Here we are providing a set of MCQ on Financial Audit. The questions below are based on different topics related to financial audit and they cover the entire syllabus of the Common Proficiency Test (CPT) from different States in India. These multiple-choice questions (MCQs) on Financial Audit are an important part of Financial Audit and Accounts exams conducted by IBPS, SSC, UPSC, Railway, and State Govt.
MCQ on Financial Audit and Answers
1) The company’s auditor is expected to give
(A) His expert opinion about the accounts
(B) A factual position about the accounts
(C) A critical review of the accounts
(D) Financial assistance
Answer: (B) A factual position about the accounts
2) Auditors of a joint-stock company are appointed by
(A) Directors of the company
(B) Annual general meeting
(C) Election at the annual general meeting
(D) Debenture holders
Answer: (C) Election at the annual general meeting
3) A company auditor can be removed by
(A) Board of directors
(B) Managing director
(C) Any director
(D) General Meeting
Answer: (D) General Meeting
4) A vacancy caused by the resignation of an auditor is filled by
(A) Board of directors
(B) Managing director
(C) General meeting
(D) Central government
Answer: (C) General meeting
5) Audit in-depth means
(A) Audit each and every item
(B) Intensive audit of each and every item
(C) Intensive audit of a few items
(D) Audit of a few selected items
Answer: (B) Intensive audit of each and every item
6) Concurrent audit is a part of
(A) Internal check system
(B) Continuous audit
(C) Internal audit system
(D) Final audit
Answer: (C) Internal audit system
7) Audit in depth is synonymous for
(A) Complete audit
(B) Completed audit
(C) Final audit
(D) Detailed audit
Answer: (D) Detailed audit
8) Balance sheet audit included verification of
(A) Assets
(B) Liabilities
(C) Income & expenditure accounts where appropriate
(D) All of the above
Answer: (D) All of the above
9) Which of the following statements is not true about a continuous audit?
(A) It is conducted at regular interval
(B) It may be carried out on a daily basis
(C) It is needed when the organization has a good internal control system
(D) It is expensive
Answer: (C) It is needed when the organization has a good internal control system
10) Which of the following is not a fact of EPA?
(A) Economic audit
(B) Efficiency audit
(C) Expenditure audit
(D) Effectiveness audit
Answer: (C) Expenditure audit
11) Balance sheet does not include
(A) Verification of assets & liabilities
(B) Vouching of income & expense accounts related to assets and liabilities
(C) Examination of adjusting and auditing & closing entries
(D) Routine checks
Answer: (D) Routine checks
12) When issuing an unqualified opinion the auditor who evaluates the audit findings should be satisfied that the
(A) Amount of known miss-statement is documented in working papers
(B) Estimates of the total likely misstatement are less than the materiality level
(C) Estimated total likely misstatement is more than the materiality level
(D) Estimates of the total likely misstatement cannot be made
Answer: (B) Estimates of the total likely misstatement are less than the materiality level
13) Under check system principle is followed.
(A) Division of labour
(B) Division of work
(C) Principle of scalar chain
(D) Accountancy
Answer: (A) Division of labour
14) This kind of audit is generally conducted between two annual audits.
(A) Internal audit
(B) Interim audit
(C) Final audit
(D) Continuous audit
Answer: (B) Interim audit
15) Before the work of audit is commenced, the auditor plans out the whole of audit work is known as
(A) Audit plan
(B) Audit note
(C) Audit risk
(D) Audit program
Answer: (D) Audit program
16) Internal auditor is appointed by
(A) The management
(B) The shareholders
(C) The government
(D) statutory body
Answer: (A) The management
17) The audit that is made compulsory under the statute is called
(A) Statuary audit
(B) Partial audit
(C) Complete audit
(D) Continues audit
Answer: (A) Statuary audit
18) Who among the following can be appointed as the auditor of the company?
(A) A partner or the director of the company
(B) A person of unsound mind
(C) Mr. ‘Y’ who owes Rs.500 to the company
(D) Mr. ‘Z’ who holds the ‘CA’ Certificate
Answer: Mr. ‘Z’ who holds the ‘CA’ Certificate
19) is documentary evidence by which the accuracy in the books of accounts may be proved
(A) Cheque
(B) Receipt
(C) Voucher
(D) Statement
Answer: (C) Voucher
20) Sale of Rs. 50,000 to ‘A’ was entered as a sale to ‘B’. This is an example of
(A) Error of omission
(B) Error of commission
(C) Compensating error
(D) Error of Principle
Answer: (B) Error of commission
21) In comparison to the independent auditor an internal auditor is more likely to be concerned with
(A) Cost accountancy system
(B) Internal control system
(C) Legal compliance
D) Accounting system
Answer: (B) Internal control system
22) The audit program is prepared by
(A) The auditor
(B) The client
(C) The audit assistants
(D) Auditor & his assistants
Answer: (D) Auditor & his assistants
23) Interim audit refers to
(A) Examination of accounts continuously
(B) Examination of accounts intermittently
(C) Audit work to find out & check interim profits of a company
(D) Carrying on audit for bonus purposes at the end of the year
Answer: (C) Audit work to find out & check interim profits of a company
24) A company auditor should see that the dividend is paid
(A) After charging depreciation
(B) Without charging depreciation
(C) Out of capital
(D) None of the above
Answer: (A) After charging depreciation
25) Errors of omission are
(A) Technical errors
(B) Error of principle
(C) Compensating error
(D) none of these
Answer: (A) Technical errors
26) Vouching implies
(A) Inspection of receipts
(B) Examination of vouchers to check the authenticity of records
(C) Surprise checking of accounting records
(D) Examining the various assets
Answer: (B) Examination of vouchers to check the authenticity of records
27) Undervaluation of stock is
(A) Technical error
(B) Compensatory error
(C) Error of principle
(D) none of these
Answer: (C) Error of principle
28) Verification refers to
(A) Examination of journal & ledger
(B) Examination of vouchers related to assets
(C) Examining the physical existence & valuation of assets
(D) Calculation of valuation of assets
Answer: (C) Examining the physical existence & valuation of assets
29) Valuation of fixed assets is based on the concept
(A) Going concern
(B) Money measurement
(C) Dual aspect
(D) Cost concept
Answer: (A) Going concern
30) Floating assets are valued at
(A) Cost
(B) Market price
(C) Cost price or market price whichever is less
(D) Cost less than depreciation
Answer: (C) Cost price or market price whichever is less
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