CA Inter – Paper 6 (Audit) – MCQ

Compiled by: CA. Pankaj Garg

(Covering ICAI SM, MTPs & RTPs till Nov. 2022 applicable for May/Nov. 2023 Exams)

Chapter – 1: Nature, Objective and Scope of Audit

1 ____________ along with other disciplines such as accounting and law, equips you with all the knowledge
that is required to enter into auditing as a profession.
(a) Auditing
(b) Taxation
(c) Finance
(d) Law
2 No business or institution can effectively carry on its activities without the help of proper ____________:
(a) Audit
(b) Record and accounts
(c) neither (a) nor (b)
(d) both (a) and (b)
3 As per SA-200 “Overall Objectives of the Independent Auditor”, in conducting an audit of financial
statements, the overall objectives of the auditor are:
(a) To obtain reasonable assurance
(b) To report on the financial statements
(c) Both (a)and (b) above
(d) To obtain absolute assurance
4 (IESBA Code) related to an audit of financial statements establishes which of the following as the
fundamental principle of professional ethics relevant to the auditor when conducting an audit of
financial statements:
(a) Professional Judgement
(b) Professional Skepticism
(c) Professional intelligence
(d) Professional competence and due care
5 The auditor’s _________ safeguards the auditor’s ability to form an audit opinion without being affected
by any influences.
(a) Objectivity
(b) independence
(c) Confidentiality
(d) Integrity

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CA Inter – Auditing & Assurance (MCQ) Compiled by: CA. Pankaj Garg
6 An employee of Fruits and Vegetables Limited was of the opinion that auditor of a company is
required to express an opinion. On which one of the following the auditor of a company is required to
express an opinion:
(a) Only Balance Sheet of the Company.
(b) Financial Statements of the Company.
(c) Only Profit and Loss Account of the Company.
(d) Only Cash Flow Statement of the Company.
7 The auditor of Delicious Sweets Limited was of the opinion that objective of audit of financial
statements of a company is to provide reasonable assurance that financial statements of that
company are free from misstatements. Which type of misstatements are mentioned by auditor of
Delicious Sweets Limited:
(a) Simple.
(b) Material.
(c) Easy.
(d) Competent.
8 A request from the client for the auditor to change the engagement may result from-
1. a change in circumstances affecting the need for the service,
2. a misunderstanding as to the nature of an audit or related service originally requested
3. a restriction on the scope of the engagement, whether imposed by management or caused by
circumstances.
(a) (1) only
(b) (1) and (2)
(c) (1), (2) and (3)
(d) (1) or (2) or (3)

9 Standard on Quality Control (SQC) 1 provides that,

(a) unless otherwise specified by law or regulation, audit documentation is the property of the
management.
(b) unless otherwise specified by law or regulation, audit documentation is the property of those charged
with governance.
(c) unless otherwise specified by law or regulation, audit documentation is the property of the
management or those charged with governance.
(d) unless otherwise specified by law or regulation, audit documentation is the property of the auditor.
10 As explained in SA 200, “Overall Objectives of the Independent Auditor and the Conduct of an Audit in
Accordance with Standards on Auditing”, _________is obtained when the auditor has obtained sufficient
appropriate audit evidence to reduce audit risk (i.e., the risk that the auditor expresses an
inappropriate opinion when the financial statements are materially misstated) to an acceptably low
level.
(a) absolute assurance
(b) limited assurance
(c) reasonable assurance
(d) reasonable or absolute assurance

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CA Inter – Auditing & Assurance (MCQ) Compiled by: CA. Pankaj Garg
11 The matter of difficulty, time, or cost involved is:
(a) not in itself a valid basis for the auditor to omit an audit procedure for which there is no alternative.
(b) in itself a valid basis for the auditor to omit an audit procedure for which there is no alternative.
(c) not in itself a valid basis for the auditor to omit an audit procedure for which alternative exists.
(d) not in itself a valid basis for the auditor to omit an audit procedure. [MTP-March 19]
12 _____________________are self-evident, and occur when auditors form relationships with the client where
they end up being too sympathetic to the client’s interests.
(a) Self-review threats
(b) Familiarity threats
(c) Intimidation threats
(d) Advocacy threats [MTP-March 19]
13 If the auditor concludes that there is reasonable justification to change the engagement and if the
audit work performed complied with the SAs applicable to the changed engagement, the report
issued would be appropriate for the revised terms of engagement. In order to avoid confusion, the
report would not include reference to:
(a) the original engagement; or any procedures that may have been performed in the original engagement.
(b) the original engagement;
(c) any procedures that may have been performed in the original engagement
(d) the original engagement and any procedures that may have been performed in the original
engagement. [MTP-April 19]
14 Which of the following is correct?
(a) The auditor is not expected to, and cannot, reduce audit risk to zero and cannot therefore obtain
absolute assurance that the financial statements are free from material misstatement due to fraud or
error.
(b) The auditor is expected to and can reduce audit risk to zero and can therefore obtain absolute
assurance.
(c) The auditor is not expected to, and cannot, reduce audit risk to zero and cannot therefore obtain
reasonable assurance that the financial statements are free from material misstatement due to fraud or
error.
(d) The auditor is expected to and can reduce audit risk to zero and can therefore obtain reasonable
assurance that the financial statements are free from material misstatement due to fraud or error.
[MTP-April 19]
15 Professional skepticism is necessary to the critical assessment of
(a) audit documentation
(b) audit evidence
(c) audit procedures and techniques
(d) none of the above [MTP-Oct. 19]
16 As per SA 210 “Agreeing the Terms of Audit Engagements”, the auditor shall agree the terms of the
audit engagement with:
(a) Management
(b) Those charged with governance
(c) Management or those charged with governance, as appropriate.
(d) Engagement team members [MTP-Oct. 19]

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CA Inter – Auditing & Assurance (MCQ) Compiled by: CA. Pankaj Garg
17 Judging the significance of a matter requires ______________ analysis of the facts and circumstances.
(a) objective
(b) subjective
(c) both subjective and objective
(d) qualitative [RTP-Nov. 19]
18 An important factor in determining the form, content and extent of audit documentation of
significant matters is the extent of _________exercised in performing the work and evaluating the
results.
(a) professional skepticism
(b) professional integrity
(c) professional judgment
(d) professional sincerity [RTP-Nov. 19]
19 Direct financial interest or materially significant indirect financial interest in a client is an example
of
(a) Self-review threats
(b) Self-interest threats
(c) Advocacy threats
(d) Intimidation threats [MTP-May 20]
20 M/s. KYC & Co. is a reputed Audit firm in Mumbai. They are appointed as Statutory Auditors of
Blessed Ltd. Which of the below is the responsibility of M/s. KYC & Co.
(a) Preparation of financial statements
(b) Designing, implementation and maintenance of internal control system
(c) Reporting on true and fair view of financial statements
(d) Compliance with the applicable law and regulation [RTP-Nov. 20]
21 Mr. Salman, is an engagement partner of Khan & Co. Chartered Accountants for an audit of Lava Ltd.,
he died of a stroke on 30.09.2020 after completing the entire routine audit work of Lava Ltd. Mr.
Shoaib, one of the partners of Khan & Co. will be signing the accounts of Lava Ltd. What is the course
of action to be taken by Mr. Shoaib?
(a) Sign the accounts of Lava Ltd. without reviewing the work of his partner
(b) Sign the balance sheet after reviewing the work of his partner
(c) Withdraw the audit as the person who has performed the audit is no more
(d) Issue an adverse report [RTP-Nov. 20]
22 ………….. is the threat which occurs when auditors are deterred from acting objectively with an
adequate degree of professional skepticism.
(a) Familiarity threat
(b) Advocacy threat
(c) Self Review threat
(d) Intimidation threat [MTP-March 21, RTP Nov. 21]
23 As per SQC 1 the retention period for audit engagements ordinarily is no shorter than …………. from
the date of the auditor’s report.
(a) ten years
(b) five years
(c) seven years
(d) four years [MTP-March 21, RTP- May 22]

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CA Inter – Auditing & Assurance (MCQ) Compiled by: CA. Pankaj Garg
24 In relation to completed engagements, procedures designed to provide evidence of compliance by
engagement teams with the firm’s quality control policies and procedures is known as:
(a) Monitoring
(b) Inspection
(c) Subsequent Audit procedures
(d) Compliance procedures [MTP-March 21, RTP-May 21, MTP-Sep. 22]
25 The persons with responsibility for overseeing the strategic direction of the entity and obligations
related to the accountability of the entity are:
(a) management
(b) those charged with governance
(c) audit committee
(d) board of directors [MTP-March 21, RTP-May 21, Nov. 21]
26 If the auditor is unable to agree to a change of the terms of the audit engagement and is not
permitted by management to continue the original audit engagement, the auditor shall:
(a) Withdraw from the audit engagement where possible under applicable law or regulation.
(b) Determine whether there is any obligation, either contractual or otherwise, to report the circumstances
to other parties, such as those charged with governance, owners or regulators.
(c) Withdraw from the audit engagement where possible under applicable law or regulation and
determine whether there is any obligation, either contractual or otherwise, to report the circumstances
to other parties, such as those charged with governance, owners or regulators.
(d) Withdraw from the audit engagement where possible under applicable law or regulation or determine
whether there is any obligation, either contractual or otherwise, to report the circumstances to other
parties, such as those charged with governance, owners or regulators.
[MTP-March 21, April 21, Nov. 21]
27 The Firm R K & Associates has an extensive understanding of Code of Ethics that underlies the
fundamental principles relevant to the Auditor when conducting an Audit of Financial Statements
and provides a conceptual framework for applying these principles. Which of the following does not
form part of the fundamental principle?
(a) Integrity
(b) Professional Competence and due care
(c) Professional Skepticism
(d) Professional behavior [MTP-April 21]
28 The agreed terms of the audit engagement shall be recorded in an audit engagement letter or other
suitable form of written agreement and shall include:
(i) The objective and scope of the audit of the financial statements;
(ii) The responsibilities of the auditor;
(iii) The responsibilities of management;
(iv) Identification of the applicable financial reporting framework for the preparation of the
financial statements; and
(v) Reference to the expected form and content of any reports to be issued by the auditor and a
statement that there may be circumstances in which a report may differ from its expected form
and content. Which of the following is correct?

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CA Inter – Auditing & Assurance (MCQ) Compiled by: CA. Pankaj Garg
(a) (i),(ii),(iii)
(b) (i),(ii),(iii), (iv), (v)
(c) (i),(ii), (iv), (v)
(d) (i),(ii),(iii), (iv) [MTP-March 22]
29 Owing to the _______ limitations of an audit, there is _________ risk that some material misstatements of
the financial statements will not be detected, even though the audit is properly planned and
performed in accordance with the SAs.
(a) Inherent, unavoidable
(b) Inherit, complete
(c) Management, unavoidable
(d) Regulatory, control [MTP-March 22]
30 Which of the following is the responsibility of the auditor:
(a) Preparation and presentation of the financial statements in accordance with applicable financial
reporting
(b) Design, implementation and maintenance of internal controls
(c) Express an opinion on the Financial Statements
(d) To obtain limited assurance. [MTP-April 22]
31 ………….. is the threat which occurs when the auditor promotes, or is perceived to promote, a client’s
opinion to a point where people may believe that objectivity is getting compromised
(a) Familiarity threat
(b) Advocacy threat
(c) Self Review threat
(d) Intimidation threat [RTP-May 22]
32 Mr. A, auditor and Mr. B, Finance Manager of XYZ Pvt. Ltd. are friends. Mr. A prepares the audit report
according to the wishes and directions of Mr. B. In this situation which essential quality of the auditor
has been compromised:
(a) Professional Competence
(b) Independence
(c) Professional Skepticism
(d) Due care [MTP-Sep. 22]
33 Which of the following is not in accordance with spirit of “Professional Skepticism”?
(a) Being alert to conditions that may indicate possible fraud
(b) Overlooking unusual circumstances
(c) Using appropriate assumptions in determining nature, timing and extent of audit procedures and
evaluating results
(d) Being alert to circumstances that suggest need for audit procedures in addition to those required by
Standards on Auditing [MTP-Oct. 22]
34 As per SA-210, preconditions for an audit do not include which of the following?
(a) Acceptability of financial reporting framework
(b) Responsibility of management regarding preparation of financial statements
(c) Making available records to the auditor
(d) Integrity of key management personnel [MTP-Nov. 22]

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CA Inter – Auditing & Assurance (MCQ) Compiled by: CA. Pankaj Garg
35 An auditor signs a false audit report knowingly. Which of the following fundamental principles of
professional ethics is violated in such a case?
(a) Objectivity
(b) Integrity
(c) Professional Competence and due care
(d) Professional behavior [RTP-Nov. 22]

Answer Key
Q. No. Answer
1 (a) Auditing
2 (b) Record and accounts
3 (c) Both (a)and (b) above
4 (d) Professional competence and due care.
5 (b) independence
6 (b) Financial Statements of the Company.
7 (b) Material.
8 (c) (1), (2) and (3)
9 (d) unless otherwise specified by law or regulation, audit documentation is the property of the
auditor.
10 (c) Reasonable assurance
11 (a) not in itself a valid basis for the auditor to omit an audit procedure for which there is no
alternative.
12 (b) Familiarity threats
13 (a) the original engagement; or any procedures that may have been performed in the original
engagement.
14 (a) The auditor is not expected to, and cannot, reduce audit risk to zero and cannot therefore obtain
absolute assurance that the financial statements are free from material misstatement due to fraud
or error.
15 (b) audit evidence
16 (c) Management or those charged with governance, as appropriate.
17 (a) objective
18 (c) professional judgment
19 (b) Self-interest threats
20 (c) Reporting on true and fair view of financial statements
21 (b) Sign the balance sheet after reviewing the work of his partner
22 (d) Intimidation threat
23 (c) seven years

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CA Inter – Auditing & Assurance (MCQ) Compiled by: CA. Pankaj Garg
24 (b) Inspection
25 (b) those charged with governance
26 (c) Withdraw from the audit engagement where possible under applicable law or regulation and
determine whether there is any obligation, either contractual or otherwise, to report the
circumstances to other parties, such as those charged with governance, owners or regulators.
27 (c) Professional Skepticism
28 (b) (i),(ii),(iii), (iv), (v)
29 (a) Inherent, unavoidable
30 (c) Express an opinion on the Financial Statements
31 (b) Advocacy threat
32 (b) Independence
33 (b) Overlooking unusual circumstances
34 (d) Integrity of key management personnel
35 (b) Integrity

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