100+ Audit MCQ | Auditing MCQ With Answers PDF

Auditing MCQ With Answers are most important for NET, SET, Ph.D. entrance exams or college & school exam preparation, or knowledge enhancement. These Auditing MCQs will help students and researchers of MBA, MCA, MMS, PGDM, BBA, BCom, MCom, and other streams for an in-depth understanding of the subject.

A Brief Description About Auditing MCQ With Answers

Topic Name:Auditing MCQ
No of Questions:100
Subject:Audit
Questions Format:Text and PDF
PDF Size:1 MB
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Audit MCQ
Audit MCQ

Auditing MCQ With Answers

1. Management audit means

a) Audit undertaken on behalf of the management

b) Evaluating performance of various management processes and functions

c) Audit undertaken on behalf of Govt. to punish management

d) Compulsory audit

Answer: (b) [Explanation & Discussion]


2. Systems audit implies

a) Systematic examination of accounts

b) Audit undertaken to improve auditing systems

c) Enquiring accounting and control systems

d) Checking the performance of management

Answer: (c) [Explanation & Discussion]


3. Internal audit means

a) Audit undertaken to ascertain truth and fairness of state of affairs

b) Audit undertaken internally to evaluate management functions

c) Audit undertaken by employees of the organization to check financial irregularities

d) Audit by independent auditor to improve internal affairs

Answer: (c) [Explanation & Discussion]


4. Internal audit is

a) Compulsory for a company with paid-up capital of Rs. 25 lakh and above

b) Voluntary for a company

c) Not necessary for a company

d) Necessary for a company

Answer: (b) [Explanation & Discussion]


5. Detection of errors and fraud in audit is  

a) Primary object

b) Secondary object

c) Specific object

d) None of the above

Answer: (b) [Explanation & Discussion]


6. Internal auditor is appointed and removed by the  

a) Management

b) Shareholders

c) Government

d) C & A-G

Answer: (a) [Explanation & Discussion]


7. The object of internal check is to

a) Control wastage of resources

b) Prevent errors and frauds

c) Verify the cash receipts and payments

d) Facilitate quick decision by the management

Answer: (b) [Explanation & Discussion]


8. Effective internal check system reduces

a) The liability of auditor

b) Work of auditor

c) Both work as well as auditor

d) Responsibilities of an auditor

Answer: (b) [Explanation & Discussion]


9. Internal check is a part of

a) Internal audit

b) Internal accounting

c) External audit

d) Internal control

Answer: (d) [Explanation & Discussion]


10. The objective of internal audit is

a) To prevent error and fraud

b) To detect error and fraud

c) To improve financial control

d) All of the above

Answer: (d) [Explanation & Discussion]


11. Internal check is carried on by

a) Special staff

b) Internal auditor

c) Accountant

d) The members of the staff among themselves

Answer: (d) [Explanation & Discussion]


12. Internal check is suitable for

a) Larger concerns

b) Smaller concerns

c) Petty shop- keepers

d) None of the above

Answer: (a) [Explanation & Discussion]


13. Internal check is essential for

a) Petty traders

b) Cash transactions in a large concern

c) A concern using automatic equipment

d) None of the above

Answer: (b) [Explanation & Discussion]


14. Misappropriation of goods may be checked by

a) Proper supervision over stock

b) Checking of employees

c) Punishment of employees

d) None of the above

Answer: (a) [Explanation & Discussion]


15. Window dressing implies

a) Curtailment of expenses

b) Checking wastages

c) Under- valuation of assets

d) Over- valuation of assets

Answer: (d) [Explanation & Discussion]


16. Falsification of accounts is undertaken by

a) Auditors

b) Clerks

c) Accountants

d) Responsible officials

Answer: (d) [Explanation & Discussion]


17. Errors of omission are

a) Technical errors

b) Error of principle

c) Compensating errors

d) None of the above

Answer: (a) [Explanation & Discussion]


18. Test checking refers to

a) Testing of accounting records

b) Testing of honesty of employees

c) Intensive checking of a selected number of transactions

d) Checking of all transactions recorded

Answer: (c) [Explanation & Discussion]


19. Test checking should not be applied to

a) Sales book

b) Purchase book

c) Bank reconciliation statement

d) Bills book

Answer: (c) [Explanation & Discussion]


20. Vouching implies

a) Inspection of receipts

b) Examination of vouchers to check authenticity of records

c) Surprise checking of accounting records

d) Examining the various assets

Answer: (b) [Explanation & Discussion]


21. A person qualified for appointment as a Company Auditor is

a) a graduate

b) a body corporate

c) officer or employee of company

d) None of them

Answer: (d) [Explanation & Discussion]


22. Contingent liability is

a) Trade liability

b) Possible liability

c) Outstanding liability

d) None of the above

Answer: (d) [Explanation & Discussion]


23. Undervaluation of stock is

a) Technical error

b) Compensatory error

c) Error of principles

d) None of the above

Answer: (c) [Explanation & Discussion]


24. Huge Investment in advertisement shown in financial statements as

a) Revenue expenses

b) Capital expenses

c) Deferred revenue expenses

d) None of the above

Answer: (c) [Explanation & Discussion]


25. Provisions regarding redemption of preference shares are in Companies Act, 2013 under

a) Section 180

b) Section 56

c) Section 55

d) None of the above

Answer: (d) [Explanation & Discussion]


26. Verification refers to

a) Examination of journal and ledger

b) Examination of vouchers related to assets

c) Examining the physical existence and valuation of assets

d) Calculation of value of assets

Answer: (c) [Explanation & Discussion]


27. Object of verification of assets

a) Physical verification of assets

b) Checking value of assets

c) Examining the authority of their acquisition

d) All of the above

Answer: (d) [Explanation & Discussion]


28. Which of the following statements is correct?

a) Valuation is a part of verification

b) Verification is a part of valuation

c) Valuation has nothing to do with verification

d) Auditor is a valuer

Answer: (b) [Explanation & Discussion]


29. Stock should be valued at

a) Cost

b) Market price

c) Cost price or market price whichever is lower

d) Cost less depreciation

Answer: (c) [Explanation & Discussion]


30. Valuation of Fixed Assets is based on the concept

a) Going concern

b) Conservation

c) Money measurement

d) Dual aspect

Answer: (a) [Explanation & Discussion]


31. Valuation means

a) Calculating value of assets

b) Checking the value of assets

c) Checking the physical existence of assets

d) Examining the authenticity of assets

Answer: (b) [Explanation & Discussion]


32. A company auditor should see that the dividend should be paid

a) After charging depreciation

b) Without charging depreciation

c) Out of capital

d) None of the above

Answer: (a) [Explanation & Discussion]


33. In his report, the auditor gives his

a) Judgment

b) Opinion

c) Guarantee to correctness of accounts

d) True state of affairs

Answer: (b) [Explanation & Discussion]


34. Civil liability of an auditor implies liability for

a) Misappropriation of cash

b) Misappropriation of goods

c) Fraud

d) Misfeasance

Answer: (d) [Explanation & Discussion]


35. An auditor can be held liable under companies Act 1949 for

a) Negligence

b) Criminal offence

c) Professional misconduct

d) Breach of contract

Answer: (c)[Explanation & Discussion]


36. Investigation of books of accounts and records is

a) Not legally compulsory

b) Compulsory

c) Compulsory as per companies act

d) Compulsory as Income Tax Act

Answer: (a) [Explanation & Discussion]


37. Inflation of closing stock results is

a) Inflation of loss

b) Deflation of loss

c) Inflation of profit

d) Deflation of profit

Answer: (c) [Explanation & Discussion]


38. Charging excessive provision for depreciation results in

a) Less profit

b) More profit

c) No change in profit

d) No change in loss

Answer: (a) [Explanation & Discussion]


39. The main purpose of management audit is to

a) Review the management operations

b) Check arithmetical accuracy

c) Prevent travel

d) Prevent error

Answer: (a) [Explanation & Discussion]


40. Management audit is

a) Compulsory

b) Not compulsory

c) Compulsory under Income Tax Act

d) Compulsory under Indian Contract Act.

Answer: (b) [Explanation & Discussion]


41. Special resolution means

a) 1/3 majority

b) 2/3 majority

c) ½ majority

d) 4/5 Majority

Answer: (b) [Explanation & Discussion]


42. Ordinary resolution means

a) 4/5

b) 1/3 majority

c) 2/3 majority

d) More than 1/2

Answer: (d) [Explanation & Discussion]


43. Institute of chartered Accounts of India was established in the year

a) April 1, 1956

b) April 1, 1949

c) July 1, 1956

d) July 1, 1949

Answer: (d) [Explanation & Discussion]


44. Auditor is an ________ of a shareholder.

a) Owner

b) Agent

c) Employer

d) Creditor

Answer: (b) [Explanation & Discussion]


45. Financial auditor submits reports to the

a) Shareholder

b) Board of director

c) Debtors

d) Employees

Answer: (a) [Explanation & Discussion]


46. Cost auditor submits reports to the

a) Shareholder

b) Board of directors

c) Employees

d) Creditors

Answer: (b) [Explanation & Discussion]


47. Auditor finds that there is change in the method of valuation of stock whether he should

a) Allow it

b) Disallow it

c) Allow it with a note to this effect

d) None of the above

Answer: (c) [Explanation & Discussion]


48. Audit under any statute in a country is called

a) Final audit

b) Internal audit

c) Proprietary Audit

d) Statutory audit

Answer: (d) [Explanation & Discussion]


49. Books of Accounts are prepared and audited as per the provisions of the

a) Income Tax Act,1961

b) Companies Act 2013

c) Chartered Accountants Act 1949

d) None of these

Answer: (b) [Explanation & Discussion]


50. CAATTS is also known as

a) Cost And Accounts Treatments

b) Computer Assisted Audit Tools and Techniques

c) Classification and Accounting of Tax Tools

d) None of these

Answer: (b) [Explanation & Discussion]


51. Auditor has got no lien on

a) Audit Note Nook

b) Audit working papers

c) Books to Accounts of Client

d) None of these

Answer: (c) [Explanation & Discussion]


52. Fixed assets are valued at

a) Cost

b) Market price

c) Cost price or market price whichever is less

d) Cost less depreciation

Answer: (d) [Explanation & Discussion]


53. Floating assets are valued at

a) Cost

b) Market price

c) Cost price or market price whichever is less

d) Cost less depreciation

Answer: (c) [Explanation & Discussion]


54. Outstanding expenses should be verified with the help of

a) Cash book

b) Balance book

c) Journal proper

d) None of the above

Answer: (c) [Explanation & Discussion]


55. Book debts should be verified with the help of

a) Balance sheet

b) Amount received from Debtors

c) Debtors schedule

d) Certificate from the management

Answer: (c) [Explanation & Discussion]


56. Book debts should be verified with the help of

a) Preparation and checking of account

b) Examination of accounts of business units only

c) Examination of accounts of professional accountants

d) Checking of vouchers

Answer: (c) [Explanation & Discussion]


57. Main object of auditing is

a) Detection of errors

b) To find out whether P&L a/c & B/S show true and fair state affairs

c) Detection of frauds

d) Detection and prevention of frauds and errors.

Answer: (b) [Explanation & Discussion]


58. Propriety audit refers to

a) Verification of accounts

b) Examination accounts of propriety concerns

c) Enquiry against justification and necessity of expresses

d) Audit of Govt. companies

Answer: (c) [Explanation & Discussion]


59. Propriety is normally undertaken in case of

a) Joint stock company

b) Government company

c) Statutory corporation 

d) Govt. departments

Answer: (d) [Explanation & Discussion]


60. Final audit implies

a) Audit of accounts at the end of the year

b) Finally checking of accounts to reveal frauds

c) Audit for submitting report immediately at the end of the year

d) Audit of banking companies

Answer: (a) [Explanation & Discussion]


61. Joint audit implies

a) Audit of two concerns together

b) Audit of joint stock companies

c) Audit of joint sector companies

d) Audit by two firms of C.A

Answer: (d) [Explanation & Discussion]


62. Investments in hand should be verified with the help of

a) Schedule of investments

b) Balance sheet

c) Inspection of securities

d) Certificate from the bank

Answer: (c) [Explanation & Discussion]


63. First auditor of a company is appointed by the

a) Shareholders

b) Central Govt.

c) Company Law Board

d) Board of Directors

Answer: (d) [Explanation & Discussion]


64. Which of the following persons is qualified to be a company auditor?

a) An employee of the company

b) A body corporate

c) A person who is indebted to the company for an amount exceeding Rs. 1000

d) A practicing chartered accountant

Answer: (d) [Explanation & Discussion]


65. The first auditor of a company will hold office

a) For a period of one year

b) Till holding of statutory meeting

c) Till the conclusion of first annual general meeting

d) Till a new auditor is appointed

Answer: (c) [Explanation & Discussion]


66. Normally, a company auditor is appointed by the

a) Central Government

b) Shareholders

c) Board of Directors

d) Company Law board

Answer: (b) [Explanation & Discussion]


67. An auditor in a casual vacancy is appointed by the

a) Board of Directors

b) Shareholders

c) Central Government

d) Company Law board

Answer: (a) [Explanation & Discussion]


68. If an auditor is not appointed at annual general meeting, he is appointed by the

a) The Central Government

b) Board of Directors

c) Shareholders

d) The existing auditor shall continue to be auditor of the company

Answer: (d) [Explanation & Discussion]


69. A vacancy caused by resignation of the auditor is filled by

a) Board of Directors

b) At the general meeting of shareholders

c) By the Central Government

d) By the Company Law board

Answer: (b) [Explanation & Discussion]


70. A special auditor is appointed by the

a) Shareholders

b) Board of Directors

c) Central Government

d) CAG

Answer: (c) [Explanation & Discussion]


71. A government Co. auditor may be appointed by the

a) CAG

b) Shareholders

c) Central Government

d) None of the above

Answer: (a) [Explanation & Discussion]


72. A company auditor can be removed before expiry of his term by

a) Shareholders

b) Board of Directors

c) Central Government

d) State Government

Answer: (a) [Explanation & Discussion]


73. Remuneration of a company auditor is fixed by the

a) Shareholders

b) Board of Directors

c) Central Government

d) Appointing authority

Answer: (d) [Explanation & Discussion]


74. A company auditor, in general has to submit his report to

a) Shareholders

b) Board of Directors

c) Central Government

d) CAG

Answer: (a) [Explanation & Discussion]


75. An auditor of Government company has to submit his report to the

a) Shareholders

b) Central Government

c) CAG

d) Ministry concerned

Answer: (b) [Explanation & Discussion]


76. Internal auditor has to submit report to

a) Shareholders

b) Government

c) Company Law board

d) None of the above

Answer: (d) [Explanation & Discussion]


77. Auditor should be dutiful like a

a) A watch dog

b) A blood hound

c) A detective

d) An insurer

Answer: (a) [Explanation & Discussion]


78. Auditor, in general is an

a) Employee of the company

b) Agent of the company

c) Agent of the shareholders

d) None of the above

Answer: (c) [Explanation & Discussion]


79. Which of the following percentage of nominal amount of shares should be received with application

a) 10   

b) 15   

c) 5 

d) 6

Answer: (c) [Explanation & Discussion]


80. While checking allotment, auditor should see that amount

a) Equal to estimated fixed capital is received

b) Equal to estimated working capital is received

c) Necessary for purchase of land & building has been received

d) None of the above

Answer: (d) [Explanation & Discussion]


81. Application money should not be withdrawn unless

a) Allotment is made

b) Cash book has been prepared

c) Certificate to commence business obtained

d) Certificate of incorporation obtained

Answer: (c) [Explanation & Discussion]


82. Shares issued for consideration other than cash should be vouched with the help of

a) Directors minutes book

b) Shareholders minutes book

c) Contract with the party concerned

d) Cash book

Answer: (c) [Explanation & Discussion]


83. Auditor should see that amount received for premium on issue of shares should be shown in

a) Subscribed capital

b) Capital Reserve Account

c) Securities Premium Reserve account

d) Paid- up capital account

Answer: (c) [Explanation & Discussion]


84. Securities Premium Reserve account should be shown in the Balance sheet under

a) Paid-up capital

b) Subscribed capital

c) Reserves & surplus

d) Reserved capital

Answer: (c) [Explanation & Discussion]


85. Amount of share premium may be utilized for

a) Payment of dividend

b) Writing of preliminary expenses

c) Routine expenses

d) Purchase of fixed assets

Answer: (b) [Explanation & Discussion]


86. Shares cannot be issued at discount under section

a) 76   

b) 75 

c) 53

d) 89

Answer: (c) [Explanation & Discussion]


87. Interest on calls paid in advance, according to Table A, should not exceed

a) 12%

b) 5% 

c) 10% 

d) 14%

Answer: (a) [Explanation & Discussion]


88. Shares can be issued at premium, under section

a) 76 

b) 75 

c) 52

d) 79

Answer: (c) [Explanation & Discussion]


89. Shares can be issued at discount only after

a) 2 years of the commencement of the business

b) 1 year of the commencement of the business

c) 3 years of the commencement of the business

d) 5 years of the commencement of the business

Answer: (b) [Explanation & Discussion]


90. With regard to issue of share warrants to the bearers, the auditor should see that is it

a) Permitted by Memorandum of Association

b) Sanctioned by the Central Government

c) Permitted by the Board of Directors

d) None of the above

Answer: (b) [Explanation & Discussion]


91. For the forfeiture of shares, the auditor should check that it is permitted

a) by Memorandum of Association

b) by articles of association

c) under Companies Act, 1956

d) None of the above

Answer: (b) [Explanation & Discussion]


92. Increase in share capital is permitted by

a) Memorandum of Association

b) Articles of association

c) Court

d) Companies Act, 2013

Answer: (b) [Explanation & Discussion]


93. Divisible profit should not include

a) Interest on capital

b) Capital

c) Depreciation

d) None of the above

Answer: (d) [Explanation & Discussion]


94. Dividend cannot be paid out of

a) Capital profit

b) Capital receipts

c) Revenue receipts

d) None of the above

Answer: (b) [Explanation & Discussion]


95. Capital profit imply profit earned

a) Through business transaction

b) From capital

c) From sale of fixed assets

d) From sale of current assets

Answer: (c) [Explanation & Discussion]


96. Capital profits

a) Can be paid by way of dividends

b) Cannot paid by way of dividends

c) Can be paid by way of dividend under certain conditions

d) None of the above

Answer: (c) [Explanation & Discussion]


97. Statutory Report should be sent to registrar before _____ days of statutory meeting.

a) 30 days

b) 14 days

c) 21 days

d) None of these

Answer: (c) [Explanation & Discussion]


98. ________ audit is not a statutory requirement.

a) Management

b) Financial

c) Tax Audit

d) None of these

Answer: (a) [Explanation & Discussion]


99. ____________ audit refers to the evaluation of company’s performance against planned goals in the areas of social responsibility.

a) Cost audit

b) Social audit

c) Management audit

d) None of these

Answer: (b) [Explanation & Discussion]


100. Bonus shares are issued to

a) New members

b) Existing share holders

c) Employees

d) None of these

Answer: (b) [Explanation & Discussion]


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