161

(a) joint stock company

j\udit (b) government comp~y
(A) . (c) s~tutory corporation.'
(d) government departmcmts ✓
ditillS re~ers :d checking of ac~oun~. Ie)si
9. checking should not be ·applied to.
~u reparau~n of accounts of business a urchase Book. (b) Sales Book
1. (a) P1·nauon
(c) S!ock Book✓ (d) Cash Book·
~aJll .
~~its onlY·. f accounts by professional lO. Speci~ Audit is necessary for
II'"' inauon o .. . (a) manufacturing concern.
(C~~aJll tantS, / · · (b) processing con~ern.
3ccoUll . of vouchers. · (c) mefficient concern:
(d) chec~Ul~
. obJec
of auditing is (d) trading concern. (e) All of these✓
Mlllll . n of errors.
i. (a)detectto t whether P & L Ne and B/S 11. Cost of removal of business to a. more
faff:airs.
• convenient place is a
/\,) to t:nd
1..... OU d. fair state o
(a) capital expenditure.
\V uue an ✓
show ion of frauds. . (b) revenue expenditure.
(c) detect . and prevention of frauds and
(d) detecnon (c) deferred revenue expenditure.✓
(d) none of the above.
erro~:
Auditing
is luxury for a . 12. Expenses on experiments are
J. 'oint stock company. (a) revenue expenses.
(a)J artnership firm. · (b) capital expenses.
(b)P all shop-keeper.✓ (c) deferred revenue expenses.✓
(c) srn ..,.,,ent company•
(d) gove11u
0
• • •
(d) none·of the above. ·
Limitation of audit is . 1'3.,Interim audit refers-to·
t th t .1does not reveal complete picture. , (a) examination of accounts continuously.
~ ~ti it does not guarantee accuracy of (b) examination of actounts interrniltently.
accounts. . (c) audit work to find out and check interim
(c) that auditor' may be biased. . profits of a company. ✓·
(d)all of the above.~ (d) carrying on audit for bonus purposes 1at
1 Auditor, in general, is an the end of year. ·
· (a) employee of the company. 14. Final.audit implies
(b) agent of the company. (a) audit of accounts at the end of year. I
(c) agent of the shareholders. (b) finally checking of accounts to reveal •
(d) none of the above.✓ frauds. .· ·
6. Auditing is compulsory for (c) audit for submitting report im111ediately
(a) small-scale business enterprises. at the end of year.
(b) all partnership firms. (d) audit of banking companies.
. (c) all joint stock companies. ✓ 15. A continuous audit is ~pecially needed for
(d) all proprietary concerns. (a) any trading concern.
1. Propriety audit refers to ' (b) smaller concerns.
(a) verification of accounts. (c) banking companies;✓
(b) examination of.accounts of proprietary (d) any manufacturing concern.
concerns. 16. Alteration of a figures after audit is a
(c) enquiry against justification and limiUltion of
necessity of expenses✓ (a) final audit.
(d) audit of Government companies. (b) continuous audit. ·
8
· Propriety audit is normally undertaken in (c) interim audit.
case of (d) none of the above.✓
 Audit
l 7 • Joint audit implies
(a) audit of two concerns together. (a)lndependent✓
24. 1be audit of accounts
O
,
raeo.;;;;;, l
(b) au~it ofjoint stock companies. ✓ (b) Comprehensive. ~ ~d~
(c) Moral. · .,..\
( c) audit ofjoint sector companies.
(d) audit of two firms of C. A. ( d) All above.
18. Management audit means. 25. Primary objective of c .
(a) audit· undertaken on behalf of the (a) Impose moral chec~ing ¾dit.
0
management. (b) Submit report to shar n elllpJO},Ii~
(b) evaluating performance of various (c) Express an opinio: holders_ tea.
management processes and functions. ✓ statements.✓ of on ~ .
(c) audit undertaken on behalf of (d) All above. ~
Government publish management. 26. The audit shall be or .
(d) compulsory audit of company manner to cover. gan1Zed in
management. (a) Capital expenditure and
11
• ~1
19. Systems audit implies. (b) Revenue expenditure andC<:e1p1s_
(a) systematic examination of accounts. (c) All aspects. ✓ receipts
(b) audit undertaken to improve auditing (d) None of the above. ·
systems. 27. ':fhe audi! which is conducted
( c) enquirying accounting and control of financial year is called. after the~
systems. ✓ (a) Continuous audit.
(d) checking the performance of (b) Final Audit. ✓
management. (c) Preparation and examinar
20. Internal audit means accounts. 10
n of ~
(a) audit undertaken to ascertain truth and (d) None of the above.
fairness of state of affairs. 28. Auditor is responsible for
(b) audit undertaken internally to evaluate (a) Preparation of the accounts.
management functions. (b) Expression of an opinion. ✓
(c) audit undertaken _by employees of the (c) Preparation and examination of
organisation to check financial . accounts. ~
irregularities. ✓ (d) None of the above.
(d) audit by independent auditor to improve 29. Examine • •
of book~ of accounts is known ll.
internal affairs. ,, examination
21 . Internal audit is (a) Accounting. (b) Auditing. ✓
(a) compulsory for a cempany with paid-up (c) Investigation. (d) Book Keeping.
capital of Rs. 25 Lakh and above. 30. Continuous audit is compulsory for a
(b) voluntary for a company. ✓ (a) Private Limited company.
(c) not necessary for a company. (b) Public Limited Company (liste(d)
(d) necessary for a company. (c) Public Limited Company (unliste(d)
22. Institute of Chartered Accountants of (d) None of the above. ✓
Pakistan was established in. 31. The classes of audit are
(a) 1956. (b) 1949. (a) Final audit. (b) Continuous audit.
(c) 1956. (d) 1961. ✓ (c) Interim audit, (d) All of the above/
23. The audit is an examination of 32. The main objective of an audit is to
,,._ (a) Balance .
sheet.
, (b) Profit and lo~s account.
(a) Examine the books of accounts. ·ru
(b) Form an opinion on the financi
(c )Balance shfet and profit & loss statement. ✓
account ✓ . (c) Report to the shareholder.
( d) Non~ 'of the ~bove. (d) Investigate the books of accounts.

d
 •ng statements correctly 163
(b) Complete audit. ✓
t .1
I wlll'. s ~
fthe follo~~ipal purpose of the
11 o th pnn .
f an enterpnse Wit m
. h" • (c) Statutory audit
(d) None of the above.
!J.ocS',,: audit o . 40. A final audit is started
, e,<l~An? . te weaknesses of Internal (a) After the close of•the ac . .
~stp,• rnuruca
f <f"O co!Tl . . (b) Aft countmg year ✓
1 er the close of the book k :
(i)
15ystertl· gement in the preparation work eepmg
co")nl,Jo'Oa5s1.s· nterprt
,f"
t rnana.se's peno · d.1c fimanc1a· l
(c) Both.
(11 11e e (d) None of the above.
of ~ents- . nd express an opinion on
s181 fo exartl10_e ~s periodic financial (B)
(c) enterprise
theteJlleots.✓ . t management in the l . Internal check refers to
sta T assJs . , . (a) Checking of record by the cashier
d) · o of the enterpnse s accounting (b) _Checking of accounts by the i.nternal
(
I
' jllai ·ntenance auditor.
I fo,......r.ords,
w
hich one
of the following does the
d . h"
Uy report when con uctmg 1s
(c) .Checking of work of one person by
1 4 another automatically.✓
J ·311ditor fonnd~t in accordance with the (d) Management control internally over sub
l au 1 ?
I' Cannua Ompanies
. Ordinance, 1984 .. ordinates.
l The directors. . 2. The object of internal check is to
(a) gulator)' bodies. (a) Control wastages of resources.
(b) Re bareholders/members. ✓ (b) Prevent errors and frauds.✓
(c) The s
(c) Verify the·cash receipts and payments.
(d) The secretary·
. audit lies between : ( d) Facilitate qui<?k decision by the
i,.InteF~m 1audit & continuous audit.✓ management.
(a) ma d" & .
(b) Bel\\'.een statutory au 1t continuous 3. Effective Internal check system reduces.
audit. (a) The liability of auditor.
(c) Both. (b) Work of auditor.✓
(d) None of the above. (c) Both work as well as liability of auditor.
J6. Depth tests are also called: (d) Responsibilities of an auditor.
(a) Substantive test. . 4. Internal check is a part of
(b) Compliance test. (a) Internal audit.
(c) CradJ~ to glave test. ✓ (b) Internal accounting.
'(d) Nd'ne of the abov.e. · (c) External audit.
J7. Objectives of depth fest are (d) Internal control.✓
a To test the accruacy of the record of the 5. Internal check is carried on by
client's accounting system. (a) Special staff.
(b) To p~rform compliance test. (b) Internal auditor.
(c) Tq, provide evidence of a substantive (c) Accountant.
nature. · · (d) None of the above.✓
(d) All of the above. ✓ 6. Internal check is suitable for
JS. Audit starts where (a) Larger concerns.✓
(a) Accountancy's work ends. ✓ (b) Smaller concerns.
(b) Book:keeping ends. ( c) Petty shop-keepers.
(c) None of the above (d) None of the above.
(d) All of the above · 7. Internal check involves.
J9. Afinal d" . '
au it 1s also called (a) Reduction of work of cashier.
(a) Interim audit.
 Audit
(c) . The members of th
(b) Division of responsibilities of members
themselves. ✓ . e , starr I~ AI
of staff. ✓
(d) Supervisor of the staff ~ /
(c) Verification of inventory. ff z3
st 16. Internal check is essential ·fo
(d) Collusion among the members of a ·
(a) Petty traders. r f
8. Internal audit is undertaken.
(b) Cash transactions in' a 1
(a) By independent auditor.
(c) A concern using autorn:?e cone%. ,
(b) Statutorily appointed auditor.
(d) None of the above. lC eqlliprn " 1 z4
(c) By a person appointed by the
17. The risk that material erro Cri4._ t
management. ✓ . rs Illa ,
(d) By a Government auditor. the preparation of financial Yoecllr .
known as ; . statellJen~ ~ri
9. Internal auditor is appointed by the
(a) Management. ✓ (a) Audit risk. (b) Control . q
(b) Shareholders. (c) Inherent risk✓ (d) Detect· ns~. I
. , . ion nsk z5.
(c) Government. 18. The aud1tor s mam objectiv . , I
. · l · e 10 ll)oL
(d) None of the above. preI1mmary eva uat1on of internal eo""'ing 11
10. The scope of work of internal audit 1s · to : ntroJi •
·decided by the (a) Assess whether the man q
(a) Shareholders. , met its responsibility to
effective system.
::ern~t
abhsh ¾
bai
(b) Management. ✓
(c) Government. (b) Determine the degree of rel. .
(d) Law. will be placed on the internal co~:c; Whi~ 26.
11 . The scope of work of statutory audit for a (c) Identi~y those internal controls~;-✓.
company is decided by the he may wish to place reliance. Whicn
(a) Shareholders. (b) Management. (d) Identify ·any weakness in th
(c) Government. (d) Law. ✓ wh1c. h shouId be reported etosystemtne
12. The object of internal audit is management.
(a) To prevent errors an4 fraud. 19. The nature, timing and extent of subst ..
. fl . an111e
(b) To detect errors and frauds. procedures a~e m uenced by the levelof: I z7.
(c) To improve financial control. (a) Inherent nsk.
(d) All of the above. ✓ (b) Control risk.
13. Internal auditor can be removed by the (c) Both((a)&((b). ✓
(a) Government. (d) None of above.
(b) Shareholders. 20. Internal control system includes.
(c) Management. ✓ (a) Financial controls.
(d) None of the above .. (b) Administrative controls.
14. Control and management of audit (c) Both. ✓ 28.
profession is in the hands of ,(d) None of the above.
(a) Government. 21. The auditor of public ·company will be
(b) Regulatory bodies.
(c) Institute of Chartered Accountants of
Pakistan. ✓
(a) Cost and management accountant.
(b) Chartered Accountant. ✓
(c) Any individual.
I
(d) Institute of Cost and Management {d) All of the above. I I.
Accountants of Pakistan. 22. To become an internal auditor person ml!ll t
15. Internal check is carried on by
(a) Staff specially appointed for the
purpose.
be
(a) A Chartered Accountant.
I
(b) A cost and management accountant
(b) Internal auditor. (c) M-Com. ·
(d) No qualification is required.I
 0; 0;s7'ib;il;etto;;;re~~;o;rtt..-·- - ~ 7 (dct:)~E~ ::::-·~----1~6i5
· x~am;;i;n~in~g~th~e:V:;:·;:.
oditor is resp 2 . Payment for danous assets.
,,, --:.iJ 1oers- vouched with Jooh l purchased should be
. ,.,~:re110 ( )C . e e p of
.: y151l"'ditofS· ✓ a red1tor's· Statement
· t' ere (llent, (b) Correspond · ..
tbl .,srta~). eviewing the internal (c) Cash M ence with the suppliers
, (') fV') $, '-., JUlique r emos. ✓ '
dl(Ii dit tee . known as (d) Ledger Accounts.
( A'J terJl 15 · 3· Payment for wag h
•J. _.\0 tr0l sYs tioll• the help of es s ou1d be vouched with
. ,ooyeri6cB ·ve test.
(S) 5ubst9?u ce test.✓ (a) Piece Work Statement
(b) JllPJlail k (b) Wages Sheets. ✓ .
(C)co sical checl ·which an enterprise _can " (c) Minute Book.
0
(d)~bY te contr •s referred to as the (d) Bank Pass Book.
si111P ploY 1 h .c: 11 · 4
,1.A fullY elll ' To which oft e io owmg . Commission paid should be vouched with
.. ~ st 5ysteJJ1 · . this control applicable? the help of .
..(llpre areas is ·1· •
1 unting
1and reconc1 1at1on. (a) Salary Book ·
~ wagescontrO trol and reimbursement. ✓ (b) W~es Sheets.
(s) cash con .( )C
~) pettY control. c reditors' Statement.
(c) oebttcontr0l. . d (d) Commission Book and -related
(d) StOC . t sts are des1gne to obtain agreements. ✓
•~_substantl: toe . 5. The most reliable voucher is one which
, e,•idence effctiveness of the design of the originates
(a) 'fhe. d internal control system. (a) In the concern.
aecounung aD: ess accuracy and validity of (b) Outside the concern.
completen , . ( )
M d by accounting system. c Outside the concern and sent directly to
dal! produce the ,auditor.✓
(c) ; of the.above.
Both ✓
(d) In the concern -and sent directly to the
(d) No~ control are performed to obtain auditor.
O
,1. rest
1
vidence as to . 6. Sale·s proceeds from machine should be
e The effectiveness of the design of the vo~ched with the help of ·
(a) t'ng and -internal ~ontrol system. ✓ (a) Cash Books.
accoun •
~) Completeness accura~y and va1·d· 1 1ty o f (b) Sale Contract. ✓
data produced by accountmg system. ( c) Brokers's Statement.
(c)Both. (d) None of the above.
(d) None of the above. 7. Payment for building purchased should be
it Another name oftest of control is vouched with the help of
(a) Compliance test. (a) Title Deed. ✓
~) Substantive test.✓ (b) Correspondence with the brokers.
(~ Walk through test. (c) Building Account.
(d) None of the above. (d) Cash Book.

(C) 8. Partner's drawings should be vouched with

the help of
I. Vouching implies (a) Stock Book.
(a) Inspection of receipts. . (b) Cash Book.
(b) Examination of vouchers to check (c) Memorandum Drawings Book. ✓
authenticity of records ✓ ( d) Agreement Deed.
(c) Surprise checking of accounting 9 . Investment should be vouched with the help
records. of
 Audit
(a) Commission Book. 3. Which of the folio .
(b) Broker's B~ok. ✓ corre~t? Wing slat
(c)-SaJes Deeds. (a) Valuation is a pan of . eni~~
(d) Minute Book: (b) Verification is a Pan v;r16, 1
l 0. Receipts from debtors should· be vouched (c) Valuation has nothin;tova1llati0rt~
with.the help of (d) Auditor is a valuer. do With v .
(a) Counterfoil Receipts and Cash Book. ✓ 4. Stock should be v·aluect '
(a) Cost. . at ~
(b) Supplier's Statement.
(c) Sales Deeds. (b) Market Price.
(d) General Ledger. (c)Cost or Market p .
lower. ✓ nee •Which
11. Dividend received should be vouched with
the help of (d) Cost less depreciation ever 1
(a) Debtors Statement. 5. Valuation means . ·
(b) General Ledger. (a) Calculating value ofas
. sets ✓
(c) Dividends Book. (b) Checkmg the value of ·
( d) Counterfoils of dividend warrants, ✓ (c) Checking the physi:~ets. .
12. Receipts from sale of investment should be assets. ex1ste11ce
vouched with the help of (d) Examining the authentic't t
(a) Broker's Budget Notes. 6. "Auditor is not a valuer" w~ Yof asse~.
(b) Broker's Sold Notes. ✓ (a) Kingston Cotton Mills C Slated in
(c) Minute Book. (b) London and General B""~e. ✓
...I.JI. case
(d) Inventory of investment. (c) L es V. Ne~chatel Co. Ltd. Case·
13. Purchase Returns should be vouched with (d) London 011 Storage Co. Cas ·
the help of 7. Fixed assets are valued at e.
(a) Bought Notes. (a) Cost.
(b) Credit Notes . ✓ (b) Market Price.
( C) Goods Inwards Book. ( c) Cost or market price whichever is
1
(d) Cash Book. (d) Cost less depreciation. ✓ ~
14. Payment for bills should be vouched with 8. Plantation products are valued at.
the help of (a) Cost.
(a).Debtor's Statement. (b) Market Price.
b Creditor's Statement. (c) Cost or market price.whichever is lower
( c) Bills Returned. ✓ (d) Net amount subsequently realised.✓
(d) Bills with the suppliers. 9. Incomplete contracts should be valued o;
the basis of
(D) (a) Net profit of the period.
I. Verification refers to (b) Two-third of~et profit of the period.
(a) Examination ofjournal and ledger. (c) Two-third of estimated profit of tt.
(b) Examination of vouchers i:elated to assets. period. ✓
(c) Examining the · physical existence and (d) None of the above. .
valuation of assets. ✓ 1o.' Motor Cars should be valued on the ba$iS1
(d) Calculation of value of assets. (a) Cost.
2. Object of verification is (b) Market Price.
(a) Physical verification ofassets. (c) Cost or Market p~ce whichever
(b) Checking value ofas.5ets. lower.
(C) Examining the authority of their acquisition. (d) Depreciated value. ✓
' {d) _Alloftheabove. ✓
11 . Floating assets are valued at
(a) Cost.
 1
f ,. :,)~tof"1,etorprice.
.1· rnarket price . Whichever is
., t' ·ost . (d) Ori i
ti-)l,i~r.I 1css depreciat1on.
. 20. t 0 g ~al Cost 1
I 1 ,11(OSI •
h lans &iven shP Us tna\ntcn,._ l67
1
Ji' k shoUId be valued Woth the help of .
e P of . oUlct be -"'l,ce Cost
I I·_-estoC counting. (a) Staten,• '<rifled "'i~ die
1;.1·\ctlllll (b) Scheou1:to~f Loans. .
1
13) cost. value. (c) Inspection o?ok debts.~
j (b)Markel f livestock.✓ 2 (d) Cenificate fr agreements.
I (cl schedule!~ be valued at I. Book Debts sh om the bank
(d) i,er shoU of ould be Verjfi . .
fi(II
11· ·s) cost.
1 Price. (b) BaiO
(a) All) nee Sheet, ed w;th the hetp
(
:,1 c~.:~
11 ~,rket market price whichever is lower.
cost plus maintenance cost..r
(d)ongi uld be valued at
1Vinc sho
ount received [
c) Deb'.or's Schedule Jrn Debtors.
22 (d) Certificate fr ·
•To Verify G0o~~~• lllanagern,n1.
11. cost. ✓
(a) Above Cost. check.
(a) Sales Deed • the •Uditor shoutd
(b) ket Value. •
(b) P11rcha5e Allreernent
(c) Balance Sheet.✓ .
(c)Mar t or market
(d) Cos
1
value whichever is (d) Certificate from th
•Goods
" '· on consignment should be valued at 23. Investments in h e lllanagernen1
il, ) Cost. nd
the help of a should be verifie<1 With
(a Market Price.
(a) Schedule oflnvestrnent ✓
cost.✓
~) C t or market price whichever is lower. (b) Balance Sheet. s.
0
I<) "ginal cost plus maintenance (c) Inspection of Securities
(d) dns sold on the basis of "Sales or return"
lo.Goo (d) Certificate fro 111 the ba~k
should. . ✓
24. IIISJlection of securities .for ven in
(a) Be included m ~e stock. investment was emphasied in fy g
(b) Not be incli!_ged in.the ~tock. (a) London and Generai Bank case
(c) Not be chec~ed by auditor.
(d) None of t~e ~b~ve. (blCity Equitable Insurance Co. Ltd.
(c) Arnutage V. Brew., and Knott.
case.✓
/1.Contingent hab1hty for (d) Farrows Bank Ltd. .
shoijld be verified by' bills discounted th b regard hto issued' ofhshare warrants to
25. With
(al Balance sheet.
(b) Note by managment. e earers, t e au ttor s ouJd see that it is:
{a) Permitte<I by Memorandum of
Association.✓
(c) Bills receivables book. ✓
(di None -of the above. (b) Sanctioned by the Central Government.
Ii.Outstanding expenses (c) Pennitttd by the Board of Directors
with the help of (d) None of the above.
(a) Cash Book. should be verified 26. For the forfeiture of shares, the auditor
(b) Balance Sheet. should check that it is pennitted.
(c) None of the above. (a) By Memorandum of Association.
9
1
(d) Journal Proper. ✓ (b) By Articles of Association.✓
lOOse
·{a t0o1s should be valued at (c) Under Companies Ordinance 1984.
JCost,
(d) None of the above. . .
st 2
(hJ Co Jess depreciation. 7. If balance confinned by the debtor 1s m
(c) Market Price agreement with the book balance. it
provides the audit evidence as to:
(a) Collectibility of balance.
 Audit
( b) Existence and accuracy of recorded (b) A firm ofC. A
balance. ✓ ( c) A body corporate ..,
(c) Absence of unrecorded balance. (d) None of the abov·
(d) None of the above. • 5. The first auditor 0;·
2 8. The primary reason an auditor requests that office. cornPlllly
letters of inquiry be sent to a client's lawyer (a) F~r a period of one e "-ill ~-
is to provide the auditor with: (b) Till holding of stat y ar. ' ,
(a) A description and evaluation of (c) Till the conclus~tory Illeeti
litigation, claims, and assessments that gene~al meeting~ ✓ Ion of fi~~-
existed at the date of the ·balance sheet. ( d) Till a new auditor is a . ~~
(b) An expert opinion as to whether a loss is 6. Normally, a company P~ 1ntect 0 '
possible probable, or remote. by the auditor is ~
( c) The opportunity to examine the (a) Central Government P!io~
documentation concerning litigation, claims (b) Shareholders . ✓ ,. · ·
and assessments. ( c) Board of Directors.
(d) Corroboration of the information ( d) C_o ~ora~e Law Authority
furnished by management concerning 7. An auditor ma casual va . ·
litigation, claims and assessments. ✓ by the cancy is apPoi~
34. Another name of teeming & lading is. (a) Board of Directors. ✓ ·
(a) Substantive test. (b) Shareholders.
(b) Compliance test. ( c) Central Government.
(c) Lapping. (d) Corpor~te Law Authority.
( d) All of the above. ✓ 8. If an auditor, not appom · td
I . .
genera meetmg, 1s appointed b
e at
annUii
(E) -. '(a) The Central Government. Ytbe
1. First auditor of a company is appointed by ; (b) Board of Directors. .
the (c) Shareholders.
(a) Shareholder. (d) Corporate Law Authority. ✓
(b) Central Government. 9. A vacancy caused ·by resignaf
(c) Corporate Law Authority. auditor is filled only. ion of~
(d) Board of Directors. ✓ (a) By Board of Directors. ✓
2. Which of the following persons is qualified · (b) At the general meeting of shareholdell.
to be a company auditor? (c) By the Central Government.
(a) Chartered Accountant. ✓ (d) By the Corporate Law Authority.
(b) An employee of the company. 10. A Spechll Auditor is appointed bythe
(c) A body corporate. (a) Shareliolders.
( d) A person who is. indebted to the (b) Board of D irectors.
company for Rs.800. I ( c) Central Government. ✓
3. Which of the following persons 1s not (d) None of the above.
qualified to be a company auditor? 11. A company auditor can be removed befoo
(a) A body corproate. · · expiry of his term by
(b) An employee of the company.I (a) Shareholders. ✓
( c) A person who is indebted to the (b) Board of Directors.
company for an amount exceeding Rs. I 00. (c) Central Government.
( d) AJI of the above. ✓ ( d) State Government. hall ~
5
4 . The following cannot be appointed as an 12. The first auditors of a company
auditor of the company. appointed.
(a) A chartered accountant .
 ::;✓;----
i,ctY day~s~o~f~thhe;-dd;at;e~orlf:----~(b~)~C?e;n;tra~lGG~o;v;;er;n;m:e:n:-t _ __!1~ 6~9
S (c) Corporate Law Auth. .
~ 1tbil'I ✓ f commencement of (d) Board.of . onty.
_1 \riitiO~~t'/ days O In 0 irectors.
i·' ..i(P'' ·11 51,, .
4 . temal auditor has t . ..
? \viil'I ual general meetmg. (a) Shareholders o submit report to
\rl .,,,sS· ~...ct aJ1ll (b) G .
j l" ·11g 1••"' bove. d't f ovemment
t' 01111 ftbe a . trnent as au l or o a (e) Corporate L~w Authority
ti' ~olle ofor apPotn tiring auditor shall be (d) None of the above ✓ .
lJl 1ice tbaJl a re S A
~ ~o otber . . uditor should be dutiful like a
f:ofl before the retirement of (a) A watch dog. ✓
~i,•ell 1east 1~ days (b) A blood hound.
'ti) f.l alld1tor. 14 days before the (c) A detective.
·0us than
f.'\1ot 1ess d of Directors. (d) An insurer.
[b~tiflgof:; 14 days before the AGM.✓ 6. An audit report is addressed to
:)~otles\the above. (a) Ch~rman of the Board of Directors.
\ tJofle o ointed by (b) Chief Executive of the Company
lJ)d·tor is aPP · e of the company· (c) Board of Directors. ·
~\I I ciecutlV
J.. chief1:, ger of the company. (d) Members. ✓
l8) •na,nce ~ana 7 Th d t fth
l~)ft individual. ✓ . e a e o e auditor's report should be
(C) AnY fthe above. (a) The date immediately after completion
of examination.✓
0
[d) t.Jone_ r is appointed t>y
0

c:
·i first a~d1~ ecutive of the company.
:-· (3)C~ef Manager of the company.
tbl f1nanholders of the company.
(b) After approval of financial statements
by the Board of Directors.
(c) After approval of accounts by the
(C) Shal'e of the above.✓ . shareholders.
(d)'NO~e be appointed as an auditor of (d) None of the above.
ollow 1ng can 8 If d ·
\Q. F blic company. · etectton risk cannot be reduced to an
apuo·rector of the company. acceptable level, auditor should
~) B~Y corporate. ✓ (a) Quality or disclaim his opinion. ✓
(c) Chartered Accountant. (b) Withdraw from the engagement.
(d)((a) and ((b). (c) Do either ((a) or ((b).
(d) None of the above.
(F) 9. Auditor's report is signed by
\. Remuneration of a company auditor is fixed (a) One Director.
by the (b) Two Directors.
(a) Shareholders. (c) Directors and ChiefExecutive. ✓
[b) Board of Directors. ( d) None of the above.
(c) Central Government. 10. Where the auditor qualifies his audit report
(d) Appointing Authority. ✓ on the grounds of uncertainty as to the
!. A company auditor, m general, has to appropriateness of the going concern
submit his report to assumption he should, as far as possible,
(a) Shareholders. ✓ identify the nature of the adjustments that
(b) Central Government. be
may have to made to the financial
(c) Corporate Law Authority. statements. Which of the following is
(d) Bo~rd of.J?irectors. unlikely to be a consideration arising in. the
1
•· Aspecial auditor has to submit his report to context of financial statements Jedrafted on_
lhe a break up basis?
(a) Shareholders. (a) Recoverability of assets.
 Audit
(b) Reclassification of liabilities. (d) ~dentification of the ti
(c) Possibility of additional assets. ✓ audited. nancia\ \)
gt~ \
(d) Possibility of additional liabilities.
1 I . T_he auditor of Shabbir Limited completed (G) ~~
his audit work, including his review of post 1. When annual general .
balance sheet events, in respect of the company is held meeting of
financial statements for the year ended 30 (a) The auditor is entitled · a Ii~
Septernber 19X0 on I February 19XI. The (b) The auditor must attto attend.
directors approved the financial statements person. end the -4.(j
on 7 February I 9X J and the audit report (c) The auditor or so ~~
was signed and dated the same day. Which authorised by him 1·n w~~ 0 ther
the AG~. ✓
' nt1ng, lllUst-~·~
lltt._
of the following is the most preferable date
for the directors to sign the letter of 2. During the course of audit ~
. representation requested by the auditor? that fictitious sales have b ' an auditor f,
(a) I February l 9X I . fl fi
m ate pro its. Whether he h
een und~ti\1~
(b) 6 February I 9Xl. (a) Ignore it. s ou\d. ~
(c) 7 February 19Xl. ✓ (b) Allow it.
(d) February 19Xl. (c) Qualify his report for it.✓
12. Which of the following terms represents the (d)None of the above.
fonn of qualification arising from limitation 3. During the course of a com
of scope which the auditor considers to be auditor finds that its machi::y audi~
of fundamental importance? shown at Rs. 40,000 aft ry has t
(a) Disclaimer of opinion. ✓ d · · er char
epreRciat1on, though its market va\;
(b) Unqualified opinion. on1Y s. 2?,000. Whether he should
(c) 'Except for' opinion. (a) Ignore 1t. ·
(d) 'Subject to 1 opinion. (b) Allow it. ✓
13. Which of the following is explicitly stated (c) Not.allow it.
in, rather than implied by, an unqualified (d) Qualify his report.
audit report on the accounts of a limited 4. During a company audit, the mana
company? argues with the auditor, that machil'
(a) Working papers are maintained on been very well maintained and is as
which an opinion is based. new. Hence there is no need for ,
(b) infonnation given in the directors' report depreciation on it. Whether the
is consistent with the financial statements. should.
(c) The financial statements have been (a) Accept it. (b) Ignore it.
properly prepared in accordance with the (c) Reject it. ✓ (d) None of the
Companies Ordinance 1984. ✓ · 5. If there is a capital loss, the auditc
(d) Proper and in-time returns have been (a) Not allow payment of dividend1
received from the branches. (b) Allow payment of dividends.✓
14. Which of the following is not a necessary (c) Allow payment of divid
component of the audit report for a limited making such losses good.
.company? (d) None of the above .
· (a) The identify of the auditor. 6. A bank can declare dividends.
(b) A statement specifying that the auditor (a) Without making capital losses
has complied with International Stand<irds (b) After making capital losses g
on Auditing. ✓ (c) None of the above.
(c ) Terms of engagement. 7. A company auditor should
dividend should be paid.
 171
(c) Allow it with Certain cond·r ✓
--:_.-ilitlS deprec:~;~n. (d) None of the above. I ions.
j1:Jlrr ~ • o deP 15. There u,-a large a . · .
. .,t-• C\JtC~lfleo . d' .d d ccumu1at10n of lU\Claimed
.i1 'iitliO CIJPital· iv1. e? . and the company dire.ctors wan1 to
111 of f •"'•e ,.b(Jve. ·r . . a..t revenue losses pay d1v1dend out of it. As a d'1to·
1· i,i1 ii• .. (bat l p--·
i.l ~#o old~ should. u r, you
1 (J)_Hor st'° profits. ent of dividends. (a) Allow it. .
1
' . ,,~ c~~ced for paYilld for payment of (b) Not aYow it.
1 ~ \i,1- t,e lJ-""' be use
ot (c) Allow it after it becomes time-barred.✓
I r-lsl~). t,iaY
i
1
~1lY

ettd5/
11
• "d ds
ent of d1v1 en . ( d) N8ne of the above. ·
1 0,~~-dt)Ooe pa)'}ll ve. 16. ln - ~he general meeting of company.
·) f(P'• of the ab<> rporation of company. shareholders want dividend @ 1Oo/o
l• NOoe inCO
lJ) i prior t~ dividends. whereas directors recommended @ 1½ % .
pt\l~~" ~ paid a~d as dividends.✓
1 Cj)J• · pat
t''
.~)
cannot be d for revenue expenses.
'""use
As an auditor.would you.
(~) Allow l 0%. - ·
1
'"311 ""' above. . (b) Not allow 10%_-
1c) l, oe of the tated due to revenue
t.Jo are overs
ld) ~ts
. l . ·11
· pf011
h
• g C af
ged to capita , 1t w1 (c) Allow only
2'
7 %. ✓
:t' tt 5es t,ein f dividend. (d) None of the above.
e~pen payment o
unt to . l✓ 17. · A company has· resorted to heavy sale of
jl!1IO fcap1ta. .
(9) out ~f capital profits. stock w\th a view· to pay divi4ends to
(b) out f venue profits. shareholders. As an auditor, your should.
0 to re
tc) u e of the above. . (a) Justify it. ✓ (b) Not justify it.
td)Non f the fol lowing statements 1s (c) Ignore it. (d) Report it.
Which O ·
18. A company has earned profits and declared
11
' ?
carrec~- .d d can be paid out o
f sale
01v1 en dividends, but does not want to pay
(o ) d of fixed assets. dividend due to shortage of cash. As auditor
procee_~ dend can never be paid .out of you should suggest, if asked, that.
(b) D1y1 .
·ta\ ✓ • . (a) Dividend should be paid.
capt ·. 'd nd cannot be paid out _of . (b)-Dividend need be paid.
ic) D1v1 e
·cumulated reserves. . . h . (c) Dividend must be paid within 42 days of
a~ . "d nd can be paid without C· argmg declaration of dividends.
(d) D1v1 e . .
depreciation. ·. , . · (d) Dividendmust be paid within 45 days. ✓
\~.ln his report. the auditor gives his. 19. You find that company has given loan to its
(a) Judgment. shareholders fQr purchasing of its shares.
\b) Opinion·. ✓ Would you, as ~uditor.
(cl Guarantee to correctness of accounts. _ (a) Allow it. (b) Not allow it. ✓
(d) True state of affairs, (c) Ignore it. · ld) None of ~he above.
il In his report. the company auditor states. . 20. Auditor finds that there is a change in the
!al Correct state of affairs. · · method of valuation of stock~ whether he
I
(bl True state of affairs. should.
(c) True and fair state of affairs. ✓ (a) Allow it.
\di Fair state of affairs. (b) Disallow it. . ,
It The company has earned profits ·on sale of (c) Allow it with a note to this effect. ✓
its machinery and wants to pay dividend.out (d) Ignore it.
of it. As auditor, you should. '_ 21. In the annual general meeti~g of a
(a) Allo\.\ it. company. the auditor is qu\!st1oi:1ed as
\b) Not allow it.
JIii .~~~------:~:-;:~~;;~~;--zs.
\udit · .
.
aJance sheet when
28 w·thI · regard to Idissueti of share. Cerrr 1
· the auditor shou re.er to section.
,:11' 1 <
ieiitti
why he has signed th~ b th value shown (a) 110. (b) 113.✓ ..
assets would not realise ~ , arguments (c) I 14. (d~ 74:
in it. Which of !he foll~~ing Increase in share capital 1s pennitt
29
given by audito1 15 corre~~ nothing to do · (a) Memorandum of ~s:c,ociation. ed by_
, a) Market value of assets (b) Articles of Association. ✓
"'ith assets. ts cannot t,e (c) Court. . .
(o) Market value of asse O d
(d) Companies r mance 1984.
ascertained. · · . · as a going . JO. For sub-divisio_ n of shares ·,n
(c) Assets arc shown treaung I1 s
concern. ✓ amount. the auditor should refer to llla!Je,
(d)Noneott_ea · h bo ve. · haspaid (a) Court's sanct.ion.
M ✓
,, ·,·11,, auditor tmds that a company Id . (b) Director's, mule Book.
~ he
--· interest · th
out of capital. Whe er . . ✓ shou · · (c) Share ho Id crs 's M.mute Book.
(a) Allow it. (b) Not allow it. , (d) Companies Ordinanq: I 984.
, c > lgn~re it. (d) None of the above. 31 . Share capital can be increased by.
.'.?3. n1c auditor did not c~-to check adequacy (a) Increasing face value of shares.
. . . t· b. d d Doubtful Debts.
ol Prov1s1on · or a an (b) Jssumg. sh ares at premmm.
.
Whether he can be h,eld. (c) Issue of fresh shares. ✓
(a) Li~ble for it. ✓ (d) None of the above.
(b) Not l.iabl~ for it. 32. For reduction in share capital, the au .
(c) Liabl.e criminally for it. should see that d1tor
~(d)No'ne.oftheabove. - · d
~4. ·1 he -auditor resortep to test chec k.mg a nd . (a) ·lt - is · perm1tte by Memorandu"' . "l
- r~sult. he could not disclose ccrtam
· Association. 01
. with thi:
' Whether he·
fr..iuus. ~an b.e heId·· (b) It is permitted b.,v Art,·cl"'" s of
(aJ.Liable for it. ✓ · Association. '
(h) Not.liabre for it. (~) . There. is prior sanction of Feder
(~) qabJe criminally for it. Government. _ al
(d)-None of the ahove. . '(d) There.is prior sanction by the court.✓
~5. During the course of an audit. an· auditor 33. Divisible profits should not include
finds that no vouchers are
available for . . (a) Interest ~n capital. .
certain payments. Whether he should (b) Capital. .
(a) Sc:ck proper explanation for it. , (c) Depreciation. ✓
(h) Demand votich~rs for it. ✓ ( d) None of the above.
··cc> Ignore it. 34. Dividends cannot be paid out of
(d) Acct:pt certificate for it. (a) Capital profits. ✓
26. Premium ·n;ceived on issue of shares, later (b) Capital receipts.
fortcih:d. should be .transferred to _..., (c) Revenue receipts.
(al Capital Reserve. (d) None of the above.
- (h J Shares Forfettcd Account.
(cJ Capital Account. 35 · Issue of payment of dividend t1ut of capital
- · was raised in ·
tJJNoneoftheabove. ✓ .
?7 Profits on rei~~ue of forfeited' shares should (a) Fisher V· Bla~k \\'bite Publishing Co.
nl' transferred to (h) Luhhuck · V. The British Bank of S.
(a) Shares Forfeited Account. ✓ Ameri~a. ✓
(h) Capital ~eservc Account. (c) Mckesson & Rohbins case.
le) ~r~fit,a~d_4oss Account. · (d) London & General Bank case.
(J)'Pn>(it an,d Loss Appropriation Account. 36. Capital profits. .
. (~l) Can be paid h) ''-UV of dividends. ,
~
11,Ji
1
., noot
tia t,e pa1
.d way of dividends.
be ~;1by way ·o f dividend under 44. A company can . 173
Id can onditions. ✓ Preference Shares if t~su~ Redeemable
I aill c .the above. . . . (a) Mernorandu , aut onsed by
l'.,~..,0ne of d'vidend out of capital profit (b) Articles of Arn of ~s_sociation.
d)l' of 1
~
( ,111eots ount to (c) Corn . ssoc1atton. ✓
;1-P}5 not am of dividendout of capital. (d) N Pan1es Ordinance 1984
one of the above .
~paynient f dividend out of profits.✓ 45. Auditor should see th .
( paymen
t
(:) psyrnent of dividend out of capital Premium on I
shoWn in
at amount received for
ssue of Shares should be
1c) . s
reee1pt . Of the above. (a) Subscribed Capital
(d) None
. Ipro fits
t
imply profits earned
•
(b) Capital Reserve Fu.nd
. capita h business transactions.
..S· ThfOUS (c) Sh?1'e Premium Acco~nt. ✓
(a) capital. (d) Paid-up Capital Account
(b) frorn sale of fixed assets. ✓ 46 Sh p · ·
. in :e Brel m1um Account should be shown
(d Frotll le of current assets. e a ance Sheet under
from sa f h (a) Paid-up-Capital. ,
(dl . 1ecking allot~1ent o s ares. the
;9. \Vh~le chiould see that it is made within (b) Subscribed Capital.
· d1tor s . f
au 100 days of issue o prospectus. (c) Reserves and Surplus.✓
(al 120 days of issue of prospectus. (d) Reserved Capital.
47
(b) 50 days of i_ssue of prospectus. · ~mount of share premium may be utilised
(C) I b ✓ for
None of the a ove.
(a) Payment of di\'idend.
JO. (d)h'I
\VI e checking allotments auditor should
see that amount. . (b) Writing off of preliminary expenses.✓
(a) Equal _to estimated fixed capital is (c) Routine cxpen!ies.
rccdved.✓ . . . (d) Purchase of tixed assets.
(b) Equal to estimated workmg capital 1s 48. Shares can be issued at discount under
.section.
received.
(a) 76. (b)75 . ✓
(C} Necessary for purchase of land and
(c) 79. (d) 84.
building has been received.
(d) None of the above. 49. The contents of statutory report are
11. Auditor should see that the return of
governed by:
allotment has been sent to Registrar within. (a) Sec. 157.✓ (b) Sec. 160
(a) I month. ✓ (b) 2 months. (c) Sec. 165. (d) Sec. 175
i,) 3months. (d) 40 days. 50. When auditor is not appointed within 120
1: Application money should not be with days of incorporation of the company then·
drJv.n unless. he will be appointed by.
ia) Allotment is made (a) Directors.
ihl la~h Boo~ has hccn prepared. ·
(b) Shareholders.
t,)( ertitkak to rnm111ei1ce b1,1siness
(c) Corporate Law authority. ✓
11htaincd.✓ (d) None of thl' Jbove. '
51. Legal prQviskm as to distribution of
1, l~l Ctniticate of incorporation obtained. di\'.idend an: contained in.
'· ~hares issued for consideration other c'ash
shoul_d he vouched with tht: help of (a) Sec. 248 to 251 .✓
fal Director's Minute Book. (b) Sec. 260 to 265.
th (c) Sec. 270 to 272.
l Shareholder;s Minuk Book.
kit' . · (d) All of the abo\c.
ontract wnh the Part\ concerned. ✓
(di Cash l3ouk •'
 (d) areach of COnt~I. . 11, . ,
If a company auditor gives fa)
Audi1 . with the ,reaunent 5· intentionally, he can be held fo~ cvh1~
52. Following ~-uon deals valuation of fixea
of surplus ansmg out of re (a) Negligence.
(b) Misfeasance. ✓
.1ssi:ts.
(b) 235 ✓
sec. · (c) Breach of c_on~~ct.
. (a) Sec. 231. ftheabove.
(,: ) S1.-c. 240. . (d) None o will be (d) criminal L1ab!hty.
53. Thi: auditor of pri vate companY If a company auditor has misapplied
(a) Chartered Accountant. t
6 · of a company, he may be held liabJ mo%
(h) Cost & Management Accountan .
. efor Y
(a) NegI1gence,
t c J Master of Comm~rce. . ✓ b. Misfeasanc~. . .
(dl No qualification ,s menuoned- blic (c) criminal Lrnb1hty.
th
SJ ,;cope of audit of other an pu (d) Contractual liability. ✓
company will be defined by. If an auditor is found guilty offal81.ti
(a) Statute. 7· of company book s, he w1·1l incur.
· icat·ion
(b) By management. d
(c) By agreement between client an (a) crimi~al !i~bility,✓
(b) Civil hab1hty. ·
auditor✓
(c) Contractual liabilitr.
(d) All of the above. . 1.f rt (d) None of the above.
55. Company can issue shares at discount
is pcnnitted by. S. Civil liability of an auditor implies liab·i·
(.rl Memorandum of Associ;,,,on.
for I 1ty
lhJ Articles of Association. ✓ (a) Misappropriation of Cash.
( c) Prospectus. (b) Misappropriation of goods.
(d) Statement in liew of prospectus. (c) Fraud.
(d) Misfeasance. ✓
9. In which of the following cases •
(H) decided that "it 'is not the dut~ It0 tas ·
I. Auditor is liable for auditor to take stock"? an
(a) Not verifying petty cash. (a) London and General Bank case.
(h) Not detennining stock.
(b) ~ndon Oil Storage Company case.
(c) Not checking accounts properly.
(c) Kingston Cotton Mill case. ✓
(d) All of the above. ✓
(d) None of the above. .
., An auditor is held criminally liable for
10. An
. auditor, working in honorary
. capac,ty
•
(a) Loss to his client.
IB '
(h) ~cglect of his duty.
, cl Otfccnces against statutory provisions. ✓ (a) Liable. ✓
(dJ Frauds. (b) Not "liable.
J. If an auditor allows publication of annual (c) Criminally liable.
reports knowing them to be materially false ( d) None of the above.
to deceive shareholders, he incurs. 1.1. For misstatement
. . in a company prospectus,
(a) Contractual liability. the aud 1tor mcurs
(b) Civil liability. (a) Civil liability. ✓
( c) Criminal !~ability. ✓ (b) Criminal liability.
<d) None of the above. -(c) Contractual liability.
➔. . \II auditor can be held liable under C.A. (d) None of the above.
Ord. 1961 for 12 · If an au?itor fails to satisfy himself that the
(a) Negligence. ,
!ransacttons are ultra virus the directors, he
(b) Criminal offence. mcurs.
'r) Professional miscond~ct. ✓
(a) Crim~nal Liability.

J
 ✓ ----:------~(a~)CCfulie;n~;;ann;::ua~lr::·:----.J217~5
. bilitY• . (b Cf)(>rt
ii '111 t liobihtY, ) Previous year Worki
b)C tfllctU.O bove. (c) Trade journals and mng ~ -
l-i('otl eof the a ntant sent circular letters (d) All of the above.✓ agazines,
l~ ~on _A f\ccou Id 1· bl
_,1,,rcv can he be he ia e.
ldl i.11,1•" 5 The I te
k · n mational St11.....1--
~ Ci• . wor . •Planning' b "'1J.\14l"ds on Auditing 4
1J·, jjcitlllg isfeasance. , o serves that ad .
st') for (11 ligance. planning helps to e . equate,_;111d1t
(O for n_eg ' directed to . . I ns~ that anent1, •n is
(b) cri(111oallY .. . 1al misconduct.✓ What audit cnt1c~ aspects of the audit.
(cl profess101 rov'1d»· ~orking pape_r. will nonnally
d)for ditor is to - p ... satisfactory evidence of th'
(o••I\I1 of_AU op'1n'1on. ✓ aspect .of aud'it pj anning? IS
.I " ...,, an
I · ) foll" (a) Client's timetable for
(:) (lepO~·e t,ooks of accounts.. preparation. accounts
( ) Exa011n ual general meetmg. . (b) Systems tlowch""'S.
c ttend ann - ... ~
(d)A has right to (c) The planning memorandum ✓
, ~adito~ information. (d) Points brought forward sche.dule.
P· Obtain . ✓ -
(a) . ·nformatton.
Q1Ve I
(b) are accounts.
(c) prep of the above. (J)
(d) Nooe does the auditor of a limited
,,,.th
I whom al 1 . hi ?
16. YI have a contractu re at1ons p. 1. Enga~ement letter is written by
comPanY
a) The co_mpanY. (a) Direc~or. (b) Auditors.✓
( The directors. (c) Creditors. (d) Chier'Executive.
(b) Chieffixecutive. 2. Before the commencement of his audit
(c) The Company and the shareholders.✓ work letter sent by the auditor is known as
(d) (I) (a) ~•anagement letter.
(b) Represcntaiton letter.
(c) Engagement letter.✓
Toe auditor should plan to (d) None of the above.
\. (a) Conduct an effective audit.✓ (3) Which of the following assertions should be
(b) Disclose fraud. . . included ig the engagement letter for a new
(c) gxamine product1on/manufactunng private company client trading as_ ·ari
techniques. 1 electrical wholesaler?
(d) Issue unqualified report. \ l) The responsibility for the ·prevention and ·
2. Audit plan is prepared ' detection of irregularities and fraud rests
(a)Before the start of audit. ✓ with management. .
(b) During audit. 2) The auditor's examination should not be
(c) After audit. relied upon to disclose irregularities and
(d) At any time. fraud which may exist.
l Audit programme is a written do_cument 3) The auditor has no responsibility ·10
which includes. detect fraud and irregularities in the course
(a) Audit procedures to be carried out. ✓ of his work.
(b) Relevant acco.unting ratio. 4) The auditor will endeavour to plan his
(c) Appointment confirmation of auditor. work so as to have aleasonable expectation
(d) All of the above: . of detecting meterial misstatements
4- For planning auditor must have knowledge resulting from irregularities or fra1:1d.
of clients business which can be obtained (a) Assertions 1, 2 and 4 m;~ly.✓
from (b) Assertion 2 & 3 Only.
 -ld_)_ /\___d_e_sc-r-:--
ip::t-;-:io::n:-:o;f-:t-;:-hc-· ~b-usioe,, . : ,
nerattons. <lflQ ,
1\ udi t Oy - I~

(c ) All thC: .th l•\t' . 3 only. ,nts (L)

Cd) A~sN1ton!i I. 2 an: !lowing stat: rn~ al
Which of the o I ' the pnnc1p
-l . . t accurate) . spect tvf ssappropriation of goods
de~nbcs mos t letter in re J. • db flla"
· • oogcmen t?
~
purpose o f t11c ene dit assignmen ·. , checke Y . . J

of a limited company au f the auditor 5 (a) Proper. superv1s1on over stock, ✓

(a) To define the extent o (b) Ch~ckmg ofemployees.
responsibilities. ✓ . d ·n , the
1
plaJ1J1ing for (c) Punishment of employees.
(b) Arrangement regal' g: (d) None ofth~ a~ve . .
. rr,ent Window dressmg 1mphes
an aud1t. d 11
' fee for the cu 2
(c) To establishthe au · (a) Curtailment of expenses.
year. . f the directors to (b) Checking wa~tages.
(d) To drnw the attention
·
o
th t the firm c
an offer. (c) Under-valuation of assets.
the range of services- a
ment letter (d) Over-~aluation of ass~ts. ✓
5. Auditor sends engage f dit ✓
(a) Before commencement o au_ . J. falsificat1on ✓of accounts 1s undertaken b
. he course of.the audit.
( b) Dunng t_ . (a) Auditors. , Y
(c) At the end 'ofthe audit. (b) Clerks.
(d} All of the above. (c) Accountants.
(d) Responsi?le_ officials.
4_ Errors of om1ss1on are
- CK) (a) Technical errors. ✓
1. Working papers are property of (b) Errors of principle.
(a) Client. (C) Compensating errors.
(b) Registrar. (d) None of the above.
(c) Auditor ✓ 5. Valuation of assets on wrong basis is
td) Corporate law authority. _ (a) Technical error
2. Which one of the following working papers
(b) Clerical error.
,vould nonnally be retained o~ .~e (c) Error of Principle . ✓
pennanent file maintained for a hm1ted
(d) Compensating error.
company audit client?
(al Extracts of · shareholders ·and 6. Test checking refers to
management meeti_ngs. • . . (a) Testing of accounting records.
(b) Entity policy regarding provident fm_-id. (b) Testing of honesty of employees.
( c) Engagement letter. . (c) Intensive checking of a selected number
(d) Copy of the Memorandum and Articles of trans(\ctions. ✓ .
of Association . ✓ (d) Checking of.all transactions recorded.
3. Which one of the following working papers 7. Which of the following procedures would
would normally be retained on the current be the most appropriate to identify the fraud
tile maintained for a limited company audit of teeming and lading?
client? (a) Reviewing aged-dehtors· listings.
(a) An organisation chart summarising . Debtors' circularisation.✓
( h)
management functions and the division ot· (c) Reviewing bank recoiwiliation.
_repsonsibilities wit~in the _company. (d) . Checking subsequent clearance of
(b) Analysis of transactions & halances. debtors.
(c) A copy of the hank's responsl' t ( i the 8. Detection and- prevention- of errors and
standard audit request letter. ✓-
fraud is the responsb1lity
{a) Auditor,(External).
 l . One reason wh
· , } an auditor
Procedurcs that r . uses analytical
~perations is to idcn~t on the client's
(a) Improper separ-nio~
_sentation letter is nonnallv .,lther financial duti;s of accounting and
of repre .
·tie date which . tb1 Weakness of ~ ~ ·,
:' !ne du ' te.l>Il. starll'.·d . system 0 1· . atenal nature in the
1 \lld1I 15 • c approved by the Board of Internal ac • ·
tll t unts ar (c) llnu~ual t .l'.ountmg control.
( ,\CC(l ' ransact1ons. ✓
(Pl 1 h d" (d ) N 0 ncomplian,. ·h
t 1· .., sil!ncd h) t e au Jtors. ✓
I •
·rectc r.>·
[) I . JI repllf . -: procedures. cc Wit prescribed control
·l AU1 • \J "•)rk ,s completeJ. 2. An abnormal nu t . .
t•· d.11 tie "'
JitW • . . ·d b,· the auditor to his client c uat.ion m gross profit that
( 1er ,~~ut: · mtgh1 suggest the need tor ·
extended audit
roe let · 111.., \\\!akness in the- system procedures for . I· . , d .
, .h1n" '" . . . ~ es an mvcmories would
• descn ::d ini' his audit is .rckrred to as
rved ur c most hkclv he identified in the l .
h f th. p anmng
obSC
Rpres1;'tll'•tl il,n kttcr. p asc o e audit b, the use of:
(al ~anagement kttcr.✓ ~ (a) 1 ~sts of transactions and balances.
till udit Engagement letkr. (h) A preliminary review of internal
1clAN ,ofthl!ahme. accounting control.
(d) on~ · ·
directors ot Nosha a mute . ave
h L. . d h
(c) Specialized audit programs.
\ fhe d the auditor', request to sign · a (d) Analytical procedrucs.✓
refuse . • .
. rmal letter o1 representation covermg 3· An example of an analytical procedure is
10
. matters which were covered by oral the comparison of:
,anous . .
sentations obtained tom1 compan) (a) Financial information with similar
repre during the au·d.1t. Wh'1cI1 ot· ~I1c
staff information regarding the industry in which
r !lowing is not acceptable as an alternat1w the entity o~rates.✓
,o .
form of evidence m respect o t e matter~
t· h
(b) Recorded amounts of major
onwhich representations were sought? disbursements with appropriate invoices.
ta) The audit working papers contain :, (c) Results of ~ statistical sample the
record of the oral representations . ✓ expe:cted characteristics of the actual
(bl The representations have been formally population.
minuted by the directors. ld) G_enerated data with ·similar data
(c) The auditor has prepared a statement of generated by manual accounting system.
the representations which he has sent tu the 4.. An. auditor ordinarily examines mv01ce
directors.; the director~ have contim1ed in from lawyers primarily in order fo:
writing that the auditor's understanding of (a) Substantiate accruals.
the representations is correct. · ' (b) A~sess the legal ramification~ of
(d) The auditor has held a meeting. \\-ith the litigation in progress. ✓
directors at which a statement of (c) Estimate · the amount of contingent
r~presentations prepared by himself· is liabilities.
d1sucssed and agreed: the purpose and (d) Identify possible unassorted litigation,
outcome of the meeting has been minuted. claims, and assessements.
5. The auditors of a public limited company
discover an.omission which existed on the
date of the auditor's report. Due to this
discover} they are unable to support the
 A ud it
previously expressed opinion. If they ( d) AnalyticaJ 1>rocud
believe persons are cummtJy relying on the appHed at review stage Ure
s.
report., tltey sho.uld promptly: .
(a) Undertake to apply the omitted
procedure or alternative procedures that (0)
would provide a satisfactory basis for the
opinion. I. Which of the foJJowin
(b) Notify the board of directors that the so-called" 'around the rn g ·c_haract .
previously expressed opinion is not to be auditing in a computer eac~ne• apel'lses ~
relt-ed on. ✓ (a) Audit work is base;virornent~toach
(c) Notify the stockholders currently relying inputs to and outputs frorn ~n the r~v ~
on the report that the previously expressed (b) The detailed corn he conip 1C\v 0
opinion is not to be relied on. routines used in the va puter Pr:~.'(
. nous -~-
( d) Notify that the previously expressed system are examined to d Parts 3~
opinion is not to be relied on. controls. are adequate. eterrnine w~f I~
6. An auditor should obtain written (c) Audit software is used ether
representation from management contents of computer files to e,clllltin
concerning litigation claims and (d) Transactions are •~ lk c\
assessments. These representations may be manually in order to a ed thr011,.t
. d test "61!1
limited to matters considered either computense processes · Whet~.
individually or collectively material, correctly. are o~~
provided an understanding on the limits of 2. Which of the following is a ·g ing
· enerai
materiality for this purpose has been (a)Procedures . for . COntrol?
reached by: unauthorjsed access attempts· t investigat~ ·
O
(a) The auditor and the client's lawyer. (b) Manual scrutiny of output data files. g
(b) Management and the auditor. (c) Programmed reasonablene~ h
( c) Management, the client's lawyer, and (d) Programmed sequence chec~ eeks.
the auditor. 3. The two principal CAATs are t ng:✓
. ft I est data
( d) The auditor independently of aud 1t so ware. n respect of w}ti h . alJd
management. ✓ following audit activities would ~e of the
. 7. Analytical review procedures are a type of test data be most relevent? . USe of
substantive testing. Which of the -following (a) Analyti~al review of th
statements. e financial
correctly describes the stages of an\ audit
during which tfie auditor may plan to make (b) Testing of programmed control
.
saIes mvo1cmg.
. . ✓ s over
use of analytical review procedures?
(a) Analytical review is confined i9 its ( c) Selection and extraction of a sample fi
application to the closing stages of the audit a debtors circularisation. or
when the review of the financial statements ( d) Verification of aged debtors balances.
is conducted. 4. Which of the following · CAATs may
(b) Analytical review pro~edures can be provide a continuous review of a client's
applied to individual account areas as well programmed controls?
as· to the review of financial statements and (a) Test data,
can be use9 at all stages of the audit other (b) A utility programme.
than initial planning. ✓ (c) An embedded Facility. ✓
(c) Analytical review can be applied at all (d) A purpose written·pJogramme.
stages of the audit, · including initial
planning. *************