Auditing Mcqs - Set 4

1)   Which of the following affects audit effectiveness?

a. Risk of over reliance
b. Risk of incorrect rejection
c. Risk of incorrect acceptance
d. Both A and C
Answer  Explanation 

ANSWER: Both A and C

Explanation:
No explanation is available for this question!


2)   What would most effectively describe the risk of incorrect acceptance in terms of substantive audit testing?

a. The auditor has ascertained that the balance is materially correct when in actual fact it is not
b. The auditor concludes the balance is materially misstated when in actual fact is not
c. The auditor has rejected an item from sample which was not supported by documentary evidence
d. He applies random sampling on data which is inaccurate and inconsistent
Answer  Explanation 

ANSWER: The auditor has ascertained that the balance is materially correct when in actual fact it is not

Explanation:
No explanation is available for this question!


3)   Audit programme is prepared by____________?

a. The auditor
b. The client
c. The audit assistants
d. The auditor and his audit assistants
Answer  Explanation 

ANSWER: The auditor and his audit assistants

Explanation:
No explanation is available for this question!


4)   The working papers which auditor prepares for financial statements audit are___________?

a. Evidence for audit conclusions
b. Owned by the client
c. Owned by the auditor
d. Retained in auditor’s office until a change in auditors
Answer  Explanation 

ANSWER: Owned by the auditor

Explanation:
No explanation is available for this question!


5)   The quantity of audit working papers complied on engagement would most be affected by__________?

a. Management’s integrity
b. Auditor’s experience and professional judgment
c. Auditor’s qualification
d. Control risk
Answer  Explanation 

ANSWER: Auditor’s experience and professional judgment

Explanation:
No explanation is available for this question!


6)   Which of the following best describes the primary purpose of audit programme preparation?

a. To detect errors or fraud
b. To comply with GAAP appropriate evidence
c. To gather sufficient
d. To assess audit risk
Answer  Explanation 

ANSWER: To gather sufficient

Explanation:
No explanation is available for this question!


7)   Which of the following is not an advantage of the preparation of working paper?

a. To provide a basis for review of audit work
b. To provide a basis for subsequent audits
c. To ensure audit work is being carried out as per programme
d. To provide a guide for advising another client on similar issues
Answer  Explanation 

ANSWER: To provide a guide for advising another client on similar issues

Explanation:
No explanation is available for this question!


8)   The auditor’s permanent working paper file should not normally, include__________?

a. Extracts from client’s bank statements
b. Past year’s financial statements
c. Attorney’s letters
d. Debt agreements
Answer  Explanation 

ANSWER: Extracts from client’s bank statements

Explanation:
No explanation is available for this question!


9)   For what minimum period should audit working papers be retained by audit firm?

a. For the time period the entity remains a client of the audit firm
b. For a period of ten years
c. For a period auditor opines them to be useful in servicing the client
d. For the period the audit firm is in existence
Answer  Explanation 

ANSWER: For a period auditor opines them to be useful in servicing the client

Explanation:
No explanation is available for this question!


10)   Which of the following factors would least likely affect the quantity and content of an auditor’s working papers

a. The assessed level of control risk
b. The possibility of peer review
c. The nature of auditor’s report
d. The content of management representation letter
Answer  Explanation 

ANSWER: The content of management representation letter

Explanation:
No explanation is available for this question!


11)   Which of the following statement is true regarding an auditor’s working papers?

a. They document the level of independence maintained by the auditor
b. They should be considered as the principle support for the auditor’s report
c. They should not contain details regarding weaknesses in the internal control system
d. They help the auditor to monitor the effectiveness of the audit firm’s quality control
Answer  Explanation 

ANSWER: They should be considered as the principle support for the auditor’s report

Explanation:
No explanation is available for this question!


12)   Which of the following statement best describes the understanding with respect to ownership and custody of working papers prepared by an auditor?

a. The working papers may be obtained by third parties when they appear to be relevant to issues raised in litigation
b. The safe custody of working papers is the responsibility of client, if kept at his premises
c. The working papers must be retained by an audit firm for a period of 10 years
d. Successor auditors may have access to working papers of the predecessor auditors. The approval of client is not required
Answer  Explanation 

ANSWER: The working papers may be obtained by third parties when they appear to be relevant to issues raised in litigation

Explanation:
No explanation is available for this question!


13)   The current file of the auditor’s working papers, generally, should include____________?

a. A flowchart of the internal controls
b. Organisation charts
c. A copy of financial statements
d. Copies of bond and debentures
Answer  Explanation 

ANSWER: A copy of financial statements

Explanation:
No explanation is available for this question!


14)   Audit of banks is an example of__________?

a. Statutory audit
b. Balance sheet audit
c. Concurrent audit
d. Both (A. and (B.
e. All of the above
Answer  Explanation 

ANSWER: All of the above

Explanation:
No explanation is available for this question!


15)   In Pakistan, balance sheet audit is synonymous to___________?

a. Annual audit
b. Continuous audit
c. Detailed audit
d. Statutory audit
Answer  Explanation 

ANSWER: Annual audit

Explanation:
No explanation is available for this question!


16)   Audit in depth is synonymous for­_____________?

a. Complete audit
b. Completed audit
c. Final audit
d. Detailed audit
Answer  Explanation 

ANSWER: Detailed audit

Explanation:
No explanation is available for this question!


17)   Balance sheet audit includes verification of____________?

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

ANSWER: All of the above

Explanation:
No explanation is available for this question!


18)   Balance sheet does not include­:_____________?

a. Verification of assets and liabilities
b. Vouching of income and expense accounts related to assets and liabilities
c. Examination of adjusting and closing entries
d. Routine checks
Answer  Explanation 

ANSWER: Routine checks

Explanation:
No explanation is available for this question!


19)   _______the audit risk,_______the materiality and _______the audit effort?

a. Lower, Higher, Lower
b. Lower, Lower, Higher
c. Higher, Lower, Lower
d. Lower, Higher, Higher
Answer  Explanation 

ANSWER: Lower, Higher, Lower

Explanation:
No explanation is available for this question!


20)   When issuing unqualified opinion, the auditor who evaluates the audit findings should be satisfied that the_____________?

a. Amount of known misstatement is documented in working papers
b. Estimates of the total likely misstatement is less than materiality level
c. Estimate of the total likely misstatement is more than materially level
d. Estimates of the total likely misstatement cannot be made
Answer  Explanation 

ANSWER: Estimates of the total likely misstatement is less than materiality level

Explanation:
No explanation is available for this question!