ACC311 Important MCQs for Exam Quiz Solution

 

Question:

Which one of the following persons are responsible for the preparation of Audit engagement later?

 Options:

  Auditor

 Client

  Company registrar

  Company secretary

 

Question:

Who is responsible for designing and preparing the financial statements?

 Options:

  Auditor

  Management

  Accountant

  Company secretary

 

Question:

Which one of the following is the method of assessing the internal control system of an entity?

Options:

  Audit procedures

  Audit evidence

  Compliance audit

  Technical analysis

 

Question:

The purpose of engagement letter includes the following EXCEPT:

Options:

  To defines the auditor’s responsibilities clearly

  To minimize misunderstandings between the client and auditors

  To educate the cliet

  To help the auditor in preparing audit report

 

Question:

A manufacturing company wants to hire external auditors who examine the activities operations procedures and processes of each department of the company. The company follows the local and international laws rules ad regulations and also has set standards for the efficiency and effectiveness. The company shall have to provide the access of all kind of operational information that will be required to the auditors as audit evidences. Considering the above situation select the most suitable type of audit which the company should opt?

 Options:

 Compliance audit

  Operational audit

  Technology audit

  Financial audit

 

Question:

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?

 Options:

  Financial report

  Financial statement

  Director’s report

  Auditor's report

 

Question:

Which of the following statements is true?

Options:

  The auditing profession is unregulated

  The auditing profession is regulated only by its own professional body

  Outside bodies sometimes become involved in the regulation of the audit profession

  The auditing profession is regulated only by the government

Question:

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?

 Options:

  Valuation

  Completeness

  Existence

  Rights and obligations

 

Question:

Internal control is primarily established within a company to do which of the following? Options:

  To prevent fraud in the company affairs

  To provide reasonable assurance that the company's ob jectives will be achieved

  To catch all errors that may occur in the company

  To aid in the effective auditing of the company

 

Fixation of remuneration of auditors can be determined by the following authorities EXCEPT: (Companies Ordinance 1984)

 Options:

  Directors

  Company secretary

  Commission

  Members

 

Question:

A leather goods manufacturing company has started its operations in 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 Ordinance 1984)

 Options:

 Company secretary

  Company registrar

  Commission

  Institute of Chartered Accountants of Pakistan (ICAP)

 

Question:

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?

Options:

  Criminal liability

  Liability for misfeasance

  Liability for negligence

  Accounting liability

 

Question:

DBMSes & Databa ses are same things.

Options: 

false

  true

 

Question:

Audit sampling conducted

Options:

  On selected number of items

  On Whole population

  On specific no of items

  All of the given options

 

Question:

Advantages of Audit Sampling

 Options:

  Economical

  Time Saving

  More Practical

  All of the given options

 

Question:

Which of the following is the component of audit risk?

Options:

  Inherent risk

  Control risk

  Detection risk

  All of the given options

 

Question:

Which of the following is not needed to be verified at the time of verification of Equity? Options:

  Share capital’s classification

  Movement in share capital

  Preliminary expenses are properly write off

  Movements in reserves

 

Question:

Which of the following is needed to be verified at the time of verification of Account Balances?

 Options:

  Look over any significant reconciling items of an unusual nature

  Inspect about outstanding stale cheques

  Acquire direct bank confirmation

  All of the given options

 

Question:

Tolerable error and sample size have

 Options:

  A direct relationship

  An inverse relationship

  No relation

  None of the given options

 

Question:

Sample risk and sample size have

 Options:

  A direct relationship

  An inverse relationship

  No relation

  None of the given options

Question:

Where the auditor relies more on the system of internal control the circumstance warrant: Options:

  He spends more time on audit

  Effectiveness of the audit is affected

  Efficiency of the audit is affected

  Reliability of the results of the tests is affected

 

Question:

The auditor should select sample in such a way that:

Options:

 All important items should be selected

  All items containing misstatement should be selected

  All items in the population are selected

  All items in population have an opportunity of being selected

 

Question:

Stratification is a process of dividing a population into sub- populations which have Options:

  Heterogeneous characteristics

  Nothing in common

  Lot of sampling units

  Homogeneous characteristics

 

Question:

Test of controls comprise of testing of all EXCEPT

 Options:

  Design

  Implementation

  Operating efficiency

  Operating effectiveness

 

Question:

Analytical procedures are carried out for which one of the following purposes?

 Options:

  To reduce detection risk

  To assess inherent risk

  To reduce control risk

  To determine detection risk

Question:

Nature of audit procedure’ refers to which one of the following desc ription?

 Options:

 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

.  It refers when audit procedures are to be performed or the period or date to which the audit evidence applies

.  It refers to sample size or number of observations of a control activity (quantity of audit evidence)

.  It refers to the nature of testing and their procedures that is designing structuring and compiling work to be done

 

Question:

The auditors are required to perform tests of controls when

 Options:

  The internal controls are operating inefficiently

  Substantive procedures alone provide sufficient appropriate audit evidence at the assertion level.

  Substantive procedures alone do not provide sufficient appropriate audit evidence at the assertion level.

  Analytical procedures alone do not provide sufficient appropriate audit evidence at the assertion level.

 

Question:

Following desc riptions are the examples of substantive testing EXCEPT:

Options:

  Test of account balances to verify the correctness of the amounts

  Verification that an operating system and/or applications are configured appropriately to the companies needs

  Review of minutes of directors; meetings and inquiry

  Use of statistical sampling to determine the accuracy of financial statement figures

Question:

How often the Bank reconciliations should be prepared?

Options:

  Weekly

  Monthly

  Quarterly

  Annually

 

Question:

How often Inventory levels should be checked against the inventory records in order to keep its control effectively?

Options:

 Rarely

  Periodically

  Never

  Daily

 

Question:

What auditors seek in the register of non current assets for each major group of assets? Options:

  Details of each item its cost and residual value

  Details of each item its cost and accumulated depreciation

  Details of each item its cost and depreciation

  Details of each item its cost and capital investment expected returns

 

Question:

Which one of the following may NOT consist of any verification methods?

 Options:

  Closing balance

  Acquisitions

  Disposals

  Reconciliation

Question:

Which one of the following may not be any matter relevant to verification of assets? Options:

  Taxation

  Vouching

  Insurance

  The letter of representation

 

Question:

Which one of the following aspects of assets must be verified?

 Options:

  Cost and authorization

  Value and existence

  Beneficial investment

  Presentation in the accounts

 

Question:

An Automobile Company hires auditors at the year end. Auditors are at the stage of verification and vouching of company’s financials. Before examining the equity section they develop general aspects concerning the owner’s equity. In your opinion which one of the following aspects may NOT be considered by the auditors during this assessment?

 Options:

  Share capital is properly classified and described in the accounts

  Capital stock is enough to execute the company’s financial needs

  Reserves are properly classified and presented

  Movements in reserves are properly authorized

 

Question:

Non current assets manufactured or constructed by the company itself should reflect which types of costs in the costing records?

 Options:

 Direct costs plus relevant overhead but not include any profit

  Direct costs plus relevant overhead and any profit earned on it

  Indirect costs plus relevant overhead but not include any profit

  Indirect costs plus relevant overhead and any profit earned on it

 

Question:

Which one of the following matters should be included in the letter of representation? Options:

  Existence of any immaterial mistake in the statements

  Existence of any fraud or error in the statements

  Company’s growth trend in the future in figures

  Market value of the company’s stock

 

Question:

Who should prepare the annual capital expenditure budgets of the company in order to keep effective?

 Options:

  Someone directly responsible to the shareholders

  Someone directly responsible for goods delivery to the customers

  Someone directly responsible to the board of directors

  Someone directly responsible to deal with the suppliers