Financial Auditing Another MCQ

8/10/2019 Financial Auditing Another MCQ

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1. A form of qualification normally used by external auditors where there are obvious uncertaintiesregarding the whole financial statements of a client is known asA. Adverse opinionB. Except forC. Material opinionD. Disclaimer of opinionE. Subject to2. The first auditors of a company are usually appointed byA. Shareholders of the CompanyB. Members of the audit committeeC. Corporate Affairs CommissionD. Directors of the CompanyE. Solicitors to the Company3. An audit procedure that involves detailed examination of assets and liabilities in the financial records atthe year end is known asA. Depth TestB. Walk Through TestC. Substantive TestD. Sampling TestE. Compliance Test4. Ethically, an auditor of a Company can as well be a receiver of the same company if the companycannot continue its operations.A. One cannot sayB. Yes3C. NoD. On application to audit committeeE. On application to the Governor of the State5. Which ONE of the following is the merit of using statistical sampling method in audit assignments?A. It helps auditors to deal with homogenous transactions.

B. It promotes the standardization of audit sampling procedureC. It assists auditors to achieve more than one audit objectivesD. It highlights auditors knowledge of using sampling methodE. It makes the selection less cumbersome6. Which of the following is NOT a potential duty of an audit committee?A. Review of financial statementsB. Review of shareholders RegisterC. Review of Internal AuditD. Liaison with external auditorsE. Review of Internal Control7. Which letter sets out those control weaknesses within an entity`s operations discovered by auditors inthe course of their duties?

A. Management Representation LetterB. Letter of ConsentC. Engagement LetterD. Domestic ReportE. Comfort Letter8. The following are the causes for the loss of audit trail in a computer-based accounting systemEXCEPT:A. Over written of computer fileB. Having backup copies for data transactions


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C. Non-preparation of documentary evidence before processingD. Non-retention of documentary evidenceE. The use of Visual Display Unit instead of Computer print out9. Which of the following mode of communication signifies the end product of an audit assignment?A. Letter of RepresentationB. Evaluation Report4C. Engagement LetterD. Domestic ReportE. Audit Report10. The pictorial presentation of the internal control system of an entity is known asA. ICEQB. MAPC. DiagramD. ArtisticE. Flowchart11. The audit procedures that ensure that transactions are recorded in the period to which they relate could

be best described asA. Border lineB. Deadline proceduresC. Leverage testD. Cut off procedureE. Line of demarcation procedures12. Where there are numerous accounts of small debtors to be circularised by the auditor, which of thefollowing circularization methods is the most appropriate for use?A. Nil MethodB. Positive MethodC. Blank MethodD. Negative MethodE. None of the above method

13. The main reason why external auditors obtain audit evidence is toA. Establish evidence for future referenceB. Use it as a basis of his opinion on the financial statementsC. Detect fraudD. Assess inherent riskE. Examine management efficiency14. Management responsibility as to the preparation of financial statements is re-emphasized inA. Bank LetterB. Comfort Letter5C. Letter of RepresentationD. Circularization Letter

E. Management Letter15. Independence and objectivity of an auditor cannot be impaired ifA. He accepts undue hospitality from the clientB. He has direct/Indirect beneficial interest in any capacity in an organization for which he is acting asauditorC. He is related by blood or by marriage to the directors of the companyD. He accepts fees, the amount of which is based on the success of an assignment except whereunavoidableE. He rejects appointment on the ground of technical incompetence


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16. What is the responsibility of an incoming auditor with respect to communicating with the outgoingauditor in connection with a prospective new audit client?A. the incoming auditor has no responsibility to contact the outgoing auditorB. the incoming auditor should obtain permission from the prospective client to contact the predecessorauditorC. the incoming auditor should contact the outgoing auditor regardless of whether the prospective clientauthorized contactD. the incoming auditor need not contact the outgoing auditor if the incoming auditor is aware of allavailable relevant facts.E. the incoming auditor needs to contact the outgoing auditor only if the size of auditing firms ofincoming and outgoing auditors are of the same size.17. ONE of the following is NOT relevant as to the qualities that an auditor must possess:-A. PainstakingnessB. TactfulnessC. DeceitD. CourageE. Honest18. Which of the following is NOT a duty of the Auditor-General for a country?A. Ensuring that money is expended for the purpose for which they are intendedB. Seeing that proper system of account as prescribed by head of regulatory agency is maintained6C. Ensuring that authorized maximum cash balance is not exceededD. Informing the Corporate Affairs Commission/agency established to register companies of any defect inthe financial informationE. Reporting on the truth and fairness view of financial statement examined19. The major objective of any statutory audit is toA. Detect fraud and errorsB. Prevent fraud and errorsC. Ascertain material misstatement in the financial statementsD. Express an opinion on whether or not the financial statements show a true and fair view

E. Report fraudulent activities of directors to shareholders20. A professional body controls the quality of audit work EXCEPT:A. Issue of Ethical guidesB. Regular revision of examination syllabus to meet current needsC. Publication of accounting and auditing standardsD. Arrangement of seminars and courses to discuss technical mattersE. Election of members at annual general meeting of accountants21. The audit committee should focus its activities on the following functions EXCEPT:A. Reliability and accuracy of the financial information provided to management and external usersB. any accounting or auditing concerns identified as a result of an auditC. the appointment of a new director in replacing the outgoing director on account of ageD. the companys compliance with legal and regulatory provisions .

E. the functioning of internal audit department22. Auditors can minimise liability arising from professional duties with the following precautionsEXCEPT:A. Quality control as regards audit assignmentB. Avoiding risky audits or carrying out more extensive workC. Minimising reliance on clients representation or even third party confirmationD. Completion of audit assignments within short period of time so as to maximise gainsE. Taking professional indemnity insurance7


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23. Limitation in audit scope involves the following aspects with EXCEPTION ofA. Lack of cooperation from the entitys management and staffB. Submission of all financial documents, books, records, schedules and other necessary evidenceshumanly possibleC. Restrictive clauses in the terms of the audit engagementD. Poor accounting and internal control proceduresE. Late appointment of auditors24. Circumstances under which auditors may need to use the services of an expert EXCLUDE:A. Valuation of certain types of assetsB. New engagement by the auditors which involves purely commercial transactionsC. Determination of quantities or physical condition of certain assetsD. Determination of amounts using specialized techniques or methodsE. the measurement of work completed and to be completed on contracts in progress25. The procedures outlined in an audit programme are designed toA. obtain audit evidenceB. detect errors or irregularitiesC. ensure early completion of the auditD. highlight movement in the accounts between yearsE. protect the auditor against litigation26. Which ONE of the following is NOT part of the powers and responsibilities of the Auditor-Generalfor a country?A. Power to examine the financial statements in any way he deemed fitB. Power to express his opinion on the financial statementsC. Power to sanction any erring officerD. Power to certify annual financial statements of his countryE. Power to appoint his successor on account of his age or mandatory years of service27. Which of the following is NOT a test of control?A. Verification of Value to InvoiceB. Use of ICEQ in systems auditC. Checking for authorization of transactions

D. Observation of controls8E. Re-performance of control procedures28. Auditors current audit file usually include a copy ofA. Companys Memorandum and Articles of AssociationB. Audit Planning MemorandumC. Certificate of IncorporationD. Last years Letter of RepresentationE. Organisational and Management Structure29. Which of the factors does NOT affect the auditors judgement as to what is sufficient audit evidence?A. the materiality of the item being examinedB. the auditors knowledge of the business and industry

C. availability of software packagesD. the risk assessmentE. the source and reliability of information available30. Persons disqualified to act as an auditor include the following EXCEPT:A. A body corporateB. A retired civil servant with Practising CertificateC. A partner or employee or officer/servant of the CompanyD. A person who has been disqualified to act as auditor of a subsidiary companyE. An auditor who becomes disqualified for any reason


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SOLUTIONS TO MULTIPLE-CHOICE QUESTIONS1. D2. D3. C4. C5. B6. B7. D8. D9. E10. E11. D912. D13. B14. C15. E16. B17. C18. D19. D20. E21. C22. D23. B24. B25. A26. E27. A28. B

29. C30. BSECTION APART II SHORT-ANSWER QUESTIONS (20 Marks)Write the answer that best completes each of the following questions or statements.1. State any ONE type of Internal Control.2. TWO main types of Test that will be carried out by the auditor to obtain audit evidenceare...............................and........................3. The type of audit that is carried out during the financial year of a company is knownas..............................4. Auditors involvement in an all year round review of client` s transactions and account balances whichoccur within a particular year is best described as............................

5. State any ONE main feature each member of The Institute of Chartered Accountants of your Countrymust possess.106. Independent professional services that improve the quality of information or its context for decisionmakers are referred to as...............................7. The system by which the affairs of companies are directed and controlled by those charged with theresponsibility of managing them is known as....................................8. The extent to which rules, policies, laws, covenants or government regulations are followed by theentity being audited is determined by............................test.


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9. Rules and regulations guiding the implementation of accounting and auditing functions within anenterprise are embedded in............................10. A letter issued by an auditor to management or another party at the request of management,expressing an opinion as to management`s compliance with regulations or requirements concerningfinancial matters, is called...........letter.11. An obligation, relating to some past events or transactions, which may arise depending on theoutcome of some future events is..........................12. An independent appraisal unit established within an entity to examine and make available its activitiesas a service to management is known as.....................13. State TWO circumstances when the directors of a company can appoint an auditor.14. An assurance given by the auditor that nothing has come to his attention which indicate that financialstatements have not been prepared according to the generally accepted accounting principles iscalled.........................15. The information obtained by the auditor which enables him to arrive at the conclusions in forming anopinion on the financial statements is referred to as...................................16. Non-statistical sampling methods are also referred to as................................17. Schedules prepared by auditors setting out those procedures to be executed during the course of theaudit in order to obtain audit evidence from which the auditors draws conclusions on the financialstatements are called.18. A person or firm possessing special skills, knowledge and experience in a particular field other thanauditing or accounting is called..........................19. Test of transactions and balances which seek to provide audit evidence as to the completeness,accuracy and validity of the information contained in the accounting record or the financial statements iscalled..................................20. Audit evidence must be reliable,................and.........................11SOLUTIONS TO SHORT-ANSWRER QUESTIONS1. Any of the following:- Physical controls, Authorization & Approval controls, Personal controls,Arithmetic & Accounting controls, Management controls, Organisational controls, Supervision controls& Segregation of duties controls.

2. Compliance and substantive Tests3. Interim Audit4. Continuous Audit5. Integrity, Independence and objectivity, Confidentiality, Technical competence, conformity withtechnical competence, Maintenance of accepted ethical conduct, fees determination, restraint onadvertisement of technical ability and publicity.6. Assurance services7. Corporate Governance8. Compliance9. Auditing Framework10. Letter of weakness/Management Letter11. Due Process

12. Internal audit13. First auditors and casual vacancy14. Negative assurance15. Audit evidence16. Judgemental sampling17. Audit programmes18. An expert19. Substantive testing20. Relevant, sufficient


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Financial Auditing Another MCQ