Scrutiny of Record for Audit Purpose MCQs

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1. What is the primary objective of scrutinizing records for audit purposes?
(A) To identify errors and frauds
(B) To calculate tax liabilities
(C) To ensure compliance with regulations
(D) To prepare financial statements

2. Which of the following is NOT a step in the audit scrutiny process?
(A) Preparation of trial balance
(B) Verification of account balances
(C) Examination of vouchers and receipts
(D) Analysis of financial ratios

3. Audit scrutiny involves:
(A) Only checking for arithmetic accuracy
(B) Quick review of financial statements
(C) Detailed examination of financial transactions
(D) None of the above

4. The main purpose of verifying vouchers during audit scrutiny is to ensure:
(A) Accuracy of market analysis
(B) Compliance with marketing regulations
(C) Proper authorization and approval
(D) Cost-effectiveness in production

5. Which type of audit is concerned with the review of financial records to determine compliance with laws and regulations?
(A) Internal audit
(B) Tax audit
(C) External audit
(D) Forensic audit

6. During audit scrutiny, the verification of account balances is primarily aimed at confirming:
(A) Accuracy of financial statements
(B) Cash flow projections
(C) Marketing strategies
(D) Personnel training records

7. What is the purpose of analyzing financial ratios during audit scrutiny?
(A) To identify weaknesses in internal controls
(B) To compare sales figures with industry standards
(C) To determine customer satisfaction levels
(D) To assess employee productivity

8. Which document is typically NOT examined during audit scrutiny?
(A) Bank reconciliation statement
(B) Annual performance review
(C) Purchase orders
(D) Sales invoices

9. In audit scrutiny, the term ‘vouching’ refers to:
(A) Checking the accuracy of financial forecasts
(B) Reviewing marketing campaign results
(C) Counting physical inventory items
(D) Examining the authenticity of transactions

10. Which of the following is a part of internal control systems that auditors typically assess during scrutiny?
(A) Inventory turnover ratios
(B) Human resource policies
(C) Customer feedback surveys
(D) Marketing budgets

11. During audit scrutiny, what does ‘substantive testing’ primarily focus on?
(A) Checking for compliance with legal requirements
(B) Verifying the accuracy of account balances
(C) Assessing the effectiveness of internal controls
(D) Reviewing marketing strategies

12. Which audit technique involves selecting a sample of transactions for detailed examination?
(A) Analytical procedures
(B) Ratio analysis
(C) Sampling
(D) Trend analysis

13. In audit terminology, what does ‘materiality’ refer to?
(A) The speed of information retrieval
(B) The complexity of financial transactions
(C) The size and significance of errors or omissions
(D) The volume of sales transactions

14. Which type of audit evidence is considered the most reliable during audit scrutiny?
(A) Oral representations
(B) Written confirmations from third parties
(C) Internal memos
(D) Preliminary drafts

15. Which auditing standard emphasizes the importance of professional skepticism during audit scrutiny?
(A) ISO 9001
(B) GAAP (Generally Accepted Accounting Principles)
(C) COSO
(D) ISA (International Standards on Auditing)

16. What is the primary objective of an auditor when conducting a ‘compliance audit’?
(A) To assess financial performance
(B) To ensure adherence to laws and regulations
(C) To evaluate operational efficiency
(D) To recommend cost-cutting measures

17. During audit scrutiny, what does the term ‘analytical procedures’ refer to?
(A) Reviewing internal control documents
(B) Evaluating cost-benefit analyses
(C) Comparing financial data for consistency and reasonableness
(D) Monitoring employee productivity

18. Which of the following is NOT an example of audit trail documentation?
(A) Customer complaints
(B) Purchase orders
(C) Bank statements
(D) Sales invoices

19. Which audit approach focuses on identifying potential risks and assessing the effectiveness of risk management practices?
(A) Compliance audit
(B) Performance audit
(C) Risk-based audit
(D) Financial statement audit

20. What is the primary purpose of reviewing internal control systems during audit scrutiny?
(A) To assess the competence of management
(B) To detect and prevent fraud and errors
(C) To identify opportunities for cost reduction
(D) To increase sales revenue

21. Which audit technique involves tracing transactions from source documents through to final records?
(A) Vouching
(B) Confirmation
(C) Analytical review
(D) Substantive testing

22. During audit scrutiny, what does the term ‘sampling risk’ refer to?
(A) The risk of fraud in financial statements
(B) The risk that the auditor’s sample may not be representative of the entire population
(C) The risk of errors in transaction processing
(D) The risk of inaccurate budget forecasts

23. Which audit procedure involves comparing financial data with industry benchmarks and historical trends?
(A) Confirmation
(B) Vouching
(C) Analytical review
(D) Compliance testing

24. What is the purpose of performing ‘test of details’ during audit scrutiny?
(A) To verify the authenticity of internal memos
(B) To confirm the accuracy of financial statements
(C) To analyze customer satisfaction surveys
(D) To evaluate employee performance

25. Which audit evidence is considered the least reliable during audit scrutiny?
(A) Bank statements
(B) Written confirmations from suppliers
(C) Oral explanations from management
(D) Sales contracts

26. What is the purpose of evaluating ‘management representations’ during audit scrutiny?
(A) To assess the quality of internal marketing plans
(B) To corroborate audit findings and assertions made by management
(C) To justify deviations in production costs
(D) To enhance branding strategy documentation

27. What is the primary objective of conducting audit scrutiny on fixed assets?
(A) To calculate depreciation expenses
(B) To assess asset liquidity
(C) To verify asset existence and valuation
(D) To review asset insurance policies

28. During audit scrutiny, the term ‘completeness’ refers to ensuring that:
(A) All transactions and events are recorded
(B) All financial statements are prepared accurately
(C) All transactions are recorded in the correct accounting period
(D) All assets are properly safeguarded

29. Which audit technique involves reviewing the consistency of accounting policies and practices?
(A) Confirmation
(B) Comparability analysis
(C) Compliance testing
(D) Analytical review

30. In audit terminology, ‘internal control’ refers to:
(A) The policies and procedures designed to safeguard assets and ensure accuracy of financial records
(B) The system established to ensure compliance with laws and regulations
(C) The process of comparing financial data with industry standards
(D) The process of assessing the efficiency of organizational activities

31. Which audit approach focuses on evaluating the economy, efficiency, and effectiveness of resource utilization?
(A) Compliance audit
(B) Performance audit
(C) Operational audit
(D) Financial statement audit

32. During audit scrutiny, what does the term ‘audit trail’ refer to?
(A) The process of tracing financial transactions from source documents to final records
(B) The documentation required for legal compliance
(C) The authorization process for financial transactions
(D) The audit report submitted to management

33. What is the primary purpose of conducting ‘substantive testing’ during audit scrutiny?
(A) To confirm compliance with laws and regulations
(B) To assess the reliability of internal controls
(C) To detect material misstatements in financial statements
(D) To evaluate employee performance

34. Which audit procedure involves assessing the adequacy of documentation supporting financial transactions?
(A) Confirmation
(B) Vouching
(C) Documentation review
(D) Compliance testing

35. During audit scrutiny, what does the term ‘audit evidence’ refer to?
(A) The opinions expressed by management
(B) The documentation and information gathered during the audit process
(C) The preliminary findings of auditors
(D) The financial statements prepared by management

36. Which audit standard emphasizes the need for auditors to maintain independence and objectivity?
(A) ISO 9001
(B) ISA (International Standards on Auditing)
(C) COSO (Committee of Sponsoring Organizations of the Treadway Commission)
(D) GAAP (Generally Accepted Accounting Principles)

37. What is the purpose of performing ‘test of controls’ during audit scrutiny?
(A) To assess the reliability of internal controls
(B) To detect errors in financial statements
(C) To verify the accuracy of financial forecasts
(D) To evaluate customer satisfaction

38. Which audit technique involves examining the financial statements of similar organizations for benchmarking purposes?
(A) Confirmation
(B) Analytical review
(C) Sampling
(D) Comparative analysis

39. In audit scrutiny, what does ‘reliability’ of audit evidence refer to?
(A) The volume of evidence collected
(B) The cost-effectiveness of gathering evidence
(C) The speed of obtaining information
(D) The accuracy and relevance of information

40. What is the primary objective of reviewing ‘management representations’ during audit scrutiny?
(A) To evaluate employee performance
(B) To assess the quality of customer service
(C) To verify the accuracy of financial statements
(D) To review marketing strategies

41. During audit scrutiny, what does ‘audit sampling’ involve?
(A) Examining all transactions within a financial period
(B) Reviewing external audit reports
(C) Conducting interviews with management
(D) Selecting a representative sample of transactions for detailed examination

42. Which audit approach focuses on verifying compliance with specific laws and regulations?
(A) Compliance audit
(B) Operational audit
(C) Financial statement audit
(D) Risk-based audit

43. What is the purpose of conducting ‘analytical procedures’ during audit scrutiny?
(A) To compare financial data for consistency and reasonableness
(B) To assess the efficiency of internal controls
(C) To verify the accuracy of purchase orders
(D) To review customer complaints

44. Which audit evidence is considered the most persuasive during audit scrutiny?
(A) Internal memos
(B) Written confirmations from third parties
(C) Oral explanations from management
(D) Preliminary drafts of financial statements