Auditing

103. Which of the following statement is not true regard to auditor’s attendance at stock taking?

A. Auditor should attend physical stock taking only if inventory is material
B. Auditor may not attend physical verification of stock by management, if he does not find it appropriate to rely on it
C. If inventory is material, even when the auditor is not placing reliance on the physical verification by the management, he should attend it
D. The primary objective of an auditor’s observation of an entity’s observation of an entity’s stock take is to obtain direct knowledge that the stock and has been property counted
✅ The correct answer is option C.

104. When counting cash on hand the auditor should ___

A. Ensure presence of somebody from management
B. Obtain a receipt from custodian as to its return
C. Ensure postage and revenue stamps are not counted in physical count
D. Temporary advances to employees are counted to calculate balance of cash in hand
✅ The correct answer is option C.

105. The balance of cash in often between one to five percent of total assets. Tick the most appropriate statement with regard to verification of cash in context of this

A. Cash in always material as materiality is qualitative concept
B. No audit of cash is needed when, in auditor’s opinion, cash is immaterial. Materiality is a relative concept
C. The cash balance need only be audited if the balance is in overdraft
D. Cash is to be verified if control risk is assessed as high
✅ The correct answer is option A.

106. Which of the following statements is not true with regard to teeming and lading ?

A. It results in the deliberate misappropriation of cash receipts
B. It is associated with cash receipts
C. If same individual maintains cash receipts and cash payments teeming and lading is likely to exist
D. To conceal the shortage, the defraud, usually, tries to keep bank and book amounts in daily agreement so that a bank reconciliation will not detect the irregularity.
✅ The correct answer is option C.
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