12-10-2012, 08:42 PM
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Current paper ACC311 Fundamentals of Auditing final term paper December 2012-2013
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FINALTERM EXAMINATION
Spring 2009
ACC311- Fundamentals of Auditing (Session - 1)
Marks: 81
Question No: 1 ( Marks: 1 ) - Please choose one
Which one of the following is an objective of the internal audit?
To report on financial statements
To check accounting system and internal control are operating efficiently
To determine the accuracy of financial statement values and disclosures
To establish a control system in the company
Question No: 5 ( Marks: 1 ) - Please choose one
The books of accounts of a company should be kept at which one of the following
offices?(Companies Ordinance, 1984)
Registered office of the company
Accounts office of the company
Record office of the company
Registrar office
Question No: 6 ( Marks: 1 ) - Please choose one
Which of the following is one of the most fundamental and effective internal controls?
Increased use of computers for recording accounting transactions
Increased reliance on internal auditors to monitor accounting systems
Segregation of incompatible duties across several people
Having internal auditors report only to the Board of Directors
Question No: 7 ( Marks: 1 ) - Please choose one
Which of the following is NOT a major component of an internal control system?
Risk assessment Staffing
Control procedures/activities
Information and communication system
Question No: 8 ( Marks: 1 ) - Please choose one
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
Arithmetic and Accounting
Segregation of duties
Question No: 9 ( Marks: 1 ) - Please choose one
Which of the following statements best describes the purpose of an internal control
questionnaire (ICQ)?
An internal control questionnaire is a series of questions regarding accounting and control
financial report
An internal control questionnaire is a series of questions regarding accounting and control
policies and procedures that the auditor considers necessary to prevent material misstatements
in the financial report
An internal control questionnaire is a series of questions regarding accounting and control
policies and procedures that the auditor considers necessary to detect material misstatements
in the financial report
An internal control questionnaire is a series of questions prepared by the entity about the
entity's accounting and control policies and procedures for which the entity seeks guidance on
from the auditor in order to detect material misstatements in the financial report
Question No: 10 ( Marks: 1 ) - Please choose one
A Beverages company is being audited by an audit firm. Audit procedures are being
undertaken in all of its departments. During this, the audit team has to spend more time on
physical examination of the company assets to get reliable audit evidence. In your opinion,
auditors are considering which type of audit inquiry in this case?
Recalculations
Inspection of tangible assets
Analytical procedures
Confirmations
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 No: 12 ( Marks: 1 ) - Please choose one
Which one of the following may NOT be a type of control of the purchase cycle of an entity?
Receipt of goods
Invoicing and returns
Invoicing and credit notes
Purchase ledger and suppliers
Question No: 13 ( Marks: 1 ) - Please choose one
While testing the purchase system of an entity, which one of the following control tests may be
applied to the Credit Notes by the auditors?
Evidence of matching credit notes to goods returned notes
Evidence of approval of credit notes
Evidence of a sequence check
Proof of issuance date
Question No: 14 ( Marks: 1 ) - Please choose one
During the audit work of testing the purchase system of an entity, which one of the following
control tests may be applied to the Payables Ledger by the auditors?
Evidence of authorization of adjustments to payables ledger
Evidence of review of reconciliation of purchase ledger listing
Evidence of authorization of adjustments to payable ledger control account
Evidence of authorization of adjustments to purchase ledger
Question No: 15 ( Marks: 1 ) - Please choose one
Which one of the following possible misstatements related to payroll does not involve the audit
objective of Validity?
Payments to fictitious employees
Payments to terminated employees
Payments to valid employees who have not worked
Payments to valid employees at a rate in excess of the authorized amount
Question No: 16 ( Marks: 1 ) - Please choose one
In order to ensure effective control, how often a full inventory count should be held when
perpetual inventory records are not kept adequately?
On a daily basis
At least once a year
At least monthly
At least weekly
Question No: 17 ( Marks: 1 ) - Please choose one
An oil exploring company employs 1500 personal in its international market. All of its personnel
are paid on monthly basis. The company should compensate them in which form of payment?
Salary
Cheque
Wages
None of the given option
Question No: 18 ( Marks: 1 ) - Please choose one
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?
Sales ledger personnel
Teller/cashier
Cash officers
Operations manager
Question No: 19 ( Marks: 1 ) - Please choose one
When should the petty cash book entries be made?
At the day end
Next day
Promptly
Monthly
Question No: 20 ( Marks: 1 ) - Please choose one
How often the physical inspection of non current assets should be carried out?
Rarely
Periodically
Never
Daily
Question No: 21 ( Marks: 1 ) - Please choose one
In which one of the following ways auditors can choice the verification techniques in a given set
of circumstances?
It depends upon the available audit evidence to the auditor
It depends upon the nature of business operations of the entity
It depends upon the audit procedures planned by the auditor
It depends upon the judgmental skills of the auditor
Question No: 22 ( Marks: 1 ) - Please choose one
Which one of the following may NOT ensure that the movement in share capital of a company
isproperly authorized and correctly shown and described in accordance with the
CompaniesOrdinance, 1984?
Check that directors were authorized to allot shares
Agree authorized capital with memorandum of association
Consider special rules for allotments of public company shares
Test payments with supporting evidence and trace entries in register
Question No: 23 ( Marks: 1 ) - Please choose one
Which one of the following testing objectives refers to the management assertion Occurrence
in obtaining audit evidence?
Assets shown include all rights under the control of the enterprise
Transactions and events that have been recorded have occurred and pertain to the entity
The amounts at which assets and liabilities are stated is correct
Assets and liabilities included on the balance sheet actually exist
Question No: 24 ( Marks: 1 ) - Please choose one
Which one of the following certain expense items may be verified in order to keep control of
stock-in-trade and stores & spares?
Interest on short term loan
Accumulated depreciation on assets
Director s fees
Wages and salaries
Question No: 25 ( Marks: 1 ) - Please choose one
Which one of the following is NOT an advantage of using statistical sampling?
It aids in the design of an efficient sample
It allows the auditor to measure the sufficiency of the evidential matter obtained
It allows the auditor to greatly reduce substantive testing
It provides means for mathematically measuring the degree of sampling risk
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Question No: 26 ( Marks: 1 ) - Please choose one
Which one of the following is an underlying feature of random-based selection of items?
Each stratum of the accounting population be given equal representation in the sample
All items in the accounting population be randomly ordered.
Every item in the population should have an opportunity to be selected
Every item must be systematically selected using replacement
Question No: 27 ( Marks: 1 ) - Please choose one
Which one of the following matters is generally included in an auditor's engagement letter?
Management's responsibility for the entity's compliance with laws and regulations
The factors to be considered in setting preliminary judgments about materiality
Management's vicarious liability for illegal acts committed by its employees
The auditor's responsibility to search for significant internal control deficiencies
Question No: 28 ( Marks: 1 ) - Please choose one
What should be the next step of an auditor after establishing the overall audit strategy of
anentity?
To develop an audit plan
To define the scope of audit
To determine the focus of engagement team efforts
To determine the objectives of audit
Question No: 29 ( Marks: 1 ) - Please choose one
The establishment of the overall audit strategy involves the following EXCEPT:
To determine the characteristics of the engagement
To consider the important factors i.e. materiality levels, higher risks of material
misstatement etc.
To guide the development of detailed business activities to occur in future
Question No: 30 ( Marks: 1 ) - Please choose one
Which one of the following mainly affects the auditor s opinion?
Agreement on accounting policies
Limitation on the scope of the auditor s work
Dispute among the members of the company
Future prospects of the company s growth
Question No: 31 ( Marks: 1 ) - Please choose one
Which one of the following matters does NOT affect Auditor s Opinion?
When there is a limitation on the scope of the auditor s work
When there is a disagreement with management regarding the accounting policies selected
When there is a disagreement with management regarding the method of applying
accounting policies
When an auditor modify the auditor s report by adding a paragraph to highlight a material
matter
Question No: 32 ( Marks: 1 ) - Please choose one
Tracing selected shipments to the sales journal to be sure that each one is included is a test of
which of the following?
Accuracy
Classification
Completeness
Existence
Question No: 33 ( Marks: 1 ) - Please choose one
Which one of the following best describes the term Input VAT?
Input VAT is charged on a firm when it makes its purchases
Input VAT is charged on a firm when it makes its investments
Input VAT is charged on a firm when it produces highly quality products
Input VAT is charged on a firm when it exports the products
Question No: 34 ( Marks: 1 ) - Please choose one
payment is made by which of the following systems?
By cheque
In cash
By demand draft
Direct transfer to employees bank account
Question No: 35 ( Marks: 1 ) - Please choose one
Which of the following are the three audit objectives that are most important for cash, and that
receive the greatest attention during the audit?
Existence, accuracy, and completeness
Existence, cutoff, and presentation
Accuracy, cutoff, and presentation & disclosure
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Question No: 36 ( Marks: 1 ) - Please choose one
Which one of the following is most likely to indicate fraud?
Several overpayments are made for goods received from a supplier
The year end cash balance does not include cash in transit to the company at year-end
A check received after year end was inadvertently recorded as if received before year-end
A documented loan is sanctioned to an officer of the company
Question No: 37 ( Marks: 1 ) - Please choose one
When an auditor increases the assessed level of control risk because certain control activities
were determined to be ineffective, which of the following would most likely be increased by the
auditor?
Extent of tests of controls
Level of detection risk
Extent of tests of details
Level of inherent risk
Question No: 38 ( Marks: 1 ) - Please choose one
Which one of the following statements is TRUE regarding control procedures?
They are not required if the control environment is strong
They should generally be all manual
They should generally be all automated
They can be either manual or automated
Question No: 2 ( Marks: 1 ) - Please choose one
Which one of the following statements is NOT correct in respect of the internal auditor?
The scope of audit performed by internal auditors is primarily in respect of financial
report audits
An internal auditor does not require a license to practice
Internal auditors are usually employed by companies and government units
Primary responsibility of the internal auditor is to the board of directors
Question No: 3 ( Marks: 1 ) - Please choose one
After how many days the Securities and Exchange Commission may appoint the auditors, if
the Directors of a company could not appoint the auditors to fill casual vacancy? (Companies
Ordinance, 1984)
30 days
60 days
80 days
120 days
Question No: 4 ( Marks: 1 ) - Please choose one
Suppose that during audit of a company, an auditor accepted the schedule of bad debts
furnished by the client, though it was apparent that debts were not recoverable. The auditor
shall be held liable for which one of the following liabilities?
Liability for negligence
Liability for misfeasance
Criminal liability
Personal liability