Free Auditing MCQs with Answers
162 Auditing MCQs from Accounting, each with the correct answer and a written explanation of why it is correct. Free and unlimited, with no account needed.
Auditing examines accounting records and financial statements to determine whether they present a reliable and fairly stated position. The subject covers audit objectives, internal controls, audit evidence, materiality, vouching, verification, working papers, auditor independence, audit reports, and the distinction between an audit and accounting or investigation.
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162 questions · page 4 of 9
- A. Self-interest threat
- B. Self-review threat
- C. Advocacy threat
- D. Familiarity threat
Explanation: A favourable loan creates a financial interest in the client relationship, so the auditor may be biased in protecting that benefit.
Correct answer: Self-interest threat- A. Other audit clients
- B. Previous years
- C. Other companies in the same industry
- D. Budget
Explanation: Analytical procedures commonly compare results with prior years, budgets and industry information.
Correct answer: Other audit clients- A. The gap between how the directors of a company perform their duties and how the shareholders expect them to perform
- B. The gap between how the directors of a company perform their duties and how the general public expects them to perform
- C. The gap between the public perception of the role of company auditors and their statutory role and responsibilities
- D. The gap between the auditors' own perception of their duties and how they are set out in the Companies Act
Explanation: The expectation gap is the difference between what the public believes auditors are responsible for and what auditing standards and law…
Correct answer: The gap between the public perception of the role of company auditors and their statutory role and responsibilities- A. Introductory paragraph specifying the pages to which the report relates and the accounting convention adopted
- B. Basis of the opinion
- C. Involvement of any specialist
- D. Statement of responsibilities of directors and auditors Hire An Accountant
Explanation: An auditor's report normally includes the introduction, responsibilities, opinion and basis of opinion, but it does not ordinarily include…
Correct answer: Involvement of any specialist- A. Conducting the inventory count
- B. Obtaining and evaluating audit evidence on the financial statements
- C. Calculating the year-end accruals figure for inclusion in the accounts
- D. Providing representations to management Get Executive Coaching
Explanation: The auditor's central function is to obtain and evaluate sufficient appropriate evidence supporting an opinion on the financial…
Correct answer: Obtaining and evaluating audit evidence on the financial statements- A. Positive assurance
- B. Negative assurance
- C. High level of assurance
- D. No assurance
Explanation: A review engagement provides limited assurance, traditionally expressed through negative assurance such as stating that nothing has come…
Correct answer: Negative assurance- A. one audit firm should audit the IFI and a different firm should audit the financial statements for the year as a whole.
- B. one accountancy firm should review the IFI and a different firm should audit the financial statements for the year as a whole.
- C. the same firm should audit the IFI and the financial statements for the year as a whole.
- D. the same firm should review the IFI and the financial statements for the year as a whole.
Explanation: The interim financial statements are normally reviewed by the same firm that audits the annual financial statements, because that auditor…
Correct answer: the same firm should review the IFI and the financial statements for the year as a whole.- A. The auditor cannot give an opinion due to lack of evidence.
- B. The client's financial statements were found to be materially misstated.
- C. The auditor could not conduct any tests due to lack of controls.
- D. The auditor did not find anything to indicate that a material misstatement exists.
Explanation: Negative assurance means the auditor states that nothing came to attention indicating a material misstatement, rather than giving the…
Correct answer: The auditor did not find anything to indicate that a material misstatement exists.- A. identify cases of unrecorded revenue
- B. ensure proper disclosure in the balance sheet
- C. recompute accrued income on the data of balance sheet
- D. Any of these
Explanation: Checking whether dividends, interest and commissions are received after year-end can reveal income earned before year-end but omitted from…
Correct answer: identify cases of unrecorded revenue70. To test whether sales have been recorded, the auditor should draw a sample from a file of__________?
- A. purchase orders
- B. sales orders
- C. sales invoices
- D. bill of loading
Explanation: A sample of sales invoices can be traced to the sales records and ledger to verify that invoiced sales have been recorded.
Correct answer: sales invoices- A. Daily cash sales summary
- B. Salesmen's summary
- C. Monthly statements sent to customers
- D. Bank statementAccounting & Auditing
Explanation: Cash sales are settled immediately, so monthly statements sent to credit customers are not relevant evidence for vouching them.
Correct answer: Monthly statements sent to customers- A. Unqualified opinion
- B. Qualified opinion
- C. Disclaimer of opinion
- D. Adverse opinion
Explanation: A disclosed depreciation-method change with no material effect on the current financial statements does not require a modified opinion…
Correct answer: Unqualified opinion- A. unqualified opinion
- B. unqualified opinion with reference to notes to the accounts
- C. qualified opinion
- D. disclaimer of opinion
Explanation: A serious going-concern uncertainty that is adequately disclosed does not automatically require a qualification; the auditor refers…
Correct answer: unqualified opinion with reference to notes to the accounts- A. Qualified opinion
- B. Disclaimer of opinion
- C. Adverse opinion
- D. Unqualified report with 'an emphasis of matter' paragraph;
Explanation: A client-imposed scope restriction normally leads to a qualified opinion when the missing evidence could affect the statements but is not…
Correct answer: Qualified opinion- A. the data of AGM
- B. later than the date on which the accounts are approved in board's meeting
- C. earlier than the date on which the accounts are approved by the management
- D. Both A. and B.
Explanation: The auditor’s report cannot be dated before management or the board has approved the financial statements, because the auditor must…
Correct answer: earlier than the date on which the accounts are approved by the management- A. Unlimited liability
- B. Manufacturing
- C. Banking
- D. Nonprofit making
Explanation: The special right to visit foreign branches is associated with bank audits under banking regulations, whereas an auditor of a…
Correct answer: Manufacturing- A. Shareholders in an annual general meeting
- B. Shareholders in general meeting
- C. Board of directors in board meeting
- D. Any of the aboveCompare Business Loans
Explanation: A branch auditor is appointed by the shareholders in a general meeting, rather than by the board alone.
Correct answer: Shareholders in general meeting- A. Books and accounts of a company
- B. Books, accounts and documents of the company
- C. Books, accounts and vouchers of the company
- D. Notices and documents of the company
Explanation: An auditor’s access extends beyond accounting books to the company’s accounts and vouchers, wherever they are kept.
Correct answer: Books, accounts and vouchers of the company- A. Erstwhile director
- B. Internal auditor
- C. Relative of a director
- D. Only (B. and (C.
Explanation: An internal auditor is generally an employee or officer of the company, and that status disqualifies the person from acting as its…
Correct answer: Internal auditor- A. the shareholders in a general meeting
- B. the shareholders in the first annual General meeting
- C. the board of directors
- D. the Central GovernmentHire An Accountant
Explanation: The first auditor is appointed by the directors, but removal before the end of the term requires action by the shareholders in a general…
Correct answer: the shareholders in a general meeting