Is a complete and exhausted description of the system as found in operation by the auditors MCQ

Q: Is a series of instructions and questions which the auditor should follow and answer?

(b) Use of Check Lists in Audit: It is a series of instructions or questions on internal control which the auditor must follow or answer. When a particular instruction is carried out, the auditor initials the space opposite the instruction.

What Is a Walk-Through Test?

A walk-through test is a procedure used during an audit of an entity's accounting system to gauge its reliability. A walk-through test traces a transaction step-by-step through the accounting system from its inception to the final disposition. However, walk-throughs aren’t required for accountants but can be instrumental in addressing weaknesses and problems.

Inhaltsverzeichnis Show

What Is a Walk-Through Test?
Key Takeaways
Understanding Walk-Through Tests
Special Considerations
Example of a Walk-Through Test
1. Auditing Meaning, Objective and Importance
2. Classification of Audit
3. Audit Process
4. Internal Check
5. Vouching
6. Verification and Valuation of Assets and Liabilities
7. Depreciation and Reserve
8. Company Audit
9. Appointment, Remuneration, Rights and Duties of an Auditor
10. Liabilities of Auditor
11. Divisible Profit and Dividend
12. Audit Report
13. Investigation
14. Special Audit
Is a complete and exhaustive description of the system as found in operation by the auditors?
What is the responsibility of an auditor who is engaged to audit the financial statements of a government entity?
Why does a company choose to have an independent auditor report on its financial statements?
Is a series of instructions and questions which the auditor should follow and answer?

Key Takeaways

Walk-through tests are audits of accounting systems that gauge reliability.
These tests look to reveal deficiencies and material weaknesses in a company’s accounting systems.
Auditors doing the walk-through will watch the company's staff and analyzed documents created during the process to identify weak points.
The American Institute of Certified Public Accountants (AICPA) recommends walk-through tests on an annual basis.

Understanding Walk-Through Tests

A walk-through test is only one of many tests performed by auditors during their evaluation of an organization's accounting controls and risk management measures. The test can reveal system deficiencies and material weaknesses that would need to be rectified by the organization as soon as possible.

In conducting a walk-through test, an auditor will study how a transaction is initiated and moves through a company or organization's accounting system to completion. This involves identifying how a transaction is authorized, recorded—manually, by automated means, or both—and then reported in the general ledger of the books. The auditor will want to know how controls for accuracy are applied at each step in the process and how follow-up steps are taken to improve controls.

A good walk-through test will also document the personnel involved in transaction entries in the accounting system. Checklists and flowcharts are helpful in conducting thorough walk-through tests. The American Institute of Certified Public Accountants (AICPA) recommends walk-through tests on an annual basis.

Walk-through tests don’t have to be a formal process, as many small businesses will perform a walk-through test without keeping detailed records or assessing a company’s accounting records. That is, the auditor will observe and make inquiries without requesting detailed documentation or reviewing the paperwork or paper trail of the transaction.

Special Considerations

A walk-through test can be done by simply asking employee questions, although this isn’t recommended. This is because an employee’s description isn’t always what happens in practice. The better method of a walk-through is actually observing employees—how they process transactions, etc. As well, actually analyzing paperwork and documents is a step further in analyzing the company’s accounting process.

Example of a Walk-Through Test

A walk-through will look differently depending on the company and auditor, but broadly, the process should include a visual assessment of how the staff operates when recording a transaction. Next, the auditor will talk with anyone who handles the transaction and then review the documents related to the transaction. An auditor may also test the accounting controls if any are in place.

At the end of the walk-through, the auditor will outline the weaknesses in how the transaction was handled. The idea is that these weak points can then be corrected to improve a company’s accounting system.

Contents

1 MCQ of auditing
- 1.1 1. Auditing Meaning, Objective and Importance
- 1.2 2. Classification of Audit
- 1.3 3. Audit Process
- 1.4 4. Internal Check
- 1.5 5. Vouching
- 1.6 6. Verification and Valuation of Assets and Liabilities
- 1.7 7. Depreciation and Reserve
- 1.8 8. Company Audit
- 1.9 9. Appointment, Remuneration, Rights and Duties of an Auditor
- 1.10 10. Liabilities of Auditor
- 1.11 11. Divisible Profit and Dividend
- 1.12 12. Audit Report
- 1.13 13. Investigation
- 1.14 14. Special Audit
  - 1.14.1 Related

MCQ of auditing:- In this post, we will help you in MCQ (Multiple Choice Question) Auditing with Solution Chapter wise this post will help you a lot in the examination. This post is for B.com 3rd year Student This post can benefit more students. MCQ of auditing Bcom

Bcom Auditing Notes Question Paper

1. Auditing Meaning, Objective and Importance

1, Which country gave recognition to Auditing first in the Companies Act –

(a) America

(b) Britain

(d) England (✓)

2, Auditing is derived from the Latin Word –

(a) Audire (✓)

(b) Auditor

(d) None of these

3, When the audit of Company Accounts was made compulsory in India.

(a) 1894

(b) 1914 (✓)

(d) 1952

4, Which of the following governments in India followed the education of Accountancy first –

(a) Government of Delhi

(b) Government of Bihar

(c) Government of Mumbai (✓)

(d) None of these

5, When the Chartered Accountant Act of India was made:

(a) 1947

(b) 1949 (✓)

(d) 1965

6, When the audit of Company Accounts was made compulsory in England –

(a) 1802

(b) 1840

(c) 1844 (✓)

(d) 1850

7, When Institute of Chartered Accountant of India established?

(a) 1 July, 1949 (✓)

(b) 1 July, 1950

(d) 1 July, 1957

8, When Double Entry System was invented –

(a) 1444

(b) 1490

(c) 1494 (✓)

(d) 1949

9, The principle of double entry book-keeping system published by –

(a) Lucas Passioli (✓)

(b) Davar

(d) None of these

10, Auditing is –

(a) An art

(b) A science

(c) Above both (a) and (b) (✓)

(d) None of these

11, Who can be an Auditor

(a) Commerce Graduate

(b) Law Graduate

(d) Chartered Accountant (✓)

12, The function of an Auditor is –

(a) To examine the arithmetical accuracy of accounts

(b) To detect and prevent the errors

(d) All the above (✓)

13, An auditor is like a ………. dog.

(a) Pet

(b) Watch (✓)

(d) Thirsty

14, “Auditor is a watch dog and not a blood-hound.” decision was given in the case of –

(a) London and General Bank, 1895

(b) Kingston Cotton Mills Company, 1896 (✓)

(d) None of these.

15, Chartered Accountants are –

(a) Amateur auditor

(b) Government auditor

(c) Professional auditor (✓)

(d) None of these.

16, An auditor should be –

(a) Fearless

(b) Honest

(d) All of the above (✓)

17, An auditor should have –

(a) Tactfulness

(b) Honesty

(d) All of the above (✓)

18, An auditor should not be

(a) Tactful

(b) Honest

(c) Suspicious (✓)

(d) Patient

19, Technical knowledge of Auditing is –

(a) Born

(b) Acquired (✓)

(d) None of these

20, High moral character of an auditor is –

(a) Born Qualities (✓)

(b) Acquired Knowledge

(d) None of these

21, ‘Auditing Practice Committee’ is now renamed –

(a) Auditing and Assurance Standards Board (✓)

(b) Auditing Board

(d) None of these

22, Number of standards issued by Institute of Chartered Accountant of India is –

(a) 20

(b) 25

(c) 35 (✓)

(d) 40

23, Institute of Chartered Accountants of India (ICAI) is a…….

(a) Autonomous body (✓)

(b) Co-operative body

(d) None of these

24, Head office of ICAI is situated at –

(a) Mumbai

(b) Chennai

(c) Delhi (✓)

(d) Kolkatta

25, International Federation of Accountants (IFAC) was set up in –

(a) 1978

(b) 1977 (✓)

(d) 1957

26, Auditing Practising Committee (APC) was set-up in –

(a) 1992

(b) 1982 (✓)

(d) 1974

27, Auditing Practising Committee (APC) was established by

(a) Central Government

(b) ICAI (✓)

(d) None of these

28, Basic principles governing an audit are described in –

(a) AAS-1 (✓)

(b) AAS-5

(d) AAS-6

29, Standard Auditing Practice related by objective and scope of the Audit of Financial Statement is –

(a) AAS-1

(b) AAS-2 (✓)

(d) AAS-4

30, Which of the following Auditing Standard is related with the auditor’s responsibility to consider Fraud and Error in an audit of Financial Statement –

(a) AAS-3

(b) AAS-4 (✓)

(d) AAS-6

31, Fellow members of ICAI can write….. name –

(a) FCS

(b) MBA

(c) FCA (✓)

(d) None of these

32, Auditing is related with –

(a) Accountancy

(b) Economics

(d) All above (✓)

33, Auditing can be defined as –

(a) Preparation of books of accounts

(b) An independent examination of books of accounts (✓)

(d) None of these

34, Auditor examines and verifies the –

(a) Costing records and cost statements.

(b) Financial records (✓)

(d) Managers records

35, Under which Act Audit is compulsory

(a) Partnership Act, 1932

(b) Indian Companies Act, 1956 (✓)

(d) None of the above

36, The principal object of auditing is –

(a) To exhibit a true and fair view of the state of affairs of the undertaking (✓)

(b) Detection of errors

(d) None of these

37, Which of the following is the function of Auditor –

(a) To examine the arithmetical accuracy of accounts

(b) To detect and prevent the errors

(d) All of these (✓)

38, Prevention of fraud is……….. Object of auditing.

(a) Primacy

(b) Subsidiary (✓)

(d) None of these

39, Where Book-keeping ends, there……….

(a) Auditing begins

(b) Accountancy begins (✓)

(d) None of these

40, Accountancy begins where………..

(a) Book-keeping ends (✓)

(b) Auditing ends

(d) All the above

41, Auditing beings where……….

(a) Book-keeping ends

(b) Accountancy ends (✓)

(d) Vouching ends

42, Where Investigation begins, there………

(a) Auditing ends (✓)

(b) Book-keeping ends

(d) None of these

43, For every business Accountancy is –

(a) Luxury

(b) Necessity (✓)

(d) None of these.

44, In an Auditor the knowledge of Book-keeping and Accountancy is –

(a) Acquired Knowledge (✓)

(b) Born Qualities

(d) All the above

45, For a Retailer, Auditing is –

(a) Necessity

(b Luxury (✓)

(d) None of these

46, To examine the books of accounts is the ………. object of auditing –

(a) Primary (✓)

(b) Social

(d) None of these

47, Verification of annual statement is………. object of auditing –

(a) Primary (✓)

(b) Social

(d) None of these

48, To render suggestions to the manager is ………. object of the auditor –

(a) Primary

(b) Secondary (✓)

(d) None of these

49, Protection from evasion of Tax is………. object of auditing:

(a) Primary

(b) Social (✓)

(d) None of these

50, Protection of investors is……….. object of auditing –

(a) Social (✓)

(b) Economic

(d) Subsidiary

51, For Reliance Company Auditing is –

(a) Necessity (✓)

(b) Luxury

(d) None of these

52, For every business Accountancy is –

(a) Luxury

(b) Necessity (✓)

(d) None of these

53, For a betel shopkeeper, Auditing is –

(a) Necessity

(b) Luxury (✓)

(d) None of these

54, Generally auditing is not necessary for small sole trading business because –

(a) Legally it is not necessary

(b) Its scope is limited

(c) Its proprietor has full control on it (✓)

(d) None of these

55, Audit of public company is –

(a) Compulsory (✓)

(b) Luxury

(d) Optional

56, Auditing is mandatory for –

(a) Religious trusts

(b) Joint stock companies

(d) All of the above (✓)

57, Audit for business of sole trading is -s

(a) Compulsory

(b) Essential

(c) Optional (✓)

(d) Not any of them

58, Audit is compulsory in –

(a) Sole trading concern

(b) Partnership firm

(c) Joint stock companies (✓)

(d) None of them.

59, If a partnership firm makes its audit, it is called –

(a) Statutory

(b) Compulsory audit

(c) Voluntary audit (✓)

(d) None of these

60, Audit of Trust is –

(a) Compulsory (✓)

(b) Voluntary

(d) None of these

61, Audit of Co-operative Firm is –

(a) Voluntary

(b) Compulsory (✓)

(d) None of these

62, Audit of Insurance Companies is –

(a) Compulsory (✓)

(b) Voluntary

(d) None of these

63, The art of writing business transactions in books of accounts is termed as –

(a) Accountancy

(b) Book-keeping (✓)

(d) None of these

64, Which of the following is not a function of Book-keeping –

(a) Entry in main journal

(b) Posting in ledger

(c) Making Final Accounts (✓)

(d) All of these

65, Which of the following is not true in case of Book keeping?

(a) Simple training

(b) Mechanised work

(c) Special qualification (✓)

(d) None of these

66, Auditing is an examination of books of accounts

(a) General

(b) Specific

(d) Both above (b) and (c) (✓)

67, Subsidiary object of Auditing is –

(a) Detection of Errors

(b) Detection of Frauds

(d) All of these (✓)

68, Main types of errors are –

(a) 4

(b) 5 (✓)

(d) 2

69, Main cause of errors is –

(a) Negligence

(b) Ignorance of Accountant

(d) Both above (a) and (b) (✓)

70, Entering capital expenses as revenue expenses in the books of accounts is –

(a) Error of principle (✓)

(b) Error of omission

(d) Compensatory error

71, Errors arise due to ignorance of fundamental principles of accounting is termed as –

(a) Errors of omission

(b) Errors of principle (✓)

(d) Errors of commission

72, When there are two or more errors, which exactly counter balance each other, are termed as –

(a) Errors of omission

(b) Errors of principle

(c) Compensatory errors (✓)

(d) Errors of commission

73, When incorrect entries are made in the books of accounts either wholly or partially, the error is –

(a) Errors of omission

(b) Errors of principle

(d) Errors of commission (✓)

74, When a transaction is recorded with a wrong amount in the books of accounts, it is termed as-

(a) Errors of omission

(b) Errors of principle

(d) Errors of commission (✓)

75, Errors which arise on account of transactions not being recorded in the books of accounts, either wholly or partially are termed as –

(a) Errors of omission (✓)

(b) Errors of principle

(d) Errors of commission books

76, Purchase of Rs. 4,100 is entered as Rs. 1,400 in of accounts is a –

(a) Error of commission (✓)

(b) Errors of principle

(d) Compensatory error

77, Furniture purchased for 50,000 but Purchase Ale debited. The error committed here is –

(a) Compensating error

(b) Clerical error

(c) Error of principle (✓)

(d) None of these

78, Received 800 from Vibhav but credited his account 8,000 is…………

(a) Error of Principle

(b) Clerical Error (✓)

(d) None of these

79, Ram’s account was excess debited by 500 where Shyam’s account was under debited by 500 is……..

(a) Compensating Error ()

(b) Clerical Error

(d) None of these

80, Goods sold to Shyam of Rs. 600 and entry for sales is made in the sales book but is omitted from the accounts of the Shyam, the error is –

(a) Error of commission

(b) Errors of principle

(c) Error of omission (✓)

(d) Compensatory error

81, The amount of Rs. 232 is entered as Rs. 322 in the bo of original entry, the error is –

(a) Error of commission (✓)

(b) Errors of principle

(d) Compensatory error

82, The error which affect both the sides of Trial Balan equally termed as –

(a) Error of commission

(b) Errors of principle

(d) Compensatory error (✓)

83, The error which can be detected by the Trial Balance is –

(a) Error of commission (✓)

(b) Errors of principle

(d) Compensatory error

84, Which of the following does not affect the agreement of Trial Balance –

(a) Error of principle

(b) Error of complete omission

(d) All above (✓)

85, Old machinery sold for Rs. 10,000 but credited to sales account is –

(a) Error of principle (✓)

(b) Error of commission

(d) Compensating error

86, Hari’s account was credited by Rs. 900 instead of Rs 90 whereas Ram’s account was over debited by Rs. 810. This is a –

(a) Error of principle

(b) Error of commission

(d) Compensating error (✓)

87, Goods sold to Ram of Rs. 200 but no entry is made in the sales book. This is a –

(a) Error of principle

(b) Error of commission

(c) Error of omission (✓)

(d) Compensating error

88, Which of the following is a type of fraud?

(a) Misappropriation of cash

(b) Manipulation of accounts

(d) All of these (✓)

89, Which of the following is a misappropriation of cash?

(a) Cash sales not being fully accounted for

b) Teaming and lading

(d) All of these (✓)

90, Which of the following is a misappropriation of Goods?

(a) Pilfer away goods from stock

(b) Using goods for personal purposes

(d) Both above (a) and (b) (✓)

90, Generally manipulation of accounts is done by

(a) Accountant

(b) Clerks

(c) Higher management cadre persons (✓)

(d) Shareholders

91, Allocation of labourers in the construction of personal building engaged in the construction of official building is………….

(a) Embezzlement of property

(b) Embezzlement of labour (✓)

(d) None of these.

92, Domestic use of official sopha is –

(a) Embezzlement of Goods

(b) Embezzlement of Labour

(c) Embezzlement of Property (✓)

(d) None of these.

93, Domestic use of official telephone is –

(a) Embezzlement of labour

(b) Embezzlement of property

(c) Embezzlement of facility (✓)

(d) None of these

94, Main object of manipulation in accounts by the owner or management is –

(a) To cover their errors

(b) To cover misappropriation of cash and goods

(c) To show increased/reduced profit in place of actual profit (✓)

(d) None of above

95, Which of the following is the object of investigation?

(a) For purchasing business

(b) For granting loan

(d) All above (✓)

96, Investigation is initiated by –

(a) Owner of the concern

(b) A person who wants to lend money to that concern

(d) All above (✓)

97, Auditing is done on the basis of –

(a) Entries of accounts

(b) Vouchers

(d) All above (✓)

98, Auditing is compulsory for –

(a) Companies

(b) Trusts

(d) All of these (✓)

Which one of the following is not an advantage of auditing?

(a) It provides satisfaction for owners

(b) It helps in getting loans

(c) It reduces cost burden (✓)

(d) It detects errors and frauds

In comparison to book-keeping, accountancy is a ……… concept.

(a) Broader (✓)

(b) Narrower

(d) None of these

Auditing is useful –

(a) To detect fraud and errors

(b) To increase goodwill of the concern

(d) All of these (✓)

Basic principles which govern auditing is –

(a) Independence

(b) Secrecy

(d) All of these (✓)

Auditing safeguards the interests of the –

(a) Owners

(b) Creditors

(d) All of these (✓)

104, Which of the following is objective of showing of profits more than actual –

(a) To show off their exaggerated efficiency

(b) To convert black money into white

(d) All of these (✓)

105, Which of the following is objective of showing profit less than actual –

(a) To deceive the competitors

(b) To evade taxes

(d) All of the above (✓)

106, Which of the following is a tactic of manipulation in accounts –

(a) Showing the liabilities and assets less or more than actual

(b) By not making essential provisions

(d) All of these ()

107, Which of the following is not correct about fraud?

(a) It is backed by intention

(b) It can never be condoned

(c) It can be easily detected ()

(d) In it person is fully aware of his activity

108, Which of the following is a limitation of Auditing?

(a) Audit is not a guarantee of cent percent truth

(b) The auditor only expresses his opinion

(d) All of these ()

109, Cost Audit is……… object of Auditing.

(a) Primary

(b) Subsidiary

(c) Specific (✓)

(d) None of these

110, Showing profits more than actual profits is termed as –

(a) Embezzlement of property

(b) Embezzlement of labour

(d) Manipulation of accounts (✓)

2. Classification of Audit

111, Continuous Audit is carried on –

(a) At the end of the year

(b) At the mid of the year

(c) For the whole year (✓)

(d) None of these

112, Continuous audit is suitable –

(a) For big institutions (✓)

(b) For small institutions

(d) None of these

113, Which of the following audit year?

(a) Final audit

(b) Continuous audit (✓)

(d) Internal audit

114, In which of the following case, continuous audit becomes necessary –

(a) To make intensive check of accounts

(b) When internal check system is not followed organisation in the

(d) All of these (✓)

115, Which of the following proves helpful in declaration of Interim dividend –

(a) Periodical Audit

(b) Balance Sheet Audit

(c) Continuous Audit (✓)

(d) All above

116, Which of the following is not a advantage of continuous audit –

(a) Early detection of errors and frauds

(b) Intensive checking of books of accounts

(c) Economic (✓)

(d) All above

117, Which of the following is not a disadvantage of continuous audit?

(a) Possibility of alteration in figures

(b) Inconvenience of work

(d) Intensive check of accounts (✓)

118, In which of the following, there is more possibility of secret pact with employees –

(a) Continuous Audit (✓)

(b) Periodical Audit

(d) Interim Audit

119, The effect of auditor on employees by continuous audit –

(a) Increases

(b) Decreases (✓)

(d) None of the above

120, Periodical Audit is carried on –

(a) At the mid of the financial year

(b) At the end of the financial year (✓)

(d) None of these

121, Final Audit can also be termed as –

(a) Annual Audit

(b) Balance Sheet Audit

(d) All of these (✓)

122, Periodical Audit is started –

(a) After preparing final accounts (✓)

(b) Before preparing final accounts

(d) None of above Sonal

123, Which of the following type of audit is suitable for small concerns –

(a) Continuous Audit

(b) Periodical Audit

(e) Balance Sheet Audit

(d) Both above (b) and (c) (✓)

124, Which of the following is suitable form of audit when there exists strong internal check system –

(a) Continuous Audit

(b) Periodical Audit (✓)

(d) Partial Audit

125, Advantage of periodical audit is –

(a) Helpful in declaration of Interim dividend

(b) Quick preparation of Final accounts

(c) Convenient (✓)

(d) All above

126, In which of the following there is more possibilities in alteration of figures –

(a) Continuous Audit (✓)

(b) Final Audit

(d) None of these

127, Periodical Audit is an audit in which –

(a) Balance sheet of number of years is audited

(b) Audit is done at the end of the financial year (✓)

(d) None of these

128, Balance Sheet Audit is useful when –

(a) The concern is a big one

(b) The concern is a small one (✓)

(d) None of these

129, The scope of interim audit falls within the purview –

(a) Partial Audit

(b) Final Audit (✓)

(d) None of these

130, Interim audit is get done –

(a) At the beginning of the year

(b) At the end of the year

(c) At the middle of the year (✓)

(d) None of the these

131, Management Audit is –

(a) Compulsory

(b) Voluntary (✓)

(d) None of these

132, Under balance sheet audit examination is done –

(a) Fixed Assets only

(b) Fixed Liabilities only

(c) All fixed assets and liabilities (✓)

(d) None of these

133, Under Management audit examination is done of the –

(a) Work of the employees

(b) Work of auditor

(c) Work of top authorities (✓)

(d) None of these.

134, The Audit which is opted by a Insurance Company is –

(a) Annual audit (✓)

(b) Interim audit

(d) None of these

135, What is necessary to measure the efficiency of a manager?

(a) Social audit

(b) Cost audit

(d) Management audit (✓)

136, Management Audit is a valuation of –

(a) Cost Accounts

(b) Financial Accounts.

(c) Management Policies and Working (✓)

(d) Assets and Liabilities

137, Which type of audit is followed by Banking Companies –

(a) Annual Audit (✓)

(b) Interim Audit

(d) Partial Audit

138, Continuous Audit is beneficial for –

(a) Banks

(b) Railway

(d) All of these (✓)

139, “The continuous audit is one which of commenced and carried on before the close of the financial year to which it relates”. This is defined by –

(a) S.W. Rowland (✓)

(b) Spicer and Pegler

(d) None of these

140, Which of the following is advantage of continuous audit –

(a) Early detection of errors and frauds

(b) Quick publication of final accounts

(d) All of these (✓)

141, Which of the following is a feature of continuous audit –

(a) Highly expensive (✓)

(b) Uninterrupted work

(d) All above

142, Audit which is done at the time of admission of a new partner is called –

(a) Casual Audit (✓)

(b) Standard Audit

(d) Interim Audit

143, If only a part of the accounts of a business are examined, it is termed as –

(a) Casual Audit

(b) Standard Audit

(c) Partial Audit (✓)

(d) Interim Audit

144, Audit is not a guarantee of cent percent truth –

(a) This statement is correct (✓)

(b) This statement is incorrect

(d) None of these

145, Feature of Periodical Audit is –

(a) No fear of alternation of figures

(b) Economical

(d) All of these (✓)

146, Which of the following type of audit make hurdle in routine works of enterprise –

(a) Continuous Audit (✓)

(b) Periodical Audit

(d) Partial Audit

147, In which of the following of Audit there remain no scope of alteration in figures –

(a) Continuous Audit

(b) Periodical Audit (✓)

(d) Partial Audit

148, In which of the following audit publishing of final accounts –

(a) Continuous Audit

(b) Periodical Audit (✓)

(d) Partial Audit

149, “A continuous audit is one where Auditor Staff is occupied continuously on the accounts the whole year round”, this is defined by –

(a) Spicer and Pegler

(b) Rowland

(c) W.W. Bigg (✓)

(d) None of these

150, “A final or completed audit is that which is commenced after the end of financial year of which it relates”. This is defined by –

(a) W.W. Bigg

(b) Rowland

(c) Lawrance Dicksi (✓)

(d) Spicer and Peglar

151, In which country Balance Sheet Audit means the audit of only Balance Sheet?

(a) In Japan

(b) In China

(c) In America (✓)

(d) In England

152, To sell the business which type of audit is carried on –

(a) Periodical Audit

(b) Continuous Audit

(c) Interim Audit (✓)

(d) None of these

153, Existence of internal audit system does not reduce the desirability of –

(a) Annual Audit (✓)

(b) Interim Audit

(d) Continuous Audit

154, Comptroller and Auditor General of India is appointed by –

(a) Central Government

(b) ICAI

(c) President (✓)

(d) None of these

155, To make audit of Government Offices, auditor appointed by –

(a) ICAI

(b) President

(c) Comptroller and Auditor General of India (✓)

(d) None of these

156, Comptroller and Auditor General of India submits its audit report to –

(a) President (✓)

(b) Prime Minister

(d) None of these

157, Qualification of an Internal Auditor is –

(a) C.A.

(b) C.S.

(d) No qualification is determined (✓)

3. Audit Process

158, “An audit programme is flexibly planned procedure of examination”, this is defined by –

(a) Kohlar

(b) Arthur W. Holmes (✓)

(d) None of above

159, Which is the essential quality of an audit programme –

(a) Division in

(b) Fixing responsibilities

(d) Flexibility (✓)

160, An audit programme must be –

(a) Flexible

(b) Detailed

(d) All of these (✓)

161, Which of the following is a merit of audit programme?

(a) Division of work according to capability

(b) Fixed responsibilities

(d) All of these (✓)

162, Which of the following is disadvantage of audit programme?

(a) Mechanised work

(b) Lack of independent decisions

(d) All above (✓)

163, Before the audit of a new institution –

(a) Scope is determined

(b) Nature of the institution is studied

(d) All of the above (✓)

164, Audit programme should be –

(A) Written (✓)

(b) Verbal

(d) None of these

165, An audit programme is chalked out for the following purpose

(a) For incoming and outgoing of auditor

(b) For routine checking

(c) For outlining the whole procedure of audit (✓)

(d) For inspection of branches of company

166, In audit programme, audit work planning is done by –

(a) Accounts staff

(b) Audit staff (✓)

(d) Managing director

167, Audit programme should –

(a) Rigid

(b) Mechanised

(d) Elastic (✓)

168, Use of working papers are necessary as it is –

(a) A statutory requirement

(b) Helps to inspect the work of assistants

(d) Beneficial for auditor (✓)

169, Audit note book contains –

(a) Dates of reference

(b) Detail of work done

(d) All above (✓)

170, The auditor obtains the working papers –

(a) In the course of the audit (✓)

(b) Before starting audit

(d) None of these

171, Audit working papers are the property of –

(a) Owner of the business

(b) Auditor (✓)

(d) None of these

172, For which of the following purpose, auditor keeps working papers –

(a) To use them as reference

(b) As a proof of his work

(d) All of these (✓)

173, Which of the following case is related with ownership working papers –

(a) Ipswich Mills vs. Dillon, 1927 (✓)

(b) Kingston Cotton Mills

(d) Mackson and Robbins

174, Which is the advantage of Audit Note Book –

(a) Make auditor free from memorising the facts

(b) Helpful in audit work

(d) All above (✓)

175, Which of the following work perview in routing checking?

(a) Checking of elementary books

(b) Rectification of errors

(d) All of these (✓)

176, Main objective of Routine checking is –

(a) To check mathematical accuracy of the entries of elementary books and accounts

(b) To check the follow-up of accounting principles

(d) All above (✓)

177, By Routine checking –

(a) Expenses of business increase

(b) Expenses of business decrease

(c) Business expenses remain unaffected (✓)

(d) None of these

178, Routine checking is done by –

(a) Employees of the concern (✓)

(b) Auditors

(d) All of these

179, Test checking means –

(a) Detailed checking of some transactions/items

(b) Checking of each item

(c) Checking of sample transactions/items (✓)

(d) None of these

180, Test checking is beneficial when –

(a) Number of business transactions is less

(b) Internal check system is satisfactory (✓)

(d) None of these

181, Test checking is appropriate –

(a) Large business concerns

(b) Huge number of transactions

(d) All above (✓)

182, Test checking……….. the responsibility of auditor –

(a) Increases (✓)

(b) Decreases

(d) None of these

183, If there arise loss to employer due to adopting test checking, then auditor is………. for loss.

(a) Liable (✓)

(b) Not liable

(d) None of the above

184, Test checking refers to –

(a) Testing of accounting records

(b) Testing of honesty of employees

(c) Intensive checking of a selected number of transactions (✓)

(d) Checking of all transactions recorded

185, In a big organisation where number of transactions are numerous, auditor check –

(a) All transactions

(b) Some transaction selected as sample (✓)

(d) Some transactions of each month

186, Test checking is done to –

(a) Find out errors

(b) Detect frauds

(c) Save time (✓)

(d) None of these

187, Audit note book is a –

(a) Audit planning

(b) Audit programming

(c) Audit diary to record auditor’s observations (✓)

(d) Checking of arithmetical accuracy of accounting records

188, Routine checking discovers –

(a) Clerical errors and ordinary frauds (✓)

(b) Planned frauds

(d) None of the above

189, Test checking reduces the –

(a) Auditor’s work (✓)

(b) Auditor’s responsibility

(d) None of these

190, Under Intensive checking –

(a) All books of accounts are examined

(b) Specific books of accounts are examined (✓)

(d) Both (a) and (b)

191, Under over all checking –

(a) All books of accounts are examined

(b) All methods of checking are used (✓)

(d) Both (a) and (b)

192, Permanent file contains the abstract of –

(a) Regulations related to the organisation of institution

(b) Agreements related to long-term liabilities

(d) Both above (a) and (c) (✓)

193, Materiality is a –

(a) Relative term (✓)

(b) Absolute term

(d) None of these

194, Which of the following Auditing Standard is related with Audit Materiality –

(a) AAS-12

(b) AAS-4

(c) AAS-13 (✓)

(d) AAS-15

195, Which of the following is not a part of the process of auditing –

(a) Preparation of Balance Sheet and profit and loss account (✓)

(b) Examination of vouchers supporting various entries in the books of account

(d) Preparation of Audit Report

196, Test checking should not be applied to –

(a) Purchase book

(b) Sales book

(d) Cash book (✓)

4. Internal Check

197, Under the Internal Check System –

(a) Responsibilities of employees are determined

(b) Work of an employees is checked automatically by other employee

(d) All above (✓)

198, Internal check is important for –

(a) Smali organisation

(b) Big organisation (✓)

(d) None of these

199, Object of internal check is –

(a) Early detection of frauds

(b) To enchance efficiency of employees

(d) All the above (✓)

200, Which of the following is based on the principle of division of work?

(a) Internal control

(b) Internal checking (✓)

(d) None of these

201, The process of distribution of work among employees according to their ability is known as –

(a) Internal audit

(b) Internal control

(c) Internal check (✓)

(d) None of these

202, An internal auditor is –

(a) Outsider person

(b) Insider person (✓)

(d) None of these

203, The scope of work of Internal Audit is decided by the –

(a) Shareholders

(b) Management (✓)

(d) Law

204, Internal checking is –

(a) Synonymous of Internal Audit

(b)Work of one auditor is checked by other senior auditor

(C) A system where work of one employee is checked automatically by other employee (✓)

(d) None of these done by

205, Internal audit of a business concern is –

(a) Employees of the organisation (✓)

(b) Registered auditors

(d) Representative of directors

206, Who appoint Internal Auditor?

(a) Management (✓)

(b) Shareholders

(d) Stock Exchange.

207, Who will be responsible for errors in report if external auditor relies on the work of internal auditor –

(a) External Auditor (✓)

(b) Internal auditor

(d) Shareholders

208, Internal check refers to –

(a) Checking of records by the cashier

(b) Checking of accounts by the internal auditor

(c) Checking of work of one person by another automatically (✓)

(d) Managerial control internally over the subordinates

209, The object of internal audit is –

(a) To prevent errors and frauds

(b) To detect errors and frauds

(d) All of the above (✓)

210, In comparison to the independent auditor, an internal auditor is more likely to be concerned with –

(a) Cost accounting system

(b) Internal control system (✓)

(d) Accounting system

211, Internal auditing can best be described as –

(a) An accounting function

(b) A line management function

(c) A function which improved the credibility of financial statement (✓)

(d) An internal control function

212, Internal audit proves helpful in –

(a) Preventing errors and frauds (✓)

(b) Statutory audit

(d) Internal check

213, Internal audit is a –

(a) Part of internal control (✓)

(b) Broader than internal check

(d) Does not related with internal control

214, Meaning of Internal Audit is –

(a) A system of internal check

(b) Routine checking by Auditor

(c) Audit by management (✓)

(d) Initial audit by Auditor

215, Main object of Internal check is –

(a) Detecting errors and frauds (✓)

(b) Checking

(d) Division of work among employees

216, Which of the following is a feature of an efficient Internal Check System?

(a) Clear-cut demarcation of authorities and

(b) Changes in the work of employees

(c) An arrangement of staff duties whereby no one person is allowed to carry thorough and to record every aspect of the transaction

(d) All above (✓)

217, “Internal check may be defined as such arrangement of Book-keeping routine that errors and frauds are likely to be prevented or discovered by the very operation the Book-keeping itself. This is defined by –

(a) Spicer and Pegler

(b) De Paula

(c) Dicksee (✓)

(d) None of these

218, Internal check system makes the auditor’s work –

(a) Easy

(b) Complicated

(d) Both (a) and (c) (✓)

219, Internal check includes –

(a) Make entries

(b) Verification

(c) Both posting and verification (✓)

(d) None of above

220, Internal check starts –

(a) Simultaneously transactions (✓)

(b) After preparing accounts

(d) None of these

221, For big concerns internal check system is –

(a) Expensive

(b) Economie (✓)

(d) None of these

222, Internal audit is done by –

(a) Salaried employees of business concern (✓)

(b) Outsider person

(d) None of these

223, “Internal check is a method of organising the entire operation of office, factory, warehouse and the duties of the respective staff so that fraud and irregularities are impossible without collusion.” This is defined by –

(a) De Paula

(b) Joseph Lancaster (✓)

(d) None of these

124, Internal control is a broader term, generally used to encompass both internal check and internal audit”. This is defined by –

(a) H. Stateler (✓)

(b) Spicer and Pegler

(d) D. Paula

125, Which of the following is a broader term?

(a) Internal control (✓)

(b) Internal check

(d) None of these

126, In which of the following detailed checking is done –

(a) Internal audit (✓)

(b) Interim audit

(d) All of these

227, Internal auditor is responsible for –

(a) Shareholders

(b) Management (✓)

(d) Creditors

228, Internal control includes –

(a) Internal check

(b) Internal audit

(d) Both (a) and (b) (✓)

229, Internal control includes –

(a) Financial control

(b) Non-financial control

(c) Both (a) and (b) (✓)

(d) None of these

230, Which of the following is based on the principle of division of labour –

(a) Internal control

(b) Internal checking (✓)
(c) Internal audit

(d) None of these

231, For which of the following Internal check is most suitable –

(a) Big institutions (✓)

(b) Small institutions

(d) None of these

232, An Internal Auditor is –

(a) Temporary employee

(b) Permanent employee (✓)

(d) None of these

233, Internal Audit means –

(a) Maintaining accountability of assets

(b) Execution of transaction according to management’s general or specific authorisation

(c) A review of operation and record on continuous basis and is undertaken within the enterprise by separate staff (✓)

(d) None of these

234, Which of the following wage method is suitable for accounting?

(a) Wages register

(b) Wages schedule

(c) Wages card (✓)

(d) None of these

235, Entry of received credit note is made in the –

(a) Sales Return Book

(b) Purchase Return Book (✓)

(d) None of these

5. Vouching

236, “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 (✓)

(d) R.G. Williams

237, “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

(d) None of these

238, Vouching is –

(a) Examination of Assets

(b) Verification of Assets

(c) Examination of Entries (✓)

(d) None of these

239, Under vouching checking is done of –

(a) Books of original entry (✓)

(b) Final books of accounts

(d) None of the above

240, Vouching is related with –

(a) Cash receipts

(b) Cash payments

(d) All of the above (✓)

241, “Vouching is the essence of Auditing”. This statement of –

(a) Spicer and Peglar

(b) R.B. Bose (✓)

(d) J.R. Batliboi

242, “Vouching is a technical term”. This statement is of –

(a) R.A. Irish (✓)

(b) Lankaster

(d) De Paula

243, Back bone of auditing is said to –

(a) The vouching (✓)

(b) The valuation

(d) The internal audit

244, Vouching includes –

(a) Routine check (✓)

(b) Test check

(d) All above

245, Main object of vouching is –

(a) To prove truthness of transactions

(b) To obtain information regarding the transactions related to business

(d) All above (✓)

246, Work of vouching is done by –

(a) Junior clerks

(b) Senior clerks (✓)

(d) None of these

247, Routine check and vouching both are –

(a) Synonymous

(b) Complimentary to each other (✓)

(d) None of above

248, Vouching is –

(a) Essence of Auditing

(b) Soul of Auditing

(d) All of these (✓)

249, Which of the following is correct –

(a) Auditing is the backbone of vouching

(b) Vouching is backbone of auditing (✓)

(d) All above

250, Vouching implies –

(a) Inspection of receipts

(b) Examination of vouchers to check authenticity of record (✓)

(d) Examination of various assets

251, “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

(d) Arthur Holmes

252, A voucher may be a receipt, an invoice, an agreement, a requisition slip, or in short, any suitable written evidence which confirms a written transaction”. This is defined by –

(a) Joseph Lankaster

(b) R.A. Irish (✓)

(d) Arthur Holmes

253, Vouchers should be concerned with –

(a) Previous year

(b) Current year

(c) Audit period (✓)

(d) None of these

254, Amount should be written on voucher in –

(a) Words

(b) Digits

(c) Both (a) and (b) (✓)

(d) Secret words

255, Voucher is a –

(a) Receipt issued to a customer for cash received

(b) Invoice received from suppliers

(c) Document in support of an entry made in the books of accounts (✓)

(d) All above

256, Voucher related to payment should be signed by –

(a) Manager

(b) Accountant

(c) Responsible and authorised official (✓)

(d) All above

257, Which of the following should be in vouchers –

(a) Date

(b) Amount

(d) All above (✓)

258, Which of the following is termed as backbone of Auditing?

(a) Vouching (✓)

(b) Verification

(d) Internal Audit

259, Which one of the following is true –

(a) Entry can be made without a voucher

(b) Comparing the voucher with entries is not essential

(c) There should be no entry without vouchers and no voucher without entry (✓)

(d) None of these

260, Under vouching checking is done of –

(a) Books of original entry (✓)

(b) Final books of accounts

(d) All above

261, Examination of vouchers come under the scope of……..

(a) Routine checking

(b) Vouching (✓)

(d) None of these

262, Addition of books come under the scope of……….

(a) Routine checking (✓)

(b) Vouching

(d) None of these

263, Best option of payment is –

(a) Cash

(b) Cheque (✓)

(d) All above

264, “Vouching is the backbone of auditing”, this statement is related to the suit –

(a) London and General Bank, 1895

(b) Armitage vs. Brewar and Knott, 1932 (✓)

(d) None of these

265, The auditor should compare the Purchase Return Book with the –

(a) Cash Book

(b) Bank Book

(c) Credit Notes sent by Sellers (✓)

(d) None of these

266, The auditor should compare the sales return book with the –

(a) Invoices

(b) Cash Book

(c) Debit Notes sent by Purchaser (✓)

(d) None of the above

267, Various entries such as adjustment, transfer, rectification of errors, opening and closing entries etc. are recorded in –

(a) Cash Book

(b) Purchase Register

(b) Sales Register

(d) Journal Proper (✓)

268, Youching of opening entries should be done from –

(a) Profit and Loss Account

(b) Balance sheet (✓)

(d) All of above

269, A receipt is termed as capital receipt, if –

(a) It is credited to capital A/c

(b) Amount is large

(c) It is related to fixed assets (✓)

(d) None of these

270, A loss is termed as capital loss, if

(a) It is debited to capital A/c

(b) Amount of loss is huge

(c) It is related to fixed assets (✓)

(d) None of these

274, A receipt is a revenue receipts if –

(a) It is related to the routine activity of the business (✓)

(b) The amount is small

(d) None of these

272, Goods returned by customers should be entered in –

(a) Sales Return Book

(b) Stock Account

(c) Both (a) and (b) (✓)

(d) None of these

273, What is the correct sequence of the following assignments –

(1) Internal control

(2) Test check

(3) Internal check

(4) Statutory audit

(a) 1, 2, 3 and 4

(b) 3, 1, 4 and 2

(d) 4, 3, 2 and 1 (✓)

274, An expenditure is capital expenditure if –

(a) The amount is paid in lump sum

(b) The amount is large

(d) It is related to the benefit of future (✓)

275, An expenditure is a revenue expenditure if –

(a) It is related to the benefit of the current period (✓)

(b) The amount is small

(d) None of the above

276, Vouching related to –

(a) Cash receipts

(b) Cash payments

(d) All of these (✓)

277, Payment for goods purchased should be vouched the help of –

(a) Cash memos

(b) Creditors statements

(d) Ledger accounts (✓)

278, Weakness in Internal Control System…….. the risk of fraud and errors –

(a) Increases (✓)

(b) Decreases

(d) None of above

6. Verification and Valuation of Assets and Liabilities

279, Meaning of verification of assets is –

(a) Valuation of assets

(b) Checking of ownership of assets

(d) All above (✓)

280, “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

(d) None of these

281, Principle of verification is –

(a) Physical inspection

(b) Principle of review

(d) All of these (✓)

282, 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

283, 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

(d) All of above (✓)

Which of the following does not require physical verification?

(a) Stock

(b) Plant

(c) Goodwill (✓)

(d) Loose Tools

285, In verifying liabilities, an auditor see that –

(a) All liabilities are shown clearly in the balance sheet

(b) All liabilities are related with

(d) All above (✓)

286, “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

(d) None of these

287, In how many parts generally assets are categorised –

(a) 2

(b) 3

(d) 5 (✓)

288, 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

(d) All above (✓)

289, Valuation is –

(a) An element of verification

(b) Essential part and element of verification ()

(d) Verification is a part of valuation

290, 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 (✓)

(d) None of the above

291, Auditor is –

(a) A valuer

(b) Not a valuer (✓)

(d) None of above

292, “An Auditor is not a valuer”. This statement is of –

(a) Joseph Lancaster (✓)

(b) De Paula

(d) J.R. Batliboi

293, The judgement that ‘an auditor is not a valuer’ in case of –

(a) Mackson and Robins (✓)

(b) Kingstom Cotton Mills

(d) London and General Bank

294, Verification and Valuation both are –

(a) the same things

(b) separate things

(c) complementary to each other (✓)

(d) None of these.

295, Valuation is a part of –

(a) Vouching

(b) Verification (✓)

(d) None of these

296, Verification is based on –

(a) Physical inspection

(b) Documentary evidence

(c) Above both (a) and (b) (✓)

(d) None of these

297, Case of London Oil Storage Co. Ltd. vs. Sear Hasluck Co. (1904) is related to –

(a) Verification of Assets (✓)

(b) Valuation of Assets

(d) None of these

298, Stock should be valued at –

(a) Cost price

(b) Market price

(c) Cost or market price whichever is lower (✓)

(d) Cost price less depreciation

299, Which asset is valued on cost price or market price whichever is less –

(a) Furniture

(b) Building

(d) Stock (✓)

300, Which reserve is useful to strength the financial position of a business?

(a) Specific reserve

(b) Secret reserve (✓)

(d) Redemption fund

301, Wasting assets means –

(a) Which decreases in value

(b) The value of which is decreases due to constant use (✓)

(d) None of above

302, Which the following is a fixed asset –

(a) Furniture (✓)

(b) Book Debts

(d) Stock

303, Current assets remain in business for –

(a) Long period

(b) Temporarily (✓)

(d) All above

304, Which of the following is current asset?

(a) Stock-in-trade

(b) Book debts

(d) All above (✓)

305, Valuation of purchased goodwill is done on the basis of –

(a) Purchase agreement (✓)

(b) Market price

(d) None of above

306, Registration from government for a name or mark of the produced goods is termed as –

(a) Patent

(b) Trademark (✓)

(d) Registration

307, Which of the following is wasting asset –

(a) Mines

(b) Quarry

(d) All above (✓)

308, Which of the following is intangible asset –

(a) Goodwill

(b) Patent

(d) All above (✓)

309, Which of the following is fictitious asset –

(a) Preliminary expenses

(b) Deferred Revenue

(d) All above (✓)

310, Which of the following is an intangible asset?

(a) Patents (✓)

(b) Prepaid expenses

(d) None of these

311, Which of the following is fictitious asset –

(a) Goodwill

(b) Copyright

(c) Preliminary expenses (✓)

(d) None of these

312, Investments in hand should be verified with the help of –

(a) Schedule of investments

(b) Balance sheet

(c) Inspection of securities (✓)

(d) Certificate from the bank

313, Direct confirmation procedure can be applied to –

(a) Debtors only

(b) Creditors only

(c) Both (a) and (b) (✓)

(d) None of above

314, Preliminary expenses include –

(a) Cost of stamp

(b) Legal expenses

(d) Both (a) and (b) (✓)

315, Verification refers to –

(a) Examination of journal and ledger

(b) Examination of vouchers related to

(c) Examination of physical existence and valuation of assets (✓)

(d) Computation of value of assets

316, Which of the following statement is correct –

(a) Valuation is a part of verification (✓)

(b) Verification is a part of valuation

(d) Auditor is a valuer

317, Which of the following statement is valuation of assets by an auditor –

(a) Auditor is not a valuer (✓)

(b) Auditor is a valuer

(d) None of these

318, Floating assets are valued at –

(a) Cost price

(b) Market price

(c) Cost or market price whichever is less (✓)

(d) Cost less depreciation

319, In case of unclaimed wages, the auditor should examine whether –

(a) The amount is deposited in a separate bank account (✓)

(b) Deposited with the cashier

(d) All of these

320, Land is valued at –

(a) Cost Price (✓)

(b) Market Price

(d) None of the above

321, Which of the following is an intangible asset –

(a) Trade mark (✓)

(b) Preliminary

(d) All above

322, Work of Valuation done by is –

(a) Secretary

(b) Auditor

(c) Manager (✓)

(d) Employee

323, Which of the following asset is valued at cost –

(a) Furniture

(b) Cash

(d) Goodwill (✓)

324, “Generally stock is valued at cost price or market price whichever is less”, this statement is given by –

(a) D. Paul (✓)

(b) Hanry Fayol

(d) Hanes

325, At which price raw material is valued –

(a) Cost Price (✓)

(b) Market Price

(d) All above

326, On which side Trade mark is shown in the Balance Sheet –

(a) Asset side (✓)

(b) Liability side

(d) Not Shown

327, Which of the following is wasting asset –

(a) Coal mines (✓)

(b) Furniture

(d) Cash

328, Quoted Price is related with –

(a) Stock

(b) Shares (✓)

(d) None of these

329, Highest in Price Out’ method of valuation is used –

(a) When the price of material is increasing

(b) When the price of material is decreasing (✓)

(d) None of these

330, In valuing livestock, auditor should take certificate of –

(a) Management

(b) Specialists (✓)

(d) All above

331, Valuation of Livestock should be made by –

(a) Expected age method

(b) Revaluation method (✓)

(d) None of these

332, Valuation of loose tools is made on the basis of –

(a) Revaluation (✓)

(b) Cost price

(d) None of these

333, In the First in First Out Method’, stock is valued at –

(a) At the rate of latest consignment purchased (✓)

(b) At the rate of earliest consignment purchased

(d) None of above

334, In the Last in Fist out Method’ stock is valued at –

(a) At the rate of latest consignment purchased

(b) At the rate of earliest consignment purchased (✓)

(d) None of above

335, In the Balance Sheet contingent liabilities is shown –

(a) Assets side

(b) Liability side

(c) In form of footnote (✓)

(d) None of above

336, Which of the following is contingent liability –

(a) Liability on bills

(b) Liability for guarantee

(e) The liability for calls on partly paid shares in other company

(d) All above (✓)

337, Main cause of over and under valuation of assets and liabilities iss –

(a) Errors of principles

(b) Clerical errors

(c) Fraudulent manipulation of accounts (✓)

(d) None of the above

338, Incorrect valuation of stock affects –

(a) Profit and Loss A/e

(b) Balance Sheet

(c) Both (a) and (b) (✓)

(d) None of these

339, In which case decision is that physical verification of stock is the liability of auditor –

(a) Mackson and Robbins (✓)

(b) Kingston cotton mills

(d) None of these

340, Which of the following is the result of undervaluation of stock –

(a) Decrease in profit

(b) Creation of secret reserve

(d) All above (✓)

341, In which possibilities of fraud and error are more –

(a) Cash

(b) Stock (✓)

(d) Bills Receivables

342, When profit is inflated by making wrong valuation of stock, then profit of succeeding year will –

(a) Decrease (✓)

(b) Increase

(d) None of above

343, Material includes –

(a) Raw material

(b) Loose Tools

(e) By-product

(d) All above (✓)

344, Average Profit Method is connected with –

(a) The valuation of stock

(b) The valuation of goodwill (✓)

(d) None of these

345, Instrinsic value method of valuation is concerned with –

(a) Stock

(b) Fixed Assets

(c) Shares (✓)

(d) None of these

346, Capitalisation method is concerned with –

(a) The valuation of stock

(b) The valuation of goodwill (✓)

(d) None of these

347, If average capital of business is Rs. 5,00,000; Average annual income Rs. 80,000 and normal rate of return 10% then amount of goodwill by capitalisation method will be –

(a) Rs. 30,000

(b) Rs. 3,00,000 (✓)

(d) Rs. 8,00,000

348, Method of valuating stock is –

(a) Individual method

(b) Group method

(c) Both (a) and (b) (✓)

(d) None of these

7. Depreciation and Reserve

349, “Depreciation is gradual and permanent decrease in the value of assets from any use.” This definition is given by –

(a) Carter (✓)

(b) Spicer and Pegler

(d) None of these

350, “Depreciation may be defined as the measure of the exhaustion of the effective life of an asset from any cause during given period”. This is defined by –

(a) Carter

(b) Spicer and Pegler (✓)

(d) None of these

351, “Depreciation may be defined as a gradual deterioation in the value of the assets due to use.” This is defined by –

(a) Carter

(b) Spicer and Pegler

(c) R.G. Williams (✓)

(d) None of these

352, Which fund is created for the replacement of assets?

(a) Reserve Fund

(b) Depreciation Fund (✓)

(d) None of these

353, The main cause of depreciation is –

(a) Use of Asset (✓)

(b) Sale of

(d) None of these

354, Which is the main base of depreciation?

(a) Life of Asset (✓)

(b) Value of Asset

(d) None of these

355, Which of the following is objective of Depreciatio management?

(a) To ascertain the correct cost of production

(b) To ascertain the accurate profit/loss

(d) All above (✓)

356, Depreciation is charged on –

(a) Fixed assets only (✓)

(b) Current assets only

(d) None of these

357, Provision for depreciation is –

(a) Voluntary

(b) Compulsory (✓)

(d) None of these

358, Arrangement for depreciation on fixed asset is a –

(a) Statutory requirement (✓)

(b) Voluntary

(d) None of these

359, Cause of depreciation is –

(a) Continuous use of Assets

(b) Depletion

(d) All above (✓)

360, Obsolescence of assets is –

(a) External cause of depreciation (✓)

(b) Internal cause of

(d) None of these

361, Continuous use of assets is –

(a) External cause of depreciation

(b) Internal cause of depreciation (✓)

(d) None of these

362, Base of depreciation is –

(a) Cost price of asset

(b) Life of asset

(d) All above (✓)

363, Which section of Companies Act is related with?

(a) Section 205

(b) Section 300

(d) All above (✓)

364, Depreciation reduced the –

(a) Book value of asset (✓)

(b) Market value of asset

(d) None of above

365, Appropriate method of depreciation for –

(a) Fixed instalment method (✓)

(b) Written down value method

(d) Sinking fund method

366, Appropriate method of depreciation machinery is –

(a) Fixed instalment method

(b) Written down value method (✓)

(d) Sinking

367, Appropriate method of depreciation on assets taken on lease is –

(a) Fixed instalment method

(b) Written down value method

(c) Annuity method (✓)

(d) Sinking fund method

368, Appropriate method of depreciation for replacement of machinery is –

(a) Fixed instalment method

(b) Written down value method

(d) Sinking fund method (✓)

369, Appropriate method of depreciation for Livestock is –

(a) Insurance policy method

(b) Revaluation method (✓)

(d) Sinking fund method

370, Reserve is made for –

(a) General object (✓)

(b) Specific object

(d) None of these

371, Sinking fund is made for –

(a) General object

(b) Specific object (✓)

(d) None of these

372, If cost price of a machine is Rs. 15,000; Scarp value is of Rs 3,000 and expected life is 4 years, then amount of depreciation will be –

(a) Rs. 3750

(b) Rs. 3,000 (✓)

(d) None of these

373, Which of the following fund is created for equalisation of dividend rate?

(a) Kevenue Reserve (✓)

(b) Capital Reserve

(d) None of these

374, Which of the following is the object of creating reserve the company –

(a) To make financial position strong of the company

(b) Increase in working capital

(d) Both (a) and (b) (✓)

375, Which of the following is the object provision?

(a) Arrangement of depreciation on fixed assets

(b) Arrangement for known liability

(d) All above (✓)

376, Which of the following is created for an unknown?

(a) Reserve (✓)

(b) Provision

(d) All above

377, Which of the following can be utilised to distribute dividends among shareholders?

(a) Capital Reserve

(b) Revenue Reserve (✓)

(d) None of these

378, A reserve which is not apparent on the face of the balance sheet is –

(a) Secret reserve (✓)

(b) Capital reserve

(d) Provision

379, Which of the following is the method of creating secret reserve –

(a) Overvaluation of liabilities

(b) Undervaluation of assets

(d) All above (✓)

380, Which of the following statement is incorrect?

(a) Final accounts will become incorrect due to secret reserve

(b) Market price of shares falls down due to secret reserve

(d) Due to secret reserve, financial position of a company becomes weak (✓)

381, Capital profits can be utilised –

(a) To issue bonus shares

(b) To writing off preliminary expenses

(d) Both above (a) and (b) (✓)

382, According to Companies Act, creating secret reserve is –

(a) Compulsory

(b) Voluntary

(c) Prohibited (✓)

(d) None of these

383, Which company can make secret reserve –

(a) Banking company

(b) Insurance company

(e) Finance company

(d) All above (✓)

384, Window dressing implies –

(a) Curtailment of expenses

(b) Checking wastages

(d) Overvaluation of assets (✓)

385, “Secret reserves are also referred as hidden reserve or inner reserve”. This is defined by –

(a) R.G. Williams (✓)

(b) De Paula

(d) None of these

386, A secret reserve is a reserve that is not disclosed in the Balance Sheet so that the Financial position is, in fac better than appears from the balance sheet.” This is defined by –

(a) R.G. Williams

(b) De Paula

(c) Spicer and Peglar (✓)

(d) None of these

8. Company Audit

Before commencing the audit work, a company auditor should –

(a) Examine the validity of appointment

(b) Examine the statutory documents

(d) All the above (✓)

Which of the following is called the charter of the company?

(a) Memorandum of Association (✓)

(b) Articles of Association

(d) None of these

For alteration in Memorandum of Association whose approval is necessary –

(a) Court (✓)

(b) Central Government

(d) None of these

Section 13 of Companies Act, 1956 is associated with –

(a) Memorandum of Association (✓)

(b) Articles of Association

(d) None of these

Table ‘A’ is the substitute of –

(a) Memorandum of Association

(b) Articles of Association (✓)

(d) None of these

Section 26 of Companies Act, 1956 is associated with –

(a) Memorandum of Association

(b) Articles of Association (✓)

(d) None of these

Section 55 of Companies Act, 1956 is associated with –

(a) Memorandum of Association

(b) Articles of Association

(c) Prospectus (✓)

(d) None of these

Section 69 of Companies Act, is associated with –

(a) Prospectus

(b) Minute Book

(c) Minimum Subscription (✓)

(d) None of these

Section 78(2) of Companies Act, 1956 is associated with –

(a) Issue of shares at premium (✓)

(b) Issue of shares at discount

(d) None of these

Section 79 of Companies Act, 1956 is associated with –

(a) Issue of shares at premium

(b) Issue of shares at discount (✓)

(d) None of these

Section 100 of Companies Act, 1956 is associated with –

(a) Reduction in Share Capital (✓)

(b) Reserve Capital

(d) Share Warrants

Section 113 of Companies Act, 1956 is associated with –

(a) Reduction in Share Capital

(b) Reserve Capital

(c) Share Certificate (✓)

(d) Share Warrants

Section 114-115 of Companies Act, 1956 are associated with –

(a) Reduction in Share Capital

(b) Reserve Capital

(d) Share Warrants (✓)

Act is associated with –

(a) Issue and Redemption of Preference Shares (✓)

(b) Payment of Interest out of capital

(d) None of above

Section 208 of Companies Act, 1956 is associated with –

(a) Issue and Redemption of Preference Shares

(b) Payment of Interest out of capital (✓)

(d) None of above

Section 139 of Companies Act, 1956 is associated with –

(a) Minute Book (✓)

(b) Profit prior to incorporation

(d) Statutory report

Section 165 of Companies Act, 1956 is associated with –

(a) Minute Book

(b) Profit prior to incorporation

(d) Statutory report (✓)

In Public Companies at least what should be the minimum number of directors –

(a) 2

(b) 3 (✓)

(d) 5

In private companies at least what should be the minimum number of directors –

(a) 2 (✓)

(b) 3

(d) 5

For what period a managing director can be appointed –

(a) 2 years

(b) 3 years

(d) 5 years (✓)

9. Appointment, Remuneration, Rights and Duties of an Auditor

Under which section a company auditor is appointed –

(a) 224 (✓)

(b) 228

(d) 251

First auditor of a company is appointed by –

(a) Government

(b) Board of Directors (✓)

(d) Company Secretary

By whom the special audit of a company is get done –

(a) Directors of the company

(b) Shareholders

(c) Central Government (✓)

(d) Creditors

Government may order for special audit under –

(a) Section 227

(b) Section 233A (✓)

(d) Section 224

411, In annual general meeting, the auditor is appointed by –

(a) Board of directors

(b) Creditors

(c) Shareholders (✓)

(d) Central Government

412, Under which section of the Act, the branch auditor is appointed –

(a) Section 224

(b) Section 225

(c) Section 228 (✓)

(d) Section 231

413, An auditor of a company is appointed for a period of –

(a) One year (✓)

(b) Two years

(d) Five years

414, The company shall intimate to the auditor appointed stating that he has been appointed as auditor of the company within –

(a) 30 days

(b) 20 days

(d) 7 days (✓)

415, The auditor shall inform the Registrar of the company in writing about his acceptance of appointment within –

(a) 7 days

(b) 14 days

(d) 30 days (✓)

416, Which section of the Companies Act state the qualifications and disqualifications of company –

(a) Section 226 (✓)

(b) Section 225

(d) None of these

417, Which of the following is not eligible to become an auditor of a company –

(a) A body corporate

(b) An officer or employee of the company

(d) All above (✓)

418, Before commencing audit work of a company, the auditor should see –

(a) Legality of appointment

(b) Nature of business

(d) All above (✓)

419, Tenure of appointment of an auditor is –

(a) Five years

(b) For indefinite period

(c) From the conclusion of one annual general meeting to the factual conclusion of the next annual general meeting (✓)

(d) None of these

420, Generally who is appointed as an auditor in the annual general meeting of a company –

(a) Retiring auditor (✓)

(b) New auditor

(d) Officer of a company

421, Auditors in Government companies are appointed by –

(a) Government

(b) Comptroller and Auditor General of India (✓)

(d) Prime Minister

422, Before commencing the audit work, a company auditor should –

(a) Examine the appointment

(b) Examine the statutory records

(d) All the above (✓)

423, In how many companies an auditor can work having less than 25 lac as share capital –

(a) 20 (✓)

(b) 10

(d) 30

424, In how many companies an auditor can work having 25 lac or more as share capital,

(a) 20

(b) 10 (✓)

(d) 30

425, To remove an auditor before the expiry of his term, the necessary thing is –

(a) Prior permission of State Government

(b) Prior permission of Central Government

(d) Both (b) and (c) above (✓)

426, Under which section of the Companies Act the remuneration of the auditor has been discussed –

(a) 224

(b) 224 (✓)

(d) 226

427, The remuneration of an auditor is fixed by –

(a) Central Government

(b) Board of Directors

(d) Appointing authority (✓)

428, In which form an auditor gets his remuneration –

(a) Salary

(b) Fees (✓)

(d) None of these

429, Which of the following is a disqualification for auditor?

(a) An officer of the company (✓)

(b) Relative of the director of the company

(d) Have a lien on books of accounts

430, A chartered accountant is not disqualified as an auditor of a company if he is a –

(a) Employee of that company

(b) Managing director of that company

(d) Indebted to the company for an amount of Rs. 1,000 (✓)

431, If auditor is not appointed by the Company in its general meeting then –

(a) Audit will not take place in that year

(b) Retiring auditor automatically will continue his work

(d) Central Government will appoint the director (✓)

432, First auditor hold his office for –

(a) One year

(b) Any period until the appointment of new auditor is

(c) Until the conclusion of the first annual general meeting (✓)

(d) None of above

433, Central Government may appoint special auditor when –

(a) Sound business principles are not followed by a company

(b) Possibility of danger to the business by the management of the company

(d) All above (✓)

484, Which of the following may be appointed as a statutory auditor –

(a) A partner of company’s employee

(b) An employee of a company’s director

(d) Non-related person with that company (✓)

435, By whom Internal Auditor can be removed from his post?

(a) Management (✓)

(b) Statutory Auditor

(d) Debentureholders

436, Vacancy arises due to resignation of an auditor can be filled by –

(a) Board of Directors

(b) Shareholders in General Meeting (✓)

(d) Managing Director

437, In partnership business, the appointment of auditor’s made –

(a) On the basis of agreement (✓)

(b) On the basis of statutory provisions

(d) None of these

438, If an auditor is not appointed or reappointed in the annual general meeting then vacancy is filled by –

(a) Board of directors of the company

(b) Central Government (✓)

(d) President of the company

439, Company auditor is –

(a) A statutory consultant

(b) An agent

(d) A professional specialist (✓)

440, An auditor has a right to –

(a) Access the books, accounts and vouchers of the company

(b) Receive notices and information regarding the general meeting

(d) All above (✓)

441, An auditor has a right to obtain information and explanations from the –

(a) Shareholders

(b) Auditors of the company

(c) Officers of the company (✓)

(d) Employees

442, Which section of the Company Act describes the duties of auditor –

(a) Section 227(1a) (✓)

(b) Section 228

(d) Section 226(3)

443, In which of the following case decision is given that an auditor should work with diligently, carefully and tactfully –

(a) Kingston Cotton Mills Ltd. 1869 (✓)

(b) London Oil Storage Co. Vs. Sheer Husluck and Co.

(d) None of above

444, It is the duty of company auditor that he should give his report to –

(a) Directors of the company

(b) Central Government

(c) Shareholders of the company (✓)

(d) Debentureholders

445, In which case it was held that ‘Auditor is not an insurer, he can not give guarantee of accuracy of balance sheet”?

(a) London and General Bank Case, 1895 (✓)

(b) The Kingston Cotton Mills Co. Ltd. 1896

(d) None of these

446, Duties and rights of an internal auditor is determined by –

(a) Company Act

(b) Management of Company (✓)

(d) Shareholders

447, The company auditor has a right to be –

(a) Indemnified (✓)

(b) Consulted

(d) None of these

448, Joint Audit implies –

(a) Audit of two concerns together

(b) Audit of joint stock companies

(c) Audit by two firms of Chartered Accountant (✓)

(d) None of these

449, Special audit is necessary for –

(a) Inefficient concern (✓)

(b) Trading concern

(d) Processing concern

450, Where clause of Companies Act are violated, the auditor should give his report to –

(a) Shareholders

(b) Managing director

(c) Board of directors (✓)

(d) Central government

451, It is the duty of auditor –

(a) To give report regarding his work

(b) To give information of the correctness of the profit and loss A/c and Balance sheet

(d) All above (✓)

452, An Auditor should see –

(a) Arithmetical accuracy

(b) Fraud irregularities

(c) Both (a) and (b) (✓)

(d) None of above

453, An auditor should have……. on company employees.

(a) Belief (✓)

(b) Disbelief

(d) None of above

454, An Auditor can –

(a) Give guarantee of truthness

(b) Not give guarantee of truthness (✓)

(d) None of above

455, An auditor should do his work with –

(a) Honestly

(b) Tactfully and censessly

(c) Both (a) and (b) (✓)

(d) Suspicion

456, A company auditor can attend General Meeting of a company as a matter of –

(a) Right

(b) Duty

(d) He can not attend general meeting (✓)

457, In which case it was held that an auditor should verify the existence of securities –

(a) City Equitable Fire Insurance Co. 1925 (✓)

(b) London and General Bank Ltd. 1885

(d) None of these

10. Liabilities of Auditor

458, Civil liability of an Auditor includes –

(a) Liability for negligence

(b) Liability for misfeasance

(d) All above (✓)

459, When the auditor do not perform his work under his duty, it is termed as –

(a) Negligence

(b) Misfeasance (✓)

(d) None of above

460, When an auditor do not perform his duty with reasonable care and prudently, it is termed as –

(a) Negligence (✓)

(b) Misfeasance

(d) None of above

461, In which condition auditor is held liable when negligence of duty is proved –

(a) When there is a resultant loss to the employer (✓)

(b) When there arise no loss due to negligence

(d) No responsibility

462, Mere negligence of duty, unless there is a resultant loss, the auditor will be –

(a) Responsible for negligence

(b) Not responsible for negligence (✓)

(d) None of above

463, Auditor is held responsible for compensation if it is proved that –

(a) There is negligence in work

(b) There arise loss to employer due to negligence

(c) Both (a) and (b) (✓)

(d) None of above

464, Damage will be recovered from auditor for misfeasance only in case when it is proved –

(a) It was the duty of the auditor for his client his

(b) Auditor has not performed his

d) All above (✓)

465, In which case auditor is held responsible for negligence for distributing dividend out of capital –

(a) Irish Woollen Co. vs. Tison and others (✓)

(b) London Oil Storage Ltd. vs. Sear Husluck and Co.

(d) None of above

466, In which case auditor was held liable for negligence for not verifying the cash in hand –

(a) Irish Woollen Co. vs. Tison and others

(b) London Oil Storage Ltd. vs. Sear Husluck and Co. (✓)

(d) None of above

467, In which case auditor was held liable for negligence checking the wage sheet –

(a) Irish Woollen Co. vs. Tison and others

(b) London Oil Storage Ltd. vs. Sear Husluck and Co.

(c) Armitage vs. Brewer Knot (✓)

(d) None of above

468, When an error takes place on believing the certificates of responsible officers, then auditor –

(a) Will be held liable for negligence

(b) Will not be held liable for negligence (✓)

(d) None of above

469, Not to disclosed true financial position of the company to the shareholders is termed as –

(a) Negligence

(b) Misfeasance (✓)

(d) All above

470, When auditor not disclosed the misuse of funds by management, it is termed as –

(a) Negligence

(b) Misfeasance (✓)

(d) All above

471, When an auditor wilfully makes a false statement in report, it is termed as –

(a) Negligence

(b) Misfeasance

(c) Criminal offence (✓)

(d) All above

472, If an auditor has misapplied money of the company, he may be held liable for –

(a) Negligence

(b) Misfeasance

(c) Criminal liability (✓)

(d) Contractual liability

473, If an auditor is found guilty of falsification of a company books, he will incur –

(a) Criminal liability (✓)

(b) Civil liability

(d) None of above

474, An auditor of a company is held responsible for which type of liability when he does not co-operate the appointing officer by the Central Government u/s 240 for the investigation –

(a) Civil

(b) Criminal (✓)

(d) None of above

475, An auditor may be penalised by an imprisonment falsification in accounts for a maximum period of –

(a) 7 years (✓)

(b) 6 years

(d) 5 years

476, The liability of an auditor can be –

(a) Only civil

(b) Only criminal

(c) Either civil or criminal (✓)

(d) None of these

477, Not to detect errors and fraud is –

(a) Criminal liability

(b) Liability of breach of duty

(d) None of these (✓)

478, When an auditor is punishable by Penalty Imprisonment or both, such liability is called –

(a) Liability for negligence

(b) Liability for misfeasance

(d) Criminal liability (✓)

479, Not to perform the work carefully and efficiently is –

(a) Liability for negligence (✓)

(b) Liability for misfeasance

(d) None of these

480, Taking the bribe during the audit course is –

(a) Criminal liability (✓)

(b) Liability for misfeasance

(d) None of these

481, Destruction of vouchers by Auditor is –

(a) Liability for misfeasance

(b) Liability for negligence

(c) Criminal liability (✓)

(d) None of these

482, To present doubtful report knowingly is –

(a) Criminal liability (✓)

(b) Liability for negligence

(d) None of these

483, Disclosure of secret information by auditor is –

(a) Liability for negligence

(b) Criminal liability (✓)

(d) None of these

484, If third party suffered any loss due to negligence auditor then he will be –

(a) Responsible for third party

(b) Not responsible for third party (✓)

(d) None of above

485, Liability of a honorary auditor is –

(a) Limited

(b) Unlimited

(c) As the liabilities of a general auditor (✓)

(d) None of these

486, The liabilities for assistants negligence is –

(a) Auditor’s liability (✓)

(b) Assistant’s liability

(d) All above

487, Auditor is held liable for third party in case of –

(a) Negligence

(b) Misfeasance

(c) Fraud (✓)

(d) Mis-statement

488, When company auditor is held liable for civil liability –

(a) For negligence (✓)

(b) Mis-statement in prospectus

(d) Only (a) and (b)

489, Indian Penal Code (IPC) provides for punishment false certificate under section –

(a) 219

(b) 279

(c) 197 (✓)

(d) 185

490, The liability of a company auditor is determined by –

(a) Company Act

(b) Court decisions

(d) All of the above (✓)

11. Divisible Profit and Dividend

491, Divisible profit means –

(a) Total profit

(b) Profit before depreciation and reserve

(c) Profit after making arrangement for depreciation and reserve (✓)

(d) All above

492, Which of the following should be considered while determining divisible profit –

(a) Accounting principles

(b) Statutory provision

(d) All above (✓)

493, Which section of Companies Act is related with divisible profits –

(a) Section 205(1) (✓)

(b) Section 225

(d) Section 228

494, According to which section of Companies Act, dividend can be distributed after making provision for depreciation –

(a) Section 205(2) (✓)

(b) Section 144

(d) Section 226

495, Maximum amount that can be transferred to Reserve after making provision for depreciation is –

(a) 20%

(b) 10% (✓)

(d) 15%

496, Dividend can be paid in –

(a) Cash

(b) Fully paid bonus shares

(d) All above (✓)

497, Dividend can never be paid out of the –

(a) Capital (✓)

(b) Capital profits

(d) Accumulated profits

498, A company has earned profits and declared dividends, but does not want to pay dividends due to shortage of cash, an auditor you should suggest, if asked that –

(a) Dividend should be paid

(b) Dividend need to be paid

(c) Dividend must be paid within 30 days of declaration of dividends (✓)

(d) Dividend must be paid within 60 days of declaration of dividend

499, Within how many days dividend must be paid after its declaration –

(a) 30 (✓)

(b) 40

(d) 15

500, What is the duration of punishment for an accused authority when dividend is not paid within the prescribed time prescribed time –

(a) 30 days

(b) 6 months

(c) 3 year (✓)

(d) 1 year

501, Which of the following table should be followed regarding dividend –

(a) Table B

(b) Table (A) (✓)

(d) None of above

502, Profit arises due to non-trading activities are termed as –

(a) Revenue Profit

(b) Capital Profit (✓)

(d) None of above

503, Profit arise due to trading activities are termed as –

(a) Revenue Profit (✓)

(b) Capital Profit

(d) None of above

504, Premium received issue of shares and debentures is –

(a) Revenue Profit

(b) Capital Profit (✓)

(d) None of above

505, Profit on sale of fixed assets is –

(a) Revenue Profit

(b) Capital Profit (✓)

(d) None of above

506, Capital profits can be utilised in –

(a) Issue of bonus shares

(b) Distributing dividends

(d). Both (a) and (c) (✓)

507, Profit prior to incorporation is treated as –

(a) Revenue Profit

(b) Capital Profit (✓)

(d) None of above

508, Which of the following can not be distributed as dividend –

(a) Premium received on issue of shares

(b) Profit on forfeiture of shares

(d) All above (✓)

509, After re-issuing of forfeited shares, balance amount of forfeited A/c is transferred in –

(a) Capital Reserve Account (✓)

(b) General Reserve

(d) None of the above

510, Distribution of dividend by undisclosing the liabilities is termed as

(a) Distribution of dividend out of

(b) Distribution of dividend out of capital (✓)

(d) None of above

511, In which condition dividend assumed to be distributed out of capital –

(a) Distribution of dividend out of the amount of sale of fixed assets

(b) Distribution of dividend treating revenue expenses as capital expenses

(d) All above (✓)

512, Interest is paid on unpaid amount of dividend –

(a) 8%

(b) 12%

(c) 18% (✓)

(d) 24%

513, Dividend is given to –

(a) All shareholders

(b) Registered shareholders (✓)

(d) None of these

514, Dividend –

(a) Can be paid out of capital

(b) Can never be paid out of capital (✓)

(d) None of the above.

515, The general rule is that no company can pay –

(a) Equity dividend

(b) Preference dividend

(c) Interest on capital (✓)

(d) Both (a) and (b)

516, Dividend cannot be paid out of –

(a) Capital profit

(b) Capital receipts (✓)

(d) None of the above.

517, Interim dividend is declared by –

(a) Shareholders

(b) Auditors

(d) Directors (✓)

12. Audit Report

518, Auditor report is a statement in which –

(a) Examine the books of accounts

(b) Examine the final accounts an auditor

(d) After examining all above present his report (✓)

519, Audit report is presented to –

(a) Secretary (✓)

(b) Managers

(d) Shareholders

520, How many types of auditing reports are there?

(a) 2 (✓)

(b) 31

(d) 5

521, According to which section of Company Act, an auditor should submit his report?

(a) 219

(b) 221

(d) 227(2) (✓)

522, Under which section, contents of the Audit Report been provided –

(a) 227(2)

(b) 228

(d) 227(3) (✓)

523, A company auditor is required to sign his audit report under section –

(a) 229 (✓)

(b) 228

(d) None of these

524, A clean Auditor’s report is one in which auditor

(a) Describe some errors

(b) Describe only frauds

(d) Does not describe any error, fraud and irregularity (✓)

525, A report bearing qualification is known as –

(a) Qualified report (✓)

(b) Unqualified report

(d) None of these

526, Benefit to shareholders from audit report is –

(a) Information about employee’s honesty

(b) Information about safety of their capital

(d) Information about the efficiency of directors and financial position of the company (✓)

527, Audit report provides information to directors about –

(a) Creditors

(b) Employee’s honesty (✓)

(d) None of above

528, Audit report provides information to investor about –

(a) Employee’s honesty

(b) Taxation

(c) Dividend, safety of investment and continuity (✓)

(d) Efficiency of directors

529, An auditor gives qualified report when –

(a) There is mistake of employees

(b) Directors work autocratically

(d) Accounts are not kept properly (✓)

530, An auditor gives clean report when –

(a) Accounts are kept properly (✓)

(b) Employees are honest

(d) Employees provide accurate information to the auditor

531, Which type of report is given by an auditor when accounts of the company give a true and fair view of the company –

(a) Unqualified Report (✓)

(b) Qualified Report

(d) Final Report

532, In which case an auditor gives qualified report –

(a) When accounting principles are not appropriately adopted

(b) In case of inadequate depreciation on fixed assets

(d) All above (✓)

533, An audit report will be –

(a) Precise

(b) Specific

(d) All above (✓)

534, Which of the following part of statutory report is certified by company auditor?

(a) Contract presented for the acceptance of meeting

(b) The extent to which underwriting contract is not fulfilled

(d) Number of allotted shares, amount received on them and summary of receipts and payment (✓)

535, When auditor does not have any reservation, objection regarding the information under audit then he issues an –

(a) Qualified opinion

(b) Adverse opinion

(c) Unqualified opinion (✓)

(d) Negative opinion

536, Due to lack of audit evidence auditor issues a –

(a) Qualified opinion (✓)

(b) Adverse opinion

(d) Negative opinion

537, The Statutory Auditor of a his report to Government company submits –

(a) The Board of Directors of the company

(b) The C & AG (✓)

(d) The company secretary

538, In his report, the company auditor states –

(a) Correct state of affairs

(b) True state of affairs

(c) True and fair state of affairs (✓)

(d) Fair state of affairs

539, Companies (Auditors Report) order came into from –

(a) 1st July, 2003 (✓)

(b) 1st January, 1975

(d) 1st January, 1956

13. Investigation

540, Investigation is get done –

(a) For specific object (✓)

(b) For general object

(d) None of these

541, The investigation is conducted –

(a) at the end of a year

(b) throughout the year

(c) as per need (✓)

(d) None of these

542, The qualification of an investigator is –

(a) C.A.

(b) R.A.

(d) Not prescribed (✓)

543, To investigate the affairs of a company under Section 238, an investigator may be –

(a) an individual (✓)

(b) association

(d) None of these

544, The accounts of a company are investigated on demand of members of a company under section –

(a) 235

(b) 236 (✓)

(d) None of these

545, Investigation report is –

(a) Brief

(b) Detailed (✓)

(d) None of these

546, Investigation begins –

(a) When accounting ends

(b) When auditing ends (✓)

(d) None of above

547, Investigation is –

(a) Compulsory

(b) Voluntary (✓)

(d) None of these

548, Investigation is get done by –

(a) The proprietor of the firm

(b) Outside parties

(c) Both (a) and (b) (✓)

(d) None of these

649, In investigation checking are done of –

(a) One year accounts

(b) Two years accounts

(c) May cover several years (✓)

(d) None of these

550, The term investigation implies an examination of the accounts of a business for some special purpose”, this is defined by –

(a) Spicer and Pegler (✓)

(b) Lacaster

(d) None of these

551, Investigation is –

(a) An intensive examination behind the books and depth of transactions (✓)

(b) Verification of the accuracy of the figures of balance sheet

(d) None of these

552, Investigation is a –

(a) Test checking of books of account

(b) Intensive and thorough examination accounts (✓)

(d) All above

553, Investigation looks for –

(a) Substantive evidences

(b) Conclusive

(d) All above (✓)

554, Investigation into the affairs of a company not having share capital may be directed by the central government on the application of –

(a) 200 members (✓)

(b) 100 members

(d) None of these

555, Investigation into the affairs of a company not having share capital may be directed by the Central Government on the application of –

(a) 200 members

(b) 100 members

(c) Not less than 1/5 of the members (✓)

(d) None of these

556, Investigation proves helpful in –

(a) Purchasing a business

(b) Admission of a new partner

(d) All above (✓)

14. Special Audit

557, Under which Act, Banking Companies An India –

(a) Banking Regulation Act, 1949 (✓)

(b) Banking Regulation Act, 1969

(d) None of above

558, Which section of the Banking Regulation Act is related with audit of annual accounts –

(a) Section 25

(b) Section 30 (✓)

(d) None of these

559, 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

560, For aided educational institutions, audit is –

(a) Compulsory (✓)

(b) Necessary

(d) None of these

561, Non-trading institutions prepare –

(a) Trading Account

(b) Profit and Loss Account

(d) Income and Expenditure Account (✓)

562, 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

563, Accounts of Insurance Companies are prepared according to which sections of Insurance Companies Act, 1938 –

(a) Section 10-29 (✓)

(b) Section

(d) None of above

564, Minimum percentage of provision for a Insurance Company is –

(a) 20%

(b) 25%

(c) 40% (✓)

(d) 10%

565, Cost Audit is started in –

(a) 1913

(b) 1935 (✓)

(d) 1965

566, Cost audit is helpful for an institution in –

(a) Price determination

(b) Cost control

(d) All above (✓)

567, Cost Audit is compulsory in –

(a) Retail business

(b) Manufacturing concern (✓)

(d) None of these

568, The cost auditor shall submit his report to –

(a) Shareholders

(b) Central Government (✓)

(d) Any of the above

569, Cost audit is beneficial for –

(a) Business organisation

(b) Labourers

(d) All above (✓)

570, Qualification of cost auditor is –

(a) Chartered Accountant

(b) Cost and Works Accountant (✓)

(d) All above

571, Cost auditor is appointed by –

(a) General meeting

(b) Board of directors

(d) Both (a) and (c) above (✓)

572, Main object of Cost Audit is –

(a) Checking of accuracy of total cost and per unit cost of production (✓)

(b) Determining total cost

(d) All above

573, 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 (✓)

(d) At least 21 days before the date of annual general meeting of the company

574, Tax audit is compulsory under section –

(a) 44 AA

(b) 44 AB (✓)

(d) 44 AD

575, Management audit is a –

(a) New Concept (✓)

(b) Traditional concept

(d) None of above

576, Where management audit is first used?

(a) Japan

(b) America (✓)

(d) None of these

577, Qualification of Management Auditor is –

(a) Chartered Accountant

(b) Commerce Graduate

(c) No Prescribed Qualification (✓)

(d) M.B.A.

578, Objective of Management audit is –

(a) Make management more efficient

(b) Detecting shortcomings of management operation

(d) All above (✓)

579, 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

580, For manufacturing concerns, cost audit is –

(a) Voluntary

(b) Compulsory (✓)

(d) None of these

581, Cost auditor furnish his report to –

(a) Shareholders

(b) Central Government (✓)

(d) Any of above

582, Management audit is get done by –

(a) Statutory auditor

(b) Government auditor

(d) None of these (✓)

583, Which of the following section of Companies Act related with cost audit –

(a) Section 233(B) (✓)

(b) Section 100

(d) None of these

584, Management Audit is –

(a) Compulsory

(b) Voluntary (✓)

(d) None of these

585, What is essential for measuring efficiency of management?

(a) Social Audit

(b) Cost Audit

(d) Management Audit (✓)

586, In management audit, evaluation is being done of the –

(a) Cost accounts

(b) Financial accounts

(c) Managerial functions and policies (✓)

(d) Assets and liabilities

MCQ of auditing

Is a complete and exhaustive description of the system as found in operation by the auditors?

Narrative records This is a complete and exhaustive description of the system as found in operation by the auditor. Actual testing and observation are necessary before such a record can be developed.

What is the responsibility of an auditor who is engaged to audit the financial statements of a government entity?

The auditor has a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud.

Why does a company choose to have an independent auditor report on its financial statements?

Independent auditors have a mandate to protect shareholders and potential investors from a public company's possible fraud and accounting improprieties. Company managers can use the results of an independent audit to improve company processes.

Is a series of instructions and questions which the auditor should follow and answer?

(b) Use of 'Check Lists' in Audit: It is a series of instructions or questions on internal control which the auditor must follow or answer. When a particular instruction is carried out, the auditor initials the space opposite the instruction.

Is a complete and exhausted description of the system as found in operation by the auditors MCQ

What Is a Walk-Through Test?

Key Takeaways

Understanding Walk-Through Tests

Special Considerations

Example of a Walk-Through Test

1. Auditing Meaning, Objective and Importance

2. Classification of Audit

3. Audit Process

4. Internal Check

5. Vouching

6. Verification and Valuation of Assets and Liabilities

7. Depreciation and Reserve

8. Company Audit

9. Appointment, Remuneration, Rights and Duties of an Auditor

10. Liabilities of Auditor

11. Divisible Profit and Dividend

12. Audit Report

13. Investigation

14. Special Audit

Is a complete and exhaustive description of the system as found in operation by the auditors?

What is the responsibility of an auditor who is engaged to audit the financial statements of a government entity?

Why does a company choose to have an independent auditor report on its financial statements?

Is a series of instructions and questions which the auditor should follow and answer?

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