MCQ Bank

Substantive procedures for the financial statement closing process include agreeing records, examining journal entries, and reviewing adjustments. Examining documentary proof of every transaction is not a specific closing process procedure.

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Q187

Which of the following is TRUE for audit evidence?

A) It is the information to form an opinion on financial statements
B) It is the information to form an opinion on audit statements
C) It is the information to form an opinion on marketing statements
D) It is the information to form an opinion on management statements

AI Explanation

Audit evidence is the information used by auditors to draw conclusions and form an opinion on financial statements. It supports the auditor's assessment of whether statements are fairly presented.

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Q188

Substantive procedures are tests which are undertaken to obtain which one of the followings?

A) Audit opinion
B) Audit appointment
C) Audit evidence
D) Reasonable assurance

AI Explanation

Substantive procedures are performed by auditors to obtain sufficient appropriate audit evidence about transactions, account balances, and disclosures. This evidence helps support the auditor's conclusions.

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Q189

Documentary evidence is used extensively in auditing. Which one of the following represents two special classes of documentary evidence?

A) Confirmations and oral representations
B) Oral and written representations
C) Confirmations and oral representations
D) Confirmations and written representations

AI Explanation

Confirmations and written representations are special classes of documentary evidence used in auditing. They provide documented support obtained from external parties or management.

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Q190

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

AI Explanation

ICQ questions are designed to evaluate control objectives, cover all relevant areas, and ensure reliable information is obtained. Management participation is not a primary objective of ICQ construction.

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Q191

Test of controls comprise of testing all of the following three things EXCEPT:

A) Design
B) Operating efficiency
C) Implementation
D) Operating effectiveness

AI Explanation

Tests of controls evaluate the design, implementation, and operating effectiveness of controls. Operating efficiency relates to performance and is not a control testing objective.

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Q192

Auditor is able to apply tests of control procedure if following condition are fulfilled EXCEPT:

A) None of the given options
B) When sufficient appropriate audit evidence can’t be obtained at assertion level by substantive procedures alone
C) When sound internal control exists in the organization
D) Only applied after application of test of details procedure

AI Explanation

Tests of controls are not necessarily applied after tests of details; they are usually performed when auditors plan to rely on internal controls. They may be used when effective controls exist or when substantive procedures alone are insufficient.

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Q193

Highlight the factor which has NO effects on quality of Confirmations made by an auditor if he ignores it:

A) Debtors & creditors
B) Banks
C) Legal advisors
D) Previous auditor

AI Explanation

Confirmations are typically obtained from external parties such as debtors, creditors, banks, and legal advisors. The previous auditor does not directly affect the quality of current audit confirmations.

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Q194

Which one of the following primary assertions is satisfied when an auditor observes the client's physical count of inventory?

A) Valuation
B) Rights and obligations
C) Existence
D) Completeness

AI Explanation

Observing the physical count of inventory provides evidence that the inventory actually exists. It is primarily used to test the existence assertion.

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Q195

Test of control is a brief method to obtain the audit evidence. It comprises of three things such as:

A) Design, implement & Checked the Operating efficiency
B) Design, implement & Checked the Operating effectiveness
C) Design, implement & Analyze the results
D) Design, implement & get results

AI Explanation

Tests of controls involve evaluating whether controls are properly designed, implemented, and operating effectively. This helps auditors determine whether reliance can be placed on the internal control system.

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Q196

Which one of the following audit procedures is most associated with the management’s assertion of ‘Completeness’?

A) Reviewing the outstanding cheques listing
B) Checking that the accounts receivable aged trial balance adds up
C) Searching for all unmatched receiving reports
D) Confirming an accounts receivable balance with a customer

AI Explanation

Searching for unmatched receiving reports helps identify goods received that may not have been recorded as purchases or liabilities. This directly addresses the completeness assertion.

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Q197

Audit quality refers to the following statements EXCEPT:

A) Resisting management pressures
B) Discharging responsibilities with due professional care
C) Collecting sufficient audit evidence
D) Having adequate competence

AI Explanation

Collecting sufficient audit evidence is an audit requirement rather than a direct characteristic of audit quality. Audit quality is more related to competence, professional care, and independence.

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Q198

Certain assertions were used while obtaining the audit evidence. “Cutoff” is an important type of assertion used in above mention process, which statement best described the “cutoff” assertion?

A) Transactions and events have been recorded in proper period
B) All transactions have been recorded
C) Transactions and events have been recorded in proper accounts
D) Appropriate amount and data have been recorded

AI Explanation

The cutoff assertion ensures that transactions and events are recorded in the correct accounting period. It prevents transactions from being recorded too early or too late.

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Q199

SOFs are special types of forms used in internal control questionnaire (ICQ) process. These form basically named as:

A) Standard (Acquiring services) Order Forms
B) Standard (Sales) Order Forms
C) Standard (Offering services) Order Forms
D) Standard (Purchase) Order Forms

AI Explanation

SOFs in the context of internal control questionnaires refer to Standard Purchase Order Forms. These forms are used to control and document purchasing activities.

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Q200

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

AI Explanation

A good ICQ generally includes Yes/No questions and space for comments when Yes/No answers are not sufficient. It does not consist only of open-ended questions and does not require all respondents to be properly literate.

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Q201

Audit evidence, including information received from the audited entity in writing or oral is called:

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

AI Explanation

Information received from the audited entity, whether in written or oral form, is considered internal audit evidence. It originates within the organization being audited.

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Q202

Sound internal control helped out the auditor to entertain some relaxation, such as:

A) Helped the auditor to check available records
B) Reduces the volume of transactions testing required in conducting an audit
C) Helped the auditor to express his opinion at the end of audit process
D) All of the given options

AI Explanation

A strong internal control system allows auditors to place reliance on controls and reduce the extent of substantive testing. It helps improve audit efficiency while maintaining assurance.

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Q203

Which one of the following is an alternative name for ‘Test of controls’?

A) Substantive tests
B) Analytical procedures
C) Control procedures
D) Compliance tests

AI Explanation

Tests of controls are also known as compliance tests because they evaluate whether prescribed internal controls are being followed. They help auditors determine the effectiveness of the control system.

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Q204

For ensuring the quality of Internal Control Questionnaire (ICQ), Auditor includes some reference in this respect. Highlight the reference which is NOT suitable to be included in ICQ;

A) None of the given options
B) Reference to Management Letter
C) Reference to Engagement Letter
D) Reference to Audit Program

AI Explanation

An ICQ may include references to the management letter and audit program for control evaluation purposes. The engagement letter is related to the agreement between auditor and client and is not a suitable ICQ reference.

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Q205

Verification of debtors’ balances includes which of the following?

A) Verify debts with reference to cash received since year-end
B) Verify nature, amount and classification of credit balance
C) Check accuracy and completeness of debtors' listing
D) All of the given options

AI Explanation

Verification of debtors’ balances includes checking subsequent cash receipts, reviewing credit balances, and ensuring the accuracy and completeness of debtor listings. All these procedures help validate receivables.