Senior Auditor MCQs

1. Which of the following is not true about the opinion on financial statements?

(A). The auditor should express an opinion on financial statements.
(B). His opinion is no guarantee to the future viability of the business.
(C). He is responsible for the detection and prevention of frauds and errors in financial statements.
(D). He should examine whether the recognized accounting principle has been consistently.

2. A sale Rs. 50,000 to Shahid was entered as a sale to Saddam. This is an example of

(A). Error of commission
(B). Error of omission
(C). Error of compensating
(D). Error of principle

3. The main object of an audit is

(A). Expression of opinion
(B). Detection and Prevention of fraud and error
(C). Both A and B
(D). Depends on the type of audit.

4. The title of A/6sued by Council of ICAI is

(A). Objective and Scope of the Financial Statements
(B). Objective and Scope of the Audit of Financial Statements
(C). Objective and Scope of Business of an Entity
(D). Objective and Scope of Financial Statements Audit

5. How many principles are listed in AAS1 which govern an auditor’s profession/Obligation?

(A). Nine
(B). Fourteen
(C). Seven
(D). Eight

6. Both auditing and accounting are concerned with financial statements. Which of the following?

(A). Auditing uses the theory of evidence to verify the financial information made available by Accountancy
(B). Auditing lends credibility dimension and quality dimension to the financial statements prepared by the accountant.
(C). The auditor should have thorough knowledge of accounting concepts and conventions to enable him to express an opinion on financial statements.
(D). All of the above.

7. The risk of management fraud increases in the presence of:

(A). Frequent changes in supplies
(B). The improved internal control system
(C). Substantial increases in sales
(D). Management incentive system based on sales done in a quarter

8. Auditing standards differ from audit procedures in that procedures relate

(A). Audit assumptions
(B). Acts to be performed
(C). Quality criterion
(D). Methods of work

9. As per AAS4 if the auditor detects an error then

(A). He should inform the management.
(B). He should communicate it to the management if it is material.
(C). The Auditor should ensure financial statements are adjusted for detected errors.
(D). Both B and C are right.

10. Which of the following is not a limitation of audit as per AAS4?

(A). The objectivity of auditor’s judgment
(B). Select testing
(C). Persuasiveness of evidence
(D). Limitations of the internal control system.

11. The process of allocating the cost of a tangible fixed asset over its useful life is called.

(A). Depletion
(B). Amortization
(C). Allocation of cost
(D). Depreciation

12. Expenditure for a plant asset that benefits more than one accounting period

(A). Plant expenditure
(B). Direct expenditure
(C). Indirect expenditure
(D). Capital Expenditure

13. The expense resulting from the using up of a natural resource

(A). Depletion
(B). Amortization
(C). Write-off expense
(D). Depreciation

14. From the given particulars, what is the depreciation rate under the straight-line method of depreciation?
Cost of Asset = Rs. 2,000 Residual Value = Rs. 400 Useful Life = 4 years

(A). 20%
(B). 30%
(C). 25%
(D). 33%

15. The periodic write-off of the cost of an intangible asset is called

(A). Depletion
(B). Amortization
(C). Allocation of cost
(D). Depreciation

16. The amount that an asset is expected to be worth at the end of its productive life is called

(A). Sales price
(B). Cost price
(C). Depreciable amount
(D). Salvage value

17. The estimated value of an asset after the expiry of its useful life is called as:

(A). Written Down value
(B). Salvage value
(C). Accumulated depreciation
(D). Sales value

18. All characteristics of debenture except which one?

(A). Liability
(B). Preference in payment
(C). Fixed interest
(D). Received dividend

19. Acknowledgment of debt is called

(A). Debenture
(B). Bond
(C). Share
(D). Both A and B

20. If debenture issued to the vendor then debit to

(A). Cash
(B). Goods
(C). Asset
(D). Vendor’s name

21. Own debenture purchase from open market for

(A). Investment
(B). Immediate cancellation
(C). Both A and B
(D). None of these

22. If interest is included in the purchasing price of debenture then interest called

(A). Simple interest
(B). Compound interest
(C). Cum interest
(D). Ex-interest

23. Provision for tax is a

(A). Current asset
(B). Fixed Assets
(C). Current Liability
(D). Long term liability

24. Incorporation certificate issued by

(A). Registrar
(B). Stock exchange
(C). SECP
(D). None of the above

25. Balance Sheet shows

(A). Equivalency
(B). Financial result
(C). Financial position
(D). All of the above

26. Show how net profit has been distributed in

(A). Trading Accounting
(B). Profit and loss account
(C). Retained earnings statement
(D). Balance sheet

27. Preliminary expense written off is a

(A). Direct expense
(B). Indirect expenses
(C). Deferred cost
(D). Balance sheet

28. In shareholder may include

(A). Promoters
(B). Directors
(C). Underwriters
(D). All of the above

29. In the source of bonus include

(A). General reserve
(B). Retained earnings
(C). Directors
(D). All of the above

30. An option to buy a share at a specific price during the specified period is called

(A). Right
(B). Share
(C). Bonus
(D). None of the above

31. Right share always issued on

(A). Market price
(B). Premium
(C). Discount
(D). Per value

32. On the basis of the residual reserve test after the proposed bonus issue the residual reserve should be at least

(A). 15%
(B). 20%
(C). 25%
(D). 30%

33. Entry for the declaration of bonus

(A). Bonus to shareholder Dr __share capital Cr
(B). Cash Dr __share capital Cr
(C). Accounts receivable Dr __share capital Cr
(D). Source of bonus Dr __bonus to shareholder Dr

34. No. of bonus share to be issued calculated as:

(A). No. of bonus share * issued price
(B). Issued capital
(C). Issued capital *
(D). None of the above