Acc311-Midterm Paper: Solved by Ahsan
Acc311-Midterm Paper: Solved by Ahsan
Acc311-Midterm Paper: Solved by Ahsan
SOLVED BY AHSAN
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Question:
Which one of the following persons are responsible for the preparation of Audit
engagement later?
Options:
Auditor
Client
Company registrar
Company secretary
Question:
Who is responsible for designing and preparing the financial statements?
Options:
Auditor
Management
Accountant
Answ er
Company secretary
Question:
Which one of the following is the method of assessing the internal control system of an
entity?
Options:
Audit procedures
Audit evidence
Compliance audit
Technical analysis
Question:
The purpose of engagement letter includes the following EXCEPT:
Options:
To defines the auditor’s responsibilities clearly
To minimize misunderstandings between the client and auditors
To educate the cliet
To help the auditor in preparing audit report
Question:
A manufacturing company wants to hire external auditors who examine the activities
operations procedures and processes of each department of the company. The company
follows the local and international laws rules ad regulations and also has set standards for
the efficiency and effectiveness. The company shall have to provide the access of all kind
of operational information that will be required to the auditors as audit evidences.
Considering the above situation select the most suitable type of audit which the company
should opt?
Options:
Compliance audit
Operational audit
Technology audit
Financial audit
Question:
Which one of the following is considered as the formal opinion or disclaimer thereof
issued by an independent auditor as a result of audit or evaluation performed on a legal
entity?
Options:
Financial report
Financial statement
Director’s report
Auditor's report
Question:
Which of the following statements is true?
Options:
The auditing profession is unregulated
The auditing profession is regulated only by its own professional body
Outside bodies sometimes become involved in the regulation of the audit
profession
The auditing profession is regulated only by the government
Question:
Which one of the following primary assertions is satisfied when an auditor ensures that
there are no unrecorded assets liabilities transactions or events or undisclosed items in the
client’s financial records?
Options:
Valuation
Completeness
Existence
Rights and obligations
Question:
Internal control is primarily established within a company to do which of the following?
Options:
To prevent fraud in the company affairs
To provide reasonable assurance that the company's ob jectives will be
achieved
To catch all errors that may occur in the company
To aid in the effective auditing of the company
Question:
A leather goods manufacturing company has started its operations in year 2001. After
five years of conducting successful business it has become a listed company recently.
Now the company is required to hire its first auditors but neither the directors nor the
members could appoint the auditors during the past 4 months since the incorporation of
the company. Select among the following authorities who can appoint the auditors in this
situation? (Companies Ordinance 1984)
Options:
Company secretary
Company registrar
Commission
Institute of Chartered Accountants of Pakistan (ICAP)
Question:
A company has hired auditors who have performed the audit process in accordance with
the auditing standards but they fail to present its report. According to the Company law
1984 the auditors shall be liable for which one of the following liabilities?
Options:
Criminal liability
Liability for misfeasance
Liability for negligence
Accounting liability
Question:
DBMSes & Databa ses are same things.
Options: false true
Question:
Audit sampling conducted
Options:
On selected number of items
On Whole population
On specific no of items
All of the given options
Question:
Advantages of Audit Sampling
Options:
Economical
Time Saving
More Practical
All of the given options
Question:
Which of the following is the component of audit risk?
Options:
Inherent risk
Control risk
Detection risk
All of the given options
Answ er
Question:
Which of the following is not needed to be verified at the time of verification of Equity?
Options:
Share capital’s classification
Movement in share capital
Preliminary expenses are properly write off
Movements in reserves
*
Question:
Which of the following is needed to be verified at the time of verification of Account
Balances?
Options:
Look over any significant reconciling items of an unusual nature
Inspect about outstanding stale cheques
Acquire direct bank confirmation
All of the given options
Answ er
Question:
Tolerable error and sample size have
Options:
A direct relationship
An inverse relationship
No relation
None of the given options
Question:
Sample risk and sample size have
Options:
A direct relationship
An inverse relationship
No relation
None of the given options
Question:
Where the auditor relies more on the system of internal control the circumstance warrant:
Options:
He spends more time on audit
Effectiveness of the audit is affected
Efficiency of the audit is affected
Reliability of the results of the tests is affected
Question:
The auditor should select sample in such a way that:
Options:
All important items should be selected
All items containing misstatement should be selected
All items in the population are selected
All items in population have an opportunity of being selected
Question:
Stratification is a process of dividing a population into sub- populations which have
Options:
Heterogeneous characteristics
Nothing in common
Lot of sampling units
Homogeneous characteristics
Question:
Test of controls comprise of testing of all EXCEPT
Options:
Design
Implementation
Operating efficiency
Operating effectiveness
Question:
Analytical procedures are carried out for which one of the following purposes?
Options:
To reduce detection risk
To assess inherent risk
To reduce control risk
To determine detection risk
Question:
Nature of audit procedure’ refers to which one of the following desc ription?
Options:
It refers to the purpose i.e. (tests of controls or substantive procedures) and
their type that is inspections observation inquiry confirmation recalculation re-
performances or analytical procedures
. It refers when audit procedures are to be performed or the period or date to which
the audit evidence applies
. It refers to sample size or number of observations of a control activity (quantity of
audit evidence)
. It refers to the nature of testing and their procedures that is designing structuring
and compiling work to be done
Question:
The auditors are required to perform tests of controls when
Options:
The internal controls are operating inefficiently
Substantive procedures alone provide sufficient appropriate audit evidence at the
assertion level.
Substantive procedures alone do not provide sufficient appropriate audit
evidence at the assertion level.
Analytical procedures alone do not provide sufficient appropriate audit evidence at
the assertion level.
Question:
Following desc riptions are the examples of substantive testing EXCEPT:
Options:
Test of account balances to verify the correctness of the amounts
Verification that an operating system and/or applications are configured
appropriately to the companies needs
Review of minutes of directors; meetings and inquiry
Use of statistical sampling to determine the accuracy of financial statement figures
Question:
How often the Bank reconciliations should be prepared?
Options:
Weekly
Monthly
Quarterly
Annually
Question:
How often Inventory levels should be checked against the inventory records in order to
keep its control effectively?
Options:
Rarely
Periodically
Never
Daily
Question:
What auditors seek in the register of non current assets for each major group of assets?
Options:
Details of each item its cost and residual value
Details of each item its cost and accumulated depreciation
Details of each item its cost and depreciation
Details of each item its cost and capital investment expected returns
Question:
Which one of the following may NOT consist of any verification methods?
Options:
Closing balance
Acquisitions
Disposals
Reconciliation
Question:
Which one of the following may not be any matter relevant to verification of assets?
Options:
Taxation
Vouching
Insurance
The letter of representation
Question:
Which one of the following aspects of assets must be verified?
Options:
Cost and authorization
Value and existence
Beneficial investment
Presentation in the accounts
Question:
An Automobile Company hires auditors at the year end. Auditors are at the stage of
verification and vouching of company’s financials. Before examining the equity
section they develop general aspects concerning the owner’s equity. In your opinion
which one of the following aspects may NOT be considered by the auditors during this
assessment?
Options:
Share capital is properly classified and described in the accounts
Capital stock is enough to execute the company’s financial needs
Reserves are properly classified and presented
Movements in reserves are properly authorized
Question:
Non current assets manufactured or constructed by the company itself should reflect
which types of costs in the costing records?
Options:
Direct costs plus relevant overhead but not include any profit
Direct costs plus relevant overhead and any profit earned on it
Indirect costs plus relevant overhead but not include any profit
Indirect costs plus relevant overhead and any profit earned on it
Question:
Which one of the following matters should be included in the letter of representation?
Options:
Existence of any immaterial mistake in the statements
Existence of any fraud or error in the statements
Company’s growth trend in the future in figures
Market value of the company’s stock
Question:
Who should prepare the annual capital expenditure budgets of the company in order to
keep effective?
Options:
Someone directly responsible to the shareholders
Someone directly responsible for goods delivery to the customers
Someone directly responsible to the board of directors
Someone directly responsible to deal with the suppliers
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total question 27
MCQz 22
3 questions of 3 marks
2 questions of 5 marks
if you hired by a government bank as an auditor what you do for permot bank's credibility?
1
ACC311 MIDTERM PAPER SHARED BY STUDENT
28 mcqs
what is the purpose of substantive procedure and define the “timing”? (5 marks)
what is the information system and what is the importance in the accounting systems (5 marks)
DATE: 27-05-2013
What is the primary difference between an operational audit and a compliance audit?
If you hired by a government bank as an auditor what you do for permit bank's
Credibility?
Mr.Kamran is a partner of an audit firm. He bought shares of a company for which his firm is
Also conducting audit. However, he sold out all these shares within thirty days and immediately
Suppose an auditor makes the assessment that there is a low level of control risk and inherent risk For a client,
what would you expect the auditor to do in this situation?
2
ACC311 MIDTERM PAPER SHARED BY STUDENT
Total 27 Question
22 MCQs and
Mcqs were mostly from past papers and current semester's Quizzes.
Test of Controls
1. Mr.Kamran is a partner of an audit firm. He bought shares of a company for which his firm is
also conducting audit. However, he sold out all these shares within thirty days and immediately
informed the company secretary about the whole transaction. Is the company secretary required to
2. Why books of accounts are required to be kept by companies? Discuss the types of books of
3
ACC311
Fundamental of auditing
Solved MCQz
Question:
Which one of the following persons are responsible for the preparation of Audit engagement later?
Options:
Auditor
Client
Company registrar
Company secretary
Question:
Who is responsible for designing and preparing the financial statements?
Options:
Auditor
Management
Accountant
Company secretary
4
Question:
Which one of the following is the method of assessing the internal control system of an entity?
Options:
Audit procedures
Audit evidence
Compliance audit
Technical analysis
Question:
The purpose of engagement letter includes the following EXCEPT:
Options:
5
Question:
A manufacturing company wants to hire external auditors who examine the activities operations procedures and
processes of each department of the company. The company follows the local and international laws rules ad
regulations and also has set standards for the efficiency and effectiveness. The company shall have to provide the
access of all kind of operational information that will be required to the auditors as audit evidences. Considering
the above situation select the most suitable type of audit which the company should opt?
Options:
Compliance audit
Operational audit
Technology audit
Financial audit
Question:
Which one of the following is considered as the formal opinion or disclaimer thereof issued by an independent
auditor as a result of audit or evaluation performed on a legal entity?
Options:
Financial report
Financial statement
Directorâtreport
Auditor's report
6
Question:
Which of the following statements is true?
Options:
Outside bodies sometimes become involved in the regulation of the audit profession
Question:
Which one of the following primary assertions is satisfied when an auditor ensures that there are no unrecorded
assets liabilities transactions or events or undisclosed items in the client financial records?
Options:
Valuation
Completeness
Existence
7
Question:
Internal control is primarily established within a company to do which of the following? Options:
The following authorities can determine fixation of remuneration of auditors EXCEPT: (Companies Ordinance
1984)
Options:
Directors
Company secretary
Commission
Members
8
Question:
A leather goods manufacturing company has started its operations in year 2001. After five years of conducting
successful business, it has become a listed company recently. Now the company is required to hire its first
auditors but neither the directors nor the members could appoint the auditors during the past 4 months since the
incorporation of the company. Select among the following authorities who can appoint the auditors in this
situation? (Companies Ordinance 1984)
Options:
Company secretary
Company registrar
Commission
Question:
A company has hired auditors who have performed the audit process in accordance with the auditing standards
but they fail to present its report. According to the Company law 1984 the auditors shall be liable for which one of
the following liabilities?
Options:
Criminal liability
Accounting liability
9
Question:
DBMSes & Databa ses are same things.
Question:
Audit sampling conducted
Options:
On Whole population
On specific no of items
Question:
Advantages of Audit Sampling
Options:
Economical
Time Saving
More Practical
10
Question:
Which of the following is the component of audit risk?
Options:
Inherent risk
Control risk
Detection risk
Question:
Which of the following is not needed to be verified at the time of verification of Equity? Options:
Share capitalâtclassification
Movements in reserves
Question:
Which of the following is needed to be verified at the time of verification of Account Balances?
Options:
11
Look over any significant reconciling items of an unusual nature
Question:
Tolerable error and sample size have
Options:
A direct relationship
An inverse relationship
No relation
Question:
Sample risk and sample size have
Options:
A direct relationship
12
An inverse relationship
No relation
Question:
Where the auditor relies more on the system of internal control the circumstance warrant: Options:
Question:
The auditor should select sample in such a way that:
Options:
13
Question:
Stratification is a process of dividing a population into sub- populations which have Options:
Heterogeneous characteristics
Nothing in common
Homogeneous characteristics
Question:
Test of controls comprise of testing of all EXCEPT
Options:
Design
Implementation
Operating efficiency
Operating effectiveness
Question:
Analytical procedures are carried out for which one of the following purposes?
Options:
Question:
Nature of audit procedure’ refers to which one of the following desc ription?
Options:
It refers to the purpose i.e. (tests of controls or substantive procedures) and their type that is inspections
observation inquiry confirmation recalculation re-performances or analytical procedures
. It refers when audit procedures are to be performed or the period or date to which the audit evidence
applies
. It refers to sample size or number of observations of a control activity (quantity of audit evidence)
. It refers to the nature of testing and their procedures that is designing structuring and compiling work to be
done
Question:
The auditors are required to perform tests of controls when
Options:
Substantive procedures alone provide sufficient appropriate audit evidence at the assertion level.
Substantive procedures alone do not provide sufficient appropriate audit evidence at the assertion level.
15
Analytical procedures alone do not provide sufficient appropriate audit evidence at the assertion level.
Question:
Following descriptions are the examples of substantive testing EXCEPT:
Options:
Verification that an operating system and/or applications are configured appropriately to the companies
needs
Question:
How often the Bank reconciliations should be prepared?
Options:
Weekly
Monthly
Quarterly
Annually
16
Question:
How often Inventory levels should be checked against the inventory records in order to keep its control
effectively?
Options:
Rarely
Periodically
Never
Daily
Question:
What auditors seek in the register of non current assets for each major group of assets? Options:
Details of each item its cost and capital investment expected returns
Question:
Which one of the following may NOT consist of any verification methods?
Options:
17
Closing balance
Acquisitions
Disposals
Reconciliation
Question:
Which one of the following may not be any matter relevant to verification of assets? Options:
Taxation
Vouching
Insurance
Question:
Which one of the following aspects of assets must be verified?
Options:
Beneficial investment
18
Question:
An Automobile Company hires auditors at the year end. Auditors are at the stage of verification and vouching of
companyâtfinancials. Before examining the equity section they develop general aspects concerning the
ownerâtequity. In your opinion which one of the following aspects may NOT be considered by the auditors during
this assessment?
Options:
Question:
Non current assets manufactured or constructed by the company itself should reflect which types of costs in the
costing records?
Options:
Direct costs plus relevant overhead but not include any profit
Indirect costs plus relevant overhead but not include any profit
19
Question:
Which one of the following matters should be included in the letter of representation? Options:
Question:
Who should prepare the annual capital expenditure budgets of the company in order to keep effective?
Options:
20
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MIDTERM EXAMINATION
Spring 2009
ACC311- Fundamentals of Auditing (Session - 1)
Which of the following auditors especially focus upon exceptions, oddities, accounting
Irregularities, patterns of conduct, and not on errors or omissions?
Financial auditors
Fraud auditors
External auditors
Internal auditors
Which of the following ‘audit process stages’ shall generally be conducted at the end in relation
to the others?
Auditing business processes and related accounts
Which of the following primary assertion is satisfied when an auditor ensures that there is no
false transaction recorded and all recorded transactions have actually taken place?
Occurrence
Completeness
Existence
Which one of the following statements is NOT true about the internal control system of a
company?
Internal control system is expected to provide absolute assurance about the performance
of a company
Internal control is geared to achieve objectives of financial reporting, compliance and
operations
General meeting
Board meeting
Management meeting
Employees meeting
The first auditors of a company are required to hold office till which one of the following events?
(Companies Ordinance, 1984)
Board meeting
A sports goods manufacturing company has started its operations in year 2003 as a private limited
company. After five years of conducting successful business, it has incorporated as a listed
company in year 2008. Now, the company is required to hire its first auditors, but neither the
directors nor the members could appoint the auditors within four months since the incorporation
of the company.
Select among the following authorities who can appoint the auditors in this situation? (Companies
Ordinance, 1984)
Company secretary
Company registrar
Which one of the following actions shall give rise to tort, while performing audit of a company?
Negligence
Negligent misconduct
Assault
Suppose that a private limited company has just been incorporated as public limited company.
After how much time the company is required to present its first annual accounts before the
Annual General Meeting (AGM)? (Companies Ordinance, 1984)
Within 12 months
Within 13 months
Within 16 months
Within 18 months
A listed company has just hired the auditors who have been involved in using ratio analysis, trend
analysis, and common size analysis of financial as well as non financial information pertaining to
the entity for about a month. In your opinion, auditors should be considered at which one of the
following stages of risk assessment?
Suppose an auditor makes the assessment that there is a low level of control risk and inherent risk
for a client, what would you expect the auditor to do in this situation?
During the audit, an independent auditor identifies the existence of a reportable condition in the
client's system of internal controls and orally communicates this finding to the client's senior
management and audit committee. In your opinion, the auditor should perform which one of the
following actions instead of reporting to management in this way?
Consider the reportable condition a scope limitation and therefore disclaim an opinion
Document the matter in the working papers and consider the effects of the condition on
the audit
Suspend all audit activities pending directions from the client's audit committee
Which one of the following statement best describes the inherent risk in auditing?
Auditors fail to discover a material misstatement in the course of their audit and do not
modify their audit opinion
While considerating the internal control system, the auditor is basically concerned that the system
provides reasonable assurance about which one of the following?
Which of the following is one of the most fundamental and effective internal controls?
An audit firm audited a Leather Manufacturing company and presented its report addressed to the
management. They found significant material misstatements in the company’s internal controls
system. They strongly recommended that there should be sufficient controls in existence to ensure
management can effectively control the business operations. In your opinion, auditors are
emphasizing on which one of the following categories of SOAP MAPS?
Authorization
Management and Monitoring
Segregation of duties
Which one of the following statements best describes the term 'Observation' that is performed
during the audit testing stage?
Seeking relevant information from knowledgeable persons inside or outside the enterprise,
whether formally or informally
In which one of the following situations auditors are required to perform tests of controls?
When substantive procedures alone do not provide sufficient appropriate audit evidence at
the assertion level
When substantive procedures alone provide sufficient appropriate audit evidence at the
assertion level
When analytical procedures alone do not provide sufficient appropriate audit evidence at
the assertion level
Due diligence
Independence
Audit fees
Audit competence
One of the main objectives of performing analytical review procedures is to obtain evidence in
the planning phase of the audit that helps to identify which one of the followings?
Authorization
Segregation of duties
An audit firm audited a company and presented its report addressed to the management. They
found significant material misstatements in the company’s records and its operations and strongly
recommended the company to define a proper allotment of responsibilities to reduce the
opportunity for fraud and manipulation. In your opinion, auditors are emphasizing on which one
of the following categories of SOAP MAPS?
Segregation of duties
Authorization
Which one of the following descriptions bestdefine the term ‘Flowchart’ used in evaluating
internal control system of the entities?
Entity relationship diagram of an accounting system
Which one of the following is the possible application of Arithmetic and Accounting category of
internal control?
A supervisor or manager reviews and checks the work of a subordinate in order to check
the work quality
Authorization of purchases, cash and bank payments, sale of non-current assets, sales to
customers on credit, bad debt write offs
Lines of authority within an organization make it clear which individuals are responsible
for decisions and transactions
When the program logic is very complex the flow chart may become difficult to
comprehend.
Any modifications in the process may require the creation of a new flow chart.
Generating a flowchart is a tedious procedure, as flowchart symbols cannot be typed.
A public limited company hires First statutory auditors who take extensive information about
business operations for understanding the entity's environment. For this, they asked for
company’s records and internal control manuals. They also visited the plant and documented the
information about its activities. In your opinion, auditors should be considered at which one of
the following stages of risk assessment in this case?
When the Cashier of a bank is also appointed to maintain the books of accounts then which one of
the following internal control principles is violated?
Establishment of responsibility
Documentation procedures
Segregation of duties
Question No: 29 ( Marks: 1 ) - Please choose one
Which of the following may NOT be considered as the essential feature of Auditing?
The end result of an audit is an opinion to assist the users of the financial statements
What is the primary difference between an operational audit and a compliance audit?
Operational audit focuses on reliability of the financial statements, while compliance audit
focuses on whether laws and other requirements are being followed
Operational audit focuses on business growth prospects, while a compliance audit focuses
on reliability of the financial statements
Operational audit focuses on business size and potential to grow, while compliance audit
focuses on reliability of accounting records
Mr.Kamran is a partner of an audit firm. He bought shares of a company for which his firm is
also conducting audit. However, he sold out all these shares within thirty days and immediately
informed the company secretary about the whole transaction. Is the company secretary required to
take any step under the Companies Law, 1984?
Why books of accounts are required to be kept by companies? Discuss the types of books of
accounts with examples.
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Fundamentals of Auditing (ACC311)
Quiz # 01
1. Which one of the following cannot be considered as the essential feature of Auditing?
a. An auditor is involved in the examination of financial statements
b. The auditor is responsible for the preparation of the financial statements
c. The end result of an audit is an opinion to assist the user of the financial
statements.
d. The auditor should be independent of the entity
2. Which one of the following best describes why an independent auditor is asked to express
an opinion on the presentation of financial reports?
a. It is difficult to prepare financial reports that fairly present a company’s financial
position without the expertise of an external auditor
b. It is management’s responsibility to seek available independent aid in the
appraisal of financial information shown in its financial reports
c. The opinion of an independent party is needed because a company may not be
objective with respect to its own financial reports
d. It is a customary courtesy that all shareholders of a company receive an
independent report on management’s stewardship of the affairs of the business
3. The audit which is a review of any part of an entity’s operating procedures and methods
is known as which one of the following?
a. Valuation
b. Completeness
c. Existence
d. Rights and obligations
7. Internal control is primarily established within a company to do which of the following?
a. Directors
b. Company secretary
c. Commission
d. Members
9. A leather goods manufacturing company has started its operations in year 2001. After five years of
conducting successful business, it has become a listed company recently. Now, the company is
required to hire its first auditors, but neither the directors nor the members could appoint the
auditors during the past 4 months since the incorporation of the company.
Select among the following authorities who can appoint the auditors in this situation? (Companies
Ordinance, 1984)
a. Company secretary
b. Company registrar
c. Commission
d. Institute of Chartered Accountants of Pakistan (ICAP)
10. A company has hired auditors who have performed the audit process in accordance with the
auditing standards, but they fail to present its report. According to the Company law, 1984, the
auditors shall be liable for which one of the following liabilities?
a. Criminal liability
b. Liability for misfeasance
c. Liability for negligence
d. Accounting liability