Introduction to Auditing MCQs

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

  1. 11)

    Which of the following is the most appropriate potential reaction of the auditor to his assessment that the risk of material misstatement due to fraud is high in relation to existence of inventory?

    • A) Visit location on surprise basis to observe test counts
    • B) Request inventory count at a date close to year end
    • C) Vouch goods sent on approval very carefully
    • D) Perform analytical procedures.

  2. 12)

    Which of the following is not likely to be a fraud risk factor relating to management’s characteristics

    • A) Tax evasion
    • B) Failure to correct known weakness in internal control system
    • C) Adoption of conservative accounting principles
    • D) High management turnover

  3. 13)

    Professional skepticism requires that the auditor assume that management is

    • A) reasonably honest
    • B) Neither honest nor dishonest
    • C) Not necessarily honest
    • D) Dishonest unless proved otherwise

  4. 14)

    Which of the following information should a successor auditor obtain during the inquiry of the predecessor auditor before accepting engagement?

        i) Information about integrity of management
        ii) Disagreement with management concerning auditing procedures
        iii) Review of internal control system.
        iv) Organisation structure

    • A) (i) and (ii)
    • B) (ii) and (iii)
    • C) (i) , (ii) and (iii)
    • D) i) and (iii)

  5. 15)

    The audit engagement letter, generally, should include a reference to each of the following except

    • A) limitations of auditing
    • B) responsibilities of management with respect to audit work
    • C) expectation of receiving a written management representation letter.
    • D) a description of the auditor’s method of sample selection.

  6. 16)

    The use of an audit engagement letter is the best method of assuring the auditor will have which of the following?

    • A) Auditor will obtain sufficient appropriate audit evidence.
    • B) Management representation letter
    • C) Access to all books, accounts and vouchers required for audit purpose
    • D) Cooperation from other auditors

  7. 17)

    The use of an audit engagement letter is the best method of documenting

        i) the required communication of significant deficiencies in internal control
        ii) significantly higher control risk than that assessed in prior audit.
        iii) Objective and scope of auditor’s work
        iv) Notification of any changes in the original arrangements of the audit.

    • A) (i) and (ii)
    • B) (i) and (iii)
    • C) (ii) and (iv)
    • D) (iii and (iv)

  8. 18)

    An auditor who accepts an audit but does not possess the industry expertise of the business entity should

    • A) engage experts
    • B) obtain knowledge of matters that relate to the nature of entity’s business
    • C) inform management about it
    • D) take help of other auditors

  9. 19)

    The least important element in the evaluation of an audit firm’s system of quality control would relate to

    • A) assignment of audit assistants
    • B) system of determining audit fees
    • C) consultation with experts
    • D) confidentiality of client’s information

  10. 20)

    Which of the following is not a quality control consideration on accepting a new client?Which of the following is not a quality control consideration on accepting a new client?

    • A) Availability of audit assistants with necessary skill and competence.
    • B) Provision of other services to the client which may impair independence
    • C) Predecessor auditor’s advice as to whether audit fees were paid promptly
    • D) Review of audit work done by one partner by the other