EPFO MCQs (Auditing) – With Options and Solutions
1. An audit notebook is primarily used to:
(a) Record company sales (b) Document audit procedures and findings (c) Draft
financial statements (d) Conduct board meetings
Answer: (b)
2. Vouching mainly ensures:
(a) Compliance with tax laws (b) Authenticity of accounting entries (c) Speed of
transaction processing (d) HR policy compliance
Answer: (b)
3. Verification in auditing refers to:
(a) Guessing financial figures (b) Checking accuracy and completeness (c) Only
physical asset checking (d) Preparing marketing reports
Answer: (b)
4. Cross-referencing in audit notebooks helps in:
(a) Hiding errors (b) Ensuring all evidence is linked and organized (c) Speeding up
transactions (d) Preparing tax returns
Answer: (b)
5. Which body issues Auditing and Assurance Standards in India?
(a) SEBI (b) ICAI (c) RBI (d) IRDAI
Answer: (b)
6. In audit sampling, sampling risk means:
(a) Auditing wrong company (b) Sample may not represent the whole population (c)
Audit delay (d) Finding fewer frauds
Answer: (b)
7. Which of the following is a non-sampling risk?
(a) Large sample size (b) Error in auditor’s judgment (c) Small sample (d) Wrong client
selection
Answer: (b)
8. Trend analysis is part of:
(a) Management accounting (b) Analytical procedures (c) Compliance audit (d) Tax
audit
Answer: (b)
9. An auditor's primary civil liability is:
(a) Acting without signature (b) Negligence (c) Attending meetings (d) Filing tax
returns late
Answer: (b)
10. Misfeasance by an auditor means:
(a) Filing returns (b) Breach of trust (c) Breach of client contract (d) Late payment to
suppliers
Answer: (b)
11. Criminal liability under IPC Section 197 relates to:
(a) Salary disputes (b) False certification (c) Resignation (d) Salary negotiations
Answer: (b)
12. Liability under Income Tax Act Section 278 arises if tax evasion exceeds:
(a) ₹50,000 (b) ₹1,00,000 (c) ₹5,00,000 (d) ₹2,00,000
Answer: (b)
13. Internal audit is:
(a) External review (b) Independent, internal evaluation (c) Done by government (d)
Only tax-related
Answer: (b)
14. Traditional Internal Audit focuses on:
(a) Future risks (b) Past transactions and compliance (c) IPO preparation (d) CSR
verification
Answer: (b)
15. A special audit related to fraud detection is called:
(a) Cost audit (b) Forensic audit (c) Social audit (d) Tax audit
Answer: (b)
16. Performance audit mainly assesses:
(a) Compliance (b) Economy, efficiency, effectiveness (c) Tax evasion (d) Internal
promotions
Answer: (b)
17. Statutory audit is:
(a) Optional (b) Mandated by law (c) Only for private companies (d) Only for NGOs
Answer: (b)
18. An audit engagement is defined under:
(a) SA 230 (b) SA 210 (c) SA 500 (d) SA 300
Answer: (b)
19. Analytical procedures involve:
(a) Only physical verification (b) Plausible relationships study (c) Random questioning
(d) Only cash verification
Answer: (b)
20. Audit evidence obtained from third-party confirmations is considered:
(a) Weak (b) Strong (c) Optional (d) Redundant
Answer: (b)
21. Right of auditor to attend general meetings is under:
(a) Sec 140 (b) Sec 143 (c) Sec 146 (d) Sec 148
Answer: (c)
22. Minimum number of directors in an Audit Committee:
(a) Two (b) Three (c) Four (d) Five
Answer: (b)
23. Cost audit is applicable to industries listed under:
(a) Table X (b) Table A and B (c) Schedule III (d) Schedule VI
Answer: (b)
24. Government audit focuses mainly on:
(a) Shareholder wealth (b) Proper use of public funds (c) Company profits (d) Cost
optimization
Answer: (b)
25. Commercial audit mainly aims at:
(a) Detecting frauds (b) Assessing financial accuracy (c) Reducing taxes (d) Company
branding
Answer: (b)
26. A company auditor must possess:
(a) MBA degree (b) Certificate of Practice (Chartered Accountant) (c) Company
Secretary qualification (d) CA Inter qualification
Answer: (b)
27. An officer or employee of a company:
(a) Can be auditor (b) Cannot be auditor (c) May become auditor with approval (d)
None of the above
Answer: (b)
28. First auditor of a company must be appointed within:
(a) 15 days (b) 30 days (c) 60 days (d) 90 days
Answer: (b)
29. Removal of auditor before expiry needs:
(a) Ordinary resolution (b) Special resolution (c) Board meeting only (d) Auditor’s
resignation letter
Answer: (b)
30. Removal of auditor by tribunal is under:
(a) Section 140(5) (b) Section 140(1) (c) Section 139 (d) Section 148
Answer: (a)
31. Cost auditor should be:
(a) Chartered Accountant (b) Cost Accountant (CMA) (c) MBA (d) Any Graduate
Answer: (b)
32. Main purpose of government audit is to ensure:
(a) Profit maximization (b) Accountability and proper use of funds (c) Marketing
efficiency (d) Shareholder dividends
Answer: (b)
33. Compliance audit ensures:
(a) Risk reduction (b) Legal and regulatory adherence (c) Financial health (d)
Employee satisfaction
Answer: (b)
34. Proprietary audit checks:
(a) Industrial productivity (b) Prudence in public expenditure (c) CSR activities (d)
Stock trading
Answer: (b)
35. A forensic audit is usually performed when:
(a) Evidence of fraud (b) Tax evasion suspected (c) Compliance failure (d) IPO
launched
Answer: (a)
36. Audit documentation is guided under:
(a) SA 230 (b) SA 210 (c) SA 500 (d) SA 200
Answer: (a)
37. Which audit is forward-looking?
(a) Traditional audit (b) Risk-based internal audit (c) Cost audit (d) Financial audit
Answer: (b)
38. Auditor’s resignation becomes effective after minimum:
(a) 7 days (b) 10 days (c) 14 days (d) 21 days
Answer: (c)
39. Main focus of operational audit:
(a) Revenue maximization (b) Efficiency and goal achievement (c) Tax evasion (d)
Employee satisfaction
Answer: (b)
40. Reporting on fraud to Central Govt. is under:
(a) Section 143(12) (b) Section 140 (c) Section 146 (d) Section 148
Answer: (a)
41. Cost audit penalties for officers include:
(a) Warning (b) Fine and/or imprisonment (c) Promotion suspension (d) Only fine
Answer: (b)
42. Proprietary audit is generally done in:
(a) Startups (b) PSUs/Government expenditure (c) MNCs (d) Small companies
Answer: (b)
43. Example of risk-based audit:
(a) Random checks (b) Focus on cybersecurity risks (c) Physical verification (d)
Employee attendance
Answer: (b)
44. Removal of auditor requires notice at least:
(a) 2 days (b) 3 days (c) 5 days (d) 7 days before meeting
Answer: (b)
45. Auditor must report compliance with accounting standards under:
(a) Section 133 (b) Section 148 (c) Section 139 (d) Section 146
Answer: (a)
46. Focus of IS (Information System) Audit is:
(a) Banking (b) Data security (c) HR compliance (d) Cash flow
Answer: (b)
47. Confirmation bias in sampling refers to:
(a) Seeking new evidence (b) Only confirming existing beliefs (c) Random selection
(d) Checking all accounts
Answer: (b)
48. Risk-based auditing prioritizes:
(a) Random checks (b) High-risk areas (c) Customer satisfaction (d) Company
branding
Answer: (b)
49. Financial audit is mandated under:
(a) Section 143 (b) Section 148 (c) Section 140 (d) Section 177
Answer: (a)
50. Performance audit is conducted by:
(a) Income Tax Dept (b) RBI (c) Comptroller and Auditor General (CAG) (d) SEBI
Answer: (c)
