Which audit procedure involves obtaining a written reply directly from a third party, such as a customer confirming the balance it owes?
Correct answer D. External confirmation
Subject / 154 questions
Auditing MCQs
Auditing MCQs are multiple-choice questions on the independent examination of a business's books and records, covering audit planning, evidence, internal control, materiality, the appointment and rights of auditors, working papers and professional ethics. They help commerce students, CA and ACCA learners, and candidates for audit and accounts posts. Each question has an instant answer for quick revision.
Checking the arithmetical accuracy of documents or records, such as re-adding an invoice, is known as which audit procedure?
Correct answer A. Recalculation
When an auditor independently carries out a control that was originally performed by the client’s staff, what is the procedure called?
Correct answer B. Reperformance
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What is the examination of documentary evidence, such as invoices and receipts, supporting entries in the books called?
Correct answer A. Vouching
Evaluating financial information by studying plausible relationships between financial and non-financial data is known as what?
Correct answer D. Analytical procedures
Which International Standard on Auditing deals with audit evidence?
Correct answer B. ISA 500
Which of the following is generally the most reliable form of audit evidence?
Correct answer A. A bank confirmation received directly by the auditor
Tracing transactions from source documents forward into the accounting records mainly tests which assertion?
Correct answer A. Completeness
Physical inspection of a tangible fixed asset provides strong audit evidence mainly about which assertion?
Correct answer D. Existence
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How is the cost of purchasing new machinery for use in a factory classified?
Correct answer B. Capital expenditure
How is the cost of routine repairs to keep existing machinery in working order classified?
Correct answer C. Revenue expenditure
Wages paid to workers for installing a newly purchased machine are treated as what?
Correct answer C. Capital expenditure
How are legal fees paid on the purchase of land treated?
Correct answer A. Added to the cost of the land as capital expenditure
Heavy spending on an advertising campaign expected to benefit the business for several years is usually treated as what?
Correct answer D. Deferred revenue expenditure
How are the proceeds from the sale of an old fixed asset classified?
Correct answer A. Capital receipt
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A machine is bought for Rs 400,000. Freight is Rs 15,000, installation is Rs 25,000 and the first year’s insurance is Rs 8,000. What amount should be capitalised as the cost of the machine?
Correct answer A. Rs 440,000
In which financial statement does capital expenditure mainly appear?
Correct answer D. Balance sheet
Spending on overhauling a second-hand machine just after buying it, before it is put into use, is treated as what?
Correct answer B. Capital expenditure
How is interest received on investments classified?
Correct answer B. Revenue receipt
An auditor watches the client’s staff carry out the year-end stock count. Which audit procedure is this?
Correct answer A. Observation
About Auditing MCQs
The Introduction to Auditing section explains what an audit is, a systematic examination of books, records and vouchers, and covers the statutory auditor's rights, such as access to books and accounts at all times. Questions on appointment and removal ask who appoints the first auditors, what shareholders do if directors fail to act, and who may not be appointed as a statutory auditor of a company.
The Audit Evidence section looks at planning, materiality, substantive procedures and their link to assessed control risk, the elements of the control environment under ISA 315 and the factors that affect working papers. It also covers ownership and custody of working papers, the dating of the auditor's report, checks on subsequent realisation of income, and the fundamental ethical principles of integrity, objectivity and professional competence.
The Capital and Revenue Expenditure section asks how expenses should be classified, how goods sold on sale or return basis should be treated and which practices create secret reserves. Auditing MCQs matter because audit and accounts posts in government departments, banks and firms test both concepts and judgement, and these questions train you to apply rules to realistic situations. They also form useful revision for professional accountancy papers.
Key facts to remember
- An audit is an independent, systematic examination of an organisation's books, records and financial statements.
- Audit risk combines inherent risk, control risk and detection risk.
- Working papers prepared by the auditor are the property of the auditor.
- Materiality means auditors focus on items that could influence the decisions of users of financial statements.
- The fundamental ethical principles include integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.
- ISA 315 deals with identifying and assessing risks of material misstatement.
- A statutory auditor has the right of access to the company's books and vouchers at all times.
Exams that include Auditing MCQs
Pakistan
- FPSC
- PPSC
- SPSC
- Banking job tests
- Lecturer tests
- NTS
India
- UGC NET
- SSC CGL
- State PSC exams
- Campus placements
Bangladesh
- BCS
- Bank job exams
- Bangladesh Bank recruitment
- Government job tests
How to prepare for Auditing MCQs
- Memorise the five fundamental ethical principles exactly, because options often slip in a similar-sounding word such as compliance.
- Link each audit procedure to the assertion it tests, such as existence, completeness or valuation, to answer evidence questions confidently.
- Learn who appoints, removes and fixes the pay of auditors under company law, as these rules are a frequent source of questions.
- Remember that higher assessed control risk means more substantive testing, which helps with many planning and evidence questions.
- Practise classifying expenditure as capital or revenue using real examples like repairs, renovations and new machinery.
Frequently asked questions
What are the most important topics in Auditing MCQs?
Core topics include the nature and objectives of auditing, audit planning and materiality, internal control and audit risk, audit evidence, working papers, the appointment, rights and duties of auditors, the audit report and professional ethics. Capital and revenue expenditure questions also appear frequently.
Which exams ask Auditing MCQs?
Auditing questions appear in tests for audit, accounts and finance posts. In Pakistan they appear in FPSC, PPSC and bank tests. In India they are relevant to UGC NET Commerce and State PSC accounts posts, and in Bangladesh to BCS and bank job exams.
How many Auditing MCQs are on MCQs360?
MCQs360 has 144 Auditing MCQs, grouped into Introduction to Auditing, Audit Evidence, and Capital and Revenue Expenditure. All questions show the correct answer instantly and are free to practise with no sign-up. The sections follow a logical order for revision.
How should I prepare for Auditing MCQs?
Understand the purpose behind each rule rather than memorising wording alone, because many questions describe a situation and ask what the auditor should do. Revise auditing standards at the level of their main idea, learn the ethical principles exactly, and practise scenario questions regularly.
What is the difference between internal and external audit?
An internal audit is carried out by staff or advisers working for management to review controls, risks and operations on an ongoing basis. An external audit is performed by an independent auditor appointed to give an opinion on whether the financial statements present a true and fair view.
Why do auditors concentrate on material items?
Auditors focus on material items because these are the amounts or disclosures that could change the decisions of people using the financial statements. Testing every small transaction would be costly and slow, so materiality lets auditors direct their effort where misstatements would matter most.
Last reviewed October 2026