SEM: 5 Sub: Auditing:
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The word audit is derived from the Latin word __________.
(a) Audire
(b) Auditor
(c) Auditorium
(d) Auditire
Which of the following is not a limitation of Auditing?
(a) Sometimes Auditing becomes routine activity because of
auditor’s insincerity.
(b) Auditing activity finds out the mal-practices in the books
of account.
(c) Auditing is a costlier activity for small business.
(d) The investors in the business can’t be assured that their
money is properly utilized by auditing of books of accounts.
It was decided in the famous case of Kingston and Cotton Mills
Company Ltd. that
(a) Auditing means Vouching.
(b) Auditing activity does not guarantee the correctness of the
accounts.
(c) Auditor is a ‘Watchdog’ and not a ‘Bloodhound’.
(d) The work of an Auditor has nothing to do with honesty and
Sincerity.
The Profession of Auditing is regulated by one of the following
acts or policies in India.
(a) The Companies’ Act, 1956
(b) The Partnership Act, 1932
(c) New Industrial Policy and Reforms, 1991
(d) The Finance Bill, 2014 (budget)
The process of checking the account books is known as ______.
(a) Book-keeping & Accounting (b) Auditing
(c) Auditor
(d) Only Accounting
Which of the following matters should not be included in the
scope of Audit?
(a) to complete the journal proper by writing the closing
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entries
(b) verification and valuation of assets
(c) examination of all the vouchers
(d) to check the correctness of allocation between capital and
revenue nature of expense
Which of the following statements is not true?
(a) Accountancy is a necessity.
(b) To prepare final account is a most important task for any
auditor.
(c) Auditing i1s both art and science.
(d) ‘Audit’ is an instrument of financial control.
How would you overstate your profit by applying one of the
following matters?
(a) by showing closing stock at less value than the cost.
(b) by keeping more Bad Debt Reserve
(c) by taking Capital Expense as the Revenue expense.
(d) by keeping more Discount Reserve on Creditors.
How would you understate your profit by applying one of the
following matters?
(a) by showing fictitious purchase
(b) by valuing the opening stock less than the cost
(c) by charging less depreciation of assets
(d) by valuing the closing stock more than the cost
Which of the following errors does not affect the Trial Balance?
(a) Over-casting of Sales book
(b) Making an error of Principle
(c) Posting on a wrong side of an account
(d) Incorrect balance of an account is shown in the Trial Balance
Which of the following is the duty of the Auditor to prevent the
misappropriation of goods?
(a) To check and verify all the data about the creditors
(b) To meet the workers and take their statements
(c) To be present at the time of delivery of purchased goods
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(d) To check all the Order, Bills of Purchase and Goods Inward
Register
Which of the following is an error of Principle?
(a) Omission of posting to an account
(b) Debiting Landlord’s account for the paid rent
(c) Posting wrong amount to an account
(d) Double Posting
Which of the following errors affects the Trial Balance?
(a) Compensating errors
(b) error of not recording a transaction completely
(c) writing a wrong balance in an account
(d) amount of paid wages is debited in paid interest’s account
Which of the following statements is not true?
(a) Giving wrong total in an account is a clerical mistake.
(b) Posting on a wrong side of an account does not affect the
trial balance.
(c) If capital expense is shown as the revenue expenses, profit will
be understated.
(d) Only responsible person should be authorized to write off the
defective goods or wastages.
Which of the following statements is not true?
(a) Statutory Audit is not compulsory.
(b) Internal Auditor is appointed by the management.
(c) Internal Auditor need not to be a Chartered Accountant.
(d) Social Audit provides protection to all stock-holders.
If the Books of Accounts are audited for whole year, this audit is a
called _________.
(a) Continuous Audit (b) Interim Audit
(c) Annual Audit
(d) Special Audit
The Auditing done at the end of the year is called ________.
(a) Continuous Audit (b) Interim Audit
(c) Annual Audit
(d) Special Audit
18. Can the Continuous Audit remove the disadvantages of the
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Annual Audit?
(a) No (b) Yes (c) if Interim Audit is done (d) None of these.
When the audit of accounts is carried on by the salaried staff
appointed by the business unit, it is called_______.
(a) Continuous Audit (b) Internal Audit
(c) Annual Audit
(d) Special Audit
The system, whereby the work of an employee is subjected to an
independent check by another employee is called _______.
(a) External Audit
(b) Internal Audit
(c) Internal check
(d) External check
The _______ system removes the possibility of errors and frauds
generally.
(a) External Audit
(b) Internal Audit
(c) External check (d) Internal check
Is the Internal Auditor the representative of the shareholders?
(a) No (b) Yes (c) Yes, if Interim Audit is done (d) None of these.
Which of the following statement is correct?
(a) Internal audit saves money spent on Annual Audit.
(b) Management Audit assures the shareholders that their money
is utilized properly.
(c) Social Audit provides protection to the stake holders.
(d)
Special Audit means the Audit of the all books of account
specially.
Cost Audit is done in ________.
(a) Software Industries
(b) Trading Companies
(c) Manufacturing Industries (d) None of these
Which one of the following is not the objective of the Cost Audit?
(a) To prepare the Final Account
(b) To verify the valuation of the stocks
(c) To find out errors in the costing calculation
(d) To verify allocation of the different expenses while deciding the
price of the product.
26. The Propriety Audit means __________.
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(a) to verify the propriety of accounting records.
(b) to verify the propriety of transactions.
(c) to verify the propriety of appointments of various officials.
(d) none of the above.
Management Audit is also known as _________Audit.
(a) Social
(b) Propriety (c) Annual (d) Efficiency
One of the Objectives of the Management Audit is ___________.
(a) To evaluate the efficiency of the management
(b) To evaluate the profitability of the concern
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To verify the authority of the management to purchase an asset
(d) To verify the propriety of the management officials’
appointment
Checking a few transactions only in Audit is called _____ .
(a) Surprise Audit (b) Interim Audit
(c) Annual Audit
(d) Test Audit
______ generally reduces the auditor’s burden but not his
responsibilities.
(a) Surprise Audit
(b) Interim Audit
(c) Annual Audit
(d) Test Audit
If the auditing is done for the daily transactions on complete and
continuous bases, it is called ________.
(a) Surprise Audit
(b) Interim Audit
(c) Routine Audit
(d) Test Audit
_____ Audit is based on the rule of Probability.
(a) Test Audit
(b) Interim Audit
(c) Routine Audit
(d) Annual Audit
A plan for carrying ou the audit work prepared by the auditor in
advance is called
(a) Audit Notebook (b) Audit Programme
(c) Audit Report
(d) all of the above
While auditing the books of account of an educational institute,
the auditor must see ……..
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(a) The Trust Deed
(b) The Fees Receipt (from students) Register
(c) The Resolution, Permission, purchase procedure and
Invoice/bill of purchase of assets
(d) all of these
The Auditor should ask for the following before the actual audit
begins
(a) the security deposit to cover his fees
(b) to give the details of the debtors
(c) the list of closing stock and the details of method of valuation
(d) to arrange he vouchers serially
Which of the following is not an example of the Capital
Expenditure?
(a) Money spent on purchase of a fixed expense
(b) Money spent on maintenance of the present efficiency
level of a fixed asset
(c) Expenses for making a cinema house air-conditioned
(d) Cost of Stamps for purchase of land
Which of the following is not an important characteristic of capital
expenditure?
(a) Acquisition of a fixed asset of permanent nature
(b) Advantage of the asset for considerably long period of time
(c) Recurring Nature
(d) Use for purpose of earning
Which of the following is not a ‘Differed Revenue Expenditure’?
(a) Preliminary Expenses
(b) Expenses on a large scale advertisement
(c) Installation expenses of a new plant
(d) Underwriting Commission
Manufacturing expenses are ________.
(a) Capital Expenses
(b) Differed Capital Expenses
(c) Revenue Expenses
(d) Differed Revenue Expenses
40. _______ has the recurring nature.
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(a) Capital Expenses
(b) Differed Capital Expenses
(c) Revenue Expenses
(d) All of the above
Commission on Sales Rs. 500 is a ________.
(a) Capital Expenses
(b) Differed Capital Expenses
(c) Revenue Expenses
(d) All of the above
_________ is an examination of entries in books of accounts with
documentary and other evidences.
(a) Voucher
(b) Vouching
(c) Internal Check
(d) Test checking
Which one of the following is not one of the objects of vouching?
(a) To see that all vouchers are correctly in the Accounts Books
(b) To ascertain that no transaction is left unrecorded
(c) To see that necessary vouchers relating to entries recorded are
with the client
(d) To see that the firm is not going to incur any loss
Which one of the following is not a relevant voucher for vouching
of ‘proceeds from fixed assets’?
(a) correspondence with purchaser
(b) Bank Passbook
(c) Sales Invoice
(d) Receipt issued by the purchaser of the asset
Which one of the following is not a relevant voucher for vouching
of ‘Cash Receipt’?
(a) Correspondence
(b) Copy of the receipt issued
(c) Cash memo Copy
(d) Letters of collection received from creditors
“Vouching is a technical term which refers to the inspection of
documentary evidences.” This definition is given by _________.
(a) Ronald Irish
(b) B. B. Bose
(c) Dicksee
(d) F.R.M. Depaulla
47. Regarding checking of purchase invoices, which of the following
should not be kept in mind?
(a) Invoices should in the name of the business
(b) Goods must have been purchased for business
(c) Reason for delayed payment by a week
(d) Officer’s initial on invoice who has checked it
48. Vouching of the subsidiary books is also called the vouching of
________.
(a) Trade Transactions
(b) Journals
(c) Petty-vouchers
(d) Special Transactions
49. Which one of the following is considered as an Outstanding
Asset?
(a) Rent Received in Advance (b) Wages Outstanding
(c) Rent paid in Advance
(d) Income Tax Provision
50. Which one of the following is a relevant voucher for vouching of
‘Sales Return’?
(a) Debit Note issued by us
(b) Debit Note issued by opposite party
(c) Credit Note issued by opposite party
(d) Bank column of cash book