In auditing, what does the term ‘negative assurance’ mean?
Correct answer D. The auditor did not find anything to indicate that a material misstatement exists
Subject / 154 questions
Auditing MCQs
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Why should an auditor examine the subsequent receipt of revenues such as dividends, interest and commission?
Correct answer C. Identify cases of unrecorded revenue
An auditor wishes to check that sales have been recorded. From which file should the sample be drawn?
Correct answer A. sales invoices
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When vouching cash sales, which of these documents has no relevance?
Correct answer C. Monthly statements sent to customers
A client switches from the straight-line to the written down value method of depreciation and discloses the change in a note. The effect on this year’s financial statements is immaterial, but future periods are expected to be significantly affected. What opinion should the auditor give?
Correct answer C. Unqualified opinion
Which statement about explanatory notes to the accounts is correct?
Correct answer C. These are given by the directors of the company
An auditor has serious doubts about a company’s ability to continue as a going concern because survival depends on a bank working capital loan that has been applied for but not yet granted. Management has fully disclosed these facts in the notes, and the auditor considers the disclosure adequate. What type of opinion should be issued?
Correct answer D. Unqualified opinion with reference to notes to the accounts
If the client imposes restrictions that significantly limit the scope of the audit, which opinion should the auditor generally issue?
Correct answer C. Disclaimer of opinion
An auditor’s report should not carry a date earlier than which of the following?
Correct answer C. earlier than the date on which the accounts are approved by the management
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Under company law, the auditor of which type of company has no right to visit the company’s foreign branches?
Correct answer B. Banking
Who appoints a company’s branch auditor?
Correct answer B. Shareholders in general meeting
What right does an auditor have during an audit?
Correct answer D. Both B and C
Under company law, a statutory auditor is entitled to access which of the following at all times?
Correct answer C. Books, accounts and vouchers of the company
Which of the following cannot be appointed as the statutory auditor of a company?
Correct answer B. Internal auditor
Who has the authority to remove the first auditor before the end of the term?
Correct answer B. The shareholders in a general meeting
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If a casual vacancy in the office of auditor arises through resignation, how must the company fill it?
Correct answer C. General meeting
Until when does the first auditor of a company hold office from the date of appointment?
Correct answer C. The conclusion of the first annual general meeting
Who is responsible for appointing the statutory auditor of a limited company?
Correct answer C. Members of the company
What is the main purpose of analytical procedures used at the overall review stage of an audit?
Correct answer D. To help to corroborate the conclusions drawn from individual components of financial statements
When applying analytical procedures, an auditor might develop an independent estimate of an account balance and compare it with what?
Correct answer A. Prior year audited balance adjusted for industry trends