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Encircle the most appropriate answer from the following options :

1. An employee cannot be an auditor of the company because

A. he cannot find his own mistakes

B. a person cannot audit his Own account

C. he may give bias and subjective views

D. it is prohibited by company law

2. Which of 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\

3. An audit which is compulsory by the law is

A. Government Audit

B. Internal Audit

C. Cost Audit

D. Statutory Audit

4. Instruction of audit issued by controller and auditor general of India

A. Statutory audit

B. Final Audit.

C. Management audit

D. Government audit

5. Audit done by the employees of the business undertaking is called

A. Final audit

B. Management Audit

C. Government Audit

D. Internal Audit

6. This kind of audit is conducted generally between two annual audit

A. Internal Audit

B. Interim audit

C. Final Audit

D. Continuous Audit

7. Management audit otherwise called as

A. Efficiency Audit

B. Final audit

C. Cost Audit

D. Cash audit

8. Before the work of audit is commenced, the auditor plans out the whole of audit work is called

A. Audit Plan

B. Audit Note

C. Audit Control

D. Audit Programme

9. A number of checks and controls exercised in a business to ensure its efficient working are known as

A. Internal Check

B. Interim Check

C. Internal Audit

D. Internal Control

10. A Voucher is a _

A. Document is support of an entry made in books of accounts

B. Invoice received from suppliers

C. Receipt issued to a customer for cash

D. Dispatch Receipt

11. Voucher relates to_

A. Cash receipt & payments, credit transactions

B. Cash payment only

C. Credit transactions only

D. Cash receipt only

12. Internal check is meant for

A. Prevention of frauds

B. Detection of frauds

C. Helping audit is depth

D. Detection of errors

13. Internal auditor is appointed by

A. The Management

B. The Shareholders

C. The Government

D. The Statutory Body

14. Auditing begins where

A. Selling

B. Inventory Valuation

C. Purchases


D. Accounting

15. A kind of audit conducted for a part of the accounting year is called

A. Periodical Audit

B. Partial Audit

C. Cost Audit

D. Interim Audit

16. For which of the following, Audit is optional?

A. Trusts

B. Joint stock companies

C. Proprietorship concern

D. Private Limited Companies

17.The audit that is made compulsory under statute is called

A. Statutory audit

B. Partial audit

C. Complete Audit

D. Continuous Audit

18. The receipt of goods must be entered in

A. Goods inward book

B. Goods outward book

C. Receipt of Stores & Goods outward book

D. Receipt issue and balance of stores

19. Auditing standards differ from auditing procedures in that procedures relate to

A. Measure of performance

B. Audit principles

C. Acts to be performed

D. Audit judgments

20. Confirmation of the court is necessary for_

A. increasing the share capital

B.reduction of share capital

C. conversion of shares into stock

D. issue of new shares

21. Profit prior to incorporation may be utilized to

A. write of goodwill

B. pay interest on purchase consideration

C. writing off fixed assets

D. pay interest on secured loans

22. Which of the following is not true about opinion on financial statements?

A. The auditor should express an opinion on financial statements

B. His opinion is no guarantee to future viability of business

C. He is responsible for detection and prevention of frauds and errors in financial statements

D. He should examine whether recognized accounting principles have been consistently followed

23. Audit means

A. recording business transactions

B. preparing the final accounts

C. examination of books, accounts, vouchers etc.

D. preparing final accounts

24. Audit programme is prepared

A. to help the auditor and his staff about the work to be done while auditing

B. to help the accountant to prepare the balance sheet

C. to help the company to submit its accounts

D. to help the shareholders to file the returns

25. Auditor shall report on the accounts examined by him

A. to the proprietor

B. to the court

C. to the bank

D. to the general public

26. Purchase of machinery is a_

A. revenue receipt

B. capital receipt

C. capital expenditure

D. revenue expenditure

27. Sale of land is a _

A. revenue receipt

B. capital receipt

C. capital expenditure

D. revenue expenditure

28. Shares are forfeited on the non-payment of

A. share calls amount

B. calls in advance

C. minimum share capital

D. debenture amount

29. Secret reserve can be created by

A. public limited company only

B. banking and financial companies only

C. private limited company only

D. Co-operative societies

30. General reserve is

A. an appropriation from the profit

B. a must item in the debit side of the P&L account

C. an appropriation from the share capital

D. important item in the balance sheet

31. When A transaction has not been recorded in the books of account either wholly or partially

Such errors are called as

A. errors of commission

B. error of principle

C. compensating error

D. errors of omission

32. Verification of the value of assets, liabilities, the balance of reserves, provision and the amount of profit earned or loss suffered a firm is called

A. continuous audit

B. partial audit

C. interim audit

D. balance sheet audit.

33. A sale of Rs. 50000 to Mr. A was entered as a sale to Mr. B. This is an example of what?

A. Error of omission

B. Error of commission

C. Compensating error

D. Error of principle

34. Recording a transaction twice in the books of original entry is an error of

  1. Commission
  2. Omissions
  3. Duplication
  4. None

35. Errors and faults committed can be discovered under the system of

  1. Internal audit internal check & internal check

External check

  1. Statutory audit
  2. interim audit

36. Treating revenue expenditure as capital expenditure is a case of

A. fraud

B. misappropriation of cash

C. misappropriation of goods

D. manipulation of accounts

37. Vouching of the balances of all incomes and expenses account is known as vouching of

A. personal ledger

B. impersonal ledger

C. cash

D. sales

38. Stock in trade is valued

A. at cost price

B. at market price

C. at cost price or market price whichever is less

D. at cost price less depreciation

39. Goods sent on approval basis have been recorded as credit sales. This is an example of what?

A. Error of principle

B. Error of commission

C. Error of omission

D. Error of duplication

40. Preliminary expenses are the best example for

A. fictitious asset

B. intangible asset

C. wasting asset

D. floating asset

41. The profits that can be legally distributed to shareholders are called

A. revenue profits

B. capital profits

C. divisible profits

D. divisible profits

42. Errors of principle are due to

A. wrong entry of the transaction in the books of original entry

B. wrong allocation of expenditure between capital and revenue

C. mistake in the payment of commission

D. mistake in the payment of salary

43. Periodical audit is also called as

A. final audit

B. interim audit

C. balance sheet audit

D. income statement audit

44. An audit programme is

A. a description, memorandum or an outline of the work to be done in a business

B. the rules and regulations prescribed for writing up the books of accounts

C. to gain knowledge of clients accounting system

D. a trial work

45. The auditor of a government company shall be appointed by

A. the government company itself

B. the central government

C. the shareholders

D. the debenture holders

46. The main object of the audit of the cash book may be

A. to verify the assets and liabilities

B. to know that all receipts and payments have been properly recorded

C. to check the internal control system in business

D. to check the bank balance

47. The purpose of the audit of wage payment is to determine that

A. the work is executed completely for which the workers are paid wages

B. the workers are paid the correct amount of wages under proper authorization

C. the workers are working regularly

D. the workers are not overpaid

48. One of the audit procedures to check the issue of share capital of the newly formed company is

A. the memorandum of association and articles of association

B. the share transfer register

C. the issue of debenture

D. certificate of commencement

49. Capital reserves are created out of profits of

A. a revenue nature

B. a capital nature

C. a secret reserve

D. contingency reserve

50. 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