Q.1 What is the primary objective of auditing?
To prepare financial statements
To detect and prevent errors and fraud
To manage the company
To invest in securities
Explanation - The primary objective of auditing is to examine financial statements to ensure accuracy and detect any errors or fraud.
Correct answer is: To detect and prevent errors and fraud
Q.2 Which of the following is a secondary objective of auditing?
To enhance the credibility of financial statements
To calculate taxes
To provide loans
To manage inventory
Explanation - Apart from detecting errors, auditing also aims to enhance the reliability and credibility of financial information for stakeholders.
Correct answer is: To enhance the credibility of financial statements
Q.3 Auditing helps in ensuring that the accounts are:
Prepared according to the owner's wish
Accurate and true
Written in any format
Hidden from investors
Explanation - Auditing verifies that the accounts reflect the true and fair view of the financial position of the business.
Correct answer is: Accurate and true
Q.4 Which of the following is NOT an objective of auditing?
Detection of errors
Prevention of fraud
Preparation of accounts
Providing managerial advice
Explanation - Preparation of accounts is the responsibility of management; auditing only verifies and examines them.
Correct answer is: Preparation of accounts
Q.5 Auditing provides assurance to which of the following?
Owners and investors
Competitors
Customers only
Suppliers only
Explanation - Auditing assures owners, investors, and other stakeholders that the financial statements are accurate and reliable.
Correct answer is: Owners and investors
Q.6 Which type of auditing objective focuses on preventing future errors?
Primary objective
Secondary objective
Internal objective
Legal objective
Explanation - Secondary objectives include preventive measures, recommendations, and guidance to improve future financial reporting.
Correct answer is: Secondary objective
Q.7 The objective of ensuring compliance with accounting standards is part of:
Primary objective
Secondary objective
Internal control
Financial planning
Explanation - Auditors ensure that financial statements comply with applicable accounting standards, which is a secondary objective.
Correct answer is: Secondary objective
Q.8 Which objective of auditing is concerned with identifying irregularities?
Detection objective
Prevention objective
Verification objective
Compliance objective
Explanation - One of the main objectives of auditing is to detect errors and fraud in the accounting records.
Correct answer is: Detection objective
Q.9 Auditing adds value to a business mainly by:
Increasing revenue
Providing assurance on financial statements
Hiring employees
Managing operations
Explanation - Auditing enhances confidence of stakeholders by providing assurance that the accounts are accurate and reliable.
Correct answer is: Providing assurance on financial statements
Q.10 Which of these is an objective of statutory auditing?
To issue a management report
To fulfill legal requirements
To conduct marketing analysis
To provide tax consultancy
Explanation - Statutory audits are conducted to comply with legal obligations and provide assurance to external stakeholders.
Correct answer is: To fulfill legal requirements
Q.11 Prevention of fraud falls under which category of auditing objectives?
Primary objective
Secondary objective
Internal objective
External objective
Explanation - A primary objective of auditing is to prevent and detect fraud and errors in the financial statements.
Correct answer is: Primary objective
Q.12 Auditing helps management by providing:
Financial advice and suggestions
Loans and capital
Marketing strategies
Employee training
Explanation - Auditors may provide recommendations to management for improving accounting systems and internal controls.
Correct answer is: Financial advice and suggestions
Q.13 Which objective of auditing ensures accuracy of books of accounts?
Verification
Classification
Preparation
Marketing
Explanation - Verification is the process of checking the accuracy and correctness of entries in the books of accounts.
Correct answer is: Verification
Q.14 One of the objectives of auditing is to ensure that transactions are recorded:
Randomly
Chronologically and systematically
Secretly
As per management wish
Explanation - Auditors ensure that transactions are properly recorded to maintain accuracy and prevent misstatements.
Correct answer is: Chronologically and systematically
Q.15 Which of the following is an objective of internal auditing?
Checking financial statements for external reporting
Improving operational efficiency
Issuing dividends
Hiring staff
Explanation - Internal audits focus on internal controls, efficiency, and risk management, beyond mere financial verification.
Correct answer is: Improving operational efficiency
Q.16 Auditing ensures that assets of a business are:
Used efficiently and protected
Sold at profit
Ignored in accounting
Invested externally
Explanation - Auditors check for proper use and safeguarding of assets as part of their objective to prevent misappropriation.
Correct answer is: Used efficiently and protected
Q.17 Which of these auditing objectives relates to reliability of financial statements?
Primary objective
Secondary objective
Marketing objective
Investment objective
Explanation - Providing reliable financial statements for stakeholders is considered a secondary objective of auditing.
Correct answer is: Secondary objective
Q.18 Detection of errors and fraud is:
A minor goal of auditing
A primary goal of auditing
Irrelevant to auditing
Only for internal staff
Explanation - Auditing is primarily concerned with detecting mistakes and fraudulent activities in financial records.
Correct answer is: A primary goal of auditing
Q.19 Which objective of auditing is concerned with improving accounting systems?
Operational objective
Preventive objective
Statutory objective
Profit objective
Explanation - Auditing often provides recommendations to improve internal accounting systems, helping prevent future errors.
Correct answer is: Preventive objective
Q.20 Auditing increases the confidence of:
Managers, investors, and creditors
Only government officials
Only competitors
Only employees
Explanation - Auditing provides assurance to all stakeholders about the accuracy and reliability of financial statements.
Correct answer is: Managers, investors, and creditors
Q.21 Objective of ensuring compliance with laws and regulations is known as:
Legal objective
Financial objective
Internal objective
Managerial objective
Explanation - Auditing ensures that business transactions comply with legal and statutory requirements.
Correct answer is: Legal objective
Q.22 An auditor's suggestion for better record keeping serves which objective?
Primary objective
Secondary objective
Financial objective
Operational objective
Explanation - Auditors provide recommendations for improvements, which is a secondary objective beyond mere verification.
Correct answer is: Secondary objective
Q.23 Auditing assists in evaluating the effectiveness of:
Internal controls
Marketing plans
Employee morale
Customer service
Explanation - Auditing examines internal controls to ensure accuracy, reliability, and prevention of fraud in financial reporting.
Correct answer is: Internal controls
Q.24 Which objective of auditing focuses on identifying weaknesses in accounting procedures?
Evaluation objective
Compliance objective
Financial objective
Operational objective
Explanation - Auditors evaluate procedures to detect inefficiencies or weaknesses, helping management improve operations.
Correct answer is: Evaluation objective
Q.25 Ensuring that the accounts show a true and fair view is part of:
Primary objective
Secondary objective
Marketing objective
Legal objective
Explanation - The main purpose of auditing is to ensure that financial statements accurately reflect the company's financial position.
Correct answer is: Primary objective