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 5 of 9
- A. Board meeting
- B. extraordinary general meeting
- C. General meeting
- D. annual general meeting
Explanation: A resignation creates a casual vacancy that must be filled by the company in a general meeting, unlike some other casual vacancies that…
Correct answer: General meeting- A. a general meeting
- B. first annual general meeting
- C. statutory meeting
- D. annual general meetingCompare Business Loans
Explanation: If the directors fail to appoint the first auditor within the prescribed period, the shareholders appoint the auditor by resolution at a…
Correct answer: a general meeting83. The term of the auditor ship of first auditor would be from the date of appointment till________?
- A. the conclusion of statutory meeting
- B. the conclusion of first annual general meeting
- C. the conclusion of next annual general meeting
- D. the date of removal
Explanation: The first auditor holds office from appointment until the conclusion of the company’s first annual general meeting, when the shareholders…
Correct answer: the conclusion of first annual general meeting- A. With in one month of completion of capital subscription state of the company
- B. With in one month of the promotion of the company
- C. With in one month of the commencement of the business of the company
- D. With in one month of incorporation of the company Get Executive Coaching
Explanation: Under company law, the directors must appoint the first auditor within 30 days of the company’s incorporation.
Correct answer: With in one month of incorporation of the company Get Executive Coaching- A. Directors of the company
- B. Members of the company
- C. The Central Government
- D. All of the above
Explanation: For a limited company, the statutory auditor is generally appointed by the members at the annual general meeting.
Correct answer: Members of the company- A. The reliability of audit evidence and its relevance in meeting the audit objective
- B. The objectivity and integrity of the auditor
- C. The quantity of audit evidence
- D. The independence of the source of evidence
Explanation: Audit evidence is evaluated primarily by its relevance to the audit objective and its reliability or persuasiveness.
Correct answer: The reliability of audit evidence and its relevance in meeting the audit objective- A. The auditor has ascertained that the balance is materially correct when in actual fact it is not
- B. The auditor concludes the balance is materially misstated when in actual fact is not
- C. The auditor has rejected an item from sample which was not supported by documentary evidence
- D. He applies random sampling on data which is inaccurate and inconsistent
Explanation: Incorrect acceptance occurs when the auditor accepts a materially misstated balance as materially correct.
Correct answer: The auditor has ascertained that the balance is materially correct when in actual fact it is not- A. The auditor concludes balance is materially correct when in actual fact it is not
- B. The auditor concludes that the balance is materially misstated when in actual fact it not
- C. The auditor has rejected an item for sample which was material
- D. None of the above
Explanation: Incorrect rejection occurs when the auditor rejects a population or balance as materially misstated even though it is actually materially…
Correct answer: The auditor concludes that the balance is materially misstated when in actual fact it not- A. Authenticated copy of relevant minutes of meetings may be regarded as management representation
- B. It should always be in working
- C. It may be dated prior to the report date
- D. It should be addressed to the auditor
Explanation: Management representations are not necessarily required to be in writing in every circumstance, although written representations are more…
Correct answer: It should always be in working- A. Risk of over reliance
- B. Risk of incorrect rejection
- C. Risk of incorrect acceptance
- D. Both A. and C.
Explanation: Overreliance on controls and incorrect acceptance can cause the auditor to miss a material misstatement, so both threaten audit…
Correct answer: Both A. and C.- A. Minutes of meetings
- B. Confirmations from debtors
- C. Information gathered by auditor through observation
- D. Worksheet supporting consolidated financial statements
Explanation: Minutes, debtor confirmations, and the auditor’s observations provide corroborative evidence from supporting sources.
Correct answer: Worksheet supporting consolidated financial statements- A. When it constitutes entire population
- B. When it is enough to provide a basis for giving reasonable assurance regarding truthfulness
- C. When it is objective and relevant
- D. When auditor collects and evaluates it independently
Explanation: Evidence is sufficient when its quantity and quality give the auditor a reasonable basis for assurance about the truthfulness of the…
Correct answer: When it is enough to provide a basis for giving reasonable assurance regarding truthfulness93. Which of the following statements is, generally, correct about the reliability of auditevidence?
- A. To be reliable, evidence should conclusive rather than persuasive
- B. Effective internal control system provides reliable audit evidence
- C. Evidence obtained from outside sources routed through the client
- D. All are correct. Hire An Accountant
Explanation: A sound internal control system generally produces more reliable accounting information and audit evidence.
Correct answer: Effective internal control system provides reliable audit evidence- A. randomly
- B. disproportionately
- C. directly
- D. inversely
Explanation: When assessed control risk rises, the auditor generally increases the nature, timing, or extent of substantive procedures; when control…
Correct answer: directly- A. may be eliminated for an account balance under certain conditions
- B. are designed to discover significant subsequent events
- C. will increase proportionately when the auditor decreases the assessed level of control risk
- D. may be test of transactions, test of balance and analytical procedures
Explanation: Substantive procedures include tests of transactions, tests of account balances, and substantive analytical procedures.
Correct answer: may be test of transactions, test of balance and analytical procedures- A. Bank statements obtained from the client
- B. Documents obtained by auditor from third parties directly.
- C. Carbon copies of sales invoices inspected by the auditor
- D. Computations made by the auditor
Explanation: Carbon copies of sales invoices are internally generated documents and therefore provide weaker evidence than direct third-party documents…
Correct answer: Carbon copies of sales invoices inspected by the auditor97. What is the primary objective of analytical procedures used in the overall review stage of an audit?
- A. To help to corroborate the conclusions drawn from individual components of financial statements
- B. To reduce specific detection risk
- C. To direct attention to potential risk areas
- D. To satisfy doubts when questions arise about a client's ability to continue
Explanation: At the overall review stage, analytical procedures help the auditor assess whether the conclusions from individual audit areas are…
Correct answer: To help to corroborate the conclusions drawn from individual components of financial statements- A. Tracing of purchases recurred in the purchase book to purchase invoices.
- B. Comparing aggregate wages paid to number of employees
- C. Comparing the actual costs with standard costs
- D. All of them are analytical procedure
Explanation: Tracing purchases from the purchase book to invoices is a test of details that verifies recorded transactions, not an analytical…
Correct answer: Tracing of purchases recurred in the purchase book to purchase invoices.- A. Substantive tests designed to assess control risk
- B. Substantive tests designed to evaluate the validity of management's representation letter
- C. Substantive tests designed to study relationships between financial and nonfinancial
- D. All of the above
Explanation: Analytical procedures evaluate plausible relationships and trends between financial and non-financial data, such as wages compared with…
Correct answer: Substantive tests designed to study relationships between financial and nonfinancial- A. It helps the auditor to study relationship among elements of financial information
- B. Relationship among data exist and continue in the absence of known condition to the contrary
- C. Analytical procedures will not be able to detect unusual relationships
- D. None of the above. Compare Credit Cards
Explanation: Analytical procedures rely on the expectation that meaningful relationships among data generally continue unless a known change or…
Correct answer: Relationship among data exist and continue in the absence of known condition to the contrary