MCQ Bank

Reliability of audit evidence depends on factors such as source, nature, timeliness, and objectivity. Quantity relates to the amount of evidence and affects sufficiency, not reliability.

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Q61

Any cancellation of sale/purchase invoice leads toward further cancellation of which one of the following:

A) Credit note
B) Return inwards note
C) Dispatch note
D) Requisition note

AI Explanation

Cancellation of a sale or purchase invoice generally requires a credit note to reverse the financial effect of the original invoice. Credit notes provide formal documentation for reducing recorded amounts.

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Q62

Inventory should be identified and marked with accordance to relevant information, this information can be related to;

A) All of above
B) Size
C) Grade
D) Origin

AI Explanation

Inventory identification information may include size, grade, and origin to ensure proper classification and control. Therefore, all listed options are relevant.

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Q63

Which of the following matters should be included in the letter of representation?

A) Market value of the company’s stock
B) Existence of any fraud or error in the statements
C) Company’s growth trend in the future in figures
D) Existence of any immaterial mistake in the statements

AI Explanation

A letter of representation includes management's confirmation about matters relevant to the audit, including fraud or errors known to management. Market values and future growth predictions are not normally included, and immaterial mistakes are generally not a required representation matter.

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Q64

Which one of the following testing objectives refers to the assertion “Completeness” in obtaining audit evidence?

A) Transactions arising during the period are reflected in the period's financial statements
B) Assets and liabilities included on the balance sheet actually exist
C) The amounts at which assets and liabilities are stated is correct
D) All transactions and events that should be recorded have been recorded

AI Explanation

The completeness assertion ensures that all relevant transactions and events have been included in the financial statements. It focuses on preventing omissions from accounting records.

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Q65

Which one of the following documents is NOT included in purchase system while applying different control procedures on it?

A) Goods received note
B) GRN Invoice
C) Goods dispatched note
D) Good returned note

AI Explanation

A purchase system includes documents such as purchase orders, goods received notes, invoices, and goods returned notes. Goods dispatched notes relate to sales or dispatch processes rather than purchasing.

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Q66

In order to ensure effective control, how often a full inventory count should be held when perpetual inventory records are not kept adequately?

A) At least weekly
B) At least once a year
C) At least monthly
D) On a daily basis

AI Explanation

When perpetual inventory records are not adequately maintained, a full physical inventory count should be performed at least annually. This helps verify inventory quantities and accuracy of records.

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Q67

When payroll costs are compared with the number of employees, the auditor would be able to:

A) Obtain evidence of management’s control over the preparation of payroll
B) Point out over employment in the entity
C) Detect an overpayment to one of the employees
D) See that payroll costs are reasonable

AI Explanation

Comparing payroll costs with the number of employees is an analytical procedure used to assess whether payroll expenses appear reasonable. It does not usually identify individual overpayments or directly test payroll controls.

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Q68

Following are some Non-Statutory payroll deductions made by the organization from worker’s pay EXCEPT:

A) Contribution to pension scheme
B) None of them
C) Contribution to gratuity scheme
D) Fee paid for subscription to trade union

AI Explanation

Non-statutory payroll deductions are voluntary deductions made from employees' pay, such as pension, gratuity, and trade union subscriptions. Since all listed items can be considered non-statutory deductions, none of them is the exception.

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Q69

For measuring the quality of audit evidence auditor used the tools of appropriateness; in case if auditor wants to measure quantity of audit evidence which tools from the following should be adopted?

A) Reliability
B) Sufficiency
C) Effectiveness
D) Relevance

AI Explanation

Appropriateness measures the quality of audit evidence through relevance and reliability, while sufficiency measures the quantity of evidence obtained. Auditors use sufficiency to determine whether enough evidence has been collected.

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Q70

Receivable ledger control accounts should be prepared regularly and should checked by the following authority:

A) Independent office
B) Sales officer
C) Purchase officer
D) Store officer

AI Explanation

Receivable ledger control accounts should be regularly prepared and reviewed by an independent authority to ensure proper verification and reduce the risk of errors or fraud. Sales, purchase, or store officers are not independent for this purpose.

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Q71

According to the requirements of auditing standards for Wages and Salaries, the authorization to employ or dismiss any employee should be done in which one of the following ways?

A) Using a legal paper
B) Verbal
C) Formal meeting
D) Written

AI Explanation

Auditing standards require authorization for employing or dismissing employees to be properly documented. Written authorization provides reliable evidence of approval and accountability.

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Q72

Which one of the following is NOT a general principle with respect to verification method of liabilities?

A) To verify all liabilities have been stated
B) To determine terms and conditions agreed when accepting loans
C) To consider the reasonableness of the liability
D) To consider the liabilities at previous accounting date

AI Explanation

Verification of liabilities focuses on ensuring all liabilities are recorded, checking loan terms, and assessing reasonableness. Considering liabilities at the previous accounting date is not a general verification principle.

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Q73

Adjustments should be made before ending the financial period. These adjustments regarding purchase system should be recorded in:

A) Purchase ledger control account
B) Goods return account
C) Sales ledger control account
D) Goods received account

AI Explanation

Adjustments related to purchases before the end of the financial period are recorded in the goods received account to ensure that received goods and related liabilities are properly reflected. This helps achieve accurate purchase system records.

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Q74

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

A) Family
B) Next of kin
C) Any colleague
D) No one

AI Explanation

According to audit control requirements, wages should only be collected by the employee entitled to receive them. Allowing another person to take wages increases the risk of fraud or unauthorized payments.

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Q75

How often the physical inspection of non current assets should be carried out?

A) Periodically
B) Never
C) Rarely
D) Everyday

AI Explanation

Physical inspection of non-current assets should be carried out periodically to verify their existence, condition, and proper use. Daily inspection is unnecessary, while never or rarely inspecting increases audit risk.

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Q76

Which statement from the following is true for describing the Sinking Funds?

A) That type of funds which are kept aside by the organization to meet the needs of daily routine works
B) That type of funds which are kept aside by the organization to meet the normal loss
C) That type of funds which are kept aside by the organization to meet the debts
D) That type of funds which are kept aside by the organization to meet the Abnormal loss

AI Explanation

Sinking funds are amounts set aside over time to repay debts or replace major assets in the future. They are not intended for routine expenses or normal operating losses.

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Q77

The term ‘Reconciliation’ refers to which one of the following statements in the context of auditing?

A) A special Congressional procedure often used to implement the revenue and spending targets established in the budget resolution
B) Reconciliation refers to an audit test that compares three sets of financial records to make sure they are in agreement
C) Reconciliation refers to a process that of preparing final audit opinion
D) Reconciliation refers to a process that compares two sets of financial records to make sure they are in agreement

AI Explanation

In auditing, reconciliation involves comparing two records or balances to identify and resolve differences. It helps verify the accuracy and completeness of accounting information.

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Q78

A telecom company has hired auditors who have been inquiring and analyzing the company’s records since a week. For this purpose, they calculate figures or multiple accounts to check accuracy. In your opinion, auditors are using which one of the following types of audit-testing procedures?

A) Inspection
B) Analytical procedures
C) Enquiry
D) Computation

AI Explanation

When auditors calculate figures or perform mathematical checks to verify accuracy, they are using the computation audit procedure. Computation involves checking the arithmetical accuracy of records and documents.

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Q79

Which one of the following tests may be applied to the goods received note?

A) Evidence of a sequence check
B) Evidence of approval of requisitions
C) Adherence to authority limits
D) Proof of issuance date

AI Explanation

Goods received notes are usually pre-numbered documents, so auditors can test whether a proper sequence check is maintained. This helps ensure completeness and control over goods received records.