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Latest CA Intermediate Auditing and Ethics Exam Question (Objective Questions), MCQ in English

Subjects : Auditing and Ethics

Question Bank CA Intermediate Auditing and Ethics Exam - English
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Auditing and Ethics

Question 1Single Answer
Statement (1): Auditor should perform compliance procedures to determine nature, timing and extent of substantive procedures
Statement (2): Auditor should perform substantive procedures to determine the nature, timing and extent of compliance procedures?
  1. A
    Only Statement (1) is true
  2. B
    Only Statement (2) is true
  3. C
    Both the Statements are true
  4. D
    None of the statements is true
Question 2Single Answer
In the context of an audit, what does the term 'independence' primarily imply as per the definition of audit?
  1. A
    The auditor must be employed by the entity being audited
  2. B
    The auditor's judgment is subordinate to the directions of the entity's management
  3. C
    The auditor must rely solely on management's representations without verification
  4. D
    The auditor's judgment is not subordinate to the wishes or directions of the party engaging him
Question 3Single Answer
Which of the following scenarios would most likely lead to the issuance of a modified opinion by the auditor?
  1. A
    The financial statements are free from material misstatement due to fraud
  2. B
    Sufficient appropriate audit evidence is obtained for all aspects of the financial statements
  3. C
    The financial statements comply with all statutory requirements without any exceptions
  4. D
    The auditor is unable to obtain sufficient appropriate audit evidence for a material portion of the financial statements
Question 4Single Answer
What is the primary distinction between 'error' and 'fraud' in the context of material misstatements in financial statements?
  1. A
    Fraud involves intentional acts, while errors are unintentional
  2. B
    Errors are always intentional, while fraud is unintentional
  3. C
    Both errors and fraud are unintentional acts by management
  4. D
    Errors relate to non-compliance with laws, while fraud relates to accounting policies
Question 5Single Answer
According to SA 200, the auditor's objective to obtain reasonable assurance implies which of the following?
  1. A
    A high level of assurance that material misstatements are detected, but not absolute certainty
  2. B
    A complete guarantee that the financial statements are free from all misstatements
  3. C
    Limited assurance based on sample testing only
  4. D
    Assurance only on the entity's internal controls, not on the financial statements
Question 6Single Answer
Which of the following is NOT part of the scope of an audit as per the fundamental concepts?
  1. A
    Assessing the reliability of accounting records and source data
  2. B
    Evaluating management judgments and disclosures in financial statements
  3. C
    Ensuring compliance with statutory requirements for disclosure
  4. D
    Performing duties that require expertise outside the auditor's competence, such as legal investigations
Question 7Single Answer
In a scenario where management is involved in sophisticated fraud schemes presenting fabricated documents, which inherent limitation of audit is most applicable?
  1. A
    Fraud risks arising from management override of controls
  2. B
    Practical limitations due to sample testing
  3. C
    Nature of financial reporting involving subjective judgments
  4. D
    Timeliness of financial statements decreasing over time
Question 8Single Answer
What distinguishes an audit from an investigation in terms of scope and purpose?
  1. A
    Audit has a narrow scope for specific purposes, while investigation is general for opinion on financial statements
  2. B
    Audit provides absolute assurance, while investigation provides reasonable assurance
  3. C
    Audit is a general examination for opinion on financial statements, while investigation is critical for a specific purpose
  4. D
    Audit requires legal powers for search, while investigation does not
Question 9Single Answer
Which of the following is an example of a situation where the auditor cannot obtain absolute assurance due to the nature of audit procedures?
  1. A
    The auditor relies on persuasive evidence rather than conclusive evidence in many cases
  2. B
    Management provides complete and accurate information voluntarily
  3. C
    The auditor examines all transactions without sampling
  4. D
    The financial reporting framework is objective and free from judgments
Question 10Single Answer
As per the objectives of audit, the auditor's report is primarily communicated to which party in a company audit?
  1. A
    The management of the entity
  2. B
    The appointing authority, such as shareholders
  3. C
    Government regulatory bodies only
  4. D
    Internal stakeholders like employees
Question 11Single Answer
Which inherent limitation arises from the fact that financial statements involve management judgments that are subjective and uncertain?
  1. A
    Nature of audit procedures
  2. B
    Future events affecting going concern
  3. C
    Lack of investigative powers
  4. D
    Nature of financial reporting
Question 12Single Answer
In the context of assurance engagements, what is the key difference between reasonable assurance and limited assurance?
  1. A
    Reasonable assurance involves limited procedures, while limited assurance involves comprehensive testing
  2. B
    Reasonable assurance is only for historical financial information, while limited assurance is not
  3. C
    Limited assurance provides absolute assurance, while reasonable assurance does not
  4. D
    Reasonable assurance is a high level of assurance, while limited assurance is moderate
Question 13Single Answer
Which of the following is NOT a factor contributing to the inherent limitations of audit related to fraud detection?
  1. A
    Management involvement in concealing fraud through collusion
  2. B
    The entity's strong internal control system preventing all misstatements
  3. C
    The auditor's use of testing on a sample basis
  4. D
    Fabrication of evidence by related parties
Question 14Single Answer
According to the definition, an audit applies to financial information of any entity, irrespective of which of the following?
  1. A
    Its compliance with accounting standards only
  2. B
    Its profit orientation, size, or legal form
  3. C
    The availability of sufficient audit evidence
  4. D
    The presence of internal controls
Question 15Single Answer
What is the primary purpose of obtaining sufficient and appropriate audit evidence in an audit?
  1. A
    To reduce audit risk to an acceptably low level for expressing an opinion
  2. B
    To guarantee the detection of all frauds
  3. C
    To ensure the entity complies with all laws
  4. D
    To evaluate the entity's future viability
Question 16Single Answer
In a scenario where the auditor identifies material misstatements due to non-compliance with the financial reporting framework, what type of opinion is most likely?
  1. A
    Qualified or adverse opinion
  2. B
    Unmodified opinion
  3. C
    Disclaimer of opinion
  4. D
    Absolute assurance opinion
Question 17Single Answer
Which principle underscores that an audit is not an official investigation with legal powers for search or oath-taking?
  1. A
    Scope limitation
  2. B
    Assurance engagement principle
  3. C
    Inherent limitation due to lack of investigative powers
  4. D
    Financial reporting framework compliance
Question 18Single Answer
What does 'material misstatement' refer to in the context of audit objectives?
  1. A
    A difference that could influence the economic decisions of users taken on the basis of financial statements
  2. B
    Any difference in reported figures, regardless of amount
  3. C
    Only misstatements due to error, not fraud
  4. D
    Misstatements that are immaterial but cumulative
Question 19Single Answer
Which of the following is a key component of the scope of audit involving the evaluation of internal controls?
  1. A
    The auditor designs the internal controls for the entity
  2. B
    The auditor ignores internal controls if sampling is used
  3. C
    The auditor assesses the accounting system and related internal controls to determine reliability
  4. D
    Internal controls are only assessed for non-profit entities
Question 20Single Answer
In the case of related party transactions, why is detection of material misstatements challenging for the auditor?
  1. A
    They are always disclosed properly in financial statements
  2. B
    They are not part of the financial reporting framework
  3. C
    They may involve wrongdoing that is concealed and hard to identify
  4. D
    Auditors are required to ignore them in the scope
Question 21Single Answer
According to SA 200, the auditor's responsibility to report on financial statements includes communicating as required by SAs, but does not include:
  1. A
    Expressing an opinion on whether the financial statements are prepared in accordance with the framework
  2. B
    Guaranteeing the future viability of the entity
  3. C
    Obtaining reasonable assurance on freedom from material misstatements
  4. D
    Reporting findings to those charged with governance
Question 22Single Answer
Which of the following best describes why an audit cannot provide absolute assurance on the going concern assumption?
  1. A
    Internal controls always prevent future adverse conditions
  2. B
    The auditor has unlimited access to all information
  3. C
    Future events are uncertain and may affect the entity's ability to continue
  4. D
    Financial statements are timeless and not affected by future events
Question 23Single Answer
What is the key difference between an unmodified opinion and a qualified opinion?
  1. A
    Unmodified is issued when misstatements are material and pervasive, qualified when they are not
  2. B
    Qualified is issued when the financial statements are free from material misstatements, unmodified when they are not
  3. C
    Unmodified is issued when the financial statements are free from material misstatements, qualified when misstatements are material but not pervasive
  4. D
    Both are issued when evidence is insufficient
Question 24Single Answer
In assessing the scope of audit, the auditor must consider statutory requirements, but is not expected to:
  1. A
    Summarize transactions and events properly
  2. B
    Evaluate management judgments for disclosure
  3. C
    Perform authentication of documents beyond competence
  4. D
    Conduct tests and enquiries on accounting records
Question 25Single Answer
Which inherent limitation is highlighted when management does not provide complete information, and the auditor can only report it but not force disclosure?
  1. A
    Nature of financial reporting
  2. B
    Legal limitations in audit procedures
  3. C
    Sample testing limitations
  4. D
    Related party transaction risks
Question 26Single Answer
The objective of the auditor to express an opinion on whether the financial statements are prepared in all material respects in accordance with the applicable financial reporting framework is derived from which standard?
  1. A
    SA 210
  2. B
    SA 240
  3. C
    SQC 1
  4. D
    SA 200
Question 27Single Answer
Which of the following is not an advantage of audit?
  1. A
    It enhances risk of management bias
  2. B
    It acts as a moral check on employees
  3. C
    It provides high quality financial information
  4. D
    It helps in safeguarding interests of shareholders
Question 28Single Answer
Which of the following is NOT TRUE about an assurance engagement?
  1. A
    It relates to providing assurance about historical financial information only
  2. B
    The practitioner obtains sufficient appropriate evidence
  3. C
    There is some information to be examined by practitioner
  4. D
    A written assurance report in appropriate form is issued by practitioner
Question 29Single Answer
Which of the following is TRUE about Engagement Standards?
  1. A
    Engagement standards ensure proper rights to practitioners in course of performance of their duties
  2. B
    Engagement standards ensure preparation and presentation of financial statements in a standardized manner
  3. C
    Engagement standards ensure savings in resources of clients
  4. D
    Engagement standards ensure uniformity by practitioners in course of performance of their duties
Question 30Single Answer
Consider following statements in relation to “Limited assurance engagement”:- Statement I - It involves obtaining sufficient appropriate evidence to draw reasonable conclusions. Statement II - Review of interim financial information of a company is an example of limited assurance engagement?
  1. A
    Statement I is incorrect. Statement II is correct
  2. B
    Both Statements I and II are correct
  3. C
    Both Statements I and II are incorrect
  4. D
    Statement I is correct. Statement II is incorrect
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