MCQs on Verification & Valuation of Assets in Audits

When counting cash on hand the auditor should:

(a) Ensure presence of somebody from management

(b) Obtain a receipt from custodian as to its return

(d) Temporary advances employees are counted to calculate balance of cash in hand

Ensure postage and revenue stamps are not counted in physical count

Which is not true regarding to auditor’s presence at stock taking?

(a) Auditor should attend physical stock taking only if inventory is material

(b) Auditor may not attend physical verification of stock by management

(c)Even when the auditor is not placing reliance on the physical verification by the management, he should attend it

(d) The primary objective of an auditor’s observation of an entity’s observation of an entity’s stock take is to obtain direct knowledge that the stock and has been property counted

If inventory is material, even when the auditor is not placing reliance on the physical verification by the management, he should attend it

While observing a client’s annual physical inventory. Auditor conducted test counts for certain test counts were higher than the recorded quantities in the client’s’ perpetual records. This situation could be the result of the client’s failure to record:

(a) Purchase returns

(b) Sales returns

(d) Purchase discounts

Sales returns

4 Which of the following assets is least likely to be subjected to lien?

(a) Freehold land

(b) Plant and machinery

(d) Motor vehicles

Lease holds property

An analysis of fixed properties account has exposed possibility of unrecorded sale of plant and machinery. Which of the following audit procedures may be adopted to discover it?

(a) Examination of property tax files

(b) Inquiry of plant manager

(d) All of the above

All of the above

The auditor has noticed presence of recurrent losses sale of fixed assets, this indicates:

(a) Depreciation charges insufficient are

(b) Policy of sale or disposal of fixed assets needs reviewed to be

(d) Accounting errors

Depreciation charges insufficient are

Analytical measures are least likely to be use in the audit of:

(a) Cash balance

(b) Investments

(d) Debtors

Cash balance

The auditor while verifying prepaid assurance has concluded that there is insufficient insurance of building He should:

(a) Modify his audit report

(b) Insist it, should be disclosed in the notes to financial statements

(d) Both (b) and (c)

Both (b) and (c)

While verifying intangible assets, an auditor would amortization charges and determine whether amortization period reasonable the auditor tries to establish by doing it:

(a) Valuation.

(b) Existence.

(d) Possession

Valuation

When auditing prepaid cover, an auditor discovers that the cover policy bond on building is, not available for inspection. This may indicate:

(a) No insurance has undertaken for building been

(b) Lien on building

(d) Insurance premium paid but not recorded

Lien on building

Equity shares of XY Ltd. held by ABC Ltd. are in the custody of Stock Holding Company of Pakistan Limited. The auditor many verify this investment by:

(a) Reviewing last year’s working papers

(b) Obtaining a certificate from a accountable official of the ABC Ltd.

(d) Obtaining a certificate from XY Ltd.

Obtaining a certificate from SHCIL

Which of the following controls would ensure that safeties are not lost, stolen or diverted?

(a) Establish physical barriers over investment securities

(b) Maintain files of authorize signatures

(d) All of the above

All of the above

The balance of cash in often between one to five percent of total assets. Tick the most appropriate statement with regard to verification of cash in context of this:

(a) Cash in always-material as materiality is qualitative concept

(b) No audit of cash is needed when, in auditor’s opinion, cash is immaterial.

(d) Cash is to be confirmed if control risk is measured as high

Cash in always-material as materiality is qualitative concept

Which of the following would give the declaration that debtors mentioned on the date of balance sheet actually exist?

(a) Sending debtor’s confirmation letters

(b) Reviewing collection subsequent

(d) Both (a) and. (b)

Both (a) and. (b)

Which of the following financial statements assertions are lectured by testing the cut off for plant asset addition?

(a) Existence and ownership

(b) Valuation and disclosure

(d) Completeness and valuation

Completeness and valuation

Which of the following declarations not true with regard to teeming and lading?

(a) It results in the deliberate misuse receipts of cash

(b) It is associated with cash receipts

(d) To conceal the shortage, the defraud, usually, tries to keep bank and book amounts in daily agreement so that a bank settlement will not detect the irregularity

If same individual maintains cash receipts and cash payments teeming and lading is likely to exist

Which of the following is not a proper third party to hold funds on behalf of the client?

(a) Regional level custodian

(b) National level custodian

(d) AEZ Securities Ltd, a stock broking firm

Pakistan trills – National level stock broking firm

Which of the following is not true with regard to verification of assets?

(a) It invoices confirmation of occurrence of transactions

(b) Its objective is to establish existence, possession, ownership; valuation arid revelation of assets

(d) All are true

It invoices substantiation of occurrence of transactions

Which of the following statements is not true?

(a) Valuation of assets is the responsibility of management

(b) The auditor can rely on a certificate issued by an authorized valuation as to the valuation of assets in the balance sheet

The auditor should value the asset as per generally accepted accounting principle

(d) Valuation is no part of auditor’s duty

An auditor is verifying valuation of building which has been self- constructed by the client: Which of the following documents is least relevant to the auditor for verification purposes?

(a) Bills of contractor

(b) Minutes of meeting of board of directors

(d) Loan agreement

Minutes of meeting of board of directors

Inspection report/receiving supports entries in: report

(a) Sales book and sales return book

(b) Purchase book and sales return book

(d) Sales book and purchase return book

Purchase book and sales return book

MCQs on Verification & Valuation of Assets in Audits
By: Prof. Dr. Fazal Rehman Shamil | Last updated: July 28, 2024

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