Test Bank

NYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45
Subject: Auditing Subject code: 354 Class: TY B. Com (Sem 5)
UNIT 1: Introduction to Principles of Auditing and Audit Process
1. An independent audit is important to readers of financial statements because it
a) Provides a measure of management's stewardship function.

b) Measures and communicates the financial data included in financial statements.
c) Objectively examines and reports on management's financial statements.
d) Reports on the accuracy of information in the financial statements.
2. The evidence available to auditor is _______ in nature, rather _______ in nature.
a) pervasive, conclusive
b) Conclusive, pervasive
c) limited, unlimited
d) None of the above
3. Compliance with the Standard of Auditing is the responsibility of
a) Management
b) Those charged with governance
c) Auditor
d) Audit committee
4. An auditor is required to determine the ____ of his audit procedures according to the
requirements of Standards of Auditing.
a) Conduct
b) Nature, timing and extent
c) Limitation
d) Planning
5. The main object of an audit is
a) Expression of opinion
b) Detection and Prevention of fraud and error
c) Both (1) and (2)
d) Depends on the type of Business
PROF. MUBINA ATTARI www.dacc.edu.in

6. The audit process is
a) special application of the scientific method of inquiry.

b) Regulated by the PICPA .c.
c) The only service a CPA is allowed to perform by law.
d) Performed only by CPAs
7. Appropriateness means _______ of audit evidence.
a) Quantity.
b) Quality.
c) Appropriateness.
d) Sufficient.
8. Professional judgment means a judgment taken by the auditor out of his ______ in an audit
situation
a) Past experience.
b) Relation with the management
c) Professional experience.
d) Work experience.
9. A sale of Rs. 50.000 to A was entered as a sale to B. This is an example of _
a) Error of omission.
b) Error of commission.
c) Compensating error.
d) Error of principle.
10. Goods sent on approval basis have been recorded as ‘Credit sales. This is an example
of…………………….
a) Error of principle.
b) Error of commission.
c) Error of omission.
d) Error of duplication.

11. What is the main objectives of Auditing?
a) To give an opinion as to the truth and fairness of Financial statement.

b) To finds errors.
c) To help taxation departments.
d) To help customers.
12. Meaning of Interim Audit:
a) Audit of 12 months
b) Audit for more than 12 months.
c) Audit for less than 12 months.
d) Audit for long period.
13. Internal Audit is conducted by :
a) Employees of an Organization.
b) Customers
c) Government
d) Employees of other Organization.
14. Audit Evidence is obtained by:

a) Inspection.
b) Observation.
c) Inquiry and Confirmation.
d) All of the above.
15. Which Audit is conducted to check the cost records of the company?
a) Financial Audit.
b) Operational Audit.
c) Management Audit.
d) Cost Audit
16. Which of the following is not a kind of audit?

a) Statutory and private.
b) Government and continuous audit.
c) Interim audit.
d) None of these

17. This kind of audit is conducted generally between two annual audits.
a) Internal audit.
b) Interim audit.
c) Final audit.
d) Continuous audit.
18. Voucher relates to ______.

a) Cash receipt.
b) Cash payment.
c) Credit transactions
19. Auditing begins where _____ends.

a) Selling.
b) Inventory valuation.
c) Accounting.
d) Purchases.
20. In the case of a company in which not less than _______% of the subscribed share capital is
held whether singly or in combination by certain special institutions and bodies, the appointment
or re-appointment of auditors shall be made at each annual general meeting by a special
resolution.
a) 25%
b) 30%
c) 20%
d) 15%
21. Which of the following persons is qualified to be a company auditor?

a) An employee of the company
b) A body corporate
c) A person who is indebted to the company for an amount exceeding Rs. 1000
d) A practicing-chartered accountant

22. When the auditor is an employee of the organization being audited, the audit is classified as
_____
a) a. Internal
b) b. External
c) c. Compliance
d) d. Both A&B
23. A company auditor can be removed before expiry of his term by

a) Shareholders
b) Board of Directors
c) Central Government
d) State Government
24. If there is capital loss, the auditor should

a) Not allow payment of dividend
b) Allow payment of dividends
c) Allow payment of dividends after making such losses good
25. Auditor should see that amount received for premium on issue of shares should be shown in
______
a) Subscribed capital
b) Capital Reserve Account
c) Share Premium account
d) Paid- up capital account
26. Sec.143 of Companies Act 20913 deals with _____

a) Powers and rights of an auditor
b) Removal of an auditor
c) Appointment of an auditor
d) Remuneration of an auditor
27. Internal auditor is appointed by______

a) Management
b) Shareholders
c) Government
d) Statutory body

28. ……………….is the medium through which an auditor expresses his opinion on the state of
affairs of the client’s business.
a) Audit report
b) Audit certificate
c) Audit programme
d) Audit planning
29………………… is the specific guidelines and directions for efficient and effective
completion of the audit work on timely and daily basis, so as to minimise audit risk.
a) Audit planning
b) Audit report
c) Audit programme
d) Audit certificate
30……………….. is a method of organising the accounting system of a business concern or a

factory by which the duties of various clerks are arranged in such a way that the work of one
person is automatically checked by another.
a) Internal control
b) Internal check
c) Internal audit
d) All of the above
31. Internal check is a part of

a) Internal audit
b) Internal accounting
c) External audit
d) Internal control
32. Civil liability of an auditor implies liability for

a) Misappropriation of cash
b) Misappropriation of goods
c) Fraud
d) Misfeasance

33. If an auditor is not appointed at annual general meeting, he is appointed by the

a) The Central Government
b) Board of Directors
c) Shareholders
d) Company Law board
34. The audit that is made compulsory under statute is called ________
a) Statutory audit
b) Partial audit
c) Complete audit
d) Continuous audit
35. Audit means _______.

a) Recording business transactions
b) Preparing final accounts
c) Examination of books, accounts or vouchers
d) Decision making
36. When a transaction has not been recorded in the books of account either wholly or partially
such errors are called _______.
a) Error of commission
b) Error of omission
c) Compensating error
37. The liabilities of an auditor can be ________.

a) Civil
b) Criminal
c) Civil & Criminal
d) Financial
38. Duties of an auditor is _______.

a) Statutory duties imposed by the Companies Act
b) Duties imposed by legal or court decisions
c) Duties arising out of professional etiquette
d) All of the above

39. Internal auditor of a company must be _______.

a) Cost accountant
b) Chartered accountant
c) ICWA
d) Need not possess any professional qualification
40. Sec.139 (7) provides that in the case of a Government Company or any other company
owned or controlled by the Central Government, or by any State Government, the first auditor
shall be appointed by _________
a) Comptroller and Auditor-General of India
b) Central Government
c) State Government
41. Objectives of internal audit includes _________.

a) Proper control
b) Perfect accounting system
c) Asset protection
d) All of the above
42. Internal control includes ________.

a) Internal audit
b) Internal check
c) Both internal audit and internal check
d) Internal check and external audit
43. …………. is the examination of all documentary evidence which are available to support the
authenticity of transactions entered in the client’s records.
a) Accounting
b) Vouching
c) Internal check

44. Audit done by the employees of the business undertaking is called ______.
a) Final audit
b) Internal audit
c) Company audit
d) Statutory audit
45. Which of the following is not a kind of audit?

a) Statutory and private audit
b) Government and continuous audit
c) Final, Interim, management audit
46. Effective internal check system reduces

a) The liability of auditor
b) Work of auditor
c) Responsibilities of an auditor
47. Misappropriation of goods may be checked by

a) Proper supervision over stock
b) Checking of employees
c) Punishment of employees
48. Internal check is suitable for _______.

a) Larger concerns
b) Smaller concerns
c) Petty-shop keepers
49. Final audit implies

a) Finally checking of accounts to reveal frauds
b) Audit for submitting report immediately at the end of the year
c) Audit of banking companies
d) Audit of accounts at the end of the year

50. Remuneration of an internal auditor is fixed by ______.

a) Management
b) Shareholders
c) Government
d) Statutory body
ANSWER KEY
1c 2c 3c 4b 5d 6a 7b 8c 9b 10 a
11a 12 c 13 a 14 d 15 d 16d 17 b 18 d 19 c 20 a
21 d 22 a 23 a 24 b 25 c 26 a 27 a 28 a 29 a 30 b
31 d 32 d 33 a 34 a 35 c 36 b 37 c 38 d 39 d 40 a
41 d 42 c 43 b 44 b 45 d 46 b 47 b 48 a 49 d 50 a

UNIT 2: Checking, Vouching and Audit Report

1.Audit of a bank is generally conducted through:
(a) Routine checking

(b) Couching
(c) Balance sheet audit
(d) Profit & Loss.
2. An auditor is liable for his annual audit of accounts o:

(a) Creditors
(b) Bankers
(c) Owners
(d) Debtors
3. Which of the following is not true about opinion on financial statements?

(a) Auditor should express an opinion on financial statements.
(b) His opinion is no guarantee to future viability of business
(c) He is responsible for detection and prevention of frauds and errors in
financial statements
(d) He should examine whether recognised accounting principle have been
consistently
4. Auditing standards differ from audit procedures in that procedures relate to
(a) Audit assumptions
(b) acts to be performed
(c) quality criterion
(d) methods of work.
5.Which of the following is the most appropriate potential reaction of the auditor to his
assessment that the risk of material misstatement due to fraud is high in relation to existence
of inventory?
(a) Visit location on surprise basis to observe test counts
(b) Request inventory count at a date close to year end
(c) Vouch goods sent on approval very carefully
(d) Perform analytical procedures.

6.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.
7. Audit in depth is synonymous for

(a) Complete audit.
(b) Completed audit.
(c) Final audit.
(d) Detailed audit.
8. 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 of the Above.
9. When is evidential matter, generally, considered sufficient?

(a) When it constitutes entire population.
(b) When it is enough to provide a basis for giving reasonable
assurance regarding truthfulness.
(c) When it is objective and relevant.
(d) When auditor collects and evaluates it independently.
10. For what minimum period should audit working papers be retained by audit firm?
(a) For the time period the entity remains a client of the audit firm.
(b) For a period of ten years.
(c) For a period auditor opines them to be useful in servicing the client.
(d) For the period the audit firm is in existence.
11. A Voucher is a ……..

(a) Document is support of an entry made in books of accounts
(b) Invoice received from suppliers
(c) Receipt issued to a customer for cash
(d) Dispatch Receipt

12. Vouching means testing the truth of the items appearing in the books of original entry”. This
is defined by –
(a) D. Paula
(b) J.R. Batliboi
(c) Arthur Holmes
(d) R.G. Williams
13. “Vouching is the examination and authentication of underlying evidence which is in support
of the accuracy of a transaction”. This definition is given by –
(a) Arthur Holmes
(b) J.R. Batliboi
(c) Arnold A. Irish
(d) None of these
14. Vouching is –
(a) Examination of Assets
(b) Verification of Assets
(c) Examination of Entries
(d) None of these
15. Under vouching checking is done of –
(a) Books of original entry

(b) Final books of accounts
(c) Balance sheets
(d) None of the above
16. Vouching is related with –
(a) Cash receipts

(b) Cash payments
(c) Credit transactions
(d) All of the above
17. “Vouching is the essence of Auditing”. This statement of –
(a) Spicer and Peglar

(b) R.B. Bose
(c) R.A. Irish
(d) J.R. Batliboi

18. Vouching is a technical term”. This statement is of –
(a) R.A. Irish

(b) Lankaster
(c) J.R. Batliboi
(d) De Paula
19. Back bone of auditing is said to –
(a) The vouching

(b) The valuation
(c) The verification
(d) The internal audit
20. Vouching includes –
(a) Routine check

(b) Test check
(c) Internal check
(d) All above
21. Main object of vouching is –
(a) To prove truthness of transactions

(b) To obtain information regarding the transactions related to business
(c) Authorisation of transactions
(d) All above
22. Work of vouching is done by –
(a) Junior clerks

(b) Senior clerks
(c) Management
(d) None of these
23. Routine check and vouching both are –
(a) Synonymous
(b) Complimentary to each other
(c) Opposite
(d) None of above

24. Vouching is –
(a) Essence of Auditing

(b) Soul of Auditing
(c) Backbone of Auditing
(d) All of these
25. Which of the following is correct –
(a) Auditing is the backbone of vouching

(b) Vouching is backbone of auditing
(c) Vouching is the backbone of accounting
(d) All above
26. Vouching implies –
(a) Inspection of receipts

(b) Examination of vouchers to check authenticity of record
(c) Surprise checking of accounting records
(d) Examination of various assets
27. A voucher may be defined as any documentary evidence by which the accuracy of book
entries may be substantiated”. This is defined by –
(a) Joseph Lankaster

(b) R.A. Irish
(c) J.R. Batliboi
(d) Arthur Holmes
28. Meaning of verification of assets is –
(a) Valuation of assets

(b) Checking of ownership of assets
(c) Checking of the title, existence and possession of assets
(d) All above
29. The verification of Assets implies an enquiry into the value, ownership and title, existence
and possession and the presence of any charge on the assets”. This is defined by –
(a) Spicer and Pegler

(b) J.R. Batliboi
(c) Luncaster
(d) None of these

30. Principle of verification is –
(a) Physical inspection

(b) Principle of review
(c) Confirmation
(d) All of these
31. Which of the following is not the object of verification –
(a) Checking of ownership of the institution on the assets

(b) Checking of possession, lien and charge on the assets
(c) Fulfilling statute
(d) Control over frauds
32. Object of verification of assets by an auditor is –
(a) Verifying the existence of assets

(b) Verifying the value on which these are shown in balance sheet
(c) Verifying their ownership
(d) All of above
33.Which of the following does not require physical verification?
(a) Stock
(b) Plant
(c) Goodwill
(d) Loose Tools
34. In verifying liabilities, an auditor see that –
(a) All liabilities are shown clearly in the balance sheet

(b) All liabilities are related with
(c) All liabilities are correct and authorised
(d) All above
35. The valuation of assets is an attempt to ensure the equitable distribution of the original outlay
over the period of the assets usefulness.” This is defined by –
(a) Lancaster
(b) J.R. Batliboi
(c) Spicer and
(d) None of these

36.In how many parts generally assets are categorised –
(a) 2
(b) 3
(c) 4
(d) 5
37.Which of the following is the object of valuation –
(a) Accurate knowledge of the financial position of the organisation

(b) Knowledge about the value of the assets
(c) Knowledge about the goodwill of the institution
(d) All above
38.Valuation is –
(a) An element of verification

(b) Essential part and element of verification
(c) Alternate of verification
(d) Verification is a part of valuation
39.When auditor has any doubt about the valuation of assets, he must disclose this fact –
(a) To secretary
(b) To manager
(c) In his report
40.Auditor is –
(a) A valuer
(b) Not a valuer
(c) Expert
(d) None of above
41.“An Auditor is not a valuer”. This statement is of –
(a) Joseph Lancaster

(b) De Paula
(c) Spicer and Pegler
(d) J.R. Batliboi

42.Verification and Valuation both are –
(a) the same things

(b) separate things
(c) complementary to each other
(d) None of these.
43. Valuation is a part of –
(a) Vouching
(b) Verification
(c) Internal control
(d) None of these
44. Verification is based on –
(a) Physical inspection

(b) Documentary evidence
(c) Above both (a) and (b)
(d) None of these
45. Case of London Oil Storage Co. Ltd. vs. Sear Hasluck Co. (1904) is related to –
(a) Verification of Assets

(b) Valuation of Assets
(c) Verification of Liabilities
(d) None of these
46. Stock should be valued at –
(a) Cost price

(b) Market price
(c) Cost or market price whichever is lower
(d) Cost price less depreciation
47. Which asset is valued on cost price or market price whichever is less –
(a) Furniture
(b) Building
(c) Machine
(d) Stock

48. Which reserve is useful to strength the financial position of a business?
(a) Specific reserve

(b) Secret reserve
(c) General reserve
(d) Redemption fund
49. Wasting assets means –
(a) Which decreases in value

(b) The value of which is decreases due to constant use
(c) Market price of which is reduced
(d) None of above
50. Which the following is a fixed asset –
(a) Furniture
(b) Book Debts
(c) Bills Receivables
(d) Stock
Answer key
1c 2c 3c 4b 5d 6a 7b 8c 9b 10c
11a 12b 13a 14c 15a 16d 17b 18a 19a 20a
21d 22b 23b 24d 25b 26b 27a 28d 29a 30d
31c 32d 33c 34d 35a 36d 37d 38b 39c 40b
41a 42c 43b 44c 45a 46c 47d 48b 49b 50a

UNIT 3: Company Audit and Tax Audit

1.Before commencing the audit work, a company auditor should –
(a) Examine the validity of appointment
(b) Examine the statutory documents
(c) Study the previous year’s report
(d) All the above
2.Which of the following is called the charter of the company?

(a) Memorandum of Association
(b) Articles of Association
(c) Prospectus
(d) None of these
3.For alteration in Memorandum of Association whose approval is necessary –

(a) Court
(b) Central Government
(c) State Government
(d) None of these
4.Section 13 of Companies Act, 1956 is associated with –

(c) Prospectus
(d) None of these
5.Table ‘A’ is the substitute of –

(c) Prospectus
(d) None of these

(c) Prospectus
(d) None of these


(c) Prospectus
(d) None of these
8.Section 69 of Companies Act, is associated with –

(a) Prospectus
(b) Minute Book
(c) Minimum Subscription
(d) None of these
9.Section 78(2) of Companies Act, 1956 is associated with –

(a) Issue of shares at premium
(b) Issue of shares at discount
(c) Issue of shares at
(d) None of these

(a) Issue of shares at premium
(b) Issue of shares at discount
(c) Issue of shares at par
(d) None of these

(a) Reduction in Share Capital
(b) Reserve Capital
(c) Share Certificate
(d) Share Warrants

(b) Reserve Capital
(c) Share Certificate
(d) Share Warrants
13.Section 114-115 of Companies Act, 1956 are associated with –

(b) Reserve Capital
(c) Share Certificate Section 80 of Companies
(d) Share Warrants

14.Act is associated with –

(a) Issue and Redemption of Preference Shares
(b) Payment of Interest out of capital
(c) Debentures
(d) None of above

(a) Issue and Redemption of Preference Shares
(b) Payment of Interest out of capital
(c) Debentures
(d) None of above

(a) Minute Book
(b) Profit prior to incorporation
(c) Preliminary expenses
(d) Statutory report

(a) Minute Book
(b) Profit prior to incorporation
(c) Preliminary expenses
(d) Statutory report
18.In Public Companies at least what should be the minimum number of directors –
(a) 2
(b) 3
(c) 4
(d) 5
19.In private companies at least what should be the minimum number of directors –
(a) 2
(b) 3
(c) 4
(d) 5
20.For what period a managing director can be appointed –

(a) 2 years
(b) 3 years
(c) 4 years
(d) 5 years

21.Under which Act, Banking Companies An India –

(a) Banking Regulation Act, 1949
(b) Banking Regulation Act, 1969
(c) Banking Companies Act, 1970
(d) None of above
22. Which section of the Banking Regulation Act is related with audit of annual accounts –
(a) Section 25
(b) Section 30
(c) Section 27
(d) None of these
23.In banking companies –

(a) Intensive audit is taken place
(b) Auditor examine each transaction in detail
(c) Auditor mínutely check the assets and liabilities shown in balance sheet
(d) None of these
24.For aided educational institutions, audit is –

(a) Compulsory
(b) Necessary
(c) Statutory
(d) None of these
25. Non-trading institutions prepare –

(a) Trading Account
(b) Profit and Loss Account
(c) P/L Appropriation Account
(d) Income and Expenditure Account
26.According to which of the following Act, final accounts of Insurance Companies are
prepared?
(a) Insurance Companies Act, 1938
(b) Companies Act, 1956
(c) Both above (a) and (b)
(d) None of these

27.Accounts of Insurance Companies are prepared according to which sections of Insurance

Companies Act, 1938 –
(a) Section 10-29
(b) Section
(c) Section 30
(d) None of above
28.Minimum percentage of provision for a Insurance Company is –

(a) 20%
(b) 25%
(c) 40%
(d) 10%
29.Cost Audit is started in –

(a) 1913
(b) 1935
(c) 1949
(d) 1965
30.Cost audit is helpful for an institution in –

(a) Price determination
(b) Cost control
(c) Cost control
(d) All above
31.Cost Audit is compulsory in –

(a) Retail business
(b) Manufacturing concern
(c) Mines
(d) None of these
32. The cost auditor shall submit his report to –

(a) Shareholders
(c) Board of Directors
(d) Any of the above
33.Cost audit is beneficial for –

(a) Business organisation
(b) Labourers
(c) Government
(d) All above
34. Qualification of cost auditor is –

(a) Chartered Accountant
(b) Cost and Works Accountant
(c) Commerce Graduate
(d) All above
35.Cost auditor is appointed by –

(a) General meeting
(b) Board of directors
(c) Permission of Central Government
(d) Both (a) and (c) above
36.Main object of Cost Audit is –

(a) Checking of accuracy of total cost and per unit cost of production
(b) Determining total cost
(c) Determining tender price
(d) All above
37. Cost Audit report is to be furnished –

(a) Within 90 days of the end of the relevant year
(b) Within 180 days of the end of the relevant financial year
(c) Within 30 days of the date on which the relevant records are made
(d) At least 21 days before the date of annual general meeting of the company
38.Tax audit is compulsory under section –

(a) 44 AA
(b) 44 AB
(c) 44 AC
(d) 44 AD
39.Management audit is a –
(a) New Concept
(b) Traditional concept
(c) Medival Period Concept
(d) None of above
40.Where management audit is first used?

(a) Japan
(b) America
(c) India
(d) None of these

41.Qualification of Management Auditor is –

(a) Chartered Accountant
(b) Commerce Graduate
(c) No Prescribed Qualification
(d) M.B.A.
42.Objective of Management audit is –

(a) Make management more efficient
(b) Detecting shortcomings of management operation
(c) Making cordial relations with employees
(d) All above
43.Under management audit, which of the following is examined –

(a) Work of employees
(b) Work of auditor
(c) Work of top authorities
(d) None of these
44.For manufacturing concerns, cost audit is –

(a) Voluntary
(b) Compulsory
(c) Statutory
(d) None of these
45.Cost auditor furnish his report to –

(a) Shareholders
(c) Board of Directors
(d) Any of above
46. Management audit is get done by –

(a) Statutory auditor
(b) Government auditor
(c) Cost auditor
(d) None of these
47. Which of the following section of Companies Act related with cost audit –
(a) Section 233(B)
(b) Section 100
(c) Section 150
(d) None of these

48. Management Audit is –

(a) Compulsory
(b) Voluntary
(c) Statutory
(d) None of these
49. What is essential for measuring efficiency of management?

(a) Social Audit
(b) Cost Audit
(c) Tax Audit
(d) Management Audit
50.In management audit, evaluation is being done of the –

(a) Cost accounts
(b) Financial accounts
(c) Managerial functions and policies
(d) Assets and liabilities
Answer Key
1d 2a 3a 4a 5b 6b 7c 8c 9a 10b
11ab 12c 13d 14a 15b 16a 17d 18b 19a 20d
21a 22b 23c 24a 25d 26c 27a 28c 29b 30d
31d 32b 33d 34b 35d 36a 37b 38b 39a 40b
41c 42d 43c 44b 45b 46d 47a 48b 49d 50c

Unit 4: Audit of Computerized Systems& Forensic Audit
1.The Accounting Basis generally accepted and used in Government Ministries is:
(a) Commitment basis
(b) Accrual basis
(c) Cash basis
(d) Obligation basis
(e) Fund basis.
2.Which of the following types of CAATs is not an example of Computer Audit Program?
(a) Utility Program
(b) Computer Audit Packages
(c) Client’s installed file interrogation program
(d) Purpose written computer Audit Program
(e) Test Data Pack.
3.The means by which audit firms ensure that their expression of opinion on the Financial
Statements always reflects the observance of approved Auditing Standards and relevant legal
requirements is:
(a) Assurance Engagement
(b) Quality Control
(c) Value for Money Audit
(d) Operational Audit
(e) Systems Audit
4. In accordance with Prudential Guidelines for licensed banks, Non-Performing credit facilities
should be classified into three categories, namely:
(a) Quality, Adequate, Doubtful
(b) Lost, Existing, Foregone
(c) Credible, Appropriate, Standard
(d) Substandard, Doubtful, Lost
(e) Bad, Recoverable, Standard.
5.A special type of CAATs used to identify the sequence in which program Instructions are
executed when processing transactions is
(a) Parallel Simulation Technique.
(b) Snapshot.
(c) Mapping.
(d) Integrated Test Facility.
(e) Tracing Software.

6.When carrying out the audit of Public Sector organization, the auditor must observe the
following EXCEPT
(a) Constitution of Federal Republic of Nigeria
(b) Financial Regulations
(c) Audit Act of 1956
(d) Treasury Circulars
(e) CBN Guidelines
7.The Committee that examines the report of the Auditor–General for the Federation, and any
unresolved matters of persons indicted in the report is
(a) Ad-hoc Committee.
(b) Appropriation Committee.
(c) Audit Committee.
(d) Public Accounts Committee.
(e) Finance and General Purposes Committee.
8.The circumstances that could give rise to disagreement, which may influence the Auditors‟
opinion include the following, EXCEPT
(a) Failure to comply with the relevant legislation.
(b) Disagreement over the Audit Fees.
(c) Inappropriate Accounting Policies
(d) Disagreement as to the facts or amounts included in the Financial Statements.
(e) Disagreement as to the manner or extent of disclosure of facts or amounts in the Financial
Statement.
9.A situation where the Balance Sheet is presented to show a state of affairs that is considered
buoyant rather than the actual position of the enterprise is
(a) forgery.
(b) manipulation.
(c) window dressing.
(d) falsification.
(e) teeming and lading.
10.One of the objectives of good corporate governance within an organization is to:

(a) ensure transparency and accountability in the management of an entity
(b) guarantee that employees collect their salary monthly
(c) instruct the directors to collect their entitlements on time
(d) assure compliance with EFCC rules and regulations
(e) direct that engagement letters are acknowledged.

11.Review of Financial Statements at the final stage of Audit involves all EXCEPT
(a) Review of contingencies
(b) Review of Post Balance Sheet events
(c) Analytical review procedure
(d) Review of expertise/skills
(e) Review of Related Party transactions.
12.The Statutory creditors given priority payment during a liquidation process are:
(a) Secured creditors
(b) Debenture holders
(c) Preferential creditors
(d) Unsecured creditors
(e) Official creditors.
13.An auditor can disclose the client’s confidential information for the following reasons
EXCEPT
(a) Auditor suspects that the client has committed treason
(b) When there is a public duty to disclose
(c) Disclosure is needed to protect the auditor’s interest
(d) When the client has committed an act of felony
(e) When information is formally requested by another client
14. The deficiencies of historical cost accounting during inflation EXCLUDE which of the
following?
(a) The Net Book Value of Fixed Assets is often substantially below their current value
(b) The statement of financial position figure of stock reflects prices ruling at the date of
purchase or manufacture rather than those current at the year end.
(c) Charges made in arriving at the profit do not reflect the current value of assets, which
result in overstated profit in real terms.
(d) If the historical cost accounting profit were distributed in full, the level of operations
would have to be curtailed
(e) The understatement of profit and the overstatement of assets prevent meaningful
calculations of profitability.
15.In a recent study involving different users of financial services in Nigeria, various types of
unethical behaviour have been identified. Which of the following does NOT have general
application in the industry?
(a) Any act that does not follow the norms of a profession
(b) Any act not in consonance with professional code of conduct
(c) A conduct that is morally adjudged wrong, unbecoming and below expectation
(d) Behaviour that is based on moral or pre-modial principles
(e) Deviations from standard and known code of conduct guiding an operation.

16.Which of the following is NOT an example of Revenue Related Fraud?

(a) Accounting and documentary
(b) Lifestyle of employees
(c) Related party transactions
(d) Management override of significant internal control activities
(e) Sale of assets that is very similar to subsequent purchases at similar amounts.
17.While developing a risk-based audit program, the Information Technology Auditor most
likely will focus on
(a) Strategic controls
(b) Critical IT applications
(c) Operation control
(d) Business strategy
(e) Business process
18.Which of the following actions is inappropriate to a material fraud detected during an audit of
a banking institution?
(a) Discuss the matter with at least one level of management above the perpetrators
(b) Obtain further evidence
(c) Mention it in the audit report
(d) Suggest that the client consults with legal counsel about question of law
(e) Report the matter directly to the police
19. Which of the following is the most appropriate objective of audit review?
(a) Frauds and errors do not occur in an audit engagement
(b) The audit is completed early for the report to be used
(c) The audit is performed with the highest standard of quality
(d) To ensure that appropriate bill is sent to the client
(e) No dispute arises between the firm and the client
20.The responsibility for auditing the accounts of Nigeria Customs Service is that of
(a) The Comptroller-General of Customs & Exercise.
(b) The National Assembly.
(c) The Auditor-General for the Federation.
(d) The Chairman of EFCC.
(e) The Chief Internal Auditor of the House of Representatives.

21. The difference between the actual present role of the Auditor and the role expected of him by
those who rely on the audit function is referred to as.............
(a) Audit techniques

(b) Audit Expectation GAP
(c) Audit procedures
(d) Audit Evidences
22.A situation where a member of staff who has not been involved in the audit reviews the
working papers immediately after the audit work is called............
(a) Hot review
(b) Hot Audit
(c) Cold work
(d) Slow Audit
23.Audit that seeks to assess how well an organization performs in safeguarding the environment
in which it operates and whether the company complies with its environmental policies is
called……….
(a) Forensic Audit
(b) ERP Audit
(c) Environment Audit
(d) HRM Audit
24.Within the context of Group Audit, a letter to the Auditors from the parent company of a
subsidiary which individually does not appear to be a Going Concern, stating that it intends to
continue to support the Subsidiary, rendering it a going concern is called.........................
(a) Working Paper
(b) Voucher
(c) Valid Documents
(d) Support Letter
25.The Receiver’s powers of Management are usually set out in the.......Deed.

(a) Registration Deed
(b) Property deed
(c) Debenture deed
(d) Promissory note

26.Computer audit programs and files, which are permanently integrated within the client’s
computerized accounting application and used by auditors for performing audit tests are known
as............
(a) Audit Validity
(b) Audit Report
(c) Embeded Audit Facilities
(d) Audit working paper
27. In the case of the audit of Financial Statements of banks, there is usually reporting
requirement, on contravention of Banks and Other Financial Institutions Act 1991 (BOFIA)
and/or CBN circulars, if any.
(a) True
(b) False
28. The set of established rules that guides the behavioural standard of members of a professional
body is titled ......
(a) Code of Professional Ethics
(b) Rules
(c) Regulations
(d) Code of Conduct.
29. The Budget Monitoring and Price Intelligence Unit in the Presidency is otherwise referred to
as .........Office.
(a) Government
(b) Private
(c) Due Process
30. An appointed Receiver of the court is...............

(a) Official Receiver
(b) Any government Officer
(c) Both A and B
31. Forensic accounting encompasses investigative accounting and litigation support

(a) True
(b) False

32. A type of Computer Assisted Audit Technique (CAAT) used to verify the existence of
program controls within the client computer is ..............
(a) Test pack
(b) Test data
(c) Both of the above
33. A code involving an access control mechanism to prevent an unauthorized access to

information stored in a computer system is known as............
(a) Password
(b) Key
(c) Lock
(d) None
34. An unintentional mistake is ...............committed by anyone in the accounting process which

results in material mis-statement
(a) Error
(b) Fraud
(c) Both
(d) None
35. A chartered accountant in public practice, who is engaged to report under the relevant
provisions of Companies and Allied Matters Act, CAP. C20, LFN 2004 and the listing
requirements of the Nigerian Stock Exchange is known as...............
(a) Reporting Accountant
(b) Cost Accountant
(c) Auditor
(d) None
36. Money laundering is an attempt to conceal the origin of the money by making it look
legitimate or clean
(a) True
(b) False
37. The use of external specialist teams or consultants to perform functions which could
otherwise be performed in-house is known as............
(a) In house production
(b) Outstanding
(c) Other production
(d) None

38. One of the major deficiencies of our Local Standards over IFRS‟s presentation of Non-
current Assets is that our Local Standards do not recognise................process
(a) Actual
(b) Amended
(c) Impairment
(d) None
39. Audit firms are required to ensure that their quality control policies and procedures are
documented and...............to the firm’s personnel.
(a) Disclosed
(b) Communicated
(c) Explained
(d) All of the above
40. Audit....................is essential in every audit process as this reduces audit time and invariably
the cost.
(a) Plan
(b) Procedure
(c) Evidence
(d) None
41.Types of EDP Accounting System:

(a) Batch Processing.
(b) Real – time Processing system.
(c) Only A
(d) Both A and B
42.Full form of CAAT.

a) Computer Application Audit Techniques.
b) Computer Audit Assisted Techniques.
c) Computer Audit Application Techniques.
d) Computer Assisted Audit Techniques.
43.Problems encountered in an EDP Environment:

a) Absence of voucher.
b) Computer virus.
c) Coding Problem.
44.What is EDP?
a) Emergency Data Program
b) Electronic Data parity
c) Electronic Data Processing
d) Emerging Data Processing.

45.Full form of GAS:

a) General Audit System
b) Generalized Audit Software
c) Generalized Audit System.
d) General Assistant System.
46. Electronic Data Processing is the abbreviation of ERP

a) True
b) False
47. A type of Computer Assisted Audit Technique (CAAT) used to verify the existence of
program controls within the client computer is test pack.
a) True
b) False
48. The set of established rules that guides the behavioural standard of members of a professional
body is titled ......
(a) Code of Conduct.
(b) Rules
(c) Regulations
(d) Code of Professional Ethics
49. Types of EDP Accounting System:

(a) Batch Processing.
(b) Real – time Processing system.
(c) Only A
(d) Both A and B.
50. An auditor can disclose the client’s confidential information for the following reasons except
(a) Auditor suspects that the client has committed treason
(b) When there is a public duty to disclose
(c) When the client has committed an act of felony
(d) When information is formally requested by another client
Answer key
1c 2e 3b 4d 5c 6e 7d 8b 9c 10a
11d 12c 13e 14e 15d 16c 17e 18e 19c 20c
21b 22a 23c 24d 25c 26c 27a 28a 29c 30a
31a 32c 33a 34a 35a 36a 37b 38c 39d 40a
41d 42d 43d 44c 45b 46a 47a 48d 49d 50d

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NYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45

Subject: Auditing Subject code: 354 Class: TY B. Com (Sem 5)

UNIT 1: Introduction to Principles of Auditing and Audit Process

1. An independent audit is important to readers of financial statements because it

a) Provides a measure of management's stewardship function.

2. The evidence available to auditor is _______ in nature, rather _______ in nature.

3. Compliance with the Standard of Auditing is the responsibility of

5. The main object of an audit is

PROF. MUBINA ATTARI www.dacc.edu.in

Subject: Auditing Subject code: 354 Class: TY B. Com (Sem 5)

6. The audit process is

a) special application of the scientific method of inquiry.

7. Appropriateness means _______ of audit evidence.

9. A sale of Rs. 50.000 to A was entered as a sale to B. This is an example of _

PROF. MUBINA ATTARI www.dacc.edu.in

Subject: Auditing Subject code: 354 Class: TY B. Com (Sem 5)

11. What is the main objectives of Auditing?

a) To give an opinion as to the truth and fairness of Financial statement.

12. Meaning of Interim Audit:

13. Internal Audit is conducted by :

14. Audit Evidence is obtained by:

16. Which of the following is not a kind of audit?

PROF. MUBINA ATTARI www.dacc.edu.in

Subject: Auditing Subject code: 354 Class: TY B. Com (Sem 5)

18. Voucher relates to ______.

19. Auditing begins where _____ends.

21. Which of the following persons is qualified to be a company auditor?

PROF. MUBINA ATTARI www.dacc.edu.in

Subject: Auditing Subject code: 354 Class: TY B. Com (Sem 5)

23. A company auditor can be removed before expiry of his term by

24. If there is capital loss, the auditor should

26. Sec.143 of Companies Act 20913 deals with _____

27. Internal auditor is appointed by______

PROF. MUBINA ATTARI www.dacc.edu.in

Subject: Auditing Subject code: 354 Class: TY B. Com (Sem 5)

30……………….. is a method of organising the accounting system of a business concern or a

31. Internal check is a part of

32. Civil liability of an auditor implies liability for

PROF. MUBINA ATTARI www.dacc.edu.in

Subject: Auditing Subject code: 354 Class: TY B. Com (Sem 5)

33. If an auditor is not appointed at annual general meeting, he is appointed by the

35. Audit means _______.

37. The liabilities of an auditor can be ________.

38. Duties of an auditor is _______.

PROF. MUBINA ATTARI www.dacc.edu.in

Subject: Auditing Subject code: 354 Class: TY B. Com (Sem 5)

39. Internal auditor of a company must be _______.

41. Objectives of internal audit includes _________.

42. Internal control includes ________.

PROF. MUBINA ATTARI www.dacc.edu.in

Subject: Auditing Subject code: 354 Class: TY B. Com (Sem 5)

45. Which of the following is not a kind of audit?

46. Effective internal check system reduces

47. Misappropriation of goods may be checked by

48. Internal check is suitable for _______.

49. Final audit implies

PROF. MUBINA ATTARI www.dacc.edu.in

Subject: Auditing Subject code: 354 Class: TY B. Com (Sem 5)

50. Remuneration of an internal auditor is fixed by ______.

PROF. MUBINA ATTARI www.dacc.edu.in

Subject: Auditing Subject code: 354 Class: TY B. Com (Sem 5)

UNIT 2: Checking, Vouching and Audit Report

(a) Routine checking

2. An auditor is liable for his annual audit of accounts o:

2. The evidence available to auditor is _ in nature, rather _ in nature.