RIFT VALLEY UNIVERSITY SHASHAMANE CAMPUS

Model exit Exam

Auditing Principles and Practices I & II

1) Audit Note Book contains: ---------------------------------------------------------
(A) Various dates of reference.
(B) Details of work done.
(C) Notes regarding item requiring clarification, explanations, etc.
(D) All of the above.

2) Which of the following has a broader scope?

(A) Internal Control.

(B) Internal Audit.

(C) Internal Checking.

(D) None of the above.

3) An internal auditor is :
(A) Temporary Employee.

(B) Permanent Employee.

(C) Daily Wager.

(D) None of the above.
4) The main object of vouching is :
(A) To prepare trial balance.

(B) Conduct routine checking.

(C) Verify authenticity & authority of transactions.

(D) Checking of vouchers

5) Valuation is the base of:

(A) Verification.

(B) Marketing.

(C) Internal checking.

(D) Vouching.

6) The first auditor or auditors are appointed by :

(A) Central Government.

(B) Company Law Board.

(C) Board of Directors.

(D) Shareholders.

7) A number of checks & controls exercised in a business to ensure its efficient working is
known as :
(A) Internal check.
(B) Internal control.
(C) Internal audit.
(D) Interim check.

8) Voucher relates to :
(A) Cash receipt.

(B) Cash payment.

(C) Credit transactions.

(D) All the above.

9) Internal check is meant for :

(A) Prevention of frauds.

(B) Detection of frauds.

(C) Helping audit in depth.

(D) Detection of errors.

10) Internal auditor is appointed by :

(A) The management.

(B) The shareholders.

(C) The government.

(D) The statutory body.
11) Auditing begins where -------- ends.
(A) Selling.

(B) Inventory valuation.

(C) Accounting.

(D) Purchases.

12) A good audit report must at least meet one of the following qualifications:
(A) It should offer constructive and timely suggestions to the management.

(B) It should not point out mistakes.

(C) It should not be based on factual information.

(D) It should not be based on balance sheet.

13) The work of one clerk is automatically check by another clerk is called :
(A) Internal control.

(B) Internal check.

(C) Internal audit.

(D) None of the above.

14) The owners of the company are called:

(A) Debenture holders.

(B) Debtors.

(C) Shareholders.

(D) None of the above.

15) Verification is :

(A) The art of recording the business transactions.

(B) An examination of the books of accounts.
(C) The act of establishing the accuracy of entries in the books of accounts.

16) The main object of investigation is :

(A) To discover errors and frauds.

(B) To prevent errors and frauds.

(C) To verify statements.
(D) All the above.
17) Internal controls and internal check are :
(A) One and the same.

(B) Different.

(C) Internal control includes internal check.

(D) None of the above.

18) An auditor is like a :

(A) Watchman.

(B) Foolish dog.

(C) Mad dog.

(D) Watch dog.

19) Special audit is necessary for:

(A) Inefficient concern.

(B) Processing concern.

(C) Trading concern.
(D) Manufacturing concern.

20) The company‟s auditor is expected to give:

(A) His expert opinion about the accounts.

(B) A factual position about the accounts.

(C) A critical review of the accounts.

(D) Financial assistance.

21) Auditors of a joint stock company are appointed by :

(A) Directors of the company.

(B) Annual general meeting.

(C) Election at the annual general meeting.

(D) Debenture holders.

22) A company auditor can be removed by :

(A) Board of directors.

(B) Managing director.

(C) Any director.

(D) General Meeting.
23) A vacancy caused by resignation of an auditor is filled by :
(A) Board of directors.

(B) Managing director.

(C) General meeting.

(D) Central government.

24) Audit in depth means:

(A) Audit of each and every item.

(B) Intensive audit of each and every item.
(C) Intensive audit of few items.
(D) Audit of a few selected items.
25) Concurrent audit is a part of :
(A) Internal check system.

(B) Continuous audit.

(C) Internal audit system.

(D) Final audit.

26) Audit in depth is synonymous for:

(A) Complete audit.

(B) Completed audit.

(C) Final audit.

(D) Detailed audit.

27) Balance sheet audit included verification of :

(A) Assets.

(B) Liabilities.

(C) Income & expenditure accounts where appropriate.

(D) All of the above.

28) Which of the following statements is not true about continuous audit?
(A) It is conducted at regular interval.

(B) It may be carried out on daily basis.

(C) It is needed when the organization has a good internal control system.

(D) It is expensive.

29) Which of the following is not a fact of EPA ?

(A) Economic audit.

(B) Efficiency audit.

(C) Expenditure audit.

(D) Effectiveness audit.

30) Balance sheet does not include :

(A) Verification of assets & liabilities.

(B) Vouching of income & expense accounts related to assets and liabilities.

(C) Examination of adjusting and auditing & closing entries.

(D) Routine checks.

31) When issuing unqualified opinion the auditor who evaluates the audit findings should be
satisfied that the :
(A) Amount of known miss-statement is documented in working papers.
(B) Estimates of the total likely misstatement are less than materiality level.
(C) Estimated of the total likely misstatement is more than materiality level.
(D) Estimates of the total likely misstatement cannot be made.

32) Under check system principle of_________ is followed.

(A) Division of labour

(B) Division of work

(C) Principle of scalar chain

(D) Accountancy

33) This kind of audit is generally conducted between two annual audits.
(A) Internal audit (D) Continuous audit
(B) Interim audit
(C) Final audit
34) Before the work of audit is commenced, the auditor plans out the whole of audit work is
known as –
(A) Audit plan
(B) Audit note
(C) Audit risk
(D) Audit program
35) Internal auditor is appointed by –

(A) The management

(B) The shareholders
(C) The government
(D) statutory body
36) The audit that is made compulsory under the statute is called –

(A) Statuary audit

(B) Partial audit
(C) Complete audit
(D) Continues audit
37) Who among the following can be appointed as the auditor of company?
(A) A partner or the director of the company

(B) A person of unsound mind

(C) Mr. „Y‟ who owes Rs.500 to company

(D) Mr. „Z‟ who holds the „CA‟ Certificate

38) ___ is documentary evidence by which the accuracy in the books of accounts may be proved.
(A) Cheque
(B) Receipt
(C) Voucher
(D) Statement
39) Sale of Rs.50,000 to „A‟ was entered– as a sa

(A) Error of omission

(B) Error of commission
(C) Compensating error
(D) Error of Principle.
40) In comparison to the independent auditor an internal auditor is more likely to be concerned
with –
(A) Cost accountancy system
(B) Internal control system
(C) Legal compliance
D) Accounting system
41) The audit program is prepared by –

(A) The auditor

(B) The client
(C) The audit assistants
(D) Auditor & his assistants
42) Interim audit refers to –
(A) Examination of accounts continuously
(B) Examination of accounts intermittently
(C) Audit work to find out & check interim profits of a company
(D) Carrying on audit for bonus purposes at the end of year
43) A company auditor should see that the dividend is paid –

(A) After charging depreciation

(B) Without charging depreciation
(C) Out of capital
(D) None of the above.
44) Errors of omission are –

(A) Technical errors

(B) Error of principle
(C) Compensating error
(D) none of these
45) Vouching implies –

(A) Inspection of receipts

(B) Examination of vouchers to check authenticity of records
(C) Surprise checking of accounting records
(D) Examining the various assets
46) Undervaluation of stock is –

(A) Technical error

(B) Compensatory error
(C) Error of principle
(D) None of these

47) Verification refers to –

(A) Examination of journal & ledger

(B) Examination of vouchers related to assets
(C) Examining the physical existence & valuation of assets
(D) Calculation of valuation of assets
48) Valuation of fixed assets is based on the concept –

(A) Going concern

(B) Money measurement
(C) Dual aspect
(D) Cost concept.
49) “Auditor is not valuer–.” This statement wa
(A)Kingston Cotton Mill Case

(B) London & General Bank Case

(C) Lee VS Neuchatel Co. LTD Case (D) London Oil Storage Co.LTDCase
50) Floating assets are valued at –
(A) Cost
(B) Market price
(C) Cost price or market price whichever is less
(D) Cost less than depreciation
51) Outstanding expenses should be verified with the help of –

(A) Cashbook
(B) Balance book
(C) Journal proper
(D) None of above.

52) First auditor of the company is appointed by the –

(A) Shareholders
(B) Central government
(C) Company law board
(D) Board of directors
53) The vacancy caused by resignation at a auditor is filled by –

(A) Board of directors

(B) At the general meeting of shareholders
(C) By the central government
(D) By the company law board
54) A special auditor is appointed by the –

(A) Shareholders
(B) Board of directors
(C) Central government
(D) CAG
55) A remuneration of a company auditor is fixed by the –

(A) Shareholders
(B) Board of directors
(C) Central Government
(D) Appointing authority

56) Internal auditor has to submit report to –

(A) Shareholders
(B) Government
(C) Company law board
(D) none of above
57) Auditor in general is –

(A) Employee of the company

(B) Agent of the company
(C) Agent of the shareholders
(C) None of the above

58) Shares issued for consideration other than cash should be vouched with help of –
(A) Directors minutes book
(B) Shareholders minute‟s book
(C) Contract with the party concerned
(D) Cash book
59) The term Standard Auditing Practices refers –

(A) Auditing techniques adopted by auditor for collecting & vouching evidences
(B) Test checking
(C) Standards of auditing
(D) True & fair view
60) AAS refers to –

(A) Audit evidence

(B) Audit Planning
(C) Risk assessments &Internal control
(D) Knowledge of business
61) The panel of Auditors of cooperative society is maintained by –

(A) Charted Accountant

(B) Central Government
(C) Registrar
(D) Shareholders
62) Banking Regulation Act was passed in the year–

(A) 1912
(B) 1949
(C) 1956
(D) 1955.
63) Which of the following statements is not correct regarding removal of first auditor
before expiry of the term?
(A) He is removed at general meeting
(B) Shareholders are authorized to do so
(C) The approval of central government is required for such removal
(D) The provision for such removal is contained in Section 224 (7)
64) Retiring auditor does not have right to –

(A) Make written representations

(B) Get his representation circulated
(C) Be heard at the meeting
(D) Speak as member of company
65) According to Section ___ Special Audit is conducted at the central government
(A) Section 233(A)
(B) Section 233(B)

(C) Section 242(A)

(D) Section 242(B)

66) Audit of Banks is an example of –

(A) Statutory Audit

(B) Balance Sheet Audit
(C) Concurrent Audit
(D) All of above
67) Auditor of a _____ company does not have right to visit foreign branches of company.
(A) Unlimited Company
(B) Manufacturing Company
(C) Banking Company
(D) Non-Profit making company
68) Cost Audit under Section 233(B) of The Company Act is _____
(A) Voluntary
(B) Compulsory
(C) Advisable.
(D) Avoidable
69) Internal Auditing Standards are issued by the –

(A) International Accounting Standard Board

(B) Financial Accounting Standard Board
(C) International Audit & Assurance Standard Board
(D) Auditing Practices Board
70) Which of the following is not a duty of an auditor?

(A) Duty to report company‟s banker

(B) Duty to report to the members
(C) Duty to sign the audit report
(D) Duty to report on any violation of law
71) The main object of vouching is :
(A) To prepare trial balance.
(B) Conduct routine checking.

(C) Verify authenticity & authority of transactions.

(D) Checking of vouchers.

72) Valuation is the basis of :
(A) Verification.

(B) Marketing.

(C) Internal checking.

(D) Vouching.
73) The first auditor or auditors are appointed by :
(A) Central Government.

(B) Company Law Board.

(C) Board of Directors.
(D) Shareholders. 74)
Voucher relates to:
(A) Cash receipt.

(B) Cash payment.

(C) Credit transactions.

(D) All the above.

75) Internal auditor is appointed by :

(A) The management.

(B) The shareholders.

(C) The government.

(D) The statutory body.

76) Auditing begins where -------- ends.

(A) Selling.

(B) Inventory valuation.

(C) Accounting.

(D) Purchases.

77) The work of one clerk is automatically check by another clerk is called:

(A) Internal control.

(B) Internal check.
(C) Internal audit.
(D) None of the above.
78) The owners of the company are called:
(A) Debenture holders.

(B) Debtors.

(C) Shareholders.

(D) None of the above.

79) An auditor is like a :

(A) Watchman.

(B) Foolish dog.

(C) Mad dog.

(D) Watch dog.

80) A company auditor can be removed by :

(A) Board of directors.
 (B) Managing director.
(C) Any director.
(D) General Meeting.
81) This kind of audit is generally conducted between two annual audits.
(A) Internal audit

(B) Interim audit

(C) Final audit

(D) Continuous audit

82) Before the work of audit is commenced, the auditor plans out the whole of audit work
is known as –
(A) Audit plan
(B) Audit note
(C) Audit risk
(D) Audit program
83) Internal auditor is appointed by –

(A) The management

(B) The shareholders
(C) The government
(D) statutory body
84) The audit that is made compulsory under the statute is called –

(A) Statuary audit

(B) Partial audit
(C) Complete audit
(D) Continues audit
85) Who among the following can be appointed as the auditor of company?
(A) A partner or the director of the company

(B) A person of unsound mind

(C) Mrho.owes„Y‟Rs.500wto company

(D) Mr. „Z‟ who holds the „CA‟ Certificate

86) ___ is documentary evidence by which the accuracy in the books of accounts may be proved.
(A) Cheque
(B) Receipt
(C) Voucher

(D) Statement
87) Sale of Rs.50, 000 to „A‟ was entered as a– sale to „B‟.

(A) Error of omission

(B) Error of commission

(C) ( C) Compensating error

(D) Error of Principle.
88) In comparison to the independent auditor an internal auditor is more likely to be concerned
with –
(A) Cost accountancy system
(B) Internal control system
(C) Legal compliance
(D) D) Accounting system
89) The audit program is prepared by –

(A) The auditor (B) The client (C) The audit assistants (D) Auditor & his assistants

90) Interim audit refers to –

(A) Examination of accounts continuously

(B) Examination of accounts intermittently
(C) Audit work to find out & check interim profits of a company
(D) Carrying on audit for bonus purposes at the end of year
91) A company auditor should see that the dividend is paid –
(A) After charging depreciation
(B) Without charging depreciation
(C) Out of capital
(D) None of the above.
92) Errors of omission are –

(A) Technical errors

(B) Error of principle
(C) Compensating error
(D) None of these

93) Vouching implies –

(A) Inspection of receipts

(B) Examination of vouchers to check authenticity of records
(C) Surprise checking of accounting records
(D) Examining the various assets
94) Undervaluation of stock is –

(A) Technical error

(B) Compensatory error
(C) Error of principle
(D) none of these
95) Verification refers to –

(A) Examination of journal & ledger

(B) Examination of vouchers related to assets
(C) Examining the physical existence & valuation of assets
(D) Calculation of valuation of assets
96) Valuation of fixed assets is based on the concept –
(A) Going concern
(B) Money measurement
(C) Dual aspect
(D) Cost concept.

97) “Auditor is not valuer–.” This statement wa

(A) Kingston Cotton Mill Case

(B) London & General Bank Case

(C) Lee VS Neuchatel Co. LTD Case
(D) London Oil Storage Co. LTD Case
98) Floating assets are valued at –
(A) Cost
(B) Market price
(C) Cost price or market price whichever is less
(D) Cost less than depreciation
99) Outstanding expenses should be verified with the help of –

(A) Cashbook
(B) Balance book
(C) Journal proper
(D) None of above.

100) First auditor of the company is appointed by the –

(A) Shareholders
(B) Central government
(C) Company law board
(D) Board of directors
101) The vacancy caused by resignation of an auditor is filled by –

(A) Board of directors

(B) At the general meeting of shareholders
(C) By the central government
(D) By the company law board
102) A special auditor is appointed by the –

(A) Shareholders
(B) Board of directors
(C) Central government
(D) CAG

103) A remuneration of a company auditor is fixed by the –

(A) Shareholders

(B) Board of directors

(C) Central Government

(D) Appointing authority
104) Internal auditor has to submit report to –

(A) Shareholders
 (B) Government
(C) Company law board
(D) None of above
105) Auditor in general is –

(A) Employee of the company

(B) Agent of the company
(C) Agent of the shareholders
(D) None of the above
106) Shares issued for consideration other than cash should be vouched with help of_________
(A) Directors minutes book
(B) Shareholders minute‟s book

(C) Contract with the party concerned

(D) Cash book
107) The term Standard Auditing Practices refers –

(A) Auditing techniques adopted by auditor for collecting & vouching evidences
(B) Test checking
(C) Standards of auditing
(D) True & fair view
108) AAS refers to –

(A) Audit evidence

(B) Audit Planning
(C) Risk assessments &Internal control
(D) Knowledge of business
109) the panel of Auditors of cooperative society is maintained by –

(A) Charted Accountant

(B) Central Government
(C) Registrar

(D) Shareholders

110) The term “Audit” originated from the Latin w

(a) Audire (b) Adhere (c) Adihere (d) None of the above

111) ______is a systematic examination of the books and records or a business.

(a) Auditing (b) Vouching (c) Verification (d) Checking.

112) ______the following are not objectives of auditing.

(a) Ascertain the profit and preparation of P/L Account, Balance sheet.
(b) Detection and prevention of frauds and errors.
(c) Give a true and fair view of financial amount.
(d) To submits the accounts to Government of India.
113) _______ the following is not a kind of audit.
a. Statutory and private audit.
b. Government and continuous audit.
c. Continuous, final, Interim, Cash, Cost and Management audit.
 d. None of these.
114) An audit which is compulsory by the law __________.
a. Government audit. (b) Internal audit. (c) Cost audit. (d) Statutory audit.
115) Instruction of audit issued by controller and auditor general of India ________.
a. Statutory audit. (b) Final audit. (c) Management audit. (d) Government audit.
116) Audit done by the employees of the business undertaking is called _______.
a. Final audit. (b) Management audit. (c) Government audit. (d) Statutory audit.
117) This kind of audit is conducted generally between two annual audit ______.
a. Internal audit. (b) Interim audit. (c) Final audit. (d) Continuous audit.
118) Management audit otherwise called as _______.

Final audit. (b) Efficiency audit. (c) Cost audit. (d) Cash audit.
119) The main object of an audit is ______.
a. Expression of opinion
b. Detection and Prevention of fraud and error
c. Both (a) and (b)
d. Depends on the type of audit

120) Process of checking the evidence of the entries called _____________.

(a) Verification (b) Observation (c) Vouching (d) Inspection

121) To verify cash transactions, it is necessary.

(a) System of internal control (b) Check all transaction

(c) Documentary evidence for every transaction (d) All of the above.

122) Total amount spent for advertisement expenses be verified from the

(a) Receipts from the Medias or advertisement agency. (b) Fixed assets register

(c) Debtors books (d) None of the above.

123) Vouching helps the auditors to ascertain whether the entries in the book________ , this is
the basic objective of auditing.
(a) True and fair (b) Only true (c) Only fair (d) None of the above.

124) Voucher should be addressed to the ________.

(a) Auditor (b) Client (c) Employee (d) None of the above.

125) Serial number of vouchers should be ________.

(a) Collared (b) Continuous (c) Even number (d) Odd number.

126) ______ is/are an importance of vouching?

(A)Ensures all items are disclosed in the financial statement as per Schedule VI
provisions.
(B)It helps to verify whether entries are passed as per acceptable accounting principles.
 (C) Helps in detection and prevention of errors & frauds.
(D) All the above
127) Checking the head of account debited or credited during vouching helps the auditor to
________.
(b) Check whether accounting is
(a) Detect errors of principle proper.
(c) Find errors of commission (d) all of the above

128) _______ of the following can be accepted as a supporting document.

(a) Invoice/Challah (b) Debit note/Credit note.

(c) Emails/letters. (d) All of the above.

129) Checking the date of voucher on the voucher during vouching mainly helps the auditor to
obtain evidence that_____.
(a) The transaction relates to current year. (b) The transaction has taken place.

(c) The transaction is genuine. (d) The transaction is legal.

130) Verification refers to

a. Examination of journal and ledger
b. Examination of vouchers related to assets
c. Examining the physical existence and valuation of assets
d. Calculation of value of assets
131) Object of verification of assets
a. Physical verification of assets
b. Checking value of assets
c. Examining the authority of their acquisition
d. All of the above
132) Which of the following statements is correct?
a) Valuation is a part of verification b) Verification is a part of valuation

c) Valuation has nothing to do with verification d) Auditor is a valour

133. Stock should be valued at

a) Cost b) Market price

c) Cost price or market price whichever is lower d) Cost less depreciation

134.Valuation of Fixed Assets is based on the concept

a) Going concern b) Conservation

c) Money measurement d) Dual aspect

135.Valuation means
a) Calculating value of assets b) Checking the value of assets

c) Checking the physical existence of assets d) Examining the authenticity of assets

 136.Outstanding expenses should be verified with the help of

a) Cash book b) Balance book

c) Journal proper d) None of the above

137.Book debts should be verified with the help of

a) Balance sheet b) Amount received from Debtors

c) Debtors schedule d) Certificate from the management

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

a) Schedule of investments b) Balance sheet

c) Inspection of securities d) Certificate from the bank

139.Floating assets are valued at

a) Cost
b) Market price
c) Cost price or market price whichever is less
d)Cost less depreciation
140.First auditor of a company is appointed by the

a)Shareholders b) Central Govt.

c) Company Law Board d) Board of Directors

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

a) An employee of the company
b) A body corporate
c) A person who is indebted to the company for an amount exceeding Rs. 1000
d) A practicing chartered accountant
142.The first auditor of a company will hold office
a) For a period of one year
b) Till holding of statutory meeting
c) Till the conclusion of first annual general meeting
d) Till a new auditor is appointed
143.Normally, a company auditor is appointed by the
a) Central Government b) Shareholders

c) Board of Directors d) Company Law board

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

a) Board of Directors b) Shareholders

c) Central Government d) Company Law board

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

 a) The Central Government b) Board of Directors

c) Shareholders d) Company Law board

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

a) Board of Directors b) At the general meeting of shareholders

c) By the Central Government d) By the Company Law board

147.A special auditor is appointed by the

a) Shareholders b) Board of Directors

c) Central Government d) C & A - G

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

a) C & A –G b) Shareholders

c) Central Government d) None of the above

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

a) Shareholders b) Board of Directors

c) Central Government d) State Government

150.Investigation of books of accounts and records is :

a) Not legally compulsory b) Compulsory

c) Compulsory as per companies act d) Compulsory as Income Tax Act

151.Investigation is carries on behalf of

a) Manager b) Employee

c) Client d) On behalf of owner and third parties

152.Examination of accounting records undertaken for a special purpose is called

a) Auditing b) Internal check

c) Investigation d) Internal control

153.The prime importance of investigation on behalf of an individual or firm intending

to purchase an existing business is to
a. Ascertain value of asset
b. Ascertain the earning capacity of the concern
c. Estimation of value of good will
 d. Extend of liabilities
154.CAATS is also known as ______.

a) Cost and Accounts Treatments

b) Computer Assisted Audit Techniques
c) Classification and Accounting of Tax Tools
d) None of these.
155._______ are tools for drawing inferences and gathering relevant and reliable evidence as
per requirements of the assignment.
a) CAAT b) CATA c) CCAT d) CATT

156.CAATs refer to using ______ for auditing data as per audit objectives.

a) Mobiles b) Computers c) Pen drive d) None of these

157.________involves using of global filter conditions to select required data based on

specified criteria.
a) Data selection b) Data analysis c) Data coding d) None of these

158.______the features of sampling, stratification and frequency analysis.

a) Arithmetic function b) Logical function c) Statistical functions d) None of these

159.An auditor can obtain the audit evidence by_______.

a) Inspection b) Observation

c) Inquiry and confirmation d) All of these

160. Auditing refers to

a. Preparation and checking of account
b. Examination of accounts of business units only
c. Examination of accounts of professional accountants
d. Checking of vouchers
161. Main object of auditing is
a. Detection of errors
b. To find out whether P&L a/c & B/S show true and fair state affairs
c. Detection of frauds
d. Detection and prevention of frauds and errors.
162. Auditing is luxury for a
a. Joint stock company
b. Partnership firm
c. Small shop-keeper
d. Government company
163. Auditing is compulsory for
a. Small scale business enterprises
b. All partnership firms
c. All joint stock companies
 d. All proprietary concerns
164. Propriety audit refers to
a. Verification of accounts
 b. Examination accounts of propriety concerns
c. Enquiry against justification and necessity of expresses
d. Audit of Govt. companies
165. Propriety is normally undertaken in case of
a. Joint stock company
b. Government company
c. Statutory corporation
d. Govt. departments
166. Interim audit refers to
a. Examination of accounts continuously
b. Examination of accounts intermittently
c. Audit work to find out and check interim profits of a company
d. Carrying on audit for bonus purposes at the end of the year
167. Final audit implies
a. Audit of accounts at the end of the year
b. Finally checking of accounts to reveal frauds
c. Audit for submitting report immediately at the end of the year
d. Audit of banking companies
168. A continuous audit is specially needed for
a. Any trading concern
b. Smaller concerns
c. Banking companies
d. Any manufacturing companies
169. Joint audit implies
a. Audit of two concerns together
b. Audit of joint stock companies
c. Audit of joint sector companies
d. Audit by two firms of C.A
170.Management audit means
a.Audit undertaken on behalf of the management
b. Evaluating performance of various management processes and functions
c. Audit undertaken on behalf of Govt. to punish management
d. Compulsory audit
171.Systems audit implies
a. Systematic examination of accounts
b. Audit undertaken to improve auditing systems
c. Enquiring accounting and control systems
d. Checking the performance of management
172.Internal audit means
a. Audit undertaken to ascertain truth and fairness of state of affairs
b. Audit undertaken internally to evaluate management functions
c. Audit undertaken by employees of the organization to check financial irregularities
d. Audit by independent auditor to improve internal affairs
173.Internal audit is
 a. Compulsory for a company with paid-up capital of Rs. 25 lakh and above
b. Voluntary for a company
c. Not necessary for a company
d. Necessary for a company
174.Internal audit is undertaken
a. By independent auditor
 b. Statutorily appointed auditor
c. By a person appointed by the management
d. By Government auditor
175.Internal auditor is appointed by the
a. Management
b. Shareholders
c. Government
d. C&A-G
176.The object of internal check is to
a. Control wastage of resources
b. Prevent errors and frauds
c. Verify the cash receipts and payments
d. Facilitate quick decision by the management
177.Effective internal check system reduces
a. The liability of auditor
b. Work of auditor
c. Both work as well as auditor
d. Responsibilities of an auditor
178.Internal check is a part of
a. Internal audit
b. Internal accounting
c. External audit
d. Internal control
179.Internal check is carried on by
a. Special staff
b. Internal auditor
c. Accountant
d. None of the above
180.Internal check is suitable for
a. Larger concerns
b. Smaller concerns
c. Petty shop- keepers
d. None of the above
181.Internal check is carried on by
a. Staff specially appointed for the purpose
b. Internal auditor
c. The members of the staff among themselves
d. Supervisor of the staff
182.Internal check is essential for
a. Petty traders
b. Cash transactions in a large concern
c. A concern using automatic equipment‟s
d. None of the above
183.Misappropriation of goods may be checked by
a. Proper supervision over stock
 b. Checking of employees
c. Punishment of employees
d. None of the above
184.Window dressing implies
a. Curtailment of expenses
 b. Checking wastages
c. Under- valuation of assets
d. Over- valuation of assets
185.Falsification of accounts is undertaken by
a. Auditors
b. Clerks
c. Accountants
d. Responsible officials
186.Errors of omission are
a. Technical errors
b. Error of principle
c. Compensating errors
d. None of the above
187.Test checking refers to
a. Testing of accounting records
b. Testing of honesty of employees
c. Intensive checking of a selected number of transactions
d. Checking of all transactions recorded
188.Test checking should not be applied to
a. Sales book
b. Purchase book
c. Bank reconciliation statement
d. Bills book
189.Test checking should not be applied to
a. Purchase book
b. Sales book
c. Stock book
d. Cash book
190.Vouching implies
a) Inspection of receipts
b) Examination of vouchers to check authenticity of records
c) Surprise checking of accounting records
d) Examining the various assets
191. Payment for goods purchased should be vouched with the help of
a. Creditors statement
b. Correspondence with suppliers
c. Cash memos
d. Ledger accounts
192.Payment for wages should be vouched with the help of
a. Piece work statement
b. Wage sheets
c. Minute book
d. Bank pass book
193. Payment for building purchased should be vouched with the help of
a. Title deed
b. Correspondence with Brokers
 c. Building account
d. Cash book
194.Investment should be vouched with the help of a. Commission
book
 b. Brokers book
c. Sales deeds
d. Minute book
195.Receipt from debtors should be vouched with the help of
a. Counterfoil Receipts cash book
b. Suppliers statement
c. Sales Deeds
d. General Ledger
196. Receipt from sale of investment should be vouched with the help of
a. Brokers Budget Notes
b. Brokers Sold Notes
c. Minute Book
d. Inventory of investment
197.Purchases returns should be vouched with the help of
a. Bought Notes
b. Credit Notes
c. Goods inward Book
d. Cash Book
198.Verification refers to
a. Examination of journal and ledger
b. Examination of vouchers related to assets
c. Examining the physical existence and valuation of assets
d. Calculation of value of assets
199.Object of verification of assets
a. Physical verification of assets
b. Checking value of assets
c. Examining the authority of their acquisition
d. All of the above
200.Which of the following statements is correct?
a. Valuation is a part of verification
b. Verification is a part of valuation
c. Valuation has nothing to do with verification
d. Auditor is a valour
201.Stock should be valued at
a. Cost
b. Market price
c. Cost price or market price whichever is lower
d. Cost less depreciation
202.Valuation of Fixed Assets is based on the concept
a. Going concern
b. Conservation
c. Money measurement
d. Dual aspect
203.Valuation means
 a. Calculating value of assets
b. Checking the value of assets
c. Checking the physical existence of assets
d. Examining the authenticity of assets
204.“ Auditor is not valuer” was stated in a. Kingston Cotton Mills case
 b. London & General Bank case
c. Lee. V. Neuchatel Co. Ltd case
d. London oil Storage Co.
case 205.Fixed assets are valued at
a. Cost
b. Market price
c. Cost price or market price whichever is less
d. Cost less depreciation
206.Floating assets are valued at
a. Cost
b. Market price
c. Cost price or market price whichever is less
d. Cost less depreciation
207. The scope of work of internal audit is decided by the
a. Share holders
b. Management
c. To improve financial control
d. All of the above
208. Outstanding expenses should be verified with the help of
a. Cash book
b. Balance book
c. Journal proper
d. None of the above
209.Book debts should be verified with the help of
a. Balance sheet
b. Amount received from Debtors
c. Debtors schedule
d. Certificate from the management
210. Investments in hand should be verified with the help of
a. Schedule of investments
b. Balance sheet
c. Inspection of securities
d. Certificate from the bank
211.First auditor of a company is appointed by the
a. Shareholders
b. Central Govt.
c. Company Law Board
d. Board of Directors
212.Which of the following persons is qualified to be a company auditor?
a. An employee of the company
b. A body corporate
c. A person who is indebted to the company for an amount exceeding Rs. 1000
d. A practicing chartered accountant
213.The first auditor of a company will hold office
a. For a period of one year
 b. Till holding of statutory meeting
c. Till the conclusion of first annual general meeting
d. Till a new auditor is appointed
214.Normally, a company auditor is appointed by the
a. Central Government
 b. Shareholders
c. Board of Directors
d. Company Law board
215.An auditor in a casual vacancy is appointed by the
a. Board of Directors
b. Shareholders
c. Central Government
d. Company Law board
216. If an auditor is not appointed at annual general meeting, he is appointed by the
a. The Central Government
b. Board of Directors
c. Shareholders
d. Company Law board
217.A vacancy caused by resignation of the auditor is filled by
a. Board of Directors
b. At the general meeting of shareholders
c. By the Central Government
d. By the Company Law board
218.A special auditor is appointed by the
a. Shareholders
b. Board of Directors
c. Central Government
d. C&A-G
219.A government Co. auditor may be appointed by the
a. C&A–G
b. Shareholders
c. Central Government
d. None of the above
220.A company auditor can be removed before expiry of his term by
a. Shareholders
b. Board of Directors
c. Central Government
d. State Government
221.Remuneration of a company auditor is fixed by the
(A) Shareholders
(D) Board of Directors
(E) Central Government
(F) Appointing authority
222.A company auditor, in general has to submit his report to
a. Shareholders
b. Board of Directors
c. Central Government
d. C&A–G
223.An auditor of Government company has to submit his report to the
a. Shareholders
 b. Central Government
c. C&A–G
d. Ministry concerned
224.Internal auditor has to submit report
to a. Shareholders
 b. Government
c. Company Law board
d. None of the above
225.Auditor should be dutiful like a
a. A watch dog
b. A blood hound
c. A detective
d. An insurer
226.Auditor, in general is an
a. Employee of the company
b. Agent of the company
c. Agent of the shareholders
d. None of the above
227.While checking allotment of shares the auditor should see that it is made within
a. 100 days of issue of prospectus
b. 120 days of issue of prospectus
c. 150 days of issue of prospectus
d. 80 days of issue of prospectus
228. Which of the following percentage of nominal amount of shares should be received
with application
a) 10 b) 15 c) 5 d) 6 229.While checking
allotment, auditor should see that amount
a. Equal to estimated fixed capital is received
b. Equal to estimated working capital is received
c. Necessary for purchase of land & building has been received
d. None of the above
230.For restriction regarding allotment of shares, the auditor should refer to
section a) 25 b) 75 c) 64 d) 69
231.For checking that allotment of shares has been properly made, an auditor should refer to
a. Cash Book
b. Shares Ledger
d) 40 days

c. Directors minutes book

d. Shareholders minutes Book
232.Auditor should see that the return of allotment has been sent to Registrar within
a) 1 month b) 2 months c) 3 months 233.Application
money should not be withdrawn unless

a. Allotment is made
 b. Cash book has been prepared
c. Certificate to commence business obtained
d. Certificate of incorporation obtained
234.Shares issued for consideration other than cash should be vouched with the help of
a. Directors minutes book
b. Shareholders minutes book
c. Contract with the party concerned
d. Cash book
235.A company can issue Redeemable Preference shares, if authorized by
a. Memorandum of association
b. Articles of association
c. Companies Act, 1956
d. None of the above
 236.Auditor should see that amount received for premium on issue of shares should be shown in
a. Subscribed capital
b. Capital Reserve Account
c. Share Premium account
d. Paid- up capital account
237.Share premium account should be shown in the Balance sheet under
a. Paid-up capital
b. Subscribed capital
c. Reserves & surplus
d. Reserved capital
238.Amount of share premium may be utilized for
a. Payment of dividend
b. Writing of preliminary expenses
c. Routine expenses
d. Purchase of fixed assets
239.Shares can be issued at discount under section
a) 76 b) 75 c) 79 d) 89
240. Interest on calls paid in advance, according to Table A, should not exceed
a) 6% b) 5% c) 10% d) 14%
241. Shares can be issued at premium, under section
a) 76 b) 75 c) 78 d) 79
242. A company can accept calls in advance from its shareholders under section
a) 82 b) 79 c) 92 d) 78
243.Shares can be issued at discount only after
a. 2 years of the commencement of the business
b. 1 year of the commencement of the business
c. 3 years of the commencement of the business
d. 5 years of the commencement of the business
244. With regard to issue of share warrants to the bearers, the auditor should see that is it
a. Permitted by Memorandum of Association
b. Sanctioned by the Central Government
c. Permitted by the Board of Directors
d. None of the above
245.For the forfeiture of shares, the auditor should check that it is permitted
a. by Memorandum of Association
b. by articles of association
c. under Companies Act, 1956
d. None of the above
246.Premium received on issue of shares, later forfeited, should be transferred to
a. Capital reserve
b. Shares forfeited Account
c. Capital Account
d. None of the above
247. With regard to issue of share certificates, the auditor should refer to section
a) 110 b) 113 c) 114 d) 123
248.Increase in share capital is permitted by
a. Memorandum of Association
b. Articles of association
 c. Court
d. Companies Act, 1956
249.Divisible profit should not include
a. Interest on capital
b. Capital
c. Depreciation
d. None of the above
250.Dividend cannot be paid out of
a. Capital profit
b. Capital receipts
c. Revenue receipts
d. None of the above
251.Capital profit imply profit earned
a. Through business transaction
b. From capital
c. From sale of fixed assets
d. From sale of current assets
252.Capital profits
a. Can be paid by way of dividends
b. Cannot paid by way of dividends
c. Can be paid by way of dividend under certain conditions
d. None of the above
253.If there is capital loss, the auditor should
a. Not allow payment of dividend
b. Allow payment of dividends
c. Allow payment of dividends after making such losses good
d. None of the above
254.A company auditor should see that the dividend should be paid
a. After charging depreciation
b. Without charging depreciation
c. Out of capital
d. None of the above
255.In his report, the auditor gives his
a. Judgment
b. Opinion
c. Guarantee to correctness of accounts
d. True state of affairs
256.Civil liability of an auditor implies liability for
a. Misappropriation of cash
b. Misappropriation of goods
c. Fraud
d. Misfeasance
257.An auditor can be held liable under companies Act 1949 for
a. Negligence
b. Criminal offence
 c. Professional misconduct
d. Breach of contract
258.Investigation of books of accounts and records is :
a) Not legally compulsory
b) Compulsory
 c) Compulsory as per companies act
d) Compulsory as Income Tax Act
259.Investigation is carries on behalf of
a) Manager
b) Employee
c) Client
d) On behalf of owner and third parties
260.Examination of accounting records undertaken for a special purpose is called
a) Auditing
b) Internal check
c) Investigation
d) Internal control
261. The prime importance of investigation on behalf of an individual or firm intending to
purchase an existing business is to
a) Ascertain value of asset
b) Ascertain the earning capacity of the concern
c) Estimation of value of good will
d) Extend of liabilities
262.Inflation of closing stock results is :-
a. Inflation of loss
b. Deflation of loss
c. Inflation of profit
d. Deflation of profit

263.Inflation of profit is possible due to :

a. Overvaluation of closing stock
b. Overstating purchase
c. Overstating opening stock
d. Overstating expenses
264.Charging excessive provision for depreciation results in
a. Less profit
b. More profit
c. No change in profit
d. No change in loss
265.The main purpose of management audit is to
a. Review the management operations
b. Check arithmetical accuracy
c. Prevent travel
d. Prevent error
266.Management audit is
a. Compulsory
b. Not compulsory
c. Compulsory under Income Tax Act
d. Compulsory under Indian Contract Act.
267.Special resolution means -------------------
a. 1/3 majority
 b. 2/3 majority
c. ½ majority
268.Ordinary resolution means -----------------------
a. 1/3 majority
 b. 2/3 majority
c. More than 1/2
269.The chartered Accountants Act is in -----------------
a. 1956
b. 1959
c. 1949
270.Section 633 of the companies Act deals with
a. Liability of auditor
b. Relief to the auditor
c. Punishment to the auditor
271.Auditor is an --------------- of a shareholder
a) Owner
b) Agent
c) Employer
272.Cost audit means audit of --------------- records
a) Financial
b) Cost
c) Tax
273.Financial auditor submits reports to the
a) Shareholder
b) Board of director
c) Employees
274.Cost auditor submits reports to the ---------------
a) Share holder
b) Board of directors
c) Employees----------------
275.--------------- audit is forward looking -
a) Financial
b) Cost
c) Tax
276.Cost auditor of a company is -----------
a) Chartered Accountant
b) Cost Accountant
c) Tax Accountant
277. Auditor finds that there is change in the method of valuation of stock whether he should
a) Allow it
b) Disallow it
c) Allow it with a note to this effect
278.Audit under any statute in a country is called ------------------
a) Final audit
b) Internal audit
c) Statutory audit
279. Books of Accounts are prepared and audited as per the provisions of the ---------------
a) Income Tax Act,1961
 b) Companies Act 1956
c) Chartered Accountants Act 1949
280.CAATTS is also known as -----------
a. Cost And Accounts Treatments
b. Computer Assisted Audit Tools and Techniques
 c. Classification and Accounting of Tax Tools
281.Auditor has got no lien on -------------
a) Audit Note Nook
b) Audit working papers
c) Books to Accounts of Client
282. Statutory Report should be sent to registrar before ------------------- days of statutory meeting
a) 30 days
b) 14 days
c) 21 days
283. The meeting held by the company with in a period of not less than one month and not more
than 6 months is called -------------
a) Statutory
b) Annual
c) General
284.-------------------- audit is not a statuary requirement
a. Management
b. Financial
c. Tax Audit
285. -----------------audit refers to the evaluation goalsofinthe comp areas of social responsibility.

a. Cost audit
b. Social audit
c. Management audit
286.Bonus shares are issued to ----------------
a. New members
b. Existing share holders
c. Employees
287.-------- Section of the Companies Act deals with Appointment of Company auditor.
a. Sec-226
b. Sec-224
c. Sec-227
288.-------- Section of the Companies Act deals with qualification of Company auditor.
a. Sec-226
b. Sec-224
c. Sec-227
289.Amount of Share premium may be utilized for
a. Payment of dividend
b. Writing of preliminary expenses
c. Routine expense
290.Share Premium Account should be shown in Balance sheet under
a. Paid-up capital
b. Subscribed capital
c. Reserves and surpluses
291. Auditor should see that amount received for premium on issue of shares should be shown in
a. Subscribed capital
b. Capital Reserve Account
 c. Share Premium Account
292.A company can issue redeemable preference shares if authorized by
a. Memorandum of Association
b. Articles of Association
c. Companies Act-1956
293.A company can issue bonus shares if authorized by
a. Memorandum of Association
b. Articles of Association
c. Companies Act-1956
294.Interest on calls paid in advance according to table A, should not exceed
a. 6%
b. 5%
c. 10%
295.For the forfeiture of shares, the auditor should check that it is permitted
Memorandum of Association
By articles of association
Under Companies Act 1956
296.Profits on reissue of forfeited Shares should be transferred
to Share forfeited Account
Capital Reserve Account
Profit and Loss Account
297. Shares issued for consideration other than cash should be vouched with the help
of
a. Director‟s minute Book
b. Shareholder‟s minute Book
c. Contact with the party concerned
298. While checking the allotment of shares, the auditor should see that it is made
within
a. 100 days of issue of prospectus
b. 120 days of issue of prospectus
c. 150 days of issue of prospectus
299. Which of the following percentage of nominal amount of shares should be received
with application
10
15
5
300.Accounting standards are prepared by
a. SEBI
b. RBI
c. ICAI
d. ITA
301.Which of the following is referred to confirm the allotment of shares to the vendor
a. Cash book
b. Pass book
c. Director‟s minute
302.Share premium Account is shown on the _______________
a. Asset side of Balance sheet
b. Liability side of Balance sheet
c. Credit side of profit and loss Account
303.Issue of shares at discount should be sanctioned by the ________________
a. Board of directors
 b. Share holders
c. Company Law Board
304.The maximum rate of discount on shares shall not exceed________________
a. 20%
b. 15%
c. 10%
305. Discount on issue of shares not written of is shown separately in Balance sheet under the
head_____________
Miscellaneous expenditure
Preliminary expanses
Current assets
306.__________________section of Companies Act deals with share Capital
a. 69
b. 60
c. 50
307.Which among the following is not a function of the author
a. Checking errors and frauds
b. Vouching with original documents
c. Preparing final Accounts
308.Audit conducted as per the provisions of law is _____________
a. Statutory Audit
b. Continuous Audit
c. Social Audit
309.The scope of auditing does not cover.
a. Vouching
b. Checking arithmetical accuracy
c. Ledger posting
310.Internal audit is conducted
a. Periodically
b. Throughout the year
c. Once in a year
311.The amount of application money received shall be deposited in a scheduled bank until________
a) Annual general meeting
b) General meeting
c) Certificate to commencement obtained
312.Amount received as premium can be used to ___________
a. Purchase Assets
b. Pay of liabilities
c. Issue bonus shares
313. The auditors are liable under
a. Companies Act Only
b. Income Tax Act Only
c. All above
314. The maximum number of audit assignment an auditor can accept is limited to -------------- companies
a. 10
b. 15
c. 20
315. Auditors can be appointed by -------------- when the shareholders fail to appoint auditors at the general meeting
a. Board of directors
b. Central government
c. Company Low board
316. The examinations of financial transactions with supporting evidences is called
a. Verification
 b. Vouch in
c. Auditing
317. Which among the following is an example of intangible asset?
 a. Goodwill
b. Patents
c. All of these
318. Which of the following is not an item current asset?
a. Stock
b. Sundry debtors
c. Furniture
319. The term inventories stands for
a. Raw materials
b. Work in progress
c. All of these
320. Sales day book is used for recording
a. Credit sales
b. Cash sales
c. All sales
321. --------------- audit is more suitable for small business houses
a. Continuous
b. Annual
c. Partial
322. Vouching is an examination of ----------- to ascertain the accuracy and authenticity of transactions in the book of
accounts
Audit files
Audit note book
Documents
323. --------------- is a written plan containing details with regard to the conduct of a particular audit
a. Audit Note book
b. Audit programme
c. Audit files
324. --------------- is the verification of books of accounts from Income tax point of view
a. Cost audit
b. Tax audit
c. Management audit
325. Investigation is conducted
a. Regularly
b. Quarterly
c. As and when required
326. Investigation is required when
a. Fraud is suspected in business
b. On acquisition of running business
c. All of them
327. Which among the following is not a right of company auditors
a. Right to access the book accounts
b. Right to seek explanations
c. Right to lies on books of accounts
328. Test checking is done when there is an effective system of --------------
a. Internal control
b. Internal audit
c. Internal check
329. Test checking means
 a. Checking of all transactions
b. Checking of half of the transactions
c. Checking of selected items
330. Audit working papers are --------------------------
a. Important information about audit
b. Appointment letters regarding audit
c. Letter of notice
331. Current audit file consists of
a. Matters of future importance
b. Matters relations to post years
c. Matters relating to the year of audit
332. ------------------- begins where accounting ends
a. Bookkeeping
b. Auditing
c. Internal check
333. ---------------- audit is compulsory for joint stock companies
a. Statutory
b. Final
c. Continuous
334. Treating revenue expenditure as capital expenditure is an example of error of -------------------
a. Principle
b. Compensating
c. Clerical
335. Financial statements are prepared by
a. The accountant
b. The auditor
c. Managing director
336. Preliminary expanses not written off are treated as
a. Fixed assets
b. Intangible assets
c. Fictitious assets
337. Verification of assets involves a critical examination of
a. Ownership
b. Existence
c. All of these
338. Finished goods are valued for a balance sheet purpose
a. At cost price
b. At market price
c. At lower of cost or market price
339. ---------------- includes financial and non-financial control
a. Internal check
b. Internal control
c. Internal audit
340. ---------------- is concerned with the allocation of work among employees
a. Internal control
b. Internal check
c. Internal audit
341. The duties of internal auditor is prescribed by
a. Companies act
b. Company law board
c. Management
342. Internal audit is considered as a service to -------------------
a. Share holders
b. Board of directories
c. Management
343. Pre-arranging and coordinating the audit work is called ------------------
a. Audit planning
b. Vouching
c. Verification
344. A fixed audit programme is also called a --------- programme
a. Tailor made
b. Man made
c. Auditor made
345. Shareholders minute book should be vouched for
a. Payment to vendors
b. Payment to promoters
c. Issue of bonus shares
346. ---------------- is deducted from called up capital to get paid up capital
a) Subscribed capital
b) Issued capital
c) Calls in arrears
347. Discount on issue of shares is shown under the --------------- lead
a) Current asset
b) Preliminary expanses
c) Miscellaneous expanses
348. To forfeit shares --------------- days‟ to noticetheshareholder‟sgiven
a. 40
b. 14
c. 24
349. -------------- of the companies Act 1956 prescribes the duty of preparing a report by an auditor
a. Sec-227(2)
b. Sec-273(1)
c. Sec-224(2)
350. A --------------- report is one which contains the opinion of the auditor subject to certain conditions
a. Unqualified
b. Qualified
c. Clean
351. --------------- is made out of reserves or share premium
(D) Preference shares
(E) Bonus shares
(F) Debentures
352.---------------- shares cannot be issued if the company makes any default in the payment of
its obligation
a. Preference
b. Equity
c. Bonus
353. Capitalization of reserves means -------------------------
a. Creation of provision
b. Declaration of dividend
c. Issue of bonus shares
354. Provisions regarding bonus issue should be given in -------------------- document
A) Memorandum of association
B) Articles of association
C) Prospectus
355. Balance remaining in the forfeited Account after reissue is transferred to ---------------
account
General reserve
Capital reserve
Premium account
356. If reissue of shares are more than face value of shares, the excess amount is
transferred to -------account.
General reserve
Capital reserve
Premium account
357. Share call amount due is credited to ------------------ account
a. Share application account
b. Share allotment account
c. Share capital account
358. When excess applications money is refunded to applicants it is vouched with cash
book and -------
a. Letter of allotment
b. Letter of call
c. Letter of regret
359. Partial auditing is usually done by
a. Sole trading concern
b. Joint stock company
c. Govt. department