Introduction to Auditing MCQs [Mutliple Choice Questions and Answers]

Introduction to Auditing MCQs
Mutliple Choice Questions and Answers

In this page, you will get Introduction to Auditing MCQs which are useful for B. Com and Various Professional Exams Like CA/CMA and CS.

We update this page frequently to add new questions. Chapter wise Auditing MCQs are also included in this post.

Introduction to Auditing

The word audit is derived from the Latin word “AUDIRE” which means to hear. Initially auditor was a person appointed by the owners to check account whenever the suspected fraud, he was to hear explanation given by the person responsible for financial transactions. Emergence of joint stock companies changed the approach of auditing as ownership was pestered from management. The emphasis now is clearly on the verification of accounting date with a view on the reliability of accounting statement.

Auditing is a systematic examination of the books and records of a business or other organization, in order to ascertain or verify and report upon the facts regarding its financial operation and the result thereof.

Introduction to Auditing MCQs
Mutliple Choice Questions and Answers

1. The word auditing is derived from the Latin word:

a) Autire.

b) Audire.

c) Aukire.

d) Aufire.

Ans: b) Audire.

[Hint: Audire means to “hear.”]

2. Double entry system was introduced in the year:

a) 1493.

b) 1494.

c) 1495.

d) 1496.

Ans: b) 1494.

3. Who is called father of modern accountancy who also described the duties and responsibilities of auditor?

a) FW Taylor.

b) Spicer and Pegler.

c) Luca Paciolo.

d) Batliboi.

Ans: c) Luca Paciolo.

4. Which Act prescribed the qualification for an auditor for the first time?

a) Companies Act, 2013.

b) Companies Act, 1956.

c) Companies Act, 1947.

d) Companies Act, 1913.

Ans: d) Companies Act, 1913.

5. The Chartered Accountants Act was passed in the year:

a) 1947.

b) 1948.

c) 1949.

d) 1950.

Ans: c) 1949.

6. 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.

Ans: c) Examination of accounts of professional accountants.

Also Read: Chapterwise Auditing MCQs

👉 Introduction to Auditing MCQS

👉 Types of Auditing MCQS

7. Auditing is compulsory for            

a) Small scale business enterprises.

b) All partnership firms.

c) All joint stock companies.

d) All proprietary concerns.

Ans: c) All joint stock companies.

8. Auditing is luxury for a                 

a) Joint stock company.

b) Partnership firm.

c) Small shop-keeper.

d) Government company.

Ans: c) Small shop-keeper.

9. Audit of business is compulsory if annual turnover exceeds:

a) Rs. 1 Crore

b) Rs. 5 Crores

c) Rs. 10 Crores

d) None of the above

Ans: a) Rs. 1 Crore

[Hint: If cash transactions are up to 5% of total gross receipts and payments, the threshold limit of turnover for tax audit is increased to Rs.10 crores (w.e.f. FY 2020-21)

10. 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.

Ans: b) To find out whether P&L a/c & B/S show true and fair state affairs.

11. Which one the following statement is true?

a) Audit is a systematic and Independent examination of books of accounts.

b) The audit should be conducted in unbiased manner.

c) Audit report is the final product of the whole audit work.

d) All of the above.

Ans: d) All of the above.

12. Auditor is mainly concerned with:

a) Critical examination of books of accounts.

b) Verification of accounts prepared by others.

c) Preparation of audit report.

d) All of the above.

Ans: d) All of the above.

13. Accounting is necessity where as auditing is a luxury but for whom?

a) Joint stock company.

b) Partnership firm.

c) Small shop-keeper.

d) Government company.

Ans: c) Small shop-keeper.

14. The main purpose of audit is to see whether:

a) The balance sheet shows true and fair view of statement of affairs of the business.

b) The profit and loss accounts show true and fair operating results.

c) All of the above.

d) None of the above.

Ans: c) All of the above.

15. Which one of the following are not the secondary objects of an audit?                 

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.

Ans: b) To find out whether P&L a/c & B/S show true and fair state affairs.

16. Which one of the following statement is true?

a) Audit of sole proprietorship is voluntary.

b) Audit of partnership firm is mandatory if turnover exceed Rs.1 Crore (business) or Rs. 50 lakhs (profession).

c) Audit of companies is compulsory.

d) All of the above.

Ans: d) All of the above.

17. Accountants and auditors help to ensure mcq

a) Arithmetical accuracy of books of accounts

b) Financial soundness of the firm

c) True and fair view of operating efficiency and financial position

d) None of the above

Ans: c) True and fair view of operating efficiency and financial position

18. An in depth examination to detect a suspected fraud is termed as:

a) Auditing.

b) Investigation.

c) Internal Check.

d) In depth analysis.

Ans: b) Investigation.

19. Audit conducted between two annual audits is knows as:

a) Efficiency audit.

b) Internal Audit.

c) Interim audit.

d) Special Audit.

Ans: c) Interim audit.

20. Which audit is conducted every month on a progressive manner?

a) Efficiency audit.

b) Internal Audit.

c) Interim audit.

d) Continuous audit.

Ans: d) Continuous audit.

21. When the auditor is an employee of the organization being audited (auditee), the audit is classified as a__ Quality audit.

a) Internal.

b) External.

c) C. Compliance.

d) D. Both A & B.

Ans: a) Internal.

22. The_____ is also expected to provide the resources needed and select staff members to accompany the auditors.

a) Auditor.

b) Client.

c) Internal auditor.

d) Auditee.

Ans: d) Auditee.

23. Each of the three parties involved in an audit______ plays a role that contributes to its success.

a) The client, the auditor, and the auditeer.

b) The client, the auditor, and the audite.

c) The client, the moderator, and the auditee.

d) The client, the auditor, and the auditee.

Ans: d) The client, the auditor, and the auditee.

24. Like account statement and balance inquires these are:

a) Customer reports

b) Financial reports

c) Management reports

d) General reports

Ans: b) Financial reports

25. An organization that has two or more owners who are legally responsible for the debts and taxes of the business is:

a) Social entity

b) Partnership

c) Sole proprietorship

d) Corporation

Ans: b) Partnership

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