Basic Auditing MCQs – T4Tutorials.com

What is the primary objective of an audit?

A) Detecting fraud
B) Ensuring financial accuracy
C) Providing consulting services
D) Expressing an opinion on financial statements
Answer: D
Which type of audit is conducted by an independent external auditor?

A) Internal audit
B) Forensic audit
C) Statutory audit
D) Compliance audit
Answer: C
What is the purpose of a compliance audit?

A) Evaluating efficiency and effectiveness
B) Ensuring adherence to laws and regulations
C) Detecting financial misstatements
D) Assessing internal controls
Answer: B
Which auditing standard provides guidelines on the auditor’s independence?

A) ISA 200
B) ISA 315
C) ISA 600
D) ISA 701
Answer: A
What is the role of an internal auditor in an organization?

A) Providing an opinion on financial statements
B) Ensuring compliance with internal policies
C) Conducting audits of external parties
D) Investigating financial fraud
Answer: B
Which type of audit focuses on reviewing financial statements for accuracy and completeness?

A) Internal audit
B) External audit
C) Management audit
D) Forensic audit
Answer: B
Who appoints an external auditor for a statutory audit?

A) Shareholders
B) Board of Directors
C) Management
D) Government regulatory bodies
Answer: A
What is the objective of a management audit?

A) Assessing compliance with laws and regulations
B) Reviewing financial statements for accuracy
C) Evaluating managerial performance and efficiency
D) Investigating suspected fraud
Answer: C
Which auditing standard provides guidance on assessing the risk of material misstatement?

A) ISA 315
B) ISA 540
C) ISA 700
D) ISA 800
Answer: A
What is the purpose of a forensic audit?

A) Evaluating internal controls
B) Assessing compliance with laws
C) Investigating suspected fraud
D) Reviewing financial statements
Answer: C
Which type of audit involves reviewing financial transactions and records for evidence of fraud?

A) External audit
B) Internal audit
C) Forensic audit
D) Compliance audit
Answer: C
What does the term “auditor’s opinion” refer to in auditing?

A) A statement of findings and recommendations
B) A summary of audit procedures performed
C) A formal report issued by the auditor
D) A judgment on the fairness of financial statements
Answer: D
Which auditing standard provides guidance on using the work of an expert in an audit?

A) ISA 200
B) ISA 500
C) ISA 620
D) ISA 800
Answer: B
Who is responsible for the preparation of financial statements being audited?

A) External auditor
B) Internal auditor
C) Management of the entity
D) Regulatory authorities
Answer: C
Which audit approach emphasizes understanding the entity’s internal controls and assessing control risk?

A) Risk-based audit approach
B) Compliance-based audit approach
C) Performance audit approach
D) Substantive audit approach
Answer: A
What is the primary focus of an operational audit?

A) Evaluating financial statements
B) Assessing internal controls
C) Reviewing efficiency and effectiveness of operations
D) Detecting fraud
Answer: C
Which type of audit focuses on specific areas of an organization’s operations, finances, or systems?

A) Integrated audit
B) Limited scope audit
C) Performance audit
D) Value-for-money audit
Answer: C
What does the term “materiality” mean in auditing?

A) The level of detail in audit procedures
B) The amount of errors in financial statements
C) The significance of misstatements
D) The timing of audit reporting
Answer: C
Which audit procedure involves comparing financial information with non-financial information to identify inconsistencies?

A) Analytical review
B) Vouching
C) Confirmation
D) Compliance testing
Answer: A
What is the purpose of an external audit?

A) Evaluating internal controls
B) Reviewing financial statements for accuracy
C) Assessing management performance
D) Detecting operational inefficiencies
Answer: B
Which auditing standard provides guidance on audit evidence?

A) ISA 200
B) ISA 500
C) ISA 600
D) ISA 800
Answer: B
What is the objective of an integrated audit?

A) Assessing compliance with laws and regulations
B) Reviewing financial statements for accuracy
C) Evaluating both financial and non-financial aspects of an organization
D) Investigating suspected fraud
Answer: C
Which audit approach emphasizes substantive testing over reliance on internal controls?

A) Risk-based audit approach
B) Compliance-based audit approach
C) Performance audit approach
D) Substantive audit approach
Answer: D
What does the term “audit risk” refer to in auditing?

A) The risk of financial loss to the auditor
B) The risk of legal action against the auditor
C) The risk that financial statements are materially misstated
D) The risk of audit failure
Answer: C
Which audit procedure involves obtaining written confirmation of a balance or transaction directly from a third party?

A) Analytical review
B) Vouching
C) Confirmation
D) Compliance testing
Answer: C
What is the purpose of an interim audit?

A) Conducting audits at regular intervals
B) Reviewing financial statements before year-end
C) Assessing compliance with specific regulations
D) Investigating suspected fraud
Answer: B
Which auditing standard provides guidance on the auditor’s responsibilities when using the work of internal auditors?

A) ISA 200
B) ISA 315
C) ISA 610
D) ISA 700
Answer: C
What is the primary focus of a forensic audit?

A) Evaluating internal controls
B) Investigating suspected fraud
C) Assessing compliance with laws
D) Reviewing financial statements
Answer: B
Which audit procedure involves detailed examination of transactions and supporting documents?

A) Analytical review
B) Vouching
C) Confirmation
D) Compliance testing
Answer: B
What is the purpose of an internal control audit?

A) Assessing efficiency of operations
B) Detecting errors in financial statements
C) Reviewing compliance with internal policies
D) Investigating suspected fraud
Answer: C
Which type of audit is conducted to evaluate whether an organization is achieving value-for-money?

A) Integrated audit
B) Performance audit
C) Compliance audit
D) Operational audit
Answer: B
What is the objective of a compliance-based audit approach?

A) Assessing risk of material misstatement
B) Reviewing efficiency and effectiveness
C) Evaluating adherence to laws and regulations
D) Investigating suspected fraud
Answer: C
Which auditing standard provides guidance on communicating audit findings to those charged with governance?

A) ISA 240
B) ISA 260
C) ISA 265
D) ISA 300
Answer: B
What is the role of an external auditor in relation to financial statements?

A) Preparing financial statements
B) Providing assurance on financial statements
C) Investigating financial fraud
D) Managing internal controls
Answer: B
Which audit approach involves reviewing the effectiveness of internal controls and assessing control risk?

A) Risk-based audit approach
B) Compliance-based audit approach
C) Performance audit approach
D) Substantive audit approach
Answer: A
What does the term “audit evidence” refer to in auditing?

A) The audit report issued by the auditor
B) The work performed by internal auditors
C) The information used by the auditor to reach conclusions
D) The auditor’s opinion on financial statements
Answer: C
Which audit procedure involves testing internal controls to ensure they are operating effectively?

A) Analytical review
B) Compliance testing
C) Substantive testing
D) Confirmation
Answer: B
What is the objective of an interim audit?

A) Reviewing financial statements before year-end
B) Conducting audits at regular intervals
C) Assessing compliance with specific regulations
D) Investigating suspected fraud
Answer: A
Which auditing standard provides guidance on evaluating the work of an expert used by the auditor?

A) ISA 500
B) ISA 620
C) ISA 700
D) ISA 800
Answer: A
What is the purpose of an internal control audit?

A) Assessing efficiency of operations
B) Detecting errors in financial statements
C) Reviewing compliance with internal policies
D) Investigating suspected fraud
Answer: C
Which audit procedure involves detailed examination of transactions and supporting documents?

A) Analytical review
B) Vouching
C) Confirmation
D) Compliance testing
Answer: B
What is the primary focus of a forensic audit?

A) Evaluating internal controls
B) Investigating suspected fraud
C) Assessing compliance with laws
D) Reviewing financial statements
Answer: B
Which type of audit is conducted to evaluate whether an organization is achieving value-for-money?

A) Integrated audit
B) Performance audit
C) Compliance audit
D) Operational audit
Answer: B
What is the objective of a compliance-based audit approach?

A) ISA 240
B) ISA 260
C) ISA 265
D) ISA 300
Answer: B
What is the role of an external auditor in relation to financial statements?

A) Risk-based audit approach
B) Compliance-based audit approach
C) Performance audit approach
D) Substantive audit approach
Answer: A
What does the term “audit evidence” refer to in auditing?

A) Analytical review
B) Compliance testing
C) Substantive testing
D) Confirmation
Answer: B
What is the objective of an interim audit?

A) Reviewing financial statements before year-end
B) Conducting audits at regular intervals
C) Assessing compliance with specific regulations
D) Investigating suspected fraud
Answer: A

Basic Auditing MCQs
By: Prof. Dr. Fazal Rehman Shamil | Last updated: July 28, 2024

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