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
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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
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3) Audit programme is prepared by____________? a. The auditor b. The client c. The audit assistants d. The auditor and his audit assistants
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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15) In Pakistan, balance sheet audit is synonymous to___________? a. Annual audit b. Continuous audit c. Detailed audit d. Statutory audit
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16) Audit in depth is synonymous for_____________? a. Complete audit b. Completed audit c. Final audit d. Detailed audit
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17) Balance sheet audit includes verification of____________? a. Assets b. Income and expense accounts where appropriate c. Liabilities d. All of the above
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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
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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
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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
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