __________ refers to the test of balances.

a) Verification b) Vouching
c) Valuation d) Depreciation

5. ____________ refers to the process of establishing accuracy of the values of assets

disclosed in the balance sheet.
a) Verification b) Valuation
c) Depreciation d) Vouching

6. The receipt of goods must be entered in ______________.

a) Good Inward Book b) Goods Outward Book
c) Receipt of Stores d) Receipt Issue and Balance of Stores

7. When lands are sold, the profit shall be credited to _____________ account.
a) Capital Reserves b) Profit and Loss
 c) Profit and Loss Appropriation d) Capital and Profit and Loss

8. The purpose of audit of the ___________ payment is to determine that the workers are
paid the correct amount of wages under proper authorization.
a) Wage b) Salary
c) Bonus d) Gratuity

9. The main objective of audit of _________ book is to know that all receipts and payments
are properly recorded.
a) Cash b) Sales
c) Purchase d) Returns inward

10. _______________ assets generally refer to assets like mines, quarries, oil wells etc., which
do not suffer usual wear and tear as other assets.
a) Floating b) Wasting
c) Contingent d) Liquid

1. __________ of the Act governs the qualifications and disqualifications of the Auditor.
a) Section 225 b) Section 226
c) Section 233 d) Section 234

2. A person shall be qualified for appointment as an auditor of a company, only if he is a

__________________ holding a Certificate of Practice.
a) Chartered Accountant b) Accountant
c) Cost and Works Accountant d ) Company Secretary

3. AT each AGM the company must pass _______________ about the appointment of an
auditor.
a) Ordinary resolution b) Special resolution
c) Circular d) Notice

4. As per the requirements of the sec 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 b) Equity shares carrying voting of the
company company
c) Shares carrying voting rights of the d) Security carrying voting rights of the
company company
5. ___________ is responsible for the appointment of statutory auditor of a limited company.
a) Directors of a Company b) Members of a company
c) Shareholders of a Company d) Central Government

6. The Board of Directors shall appoint First Auditor of a company within _______________ of
incorporation of the company.
a) One Month b) Two Months
c) One Year d) Three Months

7. In case of removal of an auditor on the expiry of term of office, a special notice shall be
send to all the shareholders at least __________ days before the date of the AGM.
a) 7 b) 9
c) 11 d) 14

8. As far the client is concerned all sums paid in connection with audit should be treated as
______________.
a) Auditors’ Remuneration b) Auditors’ Expenses
c) Auditors’ Salary d) Auditors’ Income

9. In case of Partnership Firms, the ceiling limit shall be __________ company audits per
partner who is not in full time employment elsewhere.
a) 20 b) 30
c) 22 d) 27

10. When an auditor is appointed to audit even a part of a company’s account, then it is called
as ________________.
a) Joint Audit b) Part Audit
c) Legal Audit d) Internal Audit

1. The company auditor shall have a right of access ______________ to the books and
accounts and vouchers of the company.
a) Only One Time b) At All times
c) Once in a Year d) Only at the Time of Audit

2. The term lien refers to the ______________.

a) Right of Possession b) Right of Auditing
c) Right of Checking Documents d ) Right of Verification
3. __________ Report is issued by an auditor at the end of every audit.
a) Audit b) Internal check
c) Internal Audit d) Statutory Audit

4. A report is said to be _______ when the auditor concludes that the financial statements give
true ad fair view of financial position and profit and loss for the year without any
reservations.
a) Unqualified b) Qualified
c) Adverse d) Disclaimer of Opinion

5. A ______________ report is one where the auditor does not give a clean opinion but gives
an opinion on the truth and fairness of financial statements, subject to certain reservations.
a) Unqualified b) Qualifed
c) Adverse d) Disclaimer of Opinion

6. __________ report is given when the audior concludes that based on his examination, he
does not agree with the affirmations made in the financial statements.
a) An Adverse b) A Qualified
c) A Disclaimer of Opinion d) An unqualified

7. ___________ is given when the auditor is unable to form an overall opinion about the
matters contained in the financial statements.
a) A Disclaimer of Opinion b) An Adverse Report
c) A Qualified Report d) An Unqualified Report

8. Only ___________ can sign the Auditor’s Report.

a) An Auditor b) An Accountant
c) A Company Secretary d) A Cost and Work Accountant

9. The amount of premium, that is the value received over and above the nominal value of
securities shall be transferred to the account called _______________.
a) Securities Premium Account b) Share Premium Account
c) Capital Account d) Share Capital Account

10. In issue of shares at discount, the maximum rate of discount should not exceed _______.
a) 20% b) 10%
c) 30% d) 12%