ACC311 Fundamentals of Auditing MCQs from Quiz # 3
For better assessing the audit risk, auditor inquires different groups in the organizations EXCEPT:
Board of governance and top-level management
Legal counsel
Middle-level management
Stakeholders
Internal sources of audit evidence for an entity includes the following EXCEPT:
Associated companies of the entity
Accounting systems, records, and documents
Non-financial data and records
Management representation and discussion
Associated companies of the entity
Accounting systems, records, and documents
Non-financial data and records
Management representation and discussion
An associated company is not an internal source.
An “Associated Company” is an entity in which the Company has significant influence, but not a controlling interest, over the operating and financial management policy decisions of the entity. Associated Companies are accounted for using the equity method. Significant influence is generally presumed when the Company holds between 20 percent and 50 percent of the voting rights.
Which of the following is the least concern to an auditor regarding the client’s internal control system?
Efficiency and effectiveness of operations
Controls related to the reliability of financial reporting
Controls over classes of transactions
Auditors are equally concerned with each of the given issues
Reference
During the test of the control procedure, its design can easily be tested with the help of:
ICQs and walk through tests
ICQs and judgment sample
ICQs and a random sample
ICQS and ICEC
Lesson no.21 Handouts
Testing the Design:
– The proper design of internal control is tested through ICQs and ICEC.
– The proper design of internal control is tested through ICQs and ICEC.
Which of the following is TRUE?
The audit profession is unregulated
The audit profession is regulated by its own professional body
Outside bodies sometimes become involved in the regulation of the audit profession
The audit profession is regulated only by the government
Auditing firms do not describe themselves as auditors. They describe themselves as Chartered Accountants.In Pakistan, the auditing profession is allied with the Institute of Chartered Accountants of Pakistan (ICAP). It is an autonomous body incorporated under the Chartered Accountants Ordinance 1961.ICAP is a regulatory body that enjoys a self-regulatory status. Its affairs are run by a council which is elected by its member (Chartered Accountants).
The small audit firms provide the following services EXCEPT:
Liquidation and receivership work, fraud auditing
Financial management and system consultancy
Financial system planning and preparation
Tax management and statutory form filling
The small chartered accountant firms especially may spend more time on other services than on
auditing.
The other services may include:
a. Writing up books of accounts (Bookkeeping)
b. Balancing books of accounts (Extracting trial balance)
c. Preparing final accounts
d. Tax management
e. Statutory form filling
f. Financial consultancy
g. Management and system consultancy
h. Liquidation and receivership work
i. Investigations (Fraud audit)
auditing.
The other services may include:
a. Writing up books of accounts (Bookkeeping)
b. Balancing books of accounts (Extracting trial balance)
c. Preparing final accounts
d. Tax management
e. Statutory form filling
f. Financial consultancy
g. Management and system consultancy
h. Liquidation and receivership work
i. Investigations (Fraud audit)
Which of the following is not included in the category of cash?
Deposit with banks
Checks
Postdated checks money orders
Deposit with banks
Checks
Postdated checks money orders
Which of the following letter should be included in the letter of representation?
Existence of immaterial mistake in the statementExistence of any fraud or any error in the statement
Company's growth trend in the future in figures
The market value of the company's stock
Lesson No.34 The contents of the letter of representation should not include routine matters, for example, that all fixed assets exist and are the property of the company or that stock is valued at the lower of cost and net realizable value.The letter should include only matters which:
a. are material to the financial statements, andb. the auditors cannot obtain independent corroborative evidence.
For measuring the quality of audit evidence auditors used the tool of appropriateness; in case if auditor wants to measure the quantity of audit evidence which tools from the following should be adopted?
Relevance
Reliability
SufficiencyEffectiveness
Lesson No. 22
Sufficient appropriate Audit Evidence
Sufficiency: The measure of the quantity of audit evidence.
Appropriateness: The measure of quality i.e. relevance and reliability in providing support of detecting misstatements in account balance classes of transactions and disclosures and relevant assertions.
Which statement cannot be highlighted as a merit of the audit process?
(a)It settles the dispute between management
(b)It helps the auditor to give more constructive advice top management
(c)Its help to restrict sole proprietor to by changing some fee
(d)It gives strength to the company for acquiring the finance
(b)It helps the auditor to give more constructive advice top management
(c)Its help to restrict sole proprietor to by changing some fee
(d)It gives strength to the company for acquiring the finance
When cash sales should be recorded by the companies in order to achieve control objectives?
(a)Record the cash sales when a purchase order is received from the customer
(b)Record the cash sales at the point they are made
(c)Record the cash sales after some period
(d)Record the cash sales weekly
(a)Record the cash sales when a purchase order is received from the customer
(b)Record the cash sales at the point they are made
(c)Record the cash sales after some period
(d)Record the cash sales weekly
Controls over Cash Sales:
a) Cash sales should be recorded at the point the sale is made. Usually, this is by means of a Cash Till or the use of cash sale invoices or receipts.
a) Cash sales should be recorded at the point the sale is made. Usually, this is by means of a Cash Till or the use of cash sale invoices or receipts.
Auditors conduct auditing in accordance with :
(a)International Financial Reporting Standards
(b)Local pronouncements/Legislations
(c)Financial Accounting Standards Board
(d)All of the given options
True and fair presentation means that the financial statement is prepared and presented in accordance with the requirements of the applicable International Financial Reporting Standards (IFRS) and local pronouncements/legislations.
Which of the following primary assertions is satisfied when an auditor ensures that there are no unrecorded assets, liabilities, transactions or events or undisclosed items in the client s financial records?
(a)International Financial Reporting Standards
(b)Local pronouncements/Legislations
(c)Financial Accounting Standards Board
(d)All of the given options
True and fair presentation means that the financial statement is prepared and presented in accordance with the requirements of the applicable International Financial Reporting Standards (IFRS) and local pronouncements/legislations.
Which of the following primary assertions is satisfied when an auditor ensures that there are no unrecorded assets, liabilities, transactions or events or undisclosed items in the client s financial records?
(a) Assertions about classes of transactions and events for the period under audit;
(i) Occurrence – transactions, and events that have been recorded have occurred and pertain to the entity;
(ii) Completeness – all transactions and events that should have been recorded;(iii) Accuracy – amounts and other data relating to recorded transactions and events have been recorded appropriately.
(iv) Cutoff – transactions and events have been recorded in the proper period.
(v) Classification – transactions and events have been recorded in the proper accounts.
(ii) Completeness – all transactions and events that should have been recorded;(iii) Accuracy – amounts and other data relating to recorded transactions and events have been recorded appropriately.
(iv) Cutoff – transactions and events have been recorded in the proper period.
(v) Classification – transactions and events have been recorded in the proper accounts.
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