Auditing Important Questions

 

📘 UNIT I: Introduction to Auditing

🔹 Very Short Questions (1–2 marks)

1. Define auditing.
2. What is an audit?
3. State one objective of auditing.
4. What is internal audit?
5. What is an audit programme?
6. Define audit notebook.
7. What is routine checking?
8. What is test checking?

🔹 Short Questions (3–5 marks)

1. Explain the objectives of auditing.
2. Differentiate between internal audit and external audit.
3. What is an audit programme? Explain its advantages.
4. Explain the importance of an audit notebook.
5. Distinguish between routine checking and test checking.

🔹 Long Questions (8–10 marks)

1. Define auditing and explain its objectives and importance.
2. Discuss various types of audit in detail.
3. Explain internal audit system and its advantages and limitations.

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📘 UNIT II: Internal Check & Audit Procedure

🔹 Very Short Questions

1. Define internal control.
2. What is internal check?
3. What is vouching?
4. Define verification.
5. What are assets?
6. What are liabilities?

🔹 Short Questions

1. Explain internal check system.
2. What is internal control? State its objectives.
3. Describe the process of vouching.
4. Explain the importance of vouching.
5. Differentiate between verification and vouching.

🔹 Long Questions

1. Explain internal control system and its advantages.
2. Describe vouching in detail and its importance in auditing.
3. Explain verification of assets and liabilities with examples.

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📘 UNIT III: Audit of Limited Companies

🔹 Very Short Questions

1. Who is a company auditor?
2. Who appoints the auditor?
3. What is an audit report?
4. Define audit certificate.
5. What is external audit?

🔹 Short Questions

1. Explain appointment of company auditor.
2. Describe powers of an auditor.
3. Explain duties of a company auditor.
4. Distinguish between audit report and audit certificate.
5. Difference between internal and external audit.

🔹 Long Questions

1. Explain appointment, powers, and duties of a company auditor.
2. Discuss liabilities of an auditor in detail.
3. Explain audit report and audit certificate with examples.

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📘 UNIT IV: Special Audit & Recent Trends

🔹 Very Short Questions

1. What is bank audit?
2. Define insurance audit.
3. What is social audit?
4. Define cost audit.
5. What is tax audit?
6. What is management audit?

🔹 Short Questions

1. Explain audit of banking companies.
2. Describe audit of insurance companies.
3. Explain audit of educational institutions.
4. What is efficiency audit?
5. Explain social audit.

🔹 Long Questions

1. Explain audit of banking and insurance companies.
2. Discuss audit of cooperative societies and educational institutions.
3. Explain recent trends in auditing (cost audit, tax audit, management audit).
4. Discuss penalties for unfair practices in auditing.

 

 

 

 

 

📘 UNIT I: Introduction to Auditing

🔹 Q1. Define Auditing and explain its objectives and importance.

✅ Meaning & Definition:

Auditing is the systematic examination of books of accounts, records, and financial statements of an organization to ensure they show a true and fair view.

👉 According to standard definition:
“Auditing is an independent examination of financial information to express an opinion.”

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✅ Objectives of Auditing:

1. Primary Objective:
   • To verify whether financial statements show a true and fair view.
2. Secondary Objectives:
   • Detection and prevention of frauds
   • Detection of errors
   • Ensuring proper accounting system
   • Checking compliance with laws

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✅ Importance of Auditing:

• Builds trust among investors
• Helps in fraud detection
• Improves internal control system
• Assists management in decision-making
• Required by law for companies

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🔹 Q2. Types of Audit

✅ Main Types:

1. Internal Audit – Conducted within the organization
2. External Audit – Conducted by independent auditor
3. Statutory Audit – Mandatory by law
4. Cost Audit – Checks cost records
5. Tax Audit – Ensures tax compliance

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🔹 Q3. Internal Audit – Explanation

Internal audit is conducted by employees or internal staff to:

• Check daily operations
• Improve efficiency
• Ensure internal control

Advantages:

• Continuous checking
• Early error detection

Limitations:

• Lack of independence
• Possible bias

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🔹 Q4. Audit Programme

It is a detailed plan of audit work.

Contents:

• Areas to be checked
• Time schedule
• Responsibility allocation

Advantages:

• Saves time
• Ensures systematic work
• Avoids duplication

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🔹 Q5. Audit Notebook

A record maintained by the auditor to note:

• Errors
• Missing documents
• Important observations

👉 Helps in preparing final report.

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🔹 Q6. Routine Checking vs Test Checking

Basis	Routine Checking	Test Checking
Meaning	Checking all entries	Checking sample entries
Time	Time-consuming	Saves time
Accuracy	High	Depends on sample

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📘 UNIT II: Internal Check & Audit Procedure

🔹 Q1. Internal Control System

Internal control means methods and procedures adopted to:

• Safeguard assets
• Ensure accuracy
• Prevent fraud

Objectives:

• Protection of assets
• Reliable accounting
• Operational efficiency

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🔹 Q2. Internal Check System

Internal check is a part of internal control where:

• Work is divided among employees
• One employee checks another

Advantages:

• Reduces fraud
• Improves efficiency

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🔹 Q3. Vouching – Meaning & Importance

Meaning:

Vouching is the process of checking vouchers and documents to verify transactions.

Importance:

• Ensures authenticity
• Detects fraud
• Base of auditing

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🔹 Q4. Process of Vouching

1. Examine vouchers
2. Check date and amount
3. Verify authorization
4. Match with entries

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🔹 Q5. Verification of Assets & Liabilities

Verification means:

Confirming existence, ownership, and value of assets and liabilities.

Methods:

• Physical inspection
• Document checking
• Confirmation

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📘 UNIT III: Audit of Limited Companies

🔹 Q1. Appointment of Auditor

As per law:

• First auditor → Appointed by Board
• Subsequent auditor → Appointed by shareholders

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🔹 Q2. Powers of Auditor

• Access to books
• Ask for information
• Visit branches

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🔹 Q3. Duties of Auditor

• Check accounts
• Detect frauds
• Report true financial position

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🔹 Q4. Liabilities of Auditor

Types:

1. Civil Liability – For negligence
2. Criminal Liability – For fraud

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🔹 Q5. Audit Report vs Audit Certificate

Basis	Audit Report	Audit Certificate
Meaning	Opinion	Fact confirmation
Nature	Subjective	Objective

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🔹 Q6. Internal vs External Audit

Basis	Internal Audit	External Audit
Appointment	Management	Shareholders
Purpose	Improve system	Legal compliance

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📘 UNIT IV: Special Audit & Recent Trends

🔹 Q1. Audit of Banking Companies

• Verify loans and advances
• Check compliance with RBI rules
• Ensure proper accounting

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🔹 Q2. Audit of Insurance Companies

• Check policies issued
• Verify premium income
• Ensure claim settlement accuracy

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🔹 Q3. Audit of Educational Institutions

• Verify fees collection
• Check salary payments
• Ensure proper fund utilization

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🔹 Q4. Audit of Cooperative Societies

• Check member records
• Verify loans
• Ensure compliance with laws

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🔹 Q5. Efficiency Audit

Evaluates:

• Performance
• Productivity
• Use of resources

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🔹 Q6. Social Audit

Checks:

• Social responsibility
• Impact on society

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🔹 Q7. Recent Trends in Auditing

1. Cost Audit

• Checks cost records and efficiency

2. Tax Audit

• Ensures proper tax compliance

3. Management Audit

• Evaluates management performance

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🔹 Q8. Penalties for Unfair Practices

• Fine
• Cancellation of license
• Legal action
• Imprisonment (in serious cases)