MCQ Bank

An oil marketing company employs 1000 personnel in local market. Majority of its workers are paid on the piece rate basis. The company should compensate them in which one of the following forms of payment?

A) Salary
B) Cheque
C) Money
D) Wages

AI Explanation

Employees paid on a piece rate basis are compensated through wages because payment depends on the quantity of work completed. Salaries are generally fixed periodic payments.

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Q127

“Input VAT” refers to which one of the following statements?

A) It refers to the tax which a company would charge on items which it sells
B) It refers to the tax which the company is charged when it sells its products to the retailers
C) It refers to the tax which the company is charged when it makes its purchases
D) It refers to the tax which a company would charge on items which it sells internationally

AI Explanation

Input VAT is the VAT paid by a business on purchases of goods or services. It can generally be recovered or offset against output VAT charged on sales.

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Q128

What is the treatment of social security benefit received by a worker of an organization?

A) Subtract it from bonus he received
B) Subtract it from payroll
C) Add it to total pay received
D) Add it to total income received

AI Explanation

Social security benefits received by a worker are additional benefits and are added to the total remuneration received. They are not deducted from payroll or bonus amounts.

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Q129

The access should be _________ for controlling the assets and records in better way.

A) grunted
B) Banned
C) Prohibited
D) Restricted

AI Explanation

Access to assets and records should be restricted only to authorized personnel. This helps prevent unauthorized use, errors, and fraud.

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Q130

Auditor adopts different control procedures for testing of sales system of a company. Which control procedure is Not used in testing the sales system?

A) Return inwards
B) Return outwards
C) Orders
D) Dispatches

AI Explanation

Return outwards relates to purchases and is part of the purchase system, not the sales system. Sales system testing includes orders, dispatches, and return inwards from customers.

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Q131

For the purpose of keeping effective control in the cash system, who should have no access to the cash or the preparation of the paying-in slip?

A) Cash officers
B) Operations manager
C) Sales ledger personnel
D) Teller/cashier

AI Explanation

Sales ledger personnel should not have access to cash or preparation of paying-in slips to maintain segregation of duties. This reduces the risk of fraud and improper handling of receipts.

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Q132

A building company constructs its own office block. How the company should categorize this asset?

A) Intangible fixed asset
B) Liquid asset
C) Non current asset
D) Current asset

AI Explanation

An office block constructed by a company for its own use is a long-term asset used in operations. Therefore, it is classified as a non-current asset.

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Q133

Which one of the following may NOT be the control procedure at key stages of the sales cycle?

A) Receivables
B) Invoicing and credit notes
C) Receipt of goods
D) Bad Debts

AI Explanation

Receipt of goods is part of the purchase cycle rather than the sales cycle. Key sales cycle controls include receivables, invoicing, credit notes, and bad debt management.

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Q134

In which one of the following ways auditors can choose the verification techniques in a given set of circumstances?

A) It depends upon the nature of business operation of the entity
B) It depends upon the available audit evidence to the auditor
C) It depends upon the judgmental skills of the auditor
D) It depends upon the audit procedures planned by the auditor

AI Explanation

Auditors select verification techniques based on the circumstances of the audit, including the nature and type of the entity's operations. The business environment influences which verification methods are most appropriate.

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Q135

Which one of the following is TRUE about Auditing requirements for transparency of the Payroll system of a company?

A) The duties of the wages staff should preferably be rotated with respect to company’s own policies
B) The duties of the wages staff should preferably be rotated according to their performance
C) The duties of the wages staff should preferably be rotated monthly
D) The duties of the wages staff should preferably be rotated during the year

AI Explanation

Rotating payroll staff duties during the year is a control measure that reduces the risk of fraud and helps maintain transparency in payroll operations. It also improves accountability among employees.

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Q136

Creditworthiness of a customer can be shown from which of the following method?

A) By write-off of bad debts
B) By raising the credit note
C) By acceptance of orders
D) By pricing and discounts

AI Explanation

A customer's creditworthiness is assessed before accepting credit orders, based on factors such as payment history and financial reliability. Acceptance of orders indicates that the customer has passed credit evaluation procedures.

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Q137

What is the risk that is of most concern to auditors when auditing cash?

A) Adjunct risk
B) Non-sampling risk
C) Inherent risk
D) Detective risk

AI Explanation

Cash is highly liquid and vulnerable to theft or misuse, making inherent risk a major concern for auditors. It exists before considering the effectiveness of internal controls.

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Q138

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

A) Effectiveness
B) Sufficiency
C) Reliability
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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Q139

Which of the following items are observed while verification of the interest of the owners in net assets of the company?

A) Assets and liabilities
B) Share capital and reserves
C) Investments
D) Retained earnings

AI Explanation

The owners' interest in the net assets of a company is represented by equity, which includes share capital and reserves. These items are verified during the audit of equity balances.

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Q140

What auditors seek in the register of non current assets for each major group of assets?

A) Details of each item, its cost and depreciation
B) Details of each item, its cost and accumulated depreciation
C) Details of each item, its cost and residual value
D) Details of each item, its cost and capital investment expected returns

AI Explanation

The non-current asset register should contain details of each asset, its original cost, and accumulated depreciation. This information helps auditors verify existence, valuation, and depreciation calculations.

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Q141

Mathematical accuracy of documents or records can be performed for the purpose of obtaining audit evidence with which one of the following resources?

A) Company resources
B) Auditor resources
C) Information technology
D) Mechanical devices

AI Explanation

Auditors perform mathematical accuracy checks themselves as part of audit procedures using their own resources and expertise. These checks help verify the accuracy of accounting records and documents.

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Q142

According to the requirements of auditing standards, the opening of the significant cash receipts by post should be done in the presence of how many responsible officials(s)?

A) Two individuals
B) Three individuals
C) Four individuals
D) One official

AI Explanation

Significant cash receipts received by post should be opened in the presence of two responsible officials to maintain proper segregation of duties and reduce the risk of fraud or misappropriation.

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Q143

Work in process inventory is directly comparable with;

A) Total capacity of machine
B) Total units produced in actual
C) Input supplied
D) Required output

AI Explanation

Work in process inventory represents partially completed units and is directly related to the actual production output. It is measured in relation to units produced rather than machine capacity or required output.

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Q144

Verification of equity is done according to which one of the following law?

A) International accounting laws
B) Companies ordinance, 1984
C) Generally accepted accounting principles
D) International auditing laws

AI Explanation

Verification of equity is performed according to the relevant corporate laws and regulations governing companies. In this context, the Companies Ordinance, 1984 provides the legal framework for company equity matters.

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Q145

Which one from the following is a most convenient method to pay salaries and wages of an employee electronically?

A) All of them
B) Bank transfer
C) By cheque
D) By cash

AI Explanation

Bank transfer is the most convenient electronic method for paying employee salaries and wages. It provides secure, efficient, and traceable payment processing compared with cash or cheques.