Auditing MCQs [set-6]

126. The branch auditor is appointed by –

A. Shareholders in an annual general meeting
B. Shareholders in general meeting
C. Board of directors in board meeting
D. Any of the above
Answer: B

127. Special audit is conducted at the order of the Central Government. Which
section gives such powers?
A. Section 233(A)
B. Section 233A
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C. Section 242(A)
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D. Section 242A te
Answer: C a
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128. Who among the following can be appointed as special auditor by the Central
Government?
A. The statutory auditor
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B. chartered accountant in practice
C. Any chartered accounted who is not in practice
D. Both (a) and (b)
Answer: D

129. The scope of the audit including reference to the pronouncements of the ICAI,
which the auditor adheres to, generally is communicated to the client in the ____
i) auditor’s report
ii) engagement letter
iii) representation letter
A. i) only
B. Both (i) and (ii)
C. Both (i) and (iii)
D. All the above
Answer: B

130. If any director is disqualified from being appointed under section 274(1) (g),
the auditor should mention this fact in his audit report. For this purpose, how does
he determine their eligibility :
A. He obtains a representation from each director
B. He obtains a management representation
C. He enquiries from Registrar of Companies
D. Any one of the above
Answer: A

131. As per the ‘Statement on Qualification in Auditor’s Report’s issued by the

ICAI, the auditor, Under section 227(3) has to gave a statement of fact on_
A. Proper books of account
B. Accounting standards
C. Cess payable under section 441A
D. None of the above
Answer: C

132. The date on auditor’s report should not be__

A. The data of AGM
B. Later than the date on which the accounts are approved in board’s meeting
C. Earlier than the date on which the accounts are approved by the management
D. Both (a) and (b)
Answer: C

133. Section 227(2) of the Companies Act, requires the auditor to give his report to
the members of the company on certain matters. Which of the following is not
included in the above?
A. Accounts examined by him
B. Every balance sheet and profit and loss account laid before a general meeting during his
tenure
C. Every document that is a part of or ‘annexed to’ the balance sheet
D. Every document which is attached to the profit and loss account
Answer: D

134. When restrictions that significantly affect the scope of the audit are imposed
by the client, the auditor generally should issue which of the following opinion?

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 A. Qualified opinion
B. Disclaimer of opinion
C. Adverse opinion
D. Unqualified report with ‘an emphasis of matter’ paragraph?
Answer: A

135. Which of the following report not result in qualification of the auditor’s
opinion due to a scope limitation?
A. Restrictions the client imposed
B. Reliance on the report of other auditor
C. Inability to obtain sufficient appropriate evidential matter
D. Inadequacy of accounting records
Answer: B

136. The inventory consists of about one per cent of all assets. The client has
imposed restriction on auditor to prohibit observation of stock take. The auditor
cannot apply alternate audit procedures.
A. Unqualified opinion
B. Qualified opinion
C. Disclaimer of opinion
D. Adverse opinion
Answer: C

137. The auditor has serious concern about the going concern of the company. It is
dependent on company’s obtaining a working capital loan from a bank which has
been applied for. Then management of the company has made full disclosure of
these facts in the notes to the balance sheet. The auditor is satisfied with the level of
disclosure. He should issue_
A. Unqualified opinion
B. Unqualified opinion with reference to notes to the accounts
C. Qualified opinion
D. Disclaimer of opinion
Answer: B

138. Which of the following is true about explanatory notes?

A. These are given by the directors of the company
B. These are given to adhere to requirements of section 211.

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 C. These are given by auditors of the company in auditor’s report
D. All of the above
Answer: B

139. The client changed method of depreciation from straight line to written down
value method. This has been disclosed as a note to the financial statements. It has
an immaterial effect on the current financial statements. It is expected, however,
that the change will have a significant effect on future periods. Which of the
following option should the auditor express?
A. Unqualified opinion
B. Qualified opinion
C. Disclaimer of opinion
D. Adverse opinion
Answer: A

140. Which of the following is not true regarding requirements under section
227(3) (f) of the Companies Act, 1956?
A. The auditor has to satisfy himself whether any of the directors of the company, whether public
or private, are disqualified from being appointed as directors as per section 274(1) (g).
B. Section 274(1) (g) is applicable to appointment of directors both in public and private
companies but reporting is limited to only those directors of a company who are also directors of a
public company
C. The auditor requires every director to submit a written representation in respect of each Public
company, of which the is a director, as to whether such company has defaulted in terms of
provisions of sections 274(1) (g)
D. The disqualification should be considered on the date of audit report.
Answer: D

141. The management of a company, to which AS3 is not applicable, does not
include statement of cash flows in its annual report. The auditor should express
A. Unqualified opinion
B. Qualified opinion
C. Adverse opinion
D. Any of these depending upon materiality and pervasiveness and adequacy of disclosure
Answer: A

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142. In case the auditor gives a disclaimer of opinion in the audit report which of
the following paragraph(s) of a standard unqualified audit report are modified?
A. Scope paragraph
B. Opinion paragraph
C. Scope and opinion paragraphs
D. Introductory, scope and opinion paragraph
Answer: C

143. A departure from recognized accounting principle is disclosed in a note to the

financial statements. The auditor should
A. Issue a standard unqualified audit report
B. Issue a qualified report
C. Issue an unqualified report with ‘emphasis of matter’ paragraph
D. Disclaim opinion
Answer: B

144. The auditor should state the reasons for his reservations in audit report and
should try to quantify the effect on them. This should be done in case he has
expressed _
i) A qualified opinion
ii) an unqualified opinion with emphasis of matter paragraph
iii) An adverse opinion
IV) a disclaimer of opinion
A. i) only
B. i) and (iv) only
C. i), iii) and (iv) only
D. All of the above
Answer: A

145. Which of the following documents is not relevant for vouching cash sales?
A. Daily cash sales summary
B. Salesmen’s summary
C. Monthly statements sent to customers
D. Bank statement
Answer: C

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146. The auditor should examine subsequent realization of revenue such as
dividends, interest, commission, etc to
A. Identify cases of unrecorded revenue
B. Ensure proper disclosure in the balance sheet
C. Recomputed accrued income on the data of balance sheet
D. Any of these
Answer: A

147. To test whether sales have been recorded, the auditor should draw a sample
from a file of
A. Purchase orders
B. Sales orders
C. Sales invoices
D. Bill of loading
Answer: C

148. For vouching of which item, the auditor is most likely to examine cost
records?
A. Commission earned
B. Bad debts recorded
C. Credit sales
D. Sale of scrap
Answer: D

149. The “Guidance Note on Revenue” issued by the ICAI does not deal with
A. Sales revenue
B. Revenue rendering service
C. Revenue from sale of fixed assets
D. Income from interest, dividend
Answer: C

150. An auditor conducts a surprise check on the pay day (i.e) the day wages and
salaries are paid. The primary purpose of this audit procedure is
A. To ensure that there are no ghost workers
B. To ensure the casual workers employed are authorized by the supervisor
C. To test procedures for distributing pay cheques
D. To obtain understanding of internal control system
Answer: C

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