471. The auditor has noticed existence of recurring losses sale of fixed assets this indicates
A. Depreciation charges are insufficient
B. Policy of sale or disposal of fixed assets needs to be reviewed
C. The sale of assets have not been properly authorized
D. Accounting errors

472. Which of the following financial statements assertions are addressed by testing the cut off for plant asset addition
A. Existence and ownership
B. Valuation and disclosure
C. Possession and ownership
D. Completeness and valuation

473. While verifying intangible assets, an auditor would re compute amortization charges and determine whether amortization period is reasonable. The auditor tries to establish ….by doing it
A. valuation
B. existence
C. disclosure
D. possession

474. When auditing prepaid insurance, an auditor discovers that the insurance policy bond on building is not available for inspection. This may indicate__
A. No insurance has been undertaken for building
B. Lien on building
C. Insurance premium has not been paid
D. Insurance premium paid but not recorded

475. Which of the following controls would ensure that securities are not lost, stolen or diverted?
A. Establish physical barriers over investment securities
B. Maintain files of authorized signatures
C. Segregate investment approval form accounting and from custody of securities
D. All of the above

476. The sequence of steps in the auditor’s consideration of internal control is as follows –
A. Obtain an understanding, design substantive test, perform tests of control, make a preliminary assessment of control risk
B. Design substantive tests, obtain an understanding, perform tests of control, make a preliminary assessment of control risk
C. Obtain an understanding, make a preliminary assessment of control risk, perform tests of control, design substantive procedures.

477. The primary purpose of performing tests of control is to provide reasonable assurance that_
A. there are no material misstatements due to fraud or error in financial statement
B. accounting system is well documented
C. Written evidence is there to support transactions
D. if internal control is effective

478. Control risk is assessed at
A. Overall financial statements level
B. Fraud risk factor level
C. Financial statement assertion level
D. Control environment level

479. Which of the following is not an example of a circumstance, in which additional tests of control will not be performed after obtaining an understanding to plan the audit?
A. Controls are known to be cost ineffective
B. Controls are effective but auditor opines that performing tests of control and reduced substantive tests would not be cost effective
C. Controls are effective and evidence already obtained is adequate to support a planned assessed level of control risk which is less than high
D. Performing extensive substantive testing would not lead to efficiency

480. An auditor assesses control risk because it
A. affects the audit risk
B. affects the level of detection risk that auditor may accept
C. helps him to fix materiality level for each financial assertion
D. is directly related to inherent risk

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