Auditing MCQ Quiz in मल्याळम - Objective Question with Answer for Auditing - സൗജന്യ PDF ഡൗൺലോഡ് ചെയ്യുക

Documentation of the accounting and internal control systems being reviewed is likely to appear least in the audit program.

Key Points

• An audit program is a set of directions that the auditor and its team members need to follow for the proper execution of the audit.
• After preparing an audit plan, the auditor allocates the work and prepares a program that contains steps that the audit team needs to follow while conducting an audit.
• Thus, an auditor prepares a program that contains detailed information about various steps and audit procedures to be followed by the audit.

Cost audit for Materials covers Goods inward procedure and Accounting for scrap, wastage, materials transfers.

A cost audit represents the verification of cost accounts and checking on the adherence to the cost accounting plan. Cost audit ascertains the accuracy of cost accounting records to ensure that they are in conformity with cost accounting principles, plans, procedures, and objectives.

A cost audit comprises the following;

• Verification of the cost accounting records such as the accuracy of the cost accounts, cost reports, cost statements, cost data, and costing technique
• Examination of these records to ensure that they adhere to the cost accounting principles, plans, procedures, and objective
• To report to the government on optimum utilization of national resources.

The correct answer is ICAI

Key PointsTo ensure that information provided in the financial statements are of high quality and are acceptable world wide the Auditing and Assurance Standards Board under the council of Institute of Chartered Accountants (ICAI) has formulated a few Standards. These are in line with the International Standards issued by the International Auditing and Assurance Board (IAASB).

Additional Information

Standards issued by the AASB include:

• Standards of Quality Control (SQCs) for all the services under Engagement Standards. These standards are applicable to all auditing firms which perform audits and reviews of historical financial information including assurances and related service engagements.
• Standards on Auditing (SAs) for auditing historical financial information. These apply whenever any independent Audit is carried out.
• Standards on Review Engagements (SREs) for reviewing historical financial information.
• Standards on Assurance Engagements (SAEs) for assurance engagements other than the audits and reviews of financial information.
• Standards on Related Services (SRSs) for all engagements about the application of agreed procedures to information, compilation engagements, and other related services engagements

Internal Control System:

• Internal control system refers to a set of rules and policies, and procedures an organization will implement to provide direction, increase efficiency and strengthen adherence to policies.
• Internal control involves everything that controls risks to an organization.
• The effectiveness of the internal control system reduces process variation, leading to more predictable outcomes.

The auditor can objectively test the effectiveness of the internal control system by using a compliance test check.

• Compliance test check refers to auditing for adherence to a policy, a rule, or a regulation which is done on the system to check if all the specified standards are met or not.
• The compliance test is often the first type of test performed while assessing the control environment.

 There are three elements of internal control system:

1. Environment control:

• Environment control reflects the alertness, attitude, and work-zeal of directors, managers, and shareholders.

2. Accounting system:

• Accounting system refers to procedures and recordings through which identification of business transactions, statement preparation, and analysis for timely presentation of correct information are performed.

3. Control procedure:

• Control procedure means the additional policies and procedures adopted by the business authority for ensuring the achievement of the organizational goals.     

Therefore, the auditor can objectively test the effectiveness of the internal control system by using a compliance test check.

An audit report of the company says that ‘‘Company has not provided depreciation for the year amounting to ` 8,50,000, subject to this reservation, we report that the balance sheet says true and fair view. This report is called Qualified Opinion.

Qualified Opinion

1. A qualified opinion may be issued in one of two situations: first, if the financial statements contain material misstatements that are not pervasive; or second, if the auditor is unable to obtain sufficient appropriate audit evidence on which to base an opinion, but the possible effects of any material misstatements are not pervasive.

2. A Qualified Audit Report is one where an Auditor gives an opinion on the truth and fairness of Financial Statements, subject to certain reservations.

3.  The Auditor's Reservation is generally stated as: "Subject to the above, we report that the Balance Sheet shows a true and fair view."

4. A Qualified Opinion should be expressed when the Auditor concludes that –

•  An Unqualified Opinion cannot be expressed, or
• The effect of any disagreement with Management is not so material and pervasive as to require an Adverse Opinion, or
• The Limitation on the scope is not material and pervasive as to require a Disclaimer of Opinion.

    ​

Types of Reports:

Clean or Unqualified Report

1. A clean report means that the company's financial records are free from material misstatement and conform to the guidelines set by GAAP.
2. A majority of audits end in unqualified, or clean, opinions.

Adverse Opinion

1. An adverse opinion means that the auditor has obtained sufficient audit evidence and concludes that misstatements in the financial statements are both material and pervasive.
2. An adverse opinion is the worst possible outcome for a company and can have a lasting impact and legal ramifications if not corrected.

Disclaimer of Opinion

A disclaimer of opinion means that, for some reason, the auditor is unable to obtain sufficient audit evidence on which to base the opinion, and the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive. 

The correct answer is 7 years

Key PointsThe SA 230 prescribes the minimum period of retention of engagement documentation as seven years since, as per the provisions of the Chartered Accountants Act, 1949, and regulations made there under, prescribe the minimum period of retention of working papers as seven years.

Additional InformationAudit documentation - The record of audit procedures performed, relevant audit evidence obtained, and conclusions the auditor reached.

The correct answer is Auditing Standards.

Key Points

• A social audit is a formal assessment of a company's practices and efforts in relation to its CSR and societal effect.
• It evaluates how effectively a business is achieving its CSR goals and offers the chance to pinpoint areas for improvement.
• As businesses work to maintain a delicate balance between their social activities and giving value to their investors and shareholders, social audits have a significant impact on how the public perceives them.

 Important Points

• The Indian Accounting Standards (Ind-AS), which are periodically released by the Institute of Chartered Accountants of India, govern financial reporting.
• An Indian-licensed chartered accountant is eligible to serve as a statutory auditor of a 2013. This follows the 2013 Companies Act's convention.

Hence, it can be concluded that social audit is governed by auditing standards. 

The correct answer is Books of Accounts

Key Points

Auditor: An auditor is an authorized person who verifies and reviews the financial records and financial statements of a company and ensures that they are prepared in accordance with the norms. He also checks whether any tampering or manipulation has been done with the financial data with the aim of hiding any fraud or malpractice within the company.

Important Points

• The auditor should stamp the Books of Accounts.
• The auditor will typically stamp the books of accounts to indicate that they have been reviewed and approved.
• The books of accounts are the financial records of a company or organization.
• They typically include the following:
  • Ledger: The ledger is a record of all the transactions that have taken place in a company or organization.
  • Trial balance: The trial balance is a list of all the accounts in the ledger and their balances.
  • Income statement: The income statement is a summary of the company's revenues and expenses for a specific period of time.
  • Balance sheet: The balance sheet is a summary of the company's assets, liabilities, and equity at a specific point in time.
• The auditor will stamp the books of accounts to indicate that they have been reviewed and approved.
• This stamping is typically done on each page of the books of accounts. The auditor's stamp will typically include the auditor's name, the date of the audit, and the auditor's signature.
• The stamping of the books of accounts is an important part of the audit process.
• It helps to ensure that the books of accounts are accurate and that they have been reviewed by an independent professional.
• This stamping can also help to deter fraud and ensure that the financial records of a company or organization are reliable.

The correct answer is BOD or Audit Committee

Key Points

• Auditor: An auditor is an authorized person who verifies and reviews the financial records and financial statements of a company and ensures that they are prepared in accordance with the norms.
• He also checks whether any tampering or manipulation has been done with the financial data with the aim of hiding any fraud or malpractice within the company.
• As per Section 144 of the Companies Act 2013, a company auditor is responsible for providing services that have been approved by the company's board of directors or audit committee.
• However, section 144 also prohibits a company auditor from performing certain non-audit services after being designated as a company auditor.

Audit Notebook is a record of important matters and inquiries that an Auditor has to refer to his clients.

Key Points

• According to E. L. Kohler, “Audit notebook is a record, used chiefly in recurring audits, containing data of work done and comments outside the regular subject matter of working papers. It generally contains such items as the audit program, notations showing how sections of the audit are carried out during successive examinations, the information needed for the auditor’s office and for staff administration, personnel assignment, time requirements, and notations for use in succeeding examination”.
• During the course of an audit, the audit clerk experiences several difficulties. He cannot remember everything at all times. So he maintains a book with him in which he makes note of important points and queries, which he has to refer to the client’s staff or clarify with the chief auditor. Such a book is called Audit Note Book.
• It is an essential book used to note important points that shall be included in the Auditor’s report. It is a complete record of doubts and their clarification. It helps the auditor in his subsequent audits. It is also used as a guide to the other audit clerks.
• To sum up, the audit notebook is nothing but a diary, maintained by the audit staff for the purpose of recording certain important points which require further clarification, explanation, and investigation. This book generally includes the errors found out during the course of the audit, difficulties observed and doubtful queries of various accounting records, etc.
• An audit notebook is also called a remembrance book.