ACC311 Fundamentals of Auditing Management Online Solved Quizzes/MCQ's File No 1


Which one of the following is an objective of the internal audit?

To report on financial statements
To check accounting system and internal control are operating efficiently
To determine the accuracy of financial statement values and disclosures
To establish a control system in the company


Which one of the following statements is NOT correct in respect of the internal auditor?

The scope of audit performed by internal auditors is primarily in respect of financial report audits
An internal auditor does not require a license to practice
Internal auditors are usually employed by companies and government units
Primary responsibility of the internal auditor is to the board of directors






The books of accounts of a company should be kept at which one of the following offices?(Companies Ordinance, 1984)
Registered office of the company
Accounts office of the company
Record office of the company
Registrar office

The auditor should select sample in such a way that:

All important items should be selected
 All items containing misstatement should be selected
 All items in the population are selected
 All items in population have an opportunity of being selected


Stratification is a process of dividing a population into sub- populations which have Options:
 Heterogeneous characteristics
 Nothing in common
 Lot of sampling units
 Homogeneous characteristics



Question No: 1 ( Marks: 1 ) - Please choose one
Which one of the following is an objective of the internal audit?



To report on financial statements
To check accounting system and internal control are operating efficiently
To determine the accuracy of financial statement values and disclosures
To establish a control system in the company


Question No: 2 ( Marks: 1 ) - Please choose one
Which one of the following statements is NOT correct in respect of the internal auditor?


The scope of audit performed by internal auditors is primarily in respect of financial report audits
An internal auditor does not require a license to practice

Internal auditors are usually employed by companies and government units
Primary responsibility of the internal auditor is to the board of directors
Question No: 3 ( Marks: 1 ) - Please choose one
After how many days the Securities and Exchange Commission may appoint the auditors, if the Directors of a company could not appoint the auditors to fill casual vacancy? (Companies Ordinance, 1984)



30 days
60 days
80 days
120 days

Question No: 4 ( Marks: 1 ) - Please choose one
Suppose that during audit of a company, an auditor accepted the schedule of bad debts furnished by the client, though it was apparent that debts were not recoverable. The auditor shall be held liable for which one of the following liabilities?

Liability for negligence
Liability for misfeasance
Criminal liability
Personal liability

Ref: Page no.19

Question No: 5 ( Marks: 1 ) - Please choose one
The books of accounts of a company should be kept at which one of the following offices?(Companies Ordinance, 1984)
Registered office of the company
Accounts office of the company
Record office of the company
Registrar office

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Question No: 6 ( Marks: 1 ) - Please choose one
Which of the following is one of the most fundamental and effective internal controls?

Increased use of computers for recording accounting transactions
Increased reliance on internal auditors to monitor accounting systems
Segregation of incompatible duties across several people
Having internal auditors report only to the Board of Directors

Question No: 7 ( Marks: 1 ) - Please choose one
Which of the following is NOT a major component of an internal control system?

Risk assessment Staffing
Control procedures/activities
Information and communication system

Question No: 8 ( Marks: 1 ) - Please choose one
An audit firm audited a Leather Manufacturing company and presented its report addressed to the management. They found significant material misstatements in the company s internal controls system. They strongly recommended that there should be sufficient controls in existence to ensure management can effectively control the business operations. In your opinion, auditors are emphasizing on which one of the following categories of SOAP MAPS?

Authorization
Management and Monitoring
Arithmetic and Accounting
Segregation of duties






Which of the following is one of the most fundamental and effective internal controls?

Increased use of computers for recording accounting transactions
Increased reliance on internal auditors to monitor accounting systems
Segregation of incompatible duties across several people
Having internal auditors report only to the Board of Directors


Which of the following is NOT a major component of an internal control system?

Risk assessment Staffing
Control procedures/activities
Information and communication system



An audit firm audited a Leather Manufacturing company and presented its report addressed to the management. They found significant material misstatements in the company s internal controls system. They strongly recommended that there should be sufficient controls in existence to ensure management can effectively control the business operations. In your opinion, auditors are emphasizing on which one of the following categories of SOAP MAPS?

Authorization
Management and Monitoring
Arithmetic and Accounting
Segregation of duties

Which one of the following may NOT be a type of control of the purchase cycle of an entity?

Receipt of goods
Invoicing and returns
Invoicing and credit notes
Purchase ledger and suppliers


While testing the purchase system of an entity, which one of the following control tests may be applied to the Credit Notes by the auditors?

Evidence of matching credit notes to goods returned notes
Evidence of approval of credit notes
Evidence of a sequence check
Proof of issuance date


During the audit work of testing the purchase system of an entity, which one of the following control tests may be applied to the Payables Ledger by the auditors?
Evidence of authorization of adjustments to payables ledger
Evidence of review of reconciliation of purchase ledger listing
Evidence of authorization of adjustments to payable ledger control account
Evidence of authorization of adjustments to purchase ledger


Which one of the following possible misstatements related to payroll does not involve the audit objective of Validity?
Payments to fictitious employees
Payments to terminated employees
Payments to valid employees who have not worked
Payments to valid employees at a rate in excess of the authorized amount

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In order to ensure effective control, how often a full inventory count should be held when perpetual inventory records are not kept adequately?

On a daily basis
At least once a year
At least monthly
At least weekly


An oil exploring company employs 1500 personal in its international market. All of its personnel are paid on monthly basis. The company should compensate them in which form of payment?

Salary
Cheque
Wages
None of the given option


For the purpose of keeping effective control in the cash system, who should have no access to the cash or the preparation of the paying-in slip?
Sales ledger personnel
Teller/cashier
Cash officers
Operations manager

When should the petty cash book entries be made?

At the day end
Next day
Promptly
Monthly


How often the physical inspection of non current assets should be carried out?
Rarely
Periodically
Never
Daily


In which one of the following ways auditors can choice the verification techniques in a given set of circumstances?

It depends upon the available audit evidence to the auditor
It depends upon the nature of business operations of the entity
It depends upon the audit procedures planned by the auditor
It depends upon the judgmental skills of the auditor


Which one of the following may NOT ensure that the movement in share capital of a company is properly authorized and correctly shown and described in accordance with the Companies Ordinance, 1984?
Check that directors were authorized to allot shares
Agree authorized capital with memorandum of association
Consider special rules for allotments of public company shares
Test payments with supporting evidence and trace entries in register


Which one of the following testing objectives refers to the management assertion Occurrence in obtaining audit evidence?

Assets shown include all rights under the control of the enterprise
Transactions and events that have been recorded have occurred and pertain to the entity
The amounts at which assets and liabilities are stated is correct
Assets and liabilities included on the balance sheet actually exist

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Which one of the following certain expense items may be verified in order to keep control of stock-in-trade and stores & spares?

Interest on short term loan
Accumulated depreciation on assets
Director s fees
Wages and salaries

Which one of the following authorities shall fix the remuneration of the auditors, if auditors are appointed by the SECP? (Companies Ordinance, 1984)? Directors Shareholders
 Company registrar
 SECP 
The phrase (Scope of an Audit) refers to which one of the followings?Engagement letters
 Audit procedures Audit evidence
Reasonable assurance 


Which one of the following is NOT an advantage of using statistical sampling?

It aids in the design of an efficient sample
It allows the auditor to measure the sufficiency of the evidential matter obtained
It allows the auditor to greatly reduce substantive testing
It provides means for mathematically measuring the degree of sampling risk


Which one of the following is an underlying feature of random-based selection of items?

Each stratum of the accounting population be given equal representation in the sample
All items in the accounting population be randomly ordered.
Every item in the population should have an opportunity to be selected
Every item must be systematically selected using replacement


Which one of the following matters is generally included in an auditor's engagement letter?

Management's responsibility for the entity's compliance with laws and regulations
The factors to be considered in setting preliminary judgments about materiality
Management's vicarious liability for illegal acts committed by its employees
The auditor's responsibility to search for significant internal control deficiencies




To determine the characteristics of the engagement
To ascertain the reporting objectives of the engagement
To consider the important factors i.e. materiality levels, higher risks of material
misstatement etc.
To guide the development of detailed business activities to occur in future

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Which one of the following mainly affects the auditors opinion?

Agreement on accounting policies
Limitation on the scope of the auditors work
Dispute among the members of the company
Future prospects of the company s growth


Which one of the following matters does NOT affect Auditor s Opinion?

When there is a limitation on the scope of the auditor s work
When there is a disagreement with management regarding the accounting policies selected
When there is a disagreement with management regarding the method of applying accounting policies
When an auditor modify the auditor s report by adding a paragraph to highlight a material matter


Tracing selected shipments to the sales journal to be sure that each one is included is a test of which of the following?

Accuracy
Classification
Completeness
Existence


Which one of the following best describes the term Input VAT?

Input VAT is charged on a firm when it makes its purchases
Input VAT is charged on a firm when it makes its investments
Input VAT is charged on a firm when it produces highly quality products
Input VAT is charged on a firm when it exports the products


The duties of the wages staff should preferably be rotated during the year when the salary payment is made by which of the following systems?

By cheque
In cash
By demand draft
Direct transfer to employees bank account


Which of the following are the three audit objectives that are most important for cash, and that receive the greatest attention during the audit?
Existence, accuracy, and completeness
Existence, cutoff, and presentation
Accuracy, cutoff, and presentation & disclosure
Completeness, realizable value, and cutoff

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Which one of the following is most likely to indicate fraud?

Several overpayments are made for goods received from a supplier
The year end cash balance does not include cash in transit to the company at year-end
A check received after year end was inadvertently recorded as if received before year-end
A documented loan is sanctioned to an officer of the company


When an auditor increases the assessed level of control risk because certain control activities were determined to be ineffective, which of the following would most likely be increased by the auditor?

Extent of tests of controls
Level of detection risk
Extent of tests of details
Level of inherent risk

1. Standard format of Auditor’s Report as per the Companies Ordinance 1984 is described in which one of the following Legal Forms?
A. Form31A
B. Form32A
C. Form30A
D. Form35A
Form35A.h
2. IFRS stands for which one of the following?
A. International Financial Reporting Standards
B. International Financial Recording Systems
C. International Financial Recording Statements
D. International Financial Reporting Systems
International Financial Reporting Standards.
3. Which of the following is NOT one of the five major components of internal control?
A. Risk assessment
B. Control activities
C. Information and communication system
D. Human resource background checks
Human resource background checks.

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4. All of the following should be observed and inspected by the auditors during the risk assessment process of an entity EXCEPT:
A. Observations of Activities and operations
B. Inspection of Documents and records
C. Reading Management reports
D. Visit to other companies in the industry
Visit to other companies in the industry.
5. Which one of the following audit techniques ordinarily provides an auditor with the least assurance about the operating effectiveness of an internal control activity?
A. Inquiry of client personnel
B. Inspection of documents and reports
C. Observation of client personnel
D. Preparation of system flowcharts
Inspection of documents and reports.



Question No: 1 ( Marks: 1 ) - Please choose one
Which one of the following is an objective of the internal audit?To report on financial statements
To check accounting system and internal control are operating efficiently
To determine the accuracy of financial statement values and disclosuresTo establish a control system in the company
Question No: 2 ( Marks: 1 ) - Please choose one
Which one of the following statements is NOT correct in respect of the internal auditor?

The scope of audit performed by internal auditors is primarily in respect of financial report audits
An internal auditor does not require a license to practice
Internal auditors are usually employed by companies and government unitsPrimary responsibility of the internal auditor is to the board of directors
Question No: 3 ( Marks: 1 ) - Please choose one
After how many days the Securities and Exchange Commission may appoint the auditors, if the Directors of a company could not appoint the auditors to fill casual vacancy? (Companies Ordinance, 1984)

30 days
60 days
80 days
120 days


Question No: 12 ( Marks: 1 ) - Please choose one
Which one of the following may NOT be a type of control of the purchase cycle of an entity?

Receipt of goods
Invoicing and returns
Invoicing and credit notes
Purchase ledger and suppliers
Ref : Page no.93
Question No: 13 ( Marks: 1 ) - Please choose one
While testing the purchase system of an entity, which one of the following control tests may be applied to the Credit Notes by the auditors?

Evidence of matching credit notes to goods returned notes
Evidence of approval of credit notes
Evidence of a sequence check
Proof of issuance date

Question No: 14 ( Marks: 1 ) - Please choose one
During the audit work of testing the purchase system of an entity, which one of the following control tests may be applied to the Payables Ledger by the auditors?
Evidence of authorization of adjustments to payables ledger
Evidence of review of reconciliation of purchase ledger listing
Evidence of authorization of adjustments to payable ledger control account
Evidence of authorization of adjustments to purchase ledger



Question:
Where the auditor relies more on the system of internal control the circumstance warrant: Options:
 He spends more time on audit
 Effectiveness of the audit is affected
 Efficiency of the audit is affected
 Reliability of the results of the tests is affected

Question:
The auditor should select sample in such a way that:
Options:
All important items should be selected
 All items containing misstatement should be selected
 All items in the population are selected
 All items in population have an opportunity of being selected

Question:
Stratification is a process of dividing a population into sub- populations which have Options:
 Heterogeneous characteristics
 Nothing in common
 Lot of sampling units
 Homogeneous characteristics

Question:
Test of controls comprise of testing of all EXCEPT
 Options:
 Design
 Implementation
 Operating efficiency
 Operating effectiveness

Ref: Page no.93
Question No: 15 (Marks: 1) - Please choose one
Which one of the following possible misstatements related to payroll does not involve the audit objective of Validity?
Payments to fictitious employees
Payments to terminated employees
Payments to valid employees who have not worked
Payments to valid employees at a rate in excess of the authorized amount

Question No: 16 ( Marks: 1 ) - Please choose one
In order to ensure effective control, how often a full inventory count should be held when perpetual inventory records are not kept adequately?

On a daily basis
At least once a year
At least monthly
At least weekly
Ref: Page no.101

Question No: 17 (Marks: 1 ) - Please choose one
An oil exploring company employs 1500 personal in its international market. All of its personnel are paid on monthly basis. The company should compensate them in which form of payment?

Salary
Cheque
Wages
None of the given option

Question No: 18 ( Marks: 1 ) - Please choose one

For the purpose of keeping effective control in the cash system, who should have no access to the cash or the preparation of the paying-in slip?
Sales ledger personnel
Teller/cashier
Cash officers
Operations manager
Ref: Page no.99

Question No: 19 ( Marks: 1 ) - Please choose one
When should the petty cash book entries be made?

At the day end
Next day
Promptly
Monthly

Question No: 20 ( Marks: 1 ) - Please choose one
How often the physical inspection of non current assets should be carried out?
Rarely
Periodically
Never
Daily

6. Which one of the following opinions advocates that the auditor should form an opinion only after obtaining sufficient audit evidence instead of blindly accepting any information given by the management?
A. Auditor’s liability
B. Professional ethics
C. Professional Skepticism
D. Auditor’s opinion
Professional ethics.
7. Which one of the following is NOT required as part of the audit process?
A. Substantive procedures
B. Tests of control
C. Assessment of materiality
D. Procedures to obtain an understanding of the internal control structure
Procedures to obtain an understanding of the internal control structure.
8. SECP stands for which one of the following?
A. Securities and Exchange Collaboration of Pakistan
B. Securities and Exchange Consortium of Pakistan
C. Securities and Exchange Commission of Pakistan
D. Securities and Exchange Constitution of Pakistan
Securities and Exchange Commission of Pakistan.

Which one of the following statements is TRUE regarding control procedures?

They are not required if the control environment is strong
They should generally be all manual
They should generally be all automated
They can be either manual or automated


Which one of the following statements does not apply to the Institute of Chartered Accountants of Pakistan (ICAP) in Pakistan?

An autonomous body incorporated under the Chartered Accountants Ordinance 1961
Regulatory body that formulates auditing standards in Pakistan
Its affairs are run by a council which is elected by its member (Chartered Accountants).
ICAP is a member of the International Federation of Accountants (IFAC)



Suppose that during audit of a company, an auditor accepted the schedule of bad debts furnished by the client, though it was apparent that debts were not recoverable. The auditor shall be held liable for which one of the following liabilities?

Liability for negligence
Liability for misfeasance
Criminal liability
Personal liability

Sample risk and sample size have
 A direct relationship
 An inverse relationship
 No relation
 None of the given options



Where the auditor relies more on the system of internal control the circumstance warrant: 
 He spends more time on audit
 Effectiveness of the audit is affected
 Efficiency of the audit is affected
 Reliability of the results of the tests is affected

Following are the points considered during the verification of bank balances EXCEPT:

Obtain direct bank confirmation
Obtain direct bank confirmation
Investigate about outstanding stale cheques
Investigate any significant reconciling items of an unusual nature
Ensure that the creditors have been paid for their loan amount


Enlist the typical control procedures at key stages of the sales cycle.
Solution:

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1. Orders
2. Dispatch
3. Invoicing and credit notes
4. Returns inwards
5. Receivables
6. Bad Debts

9. One type of analytical procedure is the ‘Trend Analysis’. Which one of the following is the best example of trend analysis?
A. Comparison of company financial ratios to that of its competitors
B. Comparison of accounting records to budgeted amounts
C. Comparison of inventory levels over the past 3 years
D. Comparison of interest expenses to outstanding loan balances
Comparison of inventory levels over the past 3 years.
10. While conducting operational audit, which one of the following auditing procedures does the auditor primarily rely upon?
A. Inquiry and observation
B. Analytical procedures
C. Physical inspection
D. Tracing and vouching
Analytical procedures.

Which one of the following best describes the term Input VAT?

Input VAT is charged on a firm when it makes its purchases
Input VAT is charged on a firm when it makes its investments
Input VAT is charged on a firm when it produces highly quality products
Input VAT is charged on a firm when it exports the products

Question No: 34 ( Marks: 1 ) - Please choose one
The duties of the wages staff should preferably be rotated during the year when the salary payment is made by which of the following systems?

By cheque
In cash
By demand draft
Direct transfer to employees bank account

Question No: 35 ( Marks: 1 ) - Please choose one
Which of the following are the three audit objectives that are most important for cash, and that receive the greatest attention during the audit?
Existence, accuracy, and completeness
Existence, cutoff, and presentation
Accuracy, cutoff, and presentation & disclosure
Completeness, realizable value, and cutoff

Question No: 36 ( Marks: 1 ) - Please choose one
Which one of the following is most likely to indicate fraud?

Several overpayments are made for goods received from a supplier
The year end cash balance does not include cash in transit to the company at year-end
A check received after year end was inadvertently recorded as if received before year-end
A documented loan is sanctioned to an officer of the company

Question No: 37 ( Marks: 1 ) - Please choose one
When an auditor increases the assessed level of control risk because certain control activities were determined to be ineffective, which of the following would most likely be increased by the auditor?

Extent of tests of controls
Extent of tests of details
Level of inherent risk

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Question No: 38 ( Marks: 1 ) - Please choose one
Which one of the following statements is TRUE regarding control procedures?


They are not required if the control environment is strong
They should generally be all manual
They should generally be all automated
They can be either manual or automated
11. Which one of the following helps to achieve reasonable assurance about the fairness of financial statements during an audit process?
A. Audit report
B. Audit evidence
C. Audit engagement
D. Audit program
Audit report.
For better assessing the audit risk, auditor inquires different groups in the organizations EXCEPT:
Board of governance and top level management
Legal counsel
Middle level management
Stakeholders

Which of the following authorities shall fix the remuneration of the auditor, if auditors are appointed by the SCEP?(companies ordinance, 1984)
Directors
Shareholders
Company Registrar
SECP

The small audit firms provide the following services EXCEPT:

Liquidation and receivership work, fraud auditing
Financial management and system consultancy
Tax management and statutory form filling

Which of the following audit process determines that whether entity is following specific procedures, rules or regulations set down by some higher authority?
Technical audit
Financial statement audit
Operational audit

Reliability of audit evidence is influenced by all of the following factors EXCEPT:
Source and the nature of the information
Timeliness
Objectivity
Quantity

Which statement cannot be highlighted as a merit of audit process?
It settles the dispute between management
It helps the auditor to give more constructive advice top management
Its help to restrict sole proprietor to by changing some fee
It gives strength to the company for acquiring the finance

For better assessing the audit risk, auditor inquires different groups in the organizations EXCEPT:
Board of governance and top level management
Legal counsel
Middle level management
Stakeholders

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Which of the following is the least concern to an auditor regarding the client’s internal control system?
Efficiency and effectiveness of operations
Controls related to the reliability of financial reporting
Controls over classes of transactions
Auditors are equally concern with each of the given issues

During test of control procedure its design can easily tested with the help of:
ICQs and walk through tests    
ICQs and judgment sample
ICQs and random sample
ICQS and ICEC

Testing the Design:

Proper design of internal control is tested through ICQs and ICEC. 

The books of accounts of a company should be kept at which one of the following offices?(Companies Ordinance, 1984)Registered office of the company
Accounts office of the company
Record office of the companyRegistrar office

Question No: 6 ( Marks: 1 ) - Please choose one
Which of the following is one of the most fundamental and effective internal controls?

Increased use of computers for recording accounting transactions
Increased reliance on internal auditors to monitor accounting systems
Segregation of incompatible duties across several people
Having internal auditors report only to the Board of Directors

Internal source of audit evidence for an entity includes the following EXCEPT:
Associated companies of the entity
Accounting systems, records and documents
Non-financial data and records
Management representation and discussion

Associated company is not internal source.
An “Associated Company” is an entity in which the Company has significant influence, but not a controlling interest, over the operating and financial management policy decisions of the entity. Associated Companies are accounted for using the equity method. Significant influence is generally presumed when the Company holds between 20 percent and 50 percent of the voting rights. 


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Tolerable error and sample size have

 A direct relationship
 An inverse relationship
 No relation
 None of the given options



Sample risk and sample size have

 A direct relationship
 An inverse relationship
 No relation
 None of the given options



Where the auditor relies more on the system of internal control the circumstance warrant: 
 He spends more time on audit
 Effectiveness of the audit is affected
 Efficiency of the audit is affected
 Reliability of the results of the tests is affected


The auditor should select sample in such a way that:

All important items should be selected
 All items containing misstatement should be selected
 All items in the population are selected
 All items in population have an opportunity of being selected


Stratification is a process of dividing a population into sub- populations which have  Heterogeneous characteristics
 Nothing in common
 Lot of sampling units
 Homogeneous characteristics


Question:
How often the Bank reconciliations should be prepared?
Options:
 Weekly
 Monthly
 Quarterly
 Annually


Question:
How often Inventory levels should be checked against the inventory records in order to keep its control effectively?
Options:
Rarely
 Periodically
 Never
 Daily


Question:
What auditors seek in the register of non current assets for each major group of assets? Options:
 Details of each item its cost and residual value
 Details of each item its cost and accumulated depreciation
 Details of each item its cost and depreciation
 Details of each item its cost and capital investment expected returns


Question:
Which one of the following may NOT consist of any verification methods?
 Options:
 Closing balance
 Acquisitions
 Disposals
 Reconciliation

Question:
Which one of the following may not be any matter relevant to verification of assets? Options:
 Taxation
 Vouching
 Insurance
 The letter of representation


Question:
Which one of the following aspects of assets must be verified?
 Options:
 Cost and authorization
 Value and existence
 Beneficial investment

 Presentation in the accounts


Test of controls comprise of testing of all EXCEPT

 Design
 Implementation
 Operating efficiency
 Operating effectiveness


Analytical procedures are carried out for which one of the following purposes?

 To reduce detection risk
 To assess inherent risk
 To reduce control risk
 To determine detection risk

When should the petty cash book entries be made?At the day end
Next day
Promptly
Monthly
Question No: 20 ( Marks: 1 ) - Please choose one
How often the physical inspection of non current assets should be carried out?Rarely
Periodically
NeverDaily
Question No: 21 ( Marks: 1 ) - Please choose one
In which one of the following ways auditors can choice the verification techniques in a given set of circumstances?
It depends upon the available audit evidence to the auditor
It depends upon the nature of business operations of the entity
It depends upon the audit procedures planned by the auditor
It depends upon the judgmental skills of the auditor

Nature of audit procedure†refers to which one of the following desc ription?

It refers to the purpose i.e. (tests of controls or substantive procedures) and their type that is inspections observation inquiry confirmation recalculation re-performances or analytical procedures
. It refers when audit procedures are to be performed or the period or date to which the audit evidence applies
. It refers to sample size or number of observations of a control activity (quantity of audit evidence)
. It refers to the nature of testing and their procedures that is designing structuring and compiling work to be done



The auditors are required to perform tests of controls when

 The internal controls are operating inefficiently
 Substantive procedures alone provide sufficient appropriate audit evidence at the assertion level.
 Substantive procedures alone do not provide sufficient appropriate audit evidence at the assertion level.
 Analytical procedures alone do not provide sufficient appropriate audit evidence at the assertion level.

Which of the following is the least concern to an auditor regarding the client’s internal control system?
Efficiency and effectiveness of operations
Controls related to the reliability of financial reporting
Controls over classes of transactions
Auditors are equally concern with each of the given issues

During test of control procedure its design can easily tested with the help of:
ICQs and walk through tests    
ICQs and judgment sample
ICQs and random sample
ICQS and ICEC

Testing the Design:

Proper design of internal control is tested through ICQs and ICEC.  

Internal source of audit evidence for an entity includes the following EXCEPT:
Associated companies of the entity
Accounting systems, records and documents
Non-financial data and records
Management representation and discussion


Following descriptions are the examples of substantive testing EXCEPT:

 Test of account balances to verify the correctness of the amounts
 Verification that an operating system and/or applications are configured appropriately to the companies needs
 Review of minutes of directors; meetings and inquiry
 Use of statistical sampling to determine the accuracy of financial statement figures

The small audit firms provide the following services EXCEPT:

Liquidation and receivership work, fraud auditing
Financial management and system consultancy
Tax management and statutory form filling

Which of the following audit process determines that whether entity is following specific procedures, rules or regulations set down by some higher authority?
Technical audit
Financial statement audit
Operational audit

    Audit sampling conducted
    Options:
     On selected number of items
     On Whole population
     On specific no of items
     All of the given options

How often the Bank reconciliations should be prepared?

 Weekly
 Monthly
 Quarterly
 Annually



How often Inventory levels should be checked against the inventory records in order to keep its control effectively?

Rarely
 Periodically
 Never
 Daily



What auditors seek in the register of non current assets for each major group of assets? 
 Details of each item its cost and residual value
 Details of each item its cost and accumulated depreciation
 Details of each item its cost and depreciation
 Details of each item its cost and capital investment expected returns



Which one of the following may NOT consist of any verification methods?

 Closing balance
 Acquisitions
 Disposals
 Reconciliation


Which one of the following may not be any matter relevant to verification of assets? 
 Taxation
 Insurance
 The letter of representation

What should be the next step of an auditor after establishing the overall audit strategy of an entity?

To develop an audit plan
To define the scope of audit
To determine the focus of engagement team efforts
To determine the objectives of audit


Which one of the following aspects of assets must be verified?

 Cost and authorization
 Value and existence
 Beneficial investment
 Presentation in the accounts



An Automobile Company hires auditors at the year end. Auditors are at the stage of verification and vouching of companyâtfinancials. Before examining the equity section they develop general aspects concerning the ownerâtequity. In your opinion which one of the following aspects may NOT be considered by the auditors during this assessment?

 Share capital is properly classified and described in the accounts
 Capital stock is enough to execute the companyâtfinancial needs
 Reserves are properly classified and presented
 Movements in reserves are properly authorized



Non current assets manufactured or constructed by the company itself should reflect which types of costs in the costing records?

Direct costs plus relevant overhead but not include any profit
 Direct costs plus relevant overhead and any profit earned on it
 Indirect costs plus relevant overhead but not include any profit
 Indirect costs plus relevant overhead and any profit earned on it




Which one of the following matters should be included in the letter of representation? 
 Existence of any immaterial mistake in the statements
Existence of any fraud or error in the statements
Companyâtgrowth trend in the future in figures
Market value of the companyâtstock



Who should prepare the annual capital expenditure budgets of the company in order to keep effective?

 Someone directly responsible to the shareholders
 Someone directly responsible for goods delivery to the customers
 Someone directly responsible to the board of directors
 Someone directly responsible to deal with the suppliers



Tolerable error and sample size have

 A direct relationship
 An inverse relationship
 No relation
 None of the given options


After how many days the Securities and Exchange Commission may appoint the auditors, if the Directors of a company could not appoint the auditors to fill casual vacancy? (Companies Ordinance, 1984)

30 days
60 days
80 days
120 days







Test of controls comprise of testing of all EXCEPT

 Design
 Implementation
 Operating efficiency
 Operating effectiveness


Analytical procedures are carried out for which one of the following purposes?

 To reduce detection risk
 To assess inherent risk
 To reduce control risk
 To determine detection risk

    Advantages of Audit Sampling
     Options:
     Economical
     Time Saving
     More Practical
     All of the given options


    Question:
    Which of the following is the component of audit risk?
    Options:
     Inherent risk
     Control risk
     Detection risk
     All of the given options

    Question:
    Which of the following is not needed to be verified at the time of verification of Equity? Options:
     Share capitalâtclassification
     Movement in share capital
     Preliminary expenses are properly write off
     Movements in reserves

Nature of audit procedure’ refers to which one of the following desc ription?

It refers to the purpose i.e. (tests of controls or substantive procedures) and their type that is inspections observation inquiry confirmation recalculation re-performances or analytical procedures
. It refers when audit procedures are to be performed or the period or date to which the audit evidence applies
. It refers to sample size or number of observations of a control activity (quantity of audit evidence)
. It refers to the nature of testing and their procedures that is designing structuring and compiling work to be done



The auditors are required to perform tests of controls when

 The internal controls are operating inefficiently
 Substantive procedures alone provide sufficient appropriate audit evidence at the assertion level.
 Substantive procedures alone do not provide sufficient appropriate audit evidence at the assertion level.
 Analytical procedures alone do not provide sufficient appropriate audit evidence at the assertion level.



Following descriptions are the examples of substantive testing EXCEPT:

 Test of account balances to verify the correctness of the amounts
 Verification that an operating system and/or applications are configured appropriately to the companies needs
 Review of minutes of directors; meetings and inquiry
 Use of statistical sampling to determine the accuracy of financial statement figures



How often the Bank reconciliations should be prepared?

 Weekly
 Monthly
 Quarterly
 Annually



How often Inventory levels should be checked against the inventory records in order to keep its control effectively?

Rarely
 Periodically
 Never
 Daily



What auditors seek in the register of non current assets for each major group of assets? Options:
 Details of each item its cost and residual value
 Details of each item its cost and accumulated depreciation
 Details of each item its cost and depreciation
 Details of each item its cost and capital investment expected returns



Which one of the following may NOT consist of any verification methods?

 Closing balance
 Acquisitions
 Disposals
 Reconciliation


Which one of the following may not be any matter relevant to verification of assets? 
 Taxation
 Vouching
 Insurance
 The letter of representation



Which one of the following aspects of assets must be verified?

 Cost and authorization
 Value and existence
 Beneficial investment
 Presentation in the accounts


Question:
How often the Bank reconciliations should be prepared?
Options:
 Weekly
 Monthly
 Quarterly
 Annually


Question:
How often Inventory levels should be checked against the inventory records in order to keep its control effectively?
Options:
Rarely
 Periodically
 Never
 Daily

An Automobile Company hires auditors at the year end. Auditors are at the stage of verification and vouching of companyâtfinancials. Before examining the equity section they develop general aspects concerning the ownerâtequity. In your opinion which one of the following aspects may NOT be considered by the auditors during this assessment?

 Share capital is properly classified and described in the accounts
 Capital stock is enough to execute the companyâtfinancial needs
 Reserves are properly classified and presented
 Movements in reserves are properly authorized



Non current assets manufactured or constructed by the company itself should reflect which types of costs in the costing records?

Direct costs plus relevant overhead but not include any profit
 Direct costs plus relevant overhead and any profit earned on it
 Indirect costs plus relevant overhead but not include any profit
 Indirect costs plus relevant overhead and any profit earned on it




Which one of the following matters should be included in the letter of representation? 
 Existence of any immaterial mistake in the statements
Existence of any fraud or error in the statements
Companyâtgrowth trend in the future in figures
Market value of the companyâtstock



Who should prepare the annual capital expenditure budgets of the company in order to keep effective?

 Someone directly responsible to the shareholders
 Someone directly responsible for goods delivery to the customers
 Someone directly responsible to the board of directors
 Someone directly responsible to deal with the suppliers

Question:
Tolerable error and sample size have
 Options:
 A direct relationship
 An inverse relationship
 No relation
 None of the given options


Question:
Sample risk and sample size have
 Options:
 A direct relationship
 An inverse relationship
 No relation
 None of the given options

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