Auditing MCQS with Answers PDF

Question 1

What is the primary objective of a statutory financial audit?

Accepted Answer

To express an opinion on the fairness of financial statements

Answer

To detect all frauds and errors

Answer

To guarantee the future viability of the company

Answer

To prepare the financial statements for management

Question 2

Which of the following is responsible for the preparation and presentation of financial statements?

Accepted Answer

The Management of the company

Answer

The External Auditor

Answer

The Internal Auditor

Answer

The Shareholders

Question 3

An audit risk is the risk that:

Accepted Answer

The auditor expresses an inappropriate audit opinion when the financial statements are materially misstated

Answer

The auditor gets sued by shareholders

Answer

The company goes bankrupt

Answer

The auditor fails to detect any fraud

Question 4

Audit evidence should be both:

Accepted Answer

Sufficient and appropriate

Answer

Abundant and cheap

Answer

Internal and verbal

Answer

Complex and absolute

Question 5

Which type of audit evidence is generally considered the most reliable?

Accepted Answer

Direct physical inspection or confirmation from a third party

Answer

Oral representations by management

Answer

Documents generated internally by the client

Answer

Photocopies of invoices

Question 6

What is an 'Audit Trail'?

Accepted Answer

A step-by-step record by which accounting data can be traced to its source

Answer

The path taken by the auditor around the office

Answer

The list of audit fees

Answer

The auditor's travel itinerary

Question 7

The concept of 'Materiality' in auditing refers to:

Accepted Answer

Information that, if omitted or misstated, could influence the economic decisions of users

Answer

The physical existence of assets

Answer

The quality of the paper used for reports

Answer

The cost of the audit

Question 8

If an auditor concludes that the financial statements present a true and fair view, they issue a/an:

Accepted Answer

Unqualified (clean) opinion

Answer

Adverse opinion

Answer

Qualified opinion

Answer

Disclaimer of opinion

Question 9

A 'Qualified Opinion' is issued when:

Accepted Answer

The financials are fairly presented EXCEPT for a specific, isolated issue (material but not pervasive)

Answer

The financials are completely false and misleading

Answer

The auditor was unable to obtain any evidence

Answer

The auditor is completely satisfied with the financials

Question 10

Which opinion is issued when the financial statements are materially misstated and pervasive (not presenting a true and fair view)?

Accepted Answer

Adverse

Answer

Unqualified

Answer

Qualified

Answer

Disclaimer

Question 11

A 'Disclaimer of Opinion' is most likely issued when:

Accepted Answer

There is a severe limitation on the scope of the audit (cannot obtain evidence)

Answer

The auditor finds a minor error

Answer

The auditor is independent

Answer

The company is highly profitable

Question 12

Internal control is designed, implemented, and maintained by:

Accepted Answer

Those charged with governance and management

Answer

The External Auditor

Answer

The Government

Answer

The Shareholders

Question 13

Vouching is the process of:

Accepted Answer

Tracing a transaction from the ledger back to the source document

Answer

Tracing a transaction from the source document to the ledger

Answer

Counting physical cash

Answer

Confirming bank balances

Question 14

Tracing is the process of:

Accepted Answer

Tracing from the source document forward to the ledger

Answer

Tracing from the ledger to the financial statements

Answer

Tracing from the ledger back to the source document

Answer

Reviewing previous year's audit files

Question 15

Which of the following is NOT an inherent limitation of an audit?

Accepted Answer

The auditor's lack of competence

Answer

Use of testing/sampling

Answer

Inherent limitations of internal control

Answer

The fact that most audit evidence is persuasive rather than conclusive

Question 16

In an audit, 'Confirmation' involves:

Accepted Answer

Obtaining a representation directly from a third party

Answer

Checking mathematical accuracy

Answer

Watching a process being performed

Answer

Asking questions to management

Question 17

Which standard-setting body issues International Standards on Auditing (ISAs)?

Accepted Answer

IAASB

Answer

FASB

Answer

IASB

Answer

SEC

Question 18

An 'Engagement Letter' is:

Accepted Answer

The contract between the auditor and the client establishing terms of the audit

Answer

A letter from the client thanking the auditor

Answer

The final audit report

Answer

A letter proposing marriage to a coworker

Question 19

What does 'Going Concern' refer to in auditing?

Accepted Answer

The assumption that the enterprise will continue in operational existence for the foreseeable future

Answer

A company that is traveling internationally

Answer

A highly profitable business

Answer

A business about to be liquidated

Question 20

Which of the following threats to auditor independence occurs when an auditor has a financial interest in the client?

Accepted Answer

Self-interest threat

Answer

Self-review threat

Answer

Familiarity threat

Answer

Intimidation threat