Below are neatly organized study notes based on the provided document.

The
notes are structured chapter-wise, summarizing key points while retaining all
essential details for clarity and completeness.

Study Notes: Financial Attest Audit Manual (FAAM)

Prepared by: Deepak Kumar Rahl, AAO (LAD/Patna)
Current Date: April 10, 2025

Chapter 1: Introduction
1. Purpose of FAAM
o Provides a framework for financial (attest) audit within the Indian
Audit and Accounts Department (IAAD), headed by the Comptroller
and Auditor General (CAG) of India.
2. Basis of the Manual
o Built on existing IAAD instructions, CAG’s Auditing Standards, and
best practices of Supreme Audit Institutions (SAIs) globally.
3. Financial (Attest) Audit
o Focuses on expressing an audit opinion on financial statements.

o Involves:

 Examination and evaluation of financial records.

 Audit of financial systems, transactions, and compliance with
statutes/regulations affecting accounting records.
 Audit of internal controls and internal audit functions to
safeguard assets and ensure record accuracy.
4. CAG’s Audit Responsibilities
o Wider than just opinions on financial statements; includes assessing
risks to regularity, propriety, and financial control.
5. Transaction Audit
o Addresses risks to regularity, propriety, and financial control.

o Not tied to a specific annual assurance on financial statements.

o Results in reports to management, Parliament, or Legislature, not a

formal opinion.
o Focuses on government departments/units, not financial
statements.
o Covers significant irregularities over time, even if not material to
financial statements.
6. Audit Opinion
o Provides positive annual assurance on financial statements to
Parliament/Legislature.
7. Government Companies Audit
o Financial attest audit conducted by Chartered Accountants
(Statutory Auditors) appointed by CAG under the Companies Act.
o CAG issues comments post-audit; Statutory Auditor issues the
certificate.
8. CAG’s Audit Mandate (DPC Act)
o Section 13: Audit all expenditure from Consolidated Fund,
Contingency Fund, Public Accounts, and trading/profit-loss accounts
of Union/State/UT.
o Section 14 & 15: Audit accounts of authorities/bodies receiving
government grants/loans, subject to conditions.
o Section 16: Audit receipts payable into the Consolidated Fund;
ensure effective revenue assessment and allocation.
o Section 17: Audit stores and stock accounts.

o Section 19 (1) & (2): Duties/powers for auditing Government

Companies and Corporations.
o Section 19 (3): Audit of State/UT Corporations in public interest,
after consultation with CAG and opportunity for representation.
o Section 20 (1): Audit of bodies not under Section 19, if requested
by President/Governor/Administrator after consultation.
o Section 20 (2): CAG can propose audit if substantial government
investment exists, subject to approval.
9. Definitions
o Authority: A person/body exercising power/command.

o Body: An aggregate of persons, incorporated or unincorporated.

10.Reporting
o CAG reports on audited accounts/expenditure/transactions (Section
13).
o Reports on Government Companies/Corporations submitted to
Government for Parliament/Legislature (Section 19A).
11.Inspection Powers (Section 18)
o Inspect offices of accounts, treasuries, and subsidiaries.

o Require submission of relevant documents for inspection.

 o Pose questions, make observations, and request information for
reports.
12.Responsibilities of Audited Entities (Section 18(2))
o Provide all facilities for inspection and comply with information
requests promptly.
13.CAG’s Regulatory Powers
o Section 23: Make regulations for audit scope/extent and principles
of government accounting.
o Section 24: Dispense with detailed audit or apply limited checks
when warranted.
14.IAAD Authority
o Derives powers from Section 21 of the DPC Act to perform duties on
behalf of CAG.

Chapter 2: General Concepts and Overview

1. Auditing Standards
o Provide a framework for audit steps and procedures.

2. International Federation of Accountants (IFAC)

o Established in 1977 to enhance global accountancy.

o International Auditing Practices Committee (IAPC) issues

International Standards on Auditing (ISAs).
o ISAs are authoritative but do not override local regulations.

3. Institute of Chartered Accountants of India (ICAI)

o Issues Auditing and Assurance Standards (AASs) based on ISAs,
adapted to Indian laws and practices.
4. INTOSAI Auditing Standards
o Issued in 1992 (XIVth Congress, Washington, D.C.), amended in
1995 (Cairo).
o Code of Ethics for public sector auditors issued in 1998.

5. CAG’s Auditing Standards

o First issued in 1994.

o Categories:

 General Standards: Auditor’s relationship with audited

entity and personal conduct.
 Field Standards: Regulate audit activity.
  Reporting Standards: Regulate post-audit reporting.
o Departure from standards requires high-level approval from CAG’s
Headquarters and documentation.
6. Audit Objectives in Financial Attest Audit
o Primary Objective: Expression of opinion on financial statements.

o Additional objectives set by CAG or statute.

7. Audit Evidence
o Must be competent, relevant, and reasonable (CRR) to support
conclusions.
o Relates to general audit objectives (assertions).

8. Assertions for Income & Expenditure Statement (COMDR)

o Completeness: All transactions recorded.

o Occurrence: Transactions occurred and are relevant.

o Measurement: Correctly valued per accounting policies.

o Disclosure: Properly classified and disclosed.

o Regularity: Complies with laws and regulations.

9. Assertions for Balance Sheet (CEVOD)

o Completeness: All assets/liabilities recorded (tests
understatement).
o Existence: Recorded assets/liabilities exist (tests overstatement).

o Valuation: Accurate values per accounting policies.

o Ownership: Assets owned, liabilities owed by entity.

o Disclosure: Proper presentation in statements.

10.Materiality
o Audit opinion assures financial statements are free from material
misstatement/irregularity.
o Unqualified Certificate: Issued if errors are not material.

o Materiality Levels: Set by CAG guidelines.

o Definition: An omission/misstatement influencing user decisions.

o Types:

 Value: Total error value.

 Nature: Specific items (e.g., salary, write-offs).
 Context: Implications for other account aspects.
 o Planning Materiality: Decides audit scope.

o Reporting Materiality: Evaluates results.

11.Materiality Thresholds
o Cash Basis Accounts (e.g., Appropriation/Finance Accounts):

 Very Sensitive: 1/3% of gross expenditure.

 Sensitive: 1/2%–2%.
 Non-Sensitive: 2%.
o Accrual Basis Accounts: Based on net surplus, gross income,
sales, total/net assets.
12.Most Likely Error (MLE)
o Anticipated MLE (AMLE): Predicted error based on prior audits.

o Precision: Range of acceptable error (80–90% of Materiality-AMLE).

o Sample size ensures 95% confidence in detecting errors.

13.Risk-Based Audit Approach

o Focuses efforts on high-risk areas while respecting the full audit
mandate.
o Audit Risk: Uncertainty in audit (5% risk = 95% assurance).

o Components:

 Inherent Risk: Misstatement risk without controls.

 Control Risk: Failure of controls to prevent/detect errors.
 Detection Risk: Auditor’s procedures missing errors.
o Formula: AR = IR × CR × DR.

14.Evidence Gathering
o Principal source: Auditee records.

o Methods: Observation, re-performance, analysis, vouching,

confirmation, control evaluation, CAATs.
15.Audit Procedures
o Analytical Procedures (APs): Study relationships in financial/non-
financial data (e.g., ratios, trends).
o Systems-Based Audit (SBA): Relies on internal controls.

o Direct Substantive Testing (DST): Tests without relying on

controls.
16.Analytical Procedures Types
 o Single Component: Compares recorded vs. budgeted/prior values
(used in planning/execution).
o Comparison Across Components: Analyzes multiple components
(more effective).
o System Analysis: Identifies anomalies in transaction listings.

o Predictive Testing: Independent reasonableness test.

o Regression Analysis: Statistical relationship analysis.

o Business Analysis: High-level financial statement review (no

assurance).
17.Steps in Analytical Review
o Develop expectation, define differences, compare actuals,
investigate, document.
18.SBA and DST
o SBA: Relies on controls; tests reliability and suggests
improvements.
o DST: Tests without control reliance; involves subsystem selection,
sampling, and evidence gathering.
19.Audit Sampling
o Tests <100% of population to form conclusions.

o Stratification: High-value, key items (100% tested), remainder

(sampled).
o Methods:

 Monetary Unit Sampling (MUS): Projects findings in

monetary terms.
 Simple Random Sampling: Equal selection chance.
 Stratified Sampling: Divides population into homogeneous
strata.
 Multi-Stage Sampling: For multiple locations.
o CAATs (e.g., IDEA) enhance sampling efficiency.

20.Non-Production of Records
o Audit halted; reported to Chief Secretary/Secretary/Chief Executive.

o Unresolved issues escalated to Audit Report via PAC/COPU.

o Certificate qualified with “limitation in scope.”

21.Financial Audit Process

 o Planning: Understand entity, set objectives, assess materiality/risk,
prepare plan.
o Execution: Sampling, control testing, substantive testing, review
papers.
o Reporting: Evaluate findings, issue report/certificate.

22.Accounts Mode
o Union/State/UT: Cash basis.

o Corporations/Autonomous Bodies: Generally accrual.

o Government Companies: Accrual.

o Externally-Aided Projects: Per implementing agency.

23.Audit Certificate
o Two parts: Scope and Opinion.

o Wording:

 Properly Presents: Cash basis, low judgment.

 Presents Fairly: Partial accruals, some judgment.
 True and Fair View: Full accruals.

Chapter 3: Audit Planning

1. Annual Audit Plan
o Prepared by each office yearly per Headquarters’ instructions.

o Integrates central audit, inspections, financial, and performance

audits.
o Detailed programme for financial audits set by January, approved by
AG, and shared with auditee entities.
2. Priority
o Financial attest audits are mandatory and prioritized.

3. Planning Steps
o Understanding the Entity: Inform materiality, risk, and approach.

o Assessing Materiality: Set tolerable error levels.

o Risk Assessment: Identify misstatement risks and mitigating

controls.
o Plan Finalization: Focus on risks with acceptable assurance.

4. Sources of Information
 o Past accounts, audit observations, management discussions,
statutes, manuals, budgets, interim accounts, entity operations.
5. Special Attention
o Changes in accounting standards, policies, formats, or items
requiring judgment.
6. Public Interest
o Assess Parliamentary/Legislative and public interest in entity
activities.
7. IT Systems
o Reviewed during Treasury/PAO inspections; reports shared with AG
(Civil Audit).
o IT audit personnel used for complex systems; external experts need
HQ approval.
8. Analytical Procedures
o Based on interim statements, budgets, prior periods, or
management info.
9. Materiality
o Set by AG per CAG instructions.

o Cash basis: Gross expenditure/income.

o Planning materiality may be lower than reporting materiality.

10.Risk Assessment
o Reduces risk of missing material errors.

o Inherent Risk: Misstatement susceptibility (High/Medium/Low).

o Entity Risks: Control environment, staff competence, system

reliability.
o Account Area Risks: Complex regulations, third-party delivery,
claims-based payments.
11.Mitigating Controls
o Desk instructions, independent verification, claim checks, higher-
level reviews.
12.Risk Identification Process
o Establish objectives, detail operations, identify risks, prioritize,
assess financial statement impact, evaluate management response.
13.Audit Approach
o Cost-effective: Minimizes sampling risk, costs, and maximizes
assurance.
 o Substantive Testing Levels:

 Focused: High-risk, no control reliance (e.g., high-value

testing, third-party confirmation).
 Standard: No significant risks, no control reliance (e.g.,
analytical procedures).
 Minimum: Relies on controls (e.g., comparison procedures).
14.Specific Cases
o State Government: Covers central, local, and IT audits.

o Union Government: Plans by respective DG/Principal Directors.

o Government Companies: AG may update sub-directions to statutory

auditors.

Chapter 4: Fieldwork
1. Audit Launch
o AG sends a Letter of Understanding (statutory) or Engagement
Letter (non-statutory) to entity management.
2. Audit Evidence
o Competent: Sufficient and impartial.

o Sufficient: Adequate test extent; avoids excess or shortfall.

o Reliable: Depends on nature/source (e.g., documentary > oral,

external > internal).
o Relevant: Pertains to audit objectives/assertions.

o Sources: Inspection, observation, enquiry, computation, analytical

review, interviews, surveys.
3. Evidence Guidelines
o Interviews documented and signed; cross-checked with records.

o No direct public enquiries; third-party enquiries via agencies if

auditee evidence is insufficient.
4. Audit Plan Execution
o Mix of control tests, analytical procedures, and tests of detail.

o Effective controls: Minimum substantive testing.

o Ineffective controls: Revise plan, increase substantive testing.

5. Control Testing
o Mitigating Controls: Test specific controls for risks.
 o Controls Reliance: Test overall system reliability.

o Methods: Enquiry, observation, sampling.

o Outcomes: Pass/fail or error within acceptable limits.

6. Substantive Analytical Procedures

o Test entire population; eliminate sampling risk.

o Require corroboration (less for external data).

7. Tests of Detail
o Used when controls/analytical procedures are insufficient.

o Full testing for small/high-risk populations; sampling otherwise.

o Errors: Systematic (specific conditions) or Random (general).

8. Findings Evaluation
o Combine results at account area and financial statement levels.

o Material misstatement/irregularity: Propose qualified opinion.

o Unquantifiable issues (scope limitation): Propose disclaimer.

9. Accounting Estimates
o Review management processes, test estimates, or review
subsequent events.
10.Exit Conference
o Conclude audits with chief officer; led by appropriate audit
personnel.
o Observations issued 1–2 days prior.

11.Working Papers
o Document procedures, conclusions, and implications.

o Show completion of plan, results, errors, discussions, and

unresolved matters.
12.Quality Assurance
o Adherence to Field Standards, skilled staffing, supervision,
workshops, documentation, peer review.

Chapter 5: Audit Completion

1. Overall Review
o Ensure compliance with statutes, consistent accounting policies,
and fair disclosure.
 2. Subsequent Events
o Review events between period-end and certificate date.

o Procedures: Management enquiries, meeting minutes, financial info,

representations, legislative proceedings.
3. Going Concern
o Assess auditee’s ability to continue for 1 year post-approval
(relevant for non-government entities).
4. Management Representations
o Sought for facts known only to management, regularity, and
statement preparation.
o Not a substitute for other evidence unless judgment-based.

5. Executive Summary
o Summarizes findings, key issues, adjustments, and certificate form.

o Reviewed by Audit Officer, Group Officer, and AG.

o Includes auditee operations, risks, audit approach, and conclusions.

Chapter 6: Documentation
1. Purpose
o Supports opinions, enhances efficiency, ensures compliance, aids
planning/supervision.
2. Types
o Standing File: Permanent info (e.g., audit authority, systems).

o Working Papers: Year-specific (e.g., procedures, results).

3. Review Process
o First Stage: Detailed check by Group Officer/Audit Officer.

o Second Stage: Selective review by senior officer for final

conclusions.
4. Characteristics
o Complete, clear, concise, legible, relevant, easy to prepare/review.

5. Tools
o TeamMate: Electronic documentation software.

Chapter 7: Reporting
 1. Principles
o Accurate facts, realistic recommendations.

o Elements: Title, signature, date, scope, addressee, legal basis,

standards compliance.
2. Audit Opinion
o Covers responsibilities, basis, and opinion.

o Unqualified: No material misstatement/irregularity.

o Qualified: “Except for” (material), Adverse (fundamental

disagreement), Disclaimer (fundamental uncertainty).
3. Management Letter
o Addresses non-material findings and control improvements.

o Distinct from inspection reports.

4. Submission
o Reports to President/Governor for Parliament/Legislature (Article
151, UT Act 1963).

Chapter 8: Supervision and Review

1. Supervision
o Day-to-day control by Group Officer/AG/Audit Officer.

o Ensures plan adherence, standards compliance, and objective

achievement.
2. Review
o Conducted in stages; ensures evidence supports conclusions and
identifies improvements.
o First Stage: Detailed check of work.

o Second Stage: Selective review for final approval.

These notes cover all points systematically, ensuring clarity and completeness
for study purposes. Let me know if you need further elaboration!

Below are 100 Multiple Choice Questions (MCQs) based on the study notes
derived from the provided document. The questions are organized by chapter
and cover all key points to ensure comprehensive understanding. Each question
includes four options, with the correct answer indicated.

Chapter 1: Introduction
1. What is the primary purpose of the Financial Attest Audit Manual (FAAM)?
a) To regulate internal audits
b) To provide a framework for financial attest audit within IAAD
c) To set tax policies
d) To oversee private sector audits
Answer: b)
2. The FAAM is based on which of the following?
a) CAG’s Auditing Standards only
b) IAAD instructions, CAG’s Standards, and global SAI best practices
c) Companies Act provisions
d) International tax laws
Answer: b)
3. What is the main concern of financial (attest) audit?
a) Tax collection
b) Expression of audit opinion on financial statements
c) Employee performance
d) Budget planning
Answer: b)
4. Which is NOT part of expressing an audit opinion on financial statements?
a) Examination of financial records
b) Audit of internal controls
c) Setting monetary policies
d) Compliance with statutes
Answer: c)
5. The CAG’s audit responsibilities extend beyond financial statements to
include:
a) Risks to regularity, propriety, and financial control
b) Corporate governance
c) Market regulation
d) HR management
Answer: a)
6. What does transaction audit primarily address?
a) Annual financial assurance
b) Risks to regularity, propriety, and financial control
c) Tax evasion
d) Profit maximization
Answer: b)
7. Transaction audit results in:
a) A formal opinion on financial statements
b) Reports to management or Parliament
c) Budget approval
 d) Tax assessment
Answer: b)
8. In Government Companies, who conducts the financial attest audit?
a) CAG directly
b) Chartered Accountants appointed by CAG
c) Internal auditors
d) State government
Answer: b)
9. Under Section 13 of the DPC Act, CAG audits expenditure from:
a) Consolidated Fund only
b) Consolidated, Contingency, and Public Accounts
c) Private sector funds
d) Corporate profits
Answer: b)
10.Section 20(1) of the DPC Act allows CAG to audit bodies if requested by:
a) Parliament
b) President/Governor/Administrator after consultation
c) Statutory auditors
d) Corporate boards
Answer: b)

Chapter 2: General Concepts and Overview

11.Auditing Standards provide a framework for:
a) Tax collection
b) Auditing steps and procedures
c) Corporate governance
d) Budget formulation
Answer: b)
12.When was the International Federation of Accountants (IFAC) established?
a) 1965
b) 1977
c) 1985
d) 1992
Answer: b)
13.International Standards on Auditing (ISAs) are issued by:
a) ICAI
b) IFAC’s IAPC
c) INTOSAI
d) CAG
Answer: b)
14.Who issues Auditing and Assurance Standards (AASs) in India?
a) IFAC
b) ICAI
c) INTOSAI
 d) CAG
Answer: b)
15.When were INTOSAI Auditing Standards first issued?
a) 1977
b) 1992
c) 1998
d) 2006
Answer: b)
16.CAG’s Auditing Standards were first issued in:
a) 1994
b) 1998
c) 2000
d) 2006
Answer: a)
17.General Standards in CAG’s Auditing Standards relate to:
a) Audit procedures
b) Auditor’s relationship with the audited entity
c) Reporting requirements
d) Sampling techniques
Answer: b)
18.The primary objective of financial audit is:
a) Tax assessment
b) Expression of an opinion on financial statements
c) Budget approval
d) Internal control design
Answer: b)
19.Audit evidence must be:
a) Competent, relevant, and reasonable
b) Quantitative only
c) Oral only
d) Internal only
Answer: a)
20.Which assertion ensures all transactions are recorded?
a) Occurrence
b) Completeness
c) Measurement
d) Disclosure
Answer: b)
21.The “Existence” assertion in Balance Sheet tests for:
a) Understatement
b) Overstatement
c) Valuation
d) Ownership
Answer: b)
22.An unqualified audit certificate is issued when:
a) Errors are material
 b) Errors are not material
c) Controls fail
d) Records are incomplete
Answer: b)
23.Materiality by “Nature” refers to:
a) Total error value
b) Specific items like salary or write-offs
c) Contextual implications
d) Sampling errors
Answer: b)
24.For cash basis accounts, materiality is usually a percentage of:
a) Net profit
b) Gross expenditure
c) Total assets
d) Sales turnover
Answer: b)
25.Audit risk is normally set at:
a) 1%
b) 5%
c) 10%
d) 20%
Answer: b)
26.The formula for audit risk is:
a) AR = IR + CR + DR
b) AR = IR × CR × DR
c) AR = IR - CR - DR
d) AR = IR ÷ CR ÷ DR
Answer: b)
27.The principal source of audit evidence is:
a) Public surveys
b) Auditee records
c) External consultants
d) Management opinions
Answer: b)
28.Which is NOT a commonly used audit procedure?
a) Analytical Procedures
b) Systems-Based Audit
c) Direct Substantive Testing
d) Tax Collection
Answer: d)
29.Analytical Procedures involve:
a) Testing internal controls
b) Studying relationships in financial/non-financial data
c) Full population testing
d) Random sampling
Answer: b)
 30.Systems-Based Audit (SBA) relies on:
a) Substantive testing
b) Internal controls
c) External evidence
d) Predictive testing
Answer: b)

Chapter 3: Audit Planning

31.The annual audit plan integrates:
a) Financial audits only
b) Central audit, inspections, financial, and performance audits
c) Tax audits
d) HR reviews
Answer: b)
32.When is the detailed programme for financial audits prepared?
a) April
b) January
c) July
d) October
Answer: b)
33.Financial attest audits are:
a) Optional
b) Mandatory and prioritized
c) Conducted biennially
d) Delegated to private firms
Answer: b)
34.Understanding the entity informs:
a) Tax rates
b) Materiality, risk, and audit approach
c) Budget allocation
d) Staffing decisions
Answer: b)
35.Sources of planning information include:
a) Past accounts and audit observations
b) Stock market trends
c) Employee surveys
d) Competitor analysis
Answer: a)
36.For cash basis financial statements, materiality is based on:
a) Net surplus
b) Gross expenditure or income
c) Total assets
d) Sales turnover
Answer: b)
 37.Inherent risk is defined as:
a) Control failure risk
b) Misstatement susceptibility without controls
c) Detection failure risk
d) Sampling error risk
Answer: b)
38.Entity risks include:
a) Complex regulations
b) Control environment and staff competence
c) Third-party payments
d) Transaction estimates
Answer: b)
39.Focused substantive testing is performed when:
a) Controls are reliable
b) Risks could lead to material misstatement with no control reliance
c) No risks are identified
d) Assurance is taken from controls
Answer: b)
40.Who approves the use of external IT experts in planning?
a) AG
b) Headquarters Office
c) Statutory auditors
d) Auditee management
Answer: b)

Chapter 4: Fieldwork
41.The letter sent by AG to launch the audit is called:
a) Engagement Letter for statutory audit
b) Letter of Understanding for non-statutory audit
c) Letter of Understanding for statutory audit
d) Audit Directive
Answer: c)
42.Competent evidence is:
a) Quantitatively sufficient and impartial
b) Oral only
c) Internal only
d) Excessive in quantity
Answer: a)
43.Documentary evidence is more reliable than:
a) Visual evidence
b) Oral evidence
c) External evidence
d) Certified photocopies
Answer: b)
 44.If controls are effective, the audit team performs:
a) Maximum substantive testing
b) Minimum substantive testing
c) No substantive testing
d) Random testing
Answer: b)
45.Tests of mitigating controls focus on:
a) Overall system reliability
b) A single control mitigating a specific risk
c) Analytical procedures
d) Full population testing
Answer: b)
46.Substantive analytical procedures eliminate:
a) Control risk
b) Sampling risk
c) Inherent risk
d) Detection risk
Answer: b)
47.Systematic error affects:
a) The entire population
b) A proportion of the population
c) Random transactions
d) High-value items only
Answer: b)
48.An exit conference is led by:
a) The auditee CEO
b) Appropriate audit personnel based on entity size
c) Statutory auditors
d) External consultants
Answer: b)
49.Working papers should document:
a) Only unresolved matters
b) Procedures, conclusions, and implications
c) Management opinions
d) Budget forecasts
Answer: b)
50.Quality in fieldwork is assured through:
a) Peer review and documentation
b) Tax compliance
c) Public surveys
d) Corporate policies
Answer: a)

Chapter 5: Audit Completion

 51.The overall review ensures financial statements comply with:
a) Corporate policies
b) Applicable statutes and rules
c) Tax laws only
d) Budget estimates
Answer: b)
52.Subsequent events are reviewed between:
a) Audit start and end
b) Period-end and certificate date
c) Planning and execution
d) Certificate issuance and reporting
Answer: b)
53.Going concern assessment is relevant for:
a) Government departments
b) Non-government auditees
c) All entities equally
d) Tax authorities
Answer: b)
54.Management representations are sought when:
a) Evidence is widely available
b) Facts are confined to management
c) Controls fail
d) Sampling is incomplete
Answer: b)
55.The executive summary is reviewed by:
a) Audit Officer, Group Officer, and AG
b) Statutory auditors
c) Auditee management
d) External consultants
Answer: a)

Chapter 6: Documentation
56.Working papers confirm and support:
a) Tax assessments
b) Auditor’s opinions and reports
c) Budget allocations
d) Corporate strategies
Answer: b)
57.Standing File contains:
a) Year-specific results
b) Permanent info like audit authority
c) Sampling data
d) Management letters
Answer: b)
 58.The first stage reviewer is:
a) AG
b) Group Officer or Senior/Audit Officer
c) Statutory auditor
d) Peer reviewer
Answer: b)
59.TeamMate is used for:
a) Tax calculation
b) Electronic documentation
c) Risk assessment
d) Budget planning
Answer: b)
60.A sound working paper is:
a) Incomplete but concise
b) Complete, clear, and relevant
c) Oral only
d) Illegible but detailed
Answer: b)

Chapter 7: Reporting
61.Audit opinions should ensure:
a) Tax compliance
b) Correct facts and realistic recommendations
c) Budget approval
d) Staffing decisions
Answer: b)
62.An unqualified opinion is issued when:
a) Material misstatements exist
b) Financial statements are free from material misstatement
c) Controls fail
d) Records are incomplete
Answer: b)
63.A “Disclaimer of Opinion” is used for:
a) Material disagreement
b) Fundamental uncertainty
c) Minor errors
d) Control reliance
Answer: b)
64.Management Letter addresses:
a) Material findings only
b) Non-material findings and control improvements
c) Tax issues
d) Budget forecasts
Answer: b)
 65.CAG submits reports under:
a) Companies Act
b) Article 151 of the Constitution
c) Income Tax Act
d) Corporate Governance Code
Answer: b)

Chapter 8: Supervision and Review

66.Supervision ensures:
a) Tax collection
b) Audit plan adherence and standards compliance
c) Budget approval
d) Staffing allocation
Answer: b)
67.Who supervises the planning stage?
a) Audit Officer
b) Group Supervisor Officer & AG
c) Statutory auditors
d) Peer reviewers
Answer: b)
68.Review ensures conclusions are supported by:
a) Competent, relevant, and reasonable evidence
b) Oral statements
c) Budget estimates
d) Tax records
Answer: a)
69.The first stage review involves:
a) Selective examination
b) Detailed examination of audit work
c) Final approval
d) Peer assessment
Answer: b)
70.The second stage reviewer is responsible for:
a) Detailed checks
b) Final conclusions and qualifications
c) Sampling design
d) Tax reporting
Answer: b)

Additional Mixed Questions

71.Who appoints Statutory Auditors for Government Companies?
a) CAG
b) ICAI
c) Parliament
 d) Auditee management
Answer: a)
72.Section 16 of the DPC Act relates to:
a) Expenditure audit
b) Receipts audit
c) Stores audit
d) Corporation audit
Answer: b)
73.Field Standards regulate:
a) Auditor conduct
b) Audit activity
c) Reporting
d) Sampling
Answer: b)
74.Precision in audit sampling is set between:
a) 50–60%
b) 80–90%
c) 95–100%
d) 70–80%
Answer: b)
75.Monetary Unit Sampling (MUS) is mainly used in:
a) Control testing
b) Substantive testing of details
c) Analytical procedures
d) Risk assessment
Answer: b)
76.Non-production of vital records results in:
a) Audit continuation
b) Audit halt and reporting to Chief Secretary
c) Unqualified opinion
d) Tax reassessment
Answer: b)
77.Union Government accounts are audited on:
a) Cash basis
b) Accrual basis
c) Hybrid basis
d) Project-specific basis
Answer: a)
78.“True and Fair View” is used for:
a) Cash basis statements
b) Full accruals basis statements
c) Partial accruals
d) Budget reports
Answer: b)
79.Risk assessment identifies:
a) Tax evasion
 b) Misstatement risks and mitigating controls
c) Staffing needs
d) Budget shortfalls
Answer: b)
80.The audit team familiarizes with financial statement formats during:
a) Execution
b) Planning
c) Reporting
d) Review
Answer: b)
81.Evidence from external sources is more reliable if:
a) Incomplete
b) Truly independent and complete
c) Oral
d) Photocopied
Answer: b)
82.Controls reliance strategy tests:
a) A single control
b) The overall system of controls
c) Analytical data
d) Random samples
Answer: b)
83.A qualified opinion is proposed when:
a) Errors are immaterial
b) Material misstatement exists
c) Controls are effective
d) Sampling is complete
Answer: b)
84.The going concern period assessed is:
a) 6 months
b) 1 year from approval date
c) 2 years
d) Indefinite
Answer: b)
85.Executive summary includes:
a) Tax recommendations
b) Key audit issues and certificate form
c) Staffing plans
d) Budget forecasts
Answer: b)
86.Standing File is updated:
a) Yearly
b) As needed for permanent info
c) After reporting
d) During execution
Answer: b)
87.An adverse opinion indicates:
a) Minor errors
b) Fundamental disagreement
c) Scope limitation
d) Control failure
Answer: b)
88.Supervision during field audit is by:
a) AG only
b) Audit Officer and Group Supervisor Officer
c) Statutory auditors
d) Peer reviewers
Answer: b)
89.The second stage reviewer approves:
a) Sampling methods
b) Management Letter
c) Tax reports
d) Budget plans
Answer: b)
90.Audit evidence is persuasive rather than:
a) Relevant
b) Conclusive
c) Competent
d) Reasonable
Answer: b)
91.Analytical review at the completion stage uses:
a) Interim statements
b) Final financial statements
c) Budget estimates
d) Prior year data
Answer: b)
92.Materiality for accrual basis accounts may be based on:
a) Gross expenditure only
b) Net surplus or total assets
c) Tax revenue
d) Staffing costs
Answer: b)
93.The risk model calculates:
a) Tax liability
b) Assurance needed from substantive tests
c) Budget variance
d) Staffing needs
Answer: b)
94.Direct Substantive Testing (DST) involves:
a) Control reliance
b) Testing without control reliance
c) Analytical procedures only
 d) Full population review
Answer: b)
95.Multi-stage sampling is used for:
a) Single location audits
b) Multiple location audits
c) Control testing
d) Analytical reviews
Answer: b)
96.The audit certificate date is:
a) Audit completion date
b) Signing date by CAG or delegate
c) Financial statement approval date
d) Reporting date
Answer: b)
97.CAG personally signs certificates unless:
a) Delegated to another officer
b) Auditee requests otherwise
c) Statutory auditors sign
d) Parliament approves
Answer: a)
98.Inherent risk levels include:
a) High, Medium, Low
b) Critical, Moderate, Minor
c) Primary, Secondary, Tertiary
d) Severe, Mild, Negligible
Answer: a)
99.The audit plan is revised if:
a) Controls are effective
b) Controls are ineffective
c) Sampling succeeds
d) Budget is approved
Answer: b)
100. Peer review ensures:
a) Tax compliance
b) Best practices and standards are followed
c) Budget accuracy
d) Staffing adequacy
Answer: b)

These MCQs comprehensively cover the document’s content, testing key

concepts, definitions, and processes. Let me know if you’d like further
adjustments or additional questions