1) Depreciation in spirit is similar to?

(A) Depletion
(B) Amortization
(C) Depression
(D) None of these

(2) Funds Flow Statement and sources and application statement are
(A) Synonymous
(B) Antagonistic
(C) Bookkeeping
(D) None of these

3) Balance Sheet is always prepared

(A) For the year ended
(B) As on a specified date
(C) Mid of year
(D) None of these

4) Quick Ratio can be computed as under

(A) Quick . Assets/Quick Liabilities
(B) Quick . Liabilities/Current Assets
(C) Current Assets/ Current Liabilities
(D) None of these

5) Deferred Taxation is
(A) Part of owners equity
(B) Fixed asset
(C) Fixed liabilities
(D) None of these

(7) A good Cost Accounting System is

(A) If it enables management to increase productivity and rationalize cost structure
(B) If it computes estimated cost only
(C) If it cannot be reconciled with financial accounts
(D) None of these
(8) Stratified audit sample means
(A) Purposively selected items for audit
(B) Randomly selected items for audit
(C) Items carefully selected from each group
(D) None of these

(9) Audit of a bank is generally conducted through

(A) Routine checking
(B) Couching
(C) Balance sheet audit
(D) None of these

(10) An auditor is liable for his annual audit of accounts of

(A) Creditors
(B) Bankers
(C) Debtors
(D) Owners

(11) Combination can be best described as

(A) Restructuring of capital of a company
(B) Reduction of capital of a company
(C) Amount Receivable
(D) Amalgamation of two different types of businesses

(12) Books of original entry are called

(A) Ledger
(B) Work sheets
(C) Journal
(D) All of the above

(13) For preparing balance sheets prepaid expenses are shown as part of
(A) Liability
(B) Equities
(C) Assets
(D) None of these

(14) Unpaid and unrecorded expenses are called

(A) Accrued expenses
(B) Prepaid expenses
(C) Additional expenses
(D) None of these

(15) Under the diminishing balance method, depreciation amount is

(A) Payment
(B) Receipt
(C) Expenditure
(D) None of these

(16) Users of accounting information include

(A) The tax authorities
(B) Investors
(C) Creditors
(D) All of these

(17) The business form(s) in which the owner(s) is (are) personally liable is (are) the:
(A) Partnership
(B) Proprietorship
(C) Corporation
(D) Partnership and proprietorship

(18) The investment of personal assets by the owner

(A) Increases total assets and increases owner’s equity
(B) Increases total assets only
(C) Has no effect on assets but increases owner’s equity
(D) Increase assets and liabilities

(19) Economic resources of a business that are expected to be of benefit in the future are
referred to as
(A) Liabilities
(B) Owner’s equity
(C) Assets
(D) Withdrawals

(20) An owner investment of land into the business would

(A) Decrease withdrawals
(B) Increase owner’s equity
(C) Increase liabilities
(D) Decrease assets
(21) A cash purchase of supplies would
(A) Decrease owner’s equity
(B) Increase liabilities
(C) Have no effect on total assets
(D) None of these

(22) Quick assets include which of the following

(A) Cash
(B) Accounts Receivable
(C) Inventories
(D) Only (a) and (b)

(23) Net income plus operating expenses is equal to

(A) Net sales
(B) Cost of goods available for sale
(C) Cost of goods sold
(D) Gross profit

(24) The measurable value of an alternative use of resources is referred to as

(A) An opportunity cost
(B) An imputed cost
(C) A different cost
(D) A sunk cost

(25) A cost center is

(A) A unit of production in relation to which costs are ascertained
(B) A location which is responsible for controlling direct costs
(C) Any location or department which incurs cost
(D) Part of the factory overhead system by which costs are gathered

(26) A fixed cost

(A) May change in total when such change is not related to changes in production
(B) Will not change in total because it is not related to changes in production
(C) Is constant per unit for each unit of change in production
(D) May change in total, depending on production with the relevant range
(27) The time lag between indenting and receiving material is called
(A) Lead time
(B) Idle time
(C) Stock out time
(D) None of these

(28) Depreciation is based on

(A) Economic life of asset
(B) Declared life of asset by supplier
(C) Normal life of asset
(D) None of these

(29) Random sampling in auditing means

(A) Selection through scientific sampling approach
(B) Selection through convenience sampling
(C) None of these

(30) Acid test is the same as

(A) Quick test
(B) Liquid test
(C) None of these
31) Acid Test Ratio is calculated as under
(A) Current Assets/Current Liabilities
(B) Fixed Assets/Current Liabilities
(C) Liquid Assets/Current Liabilities
(D) None of these

(32) The stage under which transactions are recorded chronologically in the books of
accounts is called
(A) Summarizing
(B) Classifying
(C) Recording
(D) None of these

(33) Book-keeping is mainly concerned with

(A) Recording of a financial data relating to business transactions
(B) Designing the systems in recording, classifying, summarizing the recorded data
(C) Interpreting the data for internal and external users
(D) None of these

(34) The discount account is a

(A) Personal account
(B) Real account
(C) Asset account
(D) Nominal account

(35) Those liabilities which arise only on the happening of some event are called
(A) Current liabilities
(B) Outstanding liabilities
(C) Contingent liabilities
(D) Fixed liabilities

(36) Marshalling of balance sheet means

(A) The ordering of its assets and liabilities
(B) The totaling of its assets and liabilities
(C) Excess of assets over liabilities
(D) None of these

(37) Which one of the following is not considered the permanent part of the accounting record
(A) Journal
(B) Trial Balance
(C) Balance sheet
(D) Final accounts

(38) The provision for discount on creditors is often not provided in keeping with the principle
of
(A) Materiality
(B) Consistency
(C) Conservatism
(D) Realization

(39) The capital receipts are shown in the balance sheet on the
(A) Liability
(B) Asset side
(C) Debit side
(D) None of these
 (40) Error due to wrong allocation as expenditure between capital and revenue is
regarded as
(A) Error of omission
(B) Error of principle
(C) Compensation errors
(D) None of these

(41) Which of the following is least important as a measure of short term liquidity
(A) Debtor ratio
(B) Current ratio
(C) Cash flow from operating activities
(D) Quick ratio

(42) The cost of goods and services used up in the process of obtaining revenue are called
(A) Net income
(B) Revenue
(C) Liabilities
(D) Expenses
(E) None of these

(43) Which of the following is not an intangible asset?

(A) An investment in marketable securities
(B) A trademark
(C) A patent
(D) None of these

44) In projecting the future profitability of a trading company, investors will be least
concerned with changes in
(A) The gross profit rate
(B) The quick ratio
(C) Sales volume
(D) None of these

(45) which of the following is ascertained by drawing up an income and expenditure

account
(A) Cash in hand
(B) Surplus or Deficiency
(C) Capital Fund
(D) None of these

(46) Identify the item that is likely to serve as source document

(A) Trial balance
(B) Income statement
(C) Balance sheet
(D) Invoice from supplier

Which of the following is normally the most reliable source of audit evidence?
1. A.Internal audit
2. Suppliers’ statements
3. Board minutes
4. Analytical review
 According to ISA 500, the strength of audit evidence is determined by which two
qualities?
A. Appropriateness & competence
B. Sufficiency & appropriateness
C. Reliability & extensiveness
D. Objectivity & independence

Which of the following are you unlikely to see in the current file of auditors’ working
papers?
A. Memorandum & articles of association
B. Audit planning memorandum
C. Summary of unadjusted errors
D. Details of the work done on the inventory count

Which of the following is NOT an accepted method of selection in sampling?

A. Systematic selection
B. Pervasive selection
C. Random selection
D. Haphazard selection

Which of the following describes sampling risk?

A. The risk of the auditor carrying out a test the wrong way round
B. The risk of reliance on unsuitable audit evidence
C. The risk that the sample does not reflect the population
D. The risk of the auditor reaching the wrong conclusions from testing

At the planning stage you would NOT consider____________?

A. the timing of the audit
B. whether corrections from the inventory count have been implemented
C. last year’s audit
D. the potential use of internal audit

Which of the following should NOT be considered at the planning stage?

A. The timing of the audit
B. Analytical review
C. Last year’s written representation letter
D. Obtaining written representations

Audit risk is composed of 3 factors. Which of the following is NOT one of those factors?
A. Compliance risk
B. Detection risk
C. Control risk
D. Inherent risk
Which one of the following is NOT considered to be part of planning?
A. Background i.e. industry
B. Previous year’s audit i.e. any qualifications in the report
C. Considering the work to be done by the client staff e.g. internal audit
D. Considering whether the financial statements show a true and fair view

How long is the auditor’s term of office?

A. Until the audit is complete
B. Until the financial statements are complete
C. Until the next AGM (Annual General Meeting)
D. Until the directors remove them

The independent auditor’s primary responsibility is to______________?

A. the directors
B. the company’s creditors (payables)
C. the company’s bank
D. the shareholders

Assuming that it is not the first appointment of the auditor, who is responsible for the
appointment of the auditor?
A. The shareholders in a general meeting
B. The managing director
C. The board of directors in a board meeting
D. The audit committee

Which one of the following is NOT a duty of the auditor?

A. Duty to report to the company’s bankers
B. Duty to report to the members
C. Duty to sign the audit report
D. Duty to report on any violation of law

When an auditor is proposed for removal from office, which one of the following is he
NOT permitted to do?
A. Circulate representations to members
B. Apply to the court to have the proposal removed
C. Speak at the AGM/EGM where the removal is proposed
D. Receive notification of the AGM/EGM where the removal is proposed

A sale of Rs. 50.000 to A was entered as a sale to B. This is an example of____________?

A. Error of omission
B. Compensating error
C. Error of commission
D. Error of principle
International auditing standards are issued by the______________?
A. International Accounting Standards Board
B. Financial Accounting Standards Board
C. International Standards Board
D. Auditing Practices Board

Which of the following is NOT the responsibility of a company’s directors?

A. Reporting to the shareholders on the accuracy of the accounts
B. Establishment of internal controls
C. Keeping proper accounting records
D. Supplying information and explanations to the auditor

Why do auditors concentrate their efforts on material items in accounts?

A. Because they are easier to audit
B. Because it reduces the audit time
C. Because the risk to the accounts of their being incorrectly stated is greater
D. Because the directors have asked for it

Concealment of shortage by delaying the recording of cash receipts is known

as_____________?
A. Embezzlement
B. Misappropriation
C. Lapping
D. None of these

Auditing is compulsory for____________?

A. Small scale business
B. Partnership firms
C. Joint stock Companies
D. Proprietary Concerns

An auditor is like a_______________?

A. Blood haunt
B. Watch dog
C. May both according to situation
D. None of these

The main object of an audit is _____________?

A. Expression of opinion
B. Detection and Prevention of fraud and error
 C. Both (A) and (B)
D. Depends on the type of audit.

The term ‘Audit’ is derived from a Latin word “audire” which means___________?
A. To inspect
B. To hear
C. To examine
D. To investigate

____________ is a systematic examination of the books and records or a business?

A. Auditing
B. Vouching
C. Verification
D. Checking