AUDITING MCQS
MULTIPLE CHOICE QUESTIONS AND ANSWERS (CMA MCQ)
FOR B.COM/CA/CS/CMA EXAM
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THIS PAGE YOU WILL GET MORE THAN 200 MCQS TYPES ON AUDITING WHICH ARE ASKED
REGULARY IN VARIOUS EXAMS. ALSO WE ARE PRPARING CHAPTERWISE NOTES AND CHAPTERWISE
MCQS ON AUDITING WHICH CAN BE VERY USEFUL FOR YOUR EXAMS. SO, VISIT THIS PAGE
REGULARLY.
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CHAPTERWISE
NOTES |
CHAPTERWISE
MCQS |
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1. INTRODUCTION TO AUDITING MCQS & MANY
MORE COMING THIS NOVEMBER’ 2020 |
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1. Auditing
refers to
a)
Preparation and checking of account
b)
Examination of accounts of business
units only
c)
Examination of accounts of professional accountants
d)
Checking of vouchers
2.
Main object of auditing
is
a)
Detection of errors
b)
To find out whether P&L a/c & B/S show true
and fair state affairs
c)
Detection of frauds
d)
Detection and prevention of frauds and
errors.
3.
Auditing is luxury for
a 2013
a)
Joint stock company
b)
Partnership firm
c)
Small shop-keeper
d)
Government company
4.
Auditing is compulsory
for 2015
a)
Small scale business enterprises
b) All
partnership firms
e)
All joint stock companies
c)
All proprietary concerns
5.
Propriety audit refers to
a)
Verification of accounts
b)
Examination accounts of propriety
concerns
c)
Enquiry against justification and necessity of
expresses
d)
Audit of Govt. companies
6.
Propriety is normally undertaken in case of
a)
Joint stock company
b)
Government company
c)
Statutory corporation
d)
Govt. departments
7.
Interim audit refers
to 2015,
2018
a)
Examination of accounts continuously
b)
Examination of accounts intermittently
c)
Audit work to find out and check interim profits of
a company
d)
Carrying on audit for bonus purposes at
the end of the year
8.
Final audit implies
a)
Audit of accounts at the end of the year
b)
Finally checking of accounts to reveal
frauds
c)
Audit for submitting report immediately
at the end of the year
d)
Audit of banking companies
9.
A continuous audit is specially needed
for 2014
a) Any trading concern
b) Smaller concerns
c) Banking companies
d) Any manufacturing companies
10.
Joint audit implies
a)
Audit of two concerns together
b)
Audit of joint stock companies
c)
Audit of joint sector companies
d)
Audit by two firms of C.A
11.
Management audit means
a)
Audit undertaken on behalf of the
management
b)
Evaluating performance of various management
processes and functions
c)
Audit undertaken on behalf of Govt. to
punish management
d)
Compulsory audit
12.
Systems audit implies
a)
Systematic examination of accounts
b)
Audit undertaken to improve auditing
systems
c)
Enquiring accounting and control systems
d)
Checking the performance of management
13.
Internal audit means
a)
Audit undertaken to ascertain truth and
fairness of state of affairs
b)
Audit undertaken internally to evaluate
management functions
c)
Audit undertaken by employees of the organization
to check financial irregularities
d)
Audit by independent auditor to improve
internal affairs
14.
Internal audit is
a)
Compulsory for a company with paid-up
capital of Rs. 25 lakh and above
b)
Voluntary for a company
c)
Not necessary for a company
d)
Necessary for a company
15. Detection of errors and fraud in audit
is
a)
Primary object
b)
Secondary object
c)
Specific object
d)
None of the above
16.
Internal auditor is appointed and removed by
the
a)
Management
b)
Shareholders
c)
Government
d)
C & A-G
17.
The object of internal check is
to
a) Control
wastage of resources
b) Prevent errors and frauds
c) Verify
the cash receipts and payments
d) Facilitate
quick decision by the management
18.
Effective internal check system reduces
a) The
liability of auditor
b) Work of auditor
c) Both
work as well as auditor
d) Responsibilities
of an auditor
19.
Internal check is a part
of
a) Internal
audit
b) Internal
accounting
c) External
audit
d) Internal control
20. The objective of internal audit is
a) To prevent error and fraud
b) To detect error and fraud
c) To improve financial
control
d) All
of the above
21.
Internal check is carried on by
a) Special
staff
b) Internal
auditor
c) Accountant
d) The members of the staff
among themselves
22.
Internal check is suitable for
a) Larger concerns
b) Smaller
concerns
c) Petty
shop- keepers
d) None of
the above
23.
Internal check is essential for
a) Petty
traders
b) Cash transactions in a
large concern
c) A
concern using automatic equipments
d) None of
the above
24.
Misappropriation of goods may be checked by
a) Proper supervision over
stock
b) Checking
of employees
c) Punishment
of employees
d) None of
the above
25.
Window dressing implies
a) Curtailment
of expenses
b) Checking
wastages
c) Under-
valuation of assets
d) Over- valuation of assets
26.
Falsification of accounts is undertaken by
a) Auditors
b) Clerks
c) Accountants
d) Responsible officials
27. Errors of omission
are
a) Technical
errors
b) Error
of principle
c) Compensating
errors
d) None
of the above
28. Test checking refers to
a) Testing
of accounting records
b) Testing
of honesty of employees
c) Intensive
checking of a selected number of transactions
d) Checking
of all transactions recorded
29. Test checking should not be applied to
a) Sales
book
b) Purchase
book
c) Bank
reconciliation statement
d) Bills
book
30. Test checking should not be applied to
a) Purchase
book
b) Sales
book
c) Stock
book
d) Cash
book
31. Vouching implies
a) Inspection
of receipts
b) Examination
of vouchers to check authenticity of records
c) Surprise
checking of accounting records
d) Examining
the various assets
32. The company can buy back its shares only if it is authorized by its Articles
of Association.
33. The Constitution of India has envisaged the office of the Comptroller
and Auditor General of India to be the Supreme Audit
Institution in the country.
34. A person qualified for appointment as a Company Auditor is
a) a
graduate
b) a body
corporate
c) officer
or employee of company
d) None of
them
35. Contingent liability is
a) Trade
liability
b) Possible
liability
c) Outstanding
liability
d) None of
the above
36. Undervaluation of stock is
a) Technical
error
b) Compensatory
error
c) Error
of principles
d) None of
the above
37. Huge Investment in advertisement shown in financial statements as
a) Revenue
expenses
b) Capital
expenses
c) Deferred
revenue expenses
d) None of
the above
38. Provisions regarding redemption of preference shares are in Companies
Act, 2013 under
a) Section
180
b) Section
56
c) Section
55
d) None of
the
above Sec.
90 of the Companies Act, 2013
39. Verification refers to
a) Examination
of journal and ledger
b) Examination
of vouchers related to assets
c) Examining
the physical existence and valuation of assets
d) Calculation
of value of assets
40. Object of verification of assets
a) Physical
verification of assets
b) Checking
value of assets
c) Examining
the authority of their acquisition
d) All of
the above
41. Which of the following statements is correct?
a) Valuation
is a part of verification
b) Verification
is a part of valuation
c) Valuation
has nothing to do with verification
d) Auditor
is a valuer
42. Stock should be valued
at
a) Cost
b) Market
price
c) Cost
price or market price whichever is lower
d) Cost
less depreciation
43. Valuation of Fixed Assets is based on the
concept
a) Going
concern
b) Conservation
c) Money
measurement
d) Dual
aspect
44. Valuation means
a) Calculating
value of assets
b) Checking
the value of assets
c) Checking
the physical existence of assets
d) Examining
the authenticity of assets
45. “ Auditor is not valuer” was stated in
a) Kingston
Cotton Mills case
b) London
& General Bank case
c) Lee
. V . Neuchatel Co. Ltd case
d) London
oil Storage Co. case
46. Fixed assets are valued at
a) Cost
b) Market
price
c) Cost
price or market price whichever is less
d) Cost
less depreciation
47. Floating assets are valued at
a) Cost
b) Market
price
c) Cost
price or market price whichever is less
d) Cost
less depreciation
48. The scope of work of internal audit is decided
by
the 2013,
2016
a) Share
holders
b) Management
c) To
improve financial control
d) All
of the above
49. Outstanding expenses should be verified with the
help of
a) Cash
book
b) Balance
book
c) Journal
proper
d) None
of the above
50. Book debts should be verified with the help of
a) Balance
sheet
b) Amount
received from Debtors
c) Debtors
schedule
d) Certificate
from the management
51. Investments in hand should be verified with the
help of
a) Schedule
of investments
b) Balance
sheet
c) Inspection
of securities
d) Certificate
from the bank
52. First auditor of a company is appointed by the
a) Shareholders
b) Central
Govt.
c) Company
Law Board
d) Board
of Directors
53. Which of the following persons is qualified to
be a company auditor?
a) An
employee of the company
b) A
body corporate
c) A
person who is indebted to the company for an amount exceeding Rs. 1000
d) A
practicing chartered accountant
54. The first auditor of a company will hold office
a) For
a period of one year
b) Till
holding of statutory meeting
c) Till
the conclusion of first annual general meeting
d) Till
a new auditor is appointed
55. Normally, a company auditor is appointed by the
a) Central
Government
b) Shareholders
c) Board
of Directors
d) Company
Law board
56. An auditor in a casual vacancy is appointed by
the
a) Board
of Directors
b) Shareholders
c) Central
Government
d) Company
Law board
57. If an auditor is not appointed at annual general
meeting, he is appointed by the
a) The
Central Government
b) Board
of Directors
c) Shareholders
d) The
existing auditor shall continue to be auditor of the company
58. A vacancy caused by resignation of the auditor
is filled by
a) Board
of Directors
b) At the
general meeting of shareholders
c) By
the Central Government
d) By
the Company Law board
59. A special auditor is appointed by the
a) Shareholders
b) Board
of Directors
c) Central
Government
d) CAG
60. A government Co. auditor may be appointed by the
a) CAG
b) Shareholders
c) Central
Government
d) None
of the above
61. A company auditor can be removed before expiry
of his term by
a) Shareholders
b) Board
of Directors
c) Central
Government
d) State
Government
62. Remuneration of a company auditor is fixed by
the
a) Shareholders
b) Board
of Directors
c) Central
Government
d) Appointing
authority
63. A company auditor, in general has to submit his
report to
a) Shareholders
b) Board
of Directors
c) Central
Government
d) CAG
64. An auditor of Government company has to submit
his report to the
a) Shareholders
b) Central
Government
c) CAG
d) Ministry
concerned
65. Internal auditor has to submit report to
a) Shareholders
b) Government
c) Company Law board
d) None of the above
66. Auditor should be dutiful like a
a) A watch dog
b) A blood hound
c) A detective
d) An insurer
67. Auditor, in general is an
a) Employee of the company
b) Agent of the company
c) Agent of the shareholders
d) None of the above
68. Which of the following percentage of nominal
amount of shares should be received with application
a) 10
b) 15
c) 5
d) 6
69. While checking allotment, auditor should see
that amount
a) Equal to estimated fixed capital is received
b) Equal to estimated working capital is
received
c) Necessary for purchase of land & building
has been received
d) None of the above
70. Application money should not be withdrawn unless
a) Allotment is made
b) Cash book has been prepared
c) Certificate to
commence business obtained
d) Certificate of incorporation obtained
71. Shares issued for consideration other than cash
should be vouched with the help of
a) Directors minutes book
b) Shareholders minutes book
c) Contract with the
party concerned
d) Cash book
72. A company can issue Redeemable Preference
shares, if authorized
by 2015
a) Memorandum of association
b) Articles of
association
c) Companies Act, 1956
d) None of the above
73. Auditor should see that amount received for
premium on issue of shares should be shown in
a) Subscribed capital
b) Capital Reserve Account
c) Securities Premium
Reserve account
d) Paid- up capital account
74. Securities Premium Reserve account should be
shown in the Balance sheet under
a) Paid-up capital
b) Subscribed capital
c) Reserves &
surplus
d) Reserved capital
75. Amount of share premium may be utilized for
a) Payment of dividend
b) Writing of
preliminary expenses
c) Routine expenses
d) Purchase of fixed assets
76. Shares cannot be issued at discount under
section
a) 76
b) 75
c) 53
d) 89
77. Interest on calls paid in advance, according to
Table A, should not
exceed
a) 12%
b) 5%
c) 10%
d) 14%
78. Shares can be issued at premium, under section
a) 76
b) 75
c) 52
d) 79
79. Shares can be issued at discount only after
a) 2
years of the commencement of the business
b) 1 year
of the commencement of the business
c) 3
years of the commencement of the business
d) 5
years of the commencement of the business
80. With regard to issue of share warrants to the
bearers, the auditor should see that is it
a) Permitted
by Memorandum of Association
b) Sanctioned
by the Central Government
c) Permitted
by the Board of Directors
d) None
of the above
81. For the forfeiture of shares, the auditor should
check that it is permitted
a) by
Memorandum of Association
b) by
articles of association
c) under
Companies Act, 1956
d) None
of the above
82. Increase in share capital is permitted by
a) Memorandum
of Association
b) Articles
of association
c) Court
d) Companies
Act, 2013
83. Divisible profit should not include
a) Interest
on capital
b) Capital
c) Depreciation
d) None of
the above
84. Dividend can not be paid out of
a) Capital
profit
b) Capital
receipts
c) Revenue
receipts
d) None
of the above
85. Capital profit imply profit earned
a) Through
business transaction
b) From
capital
c) From
sale of fixed assets
d) From
sale of current assets
86. Capital profits
a) Can
be paid by way of dividends
b) Cannot
paid by way of dividends
c) Can
be paid by way of dividend under certain conditions
d) None
of the above
87. A company auditor should see that the dividend
should be paid
a) After
charging depreciation
b) Without
charging depreciation
c) Out
of capital
d) None
of the above
88. In his report, the auditor gives his
a) Judgment
b) Opinion
c) Guarantee
to correctness of accounts
d) True
state of affairs
89. Civil liability of an auditor implies liability
for
a) Misappropriation
of cash
b) Misappropriation
of goods
c) Fraud
d) Misfeasance
90. An auditor can be held liable under companies
Act 1949 for
a) Negligence
b) Criminal
offence
c) Professional
misconduct
d) Breach
of contract
91. Investigation of books of accounts and records
is :
a) Not
legally compulsory
b) Compulsory
c) Compulsory
as per companies act
d) Compulsory
as Income Tax Act
92. Inflation of closing stock results is:
a) Inflation
of loss
b) Deflation
of loss
c) Inflation
of profit
d) Deflation
of profit
93. Charging excessive provision for depreciation
results in
a) Less
profit
b) More
profit
c) No
change in profit
d) No
change in loss
94. The main purpose of management audit is to
a) Review
the management operations
b) Check
arithmetical accuracy
c) Prevent
travel
d) Prevent
error
95. Management audit is
a) Compulsory
b) Not
compulsory
c) Compulsory
under Income Tax Act
d) Compulsory
under Indian Contract Act.
96. Special resolution means:
a) 1/3 majority
b) 2/3 majority
c) ½ majority
d) 4/5 Majority
97. Ordinary resolution means:
a) 4/5
b) 1/3
majority
c) 2/3
majority
d) More
than 1/2
98. Institute of chartered Accounts of India was established in the
year
a) April 1, 1956
b) April 1, 1949
c) July 1, 1956
d) July 1, 1949
99. Auditor is an ________ of a shareholder
a) Owner
b) Agent
c) Employer
d) Creditor
100. Financial auditor submits reports to the:
a) Shareholder
b) Board
of director
c) Debtors
d) Employees
101. Cost auditor submits reports to the:
a) Shareholder
b) Board
of directors
c) Employees
d) Creditors
102. Auditor finds that there is change in the
method of valuation of stock whether he should
a) Allow
it
b) Disallow
it
c) Allow
it with a note to this effect
d) None
of the above
103. Audit under any statute in a country is called:
a) Final
audit
b) Internal
audit
c) Proprietory
Audit
d) Statutory
audit
104. Books of Accounts are prepared and audited as
per the provisions of the:
a) Income
Tax Act,1961
b) Companies
Act 2013
c) Chartered
Accountants Act 1949
105. CAATTS is also known as:
a) Cost
And Accounts Treatments
b) Computer
Assisted Audit Tools and Techniques
c) Classification
and Accounting of Tax Tools
106. Auditor has got no lien on:
a) Audit
Note Nook
b) Audit
working papers
c) Books
to Accounts of Client
107. Statutory Report should be sent to registrar
before ------------------- days of statutory meeting
a) 30
days
b) 14
days
c) 21
days
108. ________ audit is not a statuary requirement
a) Management
b) Financial
c) Tax
Audit
109. ____________ audit refers to the
evaluation of company’s performance against planned goals in the areas of
social responsibility.
a) Cost
audit
b) Social
audit
c) Management
audit
110. Bonus shares are issued to:
a) New
members
b) Existing
share holders
c) Employees
111. Government may order for cost audit under the
a) Section 227
b) Section 223A
c) Section 223B
(Old) Section 148 of
Companies Act, 2013
d) Section 224
112. A company can issue bonus shares if authorized
by
a) Memorandum
of Association
b) Articles
of Association
c) Companies
Act 2013
113. Accounting standards are prepared by
a) SEBI
b) RBI
c) ICAI
d) ITA
114. The maximum rate of discount on shares shall
not exceed________________
a) 20%
b) 15%
c) 10%
115. Which among the following is not a function of
the auditor:
a) Checking
errors and frauds
b) Correcting
errors and frauds
c) Vouching
with original documents
d) Preparing
final Accounts
116. Internal audit is conducted
a) Periodically
b) Throughout
the year
c) Once
in a year
117. The amount of application money received shall
be deposited in a scheduled bank until________
a) Annual
general meeting
b) General
meeting
c) Certificate
to commencement obtained
118. The auditors are liable under
a) Companies
Act Only
b) Income
Tax Act Only
c) All
above
119. The maximum number of audit assignment an
auditor can accept is limited to ________ companies
a) 10
b) 15
c) 20
120. _____________ is a written plan
containing details with regard to the conduct of a particular audit
a) Audit
Note book
b) Audit
programme
c) Audit
files
121. ____________ is the verification of books of
accounts from Income tax point of view
a) Cost
audit
b) Tax
audit
c) Management
audit
122. Which among the following is not a right
of company auditors
a) Right
to access the book accounts
b) Right
to seek explanations
c) Right
to lies on books of accounts
123. Test checking is done when there is an
effective system of _________
a) Internal
control
b) Internal
audit
c) Internal
check
124. Test checking means
a) Checking
of all transactions
b) Checking
of half of the transactions
c) Checking
of selected items
125. Audit working papers are:
a) Important
information about audit
b) Appointment
letters regarding audit
c) Letter
of notice
126. Current audit file consists of
a) Matters
of future importance
b) Matters
relations to post years
c) Matters
relating to the year of audit
127. ____________ begins where accounting ends
a) Bookkeeping
b) Auditing
c) Internal
check
128. ________audit is compulsory for joint stock
companies
a) Statutory
b) Final
c) Continuous
129. Treating revenue expenditure as capital
expenditure is an example of error of:
a) Principle
b) Compensating
c) Clerical
130. Financial statements are prepared by:
a) The
accountant
b) The
auditor
c) Managing
director
131. Preliminary expanses not written off are
treated as
a) Fixed
assets
b) Intangible
assets
c) Fictitious
assets
132. Verification of assets involves a critical
examination of
a) Ownership
b) Existence
c) All
of these
133. Finished goods are valued for a balance sheet
purpose
a) At
cost price
b) At
market price
c) At
lower of cost or market price
134. ________________ includes financial and
non-financial control
a) Internal
check
b) Internal
control
c) Internal
audit
135. ____________ is concerned with the allocation
of work among employees
a) Internal
control
b) Internal
check
c) Internal
audit
136. The duties of internal auditor is prescribed by
a) Companies
act
b) Company
law board
c) Management
137. Internal audit is considered as a service to:
a) Share
holders
b) Board
of directories
c) Management
138. Pre-arranging and coordinating the audit work
is called:
a) Audit
planning
b) Vouching
c) Verification
139. A fixed audit programme is also called a
________ programme
a) Tailor
made
b) Man
made
c) Auditor
made
140. To forfeit shares ______________
days notice to the share holder’s given
a) 40
b) 14
c) 24
141. A ___________ report is one which contains the
opinion of the auditor subject to certain conditions
a) Unqualified
b) Qualified
c) Clean
142. _____________ is made out of reserves or share
premium
a) Preference
shares
b) Bonus
shares
c) Debentures
143. __________shares cannot be issued if the
company makes any default in the payment of its obligation
a) Preference
b) Equity
c) Deferred
d) Bonus
144. Capitalization of reserves means:
a) Creation
of provision
b) Capital
Reserve
c) Declaration
of dividend
d) Issue
of bonus shares
145. Provisions regarding bonus issue should be
given in ______________ document
a) Memorandum
of association
b) Articles
of association
c) Prospectus
d) None
of the above
146. Balance remaining in the forfeited Account after
reissue is transferred to ___________ account
a) General
reserve
b) Capital
reserve
c) Premium
account
147. If reissue of shares are more than face value
of shares, the excess amount is transferred to :.
a) General
reserve
b) Capital
reserve
c) Securities
Premium Reserve account
148. Which one of the following examples is not contingent asset? Claim from
the acceptor of bill receivable which has been discounted by the client from
the bank but might be dishonoured.
149. The amount of securities premium reserve may be used only for some
specific purposes as per provisions of the Companies Act, 2013 under the: Section 52(2)
150. Auditor under management audit is accountable to the : Board of
Directors.
151. Profit on redemption of debenture is transferred to which
Account? Capital Reserve Account.
152. Loss on issue of debentures is written off: During the life of debentures.
153. Auditing starts where Accounting ends.
154. Vouching is the
backbone of auditing.
155. Issue of Bonus share is a good method of
capitalizing large profits or reserves.
156. The subscribed capital of a banking company should not be less
than one half of its authorized capital.
157. Internal auditor is under the direct control of
management. False
158. Valuation is a broader term and includes verification of assets and
liabilities. False, Vice-versa
159. A debenture is an acknowledgement of
ownership. False, Creditorship securities
160. The
true ownership of the company rests in the shareholders but not in the
management. True
ALSO READ: MCQS ON
AUDIT REPORT
Auditing MCQs Asked in CA/CS and CMA Examination
1. An Audit notebook is a bound book in
which a large variety of matters observed during the course of audit are
recorded. True
2. The concept of true and fair is a
fundamental concept in auditing. True
3. First auditor of the company is
appointed by the Board of Directors within 45 days from the date of first
AGM. False
4. A Statutory Audit is an official
investigation into alleged wrong doing. False
5. Section 70 deals with the Audit of
Debenture. False
6. An Audit Committee should have 4
directors. False
7. CARO-Companies (Auditor's Report)
order, 2016 is applicable to Banking Companies. False
8. Internal Check is part of Accounting
Control. True
9. The Branch Auditor shall prepare
report on the Accounts of the Branch examined by him and send it to Audit
Committee. False
10. Maintenance of Cost Accounting
Standards is mandatory as per Section 143 of Companies Act. False
11. Routine checking is a substitute of
vouching. False
12. Casual vacancy in the office of Cost
Auditor is filled by Board of Directors. True
13. As per Section 138 of Companies Act
2013, no private company or unlisted company is required to appoint an internal
auditor. False
14. Audit Memorandum is a detailed plan
of audit work clearly specifying the responsibilities of the audit staff and
time allotted to perform the same. False
15. Substantive procedure is also known
as test of control. False
16. Cut-off procedures are adopted to
allocate revenues and costs to the proper accounting period. True
17. Audit Programme is a part of Current
Audit File. True
18. Internal audit is conducted by the
staff of the entity or by an independent professional appointed for that
purpose. True
19. The first auditor of a company is
appointed by the shareholders of the company at the general meeting. False
20. A company auditor can render
actuarial services to his client. False.
