Verification of Assets MCQs

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

  1. 11)

    Which of the following controls would ensure that securities are not lost, stolen or diverted?

    • A) Establish physical barriers over investment securities
    • B) Maintain files of authorized signatures
    • C) Segregate investment approval form accounting and from custody of securities
    • D) All of the above

  2. 12)

    Which of the following would give the assurance that debtors mentioned on the date of balance sheet actually exist?

    • A) Sending debtor’s confirmation letters
    • B) Reviewing subsequent collection
    • C) Verify debtors against sales document
    • D) Both (a) and (b)

  3. 13)

    Analytical procedures are least likely to be use in the audit of –

    • A) cash balance
    • B) investments
    • C) bills receivables
    • D) debtors

  4. 14)

    Which of the following statements is not true with regard to teeming and lading ?

    • A) It results in the deliberate misappropriation of cash receipts
    • B) It is associated with cash receipts
    • C) If same individual maintains cash receipts and cash payments teeming and lading is likely to exist
    • D) To conceal the shortage, the defraud, usually, tries to keep bank and book amounts in daily agreement so that a bank reconciliation will not detect the irregularity.

  5. 15)

    The balance of cash in often between one to five percent of total assets. Tick the most appropriate statement with regard to verification of cash in context of this

    • A) Cash in always material as materiality is qualitative concept
    • B) No audit of cash is needed when, in auditor’s opinion, cash is immaterial. Materiality is a relative concept
    • C) The cash balance need only be audited if the balance is in overdraft
    • D) Cash is to be verified if control risk is assessed as high

  6. 16)

    When counting cash on hand the auditor should ___

    • A) ensure presence of somebody from management
    • B) obtain a receipt from custodian as to its return
    • C) ensure postage and revenue stamps are not counted in physical count
    • D) temporary advances to employees are counted to calculate balance of cash in hand

  7. 17)

    Which of the following statement is not true regard to auditor’s attendance at stock taking?

    • A) Auditor should attend physical stock taking only if inventory is material
    • B) Auditor may not attend physical verification of stock by management, if he does not find it appropriate to rely on it
    • C) Auditor may not attend physical verification of stock by management, if he does not find it appropriate to rely on it
    • D) The primary objective of an auditor’s observation of an entity’s observation of an entity’s stock take is to obtain direct knowledge that the stock and has been property counted

  8. 18)

    While observing a client’s annual physical inventory, an auditor conducted test counts for certain test counts were higher than the recorded quantities in the client’s perpetual records. This situation could be the result of the client’s failure to record –

    • A) purchase returns
    • B) sales returns
    • C) goods with consignor
    • D) purchase discounts

  9. 19)

    Inspection report/receiving report supports entries in

    • A) sales book and sales return book
    • B) purchase book and sales return book
    • C) cash book and purchase book
    • D) Sales book and purchase return book