Q.1 What is the primary objective of a government audit?
To maximize profits of public enterprises
To ensure compliance with laws and regulations
To prepare financial statements for shareholders
To reduce tax liabilities of citizens
Explanation - Government audits primarily focus on ensuring that public funds are used according to laws, regulations, and policies.
Correct answer is: To ensure compliance with laws and regulations
Q.2 Which authority typically conducts the audit of central government departments in India?
Income Tax Department
Comptroller and Auditor General (CAG)
Ministry of Finance
Reserve Bank of India
Explanation - The CAG is the constitutional authority responsible for auditing the accounts of the central and state governments in India.
Correct answer is: Comptroller and Auditor General (CAG)
Q.3 Which of the following is a type of public sector audit?
Statutory Audit
Internal Audit
Performance Audit
Tax Audit
Explanation - Performance audit evaluates the efficiency, effectiveness, and economy of government programs, which is specific to public sector auditing.
Correct answer is: Performance Audit
Q.4 What distinguishes government audit from commercial audit?
Focus on profit maximization
Focus on compliance and public accountability
Audits are optional
Auditors are elected by shareholders
Explanation - Unlike commercial audits, government audits emphasize legality, propriety, and the efficient use of public resources.
Correct answer is: Focus on compliance and public accountability
Q.5 Which report is issued after auditing a government department in India?
Annual Report
CAG Report
Financial Statement Report
Tax Compliance Report
Explanation - After auditing, the CAG submits reports to the President/Parliament or Governor/State Legislature detailing audit findings.
Correct answer is: CAG Report
Q.6 In public sector audit, what does 'propriety audit' focus on?
Profit and loss assessment
Legality of expenditure
Efficiency of management
Tax compliance
Explanation - Propriety audit checks whether public money is spent according to established rules and regulations.
Correct answer is: Legality of expenditure
Q.7 Which principle is essential in public sector accounting?
Matching Principle
Prudence and Transparency
Revenue Recognition Principle
Going Concern
Explanation - Government accounting emphasizes careful, transparent, and accountable recording of public resources.
Correct answer is: Prudence and Transparency
Q.8 Who audits the accounts of local government bodies in India?
State CAG or Local Audit Authority
Reserve Bank of India
Ministry of Finance
Income Tax Department
Explanation - Local bodies are audited either by the state’s CAG or a designated local audit authority to ensure accountability.
Correct answer is: State CAG or Local Audit Authority
Q.9 Which audit type examines the effectiveness of a government program in achieving objectives?
Financial Audit
Performance Audit
Statutory Audit
Compliance Audit
Explanation - Performance audits assess whether government programs are achieving intended outcomes efficiently and effectively.
Correct answer is: Performance Audit
Q.10 What is the tenure of the Comptroller and Auditor General (CAG) of India?
5 years or until age 65, whichever is earlier
10 years fixed
6 years fixed
Until retirement from service
Explanation - The CAG holds office for 5 years or until reaching 65 years of age, whichever comes first, ensuring independence and accountability.
Correct answer is: 5 years or until age 65, whichever is earlier
Q.11 Which of the following is NOT an objective of government audit?
Detect misappropriation of funds
Ensure compliance with rules
Maximize organizational profit
Promote efficiency in public spending
Explanation - Government audit focuses on compliance, efficiency, and accountability, not profit maximization, which is a commercial objective.
Correct answer is: Maximize organizational profit
Q.12 Which term describes audit coverage of government projects for cost-effectiveness and result orientation?
Financial Audit
Cost Audit
Performance Audit
Tax Audit
Explanation - Performance audit examines both the cost-effectiveness and results achieved in government programs.
Correct answer is: Performance Audit
Q.13 Which of these audits is mandatory for government-owned companies under Companies Act in India?
Statutory Audit
Internal Audit
Performance Audit
Management Audit
Explanation - Government companies, like other companies, require statutory audits under the Companies Act for legal compliance and accountability.
Correct answer is: Statutory Audit
Q.14 Which document forms the basis for conducting a government audit?
Annual Budget and Accounts
Stock Market Reports
Corporate Profit Reports
Income Tax Returns
Explanation - Government audits are performed by examining the budget, expenditure, and financial accounts of departments and organizations.
Correct answer is: Annual Budget and Accounts
Q.15 Which principle ensures that government auditors act independently without influence from the executive?
Audit Independence
Prudence Principle
Materiality Concept
Going Concern Principle
Explanation - Audit independence guarantees objectivity and impartiality in evaluating government financial management.
Correct answer is: Audit Independence
Q.16 In India, who lays the CAG report before the Parliament?
Prime Minister
President of India
Finance Minister
Parliamentary Committee
Explanation - The CAG submits the report to the President, who then causes it to be laid before Parliament along with an explanatory memorandum.
Correct answer is: President of India
Q.17 Which of the following is a key feature of government audit?
Focuses on profit generation
Emphasizes compliance, propriety, and performance
Conducted by shareholders
Audit reports are confidential
Explanation - Government audits emphasize legal compliance, propriety of expenditure, and performance evaluation rather than profit-making.
Correct answer is: Emphasizes compliance, propriety, and performance
Q.18 Which audit checks adherence to policies, rules, and regulations?
Financial Audit
Compliance Audit
Performance Audit
Internal Audit
Explanation - Compliance audit focuses on verifying whether activities comply with the relevant laws, rules, and regulations.
Correct answer is: Compliance Audit
Q.19 Which of the following is an example of a government audit at the state level?
Audit of state electricity board accounts
Audit of private bank accounts
Audit of multinational company
Internal audit of a cooperative society
Explanation - State government departments and state-owned enterprises are subject to audits to ensure proper use of public resources.
Correct answer is: Audit of state electricity board accounts
Q.20 Which of these is NOT typically audited under public sector audit?
Government expenditure
Public debt
Corporate profits of private companies
Revenue collection
Explanation - Public sector audit deals with government finances and resources, not private corporate profits.
Correct answer is: Corporate profits of private companies
Q.21 Which audit ensures efficient utilization of public resources?
Financial Audit
Performance Audit
Tax Audit
Internal Audit
Explanation - Performance audits evaluate how efficiently public funds are used and whether programs meet intended objectives.
Correct answer is: Performance Audit
Q.22 Who is responsible for auditing the accounts of government companies in India?
Internal Auditors
CAG
Tax Authorities
RBI
Explanation - The CAG audits government companies to ensure compliance with laws and to promote accountability in use of public funds.
Correct answer is: CAG
Q.23 Which type of audit report highlights misuse or irregularity of public funds?
Unqualified Report
Qualified Report
Adverse Report
Disclaimer Report
Explanation - An adverse report is issued when public funds are misused or irregularities are significant, reflecting serious issues.
Correct answer is: Adverse Report
Q.24 What does 'audit of accounts' involve in government auditing?
Review of profit statements
Examination of financial transactions and records
Preparation of budgets
Calculation of taxes
Explanation - Audit of accounts involves verifying the accuracy, completeness, and legality of financial transactions recorded by government entities.
Correct answer is: Examination of financial transactions and records
Q.25 Which concept ensures accountability of public servants in expenditure of public funds?
Audit Trail
Going Concern
Revenue Recognition
Matching Concept
Explanation - An audit trail allows verification of all transactions, ensuring transparency and accountability in the use of public resources.
Correct answer is: Audit Trail