ACC311-Fundamental of auditing
Solved Midterm MCQ’s

1. Standard format of Auditor’s Report as per the Companies Ordinance 1984 is

described in which one of the following Legal Forms?

D. Form35A

 

2. IFRS stands for which one of the following?

A. International Financial Reporting Standards

 

3. Which of the following is NOT one of the five major components of internal control?

D. Human resource background checks

 

4. All of the following should be observed and inspected by the auditors during the

risk assessment process of an entity EXCEPT:

D. Visit to other companies in the industry

 

5. Which one of the following audit techniques ordinarily provide an auditor with the

the least assurance about the operating effectiveness of an internal control activity?

B. Inspection of documents and reports

 

6. Which one of the following opinions advocates that the auditor should form an

opinion only after obtaining sufficient audit evidence instead of blindly accepting

any information was given by the management?

A. Auditor’s liability

B. Professional ethics

 

7. Which one of the following is NOT required as part of the audit process?

D. Procedures to obtain an understanding of the internal control structure

 

8. SECP stands for which one of the following?

C. Securities and Exchange Commission of Pakistan

 

9. One type of analytical procedure is the ‘Trend Analysis’. Which one of the following

is the best example of trend analysis?

C. Comparison of inventory levels over the past 3 years

 

10. While conducting operational audit, which one of the following auditing procedures

does the auditor primarily rely upon?

B. Analytical procedures

11. Which one of the the following helps to achieve reasonable assurance about the fairness

of financial statements during an audit process?

A-Audit report

 

12. Which one of the following cannot be considered as the essential feature of Auditing?

The auditor is responsible for the preparation of the financial statements

 

13. Which one of the following best describes why an independent auditor is asked to express

an opinion on the presentation of financial reports?

The opinion of an independent party is needed because a company may not be

objective with respect to its own financial reports

 

14. The audit which is a review of any part of an entity’s operating procedures and methods

is known as which one of the following?

Operational audits

 

15. Which one of the following is considered as the formal opinion or disclaimer thereof,

issued by an independent auditor as a result of audit or evaluation performed on a legal

entity?

Auditor's report

 

16. Which of the following statements is true?

The auditing profession is regulated only by its own professional body

 

17. Which one of the following primary assertions is satisfied when an auditor ensures that

there are no unrecorded assets, liabilities, transactions or events or undisclosed items in

the client’s financial records?

Completeness

 

18. Internal control is primarily established within a company to do which of the following?

To prevent fraud in the company affairs

 

19. Fixation of remuneration of auditors can be determined by the following authorities

EXCEPT: (Companies The ordinance, 1984)

Company secretary

 

20. A leather goods manufacturing company has started its operations in the year 2001. After

five years of conducting successful business, it has become a listed company recently.

Now, the company is required to hire its first auditors, but neither the directors nor the

members could appoint the auditors during the past 4 months since the incorporation of

the company. Select among the following authorities who can appoint the auditors in this

situation? (Companies The ordinance, 1984)

Company registrar

 

21. A company has hired auditors who have performed the audit process in accordance with

the auditing standards, but they fail to present its report. According to the Company law,

1984, the auditors shall be liable for which one of the following liabilities?

Liability for negligence

 

22. When the cash sales should be recorded by the companies in order to achieve control

objectives?

Record the cash sales at the point they are made

 

23. Sales when delivery is done n cash received bcoz sales r recorded after delivery. Cash

sales should be recorded at the point, the sale is made. Usually, this is by means of a Cash

Till or the use of cash sale invoices or receipts. Auditors conduct auditing in accordance

with

International Financial Reporting Standards

Local pronouncements/Legislations

Financial Accounting Standards Board

All of the given options

 

24. Which of the following primary assertions is satisfied when an auditor ensures that there

are no unrecorded assets, liabilities, transactions or events or undisclosed items in the

client s financial records?

Completeness

 

25. Completeness means that all transactions and relevant information have been recorded

according to applicable IFRS as well as legislation. Which one of the following

statements are NOT true about the internal control system of a company?

An internal control system is expected to provide absolute assurance about the performance of

a company

 

26. Internal control systems always minimize risk but never these can eliminate risks

absolutely in auditing and accounting noting is absolute. Who shall fix the remuneration

of the auditors, if auditors of a company are appointed by the shareholders? (Companies

The ordinance, 1984)

Shareholders

 

27. If Directors could not appoint the first auditors of a company, then the first auditors shall

be appointed by which one of the following authorities? (Companies Ordinance, 1984)

 Securities and Exchange Commission

 

 

28. The books of accounts of a company should be kept at which one of the following

offices? (Companies The ordinance, 1984)

Accounts office of the company

 

Which one of the following is also called a books of secondary entries?

Ledger

 

According to Section 236, Director s report should be attached to which of the following

financial statement? (Companies The ordinance, 1984)

Balance sheet

 

29. A well designed Internal Control Questionnaire (ICQ) should incorporate the follo

wing EXCEPT:

Should include simple yes or no responses but not narrative responses

 

30. Which one of the following examples constitutes the most reliable piece of evidence

available to an auditor?

A written confirmation from a bank

 

31. Considering the Extent of audit, procedure refers to which one of the following

description?

It refers to the purpose i.e. (tests of controls or substantive procedures) and their type, that

is, inspections, observation, inquiry confirmation, recalculation, re-performances or

analytical procedures

 

32. Which one of the following situations can constitute grounds for a claim of negligence on

part of the auditors to detect a fraud?

The fraud was committed by a senior management override of internal controls which had

been relied upon in reducing the extent of detailed testing

 

The control objectives of a sales system typically include the following EXCEPT:

All valid transactions relating to payables, and only those transactions, should be

accurately recorded in the accounting records

 

33. A local gas station has one clerk that accepts cash payments for gas and rings them up on

the cash register. Which one of the following would be the best control to provide

assurance that the cashier is not keeping some of the cash?

Require that each customer be given a receipt of their purchase

 

 

 

 

34. Which one of the following may NOT be the control procedure at key stages of the sales

the cycle of an entity?

Bad Debts

 

35. While testing the purchase system of an entity, which one of the following control tests

may NOT be applied to the purchase order document?

Proof of issuance date

 

36. While testing the purchase system of an entity, which one of the following control tests

maybe applied to the Goods Returned Notes by the auditors?

Evidence of approval of requisitions

ACC311-Fundamental of auditing  Solved Midterm MCQ’s