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Principles of Auditing

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Principles of Auditing UNIT I 1. The chartered Accountants Act is in ----------------- a)1956 b)1959 c)1949 d)1950 2. Auditor is an --------------- of a shareholder a)Owner b)Agent c)Employer d) Educator 3. ------------------- begins where accounting ends a)Bookkeeping b)Auditing c) Internal check d)Internal Control 4. ---------------- audit is compulsory for joint stock companies a)Statutory b)Final c)Continuous d)Partial 5. 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 6. 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. 7. Auditing is compulsory for ______________ a) Small scale business enterprises b) All partnership firms c) All joint stock companies d)All proprietary concerns 8. Interim audit refers to _____________ 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 9. A continuous audit is specially needed for ___________ a) Any trading concern b) Smaller concerns c) Banking companies d) Any manufacturing companies 10. Internal auditor has to submit report to_____________ a) Shareholders b) Government c) Company Law board d) Management 11. Auditor should be dutiful like a ________________ a) A watch dog b) A blood hound c) A detective d) An insurer 12. 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 13. 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 14. Misappropriation of goods may be checked by______________ a) Proper supervision over stock b) Checking of employees c) Punishment of employees d) Directors 15. Errors of omission are________________ a) Technical errors b) Error of principle c) Compensating errors d) None of the above 16. --------------- audit is more suitable for small business houses a). Continuous b)Annual c).Partial d) Social 17. Audit working papers are -------------------------- a) Important information about audit b).Appointment letters regarding audit c).Letter of notice d).Rough work of company 18. --------------- 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 d)Audit Working papers 19. 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 20. Partial auditing is usually done by a. Sole trading concern b. Joint stock company c. Govt. department d. Partnership concern UNIT II 21. 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 22. 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 23. Internal audit is undertaken ______________ a) By independent auditor b) Statutorily appointed auditor c) By a person appointed by the management d) By Government auditor 24. 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 25. Internal check is a part of _____________ a) Internal audit b)Internal accounting c)External audit d)Internal control 26. Internal check is carried on by ______________ a) Special staff b) Internal auditor c) Accountant d) Employee of the company 27. Internal check is suitable for _____________ a) Larger concerns b) b)Smaller concerns c) Petty shop- keepers d) None of the above 28. The scope of work of internal audit is decided by the ____________ a) Share holders b) Management c) To improve financial control d) All of the above 29. Test checking is done when there is an effective system of -------------- a. Internal control b. Internal audit c. Internal check d. Internal management 30. 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 31. Test checking should not be applied to_______________ a) Sales book b) Purchase book c) Bank reconciliation statement d) Bills book 32. The examinations of financial transactions with supporting evidences is called___________ a. Verification b. Vouching c. Auditing d. Investigation 33. 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 34. Process of checking the evidence of the entries called _____________. (a) Verification (b) Observation (c) Vouching (d) Inspection 35. Payment for goods purchased should be vouched with the help of ________________ a) Creditors statement b) Correspondence with suppliers c) Cash memos d) Ledger accounts 36. Payment for wages should be vouched with the help of _____________ a) Piece work statement b)Wage sheets c) Minute book d)Bank pass book 37. Receipt from debtors should be vouched with the help of________________ a) Counterfoil Receipts cash book b) Suppliers statement c) Sales Deeds d) General Ledger 38. Receipt from sale of investment should be vouched with the help of_____________ a) Brokers Budget Notes b)Brokers Sold Notes c)Minute Book d)Inventory of investment 39. Purchases returns should be vouched with the help of_________________ a) Bought Notes b)Credit Notes c)Goods inward Book d)Cash Book 40. Serial number of vouchers should be ____________. (a) Colored (b) Continuous. (c) Even number (d) Odd number. UNIT III 41. Investigation is conducted_____________ a. Regularly b.Quarterly c) As and when required d) fortnightly 42. Investigation is required when_____________ a. Fraud is suspected in business b. On acquisition of running business c. All of them 43. 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 44. Investigation is carries on behalf of ___________ a. Manager b. Employee c. Client d. On behalf of owner and third parties 45. Examination of accounting records undertaken for a special purpose is called__________ a. Auditing b. Internal check c. Investigation d. Internal control 46. The prime importance of investigation on behalf of an individual or firm intending to purchase an existing business is to ______________ a. Ascertain value of asset b. Ascertain the earning capacity of the concern c. Estimation of value of good will d. Extend of liabilities 47. The main objects of investigation is _________. a) to discover errors and frauds. b) to prevent errors and frauds. c) to verify statements. d) all the above. 48. Investigation is conducted by ________________ a) Cost Accountant b) Company Secretary c) Chartered Accountant d) Any person 49. Investigation implies systematic, critical and special examination of the records of a business for a__________ a) General purpose b) Unspecified purpose c) Specific purpose d) None of the above 50. Investigation seeks _____________ a) Conclusive evidence b) Corroborative evidence c) Both (a) and (b) above d) Persuasive evidence 51. __________is conducted even though the accounts have been audited. a) Investigation b) Auditing c) Verification d) Valuation 52. Under which of the following circumstances inspectors are appointed under companies act by central government. a) Company having share capital if at least 200 members or 1/10 th of total voting power to government b) Company having share capital if at least 250 members or 1/5 th of total voting power to government c) Company having share capital if at least 100 members / 1/10 th of total voting power to government d) Company having share capital if at least 200 members / 1/5th of total voting power to government 53. Choose from the following circumstance the registrar of joint stock company may apply to the central government for the appointment of Investigator a) If company fails to send any information required to furnish b) Document filed disclose an unsatisfactory state of affairs c) Affairs of the company have been carried on fraudulently. d) All of the above 54. Special resolution means ------------------- a. 1/3 majority b. 2/3 majority c. ½ majority 55. Ordinary resolution means ----------------------- a. 1/3 majority b. 2/3 majority c. More than ½ 56. If inspector has no legal power to examine any person he may apply to _________ which may order that person to appear before inspector a) Managing Director b) Court c) Registrar of company d) Secretary 57. If Central Government appoints an auditor he will be designated as _______ a) Company Auditor b) Special Auditor c) Firm of auditors d) General Auditor 58. If any person refuses to furnish information to special auditor within prescribed time, he is punishable with a fine up to _______________ a) 5000 rupees b) 10000 rupees c) 7500 rupees d) 2500 rupees 59. The expenses incidental to special audit including remuneration of special auditor shall be determined by __________ a) Central government b) Shareholders c) Court d) Managing director 60. 60.The Auditor appointed to conduct investigation, he should get instructions in writing regarding ______ a) Scope of Enquiry b) Object of enquiry c) Time limit to submit report d) All of the above UNIT IV 61.
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