Principles of Auditing MCQ Questions and Answers Part – 1

Principles of Auditing MCQ Questions and Answers Part – 1

Principles of Auditing MCQ Questions and Answers Part – 2

Principles of Auditing MCQ Questions and Answers Part – 3

1. __________ is a systematic examination of the books and records or a business.
A. Auditing.
B. Vouching.
C. Verification.
D. Checking.
ANSWER: A
2. Which of the following are not objectives of auditing?
A. Ascertain the profit and preparation of P/L Account, Balance sheet.
B. Detection and prevention of frauds and errors.
C. Give a true and fair view of financial amount.
D. To submits the accounts to Government of India.
ANSWER: D
3. Which of the following is not a kind of audit?
A. Statutory and private audit.
B. Government and continuous audit.
C. Continuous, final, Interim, Cash, Cost and Management audit.
D. None of these.
ANSWER: D
4. An audit which is compulsory by the law __________.
A. Government audit.
B. Internal audit.
C. Cost audit.
D. Statutory audit.
ANSWER: D
5. Instruction of audit issued by controller and auditor general of India ________.
A. statutory audit.
B. final audit.
C. management audit.
D. government audit.
ANSWER: D
6. Audit done by the employees of the business undertaking is called _______.
A. final audit.
B. management audit.
C. government audit.
D. government audit.
ANSWER: B
7. This kind of audit is conducted generally between two annual audit ______.
A. internal audit.
B. interim audit.
C. final audit.
D. continuous audit.
ANSWER: B
8. Management audit otherwise called as _______.
A. final audit.
B. efficiency audit.
C. cost audit.
D. cash audit.
ANSWER: B
9. Before the work of audit is commenced, the auditor plans out the whole of audit work is called _________.
A. Audit plan.
B. Audit note.
C. Audit programme.
D. Audit programme.
ANSWER: D
10. A number of checks and controls exercised in a business to ensure its efficient working is known as
________.
A. Internal check.
B. Internal control.
C. Internal audit.
D. Interim check.
ANSWER: B
11. A Voucher is a _______.
A. document is support of an entry made in books of accounts.
B. invoice received from suppliers.
C. receipt issued to a customer for cash.
D. despatch receipt.
ANSWER: A
12. Voucher relates to _________.
A. cash receipt.
B. cash payment.
C. credit transactions.
D. all the above.
ANSWER: D
13. Internal check is meant for ___________.
A. prevention of frauds.
B. detection of frauds.
C. helping audit is depth.
D. detection of errors.
ANSWER: A
14. Internal auditor is appointed by ________.
A. the management.
B. the shareholders
C. the government.
D. he statutory body.
ANSWER: A
15. Auditing begins where ______ ends.
A. Selling.
B. inventory valuation.
C. Accounting.
D. Purchases.
ANSWER: C
16. A kind of audit conducted for a part of the accounting year is called _______.
A. Periodical audit.
B. Partial audit.
C. Cost audit.
D. Interim audit.
ANSWER: A
17. For which of the following, Audit is optional?
A. Trusts.
B. Joint stock companies.
C. Proprietorship concern.
D. None of the above.
ANSWER: C
18. Providing more or less depreciation on assets is an example of ______.
A. Misappropriation of cash.
B. Misappropriation of goods.
C. Misappropriation of accounts.
D. None of the above.
ANSWER: D
19. The audit that is made compulsory under statute is called _________.
A. Statutory audit.
B. Partial audit.
C. Complete audit.
D. Continuous audit.
ANSWER: A
20. The receipt of goods must be entered in _________.
A. goods inward book.
B. goods outward book
C. receipt of Stores.
D. ceipt issue and balance of stores
ANSWER: A
21. Who among the following can be appointed as auditor of a company?
A. A partner or a director of the company.
B. A person of unsound mind.
C. Mr. Y who owes Rs. 500 to the company.
D. Mr. Z the holder of C.A certificate.
ANSWER: D
22. Auditing standards differ from auditing procedures in that procedures relate to ________.
A. Measure of performance.
B. Audit principles.
C. Acts to be performed.
D. Audit judgments.
ANSWER: C
23. Confirmation of the court is necessary for __________.
A. increasing the share capital.
B. . reduction of share capital.
C. conversion of shares into stock.
D. issue of new shares.
ANSWER: B
24. Profit prior to incorporation may be utilized to ___________.
A. write of goodwill
B. pay interest on purchase consideration
C. writing off fixed assets.
D. all the above.
ANSWER: A
25. Which of the following is not true about opinion on financial statements?
A. The auditor should express an opinion on financial statements.
B. His opinion is no guarantee to the future viability of the business.
C. He is responsible for the detection and prevention of frauds and errors in financial statements.
D. He should examine whether recognized accounting principles have been consistent.
ANSWER: A
26. Audit means ___________.
A. recording business transactions.
B. preparing the final accounts.
C. examination of books, accounts, vouchers etc.
D. preparing final accounts.
ANSWER: C
27. Audit programme is prepared ______________.
A. to help the auditor and his staff about the work to be done while auditing.
B. to help the accountant to prepare the balance sheet.
C. to help the company to submit its accounts.
D. to help the shareholders to file the returns.
ANSWER: A
28. Audit is ________.
A. a member of the company.
B. the agent of the members of the company
C. the agent of the central government.
D. an assistant to accountant.
ANSWER: B
29. Auditor shall report on the accounts examined by him __________.
A. to the shareholders.
B. to the court.
C. to the bank.
D. to the general public.
ANSWER: A
30. Purchase of machinery is a ____________.
A. revenue receipt.
B. capital receipt.
C. capital expenditure.
D. revenue expenditure.
ANSWER: C
31. Sale of land is a __________.
A. revenue receipt.
B. capital receipt.
C. capital expenditure.
D. revenue expenditure.
ANSWER: B
32. Shares are forfeited on the non-payment of ____________.
A. share calls amount.
B. calls in advance.
C. minimum share capital.
D. debenture amount.
ANSWER: A
33. Prospectus is a document _________.
A. containing the rules and regulations of the company.
B. containing details about the manufacturing process of the company.
C. containing details about the share capital of the company.
D. containing the information of the sales.
ANSWER: C
34. Secret reserve can be created by _______________.
A. public limited company only.
B. banking and financial companies only.
C. private limited company only.
D. co-operative societies
ANSWER: B
35. General reserve is __________.
A. an appropriation from the profit.
B. a must item in the debit side of the P&L account.
C. an appropriation from the share capital.
D. important item in the balance sheet.
ANSWER: A
36. When a transaction has not been recorded in the books of account either wholly or partially such errors are
called as _________.
A. Error of commission.
B. Error of omission.
C. Compensating error.
D. Error of principle.
ANSWER: B
37. Verification of the value of assets, liabilities, the balance of reserves, provision and the amount of profit
earned or loss suffered a firm is called _________.
A. Continuous audit.
B. Balance sheet audit.
C. Interim audit.
D. Partial audit.
ANSWER: B
38. Alterations and heavy repairs to plant etc., is _____________.
A. Deferred revenue expenditure.
B. Capital expenditure.
C. Revenue expenditure.
D. Petty expenses.
ANSWER: C
39. A sale of Rs. 50000 to Mr. A was entered as a sale to Mr. B. This is an example of:
A. Error of omission.
B. Error of commission.
C. Compensating error.
D. Error of principle.
ANSWER: B
40. Recording a transaction twice in the books of original entry is an error of __________.
A. Principle.
B. Commission.
C. Duplication.
D. Omission.
ANSWER: C
41. Errors and frauds already committed can be discovered under the system of ________.
A. Internal audit.
B. Internal check.
C. Internal control.
D. All of the above.
ANSWER: D
42. Treating revenue expenditure as capital expenditure is a case of _________.
A. fraud
B. misappropriation of cash.
C. misappropriation of goods.
D. manipulation of accounts.
ANSWER: D
43. Vouching of the balances of all incomes and expenses account is known as vouching of ______.
A. Personal ledger.
B. Impersonal ledger.
C. Cash.
D. Sales.
ANSWER: B
44. Stock in trade is valued _________.
A. at cost price.
B. at market price.
C. at cost price or market price whichever is less.
D. at cost price less depreciation.
ANSWER: B
45. Goods sent on an approval basis have been recorded as credit sales. This is an example of:
A. Error of principle.
B. Error of commission.
C. Error of omission.
D. Error of duplication.
ANSWER: A
46. Preliminary expenses are the best example for _________.
A. fictitious asset.
B. intangible asset.
C. wasting asset.
D. floating asset.
ANSWER: A
47. The profits that can be legally distributed to shareholders are called _________.
A. Revenue profits.
B. Capital profits.
C. Divisible profits.
D. Profits prior to incorporation.
ANSWER: C
48. Errors of principle are due to ___________.
A. Wrong entry of the transaction in the books of original entry.
B. Wrong allocation of expenditure between capital and revenue.
C. Mistake in the payment of a commission.
D. Mistake in the payment of salary.
ANSWER: A
49. Periodical audit is also called as _________.
A. Final audit.
B. Interim audit.
C. Balance sheet audit.
D. Income statement audit.
ANSWER: C
50. An audit programme is ___________.
A. a description, memorandum or an outline of the work to be done in a business.
B. the rules and regulations prescribed for writing up the books of accounts.
C. to gain knowledge of clients accounting system.
D. a trial work.
ANSWER: B

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Author and Assistant Professor in Finance, Ardent fan of Arsenal FC. Always believe "The only good is knowledge and the only evil is ignorance - Socrates"
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