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 ACC311 Fundamentals of Auditing Final Term Solved Papers Mega File

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FINALTERM EXAMINATION
Spring 2009
ACC311- Fundamentals of Auditing (Session - 1)
Marks: 81


Question No: 1 ( Marks: 1 ) - Please choose one
Which one of the following is an objective of the internal audit?

 

To report on financial statements
To check accounting system and internal control are operating efficiently
To determine the accuracy of financial statement values and disclosures
To establish a control system in the company


Question No: 2 ( Marks: 1 ) - Please choose one
Which one of the following statements is NOT correct in respect of the internal auditor?


The scope of audit performed by internal auditors is primarily in respect of financial report audits
An internal auditor does not require a license to practice

Internal auditors are usually employed by companies and government units
Primary responsibility of the internal auditor is to the board of directors

Question No: 3 ( Marks: 1 ) - Please choose one
After how many days the Securities and Exchange Commission may appoint the auditors, if the Directors of a company could not appoint the auditors to fill casual vacancy? (Companies Ordinance, 1984)


30 days
60 days
80 days
120 days


Question No: 4 ( Marks: 1 ) - Please choose one
Suppose that during audit of a company, an auditor accepted the schedule of bad debts furnished by the client, though it was apparent that debts were not recoverable. The auditor shall be held liable for which one of the following liabilities?


Liability for negligence
Liability for misfeasance
Criminal liability
Personal liability

 

Ref: Page no.19


Question No: 5 ( Marks: 1 ) - Please choose one
The books of accounts of a company should be kept at which one of the following offices?(Companies Ordinance, 1984)

Registered office of the company
Accounts office of the company
Record office of the company
Registrar office


Question No: 6 ( Marks: 1 ) - Please choose one
Which of the following is one of the most fundamental and effective internal controls?


Increased use of computers for recording accounting transactions
Increased reliance on internal auditors to monitor accounting systems
Segregation of incompatible duties across several people
Having internal auditors report only to the Board of Directors


Question No: 7 ( Marks: 1 ) - Please choose one
Which of the following is NOT a major component of an internal control system?


Risk assessment Staffing

Control procedures/activities
Information and communication system


Question No: 8 ( Marks: 1 ) - Please choose one
An audit firm audited a Leather Manufacturing company and presented its report addressed to the management. They found significant material misstatements in the company s internal controls system. They strongly recommended that there should be sufficient controls in existence to ensure management can effectively control the business operations. In your opinion, auditors are emphasizing on which one of the following categories of SOAP MAPS?

Authorization
Management and Monitoring
Arithmetic and Accounting
Segregation of duties


Question No: 9 ( Marks: 1 ) - Please choose one
Which of the following statements best describes the purpose of an internal control questionnaire (ICQ)?

An internal control questionnaire is a series of questions regarding accounting and control policies and procedures that the auditor considers necessary to prevent all misstatements in the financial report.
An internal control questionnaire is a series of questions regarding accounting and control policies and procedures that the auditor considers necessary to prevent material misstatements in the financial report.
An internal control questionnaire is a series of questions regarding accounting and control policies and procedures that the auditor considers necessary to detect material misstatements in the financial report.
An internal control questionnaire is a series of questions prepared by the entity about the entity's accounting and control policies and procedures for which the entity seeks guidance on from the auditor in order to detect material misstatements in the financial report.


Question No: 10 ( Marks: 1 ) - Please choose one
A Beverages company is being audited by an audit firm. Audit procedures are being undertaken in all of its departments. During this, the audit team has to spend more time on physical examination of the company assets to get reliable audit evidence. In your opinion, auditors are considering which type of audit inquiry in this case?
Recalculations Inspection of tangible assets Analytical procedures Confirmations
Existence of any immaterial mistake in the statements
Existence of any fraud or error in the statements
Company s growth trend in the future in figures Market value of the company s stock


Question No: 12 ( Marks: 1 ) - Please choose one
Which one of the following may NOT be a type of control of the purchase cycle of an entity?


Receipt of goods
Invoicing and returns
Invoicing and credit notes
Purchase ledger and suppliers

 

Ref : Page no.93
Question No: 13 ( Marks: 1 ) - Please choose one
While testing the purchase system of an entity, which one of the following control tests may be applied to the Credit Notes by the auditors?


Evidence of matching credit notes to goods returned notes
Evidence of approval of credit notes
Evidence of a sequence check
Proof of issuance date


Question No: 14 ( Marks: 1 ) - Please choose one
During the audit work of testing the purchase system of an entity, which one of the following control tests may be applied to the Payables Ledger by the auditors?
Evidence of authorization of adjustments to payables ledger
Evidence of review of reconciliation of purchase ledger listing
Evidence of authorization of adjustments to payable ledger control account
Evidence of authorization of adjustments to purchase ledger

 

Ref: Page no.93
Question No: 15 (Marks: 1) - Please choose one
Which one of the following possible misstatements related to payroll does not involve the audit objective of Validity?

Payments to fictitious employees
Payments to terminated employees
Payments to valid employees who have not worked
Payments to valid employees at a rate in excess of the authorized amount


Question No: 16 ( Marks: 1 ) - Please choose one
In order to ensure effective control, how often a full inventory count should be held when perpetual inventory records are not kept adequately?


On a daily basis
At least once a year
At least monthly
At least weekly

 

Ref: Page no.101


Question No: 17 (Marks: 1 ) - Please choose one
An oil exploring company employs 1500 personal in its international market. All of its personnel are paid on monthly basis. The company should compensate them in which form of payment?


Salary
Cheque
Wages
None of the given option


Question No: 18 ( Marks: 1 ) - Please choose one

For the purpose of keeping effective control in the cash system, who should have no access to the cash or the preparation of the paying-in slip?

Sales ledger personnel
Teller/cashier
Cash officers
Operations manager

Ref: Page no.99


Question No: 19 ( Marks: 1 ) - Please choose one
When should the petty cash book entries be made?


At the day end
Next day
Promptly
Monthly


Question No: 20 ( Marks: 1 ) - Please choose one
How often the physical inspection of non current assets should be carried out?

Rarely
Periodically
Never
Daily


Question No: 21 ( Marks: 1 ) - Please choose one
In which one of the following ways auditors can choice the verification techniques in a given set of circumstances?


It depends upon the available audit evidence to the auditor
It depends upon the nature of business operations of the entity
It depends upon the audit procedures planned by the auditor
It depends upon the judgmental skills of the auditor


Question No: 22 ( Marks: 1 ) - Please choose one
Which one of the following may NOT ensure that the movement in share capital of a company is properly authorized and correctly shown and described in accordance with the Companies Ordinance, 1984?
Check that directors were authorized to allot shares
Agree authorized capital with memorandum of association
Consider special rules for allotments of public company shares
Test payments with supporting evidence and trace entries in register


Question No: 23 ( Marks: 1 ) - Please choose one
Which one of the following testing objectives refers to the management assertion Occurrence in obtaining audit evidence?


Assets shown include all rights under the control of the enterprise
Transactions and events that have been recorded have occurred and pertain to the entity
The amounts at which assets and liabilities are stated is correct
Assets and liabilities included on the balance sheet actually exist


Question No: 24 ( Marks: 1 ) - Please choose one
Which one of the following certain expense items may be verified in order to keep control of stock-in-trade and stores & spares?


Interest on short term loan
Accumulated depreciation on assets
Director s fees
Wages and salaries


Question No: 25 ( Marks: 1 ) - Please choose one


Which one of the following is NOT an advantage of using statistical sampling?


It aids in the design of an efficient sample
It allows the auditor to measure the sufficiency of the evidential matter obtained
It allows the auditor to greatly reduce substantive testing
It provides means for mathematically measuring the degree of sampling risk


Question No: 26 ( Marks: 1 ) - Please choose one
Which one of the following is an underlying feature of random-based selection of items?


Each stratum of the accounting population be given equal representation in the sample
All items in the accounting population be randomly ordered.
Every item in the population should have an opportunity to be selected
Every item must be systematically selected using replacement


Question No: 27 ( Marks: 1 ) - Please choose one
Which one of the following matters is generally included in an auditor's engagement letter?


Management's responsibility for the entity's compliance with laws and regulations
The factors to be considered in setting preliminary judgments about materiality
Management's vicarious liability for illegal acts committed by its employees
The auditor's responsibility to search for significant internal control deficiencies


Question No: 28 ( Marks: 1 ) - Please choose one
What should be the next step of an auditor after establishing the overall audit strategy of an entity?

To develop an audit plan
To define the scope of audit
To determine the focus of engagement team efforts
To determine the objectives of audit


Question No: 29 ( Marks: 1 ) - Please choose one
The establishment of the overall audit strategy involves the following EXCEPT:


To determine the characteristics of the engagement
To ascertain the reporting objectives of the engagement
To consider the important factors i.e. materiality levels, higher risks of material
misstatement etc.
To guide the development of detailed business activities to occur in future


Question No: 30 ( Marks: 1 ) - Please choose one
Which one of the following mainly affects the auditors opinion?


Agreement on accounting policies
Limitation on the scope of the auditors work
Dispute among the members of the company
Future prospects of the company s growth


Question No: 31 ( Marks: 1 ) - Please choose one
Which one of the following matters does NOT affect Auditor s Opinion?


When there is a limitation on the scope of the auditor s work
When there is a disagreement with management regarding the accounting policies selected
When there is a disagreement with management regarding the method of applying accounting policies
When an auditor modify the auditor s report by adding a paragraph to highlight a material matter


Question No: 32 ( Marks: 1 ) - Please choose one
Tracing selected shipments to the sales journal to be sure that each one is included is a test of which of the following?


Accuracy
Classification
Completeness
Existence


Question No: 33 ( Marks: 1 ) - Please choose one
Which one of the following best describes the term Input VAT?

Input VAT is charged on a firm when it makes its purchases
Input VAT is charged on a firm when it makes its investments
Input VAT is charged on a firm when it produces highly quality products
Input VAT is charged on a firm when it exports the products


Question No: 34 ( Marks: 1 ) - Please choose one
The duties of the wages staff should preferably be rotated during the year when the salary payment is made by which of the following systems?


By cheque
In cash
By demand draft
Direct transfer to employees bank account


Question No: 35 ( Marks: 1 ) - Please choose one
Which of the following are the three audit objectives that are most important for cash, and that receive the greatest attention during the audit?

Existence, accuracy, and completeness
Existence, cutoff, and presentation
Accuracy, cutoff, and presentation & disclosure
Completeness, realizable value, and cutoff


Question No: 36 ( Marks: 1 ) - Please choose one
Which one of the following is most likely to indicate fraud?


Several overpayments are made for goods received from a supplier
The year end cash balance does not include cash in transit to the company at year-end
A check received after year end was inadvertently recorded as if received before year-end
A documented loan is sanctioned to an officer of the company


Question No: 37 ( Marks: 1 ) - Please choose one
When an auditor increases the assessed level of control risk because certain control activities were determined to be ineffective, which of the following would most likely be increased by the auditor?


Extent of tests of controls
Level of detection risk
Extent of tests of details
Level of inherent risk


Question No: 38 ( Marks: 1 ) - Please choose one
Which one of the following statements is TRUE regarding control procedures?


They are not required if the control environment is strong
They should generally be all manual
They should generally be all automated
They can be either manual or automated


Question No: 39 ( Marks: 1 ) - Please choose one
Which one of the following statements does not apply to the Institute of Chartered Accountants of Pakistan (ICAP) in Pakistan?


An autonomous body incorporated under the Chartered Accountants Ordinance 1961
Regulatory body that formulates auditing standards in Pakistan
Its affairs are run by a council which is elected by its member (Chartered Accountants).
ICAP is a member of the International Federation of Accountants (IFAC)


Question No: 40 ( Marks: 1 ) - Please choose one
Which one of the following statements indicates a primary difference between an operational audit and a compliance audit?


Operational audit focuses on business efficiencies and effectiveness, while compliance audit focuses on whether laws and other requirements are being followed
Operational audit focuses on reliability of the financial statements, while compliance audit focuses on whether laws and other requirements are being followed
Operational audit focuses on business growth prospects, while a compliance audit focuses on reliability of the financial statements
Operational audit focuses on business size and potential to grow, while compliance audit focuses on reliability of accounting records


Question No: 41 ( Marks: 1 ) - Please choose one
Which one of the following primary assertions is satisfied when an auditor ensures that there is no false transaction recorded and all recorded transactions have actually taken place?


Occurrence
Completeness
Existence
Rights and obligations


Question No: 42 ( Marks: 1 ) - Please choose one
Following are the points considered during the verification of bank balances EXCEPT:


Obtain direct bank confirmation
Obtain direct bank confirmation
Investigate about outstanding stale cheques
Investigate any significant reconciling items of an unusual nature
Ensure that the creditors have been paid for their loan amount
Question No: 43 ( Marks: 3 )

Enlist the typical control procedures at key stages of the sales cycle.
Solution:


1. Orders

2. Dispatch

3. Invoicing and credit notes

4. Returns inwards

5. Receivables

6. Bad Debts


Question No: 44 ( Marks: 3 )
What steps an auditor should take in order to ensure that the reserves are properly classified and described in the accounts in accordance with the Companies Ordinance, 1984?


Question No: 45 ( Marks: 3 )
Throughout the 1960s and 70s, the largest accounting firms devoted extensive resources to the development and implementation of statistical sampling procedures. Enlist several sample selection methods now available to an auditor for selecting items in the populations.


Question No: 46 ( Marks: 5 )
Suppose you have been appointed as an auditor of a manufacturing company. You are at the stage of testing the purchase system. According to your knowledge of Auditing Standards, what control objectives would you develop in respect of the Purchase system of the entity?


Question No: 47 ( Marks: 5 )
Discuss the factors which influence auditor s judgment regarding sample size for tests of control.

Question No: 48 ( Marks: 10 )
Suppose that your supervisor has asked you to carry out an internal control review of the inventory system of a manufacturing company. What internal control procedures would you examine in respect of the following functions of the inventory system?

1. Arithmetical Accuracy
2. Control Accounts
3. Access to Assets and Records


Question No: 49 ( Marks: 10 )
A company has hired auditors at the year end. Auditors used audit sampling techniques which made them enable to gather audit evidence efficiently. State the objectives auditors might have defined first to achieve by using sampling techniques and also briefly explain further steps the auditors might undertake to complete the sampling process.

                                                    ACC311 quiz

1. Standard format of Auditor’s Report as per the Companies Ordinance 1984 is described in which one of the following Legal Forms?
A. Form31A
B. Form32A
C. Form30A
D. Form35A


2. IFRS stands for which one of the following?
A. International Financial Reporting Standards

B. International Financial Recording Systems
C. International Financial Recording Statements
D. International Financial Reporting Systems

International Financial Reporting Standards.

3. Which of the following is NOT one of the five major components of internal control?
A. Risk assessment
B. Control activities
C. Information and communication system
D. Human resource background checks
Human resource background checks.

4. All of the following should be observed and inspected by the auditors during the risk assessment process of an entity EXCEPT:
A. Observations of Activities and operations
B. Inspection of Documents and records
C. Reading Management reports
D. Visit to other companies in the industry
Visit to other companies in the industry.

5. Which one of the following audit techniques ordinarily provides an auditor with the least assurance about the operating effectiveness of an internal control activity?
A. Inquiry of client personnel
B. Inspection of documents and reports

C. Observation of client personnel
D. Preparation of system flowcharts
Inspection of documents and reports.

6. Which one of the following opinions advocates that the auditor should form an opinion only after obtaining sufficient audit evidence instead of blindly accepting any information given by the management?
A. Auditor’s liability
B. Professional ethics

C. Professional Skepticism
D. Auditor’s opinion
Professional ethics.

7. Which one of the following is NOT required as part of the audit process?
A. Substantive procedures
B. Tests of control
C. Assessment of materiality
D. Procedures to obtain an understanding of the internal control structure

Procedures to obtain an understanding of the internal control structure.
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8. SECP stands for which one of the following?
A. Securities and Exchange Collaboration of Pakistan
B. Securities and Exchange Consortium of Pakistan
C. Securities and Exchange Commission of Pakistan
D. Securities and Exchange Constitution of Pakistan
Securities and Exchange Commission of Pakistan.

9. One type of analytical procedure is the ‘Trend Analysis’. Which one of the following is the best example of trend analysis?
A. Comparison of company financial ratios to that of its competitors
B. Comparison of accounting records to budgeted amounts
C. Comparison of inventory levels over the past 3 years
D. Comparison of interest expenses to outstanding loan balances
Comparison of inventory levels over the past 3 years.

10. While conducting operational audit, which one of the following auditing procedures does the auditor primarily rely upon?
A. Inquiry and observation
B. Analytical procedures

C. Physical inspection
D. Tracing and vouching
Analytical procedures.

11. Which one of the following helps to achieve reasonable assurance about the fairness of financial statements during an audit process?
A. Audit report
B. Audit evidence
C. Audit engagement
D. Audit program
Audit report.

ACC311 2nd Online Solved Quiz Spring 2011

 

 

Quiz No. # 01: During audit of the financial statements, the auditors are concerned with the verification and determination of which one of the following items?

 

 Statements, accuracy, and feasibility

 

 Date, accuracy, and reliability

 

 Policies, value, and reliability

 

 Cycle, policies, and reliability

 

 

 

Quiz No. # 02: Which one of the following authorities shall fix the remuneration of the auditors, if auditors are appointed by the SECP? (Companies Ordinance, 1984)

 

 Directors

 

 Shareholders

 

 Company registrar

 

 SECP

 

 

 

Quiz No. # 03: The phrase (Scope of an Audit) refers to which one of the followings?

 

 Engagement letters

 

 Audit procedures

 

 Audit evidence

 

 Reasonable assurance

 

 

 

Quiz No. # 04: Following statements are true about the legal requirements of books accounts for the companies EXCEPT: (Companies Ordinance, 1984)

 

 Books of accounts should be preserved for 10 years

 

 Books of accounts are to be kept at the registered office of the company

 

 Directors can review the books of account during the business hours

 

 If a company fails to maintain books of accounts according, it may leads to demolish the entity

 

 

 

Quiz No. # 05: The factors that affect reasonable assurance include all of the following EXCEPT:

 

 Use of testing (Sampling)

 

 Interest limitations of accounting and internal control

 

 Remuneration of the auditor

 

 Persuasive nature of audit evidence

 

 

 

Quiz No. # 06: A well designed Internal Control Questionnaire (ICQ) should incorporate the following EXCEPT:

 

 Be a sufficient source of data for the evaluation of internal controls

 

 Identity the internal control system's strengths and weaknesses

 

 Be organized by individual functional organizations

 

 Should include simple yes or no responses but no narrative responses

 

 

 

Quiz No. # 07: Which one of the following is FALSE about Internal Control Evaluation Checklists (ICEC)?

 

 ICEC is developed to overcome the shortcomings of Internal Control Questionnaire

 

 The rules of constructing ICEC is different than construction of Internal Control Questionnaire

 

 It is designed to determine, whether desirable internal controls are present

 

 It is normally employed where system's information has already been recorded

 

 

 

Quiz No. # 08: An auditor's flow chart of an entity's information system is a diagrammatic representation. It depicts what kind of information?

 

 Program for tests of control

 

 Understanding of the system

 

 Understanding of the types of irregularity that are probable given by the present system

 

 Documentation of the study and evaluation of the system

 

 

 

Quiz No. # 09: Which one of the following is NOT a factor included in the control environment of an entity?

 

 Integrity and ethical values

 

 Risk assessment

 

 Commitment to competence

 

 Organization structure

 

 

 

Quiz No. # 10: The audit which is a review of any part of an entity's operating procedures and methods is known as:

 

 Financial statement audits

 

 Operational audits

 

 Technical Audits

 

 Compliance audits

 

 

 

Quiz No. # 11: While considering internal control system of an entity, the auditor is basically concerned that the system provides reasonable assurance about which one of the following?

 

 That the management can not override the system

 

 Operational efficiency has been achieved according to management plans

 

 Errors have been prevented or detected

 

 Controls have not been circumvented by collusion

 

 

 

Quiz No. # 12: Which one of the following is the source document for staff salaries?

 

 Approved payrolls

 

 Vouchers

 

 Accounting statements

 

 Cash memos

 

 

 

Quiz No. # 13: Analytical procedures used in planning an audit should focus on identifying which one of the followings?

 

 Areas that may represent specific risks relevant to the audit

 

 Material weaknesses in the internal control structure

 

 The predictability of financial data form individual transactions

 

 The various assertions that are embodied in the financial report

 

 

 

Quiz No. # 14: Which one of the following meetings is considered as a 'meeting of directors or management?

 

 General meeting

 

 Extra ordinary general meeting

 

 Board meeting

 

 Management meeting                                          

 

                                         Answers Are Not 100% Sure. Verify them at Yourself

 

 

 

FINALTERM EXAMINATION

Fall 2008

ACC311- Fundamentals of Auditing (Session - 1)

 

Question No: 1      ( Marks: 1 ) - Please choose one

 

When the cash sales should be recorded by the companies in order to achieve control objectives?

 

 

Record the cash sales when purchase order is received from the customer

 

 

Record the cash sales at the point they are made

 

 

Record the cash sales after some period

 

 

Record the cash sales weekly

 

sales when delivery is done n cash received bcoz sales r recorded after delivery. 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.  

 

 

Question No: 2      ( Marks: 1 ) - Please choose one                                                          

 

Auditors conduct auditing in accordance with :

 

 

International Financial Reporting Standards

 

 

Local pronouncements/Legislations

 

 

Financial Accounting Standards Board

 

 

All of the given options

 

True and fair presentation means that the financial statement are prepared and presented in accordance with the requirements of the applicable International Financial Reporting Standards (IFRS) and local pronouncements/legislations.

 

 

 

Question No: 3      ( Marks: 1 ) - Please choose one

 

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?

 

 

 

 

Valuation

 

 

 

 

 

Completeness

 

 

Existence

 

 

Rights and obligations

 

 

ompleteness means that all transactions and relevent information has been

recorede according with applicable ifrs as well as legislations

 

Question No: 4      ( Marks: 1 ) - Please choose one                                                          

 

Which one of the following statements is NOT true about the internal control system of a company?

 

 

 

 

Internal control is affected by people working in an organization

 

 

Internal control is a process of bringing accuracy and improvements in the systems

 

 

Internal control system is expected to provide absolute assurance about the performance of a company

 

 

Internal control is geared to achieve objectives of financial reporting, compliance and operations

 

Internal control systems always minimize risk but never these can eliminate risks absolutely

   

in auditing and accounting noting is absolute

 

 

Question No: 5      ( Marks: 1 ) - Please choose one                                                          

 

Who shall fix the remuneration of the auditors, if auditors of a company are appointed by the

shareholders? (Companies Ordinance, 1984)

 

 

 

 

Directors

 

 

Shareholders

 

 

Securities and Exchange Commission

 

 

 

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Institute of Chartered Accountants of Pakistan (ICAP)

 

 

ut company ordinance 1984 is only applicable in pakistan not in world

lazyboy: in rest of world we have company law 2006

 

Question No: 6      ( Marks: 1 ) - Please choose one                                                          

 

If Directors could not appoint the first auditors of a company, then the first auditors shall be appointed by which one of the following authorities? (Companies Ordinance, 1984)

 

 

 

 

Shareholders

 

 

Securities and Exchange Commission

 

 

 

 

Company secretary

 

 

Company registrar

 

 

 

 

Question No: 7      ( Marks: 1 ) - Please choose one                                                          

 

The books of accounts of a company should be kept at which one of the following offices?

(Companies Ordinance, 1984)

 

 

 

 

Registered office of the company

 

 

Accounts office of the company

 

 

Record office of the company

 

 

Registrar office

 

 

by the way books of prime entry will b kept at accounts office bcoz account office oftenly

need these books

 

Question No: 8      ( Marks: 1 ) - Please choose one

 

Which one of the following is also called as  books of secondary entries ?

 

 

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Journal

 

 

Voucher

 

 

Ledger

 

 

Memo

 

 

 

 

Question No: 9      ( Marks: 1 ) - Please choose one                                                          

 

According  to  Section  236,  Director s  report  should  be  attached  to  which  of  the  following

financial statement? (Companies Ordinance, 1984)

 

 

 

 

Balance sheet

 

 

Profit and loss account

 

 

Statement of retained earnings

 

 

Statement of cash flows

 

 

 

 

Question No: 10      ( Marks: 1 ) - Please choose one                                                        

 

A  well  designed  Internal  Control  Questionnaire  (ICQ)  should  incorporate  the  following

EXCEPT:

 

 

 

 

Be a sufficient source of data for the evaluation of internal controls

 

 

Identify the internal control system s strengths and weaknesses

 

 

Be organized by individual functional organizations

 

 

 

 

Should include simple yes or no responses but not narrative responses

 

 

 

 

Question No: 11      ( Marks: 1 ) - Please choose one                                                        

 

Which one of the following examples constitutes the most reliable piece of evidence available to an auditor?

 

 

 

 

A written confirmation from a bank

 

 

A supplier s invoice kept in the client's records

 

 

A duplicate sales receipt dated and signed

 

 

A receipted shipping document

 

 

 

 

Question No: 12      ( Marks: 1 ) - Please choose one                                                        

 

Considering the  Extent of audit procedure  refers to which one of the following description?

 

 

 

 

It refers to the nature of testing and their procedures that is, designing, structuring, and

compiling work to be done

 

 

It refers to the purpose i.e. (tests of controls or substantive procedures) and their type, that is, inspections, observation, inquiry confirmation,  recalculation, re-performances or analytical procedures

 

 

It refers to when audit procedures are performed or the period or date to which the audit evidence applies

 

 

It refers to sample size or number of observations of a control activity (quantity of audit

evidence)

 

 

 

 

Question No: 13      ( Marks: 1 ) - Please choose one

 

 

 

 

 

Which one of the following situations can constitute grounds for a claim of negligence on part of the auditors to detect a fraud?

 

 

The fraud was committed by a senior management override of internal controls which had been relied upon in reducing the extent of detailed testing

 

 

The auditor relied on sample evidence and thus failed to detect the fraudulent transactions

 

 

The auditor reported discrepancies to local management but did not investigate further as

the likely impact on the accounts was not material

 

 

The  auditor  accepted  local  management  representations  as  to  discrepancies  as  the potential impact of the fraud was not material to the accounts as a whole

 

 

 

 

Question No: 14      ( Marks: 1 ) - Please choose one                                                        

 

The control objectives of a sales system typically include the following EXCEPT:

 

 

Invoices  and  credits  should  be  appropriately  checked  for  accuracy  and  should  be

authorized before entering in the records

 

Goods returned and claims by customers should be controlled to determine the liability for goods returned and claims received

 

 

Customers' orders should be authorized, controlled and recorded in order to execute them promptly

 

All  valid  transactions  relating  to  payables,  and  only  those  transactions,  should  be accurately recorded in the accounting records

 

bcoz payables relate to purchases not to sales

Question No: 15      ( Marks: 1 ) - Please choose one

 

A local gas station has one clerk that accepts cash payments for gas and rings them up on the cash register. Which one of the following would be the best control to provide assurance that the cashier is not keeping some of the cash?

 

 

 

 

 

Count all cash before and after the shift and compare it to cash register totals

 

 

Require that each customer be given a receipt of their purchase

 

 

Compare cash register totals to a total that is automatically generated by each gas pump

 

 

Each employee should have a separate cash drawer that only they use

 

 

If receipt is given total receipts can be matched with total cash received

 

Question No: 16      ( Marks: 1 ) - Please choose one                                                        

 

Which one of the following may NOT be the control procedure at key stages of the sales cycle of

an entity?

 

 

 

 

Receipt of goods

 

 

Receivables

 

 

Bad Debts

 

 

Invoicing and credit notes

 

petty cash count

u r not paying customer customer is paying u

 so u will match cash register with wht

 

 

Question No: 17      ( Marks: 1 ) - Please choose one                                                        

 

While testing the purchase system of an entity, which one of the following control tests may

NOT be applied to the purchase order document?

 

 

 

 

Evidence of a sequence check

 

Evidence of approval of requisitions

 

Proof of issuance date

 

Adherence to authority limits

 

 

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Question No: 18      ( Marks: 1 ) - Please choose one                                                        

 

While testing the purchase system of an entity, which one of the following control tests may be applied to the Goods Returned Notes by the auditors?

 

 

 

 

Adherence to authority limits

 

 

Evidence of approval of requisitions

 

 

Evidence of the sequence check

 

 

Proof of the issuance date

 

 

to see if what is returned was purchased with or without authorization

 

Question No: 19      ( Marks: 1 ) - Please choose one                                                        

 

An oil marketing company employs 1000 personnel in its local market. Majority of its workers are  paid on the piece rate basis. The company should compensate them in which one of the following forms of payment?

 

 

 

 

Salary

 

Cheque

 

Wages

 

None of the given options

 

Question No: 20      ( Marks: 1 ) - Please choose one

 

According to the requirements of auditing standards for Wages and Salaries, who should be allowed to take wages of another employee in a company?

 

 

 

 

Any colleague

 

 

Next of kin


 

 

No one

 

 

Family

 

 

 

 

Question No: 21      ( Marks: 1 ) - Please choose one                                                        

 

How often Inventory levels should be checked against the inventory records in order to verify

internal control effectiveness?

 

 

 

 

Rarely

 

 

Periodically

 

 

Never

 

 

Daily

 

 

 

u cannot do daily not time n cost effective

Question No: 22      ( Marks: 1 ) - Please choose one                                                        

 

Which one of the following is an appropriate evidence for verifying the existence of inventory?

 

 

 

 

Checking valuation of that inventory

 

 

Identifying the slow-moving inventory

 

 

Obtaining a letter of representation from the management of the entity about it

 

 

Observing the counting of inventory

 

 

 

too see if inventory is present u will go n check it

Question No: 23      ( Marks: 1 ) - Please choose one                                                        

 

 

 

 

An oil exploring company employs 1500 personal in its international market. All of its personnel

are paid on monthly basis. The company should compensate them in which form of payment?

 

 

 

 

Salary

 

 

Cheque

 

 

Wages

 

 

None of the given option

 

 

 

 

Question No: 24      ( Marks: 1 ) - Please choose one

 

Which one of the following best describes the process of 'teeming and lading' in the cash system

of an entity?

 

 

 

 

The use of one's occupation for personal enrichment through the deliberate misuse of

organization s assets

 

 

An attempt to hide the loss of cash received from one customer by using cash from another customer or customers to replace it

 

 

The conversion and obtaining of money or property by false pretense

 

 

Any intentional deception resulting in injury to another person

 

 

 

 

Question No: 25      ( Marks: 1 ) - Please choose one                                                        

 

KMC Electronics Company hires auditors at the year end. Auditors are at the stage of verification and  vouching of company s financials. Before examining the equity section, they  developed general  aspects concerning  the owner s equity. In your opinion, which one of the following aspects may NOT be considered by the auditors during this assessment?

 

 

Share capital is properly classified and described in the accounts

 

 

Assets of the company are properly classified and presented

 

 

Reserves are properly classified and presented

 

 

Movements in reserves are properly authorized

 

all odrs r equity related

 

 

Question No: 26      ( Marks: 1 ) - Please choose one                                                        

 

Following are the points considered during the verification of bank balances EXCEPT:

 

 

Obtain direct bank confirmation Obtain direct bank confirmation

 

 

Investigate about outstanding stale cheques

 

 

Investigate any significant reconciling items of an unusual nature in

 

 

Ensure that the creditors have been paid for their loan amount

 

 

 

creditors we will see in payables portion

Question No: 27      ( Marks: 1 ) - Please choose one                                                        

 

Judgmental sampling has the following advantages EXCEPT:

 

 

 

 

No special knowledge of statistics is required in this type

 

 

It tends to cause uniform standards among different audit firms

 

 

No time is spent on playing with mathematics

 

 

This approach has been well understood and refined by the experience over years

 

 

 

 

 

 

 

 

Question No: 28      ( Marks: 1 ) - Please choose one                                                        

 

In which one of the following methods of sampling, an auditor is concerned that client should not

be able to know or guess which items will be examined?

 

 

Block sampling

 

 

Representative sampling

 

 

Unpredictable sampling

 

 

Haphazard sampling

 

 

 

 

Question No: 29      ( Marks: 1 ) - Please choose one

 

Which one of the following is a common approach to increase the audit efficiency in sampling?

 

 

 

 

Selective testing

 

 

Stratification

 

 

Systematic selection

 

 

Random selection

 

 

 

 

Question No: 30      ( Marks: 1 ) - Please choose one                                                        

 

Which one of the following can be an advantage of using statistical sampling techniques?

 

 

It defines the values of tolerable error and risk of incorrect acceptance required for audit satisfaction

 

It has been established in the courts to be superior to judgmental sampling

 

 

It mathematically measures risk

 

 

It eliminates the need for judgmental decisions

 

 

 

 

Question No: 31      ( Marks: 1 ) - Please choose one                                                        

 

Following statements describes the functions of internal auditing EXCEPT:

 

 

 

 

It is a function that evaluates an organization s risk management, control and governance

processes

 

It is a wide ranging activity and includes functions that are advisory or task oriented

 

It is an activity which entails appraising the entity's strategies and expressing an opinion

on the financial statements

 

It is an activity that extends beyond the appraisal of efficiency and effectiveness

 

 

Question No: 32      ( Marks: 1 ) - Please choose one

 

An audit firm started planning annual audit process for a sports goods manufacturing company. The planning involves the following key points EXCEPT:

 

 

 

 

Establishing the overall audit strategy for the engagement

 

 

Developing an audit plan, in order to reduce audit risk to an acceptably low level

 

 

Surveillance of company operations and procedures

 

 

To benefit from the experience and insight of auditors and other key members of the engagement team

 

 

 

 

Question No: 33      ( Marks: 1 ) - Please choose one                                                        

 

 

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What is NOT required as part of the audit process?

 

 

 

 

Substantive procedures

 

 

Tests of control

 

 

Assessment of materiality

 

 

Procedures to obtain an understanding of the internal control structure

 

 

 

 

Question No: 34      ( Marks: 1 ) - Please choose one                                                        

 

Which one of the following mainly affects the auditor s opinion?

 

 

 

 

Agreement on accounting policies

 

 

Limitation on the scope of the auditor s work

 

 

Dispute among the members of the company

 

 

Future prospects of the company s growth

 

 

 

 

Question No: 35      ( Marks: 1 ) - Please choose one                                                        

 

Which one of the following matters does NOT affect Auditor s Opinion?

 

When there is a limitation on the scope of the auditor s work

When there is a disagreement with management regarding the accounting policies selected

When  there  is  a  disagreement  with  management  regarding  the  method  of  applying

accounting policies

 

matter


When an auditor modify the auditor s report by adding a paragraph to highlight a material

 

 

 

 

Question No: 36      ( Marks: 1 ) - Please choose one                                                        

 

Which one of the following statements is TRUE?

 

 

 

 

A very  small  sample  of  only  one  or  two  pieces  of  relevant,  competent,  and  timely

evidence lacks persuasiveness

 

 

A large sample of highly competent evidence is not persuasive unless it is relevant to the

audit objective

 

 

A large sample of evidence that is neither competent nor timely is not persuasive

 

 

All of the given options are true

 

 

if its so small thing u r checking u can check all transactions

 

Question No: 37      ( Marks: 1 ) - Please choose one                                                        

 

Analytical procedures are performed as a substantive test to achieve  which of the following objectives?

 

 

 

 

To determine the nature, timing, and extent of compliance procedures

 

 

To reduce detection risk

 

 

To determine the nature, timing, and extent of other audit procedures

 

 

To keep audit risk to an acceptably low level

 

 

 

 

Question No: 38      ( Marks: 1 ) - Please choose one                                                        

 

 

 

 

 

A written understanding between the auditor and the client concerning the auditor's responsibility

for the discovery of illegal acts is usually set forth in which of the following letters?

 

 

 

 

Client representation letter

 

 

Letter of audit inquiry

 

 

Management letter

 

 

Engagement letter

 

 

 

 

Question No: 39      ( Marks: 1 ) - Please choose one

 

Gains and losses during business operations of a company are determined in terms of increases and decreases in which one of the following sections of the Balance sheet?

 

 

 

 

Long term finances

 

 

Investments

 

 

Owners' equity

 

 

Long term liabilities

 

Question No: 40      ( Marks: 1 ) - Please choose one                                                        

 

All expenditures incurred through petty cash should be recorded in which one of the following?

 

 

 

 

Cheque

 

 

Register

 

 

Computer sheet

 

 

 

 

Voucher

 

 

 

 

Question No: 41      ( Marks: 1 ) - Please choose one                                                        

 

Which one of the following International Auditing Standards deals with the Audit Materiality?

 

 

 

 

ISA    300

 

 

ISA    315

 

 

ISA - 320

 

 

ISA    335

 

 

 

 

Question No: 42      ( Marks: 1 ) - Please choose one                                                        

 

Property, plant and equipment are stated at cost less accumulated depreciation. Which of the

following is the relevant assertion?

 

 

 

 

Rights and obligations

 

 

Valuation

 

 

Completeness

 

 

Existence or occurrence

 

 

 

 

Question No: 43      ( Marks: 3 )                                                                                         

 

According to your understanding, what control objectives must be defined for bringing fairness in the Cash System of an entity?

Ans: first of all only authorized vouchers should be paid for n daily cash should be counted

Matched with cash in books

 

 

 

 

 

 

 

 

 

 

Question No: 44      ( Marks: 3 )                                                                                         

 

What are the Control Accounts? How they should be monitored in order to bring fairness in the

inventory system of an entity?

 

 

 

 

Question No: 45      ( Marks: 3 )                                                                                         

 

Suppose you have been appointed as the auditor of a company and have started examining the entity  by taking initial interviews of the concerned personnel. During this course, one of the person from management has asked you the following information:

1.   What are the matters about which an auditor may disagree with the management?

2.   What should an auditor do if such disagreements are material?

Give your answers in brief

 

 

 

 

 

Question No: 46      ( Marks: 5 )                                                                                         

 

According to your knowledge, what tests of controls auditors usually perform for the evaluation

of Purchase Invoice of an entity?

 

 

 

 

 

 

 

Question No: 47      ( Marks: 5 )

 

What matters should the auditor consider for developing an overall audit plan for the expected scope and control of an audit?

 

 

 

 

 

Question No: 48      ( Marks: 10 )

 

A company has hired auditors at the year end. Auditors used audit sampling techniques which made  them enable to gather audit evidence efficiently. State the objectives auditors might have defined  first to achieve by using sampling techniques and also briefly explain further steps the auditors might undertake to complete the sampling process.

 

 

 

 

 

 

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Question No: 49      ( Marks: 10 )                                                                                       

 

An unlisted public limited company undergoing expansion intends to create an internal audit department. The Managing Director (MD) has asked your advice and comments on each of the matters listed below:

1.   The fundamental differences in the scope, approach, and responsibility between the internal and external auditor.

2.   Whether it would be advisable to assign the responsibility of development of systems and

procedures to the internal auditor?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Which of the following authorities shall fix the remuneration of the auditor, if auditors are appointed by the SCEP?(companies ordinance, 1984)

Directors

Shareholders

Company Registrar

SECP

 

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

 

Which of the following audit process determines that whether entity is following specific procedures, rules or regulations set down by some higher authority?

Technical audit

Financial statement audit

Compliance audit

Operational audit

 

Reliability of audit evidence is influenced by all of the following factors EXCEPT:

Source and the nature of the information

Timeliness

Objectivity

Quantity

 

Which statement cannot be highlighted as a merit of audit process?

It settles the dispute between management

It helps the auditor to give more constructive advice top management

Its help to restrict sole proprietor to by changing some fee

It gives strength to the company for acquiring the finance

 

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

 

 

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 concern with each of the given issues

 

During test of control procedure its design can easily tested with the help of:

ICQs and walk through tests    

ICQs and judgment sample

ICQs and random sample

ICQS and ICEC

Testing the Design:

Proper design of internal control is tested through ICQs and ICEC.  

 

Internal source 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 company is not 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 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 audit profession

The audit profession is regulated only by the government

 

 

 

Fall Semester 2008
Fundamentals of Auditing (ACC311)
Quiz # 01

  1. Which one of the following cannot be considered as the essential feature of Auditing?
    1. An auditor is involved in the examination of financial statements
    2. b.      The auditor is responsible for the preparation of the financial statements
      1. The end result of an audit is an opinion to assist the user of the financial statements.
  2. The auditor should be independent of the entity
    1. It is difficult to prepare financial reports that fairly present a company’s financial position without the expertise of an external auditor
    2. It is management’s responsibility to seek available independent aid in the appraisal of financial information shown in its financial reports
    3. c.       The opinion of an independent party is needed because a company may not be objective with respect to its own financial reports
  3. It is a customary courtesy that all shareholders of a company receive an
  1. Which one of the following best describes why an independent auditor is asked to express an opinion on the presentation of financial reports?

independent report on management’s stewardship of the affairs of the business

  1. The audit which is a review of any part of an entity’s operating procedures and methods

is known as which one of the following?

  1. Financial statement audits
  2. b.      Operational audits
  3. Technical Audits
  4. Compliance audits
  5. Financial report
  6. Financial statement
  7. Director’s report
  8. d.      Auditor's report
  1. Which one of the following is considered as the formal opinion, or disclaimer thereof, issued by an independent auditor as a result of audit or evaluation performed on a legal entity?

5. Which of the following statements is true?

  1. The auditing profession is unregulated
  2. b.      The auditing profession is regulated only by its own professional body
    1. Outside bodies sometimes become involved in the regulation of the audit profession
    2. The auditing profession is regulated only by the government

6. Which one 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?

  1. Valuation
  2. b.      Completeness
  3. Existence
  4. Rights and obligations

7. Internal control is primarily established within a company to do which of the following?

  1. a.       To prevent fraud in the company affairs
  2. To provide reasonable assurance that the company's objectives will be achieved
  3. To catch all errors that may occur in the company
  4. To aid in the effective auditing of the company

8. Fixation of remuneration of auditors can be determined by the following authorities EXCEPT: (Companies Ordinance, 1984)

  1. Directors
  2. b.      Company secretary
  3. Commission
  4. Members

9. A leather goods manufacturing company has started its operations in year 2001. After five years of conducting successful business, it has become a listed company recently. Now, the company is required to hire its first auditors, but neither the directors nor the members could appoint the auditors during the past 4 months since the incorporation of the company.

Select among the following authorities who can appoint the auditors in this situation? (Companies Ordinance, 1984)

  1. Company secretary
  2. b.      Company registrar
  3. Commission
  4. Institute of Chartered Accountants of Pakistan (ICAP)

10. A company has hired auditors who have performed the audit process in accordance with the auditing standards, but they fail to present its report. According to the Company law, 1984, the auditors shall be liable for which one of the following liabilities?

  1. Criminal liability
  2. Liability for misfeasance
  3. c.       Liability for negligence
  4. Accounting liability

 

JAZAKALLAH KHIRRR 

ALLAH BLESS YOU !!

plz koi to curent paper mein kya aya hai batao questions

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