Here are 100 interview questions and sample answers for an Audit Assistant position at

Deloitte, aimed at freshers:

1. **Tell me about yourself.**

- *Answer:* I recently graduated with a degree in Accounting from XYZ University. During
my studies, I completed internships in finance and accounting where I developed my
analytical and problem-solving skills. I am keen on starting my career in audit because it
aligns with my passion for ensuring financial accuracy and integrity.

2. **Why do you want to work for Deloitte?**

- *Answer:* Deloitte is a global leader in audit and consulting services, known for its
commitment to innovation and quality. I am particularly impressed by Deloitte’s focus on
professional development and its supportive work environment, which I believe will provide
me with excellent opportunities to grow and learn.

3. **What do you know about Deloitte’s audit services?**

- *Answer:* Deloitte offers comprehensive audit services including financial statement

audits, internal audits, and risk assessments. The firm uses advanced technology and
methodologies to deliver high-quality audit services, ensuring compliance and enhancing
stakeholders’ trust.

4. **What do you understand by auditing?**

- *Answer:* Auditing involves the examination of financial statements and related

operations to ensure accuracy, compliance with regulations, and identification of any
discrepancies or fraud. It helps maintain transparency and accountability in financial
reporting.

5. **Explain the difference between internal and external audit.**

- *Answer:* Internal audit is conducted by an organization’s own staff to assess internal

controls, risk management, and governance processes. External audit is performed by
independent auditors to provide an objective opinion on the accuracy of financial
statements and compliance with regulations.

6. **What are the key stages of an audit?**

- *Answer:* The key stages of an audit include planning, risk assessment, internal control
evaluation, testing and evidence gathering, and reporting. Each stage is crucial to ensure a
thorough and accurate audit process.

7. **How do you ensure accuracy in your work?**

- *Answer:* I ensure accuracy by double-checking my work, using checklists, and

verifying information from multiple sources. I also stay organized and pay close attention to
detail, which helps minimize errors.

8. **What are your strengths?**

- *Answer:* My strengths include strong analytical skills, attention to detail, and a solid
understanding of accounting principles. I am also a quick learner and adaptable, which
helps me tackle new challenges effectively.

9. **What are your weaknesses?**

- *Answer:* One of my weaknesses is that I can be overly critical of my own work.

However, I am working on balancing self-criticism with confidence, and I use feedback
from others to improve continuously.

10. **How do you handle tight deadlines?**

- *Answer:* I handle tight deadlines by prioritizing tasks, creating a detailed schedule,

and staying focused. Effective time management and clear communication with my team
also help me meet deadlines without compromising on quality.

11. **Describe a time when you worked in a team.**

 - *Answer:* During my internship, I worked in a team on a financial analysis project. We
divided tasks based on our strengths, maintained regular communication, and
collaborated to meet our goals. This experience taught me the importance of teamwork
and effective collaboration.

12. **How do you stay updated with industry trends and regulations?**

- *Answer:* I stay updated by reading industry publications, attending webinars, and

participating in professional forums. I also follow regulatory updates from authoritative
bodies like the PCAOB and FASB.

13. **What accounting software are you familiar with?**

- *Answer:* I am familiar with several accounting software programs, including

QuickBooks, SAP, and Microsoft Excel. I have used these tools for various accounting tasks
during my internships and academic projects.

14. **What do you understand by risk assessment in auditing?**

- *Answer:* Risk assessment in auditing involves identifying and analyzing the potential
risks that could impact the accuracy and reliability of financial statements. This helps
auditors focus on high-risk areas and develop appropriate audit procedures.

15. **Can you explain the concept of materiality in auditing?**

- *Answer:* Materiality refers to the significance of an omission or misstatement in

financial statements that could influence the economic decisions of users. Auditors
determine materiality thresholds to focus on the most impactful issues.

16. **What is your approach to learning new concepts quickly?**

- *Answer:* I approach learning new concepts by breaking them down into manageable
parts, seeking clarification when needed, and applying what I learn through practical
exercises or real-life scenarios. This helps reinforce my understanding.
17. **Describe your experience with data analysis.**

- *Answer:* During my internships, I frequently analyzed financial data to identify trends,

discrepancies, and opportunities for improvement. I used Excel to perform data analysis,
create pivot tables, and generate insightful reports.

18. **How do you handle confidential information?**

- *Answer:* I handle confidential information with the utmost care by following company
policies, securing data, and sharing information only with authorized individuals. I
understand the importance of maintaining confidentiality to protect client interests.

19. **What motivates you in your career?**

- *Answer:* I am motivated by the opportunity to make a meaningful impact through my

work. In auditing, ensuring financial accuracy and integrity is crucial for stakeholders, and
contributing to this process drives my passion and dedication.

20. **How do you prioritize tasks?**

- *Answer:* I prioritize tasks by assessing their urgency and importance, setting clear
deadlines, and creating a structured to-do list. This helps me stay organized and focused
on completing high-priority tasks efficiently.

21. **Explain the term ‘audit trail’.**

- *Answer:* An audit trail is a chronological record of all transactions, changes, and

activities in an organization’s financial system. It provides a detailed history that auditors
can follow to verify the accuracy and integrity of financial data.

22. **How do you ensure compliance with auditing standards?**

- *Answer:* I ensure compliance by staying updated with the latest auditing standards,
following established protocols, and regularly reviewing my work against these standards.
Continuous education and training also help me maintain compliance.
23. **What is your experience with financial statement analysis?**

- *Answer:* I have experience analyzing financial statements during my internships,

where I evaluated balance sheets, income statements, and cash flow statements. I used
ratio analysis and other techniques to assess financial health and performance.

24. **How do you approach problem-solving in auditing?**

- *Answer:* I approach problem-solving by identifying the root cause of the issue,

gathering relevant data, and analyzing potential solutions. I also consult with colleagues
and leverage available resources to develop effective and practical solutions.

25. **Describe a challenging project you worked on.**

- *Answer:* During my internship, I worked on a project that required reconciling complex

financial data from multiple sources. I approached the challenge by systematically
verifying each data point, collaborating with my team, and using advanced Excel functions
to ensure accuracy.

26. **How do you handle feedback?**

- *Answer:* I handle feedback constructively by listening carefully, asking for clarification

if needed, and reflecting on how I can improve. I view feedback as an opportunity for growth
and make a conscious effort to implement suggestions.

27. **What do you know about SOX compliance?**

- *Answer:* SOX compliance refers to adherence to the Sarbanes-Oxley Act, which sets
requirements for financial reporting, internal controls, and auditing processes to prevent
fraud and protect investors. It emphasizes transparency and accountability in financial
practices.

28. **Explain the importance of independence in auditing.**

 - *Answer:* Independence is crucial in auditing as it ensures that auditors provide
unbiased and objective opinions on financial statements. It enhances the credibility of the
audit process and fosters trust among stakeholders.

29. **What steps would you take if you identified a discrepancy in financial statements?**

- *Answer:* If I identified a discrepancy, I would first gather all relevant information and
verify the data. I would then communicate with the appropriate personnel to understand
the cause of the discrepancy and work collaboratively to resolve it, ensuring accurate and
compliant financial reporting.

30. **How do you manage stress during busy periods?**

- *Answer:* I manage stress by staying organized, prioritizing tasks, and taking regular
breaks to maintain focus. I also practice mindfulness techniques and ensure a healthy
work-life balance to stay energized and productive.

31. **What are your career goals?**

- *Answer:* My career goals include becoming a proficient audit professional, gaining

specialized knowledge in areas like forensic accounting or risk management, and
eventually taking on leadership roles within the firm. I am committed to continuous
learning and professional development.

32. **What is your understanding of internal controls?**

- *Answer:* Internal controls are processes and procedures implemented by an

organization to ensure the integrity of financial reporting, compliance with laws and
regulations, and the efficient operation of business activities. They help prevent fraud and
errors.

33. **How do you approach teamwork?**

- *Answer:* I approach teamwork by being a collaborative and supportive team member,

actively listening to others, and contributing my skills and knowledge. I believe effective
communication and mutual respect are key to successful teamwork.
34. **Describe a time when you had to meet a tight deadline.**

- *Answer:* During my internship, I had to complete a detailed financial analysis within a

short timeframe. I managed this by prioritizing tasks, working efficiently, and seeking
support from my team when necessary. This experience taught me the importance of time
management and teamwork.

35. **How do you handle conflicts in a team setting?**

- *Answer:* I handle conflicts by addressing issues openly and respectfully, seeking to

understand different perspectives, and finding common ground. I believe in collaborative
problem-solving and maintaining a positive and professional team environment.

36. **What is the purpose of a financial statement audit?**

- *Answer:* The purpose of a financial statement audit isto provide an independent and
objective assessment of an organization’s financial statements, ensuring that they present
a true and fair view of the financial position and performance in accordance with
applicable accounting standards and regulations.

37. **What are substantive procedures in auditing?**

- *Answer:* Substantive procedures are audit tests designed to detect material

misstatements in financial statements. They include detailed testing of transactions,
account balances, and disclosures, and can involve inspection, observation, inquiry, and
confirmation.

38. **How do you ensure ethical behavior in your work?**

- *Answer:* I ensure ethical behavior by adhering to professional standards, company

policies, and legal requirements. I am committed to honesty, integrity, and transparency in
all my actions, and I seek guidance when faced with ethical dilemmas.

39. **What do you know about GAAP?**

 - *Answer:* Generally Accepted Accounting Principles (GAAP) are a set of accounting
standards and guidelines used in the preparation of financial statements. They ensure
consistency, reliability, and comparability of financial information across organizations.

40. **Can you explain the audit risk model?**

- *Answer:* The audit risk model is a framework used to assess the risk of material
misstatement in financial statements. It includes inherent risk, control risk, and detection
risk. Auditors use this model to design appropriate audit procedures and reduce overall
audit risk.

41. **What is the importance of documentation in auditing?**

- *Answer:* Documentation is crucial in auditing as it provides evidence of the audit work

performed, supports the auditor’s conclusions, and ensures compliance with auditing
standards. It also facilitates review and helps in defending the audit opinion if challenged.

42. **How do you stay organized when handling multiple tasks?**

- *Answer:* I stay organized by creating detailed to-do lists, setting clear priorities, and
using productivity tools like calendars and project management software. Regularly
reviewing and adjusting my plans helps me stay on track and manage my workload
effectively.

43. **What is your experience with financial reporting?**

- *Answer:* During my internships, I assisted in preparing financial reports, including

balance sheets, income statements, and cash flow statements. I ensured accuracy and
compliance with accounting standards, and gained experience in presenting financial
information clearly and concisely.

44. **How do you handle ambiguity in your work?**

- *Answer:* I handle ambiguity by seeking clarification, breaking down complex issues

into manageable parts, and consulting with colleagues or supervisors when needed.
Staying flexible and open-minded helps me adapt to changing situations and find effective
solutions.

45. **Describe your experience with Excel.**

- *Answer:* I have extensive experience with Excel, including creating spreadsheets,

using advanced functions and formulas, and generating pivot tables and charts. I have
used Excel for data analysis, financial modeling, and reporting during my internships and
academic projects.

46. **What is your understanding of forensic auditing?**

- *Answer:* Forensic auditing involves the examination of financial records to detect and
investigate fraud, embezzlement, or other financial misconduct. It requires specialized
skills in identifying irregularities, gathering evidence, and providing expert testimony in legal
proceedings.

47. **How do you handle repetitive tasks?**

- *Answer:* I handle repetitive tasks by maintaining a high level of focus and efficiency. I
look for ways to streamline processes and use tools like templates and automation to
improve productivity. I also take regular breaks to stay refreshed and avoid monotony.

48. **What is the role of an audit assistant?**

- *Answer:* An audit assistant supports the audit team in conducting audits by

performing tasks such as gathering and analyzing financial data, testing internal controls,
documenting findings, and assisting in the preparation of audit reports. They play a crucial
role in ensuring the accuracy and integrity of the audit process.

49. **How do you approach continuous learning?**

- *Answer:* I approach continuous learning by seeking out opportunities for professional

development, such as attending workshops, pursuing certifications, and staying updated
with industry trends and best practices. I also actively seek feedback and reflect on my
experiences to identify areas for improvement.
50. **What is a compliance audit?**

- *Answer:* A compliance audit evaluates whether an organization adheres to external

laws, regulations, and internal policies and procedures. It ensures that the organization
operates within legal and regulatory frameworks and identifies any areas of non-
compliance.

51. **Describe a time when you had to learn a new skill quickly.**

- *Answer:* During my internship, I had to quickly learn how to use a new accounting
software. I approached this by dedicating time to training, seeking guidance from
experienced colleagues, and practicing regularly. This helped me become proficient in a
short period.

52. **How do you ensure your work aligns with audit objectives?**

- *Answer:* I ensure my work aligns with audit objectives by thoroughly understanding the
audit plan, following established procedures, and regularly communicating with my team. I
also review my work against the audit objectives to ensure accuracy and relevance.

53. **What do you know about IFRS?**

- *Answer:* International Financial Reporting Standards (IFRS) are a set of accounting

standards developed by the International Accounting Standards Board (IASB). They provide
a global framework for financial reporting, ensuring consistency and comparability across
international boundaries.

54. **How do you handle constructive criticism?**

- *Answer:* I handle constructive criticism by listening carefully, acknowledging the

feedback, and reflecting on how I can improve. I view it as an opportunity to grow and
develop my skills, and I make a conscious effort to apply the suggestions in my work.

55. **What is your approach to time management?**

 - *Answer:* My approach to time management involves setting clear goals, prioritizing
tasks, and creating a structured schedule. I break down larger tasks into smaller,
manageable steps and regularly review my progress to stay on track and adjust as needed.

56. **Explain the term ‘audit evidence’.**

- *Answer:* Audit evidence refers to the information auditors collect to support their
conclusions and opinions on financial statements. It includes documents, records,
observations, and confirmations that provide a basis for the audit findings and ensure the
accuracy and reliability of financial reporting.

57. **What is your understanding of the audit report?**

- *Answer:* An audit report is a formal document issued by auditors at the conclusion of

an audit. It presents the auditor’s opinion on whether the financial statements are free from
material misstatement and in compliance with accounting standards. The report may also
include findings and recommendations for improvement.

58. **How do you handle working under pressure?**

- *Answer:* I handle working under pressure by staying calm, organized, and focused. I
prioritize tasks, set realistic deadlines, and break down complex problems into
manageable parts. Effective communication with my team also helps me manage stress
and meet expectations.

59. **What is your experience with audit documentation?**

- *Answer:* During my internships, I assisted in preparing and organizing audit

documentation, including working papers, test results, and evidence. I ensured that
documentation was accurate, complete, and compliant with auditing standards, providing
a clear record of the audit process.

60. **Describe a time when you identified a problem and resolved it.**

- *Answer:* During a financial analysis project, I identified discrepancies in the data

provided. I investigated the issue by cross-referencing multiple sources and consulting with
colleagues. After identifying the root cause, I corrected the errors and implemented
additional checks to prevent future discrepancies.

61. **What do you know about PCAOB?**

- *Answer:* The Public Company Accounting Oversight Board (PCAOB) is a regulatory

body that oversees the audits of public companies in the United States. It establishes
auditing and quality control standards, inspects audit firms, and enforces compliance to
protect investors and ensure the accuracy of financial reporting.

62. **How do you handle multitasking?**

- *Answer:* I handle multitasking by prioritizing tasks, creating a detailed plan, and

focusing on one task at a time to ensure quality. I also use productivity tools and
techniques to manage my workload efficiently and stay organized.

63. **What is your understanding of audit planning?**

- *Answer:* Audit planning involves developing a strategy and approach for conducting an
audit. It includes understanding the client’s business, assessing risks, determining
materiality, and designing audit procedures to address identified risks and achieve audit
objectives.

64. **How do you ensure thoroughness in your work?**

- *Answer:* I ensure thoroughness by paying attention to detail, following established

procedures, and double-checking my work. I also seek feedback from colleagues and
supervisors to ensure that all aspects of the task are covered comprehensively.

65. **What is your experience with internal audit?**

- *Answer:* During my internships, I had exposure to internal audit processes, where I

assisted in evaluating internal controls, identifying risks, and testing compliance with
policies and procedures. This experience helped me understand the importance of internal
audit in maintaining operational efficiency and regulatory compliance.
66. **How do you approach learning from mistakes?**

- *Answer:* I approach learning from mistakes by reflecting on what went wrong,

identifying the root cause, and developing strategies to prevent similar issues in the future.
I view mistakes as valuable learning opportunities and strive to continuously improve my
performance.

67. **What is your understanding of audit sampling?**

- *Answer:* Audit sampling involves selecting a representative subset of transactions or

items for testing to draw conclusions about the entire population. It allows auditors to
assess the accuracy and reliability of financial information without examining every single
transaction.

68. **How do you handle conflicting priorities?**

- *Answer:* I handle conflicting priorities by assessing the urgency and importance of

each task, communicating with stakeholders to clarify expectations, and making informed
decisions on how to allocate my time and resources effectively.

69. **What is your experience with financial reconciliations?**

- *Answer:* During my internships, I regularly performed financial reconciliations to

ensure

Certainly! Here are 50 technical questions related to auditing along with their answers,
aimed at helping you prepare for an interview round for an Audit Assistant position:

1. **What is an audit?**

- *Answer:* An audit is an independent examination of financial information of any entity,

whether profit-oriented or not, irrespective of its size or legal form, when such an
examination is conducted with a view to express an opinion thereon.
2. **What are the different types of audits?**

- *Answer:* The main types of audits are internal audits, external audits, forensic audits,
statutory audits, and compliance audits.

3. **What are Generally Accepted Auditing Standards (GAAS)?**

- *Answer:* GAAS are a set of systematic guidelines used by auditors when conducting
audits on companies’ financial records. GAAS ensures the accuracy, consistency, and
verifiability of auditors’ actions and reports.

4. **What is audit risk?**

- *Answer:* Audit risk is the risk that the auditor expresses an inappropriate opinion on
financial statements that are materially misstated. It is a combination of inherent risk,
control risk, and detection risk.

5. **What is inherent risk?**

- *Answer:* Inherent risk is the susceptibility of an account balance or class of

transactions to a material misstatement, assuming there are no related controls.

6. **What is control risk?**

- *Answer:* Control risk is the risk that a material misstatement that could occur in an
account balance or class of transactions will not be prevented or detected and corrected
on a timely basis by the entity’s internal controls.

7. **What is detection risk?**

- *Answer:* Detection risk is the risk that the auditor’s procedures will not detect a
material misstatement that exists in an account balance or class of transactions.

8. **What is materiality in auditing?**

 - *Answer:* Materiality is the magnitude of an omission or misstatement of accounting
information that, in the light of surrounding circumstances, makes it probable that the
judgment of a reasonable person relying on the information would have been changed or
influenced.

9. **What are substantive procedures?**

- *Answer:* Substantive procedures are audit procedures designed to detect material

misstatements in account balances and transaction classes. They include tests of details
and substantive analytical procedures.

10. **What is an audit trail?**

- *Answer:* An audit trail is a step-by-step record by which accounting data can be traced
to their source. It helps auditors verify the accuracy and completeness of the accounting
records.

11. **What is a working paper in auditing?**

- *Answer:* Working papers are the documents that auditors use to record their audit
observations, findings, and the evidence they collect during the audit process. They
support the auditor’s conclusions and opinion on the financial statements.

12. **What is a management letter?**

- *Answer:* A management letter is a document prepared by the auditor and addressed

to the management of the client. It includes the auditor’s findings, recommendations for
improvement, and any weaknesses identified during the audit.

13. **What is a compliance audit?**

- *Answer:* A compliance audit is an audit to determine whether the organization is

following specific rules, policies, procedures, laws, or regulations.

14. **What is the purpose of an internal audit?**

 - *Answer:* The purpose of an internal audit is to evaluate and improve the effectiveness
of risk management, control, and governance processes within an organization.

15. **What are analytical procedures?**

- *Answer:* Analytical procedures are evaluations of financial information through

analysis of plausible relationships among both financial and non-financial data. They
include comparisons with prior periods, budgets, forecasts, and industry norms.

16. **What is a confirmation in auditing?**

- *Answer:* A confirmation is a direct written response from a third party to the auditor,
verifying the accuracy of information such as account balances or transactions.

17. **What are the key components of an audit report?**

- *Answer:* The key components of an audit report are the title, addressee, introductory
paragraph, management’s responsibility, auditor’s responsibility, opinion paragraph, and
signature of the auditor.

18. **What is the role of an external auditor?**

- *Answer:* The role of an external auditor is to provide an independent opinion on

whether the financial statements of an organization are free from material misstatement
and comply with accounting standards.

19. **What is the difference between a qualified and an unqualified audit opinion?**

- *Answer:* An unqualified opinion indicates that the financial statements present a true
and fair view in accordance with the applicable financial reporting framework. A qualified
opinion is given when there are material misstatements or limitations in the scope of the
audit.

20. **What is a going concern assumption?**

 - *Answer:* The going concern assumption is the assumption that an entity will continue
its operations in the foreseeable future and will not be forced to halt operations and
liquidate its assets.

21. **What is the difference between a financial audit and a forensic audit?**

- *Answer:* A financial audit is focused on evaluating the accuracy and completeness of

financial statements. A forensic audit involves investigating and evaluating financial
records to detect and investigate fraud or financial misconduct.

22. **What is an engagement letter?**

- *Answer:* An engagement letter is a formal agreement between the auditor and the
client, outlining the scope of the audit, the responsibilities of both parties, and the terms
and conditions of the audit engagement.

23. **What is a risk-based audit approach?**

- *Answer:* A risk-based audit approach focuses on identifying and assessing the areas
of highest risk in the financial statements and designing audit procedures to address those
risks effectively.

24. **What are control activities?**

- *Answer:* Control activities are the policies and procedures that help ensure that
management’s directives are carried out. They include approvals, authorizations,
verifications, reconciliations, and segregation of duties.

25. **What is an audit assertion?**

- *Answer:* An audit assertion is a claim made by management regarding the recognition,

measurement, presentation, and disclosure of information in the financial statements.
Examples include existence, completeness, accuracy, and valuation.

26. **What is a test of controls?**

 - *Answer:* A test of controls is an audit procedure used to evaluate the operating
effectiveness of internal controls in preventing, detecting, and correcting material
misstatements.

27. **What is a substantive test?**

- *Answer:* A substantive test is an audit procedure designed to detect material

misstatements in financial statements. It includes detailed testing of transactions, account
balances, and disclosures.

28. **What is an audit program?**

- *Answer:* An audit program is a detailed plan that outlines the nature, timing, and
extent of audit procedures to be performed. It serves as a roadmap for the audit process
and ensures that all necessary steps are completed.

29. **What is the purpose of a management representation letter?**

- *Answer:* The purpose of a management representation letter is to obtain written

confirmation from management regarding the accuracy and completeness of information
provided to the auditor and to confirm management’s responsibilities.

30. **What is the difference between a walkthrough and a test of controls?**

- *Answer:* A walkthrough involves tracing a single transaction through the entire

accounting process to understand the flow of transactions and identify controls. A test of
controls evaluates the operating effectiveness of controls over a period.

31. **What is the role of an audit committee?**

- *Answer:* The role of an audit committee is to oversee the financial reporting process,
the audit process, and the company’s internal controls. It ensures the independence of the
auditors and addresses any issues that arise during the audit.

32. **What is vouching in auditing?**

 - *Answer:* Vouching is an audit procedure that involves examining supporting
documents to verify the authenticity and validity of transactions recorded in the financial
statements.

33. **What is a management override of controls?**

- *Answer:* A management override of controls occurs when management intentionally

bypasses established internal controls to achieve a specific outcome. It poses a significant
risk to the integrity of financial reporting.

34. **What is a related party transaction?**

- *Answer:* A related party transaction is a business deal or arrangement between two

parties who have a pre-existing relationship, such as a parent company and its subsidiary,
or between directors and the company. Such transactions require special disclosure due to
potential conflicts of interest.

35. **What is the purpose of audit documentation?**

- *Answer:* The purpose of audit documentation is to provide evidence of the audit work
performed, support the auditor’s conclusions, and ensure compliance with auditing
standards. It also facilitates review and provides a basis for future audits.

36. **What is the significance of audit planning?**

- *Answer:* Audit planning is significant because it helps the auditor understand the
client’s business, assess risks, determine materiality, and develop an effective audit
approach. It ensures that the audit is conducted efficiently and effectively.

37. **What is an audit sampling method?**

- *Answer:* Audit sampling is the application of audit procedures to less than 100% of the
items within an account balance or class of transactions to obtain audit evidence and draw
conclusions about the entire population. Common methods include random sampling,
systematic sampling, and judgmental sampling.
38. **What is an audit finding?**

- *Answer:* An audit finding is an issue identified during the audit that may indicate a
material misstatement, control deficiency, or non-compliance with regulations. It is
documented and communicated to management for corrective action.

39. **What is a substantive analytical procedure?**

- *Answer:* A substantive analytical procedure involves evaluating financial information

by analyzing plausible relationships among both financial and non-financial data. It helps
identify unusual trends or discrepancies that may indicate material misstatements.

Certainly! Here are 100 technical questions related to auditing, including explanations and
practical scenarios, along with their answers:

1. **How will you audit the bank balance appearing in financial statements?**

- *Answer:* To audit the bank balance, you would:

1. Obtain bank statements and bank reconciliation statements.

2. Confirm the balance directly with the bank using a bank confirmation letter.

3. Verify outstanding checks and deposits in transit by checking subsequent bank

statements.

4. Test the mathematical accuracy of the bank reconciliation statement.

5. Examine any unusual or large transactions near the year-end for proper cut-off.

2. **Tell me the five criteria to recognize revenue as per Ind AS 115.**

- *Answer:* The five criteria to recognize revenue as per Ind AS 115 are:

1. Identification of the contract(s) with a customer.

2. Identification of the performance obligations in the contract.

3. Determination of the transaction price.

 4. Allocation of the transaction price to the performance obligations in the contract.

5. Recognition of revenue when (or as) the entity satisfies a performance obligation.

3. **What is the journal entry for provision for doubtful debt?**

- *Answer:* The journal entry for provision for doubtful debt is:

- Debit: Bad Debt Expense (P&L)

- Credit: Provision for Doubtful Debts (Balance Sheet – contra asset account)

4. **How will you audit the revenue expense of rent?**

- *Answer:* To audit the revenue expense of rent, you would:

1. Obtain a copy of the lease agreement.

2. Verify rental payments with lease terms and conditions.

3. Confirm payments made through bank statements.

4. Check the classification of rent expenses in the financial statements.

5. Ensure that any rent prepayments or accruals are properly accounted for.

5. **How will you determine materiality levels while performing the audit of a mutual fund
company?**

- *Answer:* To determine materiality levels while auditing a mutual fund company, you
would:

1. Understand the company’s business, environment, and financial statements.

2. Use quantitative factors like total assets under management, net income, or total
revenue.

3. Consider qualitative factors, such as regulatory requirements or the nature of the

financial instruments.

4. Use professional judgment to set a preliminary materiality level.

 5. Adjust the materiality level based on the risk assessment and findings during the
audit.

6. **What are the assertions and procedures for the audit of debtors?**

- *Answer:* The assertions and related procedures for auditing debtors include:

- **Existence:** Confirm receivable balances directly with customers.

- **Rights and Obligations:** Verify that the entity has rights to the receivables by
checking invoices and contracts.

- **Completeness:** Perform cut-off testing to ensure all sales are recorded in the
correct period.

- **Valuation:** Review the adequacy of the allowance for doubtful accounts and test
the aging analysis.

- **Presentation and Disclosure:** Ensure receivables are appropriately classified and

disclosed in the financial statements.

7. **What are the three golden principles of accounting?**

- *Answer:* The three golden principles of accounting are:

1. **Personal Account:** Debit the receiver, credit the giver.

2. **Real Account:** Debit what comes in, credit what goes out.

3. **Nominal Account:** Debit all expenses and losses, credit all incomes and gains.

8. **What are subsequent events in auditing?**

- *Answer:* Subsequent events are events that occur after the balance sheet date but
before the issuance of the financial statements. They are categorized into:

1. **Adjusting events:** Events that provide additional evidence of conditions that

existed at the balance sheet date and affect the amounts recognized in the financial
statements.
 2. **Non-adjusting events:** Events that are indicative of conditions that arose after the
balance sheet date and do not require adjustment to the financial statements, but may
require disclosure.

9. **How are various items treated in the balance sheet and profit & loss statement, and
what are the types of assets?**

- *Answer:*

- **Balance Sheet:**

- **Assets:** Classified as current or non-current.

- **Liabilities:** Classified as current or non-current.

- **Equity:** Includes share capital, retained earnings, and other reserves.

- **Profit & Loss Statement:**

- **Revenue:** Sales, services, other income.

- **Expenses:** Cost of goods sold, operating expenses, depreciation, interest, and

taxes.

- **Types of Assets:**

- **Current Assets:** Cash, accounts receivable, inventory.

- **Non-Current Assets:** Property, plant, and equipment, intangible assets, long-term

investments.

10. **What are audit assertions?**

- *Answer:* Audit assertions are representations by management that are embodied in

financial statement elements and related disclosures. Key assertions include:

1. **Existence or Occurrence:** Assets or liabilities exist at a given date, and recorded

transactions have occurred during the period.

2. **Completeness:** All transactions and accounts that should be presented in the

financial statements are included.

3. **Valuation or Allocation:** Components are included in the financial statements at

appropriate amounts.
 4. **Rights and Obligations:** The entity holds or controls rights to assets, and liabilities
are the obligations of the entity.

5. **Presentation and Disclosure:** Financial statement elements are properly

classified, described, and disclosed.

11. **Explain IFRS 15 on revenue recognition.**

- *Answer:* IFRS 15, “Revenue from Contracts with Customers,” provides a single,
comprehensive framework for revenue recognition. It requires entities to recognize revenue
to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled. The five-step model
includes:

1. Identifying the contract with the customer.

2. Identifying the performance obligations in the contract.

3. Determining the transaction price.

4. Allocating the transaction price to the performance obligations.

5. Recognizing revenue when (or as) the entity satisfies a performance obligation.

12. **How would you audit inventory?**

- *Answer:* To audit inventory, you would:

1. Attend physical inventory counts to observe the count procedures.

2. Test the accuracy of the count by performing sample counts.

3. Verify the costing method used (FIFO, LIFO, weighted average) and test its application.

4. Review the valuation of inventory and test for obsolescence or slow-moving items.

5. Check cut-off procedures to ensure inventory transactions are recorded in the correct
period.

13. **What procedures would you perform to audit fixed assets?**

- *Answer:* To audit fixed assets, you would:

 1. Verify the existence of assets through physical inspection.

2. Review the acquisition and disposal documentation.

3. Test the depreciation calculations for accuracy and appropriateness.

4. Evaluate the impairment of fixed assets.

5. Check the classification and presentation in the financial statements.

14. **How would you audit accounts payable?**

- *Answer:* To audit accounts payable, you would:

1. Confirm balances directly with vendors.

2. Review subsequent payments to ensure liabilities are recorded.

3. Test for completeness by reviewing unmatched invoices and purchase orders.

4. Check the cut-off for proper recording of liabilities.

5. Verify the classification and presentation in the financial statements.

15. **What is the purpose of internal controls in auditing?**

- *Answer:* The purpose of internal controls in auditing is to provide reasonable

assurance regarding the achievement of objectives related to operations, reporting, and
compliance. Effective internal controls help prevent and detect errors and fraud, ensure
the reliability of financial reporting, and ensure compliance with laws and regulations.

16. **How would you test the internal controls of a company?**

- *Answer:* To test internal controls, you would:

1. Understand and document the control environment.

2. Perform a risk assessment to identify key controls.

3. Test the design effectiveness of controls through walkthroughs.

4. Test the operating effectiveness of controls by selecting samples and performing

substantive tests.
 5. Evaluate the results and determine if additional substantive testing is needed.

17. **Explain the concept of segregation of duties in auditing.**

- *Answer:* Segregation of duties is an internal control concept where no single

individual has control over all aspects of a financial transaction. It helps prevent fraud and
errors by ensuring that responsibilities are divided among different employees, such as
authorizing transactions, recording transactions, and maintaining custody of assets.

18. **What are related party transactions, and how would you audit them?**

- *Answer:* Related party transactions are transactions between the company and its
related parties, such as subsidiaries, associates, joint ventures, and key management
personnel. To audit related party transactions, you would:

1. Identify related parties and review the entity’s related party disclosures.

2. Obtain and review documentation of transactions with related parties.

3. Confirm the terms and conditions of the transactions.

4. Test for completeness and accuracy of disclosures in the financial statements.

19. **What is the purpose of an audit committee?**

- *Answer:* The purpose of an audit committee is to provide oversight of the financial

reporting process, the audit process, the company’s internal controls, and compliance
with laws and regulations. The audit committee helps ensure the integrity and reliability of
the company’s financial statements and the effectiveness of its internal controls.

20. **How do you audit payroll expenses?**

- *Answer:* To audit payroll expenses, you would:

1. Verify the accuracy of payroll calculations by re-performing calculations for a sample

of employees.

2. Review payroll tax returns and other payroll-related documents.

3. Confirm payroll expenses by comparing them with bank statements and payroll
registers.
 4. Test the completeness and accuracy of payroll records.

5. Ensure that payroll expenses are correctly classified and presented in the financial
statements.

21. **What are audit working papers?**

- *Answer:* Audit working papers are the documents prepared or obtained by the auditor
during the audit to support the auditor’s conclusions and opinion. They include audit plans,
evidence gathered, analyses, summaries, and correspondence relating to the audit.

22. **Explain the concept of audit sampling.**

- *Answer:* Audit sampling is the application of audit procedures to less than 100% of the
items within an account balance or class of transactions to obtain evidence and draw
conclusions about the entire population. Sampling allows auditors to form an opinion on
financial statements without examining every transaction.

23. **What is a management representation letter?**

- *Answer:* A management representation letter is a document signed by the

management of the client organization, confirming the accuracy and completeness of the
information provided to the auditor. It covers various aspects of the financial statements,
such as compliance with laws and regulations, and any significant events affecting the
financial statements.

24. **What is the difference between internal and external audit?**

- *Answer:* The key differences between internal and external audit are:

- **Internal Audit:** Conducted by employees of the organization, focuses on improving

internal controls, risk management, and governance processes.

- **External Audit:** Conducted by independent auditors, focuses on providing an

opinion on the accuracy and fairness of the financial statements.

25. **What is a substantive test of transactions?**

 - *Answer:* A substantive test of transactions involves examining the details of individual
transactions to detect material misstatements. This includes testing the occurrence,
accuracy, completeness, and cut-off of transactions.

26. **What is the role of an auditor in detecting fraud?**

- *Answer:* The role of an auditor in detecting fraud includes:

1. Assessing the risk of material misstatement due to fraud.

2. Designing and implementing audit procedures to address identified fraud risks.

3. Evaluating the effectiveness of internal controls related to fraud prevention and

detection.

4. Exercising professional skepticism throughout the audit.

27. **Explain the concept of a control environment.**

- *Answer:* The control environment is the foundation of an organization’s internal

control system. It includes the attitudes, awareness, and actions of management and
those charged with governance concerning the internal control and its importance. It sets
the tone for the organization and influences the control consciousness of its employees.

28. **What is audit evidence, and what are its types?**

- *Answer:* Audit evidence is the information collected by the auditor to support the
audit opinion. Types of audit evidence include:

- **Physical evidence:** Obtained through physical inspection or observation.

- **Documentary evidence:** Obtained through examination of documents and records.

- **Testimonial evidence:** Obtained through inquiries and confirmations.

- **Analytical evidence:** Obtained through analysis of financial and non-financial data.

29. **How do you evaluate the effectiveness of internal controls?**

- *Answer:* To evaluate the effectiveness of internal controls, you would:

 1. Understand the control environment and design of controls.

2. Perform walkthroughs to assess the implementation of controls.

3. Test the operating effectiveness of controls through sample testing.

4. Assess the results and identify any control deficiencies.

5. Communicate findings to management and recommend improvements.

30. **What is a test of details?**

- *Answer:* A test of details is an audit procedure that involves examining the detailed
elements of transactions or balances to verify their accuracy and completeness. It
includes vouching transactions to supporting documents and performing account
reconciliations.

31. **How would you audit cash and cash equivalents?**

- *Answer:* To audit cash and cash equivalents, you would:

1. Obtain and review bank reconciliations.

2. Confirm bank balances with financial institutions.

3. Verify the existence of cash on hand through physical count.

4. Test for completeness by reviewing cut-off procedures.

5. Ensure proper classification and presentation in the financial statements.

32. **What is the difference between a review and an audit?**

- *Answer:* The key differences between a review and an audit are:

- **Review:** Provides limited assurance that financial statements are free from
material misstatement. It involves inquiry and analytical procedures.

- **Audit:** Provides reasonable assurance that financial statements are free from
material misstatement. It involves a more thorough examination, including substantive
testing and evaluation of internal controls.
33. **What is an unqualified audit opinion?**

- *Answer:* An unqualified audit opinion, also known as a clean opinion, is issued when
the auditor concludes that the financial statements present a true and fair view in
accordance with the applicable financial reporting framework and are free from material
misstatements.

34. **How would you audit intangible assets?**

- *Answer:* To audit intangible assets, you would:

1. Verify the existence and ownership of intangible assets through contracts and legal
documents.

2. Assess the valuation and impairment testing of intangible assets.

3. Review the amortization policy and calculations.

4. Ensure proper disclosure and classification in the financial statements.

35. **What is an emphasis of matter paragraph in an audit report?**

- *Answer:* An emphasis of matter paragraph is included in an audit report to draw users’

attention to a matter presented or disclosed in the financial statements that is of such
importance that it is fundamental to their understanding of the financial statements.

36. **What is the purpose of analytical procedures in auditing?**

- *Answer:* The purpose of analytical procedures in auditing is to evaluate financial

information by analyzing plausible relationships among data. They help identify unusual
transactions, trends, or variances that may indicate potential misstatements or areas
requiring further investigation.

37. **Explain the concept of audit materiality.**

- *Answer:* Audit materiality is the threshold above which misstatements or omissions in

the financial statements could influence the economic decisions of users. It is determined
based on quantitative and qualitative factors and guides the auditor in planning and
performing the audit.
38. **How do you audit prepaid expenses?**

- *Answer:* To audit prepaid expenses, you would:

1. Verify the existence and ownership of prepayments through supporting documents.

2. Test the accuracy of the amortization of prepaid expenses over the appropriate
periods.

3. Confirm that prepaid expenses are properly classified in the balance sheet.

4. Ensure the completeness of the recording of prepaid expenses.

39. **What is the purpose of a management letter in auditing?**

- *Answer:* The purpose of a management letter is to communicate the auditor’s findings

and recommendations to management. It includes observations on internal control
weaknesses, operational inefficiencies, and suggestions for improvement.

40. **How would you audit accounts receivable?**

- *Answer:* To audit accounts receivable, you would:

1. Confirm balances with customers through direct confirmations.

2. Test the aging of receivables to assess collectability.

3. Review subsequent collections to verify the validity of receivables.

4. Evaluate the adequacy of the allowance for doubtful accounts.

5. Ensure proper classification and disclosure in the financial statements.

41. **What is the role of an auditor in the detection of errors?**

- *Answer:* The role of an auditor in the detection of errors includes:

1. Designing and performing audit procedures to identify potential errors.

2. Evaluating the effectiveness of internal controls in preventing and detecting errors.

3. Exercising professional skepticism and judgment in identifying and addressing errors.

 4. Communicating identified errors to management for correction.

42. **How would you audit long-term liabilities?**

- *Answer:* To audit long-term liabilities, you would:

1. Verify the existence and terms of long-term debt through loan agreements and
confirmations.

2. Test the accuracy of interest expense and amortization of debt.

3. Review debt covenants and compliance with contractual terms.

4. Ensure proper classification and disclosure of long-term liabilities in the financial

statements.

43. **What is an auditor’s responsibility for assessing going concern?**

- *Answer:* An auditor’s responsibility for assessing going concern includes:

1. Evaluating management’s assessment of the entity’s ability to continue as a going

concern.

2. Considering events or conditions that may cast significant doubt on the entity’s ability
to continue as a going concern.

3. Obtaining sufficient audit evidence to determine whether a material uncertainty

exists.

4. Reporting on going concern in the audit report if a material uncertainty exists.

44. **Explain the concept of audit risk and its components.**

- *Answer:* Audit risk is the risk that the auditor expresses an inappropriate opinion on
financial statements that are materially misstated. The components of audit risk are:

1. **Inherent Risk:** The susceptibility of an assertion to a material misstatement,

assuming there are no related controls.

2. **Control Risk:** The risk that a material misstatement could occur in an assertion
and not be prevented, or detected and corrected, on a timely basis by the entity’s internal
controls.
 3. **Detection Risk:** The risk that the auditor’s procedures will not detect a material
misstatement that exists in an assertion.

45. **How do you audit investments?**

- *Answer:* To audit investments, you would:

1. Confirm investment holdings with custodians or brokers.

2. Verify the existence and ownership of investments through physical inspection or

third-party confirmations.

3. Review and test the valuation of investments by comparing to market prices or other
valuation models.

4. Examine the appropriateness of accounting for investment gains or losses.

5. Ensure proper classification and disclosure of investments in the financial

statements.

46. **What is the purpose of a walkthrough in auditing?**

- *Answer:* The purpose of a walkthrough in auditing is to understand the flow of

transactions through the accounting system and evaluate the design and implementation
of internal controls. It involves tracing a transaction from initiation to completion to identify
potential risks and control points.

47. **How would you audit sales and revenue?**

- *Answer:* To audit sales and revenue, you would:

1. Confirm revenue transactions through direct confirmations with customers.

2. Perform cut-off testing to ensure revenue is recorded in the correct period.

3. Test the accuracy and completeness of revenue by tracing transactions to supporting

documents.

4. Review and test the entity’s revenue recognition policies for compliance with
applicable standards.
 5. Analyze trends and perform analytical procedures to identify any unusual or
unexpected fluctuations.

48. **Explain the concept of dual purpose tests in auditing.**

- *Answer:* Dual purpose tests are audit procedures that serve both control testing and
substantive testing purposes. They allow the auditor to test the effectiveness of controls
and verify the accuracy of transactions or balances simultaneously, improving audit
efficiency.

49. **What is the difference between vouching and tracing?**

- *Answer:* The key differences between vouching and tracing are:

- **Vouching:** Involves verifying transactions recorded in the accounting records by

examining supporting documents, starting from the financial statements to the source
documents.

- **Tracing:** Involves following transactions from the source documents through the
accounting records to ensure they have been properly recorded, starting from the source
documents to the financial statements.

50. **What is a control deficiency, and how is it communicated to management?**

- *Answer:* A control deficiency is a flaw in the design or operation of a control that does
not allow management to prevent or detect and correct misstatements on a timely basis. It
is communicated to management through a management letter or report, detailing the
deficiency, its potential impact, and recommendations for improvement.

51. **How would you audit contingent liabilities?**

- *Answer:* To audit contingent liabilities, you would:

1. Review legal and contractual agreements for potential liabilities.

2. Obtain representations from management about the existence and nature of

contingent liabilities.

3. Confirm with the entity’s legal counsel regarding any pending or threatened litigation.
 4. Evaluate the likelihood and potential impact of contingent liabilities.

5. Ensure proper disclosure in the financial statements.

52. **What is the purpose of a risk assessment in auditing?**

- *Answer:* The purpose of a risk assessment in auditing is to identify and evaluate the
risks of material misstatement in the financial statements. It helps the auditor plan and
design appropriate audit procedures to address those risks and ensure that sufficient and
appropriate audit evidence is obtained.

53. **How do you audit deferred tax assets and liabilities?**

- *Answer:* To audit deferred tax assets and liabilities, you would:

1. Review the entity’s tax returns and supporting documentation.

2. Verify the accuracy of the temporary differences and tax rates used in calculations.

3. Assess the likelihood of realizing deferred tax assets by evaluating future taxable
income projections.

4. Confirm that deferred tax assets and liabilities are properly classified and presented
in the financial statements.

5. Ensure adequate disclosure of the nature and components of deferred taxes.

54. **Explain the concept of professional skepticism in auditing.**

- *Answer:* Professional skepticism is an attitude that includes a questioning mind,

being alert to conditions that may indicate possible misstatement, and critically assessing
audit evidence. It requires auditors to remain objective and cautious, without assuming
that management is dishonest or unquestioningly honest.

55. **How would you audit leases?**

- *Answer:* To audit leases, you would:

1. Obtain and review lease agreements to understand the terms and conditions.
 2. Verify the accuracy of lease liability and right-of-use asset calculations.

3. Assess the classification of leases as operating or finance leases.

4. Test the completeness and accuracy of lease-related disclosures.

5. Evaluate the entity’s lease accounting policies for compliance with applicable
standards.

56. **What are substantive analytical procedures?**

- *Answer:* Substantive analytical procedures are audit techniques that involve

evaluating financial information by analyzing plausible relationships among both financial
and non-financial data. They help identify fluctuations or relationships that are
inconsistent with other relevant information or expected patterns.

57. **What is the purpose of an engagement letter in auditing?**

- *Answer:* The purpose of an engagement letter is to outline the scope and terms of the
audit engagement, including the responsibilities of the auditor and the client. It helps
establish a clear understanding between both parties and sets expectations for the audit
process.

58. **How would you audit pension plans?**

- *Answer:* To audit pension plans, you would:

1. Review the terms and conditions of the pension plan agreement.

2. Verify contributions made by the entity and employees.

3. Assess the accuracy of pension expense calculations and funding status.

4. Confirm the valuation of plan assets and actuarial assumptions used.

5. Ensure proper disclosure of the pension plan in the financial statements.

59. **Explain the difference between positive and negative confirmations.**

- *Answer:* The key differences between positive and negative confirmations are:
 - **Positive Confirmations:** Request the recipient to respond whether they agree or
disagree with the information provided. They provide more reliable evidence as a response
is required.

- **Negative Confirmations:** Request the recipient to respond only if they disagree with
the information provided. They are less reliable as no response is assumed to be an
agreement.

60. **What is a management override of controls, and how would you test for it?**

- *Answer:* A management override of controls occurs when management bypasses

established internal controls to manipulate financial reporting. To test for it, you would:

1. Review journal entries and adjustments for unusual or unauthorized transactions.

2. Test the appropriateness of significant management estimates and judgments.

3. Evaluate the segregation of duties and authorization processes.

4. Perform analytical procedures to identify any unusual patterns or trends.

61. **How would you audit a company’s compliance with laws and regulations?**

- *Answer:* To audit a company’s compliance with laws and regulations, you would:

1. Understand the legal and regulatory framework applicable to the entity.

2. Review policies and procedures for compliance.

3. Inspect correspondence with regulatory authorities.

4. Perform substantive tests on transactions to ensure compliance.

5. Obtain representations from management regarding compliance with laws and

regulations.

62. **What is the difference between a control and a substantive procedure?**

- *Answer:* The key differences between a control and a substantive procedure are:

- **Control Procedure:** Tests the design and operating effectiveness of the entity’s
internal controls.
 - **Substantive Procedure:** Tests the accuracy, completeness, and validity of financial
statement amounts and disclosures, including tests of details and analytical procedures.

63. **How do you audit cash flow statements?**

- *Answer:* To audit cash flow statements, you would:

1. Reconcile the cash flow statement to the underlying accounting records.

2. Verify the classification of cash flows into operating, investing, and financing
activities.

3. Test significant cash flows by tracing them to supporting documents.

4. Review the accuracy of non-cash transactions and disclosures.

5. Ensure proper presentation and disclosure in the financial statements.

64. **What is a control environment, and why is it important?**

- *Answer:* The control environment is the foundation of an organization’s internal

control system. It includes the attitudes, awareness, and actions of management and
those charged with governance concerning the internal control and its importance. It sets
the tone for the organization and influences the control consciousness of its employees. A
strong control environment is important because it helps establish a culture of integrity,
accountability, and ethical behavior.

65. **How do you audit IT controls?**

- *Answer:* To audit IT controls, you would:

1. Understand the IT environment and assess the risks related to IT.

2. Review and evaluate the design and implementation of IT general controls (e.g.,
access controls, change management).

3. Test the operating effectiveness of application controls (e.g., input, processing,

output controls).

4. Assess the reliability of IT systems and data integrity.

5. Review IT governance and oversight practices.

66. **What is the purpose of an audit trail?**

- *Answer:* The purpose of an audit trail is to provide a documented history of a

transaction from its initiation through its final disposition. It allows auditors to trace the
sequence of events, verify the authenticity and accuracy of transactions, and ensure the
integrity of the financial records.

67. **How would you audit fixed assets?**

- *Answer:* To audit fixed assets, you would:

1. Verify the existence and ownership of fixed assets through physical inspection and
review of title documents.

2. Test the accuracy of depreciation calculations and assess the appropriateness of

depreciation methods.

3. Review additions and disposals of fixed assets for proper authorization and recording.

4. Evaluate the impairment of fixed assets and the adequacy of related disclosures.

5. Ensure proper classification and presentation of fixed assets in the financial

statements.

68. **Explain the concept of a management override of controls and how it can be
detected.**

- *Answer:* A management override of controls occurs when management bypasses

established internal controls to manipulate financial reporting. It can be detected by:

1. Reviewing unusual or significant journal entries and adjustments.

2. Testing the appropriateness of significant management estimates and judgments.

3. Evaluating the segregation of duties and authorization processes.

4. Performing analytical procedures to identify anomalies or unusual patterns.

5. Investigating unexpected or unexplained transactions.

69. **How do you audit inventory?**

 - *Answer:* To audit inventory, you would:

1. Observe physical inventory counts and verify quantities through test counts.

2. Test the valuation of inventory by reviewing cost records and pricing methods.

3. Assess the obsolescence and slow-moving inventory.

4. Reconcile inventory records with the general ledger.

5. Ensure proper classification and disclosure of inventory in the financial statements.

70. **What are audit assertions, and how do they relate to audit procedures?**

- *Answer:* Audit assertions are representations made by management regarding the

recognition, measurement, presentation, and disclosure of information in the financial
statements. They include:

- **Existence or Occurrence:** Assets, liabilities, and transactions exist or occurred.

- **Completeness:** All transactions and accounts that should be included are

included.

- **Valuation or Allocation:** Assets, liabilities, and transactions are recorded at

appropriate amounts.

- **Rights and Obligations:** The entity holds or controls the rights to assets and
liabilities.

- **Presentation and Disclosure:** Financial statement items are properly classified,

described, and disclosed.

Audit procedures are designed to test these assertions to obtain sufficient and
appropriate audit evidence.

71. **How do you audit revenue recognition under IFRS 15?**

- *Answer:* To audit revenue recognition under IFRS 15, you would:

1. Review contracts with customers to understand performance obligations and

transaction price.

2. Verify the allocation of transaction price to performance obligations.

 3. Test the timing of revenue recognition to ensure it is recognized when (or as) the
performance obligations are satisfied.

4. Evaluate variable considerations, such as discounts and rebates.

5. Ensure proper disclosure of revenue recognition policies and practices.

72. **What is a subsequent event, and how do you audit it?**

- *Answer:* A subsequent event is an event that occurs after the balance sheet date but
before the financial statements are issued. To audit subsequent events, you would:

1. Review minutes of meetings, legal correspondence, and other documents for

significant events.

2. Inquire with management about any events occurring after the balance sheet date.

3. Evaluate the impact of subsequent events on the financial statements.

4. Ensure proper disclosure of subsequent events in the financial statements.

73. **How do you audit debt covenants?**

- *Answer:* To audit debt covenants, you would:

1. Review loan agreements to identify debt covenants and compliance requirements.

2. Test the accuracy of calculations related to debt covenants.

3. Evaluate the entity’s compliance with debt covenants as of the balance sheet date.

4. Assess the impact of any covenant breaches on the financial statements.

5. Ensure proper disclosure of debt covenants and any breaches.

74. **What is an audit program, and how do you develop one?**

- *Answer:* An audit program is a detailed plan outlining the audit procedures to be

performed during the audit. To develop an audit program, you would:

1. Assess the risks of material misstatement in the financial statements.

2. Identify the key audit areas and assertions to be tested.

 3. Determine the nature, timing, and extent of audit procedures.

4. Allocate resources and assign responsibilities for the audit team.

5. Review and update the audit program as necessary based on findings and changes in
circumstances.

75. **Explain the concept of audit documentation and its importance.**

- *Answer:* Audit documentation, also known as working papers, is the record of audit
procedures performed, evidence obtained, and conclusions reached. It is important
because it:

1. Provides a basis for the audit opinion.

2. Supports the auditor’s compliance with auditing standards.

3. Facilitates supervision and review of audit work.

4. Serves as evidence in legal or regulatory proceedings.

5. Aids in planning and conducting future audits.

76. **How do you audit accounts payable?**

- *Answer:* To audit accounts payable, you would:

1. Confirm balances with suppliers through direct confirmations.

2. Test the accuracy and completeness of accounts payable by reconciling to supplier

statements.

3. Perform cut-off testing to ensure liabilities are recorded in the correct period.

4. Review subsequent payments to verify the validity of recorded liabilities.

5. Ensure proper classification and disclosure of accounts payable in the financial

statements.

77. **What is a material weakness, and how is it communicated to management?**

- *Answer:* A material weakness is a deficiency, or combination of deficiencies, in

internal control over financial reporting, such that there is a reasonable possibility that a
material misstatement will not be prevented, or detected and corrected, on a timely basis.
It is communicated to management through a management letter or report, detailing the
material weakness, its potential impact, and recommendations for remediation.

78. **How do you audit contingent assets?**

- *Answer:* To audit contingent assets, you would:

1. Review contracts and agreements for potential contingent assets.

2. Obtain representations from management regarding the existence and likelihood of

realizing contingent assets.

3. Confirm with third parties (e.g., legal counsel) about the status and likelihood of
contingent assets.

4. Evaluate the impact of contingent assets on the financial statements.

5. Ensure proper disclosure of contingent assets in the financial statements.

79. **What is the purpose of a management representation letter in an audit?**

- *Answer:* The purpose of a management representation letter is to obtain written

confirmation from management regarding the accuracy and completeness of the
information provided to the auditor. It covers various aspects of the financial statements,
such as compliance with laws and regulations, and any significant events affecting the
financial statements.

80. **How do you audit accrued liabilities?**

- *Answer:* To audit accrued liabilities, you would:

1. Review the entity’s accounting policies for accruing liabilities.

2. Test the accuracy and completeness of accrual calculations.

3. Confirm the existence and validity of accrued liabilities through supporting

documents.

4. Perform cut-off testing to ensure liabilities are recorded in the correct period.
 5. Ensure proper classification and disclosure of accrued liabilities in the financial
statements.

81. **Explain the concept of inherent risk in auditing.**

- *Answer:* Inherent risk is the susceptibility of an assertion to a material misstatement,

assuming there are no related controls. It is influenced by factors such as the nature of the
entity’s business, the complexity of transactions, and the degree of judgment involved in
financial reporting.

82. **How do you audit related party transactions?**

- *Answer:* To audit related party transactions, you would:

1. Identify related parties and relationships through inquiries and review of records.

2. Examine the terms and conditions of related party transactions.

3. Test the accuracy and completeness of disclosures related to related party

transactions.

4. Assess the appropriateness of accounting treatment and impact on financial

statements.

5. Ensure proper disclosure of related party transactions in the financial statements.

83. **What is an auditor’s responsibility for detecting illegal acts?**

- *Answer:* An auditor’s responsibility for detecting illegal acts includes:

1. Understanding the legal and regulatory framework applicable to the entity.

2. Assessing the risk of material misstatement due to illegal acts.

3. Designing and performing audit procedures to address identified risks.

4. Evaluating the impact of detected illegal acts on the financial statements.

5. Reporting illegal acts to those charged with governance and, if necessary, to

regulatory authorities.
84. **How do you audit financial instruments?**

- *Answer:* To audit financial instruments, you would:

1. Confirm the existence and ownership of financial instruments through third-party

confirmations.

2. Review and test the valuation of financial instruments using appropriate valuation
models and market data.

3. Assess the classification and disclosure of financial instruments in accordance with

applicable standards.

4. Test the accuracy of interest, dividends, and gains or losses related to financial
instruments.

5. Ensure proper disclosure of the nature and risks associated with financial
instruments.

85.