Senior Auditor 2014

1)The meaning of the word procurement means.....

The action of obtaining or acquiring procuring something and the act of obtaining
or buying goods and services.

2)cost center means..... cost centre is a department within a company that does not produce
direct profit and adds to the cost of running a company.
3).......the risk ......the materiality,........the audit procedures.
Ans Low High Low
4) capital Account is ......... in nature. Personal
5)Formula of Machine working hours was asked.
The machine hour rate is similar to the labor hour rate method and is used where the work is
performed primarily on machines.

Machine Hours Rate = Factory overhead/Machine hours

6)PAAS stands for? Platform as a Service / Pharmacy Audit Assistance Service
7)following are not the nominal accounts...
a)cash, unearned revenue.....
b)drawings,rent.....
rest I cant remember
8)a question about the super tax was asked

An additional tax on something already taxed.

9)another question was about the Master budget

A master budget is a set of interconnected budgets of sales, production costs, purchases,
incomes, etc. and it also includes pro forma financial statements. A budget is a plan of future
financial transactions. A master budget serves as planning and control tool to the management
since they can plan the business activities during the period based on master budget. At the end
of each period, actual results can be compared with the master budget and necessary control
actions can be taken.

The master budget is the aggregation of all lower-level budgets produced by a company's various
functional areas
10)Increase in the value of assets is called...? appreciation

7) Financial statements are prepared:

A) Only for publicly owned business organizations.
B) For corporations, but not for sole proprietorships or partnerships.
C) Primarily for the benefit of persons outside of the business organization.
D) In either monetary or nonmonetary terms, depending upon the need of the decision maker.

8) The basic purpose of an accounting system is to:

A) Develop financial statements in conformity with generally accepted accounting principles.
B) Provide as much useful information to decision makers as possible, regardless of cost.

C) Record changes in the financial position of an organization by applying the concepts of

double-entry accounting.
D) Meet an organization's need for accounting information as efficiently as possible.

9) Information is cost effective when:

A) The information aids management in controlling costs.
B) The information is based upon historical costs, rather than upon estimated market values.
C) The value of the information exceeds the cost of producing it.
D) The information is generated by a computer-based accounting system.

10) Although accounting information is used by a wide variety of external parties, financial
reporting is primarily directed toward the information needs of:
A) Investors and creditors..
B) Government agencies such as the Internal Revenue Service.
C) Customers.
D) Trade associations and labor unions.
11) All of the following are characteristics of managerial accounting, except:
A) Reports are used primarily by insiders rather than by persons outside of the business entity.
B) Its purpose is to assist managers in planning and controlling business operations.
C) Information must be developed in conformity with generally accepted accounting principles
or with income tax regulations.
D) Information may be tailored to assist in specific managerial decisions.

12) In comparison with a financial statement prepared in conformity with generally accepted
accounting principles, a managerial accounting report is more likely to:
A) Be used by decision makers outside of the business organization.
B) Focus upon the operation results of the most recently completed accounting period.
C) View the entire organization as the reporting entity.
D) Be tailored to the specific needs of an individual decision maker.

13) The nature of an asset is best described as:

A) Something with physical form that is valued at cost in the accounting records.
B) An economic resource owned by a business and expected to benefit future operations.
C) An economic resource representing cash or the right to receive cash in the near future.
D) Something owned by a business that has a ready market value.
B is rite ans
14) The amount of owner's equity in a business is not affected by:
A) The percentage of total assets held in cash.
B) Investments made in the business by the owner.
C) The profitability of the business.
D) The amount of dividends paid to stockholders.
A is rite ans

15) Inventory is considered a current asset because it:

A) Often reflects the most current trends and styles.

B) Usually was purchased during the current year.

C) Will be converted into cash in the course of the company's operating cycle.

D) Can be returned to the supplier for a cash refund

C is rite ans
16) The primary economic function of a wholesaler is to:
A) Supply merchandise to retailers.

B) Sell merchandise to the public at "factory-direct" prices.

C) Manufacture low-cost products.

D) Sell merchandise on a "cash-and-carry" basis.

A is rite ans

17) The income statement of Laurel Company shows a large gross profit. This means that Laurel:
A) Is profitable.

B) Uses a perpetual inventory system.

C) Engages in retail sales.

D) Has sold merchandise at prices above its cost.
d is the correct answer.

18) In a perpetual inventory system, purchases of merchandise on account are recorded by

debiting:
A) Cost of Goods Sold.

B) Accounts Payable.

C) Purchases.
D) Inventory.
d is the correct answer.

19) Colby's General Store uses a periodic inventory system. At year-end, the balance in the
Inventory account is $8,500. Assuming that the inventory records have been maintained
properly, a year-end physical inventory:
A) Is unnecessary.

B) Probably will indicate slightly less than $8,500 in merchandise on hand, because of inventory
shrinkage.

C) Probably will indicate slightly more than $8,500 in merchandise on hand, because of
inflation.

D) Is needed to establish the ending inventory, as the $8,500 balance in the Inventory account
represents the inventory at the beginning of the year.
d is the correct answer.

20) Ward Company discovered that merchandise purchased on account was defective and
returned this merchandise to the supplier. The entry to record this return will reduce Ward's:
A) Sales revenue and the cost of goods sold.
This is the correct answer.
B) Inventory and liabilities.

C) Inventory and cost of goods sold.

D) Sales revenue and liabilities.

b is the correct answer.
21) Which of the following should not be included as part of cash on the balance sheet?
A) The amount of petty cash at year-end.
B) Outstanding checks at year-end.
C) Deposits in transit at year-end.

D) Checks received from customers.

B is rite ans

22) The financial statement which shows cash activity (receipts and disbursements) during
the accounting period is called a(n):
A) Bank statement.
B) Income statement.
C) Statement of cash flows.
D) Bank reconciliation.
C is rite ans

23) The principal purpose of a voucher system is to provide assurance that:

A) All cash receipts are deposited intact in the bank.
B) All cash disbursements are approved before a check is issued.
C) All cash receipts are recorded in the accounting records.
D) All credit sales will be collectible.
B is rite ans
24) When a voucher system is in use, the finance department has access to each of the following
except:
A) Perforated voucher and support.
B) Signed check.
C) Approved voucher and support.
D) Check register.

D is rite ans
25) Which of the following is not disclosed in a bank reconciliation?
Which of the following is not disclosed in a bank reconciliation?
A) Error made by the depositor in recording the amount of a check received from a customer.
B) Error made by the bank in recording the amount of cash disbursement.
C) Check received from a customer which proved to be uncollectible.
D) Amount stolen by a salesclerk who did not ring up several cash sales.

D is rite ans
26) During preparation of a bank reconciliation, interest earned on the average bank balance
during the month should be:
A) Deducted from the cash balance per accounting records.
B) Added to the cash balance per accounting records.
C) Deducted from the balance per bank statement.
D) Added to the balance per bank statement.

B is rite ans
27) A company which uses the direct write-off method recognizes uncollectible accounts
expense:
A) As a percentage of net sales during the period.
B) As a percentage of net credit sales during the period.
C) As indicated by aging the accounts receivable at the end of the period.
D) As specific accounts receivable are determined to be worthless.

D is rite ans
28) Which of the following transactions would increase the net cash flow from operating
activities?
A) The amount of petty cash at year-end.
B) Outstanding checks at year-end.
C) Deposits in transit at year-end.
D) Checks received from customers.
B is rite ans

29) For purposes of preparing a cash flow statement, which of the following is not considered a
"cash equivalent"?
A) A money market fund.
B) An investment in IBM bonds.
C) Treasury bills.
D) Commercial paper.
B is rite ans

30) Warner Corporation reported net income in excess of its net cash flow from operations. A
possible explanation of this difference is:
A) Depreciation expense.
B) Nonoperating gains.
C) A decrease in income tax rates.
D) A decrease in accounts receivable over the period.

B is rite ans

31) An important distinction between the direct method and the indirect method of preparing a
statement of cash flows is that:
A) The direct method reconciles accrual-based net income with net cash flow from operations;
the indirect method shows the specific cash inflows and outflows constituting the operating
activities.
B) The direct method results in a lower (more conservative) figure for net cash flow from
operating activities than does the indirect method.
C) Only those statements of cash flows prepared using the direct method are in accordance with
generally accepted accounting principles as set forth by the FASB.
D) The format of the section computing net cash flow from operating activities is different under
the two methods.
D is rite ans
32) A corporation's free cash flow is its:
A) Cash flow from operating activities that is not subject to income taxes.
B) Cash flow from operating activities available after basic business obligations have been met.
C) Net increase in cash from all sources during the year.
D) Cash flow from operating activities less all cash payments for investing and financing
activities.
B is rite ans

33) Which of the following is ordinarily computed and reported as part of the financial
statements of a large corporation?
A) The current ratio,
B) The return on assets.
C) Book value per share.
D) Earnings per share.
D is rite ans

34) The basic purpose in preparing classified financial statements is to:

A) Aid management in controlling expenses.
B) Develop useful subtotals which will assist users of the statements in their analysis of the
company's financial position, profitability, and future prospects.
C) Create a balance sheet which measures the profitability of the business as well as its financial
position.
D) Determine that the amounts shown in the financial statements are in agreement with the
company's subsidiary ledgers.

35) How would a company's current ratio be affected if a substantial amount of accounts payable
were paid in cash?
A) It would be unaffected since the transaction reduces the numerator and denominator by the
same amount.
B) It would fall.

C) It would increase.
D) The change would depend on the relationship between the payables liquidated and current
liabilities.
C is rite ans

36) Assume that net sales are increasing faster than the rate of inflation, and that the company's
gross profit rate is falling. The most likely explanation is:
The company's cost of purchasing merchandise is falling.
B) Operating expenses are rising.
C) Demand for the company's products is very strong.
D) The company has achieved an increase in sales volume by reducing its sales prices.

D is rite ans

37) Assume that for several years, the net income of Delta-Baines (DB) has been rising as a
percentage of the company's net sales. Analysts normally would interpret this to mean that:
A) DB's sales volume has been declining.
B) DB has been successful in efforts to control expenses.
C) DB's net sales are increasing faster than the rate of inflation.
D) The portion of DB's total assets financed by creditors is decreasing.
B is rite ans

38) Clay Corporation earns a rate of return on common stockholders' equity of 14%. Which of
the following will cause the rate of return to increase?
A) Issuing 9% bonds and investing the proceeds to earn 12%.
B) Increasing the size of the cash dividend paid on common stock.
C) An increase in the company's price-earnings ratio.
D) An increase in the market price of the company's stock.
A is rite ans

39) If more units are produced than the "normal" level, and the overhead spending variance is
favorable, then:
Manufacturing overhead will be underapplied.
B) The labor efficiency variance will be favorable.
C) Manufacturing overhead will be overapplied.
D) An unfavorable overhead volume variance will result.
C is rite ans

40) Which of the following unfavorable cost variances would be the least relevant in evaluating
the performance of a production supervisor?
A) Materials price variance.
B) Labor efficiency (usage) variance.
C) Overhead spending variance.
D) Materials quantity variance.

41) A difference between the overhead applied to work in process at a standard and the overhead
budgeted for the level of output achieved:
A) Will not occur because the amount of overhead budgeted is used to determine the amount of
overhead applied.
B) Is called the overhead volume variance.
C) Is called the overhead spending variance.
D) Is largely due to controllable overhead costs.
B is rite ans

42) SECP Stands for Securities and Exchange Commission of Pakistan

43) IFRS Stands For International Financial Reporting Standards
44) Opening and Ending Inventory
45) Auditors form no. 35A

1) The terms purchasing and procurement should not be seen as synonymous. As such, which of
the following statements do you think has greatest validity?
1 Procurement is broadly equivalent to purchasing
2 Procurement has a broader meaning than purchasing
3 Purchasing has a broader meaning than procurement
4 None of the above
Ans 2

2) Generally, which sequence is most typical of the procurement process?

1 Approver to originator to buyer to supplier
2 Originator to buyer to approver to supplier
3 Supplier to originator to approver to buyer
4 Originator to approver to buyer to supplier
5 None of the above

3) E-procurement aims to improve performance of what is known as the 'five rights of

purchasing'. One aim of e-procurement is increasing savings by sourcing items:
1 At the right price
2 From the right source
3 Of the right quantity
4 Of the right quality
Ans 1

4) Another aim of e-procurement is increased choice of supplier leading to sourcing items:

1 Of the right quantity
2 From the right source
3 Delivered at the right time
4 At the right price
Ans 2

5) Production related procurement refers to the purchasing of:

Information systems
2 Office supplies
3 Furniture
4 Raw material

6) Negotiated contracts with regular suppliers typically in long-term relationships is an example

of:
1 MRO sourcing
2 E-procurement
3 Systematic sourcing
4 Spot sourcing

That's not the butcher you brought the meat, you must have gone_______.
Options 1. The wrong one 2. Some wrong one 3. Wrong 4. Wrong one
Everyone _____ the magician.
(a) cheers (b) cheering (c) cheer (d) has cheer

Best of luck, Keep me in your Prays. Aman