Multiple Choice Questions: 6) The first auditor or auditors are

appointed by:
1) Audit Note Book contains: --------------------
(A) Central Government.
(A) Various dates of reference.
(B) Company Law Board.
(B) Details of work done.
(C) Board of Directors.
(C) Notes regarding item requiring clarification,
explanations, etc. (D) Shareholders.

(D) All of the above. Ans.: (C) Board of Directors.

Ans.: (D) All of the above. 7) A number of checks & controls exercised
in a business to ensure its efficient working
2) Which of the following has a broader is known as:
scope?
(A) Internal check.
(A) Internal Control.
(B) Internal control.
(B) Internal Audit.
(C) Internal audit.
(C) Internal Checking.
(D) Interim check.
(D) None of the above.
Ans.: (A) Internal check
Ans.: (D) None of the above.
8) Voucher relates to:
3) An internal auditor is:
(A) Cash receipt.
(A) Temporary Employee.
(B) Cash payment.
(B) Permanent Employee.
(C) Credit transactions.
(C) Daily Wager.
(D) All the above.
(D) None of the above.
Ans.: (D) All the above.
Ans.: (B) Permanent Employee.
9) Internal check is meant for :
4) The main object of vouching is:
(A) Prevention of frauds.
(A) To prepare trial balance.
(B) Detection of frauds.
(B) Conduct routine checking.
(C) Helping audit in depth.
(C) Verify authenticity & authority of
transactions. (D) Detection of errors.

(D) Checking of vouchers Ans.: (C) Helping audit in depth.

Ans.: (D) Checking of vouchers 10) Internal auditor is appointed by :

5) Valuation is the base of: (A) The management.

(A) Verification. (B) The shareholders.

(B) Marketing. (C) The government.

(C) Internal checking. (D) The statutory body.

(D) Vouching. Ans.: (A) The management.

Ans.: (A) Verification.

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11) Auditing begins where -------- ends. 16) The main object of investigation is :
(A) Selling. (A) To discover errors and frauds.
(B) Inventory valuation. (B) To prevent errors and frauds.
(C) Accounting. (C) To verify statements.
(D) Purchases. (D) All the above.
12) A good audit report must at least meet Ans. :(D) All the above.
one of the following qualifications:
17) Internal controls and internal check are:
(A) It should offer constructive and timely
suggestions to the management. (A) One and the same.

(B) It should not point out mistakes. (B) Different.

(C) It should not be based on factual (C) Internal control includes internal check.
information. (D) None of the above.
(D) It should not be based on balance sheet. Ans. : (C) Internal control includes internal
Ans.: (A) It should offer constructive and timely check.
suggestions to the management. 18) An auditor is like a :
13) The work of one clerk is automatically (A) Watchman.
check by another clerk is called:
(B) Foolish dog.
(A) Internal control.
(C) Mad dog.
(B) Internal check.
(D) Watch dog.
(C) Internal audit.
Ans. : . (D) Watch dog.
(D) None of the above.
19) Special audit is necessary for:
Ans.: (B) Internal check.
(A) Inefficient concern.
14) The owners of the company are called:
(B) Processing concern.
(A) Debenture holders.
(C) Trading concern.
(B) Debtors.
(D) Manufacturing concern.
(C) Shareholders.
Ans.: (A) Inefficient concern.
(D) None of the above.
20) The company’s auditor is expected to
Ans.: (C) Shareholders. give:
15) Verification is: (A) His expert opinion about the accounts.
(A) The art of recording the business (B) A factual position about the accounts.
transactions.
(C) A critical review of the accounts.
(B) An examination of the books of accounts.
(D) Financial assistance.
(C) The act of establishing the accuracy of
entries in the books of accounts. Ans.: (B) A factual position about the accounts.
Ans.: (C) The act of establishing the accuracy
of entries in the books of accounts.

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21) Auditors of a joint stock company are 26) Audit in depth is synonymous for:
appointed by :
(A) Complete audit.
(A) Directors of the company. (B) Completed audit.
(C) Final audit.
(B) Annual general meeting. (D) Detailed audit.
(C) Election at the annual general meeting. Ans. : (D) Detailed audit.

(D) Debenture holders. 27) Balance sheet audit included

verification of :
Ans.: (C) Election at the annual general
meeting. (A) Assets.

22) A company auditor can be removed by : (B) Liabilities.

(A) Board of directors. (C) Income & expenditure accounts where

appropriate.
(B) Managing director.
(D) All of the above.
(C) Any director.
Ans. : (D) All of the above.
(D) General Meeting.
28) Which of the following statements is not
Ans. : (D) General Meeting. true about continuous audit?
23) A vacancy caused by resignation of an (A) It is conducted at regular interval.
auditor is filled by :
(B) It may be carried out on daily basis.
(A) Board of directors.
(C) It is needed when the organization has a
(B) Managing director. good internal control system.
(C) General meeting. (D) It is expensive.
(D) Central government. Ans. : (C) It is needed when the organization
has a good internal control system.
Ans.: (C) General meeting
29) Which of the following is not a fact of
24) Audit in depth means:
EPA?
(A) Audit of each and every item.
(A) Economic audit.
(B) Intensive audit of each and every item.
(B) Efficiency audit.
(C) Intensive audit of few items.
(C) Expenditure audit.
(D) Audit of a few selected items.
(D) Effectiveness audit.
Ans.: (B) Intensive audit of each and every
Ans.: (C) Expenditure audit.
item.
30) Balance sheet does not include:
25) Concurrent audit is a part of:
(A) Verification of assets & liabilities.
(A) Internal check system.
(B) Vouching of income & expense accounts
(B) Continuous audit.
related to assets and liabilities.
(C) Internal audit system.
(C) Examination of adjusting and auditing &
(D) Final audit. closing entries.

Ans. (C) Internal audit system. (D) Routine checks.

Ans.: (D) Routine checks.

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31) When issuing unqualified opinion the 36) The audit that is made compulsory
auditor who evaluates the audit findings under the statute is called –
should be satisfied that the :
(A) Statuary audit
(A) Amount of known miss-statement is
documented in working papers. (B) Partial audit
(B) Estimates of the total likely misstatement (C) Complete audit
are less than materiality level.
(C) Estimated of the total likely misstatement is (D) Continues audit
more than materiality level.
Ans. : (A) Statuary audit.
(D) Estimates of the total likely misstatement
37) Who among the following can be
cannot be made.
appointed as the auditor of company?
Ans. : (B) Estimates of the total likely
(A) A partner or the director of the company
misstatement are less than materiality level.
(B) A person of unsound mind
32) Under check system principle
of_________ is followed. (C) Mr. ‘Y’ who owes Rs.500 to company
(A) Division of labour (D) Mr. ‘Z’ who holds the ‘CA’ Certificate
(B) Division of work Ans. : Mr. ‘Z’ who holds the ‘CA’ Certificate.
(C) Principle of scalar chain 38) ___ is documentary evidence by which
the accuracy in the books of accounts may
(D) Accountancy
be proved.
.ANS : (A) Division of labour
(A) Cheque
33) This kind of audit is generally
(B) Receipt
conducted between two annual audits.
(C) Voucher
(A) Internal audit
(D) Statement
(B) Interim audit
Ans. : (C) Voucher.
(C) Final audit
39) Sale of Rs.50,000 to ‘A’ was entered as
(D) Continuous audit
a sale to ‘B’. This is an example of –
Ans. : (B) Interim audit.
(A) Error of omission
34) Before the work of audit is commenced,
(B) Error of commission
the auditor plans out the whole of audit
work is known as – (C) Compensating error
(A) Audit plan (D) Error of Principle.
(B) Audit note
(C) Audit risk Ans. : (B) Error of commission.
(D) Audit program 40) In comparison to the independent
Ans. : (D) Audit program. auditor an internal auditor is more likely to
35) Internal auditor is appointed by – be concerned with –

(A) The management (A) Cost accountancy system

(B) The shareholders (B) Internal control system

(C) The government (C) Legal compliance

(D) statutory body D) Accounting system

Ans. : (A) The management. Ans. : (B) Internal control system.

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41) The audit program is prepared by – 46) Undervaluation of stock is –
(A) The auditor (A) Technical error
(B) The client (B) Compensatory error
(C) The audit assistants (C) Error of principle
(D) Auditor & his assistants (D) none of these
Ans. : (D) Auditor & his assistants. Ans. : (C) Error of principle.
42) Interim audit refers to – 47) Verification refers to –
(A) Examination of accounts continuously (A) Examination of journal & ledger
(B) Examination of accounts intermittently (B) Examination of vouchers related to assets
(C) Audit work to find out & check interim profits (C) Examining the physical existence &
of a company valuation of assets
(D) Carrying on audit for bonus purposes at the (D) Calculation of valuation of assets
end of year
Ans. : (C) Examining the physical existence &
Ans. : (C) Audit work to find out & check interim valuation of assets.
profits of a company .
48) Valuation of fixed assets is based on the
43) A company auditor should see that the concept –
dividend is paid –
(A) Going concern
(A) After charging depreciation
(B) Money measurement
(B) Without charging depreciation
(C) Dual aspect
(C) Out of capital
(D) Cost concept.
(D) None of the above.
Ans. : (A) Going concern.
Ans. : (A) After charging depreciation.
49) “Auditor is not valuer.” This statement
44) Errors of omission are – was stated in –
(A) Technical errors (A) Kingston Cotton Mill Case
(B) Error of principle (B) London & General Bank Case
(C) Compensating error (C) Lee VS Neuchatel Co. LTD Case
(D) none of these (D) London Oil Storage Co.LTD Case
Ans.: (A) Technical errors. Ans. :(A) Kingston Cotton Mill Case.
45) Vouching implies – 50) Floating assets are valued at –
(A) Inspection of receipts (A) Cost
(B) Examination of vouchers to check (B) Market price
authenticity of records
(C) Cost price or market price whichever is less
(C) Surprise checking of accounting records
(D) Cost less than depreciation
(D) Examining the various assets
Ans. : (C) Cost price or market price whichever
Ans. : (B) Examination of vouchers to check is less.
authenticity of records.

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51) Outstanding expenses should be 56) Internal auditor has to submit report to
verified with the help of –
(A) Shareholders
(A) Cashbook
(B) Government
(B) Balance book
(C) Company law board
(C) Journal proper
(D) none of above
(D)None of above.
Ans. : D) none of above.
Ans. : (C) Journal proper
57) Auditor in general is –
52) First auditor of the company is
appointed by the – (A) Employee of the company

(A) Shareholders (B) Agent of the company

(B) Central government (C) Agent of the shareholders

(C) Company law board (D) None of the above

(D) Board of directors Ans. : (C) Agent of the shareholders.

Ans. :(D) Board of directors. 58) Shares issued for consideration other
than cash should be vouched with help of –
53) The vacancy caused by resignation at a
auditor is filled by – (A) Directors minutes book

(A) Board of directors (B) Shareholders minute’s book

(B) At the general meeting of shareholders (C) Contract with the party concerned

(C) By the central government (D) Cash book

(D) By the company law board Ans. : (C) Contract with the party concerned.

Ans. : (B) At the general meeting of 59) The term Standard Auditing Practices
shareholders refers –

54) A special auditor is appointed by the – (A) Auditing techniques adopted by auditor for
collecting & vouching evidences
(A) Shareholders
(B) Test checking
(B) Board of directors
(C) Standards of auditing
(C) Central government
(D) True & fair view
(D) CAG
Ans. : (A) Auditing techniques adopted by
Ans. : (C) Central government. auditor for collecting & vouching evidences.
55) A remuneration of a company auditor is 60) AAS refers to –
fixed by the –
(A) Audit evidence
(A) Shareholders
(B) Audit Planning
(B) Board of directors
(C) Risk assessments &Internal control
(C) Central Government
(D) Knowledge of business
(D) Appointing authority
Ans. :(D) Knowledge of business.
Ans. : (D) Appointing authority.

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61) The panel of Auditors of cooperative 66) Audit of Banks is an example of –
society is maintained by –
(A) Statutory Audit
(A) Charted Accountant
(B) Balance Sheet Audit
(B) Central Government
(C) Concurrent Audit
(C) Registrar
(D) All of above
(D) Shareholders
Ans. : (D) All of above.
Ans. : (C) Registrar.
67) Auditor of a _____ company does not
62) Banking Regulation Act was passed in have right to visit foreign branches of
the year– company.
(A) 1912 (A) Unlimited Company
(B) 1949
(C) 1956 (B) Manufacturing Company
(D) 1955. (C) Banking Company
Ans. : (B) 1949.
(D) Non-Profit making company
63) Which of the following statements is not
correct regarding removal of first auditor Ans. : (B) Manufacturing Company.
before expiry of the term?
68) Cost Audit under Section 233(B) of The
(A) He is removed at general meeting Company Act is _____
(B) Shareholders are authorized to do so (A) Voluntary
(C) The approval of central government is (B) Compulsory
required for such removal
(C) Advisable.
(D) The provision for such removal is contained
(D) Avoidable
in Section 224 (7)
Ans. : (C) Avoidable.
Ans. : (C) The approval of central government
is required for such removal 69) Internal Auditing Standards are issued
by the –
64) Retiring auditor does not have right to –
(A) International Accounting Standard Board
(A) Make written representations
(B) Financial Accounting Standard Board
(B) Get his representation circulated
(C) International Audit & Assurance Standard
(C) Be heard at the meeting
Board
(D) Speak as member of company
(D) Auditing Practices Board
Ans. :(A) Make written representations
Ans. : (C) International Audit & Assurance
65) According to Section ___ Special Audit Standard Board
is conducted at the central government
70) Which of the following is not a duty of
(A) Section 233(A) an auditor?
(B) Section 233(B) (A) Duty to report company’s banker
(C) Section 242(A) (B) Duty to report to the members
(D) Section 242(B) (C) Duty to sign the audit report(D) Duty to
report on any violation of law
Ans. : (C) Section 242(A).
Ans. : (A) Duty to report company’s banker.

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71) The main object of vouching is : 76) Auditing begins where -------- ends.
(A) To prepare trial balance. (A) Selling.
(B) Conduct routine checking. (B) Inventory valuation.
(C) Verify authenticity & authority of (C) Accounting.
transactions.
(D) Purchases.
(D) Checking of vouchers.
Ans. : (C) Accounting
Ans. : (C) Verify authenticity & authority of
transactions 77) The work of one clerk is automatically
check by another clerk is called :
72) Valuation is the basis of :
(A) Internal control.
(A) Verification.
(B) Internal check.
(B) Marketing.
(C) Internal audit.
(C) Internal checking.
(D) None of the above.
(D) Vouching.
Ans. : (B) Internal Check
Ans. : (A) Verification
78) The owners of the company are called:
73) The first auditor or auditors are
appointed by : (A) Debenture holders.

(A) Central Government. (B) Debtors.

(B) Company Law Board. (C) Shareholders.

(C) Board of Directors. (D) None of the above.

(D) Shareholders. Ans.: (C) Shareholders

Ans.: (C) Board Of Directors 79) An auditor is like a :

74) Voucher relates to: (A) Watchman.

(A) Cash receipt. (B) Foolish dog.

(B) Cash payment. (C) Mad dog.

(C) Credit transactions. (D) Watch dog.

(D) All the above. Ans.: (D) Watch dog

Ans. : All of the above. 80) A company auditor can be removed by :

75) Internal auditor is appointed by : (A) Board of directors.

(A) The management. (B) Managing director.

(B) The shareholders. (C) Any director.

(C) The government. (D) General Meeting.

(D) The statutory body. Ans. : (D) General Meeting

Ans. : (A) The management

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81) This kind of audit is generally 86) ___ is documentary evidence by which
conducted between two annual audits. the accuracy in the books of accounts may
be proved.
(A) Internal audit
(A) Cheque
(B) Interim audit
(B) Receipt
(C) Final audit
(C) Voucher
(D) Continuous audit
(D) Statement
Ans.: (B) Interim audit.
Ans. : (C) Voucher.
82) Before the work of audit is commenced,
the auditor plans out the whole of audit 87) Sale of Rs.50,000 to ‘A’ was entered as
work is known as – a sale to ‘B’. This is an example of –
(A) Audit plan (A) Error of omission
(B) Audit note (B) Error of commission
(C) Audit risk (C) Compensating error
(D) Audit program (D) Error of Principle.
Ans. : (D) Audit program. Ans. : (B) Error of commission.
83) Internal auditor is appointed by – 88) In comparison to the independent
auditor an internal auditor is more likely to
(A) The management be concerned with –
(B) The shareholders (A) Cost accountancy system
(C) The government (B) Internal control system
(D) statutory body (C) Legal compliance
Ans. : (A) The management. D) Accounting system
84) The audit that is made compulsory Ans. : (B) Internal control system.
under the statute is called –
89) The audit program is prepared by –
(A) Statuary audit
(A) The auditor
(B) Partial audit (B) The client
(C) Complete audit (C) The audit assistants
(D) Auditor & his assistants
(D) Continues audit Ans. : (D) Auditor & his assistants.
Ans. : (A) Statuary audit. 90) Interim audit refers to –
85) Who among the following can be (A) Examination of accounts continuously
appointed as the auditor of company?
(B) Examination of accounts intermittently
(A) A partner or the director of the company
(C) Audit work to find out & check interim profits
(B) A person of unsound mind of a company
(C) Mr. ‘Y’ who owes Rs.500 to company (D) Carrying on audit for bonus purposes at the
end of year
(D) Mr. ‘Z’ who holds the ‘CA’ Certificate
Ans. : (C) Audit work to find out & check interim
Ans. : (D) Mr. ‘Z’ who holds the ‘CA’ Certificate.
profits of a company .

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91) A company auditor should see that the 96) Valuation of fixed assets is based on the
dividend is paid – concept –
(A) After charging depreciation (A) Going concern
(B) Without charging depreciation (B) Money measurement
(C) Out of capital (C) Dual aspect
(D) None of the above. (D) Cost concept.
Ans. : (A) After charging depreciation. Ans. : (A) Going concern.
92) Errors of omission are – 97) “Auditor is not valuer.” This statement
was stated in –
(A) Technical errors
(A)Kingston Cotton Mill Case
(B) Error of principle
(B) London & General Bank Case
(C) Compensating error
(C) Lee VS Neuchatel Co. LTD Case
(D) None of these
(D) London Oil Storage Co.LTD Case
Ans.: (A) Technical errors.
Ans. : (A)Kingston Cotton Mill Case.
93) Vouching implies –
98) Floating assets are valued at –
(A) Inspection of receipts
(A) Cost
(B) Examination of vouchers to check
authenticity of records (B) Market price
(C) Surprise checking of accounting records (C) Cost price or market price whichever is less
(D) Examining the various assets (D) Cost less than depreciation
Ans. : (B) Examination of vouchers to check Ans. : (C) Cost price or market price whichever
authenticity of records. is less.
94) Undervaluation of stock is – 99) Outstanding expenses should be
verified with the help of –
(A) Technical error
(A) Cashbook
(B) Compensatory error
(B) Balance book
(C) Error of principle
(C) Journal proper
(D) none of these
(D) None of above.
Ans. : (C) Error of principle.
Ans. : (C) Journal proper
95) Verification refers to –
100) First auditor of the company is
(A) Examination of journal & ledger appointed by the –
(B) Examination of vouchers related to assets (A) Shareholders
(C) Examining the physical existence & (B) Central government
valuation of assets
(C) Company law board
(D) Calculation of valuation of assets
(D) Board of directors
Ans. : (C) Examining the physical existence &
valuation of assets. Ans. : (D) Board of directors.

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101) The vacancy caused by resignation of 106) Shares issued for consideration other
an auditor is filled by – than cash should be vouched with help of –
(A) Board of directors (A) Director’s minutes book
(B) At the general meeting of shareholders (B) Shareholders minute’s book
(C) By the central government (C) Contract with the party concerned
(D) By the company law board (D) Cash book
Ans. : (B) At the general meeting of Ans. : (C) Contract with the party concerned.
shareholders
107) The term Standard Auditing Practices
102) A special auditor is appointed by the – refers –
(A) Shareholders (A) Auditing techniques adopted by auditor for
collecting & vouching evidences
(B) Board of directors
(B) Test checking
(C) Central government
(C) Standards of auditing
(D) CAG
(D) True & fair view
Ans. : (C) Central government.
Ans. : (A) Auditing techniques adopted by
103) A remuneration of a company auditor auditor for collecting & vouching
is fixed by the –
evidences.
(A) Shareholders
108) AAS refers to –
(B) Board of directors
(A) Audit evidence
(C) Central Government
(B) Audit Planning
(D) Appointing authority
(C) Risk assessments &Internal control
Ans. : (D) Appointing authority.
(D) Knowledge of business
104) Internal auditor has to submit report to
– Ans. : (D) Knowledge of business .
(A) Shareholders 109) The panel of Auditors of cooperative
society is maintained by –
(B) Government
(A) Charted Accountant
(C) Company law board
(B) Central Government
(D) None of above
(C) Registrar
Ans. : D) none of above.
(D) Shareholders
105) Auditor in general is –
Ans. : (C) Registrar.
(A) Employee of the company
(B) Agent of the company
(C) Agent of the shareholders
(D) None of the above
Ans. : (C) Agent of the shareholders.

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