In this post, we have compiled various multiple-choice questions (MCQs) with regard to the preparation, signing, and other matters relevant to an audit report.
What is an audit report?
Every organization usually gets its books of account audited by an independent external auditor. The end result of such an exercise of audit is presented by the auditor in the form of an audit report. It showcases an auditor’s opinion as to whether or not the concerned organization has prepared its financials accurately in compliance with generally accepted accounting principles.
Audit reports are generally annexed to a company’s annual report. They give assurance to the shareholders, creditors, regulators, bankers, and potential investors about the state of the financial health of the company. The most common type of opinion expressed by the auditor is a clean or unqualified opinion, which represents that the company’s financial statements have been found to be compliant with accounting principles and standards. Other types of opinion include qualified, adverse, or a disclaimer of opinion.
Given below are the MCQs related to the concept of “Audit Report”. An attempt is made to include both knowledge-based as well as application-based MCQs.
MCQs on Audit Report
Q1. Which of the following statements is correct in relation to the essential qualities of a good audit report?
- It shouldn’t point out mistakes and errors.
- It should give timely and constructive suggestions to the client’s management.
- It shouldn’t be based on facts and information.
- It shouldn’t be based on the Balance Sheet.
Answer: 2. It should give timely and constructive suggestions to the client’s management.
Q2. Based on his audit findings, when an auditor issues an unqualified opinion, he must be satisfied that:
- The estimate of likely misstatements cannot be made.
- The estimate of likely misstatements is more than the materiality level.
- The estimate of likely misstatements is less than the materiality level.
- Known misstatements and their amounts are documented in working papers.
Answer: 3. The estimate of likely misstatements is less than the materiality level.
Q3. Due to lack of audit evidence, an auditor issues which of the following reports?
- Qualified opinion
- Adverse opinion
- Unqualified opinion
- Disclaimer of opinion
Answer: 4. Disclaimer of opinion
Q4. Who shall be held responsible for non-detection of misstatements and issue of a clean report if the external auditor relies on the work of the internal auditor:
- External auditor
- Internal auditor
Answer: 2. External auditor [Relying on the work of internal auditors does not reduce the liability of the external auditor. He himself would be liable for any errors in reporting.]
Q5. A cost auditor submits his report to whom?
- Board of Directors
- Statutory auditor
Answer: 3. Board of Directors
Q6. An audit report is often referred to as the __________ product of audit.
- None of the above
Answer: 3. Final
Q7. The Standard on Auditing “SA 700” stands for _________.
- Audit Planning
- Joint Auditors
- Audit Documentation
- Forming an opinion and reporting on Financial Statements
Answer: 4. Forming an opinion and reporting on Financial Statements
Q8. A disclaimer of opinion should be submitted by the auditor when:
- He is satisfied with the truthfulness of financial statements.
- Some material information, to form the grounds for giving an opinion, is not available to him.
- He has some reservations with regard to the truthfulness and fairness of financial statements.
- The effect of any disagreement with the client’s management is not so material.
Answer: 2. Some material information, to form the grounds for giving an opinion, is not available to him.
Q9. A secretarial audit report is given in which Form?
Answer: 3. MR-3
Q10. The Form in which a cost audit report is submitted to the Board of directors is called:
Answer: 3. CRA-3
Q11. After submission of the report by the cost auditor, when the cost audit report is furnished by the Board of Directors to the Central Government, it should be filed in:
Answer: 4. CRA-4
Q12. Which amongst the following best describes Section 146 of the Companies Act, 2013?
- Auditor to sign audit reports
- Auditor to attend the company’s general meeting
- Auditor not to render certain specified services
- Punishment for contravention
Answer: 2. Auditor to attend the company’s general meeting
MCQs on audit report continued on next page….