Auditing is part of Accounting and Finance and holds 147 questions with answers, free to read and with no account needed.
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Answer: E. All of the above
Independent financial examinations of commercial banks encompass multiple specialized audit types depending on regulatory and operational requirements. Statutory audits are legally required reviews mandated by governing...
Answer: A. Taking management decisions
Auditors are strictly prohibited from making management decisions or assuming management responsibilities to maintain independence. An independent auditor must remain objective and never act as part of the client executi...
Answer: C. It is needed when the organization has a good internal control system
A continuous audit is generally unnecessary and inefficient when an organization maintains robust internal controls. Strong internal controls already provide reliable error detection, making continuous auditing redundant...
Answer: B. Obtaining and evaluating audit evidence on the financial statements
An auditor's core responsibility is to obtain sufficient appropriate audit evidence to evaluate the assertions made in the financial statements. Gathering objective evidence allows the auditor to form an independent prof...
Answer: C. Owned by the auditor
Audit working papers are prepared by the auditor and remain the exclusive property of the audit firm. Ownership stays with the auditor to protect client confidentiality and maintain professional independence. Working pap...
Answer: A. Obtain the client’s permission to communicate with the existing auditor
Professional ethics require new auditors to obtain client permission before contacting predecessor auditors. Communicating with previous auditors helps uncover professional reasons why the appointment should not be accep...
Answer: B. They should be used only when there is a lack of other substantive audit evidence
Written representations cannot substitute for necessary substantive audit procedures when other evidence is available. Auditors must gather independent corroborating evidence rather than relying solely on management lett...
Answer: B. Internal auditor
An internal auditor is an employee of the company, making them ineligible to act as independent statutory auditor. Statutory auditors must maintain complete independence, which is impossible if they are internal staff. E...
Answer: D. At the planning state, the auditor considers materiality at the financial statement level
Materiality is considered at multiple levels, including the overall financial statement level and specific account balances, during the planning stage.
Answer: B. Members of the company
Statutory auditors of a limited company are appointed by the company's members in general meetings. Shareholders hold the legal authority to select and appoint independent auditors for their corporation. Member voting en...
Answer: D. Over Valuation of assets
Window dressing involves overvaluing assets to artificially strengthen reported financial positions. This manipulative practice misleads stakeholders by presenting a false picture of corporate wealth. Management sometime...
Answer: A. Other audit clients
Other audit clients cannot be used as benchmarks due to strict client confidentiality requirements. Comparing confidential data across different client businesses violates professional secrecy obligations. Distinct opera...
Answer: C. Monthly statements sent to customers
Monthly statements sent to customers relate to credit sales and accounts receivable tracking. Cash sales do not involve customer statements because transactions settle immediately upon payment. Auditors must select relev...
Answer: A. When a company negotiates a ‘friendly’ takeover, it usually appoints a firm of accountants to carry out due diligence on the takeover target.
Carnot's theorem proves that all reversible engines operating between identical thermal reservoirs share efficiency. The working fluid inside the cycle does not affect this theoretical maximum efficiency limit. Therefore...
Answer: A. Tracing of purchases recurred in the purchase book to purchase invoices.
Tracing purchase entries from books to invoices is a detailed vouching test, not an analytical procedure. Analytical procedures involve studying aggregate data relationships rather than tracing individual source document...
