MCQ Bank

Tests of controls involve evaluating whether controls are properly designed, implemented, and operating effectively. This allows auditors to determine whether they can rely on the internal control system.

ACC311 Final Term AI Solved

Q47

The process of studying the legitimacy, usefulness and reliability of business transactions is:

A) Collection of audit evidence
B) Examination of violations found in operations
C) Study of economic operations
D) Formulation of audit categories

AI Explanation

The study of economic operations involves evaluating the legitimacy, usefulness, and reliability of business transactions. It helps auditors understand and assess the organization's activities.

ACC311 Final Term AI Solved

Q48

Appropriateness of the audit evidence refers to the quality of audit evidence that imply to which one of the following statements?

A) Relevance and reliability of audit evidence gathered
B) Inconsistency and flexibility of audit evidence gathered
C) Formulation and structure of audit evidence gathered
D) Consequence and implication of audit evidence gathered

AI Explanation

Appropriateness of audit evidence refers to the quality of evidence, which is determined by its relevance and reliability. High-quality evidence helps auditors reach valid conclusions.

ACC311 Final Term AI Solved

Q49

Audit evidence, including information received from third parties in writing is called:

A) Internal audit evidence
B) Mixed audit evidence
C) None of the given options
D) External audit evidence

AI Explanation

Information received from third parties in writing is considered external audit evidence. It is generally more reliable because it comes from an independent source outside the organization.

ACC311 Final Term AI Solved

Q50

An auditor of a large telecom company gathers audit evidence to determine if specific management assertions are being met. He should perform the specific facts as follows EXCEPT:

A) Incorporate risk assessment procedures
B) Conducts tests of controls
C) Perform substantives procedures
D) Develop strategies for operational effectiveness

AI Explanation

Auditors gather evidence through risk assessment procedures, tests of controls, and substantive procedures to evaluate financial statement assertions. Developing strategies for operational effectiveness is a management activity, not an audit evidence procedure.

ACC311 Final Term AI Solved

Q51

While inspecting the purchase cycle of a company the auditor focuses to obtain the following objectives EXCEPT:

A) Goods received should be properly inspected
B) Purchase order issued under proper authority and procedures
C) Purchase orders only issues for such quantity which is necessary for the conducting of business operations
D) All transaction related to receivables should be properly recorded

AI Explanation

The purchase cycle relates to purchasing activities, receiving goods, and authorization of purchases. Recording receivables is part of the sales and collection cycle, not the purchase cycle.

ACC311 Final Term AI Solved

Q52

For better results, Auditor focused on designing the question while ICQ constructions. Questions should be designed to fulfill the following objectives EXCEPT:

A) It ensures the management participation in ICQ constructions
B) It ensure whether the control objectives are being achieved or not
C) It ensures that the all aspects were covered
D) It ensures about the validity of information obtaining in response

AI Explanation

Internal Control Questionnaire (ICQ) questions are designed to assess control objectives, cover relevant areas, and validate information obtained. Ensuring management participation is not a primary objective of ICQ construction.

ACC311 Final Term AI Solved

Q53

If we talk about timings of substantive procedures. Which statement seems to be true?

A) Substantive procedure are more reliable if applied at the end of year
B) Substantive procedure are more reliable if applied frequently during the year
C) Substantive procedure are more reliable if applied after specific intervals in a year at least 2 times
D) Substantive procedure are more reliable if applied at start of the year

AI Explanation

Substantive procedures are generally more reliable when performed at or near the end of the reporting period because they directly test year-end balances and transactions. This reduces the risk of changes occurring between testing and the financial statement date.

ACC311 Final Term AI Solved

Q54

For better results an ICQ should carry basic information as:

I. Yes and No answer
II. Comments with Yes and No answer are not applicable
III. Consists of open ended questions only
IV. All respondents should properly literate

A) IV & I only
B) II & III only
C) III & IV only
D) I & II only

AI Explanation

An effective ICQ generally includes Yes/No answers along with comments or explanations where needed. It is not limited to open-ended questions, and respondent literacy is not considered a basic feature of ICQ design.

ACC311 Final Term AI Solved

Q55

Inspection of tangible assets is a good example of the following assertion for obtaining audit evidence:

A) Presence
B) Subsistence
C) Occurrence
D) Existence

AI Explanation

Inspection of tangible assets provides evidence that recorded assets actually exist. It helps auditors verify the existence assertion for physical assets.

ACC311 Final Term AI Solved

Q56

Audit evidence can be obtained through different audit procedures, following are some important audit procedures EXCEPT:

A) Test of skills
B) Test of details
C) Analytical procedures
D) Test of control

AI Explanation

Common audit procedures include tests of controls, tests of details, and analytical procedures. Test of skills is not a recognized audit evidence gathering procedure.

ACC311 Final Term AI Solved

Q57

Inquiries of warehouse personnel concerning possible obsolete or slow-moving inventories provide assurance about which one of the following management's assertions?

A) Existence
B) Completeness
C) Valuation
D) Presentation

AI Explanation

Inquiries about obsolete or slow-moving inventory help auditors assess whether inventory is properly valued. Such conditions may require adjustments due to reduced net realizable value.

ACC311 Final Term AI Solved

Q58

Which of the following risk/(s) can present at assertion level?

A) Material misstatement risk
B) All of the given options
C) Audit risk
D) Significant risk

AI Explanation

At the assertion level, auditors consider risks such as material misstatement risk, audit risk, and significant risk. These risks affect the assessment of financial statement assertions and the design of audit procedures.

ACC311 Final Term AI Solved

Q59

All of the following characteristics reflect the level of competence of audit evidence EXCEPT:

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

AI Explanation

Competence of audit evidence relates to its quality, including reliability, relevance, and independence. Sufficiency refers to the quantity of evidence rather than its competence.

ACC311 Final Term AI Solved

Q60

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

A) Source and nature of the information
B) Timeliness
C) Quantity
D) Objectivity

AI Explanation

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.

ACC311 Final Term AI Solved

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.

ACC311 Final Term AI Solved

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.

ACC311 Final Term AI Solved

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.

ACC311 Final Term AI Solved

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.

ACC311 Final Term AI Solved

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.