Introduction to Auditing MCQs

NOTE: Attempt all Questions to see the Result at the bottom of this page.

  1. 1)

    The main object of an audit is ___

    • A) Expression of opinion
    • B) Detection and Prevention of fraud and error
    • C) Both (a) and (b)
    • D) Depends on the type of audit.

  2. 2)

    Which of the following is not true about opinion on financial statements?

    • A) The auditor should express an opinion on financial statements.
    • B) His opinion is no guarantee to future viability of business
    • C) He is responsible for detection and prevention of frauds and errors in financial statements
    • D) He should examine whether recognised accounting principle have been consistently

  3. 3)

    A sale of Rs. 50.000 to A was entered as a sale to B. This is an example of _

    • A) Error of omission
    • B) Error of commission
    • C) Compensating error
    • D) Error of principle

  4. 4)

    ‘Goods sent on approval basis’ have been recorded as ‘Credit sales’. This is an example of _

    • A) Error of principle
    • B) Error of commission
    • C) Error of omission
    • D) Error of duplication

  5. 5)

    Which of the following statements is not true?

    • A) Management fraud is more difficult to detect than employee fraud
    • B) Internal control system reduces the possibility of occurrence of employee fraud and management fraud
    • C) The auditor’s responsibility for detection and prevention of errors and frauds is similar.
    • D) All statements are correct.

  6. 6)

    Both auditing and accounting are concerned with financial statements. Which of the following

    • A) Auditing uses the theory of evidence to verify the financial information made available by Accountancy
    • B) Auditing lends credibility dimension and quality dimension to the financial statements prepared by the accountant
    • C) Auditor should have through knowledge of accounting concepts and convention to enable him to express an opinion on financial statements
    • D) All of the above.

  7. 7)

    The risk of management fraud increases in the presence of :

    • A) Frequent changes in supplies
    • B) Improved internal control system
    • C) Substantial increases in sales
    • D) Management incentive system based on sales done in a quarter

  8. 8)

    Auditing standards differ from audit procedures in that procedures relate to

    • A) Audit assumptions
    • B) acts to be performed
    • C) quality criterion
    • D) methods of work

  9. 9)

    Which of the following factors likely to be identified as a fraud factor by the auditor?

    • A) The company is planning a initial public offer of quality shares to raise additional capital for expansion.
    • B) Bank reconciliation statement includes depositsintransit.
    • C) Plant and machinery is sold at a loss.
    • D) The company has made political contributions.

  10. 10)

    The most difficult type of misstatement to detect fraud is based on:

    • A) Related party purchases
    • B) Related party sales
    • C) Related party sales
    • D) Omission of a sales transaction from being recorded.