1. 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

2. Both auditing and accounting are concerned with financial statements. Which of the following
is/are true
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. Auditor should have through knowledge of accounting concepts and convention to enable him
to express an opinion on financial statements
d. All of the above.

3. Audit of banks is an example of ……………………………

a. Statutory audit
b. Balance sheet audit
c. Concurrent audit
d. Both (a) and (b)
*e. All of the above

4. Concurrent audit is a part of

a. Internal check system
b. Continuous audit
*c. Internal audit system
d. None

5. Audit in depth is synonymous for

a. Complete audit
b. Completed audit
c. Final audit
*d. Detailed audit

6. Balance sheet audit includes verification of ……………………………………..

a. Assets
b. Liabilities
c. Income and expense accounts where appropriate
*d. All of the above

7. Which of the following statements is not true about continuous audit?

a. It is conducted at regular interval
b. It may be carried out on daily basis
*c. It is needed when the organization has a good internal control system

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AFRIYIE YAW ADDAE
d. It is expensive

8. Audit of transaction does not include ………………………….

a. Propriety audit
*b. efficiency –cum performance audit
c. audit of receipts
d. audit of expenditure

9. Which of the following best describes the relationship between assurance services and attest
services?
a. While attest services involve financial data, assurance services involve nonfinancial data.
b. While attest services require objectivity, assurance services do not require objectivity.
*c. Attest services are a subset of assurance services.
d. Attest and assurance services are different terms referring to the same types of services.

10. The most important benefit of having an annual audit by a public accounting firm is to:
*a. Provide assurance to investors and other outsiders that the financial statements are reliable.
b. Enable officers and directors to avoid personal responsibility for any misstatements in the
financial statements.
c. Meet the requirements of government agencies.
d. Provide assurance that illegal acts, if any exist, will be brought to light.

11. Governmental auditing, in addition to including audits of financial statements, often includes
audits of efficiency, effectiveness, and:
a. Adequacy.
b. Evaluation.
c. Accuracy.
*d. Compliance.

12. Which one of the following is NOT required as part of the audit process?
a. Substantive procedures
b. Tests of control
c. Assessment of materiality
*d. Procedures to obtain an understanding of the internal control structure

13. Which one of the following helps to achieve reasonable assurance about the fairness of
financial statements during an audit process?
*a. Audit report
b. Audit evidence
c. Audit engagement
d. Audit program

14. Auditing standards differ from audit procedures in that procedures relate to
a. audit assumptions
b. methods of work

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c. quality criterion
*d. acts to be performed

15. The audit engagement letter, generally, should include a reference to each of the following
except
a. limitations of auditing
b. responsibilities of management with respect to audit work
c. expectation of receiving a written management representation letter.
*d. a description of the auditor’s method of sample selection.

16. Which of the following affects audit effectiveness?

a. Risk of over reliance
b. Risk of incorrect rejection
c. Risk of incorrect acceptance
*d. Both (a) and (c)

17. The fundamental objective of the audit of a company is to

a. Protect the interests of the minority shareholders
b. Detect and prevent errors and fraud
c. Assess the effectiveness of the company’s performance
*d. Attest to the credibility of the company’s accounts

18. The concept of stewardship means that a company’s directors

a. Are responsible for ensuring that the company complies with the law
b. Are responsible for ensuring that the company pays its tax by the due date
*c. Safeguard the company’s assets and manage them on behalf of the
shareholders
d. Report suspected fraud and money laundering to the authorities

19. Which of the following is NOT the responsibility of a company’s directors?

*a. Reporting to the shareholders on the accuracy of the accounts
b. Establishment of internal controls
c. Keeping proper accounting records
d. Supplying information and explanations to the auditor

20.International auditing standards are issued by the:

a. International Accounting Standards Board
b. Financial Accounting Standards Board
*c. International Audit and Assurance Standards Board
d. Auditing Practices Board

21. The independent auditor's primary responsibility is to:

a. the directors
b. the company's creditors (payables)
c. the company's bank
*d. the shareholders

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22. What sort of assurance is provided in a review engagement?
a. Positive assurance
*b. Negative assurance
c. High level of assurance
d. No assurance

23. What is meant by negative assurance?

a. The auditor cannot give an opinion due to lack of evidence.
b. The client's financial statements were found to be materially misstated.
c. The auditor could not conduct any tests due to lack of controls.
*d. The auditor did not find anything to indicate that a material misstatement exists.

24. Which of the following is not one of the three phases in an financial statement audit?
a. Planning.
*b. Training and supervising employees.
c. Evidence accumulation and evaluation.
d. Reporting and follow-up.

25. Auditing should be done by

a. a professional accountant.
b. a certified management accountant.
*c. a competent and independent person.
d. a chartered accountant.

26. Joe is recording sales transactions in the accounting system so that they can be summarized in
a logical manner for the purpose of providing financial information for decision-making. Joe is
doing
a. management consulting.
b. review.
*c. accounting.
d. auditing.

27. What type of organizations use auditing services?

a. Non-for-profit organizations
b. Businesses
c. Governments
*d. All of the above

28. The objective of the audit of financial statements by the auditor is the expression of an
opinion on
a. the accuracy of the financial statements.
*b. the fairness of the financial statements.
c. the balance sheet and income statement.
d. the annual report.

AFRIYIE YAW ADDAE

29. The responsibility for the preparation of the financial statements and the accompanying
footnotes belongs to
a. both management and the auditor equally.
b. management for the statements and the auditor for the notes.
c. the auditor.
*d. management.

30. Which of the following parties is responsible for establishing an entity’s internal controls?
*a. Management.
b. Auditors.
c. Management and auditors.
d. Committee of Sponsoring Organizations.

31. Which two of the following are elements of an assurance engagement?

1 A three- party relationship
2 Suitable criteria
3 Determination of materiality
4 An engagement letter
*a. (1) and (2) only
b. (1) and (3) only
c. (2) and (3) only
d. (2) and (4) only

32. Which of the following is the most appropriate definition of the external audit
a. The external audit is an exercise carried out by auditors in order to give an opinion on whether
the financial statement of a company is materially misstated.
b. The external audit is an exercise carried out in order to give an opinion on the effectiveness of
a company’s internal control system.
c. The external audit is performed by management to identify areas of deficiency within a company
and make recommendations to mitigate such deficiency.
*d. The external audit provides negative assurance on the truth and fairness of the financial
statement of a company.

33. Ethically, an auditor of a Company can as well be a receiver of the same company if the
company cannot continue its operations.
a. On application to the Governor of the State
b. Yes
*c. No
d. On application to audit committee

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34. Management responsibility as to the preparation of financial statements is reemphasized in
a. Bank Letter
b. Comfort Letter
*c. Letter of Representation
d. Circularization Letter

35. The major objective of any statutory audit is to

a. Detect fraud and errors
b. Prevent fraud and errors
c. Ascertain material misstatement in the financial statements
*d. Express an opinion on whether or not the financial statements show a true and fair view

36. Auditors can minimise liability arising from professional duties with the following
precautions EXCEPT:
a. Quality control as regards audit assignment
b. Avoiding risky audits or carrying out more extensive work
c. Minimising reliance on client’s representation or even third-party confirmation
*d. Completion of audit assignments within short period of time so as to maximise gains

37. Limitation in audit scope involves the following aspects with EXCEPTION of
a. Lack of cooperation from the entity’s management and staff
*b. Submission of all financial documents, books, records, schedules and other necessary
evidences humanly possible
c. Restrictive clauses in the terms of the audit engagement
d. Poor accounting and internal control procedures

38. A reason for private companies to be audited is

a. having a professional accountant perform their bookkeeping.
*b. facilitating access to capital.
c. complying with the laws requiring them to be audited.
d. ensuring that their financial statement do not contain errors.

39. The requirement for an attitude of scepticism means that the auditor should
a. plan and conduct the audit with an attitude of distrust in management.
*b. not be blind to evidence that suggests the documents, books or records have
been altered or are incorrect.
c. perform additional tests of controls to increase the probability of discovering
fraud or errors.
d. not consider management's explanation as evidence on any subject.

40. The factor which distinguishes an error from fraud and other irregularity is
a. whether it is a dollar amount or a process.
*b. intent.

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c. materiality.
d. whether it is a caused by the auditor or the client.

41. After the auditor has completed all the procedures, it is necessary to combine the
information obtained to reach an overall conclusion as to whether the financial statements are
fairly presented. This is a highly subjective process that relies heavily on
*a. the auditor's professional judgment.
b. generally accepted accounting principles.
c. the provincial institutes' Rules of Professional Conduct.
d. generally accepted auditing standards.

42. The type of audit that is carried out during the financial year of a company is known as ..................
*Interim Audit

43. Auditors’ involvement in an all year-round review of client`s transactions and account balances which
occur within a particular year is best described as............................
*Continuous Audit

44. Independent professional services that improve the quality of information or its context for decision
makers are referred to as...............................
*Assurance services

45. The extent to which rules, policies, laws, covenants or government regulations are followed by the
entity being audited is determined by............................ test.
*Compliance

46. An independent appraisal unit established within an entity to examine and make available its activities
as a service to management is known as.....................
*Internal audit

47. An assurance given by the auditor that nothing has come to his attention which indicate that financial
statements have not been prepared according to the generally accepted accounting principles is called .....
*Negative assurance

48. Schedules prepared by auditors setting out those procedures to be executed during the course of the
audit in order to obtain audit evidence from which the auditors draw conclusions on the financial
statements are called.
*Audit programs

49. A person or firm possessing special skills, knowledge and experience in a particular field other than
auditing or accounting is called ..........................
*An expert

50. Which of the following is not true about opinion on financial statements?
a. The auditor should express an opinion on financial statements.
b. His opinion is no guarantee to future viability of business
*c. He is responsible for detection and prevention of frauds and errors in financial statements

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d. He should examine whether recognised accounting principle have been consistently

51. Which of the following statements best describes the term ‘assurance services’?
a. Services designed to express an independent opinion on the truth and fairness of a financial
report.
b. Services designed to provide confidence as to the integrity and security of e-commerce
business to consumers undertaking internet transactions.
*c. Independent professional services that improve the quality of information for decision-
makers.
d. Services that result in better outcomes through the improvement of operation

52. Assurance services differ from consulting services in that they:

I. focus on providing advice.
II. involve primarily the monitoring of one party by another.
a. I. Yes II. Yes
b. I. Yes II. No
*c. I. No II. Yes
d. I. No II. No

53. Which of the following is not an essential element of an assurance engagement under the
Framework for Assurance Engagements?
*a. A two-party relationship between an assurance practitioner and the intended user.
b. An underlying subject matter.
c. A suitable criterion.
d. A conclusion by an assurance practitioner.

54. The subject matter of an assurance engagement may be:

a. financial position and performance.
b. systems and processes.
c. non-financial performance.
*d. All of the given answers are correct

55. What level of assurance is provided by the auditor in a review engagement?

*a. Limited.
b. Low.
c. Reasonable.
d. None.

56. Which of the following items is a component of the expectation gap?

a. The fraud gap.
b. The accounting standards gap.
*c. Performance gap.
d. All of the given answers are correct.

57. The major international audit firms are now known as:
*a. the Big Four.

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b. the Big Eight.
c. the Forum of Firms
d. the Transnational Audit Committee

58. Financial report auditing is the process of:

a. recording, classifying and measuring accounting data.
*b. obtaining sufficient appropriate audit evidence of the propriety and accuracy of information
included in an entity’s financial report.
c. checking invoices back to supporting documentation.
d. ensuring compliance with the Company’s Act 1963 (act 179)

59. The financial report assertion of existence is concerned with ensuring that:
a. a transaction or event that relates to the entity actually took place during the period.
*b. assets, liabilities and equity interests exist at the balance date.
c. the entity owns and has clear title to the assets of the entity.
d. assets and liabilities are recorded at an appropriate carrying value.

60. Which of the following procedures for establishing whether to accept a client should the
auditor follow?
a. Reviewing available financial information about the prospective client
b. Evaluating the audit firm’s independence status concerning the prospective client
c. Evaluating the audit firm’s technical skills to undertake the audit
*d. All of the given answers are correct

61. An audit firm may use which of the following methods of advertising to obtain clients?
a. Advertising that promotes the firm as having the lowest auditor’s report modification rate.
b. Direct mailing together with persistent follow-up of recipients.
c. Advertising that promises a low set fee
*d. Brochures indicating the range of services that the audit firm offers.

62. Auditing refers to

a. Preparation and checking of account
b. Examination of accounts of business units only
*c. Examination of accounts of professional accountants
d. Checking of vouchers

63. Main object of auditing is

a. Detection of errors
*b. To find out whether financial statement show true and fair state of affairs
c. Detection of frauds
d. Detection and prevention of frauds and errors.

64. Auditing is luxury for a

a. Joint stock company
b. Partnership firm
*c. Small shop-keeper

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d. Government company

65. An auditor’s responsibility extends to both evaluating the overall presentation of the financial
statements AND evaluating the reasonableness of accounting estimates made by management. Is
this statement true or false?
*a. True
b. False

1. Professional skepticism requires that the auditor assume that management is

a. reasonably honest
*b. Neither honest nor dishonest
c. Not necessarily honest
d. Dishonest unless proved otherwise

2. Which of the following information should a successor auditor obtain during the inquiry of the
predecessor auditor before accepting engagement?
i. Information about integrity of management
ii. Disagreement with management concerning auditing procedures
iii. Review of internal control system.
iv. Organisation structure
*a. (i) and (ii)
b. (ii) and (iii)
c. (i) , (ii) and (iii)
d. i) and (iii)

3. The audit engagement letter, generally, should include a reference to each of the following
except
a. limitations of auditing
b. responsibilities of management with respect to audit work
c. expectation of receiving a written management representation letter.
*d. a description of the auditor’s method of sample selection.

4. The use of an audit engagement letter is the best method of assuring the auditor will have
which of the following?
a. Auditor will obtain sufficient appropriate audit evidence.
b. Management representation letter
*c. Access to all books, accounts and vouchers required for audit purpose

AFRIYIE YAW
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d. Cooperation from other auditors

5. The use of an audit engagement letter is the best method of documenting

i. the required communication of significant deficiencies in internal control
ii. significantly higher control risk than that assessed in prior audit.
iii. Objective and scope of auditor’s work
iv. Notification of any changes in the original arrangements of the audit.
a. (i) and (ii)
b. (i) and (iii)
c. (ii) and (iv)
*d. (iii) and (iv)

6. An auditor who accepts an audit but does not possess the industry expertise of the business
entity should
a. engage experts
*b. obtain knowledge of matters that relate to the nature of entity’s business
c. inform management about it
d. take help of other auditors

7. An auditor obtains knowledge about a new client’s business and its industry to
a. Make constructive suggestions concerning improvements to the client’s internal control
system.
b. Evaluate the appropriateness of audit evidence obtained
c. Understand the events and transactions that may have an effect on client’s financial
statements.
*d. All of the above

8. The Ghana Government had constructed six bungalows for its ministers. They are lying
unoccupied for last three years. This would be a matter of concern for
a. Propriety Auditor
b. Performance Auditor
c. Financial Auditor
*d. None of the above

9. The board of directors shall appoint first auditor of a company

a. Within one month of completion of capital subscription state of the company
b. Within one month of the promotion of the company
c. Within one month of the commencement of the business of the company
*d. Within one month of incorporation of the company

10. 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

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11 ADDAE
11. In case the directors fail to appoint first auditor (s), the shareholders shall appoint them at
…………......... by passing a resolution
*a. a general meeting
b. first annual general meeting
c. statutory meeting
d. annual general meeting

12. Which of the following statement is not true regarding appointment of statutory auditor by
the Central Government?
a. Such powers have been conferred upon it by section 224(3)
*b. If a company fails to appoint an auditor at a general meeting
c. If an auditor refuses to accept appointment, the powers of the Central Government can be
exercised.
d. None of the above

13. If a casual vacancy in the office of auditor arises by his resignation it should only be filled by
the company in a……..
a. Board meeting
b. extraordinary general meeting
*c. General meeting
d. annual general meeting

14. The auditor of a Government company is appointed by the C & AG Ltd. His remuneration is
fixed by ……………………………….
a. the C & AG Ltd
*b. the shareholders
c. the shareholders at an annual general meeting
d. the board of directors

15. The authority to remove the first auditor before the expiry of term is with …………………..
*a. the shareholders in a general meeting
b. the shareholders in the first annual General meeting
c. the board of directors
d. the Central Government

16. Which of the following statements is not correct regarding removal of first auditor before
expiry of the term?
a. He is removed at a general meeting
b. The shareholders are authorized to do so
*c. The approval of the Central Government is required for such removal
d. The provisions for such removal are contained in the companies’ code

17. The retiring auditor does not have a right to …………………………

a. make written representations
b. get his representations circulated.
c. be heard at the meeting

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AFRIYIE YAW ADDAE
*d. speak as a member of the company

18. Who out of the following cannot be appointed as a statutory auditor of the company?
a. Erstwhile director
*b. Internal auditor
c. Relative of a director
d. Only (b) and (c)

19. A statutory auditor has a right of access at all times to

a. Books and accounts of a company
b. Books, accounts and documents of the company
*c. Books, accounts and vouchers of the company
d. Notices and documents of the company

20. The auditor has a right to

a. Obtain information and explanation
b. Obtain information and explanation from the employees and officers
c. Obtain information and explanation necessary for the purpose of audit
*d. All the above

21. The auditor is appointed by

a. Shareholders in an annual general meeting
*b. Shareholders in general meeting
c. Board of directors in board meeting
d. Any of the above

22. Auditor of a ………… company does not have right to visit foreign branches of the company
a. Unlimited liability
*b. Manufacturing
c. Banking
d. Nonprofit making

23. Who among the following can be appointed as special auditor by the Central Government?
a. The statutory auditor
*b. chartered accountant in practice
c. Any chartered accounted who is not in practice
d. Both (a) and (b)

24. The independence of an internal auditor will most likely be assured if he reports to the
a. President Finance
b. President System
*c. Board Chairman
d. Managing Director

27. The audit committee of a company must be made up of:

a. Representatives from the client’s management, investors, suppliers, and customers.

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b. The audit partner, the chief financial officer, the legal counsel, and at least one outsider.
c. Representatives of the major equity interests, such as preferred and common stockholders.
*d. Members of the board of directors who are not officers or employees.

28. Which of the following should not normally be included in the engagement letter for an audit?
a. A description of the responsibilities of client personnel to provide assistance.
*b. An indication of the amount of the audit fee.
c. A description of the limitations of an audit.
d. A listing of the client’s branch offices selected for testing.

29. Which of the following should the auditors obtain from the predecessor auditors before
accepting an audit engagement?
a. Analysis of balance sheet accounts.
b. Analysis of income statement accounts.
*c. All matters of continuing accounting significance.
d. Facts that might bear on the integrity of management.

30. The audit engagement letter, generally, should include a reference to each of the following
except
a. limitations of auditing
b. responsibilities of management with respect to audit work
c. expectation of receiving a written management representation letter.
*d. a description of the auditor’s method of sample selection.

31. The use of an audit engagement letter is the best method of assuring the auditor will have
which of the following?
a. Auditor will obtain sufficient appropriate audit evidence.
b. Management representation letter
*c. Access to all books, accounts and vouchers required for audit purpose
d. Cooperation from other auditors

32. The use of an audit engagement letter is the best method of documenting
i) the required communication of significant deficiencies in internal control
ii) significantly higher control risk than that assessed in prior audit.
iii) Objective and scope of auditor’s work
iv) Notification of any changes in the original arrangements of the audit.
a. (i) and (ii)
*b. (i) and (iii)
c. ii and (iv)
d. (iii and (iv)

33. An auditor who accepts an audit but does not possess the industry expertise of the
business entity should
a. engage experts
*b. obtain knowledge of matters that relate to the nature of entity’s business
c. inform management about it

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14 ADDAE
d. take help of other auditors

34. Who is responsible for the appointment of statutory auditor of a limited company?
a. Directors of the company
*b. Members of the company
c. The Central Government
d. All of the above

36. Who out of the following cannot be appointed as a statutory auditor of the company?
a. Erstwhile director
*b. Internal auditor
c. Relative of a director
d. Only (b) and (c)

37. A statutory auditor has a right of access at all times to

a. Books and accounts of a company
b. Books, accounts and documents of the company
*c. Books, accounts and vouchers of the company
d. Notices and documents of the company

38. The auditor has a right to

a. Obtain information and explanation
b. Obtain information and explanation from the employees and officers
c. Obtain information and explanation necessary for the purpose of audit
*d. Both (b) and (c)

39. Which of the following has primary responsibility for the fairness of the representations
made in financial statements?
*a. Client’s management.
b. Independent auditor.
c. Audit committee.
d. AICPA.

40. An auditor who accepts an audit but does not possess the industry expertise of the business
entity should
a. engage experts
*b. obtain knowledge of matters that relate to the nature of entity’s business
c. inform management about it
d. take help of other auditors

41. Auditors conduct auditing in accordance with:

a. International Financial Reporting Standards
b. Local pronouncements/Legislations
c. Financial Accounting Standards Board
*d. All of the given options
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42. True and fair presentation means that the financial statement are prepared and presented in
accordance with the requirements of the applicable International Financial Reporting Standards
(IFRS) and local pronouncements/legislations.
Which of the following primary assertions is satisfied when an auditor ensures that there are no
unrecorded assets, liabilities, transactions or events or undisclosed items in the client s financial
records?
a. Valuation
*b. Completeness
c. Existence
d. Rights and obligations

43. External audit of the accounts of a limited company is required

a. because it is demanded by the company’s bankers
b. at the discretion of the shareholders
c. to detect fraud
*d. by the Companies Code

44. The goal of corporate governance and business ethics education is to

a. Teach students their professional accountability and to uphold their personal Integrity to
society.
b. Change the way in which ethics is taught to students.
*c. Create more ethics standards by which corporate professionals must operate.
d. Increase the workload for accounting students.

45. The internal audit function is least effective when the department:
*a. Is non-independent.
b. Is competent.
c. Is objective.
d. Exhibits integrity

46. An independent director is one who:

a. Did not attend a school supported by the company.
b. Does not have outside relationships with other directors.
*c. Does not have any other relationships with the company other than his or her directorship.
d. All of the above.

47. Internal auditors are responsible to:

a. the board of directors.
b. management.
*c. both a and b.
d. neither a nor b.

48. When an auditor is proposed for removal from office, which one of the following is he
NOT permitted to do?
a. Circulate representations to members
*b. Apply to the court to have the proposal removed

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c. Speak at the AGM/EGM where the removal is proposed
d. Receive notification of the AGM/EGM where the removal is proposed

49. Which one of the following is NOT a duty of the auditor?

*a. Duty to report to the company’s bankers
b. Duty to report to the members
c. Duty to sign the audit report
d. Duty to report on any violation of law

50. Assuming that it is not the first appointment of the auditor, who is responsible for the
appointment of the auditor?
*a. The shareholders in a general meeting
b. The managing director
c. The board of directors in a board meeting
d. The audit committee

51. You have been proposed as auditor of a company. What is the first step that you
should take?
*a. Obtain the client’s permission to communicate with the existing auditor
b. Obtain the existing auditor’s working papers
c. Obtain a copy of the company’s most recent board minutes
d. Obtain a copy of the existing auditor’s letter of engagement

52. Which one of the following may auditors NOT perform for their client?
*a. Taking management decisions
b. Preparation of accounting records
c. Preparing tax computations
d. Advising on weaknesses in the internal control systems

53. Which of the following are fundamental ethical principles for professional accountants?
1 Competence
2 Compliance
3 Integrity
4 Objectivity
a. 1, 2 and 3 only
*b. 1, 3 and 4 only
c. 2, 3 and 4 only
d. 1, 2 and 4 only

54. Which of the following statements is INCORRECT?

*a. An auditor may serve on the board of directors of an audit client.
b. An auditor who is an immediate family member of the director of an audit client
must not be assigned to the audit team.

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AFRIYIE YAW ADDAE

c. Purchasing goods from an audit client on normal commercial terms does not
create a threat to the auditor’s independence.
d. An auditor who was recently a director of an audit client must not be assigned to
the audit team for that client.

55. Who normally appoints the external auditors of a company?

a. Directors
*b. Shareholders
c. Audit Committee
d. Senior management

56. Which of the following is NOT the responsibility of the auditor?

a. To provide an opinion on the truth and fairness of the financial statement
b. To conduct an audit in accordance to the International Standards on auditing
*c. To express an opinion on the companies going concern status
d. To assess the accurateness of management assumption of going concern status
57. Persons disqualified to act as an auditor include the following EXCEPT:
a. A body corporate
*b. A retired civil servant with Practising Certificate
c. A partner or employee or officer/servant of the Company
d. A person who has been disqualified to act as auditor of a subsidiary company

58. Which one of the following is not a duty of the auditor?

*a. Duty to report to the company’s bankers
b. Duty to report to the members
c. Duty to sign the audit report
d. Duty to report on any violation of law

59. Which of the following is NOT a potential duty of an audit committee?

a. Review of financial statements
*b. Review of shareholders register
c. Review of Internal Audit
d. Liaison with external auditors

60. One of the following is NOT relevant as to the qualities that an auditor must possess
a. Painstakingness
b. Tactfulness
*c. Deceit
d. Courage

61. The audit committee should focus its activities on the following functions EXCEPT:
a. Reliability and accuracy of the financial information provided to management and external
users

18
b. any accounting or auditing concerns identified as a result of an audit
*c. the appointment of a new director in replacing the outgoing director on account of age
d. the company’s compliance with legal and regulatory provisions.

62. In the audit of historical financial statements by Accounting firms, the

criteria used are
a. regulations of the Canada Revenue Agency.
b. generally accepted auditing standards.
*c. generally accepted accounting principles.
d. regulations of the provincial securities commissions.

63. The auditor has considerable responsibility for notifying users as to whether or not the
statements are properly stated. This imposes upon the auditor a duty to
a. be equally responsible with management for the preparation of the financial
statements.
b. be a guarantor of the fairness in the statements.
c. be an insurer of the fairness in the statements.
*d. provide reasonable assurance that material misstatements will be detected.

64. State any ONE main feature each member of The Institute of Chartered Accountants of your
Country must possess.
*Integrity
*Independence and objectivity
*Confidentiality
*Technical competence
*Conformity with technical competence
*Maintenance of accepted ethical conduct
*Restraint on advertisement of technical ability and publicity.

65. The system by which the affairs of companies are directed and controlled by those charged
with the responsibility of managing them is known as....................................
*Corporate Governance

66. Rules and regulations guiding the implementation of accounting and auditing functions
within an enterprise are embedded in ............................
*Regulatory Framework

67. State TWO circumstances when the directors of a company can appoint an auditor.
*First auditors and casual vacancy

68. Who is responsible for overall quality control on an audit engagement?

*a. Audit engagement partner.
b. Audit engagement team.
c. Quality control reviewer.
d. Audit manager.

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69. An auditor has a duty to:
a. inform shareholders of directors’ remuneration.
b. prepare the financial report for presentation to shareholders.
*c. exercise reasonable care and skills
d. exercise perfect judgment.

70. Corporate governance procedures are primarily concerned with ensuring:

a. the company will not be sued by its shareholders for inappropriate behaviour.
*b. the entity operates at high levels of efficiency and effectiveness.
c. all members of the board of directors attend all directors’ meetings.
d. All of the given answers are correct.

71. Which of the following persons is qualified to be a company auditor?

a. An employee of the company
b. A body corporate
c. A person who is indebted to the company for an amount exceeding GH¢1,000
*d. A practicing chartered accountant
72. Normally, a company auditor is appointed by the
a. Central Government
*b. Shareholders
c. Board of Directors
d. Company Law board

73. An auditor in a casual vacancy is appointed by the

*a. Board of Directors
b. Shareholders
c. Central Government
d. Company Law board

74. A company auditor can be removed before expiry of his term by

*a. Shareholders
b. Board of Directors
c. Central Government
d. State Government

75. Remuneration of a company auditor is fixed by the

a. Shareholders
b. Board of Directors
c. Central Government
*d. Appointing authority

76. A company auditor, in general has to submit his report to

*a. Shareholders
b. Board of Directors
c. Central Government

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d. None of the above

77. Auditor, in general is an

a. Employee of the company
b. Agent of the company
*c. Agent of the shareholders
d. None of the above

78. Which of the following is NOT a statutory right of the auditors of a limited company?
(1) A right to attend all directors’ meetings and receive all notices and communications
relating to such meetings.
(2) A right to speak at general meetings on any part of the business that concerns them as
auditors.
(3) A right to attend any general meeting and receive all notices and communications
relating to such meetings.
*a. (1) only
b. (1) and (3)
c. (2) only
d. (2) and (3)

AFRIYIE YAW ADDAE

1. Which of the following is not correct about independence of mind?

a. It is the exercise of objectivity and professional skepticism.
b. It permits the provision of an opinion without being affected by influences that compromise
professional judgement
c. It allows an individual to act with integrity
*d. It is the state of mind that creates confidence in the auditor

2. Which of the following is not a safeguard created by the profession, legislation or regulation?

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a. Peer review of quality control.
b. Continuing education requirements.
*c. Internal policies to monitor compliance with independence ethics.
d. Professional monitoring processes.

3. The generally accepted auditing standard that requires “Adequate technical training and
proficiency” is normally interpreted as requiring the auditor to have
a. formal education in auditing and accounting.
b. adequate practical experience for the work being performed.
c. continuing professional education.
*d. all of the above.

4. Providing certain non-assurance services to an audit client may create a threat to

independence so significant that no safeguards could reduce the threat to an acceptable level.
All the following are examples of this type of non-assurance services except:
a. Internal audit services.
b. Services that assume a management responsibility.
*c. Tax preparation for chief executives.
d. Tax planning that impacts the financial statements.

5. If a member of the audit team, a member of that individual’s immediate family, or a firm has
a direct financial interest or a material indirect financial interest in the audit client then:
a. The auditor may have to create new safeguards to counteract the threat.
b. The auditors should not participate in the audit, but only act as supervisors.
c. The auditor would have to hire outside auditors to help in the audit.
*d. The self-interest threat created would be so significant that no safeguards could reduce the
threat to an acceptable level.

6. Which of the following would be considered a self-interest threat?

a. When a member of the assurance team was previously a director or officer of the assurance
client.
b. Acting as the client’s advocate in a legal proceeding.
*c. Potential employment with an assurance client.
d. A member of the assurance team has a close family member who is a director or officer of the
assurance client.
7. Which fundamental principle of professional and ethical conduct is described by the phrase
‘having the courage to pursue one’s convictions’?
*a. integrity
b. objectivity
c. confidentiality
d. professional competence and due care

8. In a conflict of interest situation, to whom is the accountant’s first obligation?

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a. the client
*b. the public
c. themselves
d. the government

9. In which one of the following situations is the duty of confidentiality most likely to be
breached?
a. When information is disclosed in a court of law.
b. When information is disclosed in response to a formal investigation by ICAG.
c. If the auditor obtains authorization from the client before disclosing the information.
*d. If information is disclosed after the accountant has resigned from their position with the
employer.

10. Financial involvement with a client will affect independence and may lead a reasonable
observer to conclude that independence has been impaired. Which of the following is not a
form of financial involvement with a client?
a. Loans to or from the client.
*b. Fees paid for audit engagement.
c. Financial interest in a joint venture with a client.
d. Financial interest resulting from being an administrator of a trust with a financial interest in
the client.

11. ‘A professional accountant should not allow bias, conflict of interest or undue influence of
others to override professional or business judgments’ is the definition of what ethics
principle?
a. Integrity.
b. Professional Behaviour.
c. Professional competence and due care.
*d. Objectivity.

12. Safeguards for accepting an audit engagement shall be applied to eliminate any threats or
reduce them to an acceptable level. Which of the following is not a reasonable safeguard for
accepting an audit engagement?
*a. Requesting a background check of key employees.
b. Obtaining necessary information from other sources.
c. Asking the existing accountant to provide known information on any facts or circumstances
that the proposed accountant needs to be aware of before deciding whether to accept the
engagement.
d. Before accepting the engagement state that contact with the existing accountant will be
requested.

13. Regarding auditor remuneration, a self-interest threat to professional competence and due
care is created if:

AFRIYIE YAW ADDAE

23
a. A professional accountant in public practice solicits new work through advertising or other
forms of marketing.
*b. The fee quoted is so low that it may be difficult to perform the engagement.
c. The auditor accepts a referral of a new client from an existing client.
d. A gift from a client is accepted.

14. To safeguard against a self-interest threat to objectivity, a professional accountant in public

practice entrusted with money (or other assets) belonging to others should do all the
following except:
a. Use such assets only for the purpose for which they are intended.
*b. Report all transactions to the person whose money is being held on a periodic basis.
c. At all times, be ready to account for those assets, and any income, dividends or gains
generated.
d. Keep such assets separately from personal or firm assets.

15. The state of mind that permits the expression of a conclusion without being affected by
influences that compromise professional judgement, thereby allowing an individual to act
with integrity and exercise objectivity and professional scepticism, is called:
a. Professional behaviour.
*b. Independence of mind.
c. Independence in appearance.
d. Objectivity.

16. An auditor should not accept a loan on favourable commercial terms from an audit
client because of the threat to his or her independence. The threat would be a:
*a. Self-interest threat
b. Self-review threat
c. Advocacy threat
d. Familiarity threat

17. The audit procedures that ensure that transactions are recorded in the period to which they
relate could be best described as
a. Border line
b. Deadline procedures
c. Leverage test
*d. Cut off procedure

18. Independence and objectivity of an auditor cannot be impaired if

a. He accepts undue hospitality from the client
b. He has direct/Indirect beneficial interest in any capacity in an organization for which he is
acting as auditor
c. He is related by blood or by marriage to the directors of the company
*d. He rejects appointment on the ground of technical incompetence

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19. What is the responsibility of an incoming auditor with respect to communicating with the
outgoing auditor in connection with a prospective new audit client?
a. the incoming auditor has no responsibility to contact the outgoing auditor
*b. the incoming auditor should obtain permission from the prospective client to contact the
predecessor auditor
c. the incoming auditor should contact the outgoing auditor regardless of whether the prospective
client authorized contact
d. the incoming auditor need not contact the outgoing auditor if the incoming auditor is aware of
all available relevant facts.

20. A letter issued by an auditor to management or another party at the request of management,
expressing an opinion as to management`s compliance with regulations or requirements
concerning financial matters, is called...........letter.
*Letter of weakness
*Management Letter

21. Which of the following is not a threat to independence?

a. Self-interest.
b. Familiarity.
*c. Public interest.
d. Advocacy.

22. In which of the following situations do you believe the auditor has upheld the fundamental
principle of independence?
a. An auditor has been appointed to audit a company in which he/she is a major shareholder.
b. An auditor has been appointed to audit a major manufacturing company that has lent him/her
GH¢300,000 for the purchase of a house.
*c. The auditor of VIP Travel Ltd currently has a travel account with VIP Travel that operates on
the same terms and conditions as all other travel accounts with the travel agent.
d. The auditor of ABCD Ltd is the spouse of the chairman of the board of directors of ABCD
Ltd.

23. An audit independence issue might be raised by the auditor’s participation in consulting
services engagements. Which of the following statements is most consistent with the
profession’s attitude towards this issue?
a. Information obtained as a result of a consulting engagement is confidential to that engagement
and should not influence the performance of the
attest function.
b. The decision as to loss of independence must be made by the client, based on the facts of the
particular case.
*c. The auditor should not make management decisions for an audit client.

25
d. An auditor who is asked to review management decisions is competent to make these
decisions and can do so without loss of their independence.

24. Audit fees should be determined by:

a. the amount of time taken to perform the audit.
b. the least expensive tender in an audit tender process.
c. the knowledge and skill required and the responsibility accepted by the auditor.
*d. the time, skill and responsibility required to complete the audit.

RANSFORD AHIMA

1. Audit information is usually considered relevant when it is:

a. derived from valid statistical sampling
b. objective and unbiased
c. factual, adequate and convincing
*d. consistent with the audit objectives

2. Analytical procedures issued in the planning stage of an audit, generally

a. helps to determine the nature, timing and extent of other audit procedures
b. directs attention to potential risk areas
c. indicates important aspects of business
*d. All of the above

3. Audit programme is prepared by

a. the auditor
b. the client
c. the audit assistants
*d. the auditor and his audit assistants

4. Which of the following best describes the primary purpose of audit programme preparation?
a. To detect errors or fraud.
b. To comply with GAAP
*c. To gather sufficient appropriate evidence
d. To assess audit risk

5. In planning and performing an audit, auditors are concerned about risk factors for two distinct

26
types of fraud: fraudulent financial reporting and misappropriation of assets. Which of the
following is a risk factor for misappropriation of assets?
a. Generous performance-based compensation systems.
b. Management preoccupation with increased financial performance.
*c. An unreliable accounting system.
d. Strained relationships between management and the auditors.

6. Which of the following statements is not correct about materiality?

a. Materiality is a relative concept
b. Materiality judgments involve both quantitative and qualitative judgments
c. Auditor’s consideration of materiality is influenced by the auditor’s perception of the needs of
an informed decision maker who will rely on the financial statements
*d. At the planning state, the auditor considers materiality at the financial statement level only

6. ………. the audit risk…….., the materiality and ……the audit effort
*a. Lower, Higher, Lower
b. Lower, Lower, Higher
c. Higher, Lower, Lower
d. Lower, Higher, Higher

7. In determining the level of materiality for an audit, what should not be considered?
a. Prior year’s errors
*b. The auditor’s remuneration
c. Adjusted interim financial statements
d. Prior year’s financial statements

8. Which of the following is not an objective of the audit planning procedure?

a. To set out the way in which the objectives and other priorities will be achieved
b. To define how the audit evidence necessary to achieve the objectives will be obtained
*c. To perform data analysis to identify major weaknesses
d. To identify the resources that will be needed and actually employed in audits

9. Materiality threshold is defined as the maximum tolerance level of errors identified after
verification of a sample. Audit risk is the probability of existing errors not being identified by the
auditors. Which of the following statements is not correct?
a. The higher the materiality threshold, the lower the audit risk
b. Materiality and audit risk are inversely proportional
*c. The lower the materiality threshold, the higher the audit risk
d. Materiality and audit risk are not related

10. In determining the level of materiality for an audit, what should not be considered?
a. Prior year’s errors
*b. The auditor’s remuneration
c. Adjusted interim financial statements
d. Prior year’s financial statements

AFRIYIE YAW 27ADDAE

11. Which of the following is one of the procedures in the planning phase?
a. Determine need for other professionals
b. Prepare clients proposal
*c. Determine materiality
d. Select staff to perform the audit

12.The standards given in ‘Understanding the Entity and Its Environment and Assessing the
Risks of Material Misstatement’ (ISA 315) emphasizes:
*a. Obtaining an understanding of business risks and significant risks.
b. Procedures for sampling audit tests.
c. Reports to federal regulators.
d. Obtaining an understanding of control risk.

13. Information acquired during the planning phase about business operations may include all of
the following except:
a. Nature of revenue sources.
*b. Acquisition and disposals of business divisions.
c. Market.
d. Employment.

14. Which of the following is not a procedure to obtain an understanding of risk in the planning
stage (described in ISA 315)?
*a. Procedures for sampling audit tests.
b. Inquiries of management.
c. Observation and inspection.
d. Analytical procedures.

15. Misstatements or omissions are material if they could reasonably be expected to influence
_____________ taken on the basis of the financial statements.
a. Primary qualitative characteristics.
*b. Economic decisions of users.
c. Pervasiveness of the item.
d. The content of the item or error

16. Judgements about materiality are made in light of surrounding circumstances, and are
affected by the ______________ of a misstatement, or a combination of both.
a. Significance or nature.
b. Significance or size.
c. Size or characteristics.
*d. Size or nature.

17. Business operations, types of investments, capital structure and financing, and ownership
structures are areas that are considered when obtaining an understanding of:
a. Accounting policies.
b. Objectives and strategies.
*c. The nature of the entity.

RANSFORD28AHIMA
d. Measurement and review of financial performance.

18. Which of the following might be a commonly used guideline related to a financial statement
materiality base?
a. 5% to 10% of long-term liabilities.
b. 2% to 4% of net income before taxes.
*c. 1/2% to 2% of total assets.
d. 15% to 20% of current assets.

19. Typically, an audit planning memorandum would contain the following sections except:
a. Background information.
b. Objectives of the audit.
*c. Assessment of business risk.
d. Audit approach.

20. Why do auditors concentrate their efforts on material items in accounts?

a. Because they are easier to audit
b. Because it reduces the audit time
*c. Because the risk to the accounts of their being incorrectly stated is greater
d. Because the directors have asked for it
21. Which one of the following is NOT considered to be part of planning?
a. Background i.e. industry
b. Previous year’s audit i.e. any qualifications in the report
c. Considering the work to be done by the client staff e.g. internal audit
*d. Considering whether the financial statements show a true and fair view

22. Which of the following should NOT be considered at the planning stage?
a. The timing of the audit
b. Analytical review
c. Last year’s written representation letter
*d. Obtaining written representations

23. At the planning stage you would NOT consider:

a. the timing of the audit
*b. whether corrections from the inventory count have been implemented
c. last year's audit
d. the potential use of internal audit

24. The auditor must have a thorough understanding of the entity and its environment. The
auditor must also consider the client's business strategies, processes, and measurement indicators
for critical success factors related to those strategies. This analysis helps the auditor
a. decide if they want to accept the engagement.
*b. identify risks associated with the client's strategy that could affect the financial statements.
c. assess the level of materiality that is appropriate for the audit.
d. identify the potential for fraud in the financial reporting process.

AFRIYIE YAW
29 ADDAE
25. When considering each material type (or class) of transactions during the audit, which
general transaction-related audit objectives are assessed during the audit?
*a. all five transaction-related audit objectives
b. those transaction-related audit objectives where there are poor internal
controls
c. those transaction-related audit objectives where there is the highest risk of
error
d. primarily completeness, existence and valuation, since this is where most
errors occur

26. Materiality in planning and performing an audit defines materiality in terms of three key
concepts. The first and second concepts are that a material misstatement should be considered in
the context of knowledgeable users and the effect on decision making and that material is relative
to circumstances surrounding the decision and nature of the information. The third concept is
*a. that the auditor should consider users of financial statements as a group.
b. that the auditor should consider users of financial statements individually.
c. that the auditor should be conservative in setting the materiality level.
d. that the users should be informed and approve of the materiality used by the
auditor.

27. Ms. Nyame is in the process of performing the audit. In this process, Sika decided to change
the materiality. A valid reason for this would be
a. the reviewing partner indicated he would feel more comfortable if additional
tests were performed and materiality was lower.
*b. a new user of the financial statement was identified in the process.
c. the planning materiality required the auditors to perform too many tests.
d. a fraud was discovered in the accounts payable section.

28. If the auditor sets a low dollar amount as the preliminary judgment about materiality,
a. less evidence is required than for a high amount.
*b. more evidence is required than for a high amount.
c. the same amount of evidence is required as for a high dollar amount.
d. it has no effect on the amount of evidence required.

29. The auditors have decided upon a materiality level of GH¢100,000 for their audit of ABC
Manufacturing. Which one of the following errors would be considered more important by the
auditors? An
a. error in accounts receivable cut-off of GH¢50,000
b. error in allocation between accounts receivable and accounts payable by
GH¢75,000
*c. illegal payment of GH¢5,000
d. overstatement of accounts payable by GH¢15,000

20. The purpose of allocating planning materiality to balance sheet accounts is to

30
AFRIYIE YAW ADDAE
*a. assess the appropriate evidence to accumulate for each account on both the
balance sheet and income statement.
b. reduce the amount of procedures done in the course of the audit.
c. increase the possibility that fraud or illegal activities would be detected by
audit procedures.
d. assess the appropriate evidence to accumulate for each account on the balance
sheet.

21. Which of the following items must the auditor comply with in the planning, conduct and
reporting of all audit engagements?
a. Guidance statements.
b. Companies Act 1963 (Act 179).
*c. Requirements of auditing standards.
d. All of the given answers are correct.

22. Which of the following statements concerning professional indemnity insurance is correct?
*a. Professional indemnity insurance is one of the major costs for audit firms.
b. Professional indemnity insurance is readily available.
c. Professional indemnity insurance provides complete protection from negligence claims.
d. All of the given answers are correct.

23. The level of materiality that the auditor determines:

a. is the same for all clients.
b. should always be based on the net profit after tax.
*c. is dependent on the auditor’s judgment.
d. should always equal 5 percent of a relevant base

24. Which of the following statements concerning communication with the previous auditor is
incorrect?
a. The prospective auditor should obtain the client’s permission to communicate with the
previous auditor.
b. In their communication with the previous auditor, the prospective auditor should ask the
previous auditor for any
information necessary to make a decision on acceptance.
c. The previous auditor must obtain the client’s permission to discuss the client’s affairs with the
prospective auditor.
*d. The prospective auditor should discuss with management any issues raised in the previous
auditor’s response before deciding whether to accept the appointment.

25. Which of the following statements about scheduling of audit staff is correct?
a. The number of audit staff required for an engagement is always the same.
*b. The quality of audit staff needed on an engagement depends on the complexity of audit work
anticipated.
c. When scheduling the staff for an engagement the auditor needs to consider confidentiality.
d. There should always be at least three audit staff on an engagement.

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26. A properly planned and performed audit may fail to detect a material misstatement resulting
from fraud because:
*a. audit procedures that are effective for detecting an error may be ineffective for fraud that is
concealed through collusion.
b. an audit is planned and performed to provide reasonable assurance of detecting material
misstatements caused by errors but not by fraud
c. the factors considered in assessing control risk indicated an increased risk of error but only a
low risk of fraud in the financial report.
d. the auditor did not consider factors influencing audit risk for account balances that have
effects pervasive to the financial report taken as a whole.

UNIVERSITY OF GHANA BUSINESS SCHOOL

BSC ADMINISTRATION [ACCOUNTING]
AUDIT AND ASSURANCE
MCQ: CORPORATE GOVERNANCE

53 Which of the following relationships is unlikely to impair the independence of a non-executive director?
A Being an executive director of another company, which trades with the company
B Holding ordinary shares in the company
C Having once been an operational manager of the company nine years ago
D Entering into a GHS2m construction contract with the company five years ago in a previous employment
E Being the husband of the finance director

54 Who is primarily responsible for ensuring that a company complies with all relevant legal provisions?
A The directors
B The auditor
C The regulatory authorities
D All of the other options

55 Which of the following statements is true in respect of auditors' duties?

A Auditors must prepare a report for the shareholders on whether the financial statements are presented fairly in
accordance with the financial reporting framework
B Auditors are responsible for the preparation of the financial statements
C Auditors are responsible for the effective operation of the accounting systems and internal control
D Auditors owe a statutory duty of care to creditors of a company

56 Which of the following statements is true in respect of audit committees?

A Audit committees should be made of non-executive directors
B Audit committees liaise between shareholders and directors
C There is a statutory requirement for all companies that are not small or medium-sized to establish an audit committee
D Audit committees are responsible for recommending directors' remuneration

AFRIYIE YAW
32 ADDAE
57 Good corporate governance covers a range of areas. Which of the following areas does not constitute a major
element of corporate governance?
A Accountability and audit
B The board
C Relations with shareholders
D Relations with creditors and other stakeholders

58 Which of the following statements is true regarding International Standards on Auditing?

A They only apply to audits which include international companies
B They are issued by the IAASB
C They are issued by the FRC
D They only apply to audits of financial statements which have been prepared in accordance with
IFRSs

59 Hugh has recently set up in business as a Chartered Accountant. He has a few clients already, and is
looking to expand. Which of the following possibilities is it most likely that Hugh would be able to accept?
A An offer to take over the audit of the company of which Hugh's father is managing director
B An offer from a large private company to carry out the annual audit for a fee which represents 20% of Hugh's total
fee income
C An offer from a client interested in a tax avoidance scheme to pay Hugh on the basis of 10% of any tax saving
D An offer from Hugh's only public company audit client to prepare the year end accounts for the company

60 Mr Brown is a senior manager in a small firm of Chartered Accountants, ABC and Co, and has been
asked by Mr Smith, the managing director of Ahafo Ltd, to become their financial director. Initially, it is not expected
that this will take up much of Mr Brown's time and so he will remain an employee of ABC and Co for the foreseeable
future. Which of the following Chartered Accountants could then act as auditor of Ahafo Ltd without infringing
the provisions of the IESBA Code of Ethics?
A Mr Jones, who retired as managing director of Ahafo Ltd four years ago
B A partner in ABC and Co
C Mr Black, whose wife has a beneficial shareholding in Ahafo Ltd
D Mr Brown's wife, who works part-time from home

61 Which of the following is most likely to be ethically unacceptable?

A Sending a brochure to the MDs of the largest companies in your area advertising your services
B Holding clients' monies in trust for a long period of time
C Receiving a bonus for performing the audit of a client within a prescribed time frame
D Performing internal and external audit services for the same client

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