Students should practice these Audit Documentation and Audit Evidence – CA Inter Audit MCQ based on the latest syllabus.

Audit Documentation and Audit Evidence – CA Inter Audit MCQ

Question 1.
SA 230 defines the term audit documentation as to the record of:
(a) audit procedures performed and audit evidence obtained
(b) audit evidence Obtained and Conclusion the auditor reached
(c) Audit procedure performed and conclusion the auditor reached
(d) Audit procedure performed, relevant audit evidence obtained and conclusion the auditor reached
Answer:
(d) Audit procedure performed, relevant audit evidence obtained and conclusion the auditor reached

Question 2.
As per SA 230 auditor is required to prepare audit documentation that provides a ________ and ________ record of the basis of the auditor’s report
(a) Complete and Exhaustive
(b) Sufficient and Reliable
(c) Sufficient and Appropriate
(d) None of the Above
Answer:
(c) Sufficient and Appropriate

Question 3.
________ refers to one or more folders or other storage media, in physical or electronic form, containing the records that comprise the audit documentation for a specific engagement
(a) Completion Memorandum
(b) Audit File
(c) Audit Report
(d) Audit Summary
Answer:
(b) Audit File

Question 4.
The auditor shall assemble the audit documentation in an audit file and complete the administrative process of assembling the final audit file on a timely basis within ________ of the date of the auditor’s report
(a) 30 days
(b) 60 days
(c) 90 days
(d) 120 days
Answer:
(b) 60 days

Question 5.
The completion of the assembly of the final audit file after the date of the auditor’s report is ________
(a) an administrative process that does not involve the performance ofnewauditproceduresbutcertainly involves the drawing of new conclusions
(b) an administrative process that involves the performance of new audit procedures or the drawing of new conclusions
(c) an administrative process that does not involve the performance of new audit procedures or the drawing of new conclusions
(d) a statutory process
Answer:
(c) an administrative process that does not involve the performance of new audit procedures or the drawing of new conclusions

Question 6.
SA 500 defines the term audit evidence as informa-tion used by the auditor in arriving at the conclusions on which the auditor’s opinion is based. The term information as used in definition of audit evidence comprises of:
(a) Information contained in accounting records
(b) Information obtained from other sources
(c) Both of the above
(d) None of the above
Answer:
(c) Both of the above

Question 7.
Procedures performed to obtain understanding of the entity and its environment including the entity internal control, to identify and assess the risk of material misstatement whether due to fraud or error at the financial statement and assertion level are known as
(a) Risk Assessment procedures
(b) Compliance procedures
(c) Substantive procedures
(d) Analytical procedures
Answer:
(a) Risk Assessment procedures

Question 8.
Substantive procedures comprise of:
(a) Tests of Control and Tests of Details
(b) Risk Assessment procedures and Tests of details
(c) Tests of Control and Substantive Analytical Procedures
(d) Tests of details and Substantive Analytical Procedures
Answer:
(d) Tests of details and Substantive Analytical Procedures

Question 9.
Which of the following statement is false?
(a) Reliability of audit evidence is increased when it is obtained from independent sources outside the entity
(b) Audit evidence obtained indirectly are more reliable than audit evidence obtained directly by the auditor
(c) Audit evidence in documentary form, whether paper, electronic, or other medium, is more reliable than evidence obtained orally
(d) Audit evidence provided by original documents are more reliable than audit evidence provided by photocopies
Answer:
(b) Audit evidence obtained indirectly are more reliable than audit evidence obtained directly by the auditor

Question 10.
Audit evidence is necessary to support the au-ditor’s opinion and report. It is ________ in nature and is primarily obtained from audit procedures performed during the course of the audit
(a) Cumulative
(b) Regressive
(c) Selective
(d) Objective
Answer:
(a) Cumulative

Question 11.
As per SA 330, which of the following factors do not warrant retesting of controls:
(a) Effective control environment
(b) Personnel changes that significantly affect the application of the control
(c) Significant manual element to the relevant controls
(d) Both (b) and (c) above
Answer:
(a) Effective control environment

Question 12.
As per SA 330, external confirmations may be used as substantive procedure. Areas in which ex-ternal confirmations may be obtained are:
(a) Amount due to lenders, including terms of repayment
(b) Salary paid to employees
(c) Profits transferred to reserves
(d) Both (a) and (c)
Answer:
(a) Amount due to lenders, including terms of repayment

Question 13.
In the context of an audit of financial statements, substantive tests are audit procedures that
(a) may be eliminated under certain conditions
(b) may be either tests of transactions, direct tests of financial balances, or analytical tests
(c) will increase proportionately with the auditor’s reliance on internal control
(d) are designed to discover significant subsequent events
Answer:
(b) may be either tests of transactions, direct tests of financial balances, or analytical tests

Question 14.
The auditor’s decision on whether to rely on audit evidence obtained in previous audits for controls that:(a) have not changed since they were last tested; and (b) are not controls that mitigate a significant risk; is a matter of professional judgment. In addition, the length of time between retesting such controls is also a matter of professional judgment, but is required to be at least
(a) once in every year
(b) once in every two year
(c) once in every third year
(d) once in every fifth year
Answer:
(c) once in every third year

Question 15.
When deviations from controls upon which the auditor intends to rely are detected, the auditor shall make specific inquiries to understand these matters and their potential consequences, and shall determine whether:
(a) The tests of controls that have been performed provide an appropriate basis for reliance on the controls
(b) Additional tests of controls are necessary
(c) The potential risks of misstatement need to be addressed using substantive procedures
(d) Any of the above
Answer:
(d) Any of the above

Question 16.
A written statement by management provided to the auditor to confirm certain matters or to support other audit evidence is known as
(a) Letter of Engagement
(b) External Confirmation
(c) Written Representation
(d) Third party confirmation
Answer:
(c) Written Representation

Question 17.
Which of the following is true?
(a) Written representation shall be in the form of a representation letter addressed to TCWG
(b) Date of written representation shall be as near as practicable to the date of financial statements
(c) If based on written representation received, auditor claims that there is sufficient doubt about integrity of management, he shall issue an adverse opinion
(d) None of the above
Answer:
(d) None of the above

Question 18.
Which statement is correct regarding written representations?
(a) Although written representations provide necessary audit evidence, they do not provide sufficient appropriate audit evidence on their own about any of the matters with which they deal
(b) Written representations provide sufficient appropriate audit evidence on their own about any of the matters with which they deal
(c) Written representations neither provide necessary audit evidence nor they provide sufficient appropriate audit evidence
(d) Written representations are not related to audit evidence
Answer:
(a) Although written representations provide necessary audit evidence, they do not provide sufficient appropriate audit evidence on their own about any of the matters with which they deal

Question 19.
As per SA 580 “Written Representations” the auditor shall disclaim the opinion on the financial statements in accordance with SA 705 if;
(a) Auditor has concerns about the competence, integrity, ethical values or diligence of management
(b) Written representations are inconsistent with other audit evidences
(c) Management does not provide the written representation
(d) None of the above
Answer:
(c) Management does not provide the written representation

Question 20.
While auditing a lawyer company, Mr. X, the statutory auditor of the company, was unable to get the confirmation about the existence and value of certain books existed in the library worth ₹ 35 lakh. However, the management gave him a certificate to prove the existence and value of the books as appearing in the books of account. The auditor accepted the same without any further procedure and signed the audit report. Is he right in his approach?
(a) The approach adopted by the auditor is right, as “Written Representations” are considered as suf-ficient appropriate audit evidence in the absence of other audit evidences
(b) The approach adopted by the auditor is not right, as “Written Representations” cannot be a substitute for other audit evidence that the auditor could reasonably expect to be available
(c) The approach adopted by the auditor can be considered as right, if he discloses this fact in the audit report as “Key Audit Matter”
(d) The approach adopted by the auditor can be considered as right, if he discloses the fact in the audit report in “Emphasis of Matter” Para
Answer:
(b) The approach adopted by the auditor is not right, as “Written Representations” cannot be a substitute for other audit evidence that the auditor could reasonably expect to be available

Question 21.
As per SA 501, auditor is required to obtain sufficient and appropriate audit evidences as to:
(a) Valuation of Inventory
(b) Completeness of Litigation and Claims
(c) Presentation and Disclosures of Financial Instruments
(d) All of the Above
Answer:
(b) Completeness of Litigation and Claims

Question 22.
If physical inventory counting is conducted at a date other than the date of the financial statements, the auditor shall
(a) perform audit procedures to obtain audit evidence about whether changes in inventory between the count date and the date of the financial statements are properly recorded
(b) shall make or observe some physical counts on an alternative date, and perform audit procedures on intervening transactions
(c) perform alternative audit procedures to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory. If it is not possible to do so, the auditor shall modify the opinion in the auditor’s report in accordance with SA 705
(d) obtain sufficient appropriate audit evidence regarding the existence and condition of that inventory by requesting confirmation from the third party as to the quantities and condition of inventory held on behalf of the entity
Answer:
(a) perform audit procedures to obtain audit evidence about whether changes in inventory between the count date and the date of the financial statements are properly recorded

Question 23.
When inventory under the custody and control of a third party is material to the financial statements, the auditor shall obtain sufficient appropriate audit evidence regarding the existence and condition of that inventory by
(a) Request confirmation from the third party as to the quantities and condition of inventory held on behalf of the entity
(b) Perform inspection or other audit procedures appropriate in the circumstances
(c) Either or Both of the above
(d) None of the above
Answer:
(c) Either or Both of the above

Question 24.
“If inventory is material to the financial state-ments, theauditor shall obtain sufficient appropriate audit evidence regarding the existence of inventory by attending the physical inventory counting unless impracticable.” Purpose of attending inventory count is to:
1. Evaluate management’s instructions and procedures for recording and controlling the results of the entity’s physical inventory counting
2. Observe the performance of management’s count procedures;
3. Inspect the inventory;
4. Perform test counts
5. Valuation of the inventory
6. Identify the weaknesses to be informed to those charged with governance as per requirement of SA 260
7. Determine the key audit matters so as to be incorporated in the audit report as per require-ments of SA 701
Select the main purpose:
(a) 1,2, 6 and 7
(b) 1, 2, 3 and 4
(c) 1,2, 5, 6 and 7
(d) 5, 6 and 7
Answer:
(b) 1, 2, 3 and 4

Question 25.
ABC Ltd. is dealing in trading of electronic goods. Huge inventory {60% approximately) of the company is lying on consignment (i.e. under the custody of third party). CA. Mohit, the auditor of the company, wants to obtain sufficient appropriate audit evidence regarding the existence and condition of the inventory lying on consignment. Thus, he requested & obtained confirmation from the third party as to the quantities and condition of inventory held on behalf of the entity, however, it raised doubts about the integrity and objectivity ofthe third party. Which of the following other audit procedures may be performed by CA. Mohitto obtain sufficient appropriate audit evidence regarding the existence and condition of the inventory under the custody of third party?
(a) Attend third party’s physical counting of inventory
(b) Arrange for another auditor to attend third party’s physical counting of inventory
(c) Inspect warehouse receipts regarding inventory held by third parties
(d) All of the above
Answer:
(d) All of the above

Question 26.
A request that the confirming party respond directly to the auditor indicating whether the confirming party agrees or disagrees with the information in the request, or providing the requested information is known as:
(a) Positive Confirmation request
(b) Negative Confirmation request
(c) Third party confirmation
(d) Request for Written representation
Answer:
(a) Positive Confirmation request

Question 27.
While designing external confirmation request, which ofthe following factors need to be considered:
(a) Method of communication
(b) Management authorisation/encouragement to Confirming Party to respond to auditor
(c) Ability of Confirming Party to provide/confirm requested info
(d) All of the Above
Answer:
(d) All of the Above

Question 28.
As per SA 505, if management refuses to allow the auditor to send a confirmation request, the auditor:
(a) need not to inquire the reasons from management and may modify the opinion directly
(b) need not to inquire the reasons from management & perform alternate procedures
(c) need to inquire the reasons and perform alternate audit procedures
(d) None of the above
Answer:
(c) need to inquire the reasons and perform alternate audit procedures

Question 29.
As per SA 505 “External Confirmations”, if man-agement refuses the auditor to send a confirmation request, the auditor shall:
(a) Determine the implications for the audit and audi-tor’s opinion in accordance with SA 705
(b) Evaluate the implications ofthe assessment ofthe relevant risk of material misstatements, including the risk of fraud
(c) Consider the matter as Key Audit matter and report as per SA 701
(d) None of the above
Answer:
(b) Evaluate the implications ofthe assessment ofthe relevant risk of material misstatements, including the risk of fraud

Question 30.
In which of the following circumstances would the use of the negative form of accounts receivable confirmation most likely be justified?
(a) A substantial number of accounts maybe in dispute and the accounts receivable balance arises from sales to a few major customers
(b) A small number of accounts may be in dispute and the accounts receivable balance arises from sales to many customers with small balances
(c) A small number of accounts may be in dispute and the accounts receivable balance arises from sales to a few major customers
(d) A substantial number of accounts maybe in dispute and the accounts receivable balance arises from sales to many customers with small balances
Answer:
(b) A small number of accounts may be in dispute and the accounts receivable balance arises from sales to many customers with small balances

Question 31.
Initial Audit Engagement is an engagement in which prior period financial statements are:
(a) not audited
(b) audited by the predecessor auditor
(c) audited by same auditor
(d) either (a) or (b)
Answer:
(d) either (a) or (b)

Question 32.
Which of the following is false?
(a) If the auditor is unable to obtain sufficient appropriate audit evidence regarding the opening balances, the auditor shall express a qualified opinion or a disclaimer of opinion, as appropriate in accordance with SA 705
(b) If the auditor concludes that the opening balances contain a misstatement that materially affects the current period’s financial statements and the effect of the misstatements is not properly accounted for or adequately presented or disclosed, the auditor shall express a qualified opinion or an adverse opinion as appropriate in accordance with SA 705
(c) If the auditor concludes that the current period accounting policies are consistency applied in relation to opening balances in accordance with applicable FRF, the auditor shall express a qualified opinion or an adverse opinion as appropriate in accordance with SA 705
(d) If the auditor concludes that a change in accounting policies is not properly accounted for or not adequately presented or disclosed in accordance with the applicable FRF, the auditor shall express a qualified opinion or an adverse opinion as appropriate in accordance with SA
Answer:
(c) If the auditor concludes that the current period accounting policies are consistency applied in relation to opening balances in accordance with applicable FRF, the auditor shall express a qualified opinion or an adverse opinion as appropriate in accordance with SA 705

Question 33.
Which of the following is false in case of initial audit engagement?
(a) The auditor shall read the most recent F.S., if any, and the predecessor auditor’s report thereon, if any, for information relevant to opening balances
(b) If the auditor obtains audit evidence that the opening balances contain misstatements that could materially affect the current period’s F.S., the auditor shall perform such additional audit procedures as appropriate to determine the effect on the current period’s F.S.
(c) Auditor shall obtain SAAE about whether the accounting policies reflected in the opening balances have been consistently applied in the current period’s F.S.
(d) If the auditor is unable to obtain sufficient appropriate audit evidence regarding the opening balances, the auditor shall express an adverse opinion
Answer:
(d) If the auditor is unable to obtain sufficient appropriate audit evidence regarding the opening balances, the auditor shall express an adverse opinion

Question 34.
Which of the below mentioned standards deals with the related party disclosures in the financial statements and auditor’s responsibilities regarding related party relationships and transactions when performing an audit of financial statements
(a) AS 18 and SA 540
(b) AS 17 and SA 550
(c) AS 18 and SA 550
(d) AS 17 and SA 540
Answer:
(c) AS 18 and SA 550

Question 35.
As per SA 550 “Related Parties”, if the auditor identifies related parties or significant related party transactions that management has not previously identified or disclosed to the auditor, the auditor shall:
(a) Determine whether the underlying circumstances confirm the existence of those relationships or transactions
(b) Request management to identify all transactions with the newly identified related parties for the auditor’s further evaluation
(c) Report the matter to the Central Government
(d) All of the above
Answer:
(b) Request management to identify all transactions with the newly identified related parties for the auditor’s further evaluation

Question 36.
If the auditor identifies related parties or significant related party transactions that management has not previously identified or disclosed to the auditor, the auditor shall:
(a) Promptly communicate the relevant information to Regulatory authorities
(b) Perform appropriate substantive aud it procedures relating to such newly identified related parties or significant related party transactions
(c) Reconsider the risk that other related parties or significant related party transactions may exist that auditor fails to identify
(D) All of the above
Answer:
(b) Perform appropriate substantive aud it procedures relating to such newly identified related parties or significant related party transactions

Question 37.
For identified significant related party transactions outside the entity’s normal course of business, the auditor shall evaluate whether
(a) The business rationale (or lackthereof) ofthe trans-actions suggests that they may have been entered into to engage in fraudulent financial reporting or to conceal misappropriation of assets
(b) The terms of the transactions are consistent with management’s explanations
(c) The transactions have been appropriately accounted for and disclosed in accordance with the applicable financial reporting framework
(d) All of the above
Answer:
(d) All of the above

Question 38.
If the auditor identifies significant transactions outside the entity’s normal course of business when performing the audit procedures, the auditor shall
(a) inquire of management about the nature of these transactions and whether related parties could be involved
(b) perform the procedures as prescribed in SA 240
(c) ask a written representation from the management in this regard
(d) none of the above
Answer:
(a) inquire of management about the nature of these transactions and whether related parties could be involved

Question 39.
Which of the following is false?
(a) Nature of related party relationships and transactions may, in some circumstances, give rise to higher risks of material misstatement of the financial statements than transactions with unrelated parties
(b) Where the applicable FRF establishes requirements of related party disclosures, auditor has no respon-sibility to perform audit procedures to identify, assess and respond to the RMM arising from the entity’s failure to appropriately account for or disclose related party relationships, transactions or balances
(c) In case of identification of significant Related party transaction outside the entity normal course of business, auditor shall obtain evidence that transactions have been appropriately authorised & approved
(d) All of the Above
Answer:
(b) Where the applicable FRF establishes requirements of related party disclosures, auditor has no respon-sibility to perform audit procedures to identify, assess and respond to the RMM arising from the entity’s failure to appropriately account for or disclose related party relationships, transactions or balances

Question 40.
As per SA 560, subsequent events are events oc- curringbetween the date ofthe financial statements and the ________ and facts that become known to the auditor after the date of the auditor’s report
(a) Date of approval of financial statement
(b) Date of the auditor’s report
(c) Date of the annual general meeting
(d) None of the above
Answer:
(b) Date of the auditor’s report

Question 41.
SA 560 “Subsequent Events” deals with the auditor’s responsibilities as to:
(a) Subsequent events in an audit of financial statements
(b) “Other Information” obtained after the date of auditor’s report
(c) Both of the above
(d) None of the Above
Answer:
(a) Subsequent events in an audit of financial statements

Question 42.
As per SA 560, if auditor identifies events or conditions that require adjustments or disclosures in the financial statements, the auditor
(a) has no obligation to perform any audit procedures regarding the financial statements after the date of the auditor’s report
(b) shall modify the audit opinion
(c) shall determine whether each such event is appropriately reflected in financial statements
(d) Any of the above
Answer:
(c) shall determine whether each such event is appropriately reflected in financial statements

Question 43.
If a fact becomes known to the auditor that, had it been known to the auditor at the date of the auditor’s report, may have caused the auditor to amend the auditor’s report, the auditor shall
(a) discuss the matter with management
(b) determine whether the financial statements need amendment
(c) if financial statements need to be amended, inquire how management intends to address the matter in the financial statements
(d) All of the Above
Answer:
(d) All of the Above

Question 44.
AS 4 discusses the treatment of events occurring after period end in the financial statement. Events are classified in two categories;
I. Events that provide further evidence of conditions that existed at period end
II. Events that are indicative of conditions that arose subsequent to period end
How are the following two types of significant event treated?
(a) Adjust Financial Statement for Type I and Disclosure in Type II
(b) Adjust Financial Statement for Type I and Type II
(c) Disclosure for Type I and Type II
(d) Disclosure for Type I and Adjust Financial Statement in Type II
Answer:
(a) Adjust Financial Statement for Type I and Disclosure in Type II

Question 45.
Which of the following is not an example of sub-sequent events relating to conditions that existed at period end which require adjustment in the financial statements?
(a) disposal of equipment not being used in operations at a price below current book value
(b) an uninsured loss of inventories as a result of fire
(c) settlement of litigation at an amount different from the amount recorded on the books
(d) sale of investments at a price below recorded cost
Answer:
(b) an uninsured loss of inventories as a result of fire

Question 46.
Which of the below mentioned indicators are classified as financial indicators that may cast doubt about going concern assumption:
(a) loss of key management without replacement
(b) non-compliance with capital requirements
(c) shortage of important supplies
(d) in ability to pay creditors on due dates
Answer:
(d) in ability to pay creditors on due dates

Question 47.
As per SA 570, if auditor concludes that use of going concern basis of accounting by management in preparation of financial statements is inappropriate, auditor shall issue ________
(a) Qualified Opinion
(b) Adverse Opinion
(c) Disclaimer of Opinion
(d) Unmodified opinion with a separate section titled as “Material Uncertainty relatingto Going Concern”
Answer:
(b) Adverse Opinion

Question 48.
As per SA 570, if events or conditions have been identified that may cast significant doubt on the entity’s ability to continue as a going concern, the auditor shall determine whether or not a material uncertainty exists that may cast significant doubt on the entity’s ability to continue as a going concern through performing additional audit procedures. Additional Procedures may comprise of:
(a) Evaluating Management Plans for future actions (h) Evaluating the reliability of cash flow forecast
(c) Requesting Written Representations from manage-ment regarding feasibility for future plans
(d) All of the above
Answer:
(d) All of the above

Question 49.
When an auditor concludes there is substantial doubt about a continuing audit client’s ability to continue as a going concern for a reasonable period of time, the auditor’s responsibility is to
(a) Consider the adequacy of disclosure about the client’s possible inability to continue as a going concern
(b) Report to the client’s audit committee that management’s accounting estimates may need to be adjusted
(c) Issue a qualified or adverse opinion, depending upon materiality, due to the possible effects on the financial statements
(d) Reissue the prior year’s auditor’s report and add an explanatory paragraph that specifically refers to “substantial doubt” and “going concern.”
Answer:
(a) Consider the adequacy of disclosure about the client’s possible inability to continue as a going concern

Question 50.
Which of the following is false?
(a) If the financial statements have been prepared using the going concern basis of accounting but, in the auditor’s judgment, management use of the going concern basis of accounting in the preparation of the financial statements is inappropriate, the auditor shall express an adverse opinion
(,b) If management is unwilling to make or extend its assessment when requested to do so by the auditor, the auditor shall consider the implications for the auditor’s report
(c) If use of going concern basis of accounting is appropriate but a material uncertainty exists and adequate disclosure aboutthe material uncertainty is made in the financial statements, the auditor shall express a modified opinion and auditor report shall include a separate section under the heading “Material Uncertainty related to Going Concern”
(d) If use of going concern basis of accounting is ap-propriate but a material uncertainty exists and adequate disclosure aboutthe material uncertainty is not made in the financial statements, the auditor shall express a qualified opinion or adverse opinion as appropriate in accordance with SA 705
Answer:
(c) If use of going concern basis of accounting is appropriate but a material uncertainty exists and adequate disclosure aboutthe material uncertainty is made in the financial statements, the auditor shall express a modified opinion and auditor report shall include a separate section under the heading “Material Uncertainty related to Going Concern”

Question 51.
Audit evidence is necessary to support the auditor’s opinion and report. It is in nature and is primarily obtained from audit procedures performed during the course of the audit.
(a) cumulative
(b) regressive
(c) selective
(d) objective
Answer:
(a) cumulative

Question 52.
________ refer to the audit procedures performed to obtain an understanding of the entity and its environment, including the entity’s internal control, to identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and assertion levels.
(a) Audit assessment procedures
(b) Substantive procedures
(c) Test of control
(d) Risk assessment procedures
Answer:
(d) Risk assessment procedures

Question 53.
If the auditor is unable to obtain sufficient appropriate audit evidence regarding the opening balances, the auditor shall express:
(a) a disclaimer opinion
(b) a qualified opinion
(c) a qualified opinion or a disclaimer of opinion, as appropriate, in accordance with SA 705.
(d) unmodified opinion
Answer:
(c) a qualified opinion or a disclaimer of opinion, as appropriate, in accordance with SA 705.

Question 54.
A failure of the confirming party to respond, or fully respond, to a positive confirmation request, or a confirmation request returned undelivered is called ________
(a) Negative confirmation request
(b) Non-response
(c) Exception
(d) Positive confirmation request
Answer:
(b) Non-response

Question 55.
Which of the following is correct:
(a) The auditor shall assemble the audit documentation in an audit file and complete the administrative process of assembling the final audit file on a timely basis after the date of the auditor’s report,
(b) The auditor shall assemble the audit documentation in an audit file and shall not complete the administrative process of assembling the final audit file.
(c) The auditor shall assemble the audit documentation in an audit file and complete the administrative process of assembling the final audit file on a timely basis before the date of the auditor’s report.
(d) The auditor shall not assemble the audit documentation in an audit file.
Answer:
(a) The auditor shall assemble the audit documentation in an audit file and complete the administrative process of assembling the final audit file on a timely basis after the date of the auditor’s report,

Question 56.
Audit evidence includes
(a) information contained in the accounting records underlying the financial statements
(b) both information contained in the accounting records underlying the financial statements and other information.
(c) other information.
(d) information contained in the accounting records underlying the financial statements or other information.
Answer:
(d) information contained in the accounting records underlying the financial statements or other information.

Question 57.
Most of the auditor’s work in forming the auditor’s opinion consists of:
(a) obtaining audit evidence.
(b) evaluating audit evidence.
(c) obtaining or evaluating audit evidence.
(d) obtaining and evaluating audit evidence.
Answer:
(d) obtaining and evaluating audit evidence.

Question 58.
A difference between the amount, classification, presentation, or disclosure of a reported financial statement item and the amount, classification, presentation, or disclosure that is required for the item to be in accordance with the applicable financial reporting framework is:
(a) Misstatement
(b) Error
(c) Fraud
(d) Any of the above
Answer:
(a) Misstatement

Question 59.
If the auditor is unable to obtain sufficient appropriate audit evidence regarding the opening balances,
(a) the auditor shall express a qualified opinion in accordance with SA 705.
(b) the auditor shall express a disclaimer of opi nion in accordance with SA 705.
(c) the auditor shall express a qualified opinion or adverse opinion, as appropriate, in accordance with SA 705.
(d) the auditor shall express a qualified opinion or a disclaimer of opinion, as appropriate, in accordance with SA 705.
Answer:
(d) the auditor shall express a qualified opinion or a disclaimer of opinion, as appropriate, in accordance with SA 705.

Question 60.
Audit documentation provides:
(a) evidence of the auditor’s basis for a conclusion about the achievement of the overall objectives of the auditor; or evidence that the audit was planned and performed in accordance with SAs and applicable legal and regulatory requirements.
(b) evidence of the auditor’s basis for a conclusion about the achievement of the overall objectives of the auditor; and evidence that the audit was planned and performed in accordance with SAs and applicable legal and regulatory requirements.
(c) evidence of the auditor’s basis for a conclusion about the achievement of the overall objectives of the auditor
(d) evidence thatthe audit was planned and performed in accordance with SAs and applicable legal and regulatory requirements.
Answer:
(b) evidence of the auditor’s basis for a conclusion about the achievement of the overall objectives of the auditor; and evidence that the audit was planned and performed in accordance with SAs and applicable legal and regulatory requirements.

Question 61.
Which of the following is not an example of audit documentation?
(a) Audit programmes
(b) Summaries of significant matters
(c) Audit file
(d) Checklists.
Answer:
(c) Audit file

Question 62.
Which of the following is incorrect?
(a) Inquiry consists of seeking information of unknown persons, both financial and non-financial, within the entity or outside the entity.
(b) Inquiry is used extensively throughout the audit in addition to other audit procedures.
(c) Inquiries may range from formal written inquiries to informal oral inquiries. Evaluating responses to inquiries is an integral part of the inquiry process.
(d) Responses to inquiries may provide the auditor with information not previously possessed or with corroborative audit evidence.
Answer:
(a) Inquiry consists of seeking information of unknown persons, both financial and non-financial, within the entity or outside the entity.

Question 63.
Which of the following is incorrect?
(a) Written representations are necessary information that the auditor requires in connection with the audit of the entity’s financial statements.
(b) Similar to responses to inquiries, written repre-sentations are audit evidence.
(c) Written representations are requested from those responsible for the preparation and presentation of the financial statements.
(d) Written representations provide necessary audit evidence and also they provide sufficient appro-priate audit evidence on their own about any of the matters with which they deal.
Answer:
(d) Written representations provide necessary audit evidence and also they provide sufficient appro-priate audit evidence on their own about any of the matters with which they deal.

Question 64.
The auditor has no obligation to perform any audit procedures regarding the financial statements after the date ofthe auditor’s report. However, when, after the date ofthe auditor’s report but before the date the financial statements are issued, a fact becomes known to the auditor that, had it been known to the auditor at the date of the auditor’s report, may have caused the auditor to amend the auditor’s report, the auditor shall:
(a) Discuss the matter with management and, where appropriate, those charged with governance.
(b) Determine whether the financial statements need amendment.
(c) Inquire how management intends to address the matter in the financial statements.
(d) All of the above
Answer:
(a) Discuss the matter with management and, where appropriate, those charged with governance.

Question 65.
A request that the confirming party respond directly to the auditor only if the confirming party disagrees with the information provided in the request is ________
(o) Positive confirmation request
(b) Non-response
(c) Exception
(d) Negative confirmation request
Answer:
(d) Negative confirmation request

Question 66.
The auditor shall design and perform audit procedures in order to identify litigation and claims involving the entity which may give rise to a risk of material misstatement, including:
(a) Inquiry of management and, where applicable, others within the entity, including in-house legal counsel.
(b) Reviewing minutes of meetings of those charged with governance and correspondence between the entity and its external legal counsel.
(c) Reviewing legal expense accounts.
(d) All of the above
Answer:
(d) All of the above

Question 67.
CA. Bobby is a recently qualified Chartered Accountant. He is appointed as an auditor of Droopy Ltd. for the current Financial Year 2017-18. He is quite conservative in nature which is also replicated in his professional work. CA. Bobby is of the view that he shall record all the matters related to audit, audit procedures to be performed, audit evidence obtained and conclusions reached. Thus, he maintained a file and recorded each and every of his Findings during the audit. His audit file, besides other thing, includes audit programmes, notes reflecting preliminary thinking, letters of confir-mation, e-mails concerning significant matters, etc. State which of the following need not be included in the audit documentation?
(a) Audit programmes.
(b) Notes reflecting preliminary thinking.
(c) Letters of confirmation.
(d) E-mails concerning significant matters.
Answer:
(b) Notes reflecting preliminary thinking.

Question 68.
Statement 1: Audit procedures consist of Risk Assessments Procedures and other procedures.
Statement 2: Substantive procedures consist of test of details and analytical procedures.
(a) Only Statement 1 is correct
(b) Only Statement 2 is correct
(c) Both 1 & 2 are correct
(d) Both 1 & 2 are incorrect
Answer:
(c) Both 1 & 2 are correct

Question 69.
A request that the confirming party respond directly to the auditor only if the confirming party disagrees with the information provided in the request is ________
(a) Positive confirmation request
(b) Non-response
(c) Exception
(d) Negative confirmation request
Answer:
(d) Negative confirmation request

Question 70.
If the auditor is unable to obtain sufficient appropriate audit evidence regarding the opening balances, the auditor shall express;
(a) a disclaimer opinion
(b) a qualified opinion
(c) a qualified opinion or a disclaimer of opinion, as appropriate, in accordance with SA 705.
(d) unmodified opinion
Answer:
(c) a qualified opinion or a disclaimer of opinion, as appropriate, in accordance with SA 705.

Question 71.
Which of the following is not an example of an event or condition that may cast significant doubt on entity’s ability to continue as a going concern:
(a) Loss of key management without replacement
(b) Adverse key financial ratios
(c) Inability to pay creditors on due date
(d) Current year profit turns to loss after providing depreciation
Answer:
(d) Current year profit turns to loss after providing depreciation