AUDITING — INTRODUCTION AND DETAILS QUESTIONS WITH WELL VERIFIED ANSWERS ## 60 Practice Questions with Correct Answers ### PART A: INTRODUCTION TO AUDITING **1. What is auditing?** A. The preparation of financial statements B. An independent e

# AUDITING — INTRODUCTION AND DETAILS QUESTIONS
WITH WELL VERIFIED ANSWERS


## 60 Practice Questions with Correct Answers

### PART A: INTRODUCTION TO AUDITING



**1. What is auditing?**



A. The preparation of financial statements

B. An independent examination of financial information

C. The recording of business transactions

D. The calculation of employee salaries



**Answer: B**



**Explanation:** Auditing involves an independent examination and evaluation of financial
information to determine whether it is fairly presented according to an applicable framework.



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**2. What is the primary objective of an external audit?**



A. To prepare management accounts

B. To detect every fraud in an organization

,C. To express an opinion on whether financial statements are fairly presented

D. To guarantee that the company will make a profit



**Answer: C**



**Explanation:** The auditor's primary responsibility is to express an opinion on the financial
statements.



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**3. Who is primarily responsible for preparing financial statements?**



A. External auditor

B. Government

C. Management

D. Shareholders



**Answer: C**



**Explanation:** Management is responsible for preparing financial statements and
maintaining appropriate internal controls.



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**4. Which characteristic is essential for an external auditor?**



A. Independence

,B. Ownership of the company

C. Employment by the client

D. Participation in management decisions



**Answer: A**



**Explanation:** Independence allows the auditor to form an unbiased opinion.



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**5. What does an audit opinion provide?**



A. Absolute assurance

B. Reasonable assurance

C. No assurance

D. A guarantee of future profits



**Answer: B**



**Explanation:** An audit provides reasonable, not absolute, assurance that financial
statements are free from material misstatement.



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### PART B: TYPES OF AUDITS

, **6. Which audit is conducted by an organization's own employees?**



A. External audit

B. Internal audit

C. Government audit

D. Statutory audit



**Answer: B**



**Explanation:** Internal auditors are employed or engaged by the organization to evaluate
controls, risks, governance, and operations.



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**7. A statutory audit is:**



A. Required by law

B. Always optional

C. Conducted only by management

D. Limited to cash transactions



**Answer: A**



**Explanation:** A statutory audit is an audit required by applicable legislation or regulation.



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