Page 100 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
V. " The impact of the exercise carried on by the Company for unbilled challans will have an impact
on
(a). Gross Receipts and Debtors
(b). Gross Receipts and Inventory
(c). Debtors
(d). Inventory"

16
"M/s KDR & associates, Chartered accountants have been appointed auditors of a company having
operations spread in three states in India for the first time. The nature of business of company is such
that that there are about 50000 monthly entries in its books of accounts accompanied with
commensurate records. The company has also robust internal control system. The auditors want reliable

evidence. However, they are desirous of curtailing non-consequential routine checking. Hence, while
formulating strategy and plan for conducting audit, auditors desire to rely upon good audit samples
both for tests of controls and tests of details.
In above context, answer the following questions: -"
I. " Consider the following statements for determining sample size for tests of control: -
Statement I--- An Increase in the tolerable rate of deviation leads to decrease in sample size.
Statement II--- An increase in the expected rate of deviation of the population to be tested leads
to increase in sample size. Statement III—An increase in the number of sampling units in the
population leads to substantial increase in sample size.
Which of the following is most likely correct option?

(a). All Statements I, II and III are true.
(b). Statements I and II are true. However, Statement III is false.
(c). Statements I and III are true. However, Statement II is false.
(d). Statements II and III are true. However, Statement I is false."
II. " Consider the following statements for determining sample size for tests of details: -
Statement I--- An increase in tolerable misstatement leads to increase in sample size.
Statement II--- An increase in the auditor’s desired level of assurance that tolerable misstatement
is not exceeded by actual misstatement in the population leads to decrease in sample size.
Statement III—An increase in the amount of misstatement auditor expects to find in the
population leads to increase in sample size.
Which of the following is most likely correct option?

(a). All Statements I, II and III are true.
(b). Statements I and II are false. However, Statement III is true.
(c). Statements I and III are true. However, Statement II is false.
(d). Statements II and III are true. However, Statement I is false."

III. " Which of the following is not likely to be correct in evaluating results of audit sampling in case
of tests of details?
(a). The projected misstatement combined with anomalous misstatement is auditor’s best estimate
of misstatement in population.
(b). In case projected misstatement combined with anomalous misstatement exceeds tolerable
misstatement, the sample provides a reasonable basis for conclusions about population.
(c). The closer the projected misstatement combined with anomalous statement is to tolerable
misstatement, it is more likely that actual misstatement in the population may exceed tolerable
misstatement.
(d). In case the projected misstatement is greater than auditor’s expectation of misstatement used to
determine sample size, the auditor may conclude that there is unacceptable sampling risk of
actual misstatement in the population exceeding tolerable misstatement."
IV. " Which of the following is not likely to be correct in relation to Block Sampling and audit samples
drawn upon using this technique?

(a). Block selection involves selection of a block/blocks of contiguous items within the population.

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