Auditing General Knowledge Quiz | Auditing General Knowledge Multiple Choice Questions(MCQs) & Answers

Questions
1 The independent auditor’s primary responsibility is to______________?
A the directors
B the company’s creditors (payables)
C the company’s bank
D the shareholders

Answer: the shareholders
2 Assuming that it is not the first appointment of the auditor, who is responsible for the appointment of the auditor?
A The shareholders in a general meeting
B The managing director
C The board of directors in a board meeting
D The audit committee

Answer: The shareholders in a general meeting
3 Which one of the following is NOT a duty of the auditor?
A Duty to report to the company’s bankers
B Duty to report to the members
C Duty to sign the audit report
D Duty to report on any violation of law

Answer: Duty to report to the company’s bankers
4 When an auditor is proposed for removal from office, which one of the following is he NOT permitted to do?
A Circulate representations to members
B Apply to the court to have the proposal removed
C Speak at the AGM/EGM where the removal is proposed
D Receive notification of the AGM/EGM where the removal is proposed

Answer: Apply to the court to have the proposal removed
5 A sale of Rs. 50.000 to A was entered as a sale to B. This is an example of____________?
A Error of omission
B Error of commission
C Compensating error
D Error of principle

Answer: Error of commission
6 Which of the following is not true about opinion on financial statements?
A The auditor should express an opinion on financial statements.
B His opinion is no guarantee to future viability of business
C He is responsible for detection and prevention of frauds and errors in financial statements
D He should examine whether recognised accounting principle have been consistently

Answer: He is responsible for detection and prevention of frauds and errors in financial statements
7 International auditing standards are issued by the______________?
A International Accounting Standards Board
B International Federation of Accountants
C International Standards Board
D Auditing Practices Board

Answer: International Federation of Accountants
8 Which of the following is NOT the responsibility of a company’s directors?
A Reporting to the shareholders on the accuracy of the accounts
B Establishment of internal controls
C Keeping proper accounting records
D Supplying information and explanations to the auditor

Answer: Reporting to the shareholders on the accuracy of the accounts
9 Why do auditors concentrate their efforts on material items in accounts?
A Because they are easier to audit
B Because it reduces the audit time
C Because the risk to the accounts of their being incorrectly stated is greater
D Because the directors have asked for it

Answer: Because the risk to the accounts of their being incorrectly stated is greater
10 The concept of stewardship means that a company’s directors________________?
A Are responsible for ensuring that the company complies with the law
B Are responsible for ensuring that the company pays its tax by the due date
C Safeguard the company’s assets and manage them on behalf of the shareholders
D Report suspected fraud and money laundering to the authorities

Answer: Safeguard the company’s assets and manage them on behalf of the shareholders
11 The fundamental objective of the audit of a company is to_____________?
A Protect the interests of the minority shareholders
B Detect and prevent errors and fraud
C Assess the effectiveness of the company’s performance
D Attest to the credibility of the company’s accounts

Answer: Attest to the credibility of the company’s accounts
12 Concealment of shortage by delaying the recording of cash receipts is known as_____________?
A Embezzlement
B Misappropriation
C Lapping
D None of these

Answer: Lapping
13 Auditing is compulsory for____________?
A Small scale business
B Partnership firms
C Joint stock Companies
D Proprietary Concerns

Answer: Joint stock Companies
14 Process of verifying the documentary evidences of transactions are known as___________?
A Auditing
B Testing
C Vouching
D Verification

Answer: Vouching
15 An auditor is like a_______________?
A Blood haunt
B Watch dog
C May both according to situation
D None of these

Answer: Watch dog
16 The main object of an audit is _____________?
A Expression of opinion
B Detection and Prevention of fraud and error
C Both (A) and (B)
D Depends on the type of audit

Answer: Depends on the type of audit
17 The term ‘Audit’ is derived from a Latin word “audire” which means___________?
A To inspect
B To examine
C To hear
D To investigate

Answer: To hear
18 ____________ is a systematic examination of the books and records or a business?
A Auditing
B Vouching
C Verification
D Checking

Answer: Auditing
19 How long is the auditor’s term of office?
A Until the audit is complete
B Until the financial statements are complete
C Until the next AGM (Annual General Meeting)
D Until the directors remove them

Answer: Until the next AGM (Annual General Meeting)
20 Which of the following is correct in relation to materiality?
A A matter is material only if it changes the audit report
B A matter is material if the auditor and the directors both decide that further work needs to be done in the area under question
C A matter is material only if it affects directors’ emoluments
D A matter is material if its omission or misstatement would reasonably influence the decisions of an addressee of the auditors’ report

Answer: A matter is material if its omission or misstatement would reasonably influence the decisions of an addressee of the auditors’ report
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