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24.1 MULTIPLE CHOICE QUESTIONS, , i i fences :, Select the appropriate option and rewrite the following sentence, I Financial statements need to be prepared in accordance with: a, , 2 f i ts india, (a) Relevant statutory requiremen —, (b) Accounting standards issued by the Institute of Chartered A iadin, (c) Guidance Notes issued by the Institute of Chartered Accountants, (d) All the above, , SS a, : : : itor to expre, Objective of an audit of financial statements is to enable the audito! festti, , n opinion, of double, tN, , : Si, , (a) Whether the financial statements are prepared in accordance with thes}? entry book-keeping eh accounting policies, , (b) Whether the financial statements are prepared in accordance wit, , laid down by the management, , : ified financial, ; ‘+h an identifie, (c) Whether the financial statements are prepared in accordance with a, reporting framework, , : rovisions of the, (d) Whether the financial statements are prepared in accordance with the p', Income-tax Act, , , , | 3., , . . the auditor, If the financial statements are Prepared as per the financial reporting framework,, i 8lves an opinion that the financial statements, (a) Are true and correct (b) Are correct and fair, (c) Givea true and fair view (d) Are reliable, 4,, , The term “General Purpose Financial State, , ments” never includes, (a) Acash flow statement, , (c) Staternent by chairman, , (d) Supplemen tary schedules and information based on such statements, , ae, Ss

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53, , which of the following er,, Tors j, @ Sale of F500 was erie 'S an error of omission?, * ion?, , (d) None of these, 1 Errors of recording do not allow, Correct totalli, i The Trial Balan of the Balance Sheet(b), Ce actin ince to agree - Orrect totalling of the Trial Balance, whic : 0) Owing €rrors will affect th i eanseie, (a) Repairs to buildings have been debit oe Balance?, (b) The total of purchases journal is 22 ‘i eens, (©) Freight paid on new machine: 000 short, (@)_ None of these Ty has been debited to the Freight Account, . t z ., which of the following errors will not affect the Tri, @) Wrong balancing of an account ¢ Trial Balance?, Writing a i, (0) ee amount in the wrong account but on th i, (c) Wrong totalling ofan account ena, , (d) None of these, , The total of Sales Book was not posted to the ledger. This i, , (a) Error of Omission (b : *, , (c) Error of Principle @ Som ore as, Sales Book was overcast by = 500. This is oe, (a) Error of Onilssiog (b) Error of Commission, , (c) Error of Principle (d) None of the above, , The total of a folio in the Sales Book & 1,000 was carried forward as 100. This is, (a) Error of Omission (b) Error of Commission, , (c) Error of Principle (d) None of the above, , sales to Ram & 143 posted to his account as X 134. This is, (b) Error of Commission, , (a) Error of Omission, Error of Principle (d) None of the above, , , , (c), ld. Sales to Meena € 143 posted to Meenu as = 143. This is, (a) Error of Omission (b) Error of Commission, (c) Error of Principle (d) None of the above, d by Ram and were taken into stock on the same date, , Goods of the value of € 376 were returne, but no entry was made in the books. This is, (b) Error of Commission, , (a) Error of Omission, (d) None of the above, , (c) Error of Principle ab, |. Acredit sale wrongly passed through the purchases book. This is, (a) Error of Omission (b) Error of Commission, , (d) None of the above, , (c) Error of Principle, EL eee

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7 Re a, ep i i Repairs Expenses Acco,, hased second-hand machinery debited to Rep ., 17. airs of newly purchas, TrOr (b) Error of Commission, (a) E of Omission ae a, , EB f Principle ; This is, , e i oh hinery had been charged to Machinery A/c. /, , oF ents (b) Error of Commission, (d) None of the above, , inery, posted to Cartage Account. This is, , (a) Error of Omission, (c) Error of Principle :, 19. Cartage paid for newly purchased machi, (a) Error of Omission, , Error of Principle, & ds taken away by the Proprietor for personal use not recorded anywhere. This is, ‘oods, , (b) Error of Commission, , (b) Error of Commission, (d) None of the above, , 20. >, (a) Error of Omission, (c) Error of Principle (d) None of the above, , 21. Which of the following errors will affect the trial balance., (a) Repairs to building wrongly debited to Building A/c, (b) Total of purchase Journal is short by = 1000, (c) Freight paid on purchase of new machinery debited to freight account, (d) None of the above, , 22. Ifa purchase return of 84 has been wrongly posted to the debit of the sales return account, by,, had been correctly entered in the suppliers account, the total of the trial balance would shoy,, , (a) the credit side to be = 84 more than debit side., (b) the debit side‘to be € 84 more than credit side, (c) _ the credit side to be = 168 more than debit side., , (d) the debit side to be € 168 more than credit side., , 23. A purchase of = 1,870 by cheque has been wrongly posted in the cash book as € 1,780. This has, the effect of |, , (a) Increasing the bank balance by®%90 (b) Decreasing the bank balance by %90, , (c) Increasing the bank balance by® 180 (d) Decreasing the bank balance by = 180, , 24, After Preparing the trial balance the accountant finds that the, ¥ 1,500. This difference will be, , (a) Credited to suspense account, , , , total of the credit side is short by, , (b) Debited to suspense account, (c) Adjusted to any of the debit balance a/c, (d) Adjusted to any of the credit balance a/c, , 25. The accountant of the firm M/s ABC is un, No. Account heads, , 1 Sales Debit(G — Credit @, 2 Purchases 12,500, 3 Miscellaneous expenses 10,000, , 2, Total =i, 5500, , 5 10,000 15,000, , The above difference in trial balance is due to ———_- +~=——, , (a) wrong placing of sales account, (b) Incorrect totalling

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fc) YFONE placing OF Miscedtan, eons eExpenne, (ad) 8TONE placing of all nec PEDKES AEC, HOCUS, is basiva o, — cally responsible for pre :, w Auditor prevention ane detection ot, te) Management (by Acconitane sail, (dt) Cashier, , mich of the to, WwW OHOWINE Is NOt true About Op ', sab {Pen on Eyameral state, , The auditor she, a) ould express an apinie ', en on Bnatye tal ‘, , y) His opinio, «t PINION IS NO RUAFantee to future viabil, lability of busine, , , , He is responsible for de, Ss res sible, OF detection and prevention aft {, an of frande ane, , we, i, , He should ex, amine whether recopnts, followed ynised ACCOUNT prime ipt, , which of the following statements |, SUS HOt trae 7, Management ti, ig fraud is more difficult to de fect than empl {, an employee fraud, , , , , , j@, , (b) Internal control system prevents employee f, , (c) The management is baaicall yreaponsihil { ‘Meio, , (d) All statements are correct vetoes “, As per SA 240, if auditor detects an error then, , (a) He should submit his resignation, , (b) He should communicate it to the shareholders, , (c) The auditor should ensure financial statements are adjusted for detected, , (d) None of the above, Oa ee following is nota limitation of audit as per SA 240?, auditoi, ; ‘ neenne rely upon experts (b) Auditor cannot check all trar, Audit evidence is not conclusive (d), , (a), , (c), The risk of fraud increases when, , (a) the working capital is high, , (b) the cash sales are high, , (c) the auditors remain the same, , (d) Managementis in the hands ofa single person, , Which of the following factors likely to be identified as a fraud factor by th, The company is planning an initial public offer of shares to rat addit ona, , Auditor cannot discover all fr, , , , , , (a) ft, expansion, (b) Bank reconciliation statement includes cheques deposited but not cr, (c) Lawyers are not changed frequently, (d) There is under-payment for services, bout materiality?, , Which of the following statements is not correct a, Materiality provides a quantitative cut-off point, , (a), , (b) Materiality is a matter of professional judgement, , (c) SA320 deals with materiality, , (d) Auditor should consider materiality when dratting the audit report, , State which of the following statements 15 false , longer an audit objective, , (a) The detection of errors and frauds is no, e from frauds and errors, , (b) An audit does not guarantee that the accounts are fre, , ee enenrers a

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Auditing (+ 2’ we, , 56, , fr si accounts audited by hi, , The auditor is not primarily responsible for all the frauds in the A ., is the primary audit objective, , (d) The detection of errors and frauds, ~ ; —_ on, , In “auditing” financial accounting data, the primary ©, i i er, , determining whether recorded information prop’, , occurred during the accounting period, , (b) determining if fraud has occurred, determining if taxable income has been calculated correct'y, bi gement to earn more profits, , nancial information to help mana, reliable information is to, , {c), cern is with, , ly reflects the economic events thay, , (a), , (c), , (d) analysing the fi, , The most common way for users to obtain, (b) havean independent audit, , (d)_ verify the information with management, , s is an expression of an opinion on, , toa, a, , (a) have an internal audit, (c) _ verifyall information individually, , ctive of an audit of the financial statement, ements in all materials respects, , The obje:, (a) _ the fairness of the financial stat!, , (b) the accuracy of the financial statements, (c) the accuracy of the directors report, (d) the accuracy of the income-tax returns, Auditors accumulate evidence to, (a) defend themselves in the event of a lawsuit, (b) determine if the finan cial statements are correct, (c) satisfy the requirements of the Companies Act, (d) reach a conclusion about the fairness of the financial statements, , 39. The responsibility for the preparation of the financial statements belongs to, (a) the auditor (b) management, (c) both management and the auditor equally, (d) management for the figures in the financial statements and the auditor for the notes to the, , w, , accounts, 40. ~ auditor's best defence when material frauds are not discovered is to have conducted the, audit, (a) inaccordance with generally accepted auditing standards, (b) as per the audit programme, (c) ina timelymanner, (d) on the assumption that the management is honest, 41. Which of the following statements is the most correct regarding errors and fraud ?, , 42., , (a) Anerror is unintentional, whereas fraud is intentional, , (b) Frauds occur more often than errors in financial statements, , (c) Errors are always frauds and frauds are always errors, , (d) Auditors have more responsibility for finding fraud than errors, Window-dressing is most likely to be committed by whom ?, , (a) Line employees of the company, (b) Outside members of the company's board of directors, (c) Company management (d) The company's auditors, , An auditor dis, covers that the company's book-keeper unintentionally made a mistake in, , calculating the amount of the quarterly sales. This is an example of, , (a) Employee fraud (b) Anerr mw, hi or, , (c) Misappropriation of assets (d) A defalcation