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Advanced Auditing, Assurance and Professional Ethics MCQs for CA Final
Chapter-wise Advanced Auditing, Assurance and Professional Ethics MCQs with answers and explanations. Try the sample questions below, then practise a set of 10 with instant right/wrong.
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Q1 · Chapter 2: General Auditing Principles and Auditors Responsibilities
Under SA 230 (Audit Documentation), which of the following is NOT a typical requirement regarding the audit file?
- (a) Audit documentation should be completed on a timely basis after the date of the auditor's report
- (b) The auditor should document significant matters and conclusions reached
- (c) Documentation should be sufficient to enable an experienced auditor with no prior connection to understand the work performed
- (d) The auditor may alter existing audit documentation at any time after the file is assembled without recording who made the change and why
Show answer ↓
Answer: (d) The auditor may alter existing audit documentation at any time after the file is assembled without recording who made the change and why
(d) is correct as the exception: SA 230 requires that any changes made after assembly of the final file be documented with the reason, the date and who made them, so unrecorded alteration is not permitted. (a), (b) and (c) are all stated requirements of SA 230.
Q2 · Chapter 4: Materiality, Risk Assessment and Internal Control
A statutory auditor of a company is assessing the materiality for a company with profit before tax of Rs. 60 lakh and revenue of Rs. 4 crore. Using the commonly applied benchmark of 5% of profit before tax, what is the planning materiality?
- (a) Rs. 2 lakh
- (b) Rs. 3 lakh
- (c) Rs. 4 lakh
- (d) Rs. 30 lakh
Show answer ↓
Answer: (b) Rs. 3 lakh
(b) is correct: 5% of Rs. 60 lakh is Rs. 3 lakh, the profit-based benchmark. Rs. 4 lakh would be about 0.1% of revenue, a different benchmark, and Rs. 30 lakh is 50% of profit, far too high.
Q3 · Chapter 7: Reporting
Which of the following best describes the auditor's responsibility under SA 720 (The Auditor's Responsibilities Relating to Other Information)?
- (a) To audit all information published with the financial statements in the annual report
- (b) To read the other information and consider whether it is materially inconsistent with the financial statements or the auditor's knowledge
- (c) To express an opinion on the other information in the auditor's report
- (d) To verify the accuracy of the directors' report line by line
Show answer ↓
Answer: (b) To read the other information and consider whether it is materially inconsistent with the financial statements or the auditor's knowledge
(b) is correct: SA 720 requires the auditor to read other information, consider material inconsistencies and act on material misstatement of fact, but does not require an audit or opinion on it. (a), (c) and (d) overstate the responsibility.
Q4 · Chapter 1: Quality Control
CA Raj, engagement partner of a listed company audit, has completed the audit file. Under SQC 1 / SA 220, an engagement quality control review for this listed entity must be completed:
- (a) Within 60 days after the date of the auditor's report
- (b) Before the date of the auditor's report
- (c) Only if the auditor's opinion is modified
- (d) At the discretion of the engagement partner
Show answer ↓
Answer: (b) Before the date of the auditor's report
(b) is correct: for audits of listed entities, the engagement quality control review must be completed before the auditor's report is dated. (a) is wrong because 60 days is the period for assembling the final audit file, not for completing the EQCR.
Q5 · Chapter 7: Reporting
During the audit of PQR Ltd, the auditor finds that the going concern basis is appropriate, but a material uncertainty exists and it is adequately disclosed in the financial statements. As per SA 570, the auditor should:
- (a) Issue an adverse opinion
- (b) Express an unmodified opinion and include a separate section headed 'Material Uncertainty Related to Going Concern'
- (c) Issue a qualified opinion
- (d) Disclaim an opinion
Show answer ↓
Answer: (b) Express an unmodified opinion and include a separate section headed 'Material Uncertainty Related to Going Concern'
(b) is correct: when the disclosure is adequate, SA 570 requires an unmodified opinion with a separate 'Material Uncertainty Related to Going Concern' section. (c) is wrong because a qualified or adverse opinion applies only when the disclosure is inadequate.
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