FREE CGAP Questions and Answers

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Which of the following claims about the first auditor's removal before the term's end is untrue?

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The statement "The approval of the central government is required for such removal" is not correct regarding the removal of the first auditor before the expiry of the term. In most jurisdictions, the appointment and removal of auditors, including the first auditor, are determined by the shareholders of the company during a general meeting. The central government typically does not have direct involvement in the removal of auditors, especially in private companies.

The controller and auditor general of India issued a directive for an audit.

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The instructions of audit issued by the Comptroller and Auditor General (CAG) of India are specifically related to "government audit." The CAG is an independent constitutional authority in India responsible for auditing the accounts of the central and state government departments, as well as other government entities. The instructions provided by the CAG outline the standards, procedures, and guidelines to be followed by auditors during the audit of government organizations to ensure transparency, accountability, and compliance with established rules and regulations.

A thorough investigation of a company's books and records is called a .

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"Auditing" is a systematic examination of the books and records of a business. It involves assessing financial transactions, internal controls, and financial statements to ensure accuracy, compliance, and transparency in financial reporting. Auditing helps provide assurance to stakeholders that the financial information presented is reliable and trustworthy.

The auditor is required to provide a report on the accounts they examined.

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Auditor shall report on the accounts examined by him "to the shareholders." The auditor's report is a formal statement that communicates the results of the audit to the shareholders of the company. This report provides information about the accuracy, fairness, and compliance of the financial statements with accounting standards and regulations. The auditor's report is an important tool for shareholders to understand the company's financial health and the reliability of its financial statements.

This type of audit is typically undertaken between two annual audits.

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The kind of audit that is conducted generally between two annual audits is called an "interim audit." An interim audit is conducted during the accounting period between two annual financial statement audits. It involves reviewing the company's financial records, transactions, and internal controls to provide an assessment of the company's financial position and performance at a specific point in time, usually mid-year. Interim audits help identify issues early, ensure accuracy in financial reporting, and provide management with timely insights for making informed decisions.

The internal auditor is chosen by .

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The internal auditor is typically appointed by "the management" of the company. The internal auditor is an employee of the company and is responsible for conducting internal audits to assess and evaluate the company's financial records, operational processes, and internal controls. The internal auditor assists the management in identifying areas for improvement, ensuring compliance with policies and regulations, and enhancing the overall efficiency and effectiveness of the organization's operations.

Where _____ ends, auditing begins.

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Which of the following doesn't qualify as an audit?

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There is no option among them that is not a kind of audit.

Errors are referred to as ________ when a transaction has not been fully or partially documented in the books of account.

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When a transaction has not been recorded in the books of account either wholly or partially, such errors are called "Errors of omission." These errors occur when a transaction is completely omitted from being recorded, leading to discrepancies between the actual financial transaction and the recorded information in the books of accounts. Errors of omission can affect the accuracy of financial statements and need to be identified and rectified during the auditing process.

The first auditor of a corporation is chosen by the board of directors.

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The board of directors shall appoint the first auditor of a company "within one month of the incorporation of the company." This appointment is a legal requirement in many jurisdictions and ensures that the company's financial records are subject to an independent audit from the early stages of its existence. The first auditor's role is to conduct the initial audit of the company's financial statements and report on them to the shareholders.

The court must be confirmed in order for .

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Confirmation of the court is necessary for the "reduction of share capital." When a company intends to reduce its share capital, which involves decreasing the nominal value of its shares, it typically requires approval from the court. This is to ensure that the rights and interests of creditors and shareholders are protected. The court's confirmation is part of the legal process for ensuring that the reduction is carried out in accordance with applicable laws and regulations.

Who among the following can be chosen to serve as a company's auditor?

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Mr. Z, who holds a Chartered Accountant (C.A.) certificate, can be appointed as an auditor of a company. Chartered Accountants are often qualified and well-suited to perform audit duties due to their expertise in accounting, auditing, and financial reporting. In many jurisdictions, Chartered Accountants meet the requirements to serve as auditors and ensure the accuracy and transparency of a company's financial records.

The audit that is required by law is known as .

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The audit that is made compulsory under statute is called "Statutory audit." Statutory audit refers to the mandatory external audit of a company's financial statements and accounts as required by law or regulations. The purpose of a statutory audit is to ensure that the company's financial records are accurate, complete, and compliant with accounting standards and legal requirements. This type of audit is typically conducted by independent auditors who are appointed by the shareholders or regulatory authorities.

Which of the following sections addresses the auditor's qualifications?

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Section 226(1) and Section 226(2) of the Companies Act deal with the qualification of the auditor. These sections outline the eligibility criteria and qualifications required for an individual to be appointed as an auditor of a company. The qualifications may include professional certifications, memberships, and expertise in auditing and accounting practices. The Companies Act in various jurisdictions may have different sections with similar provisions, but the exact reference can depend on the specific country's legislation.

The auditor sets out the entire audit process before work on it begins, and this process is known as .

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Before the work of audit is commenced, the auditor plans out the whole audit process, including the scope, procedures, and timeline. This planning is organized in a document known as an "Audit program." The audit program outlines the objectives, steps, and resources required for the audit engagement. It helps ensure that the audit is conducted systematically, efficiently, and effectively to achieve the desired audit objectives and provide reliable results.

It is known as ________ to verify the worth of a firm's assets, liabilities, reserve balance, provision, and amount of profit made or loss incurred.

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Verification of the value of assets, liabilities, the balance of reserves, provisions, and the amount of profit earned or loss suffered by a firm is called "Balance sheet audit." A balance sheet audit involves examining and verifying the financial information presented in the company's balance sheet, including assets, liabilities, equity, reserves, and provisions. This audit aims to ensure that the financial statements provide an accurate representation of the company's financial position and performance at a specific point in time.

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