91. Consider the following statements�
The vouching of remuneration to directors involve the checking of
1. special resolution.
2. statement of accounts.
3. approval note of the Central Government.
4. Minutes Book.
Which of the statements given above are correct ?
(A) 1 and 2 only
(B) 2 and 3 only
(C) 1, 2 and 4
(D) 1, 3 and 4

92. Match List-I with List-II and select the correct answer using the code given below the Lists�
List-I (Liability of Auditor)
(a) Liability for negligence
(b) Liability for misfeasance
(c) Criminal liability
(d) Liability to third party
List-II (Example)
1. Breach of trust or duty
2. Untrue statement in the prospectus
3. Not liable for untrue statement in prospectus
4. Dividends paid out of capital
Codes :
(a) (b) (c) (d)
(A) 4 3 2 1
(B) 2 1 4 3
(C) 4 1 2 3
(D) 2 3 4 1

93. Consider the following statements�
1. Corporate governance requires the appointment of audit committees by public
limited companies.
2. The members of an audit committee should be those non-executive directors who do not represent the controlling group.
3. The independence of the statutory auditors is likely to be affected if he deals directly with the audit committee.
Which of the statements given above are correct ?
(A) 1 and 2 only
(B) 2 and 3 only
(C) 1 and 3 only
(D) 1, 2 and 3

94. Under the head 'Secured Loans' the following are disclosed�
1. Loans and Advances from banks.
2. Debentures.
3. Loans and Advances from subsidiaries.
4. Other loans and advances.
What is the correct chronological order of disclosure of the items given above in balance sheet of a company ?
(A) 3 � 1 � 2 � 4
(B) 2 � 4 � 3 � 1
(C) 3 � 4 � 2 � 1
(D) 2 � 1 � 3 � 4

95. Consider the following statements�
Accounting control comprises
1. The plan of organization concerned with decision process.
2. The plan of organization concerned with safeguarding of assets.
3. The procedure concerned with safeguarding of assets.
Which of the statements given above are correct ?
(A) 1 and 2 only
(B) 2 and 3 only
(C) 1 and 3 only
(D) 1, 2 and 3

96. Which of the following statements is/are correct ?
1. Internal control includes quality control.
2. Internal control is compulsory for all forms of business organizations.
3. Internal control helps external auditor to design suitable audit programme for client's organization.
Select the correct answer using the code given below�
(A) 1 only
(B) 2 only
(C) 3 only
(D) 1 and 3

97. Which of the following is not a part of the usual contents of the current file and audit working papers ?
(A) A copy of accounts on which auditors are reporting
(B) Audit programme
(C) Minutes of the meetings
(D) Memorandum of Association and Articles of Association

98. Consider the following statements�
Audit working papers are maintained because
1. they act as a guide to subsequent audit.
2. they verify the arithmetical accuracy of the books of accounts.
3. they provide evidence of the work performed by the auditor.
Which of the statements given above are correct ?
(A) 1 and 2 only
(B) 2 and 3 only
(C) 1 and 3 only
(D) 1, 2 and 3

99. Match List-I with List-II and select the correct answer using the code given below the Lists�
List-I (Technique)
(a) Rotation of Duties
(b) Random Sampling
(c) Trend Analysis
(d) Cash verification
List-II (Auditing Procedure)
(1) Internal control
(2) Physical examination
(3) Selective verification
(4) Overall assessment
Codes :
(a) (b) (c) (d)
(A) 1 4 3 2
(B) 2 3 4 1
(C) 1 3 4 2
(D) 2 4 3 1

100. Consider the following stages an auditor has to undergo before commencing an audit�
1. Ascertaining the scope of audit work.
2. Gaining knowledge about business of the client.
3. Going through the agreement with the client.
4. Instructions to and information from the client.
What is the correct sequence of the above stages ?
(A) 2 � 1 � 3 � 4
(B) 3 � 4 � 2 � 1
(C) 2 � 4 � 3 � 1
(D) 3 � 1 � 2 � 4

101. Which one of the following statements is correct ?
(A) If an asset is used by a company, it should be owned by the company
(B) Verification of liabilities means that the amounts of current and long-term liabilities shown in the balance sheet are correct
(C) Vouching and verification means the same thing
(D) It is not the duty of an auditor to confirm the physical existence and ownership of an asset

102. The following steps should be adopted by an auditor for verification of land�
1. To examine that the land has been shown in the balance sheet at its original cost.
2. To ensure that the cost of land also includes the expenses like broker's commission, legal expenses, improvement expenses etc.
3. To get a certificate from solicitor of the client regarding validity of the title deeds.
4. To examine that the land is not subject to any charge or mortgage.
What is the correct sequence of the above steps to be followed by an auditor during the course of auditing ?
(A) 1 � 4 � 2 � 3
(B) 3 � 2 � 4 � 1
(C) 1 � 2 � 4 � 3
(D) 3 � 4 � 2 � 1

103. What does payout ratio mean ?
(A) Ratio of debtors to creditors
(B) Ratio of profit distributed to profit retained
(C) Ratio of dividends per share and earnings per share
(D) Retained earnings

104. Consider the following statements�
1. Premium on issue of shares is transferred to General Reserve Account.
2. For declaration of bonus shares out of General Reserve, a resolution in the shareholders' meeting is necessary.
Which of the statements given above is/are correct ?
(A) 1 only
(B) 2 only
(C) Both 1 and 2
(D) Neither 1 nor 2

105. How is 'Calls in arrear' shown in the balance sheet on the liability side ?
(A) By deducting the amount from the called up capital
(B) Under the heading 'Reserves and Surplus'
(C) By deducting the amount from 'Capital Reserve'
(D) By deducting the amount from the 'Share Forfeited Account'

106. Match List-I with List-II and select the correct answer using the code given below the Lists�
List-I (Activity)
(a) Admission of a partner
(b) Partnership dissolution
(c) Rectification of errors
(d) Transfer of realization profit
List-II (Account)
(1) Capital Accounts
(2) Suspense Account
(3) Revaluation Account
(4) Realization Account
Codes :
(a) (b) (c) (d)
(A) 3 4 2 1
(B) 2 1 3 4
(C) 3 1 2 4
(D) 2 4 3 1

107. The balance of old provision for doubtful debts on 1-4-2006 was Rs. 10,000. The bad debts written off during the year 2006-07 amounted to Rs. 12,000, and the new provision requiredon 31-3-2007 was Rs. 15,000. What is the total amount to be debited to profit and loss account on account of bad debts and the provision for doubtful debts ?
(A) Rs. 37,000
(B) Rs. 27,000
(C) Rs. 17,000
(D) Rs. 15,000

108. A and B sharing profit in the ratio of 3 : 2 and having capitals of Rs. 30,000 (for A) and Rs. 15,000 (for B), decided to dissolve their firm. After paying off all liabilities, cash realized from various assets is Rs. 15,000. How will this amount be distributed to A and B ?
(A) A�Rs. 9,000 and B�Rs. 6,000
(B) A�Rs. 10,000 and B�Rs. 5,000
(C) A�Rs. 7,500 and B�Rs. 7,500
(D) A�Rs. 12,000 and B�Rs. 3,000

109. X and Y sharing profits in the ratio of 7 : 3 admit Z on 37th share in the new firm. Z takes 27 th from X and 17th from Y.
What is the new ratio among X, Y and Z ?
(A) 7 : 3 : 3
(B) 4 : 2 : 15
(C) 14 : 6 : 15
(D) 29 : 11 : 30

110. Given�
Opening inventory : Rs. 3,500
Closing inventory : Rs. 1,500
Cost of goods sold : Rs. 22,000
What is the amount of purchase ?
(A) Rs. 20,000
(B) Rs. 24,000
(C) Rs. 27,000
(D) Rs. 17,000

111. Consider the following�
Amortization refers to writing off the value of
(1) tangible assets
(2) intangible assets
(3) fictitious assets
Which of the above is/are correct ?
(A) 1 and 2
(B) 2 and 3
(C) 1 only
(D) 2 only

112. The following information is disclosed by 'A'� Rs. Provision for doubtful debts as on 1.1.2006 : 6,000 Bad debts written off during the year 2006 : 1,200 Total debtors as on 31.12.2006 : 80,000 A provision for Doubtful Debts to be made @ 5% What is the amount to be shown on the credit side of P/L A/c ?
(A) Rs. 4,800
(B) Rs. 2,400
(C) Rs. 1,200
(D) Rs. 800

113. What is reduction of paid-up share capital called ?
(A) External reconstruction
(B) Internal reconstruction
(C) Reorganization
(D) Redemption of capital

114. Under which of the following methods of depreciation the amount of an asset is never reduced to zero ?
(A) Straight line method
(B) Diminishing balance method
(C) Sums of Years Digit method
(D) Annuity method

115. An insurance claim of Rs. 300 was accepted in respect of stock (inventory) of Rs. 500, which was destroyed by fire. Rs. 200 not covered by insurance should be debited to which one of the following ?
(A) Stock account
(B) Trading account
(C) Profit and loss account
(D) Goodwill account

116. Debtors turnover ratio is 4.
What is the average collection period ?
(A) 5 months
(B) 4 months
(C) 3 months
(D) 2 months

117. The net profits of a business after providing for taxation for the past five years are Rs. 80,000, Rs. 85,000, Rs. 92,000, Rs. 1,05,000 and Rs. 1,18,000. Capital employed in the business is Rs. 8,00,000. Normal rate of return is 10%. What is the value of goodwill on the basis of capitalization of super profit method ?
(A) Rs. 1,00,000
(B) Rs. 1,50,000
(C) Rs. 1,60,000
(D) Rs. 1,80,000

118. Given�
Purchases � Rs.50,000
Sales � Rs.90,000
Closing Stock � Rs.7,000
Manufacturing Exp. � Rs.5,000
Rate of gross profit � Rs.331
3% on cost
What is the opening stock ?
(A) Rs. 20,000
(B) Rs. 19,500
(C) Rs. 22,500
(D) Rs. 25,000

119. A particular firm provided the following data for a year�
Current Ratio 2�5 : 1
Liquid Ratio 1�5 : 1
Net Working Capital
Rs. 3,00,000
What are the current assets and current liabilities of this firm, respectively ?
(A) Rs. 3,00,000 and Rs. 1,50,000
(B) Rs. 5,00,000 and Rs. 2,00,000
(C) Rs. 2,00,000 and Rs. 5,00,000
(D) Rs. 3,00,000 and Rs. 1,00,000

120. Depreciation is a process of which one of the following ?
(A) Valuation of assets
(B) Allocation of acquisition cost over the estimated useful life of the asset
(C) Allocation of realizable value over the estimated useful life of the asset
(D) Estimating the market value of the asset on the balance sheet date

Answers

1. (B) 2. (C) 3. (A) 4. (B)

5. (A) Small shareholders of a public company will be able to appoint (elect) one director on the Board of Company if the company has a paid up capital of Rs. 5 crore or more, or has 1000 or more small shareholders as per section 252 Companies (Amendment) Act, 2000.

6. (C) 7. (A)

8. (D) 7S McKinsey Model's elements includes :
(i) Strategy, (ii) Structure, (iii) System, (iv) Shared value, (v) Skills, (vi) Style, (vii) Staff

9. (C) 10. (D) 11. (C)

12. (C) Funds from operation computed as follows :
Net profit � Rs.2,00,000
Add : Preliminary Exp. � Rs.20,000
Depreciation � Rs.40,000
= 2,60,000
Less : Gain on sale of machinery � Rs.10,000
Funds from operation = 2,50,000

13. (C) 14. (C) 15. (D) 16. (A) 17. (A) 18. (C) 19. (C)

20. (A) According to Spicer and Pegler internal check is an arrangement of staff duties whereby no one person is allowed to carry through and record every aspect of a transaction so that, without collusion between any two or more persons, fraud is prevented and at the same time the possibilities of errors are reduced to a minimum.

21. (B) 22. (C) 23. (C) 24. (C) 25. (B) 26. (D) 27. (D) 28. (D) 29. (B) 30. (D)
31. (A) 32. (D) 33. (B) 34. (B) 35. (B) 36. (B) 37. (A) 38. (C) 39. (A) 40. (D)
41. (B) 42. (A) 43. (C) 44. (B) 45. (C) 46. (C) 47. (C) 48. (C) 49. (A) 50. (B)
51. (D) 52. (B) 53. (D) 54. (C) 55. (C) 56. (A) 57. (D) 58. (D) 59. (A) 60. (B)
61. (B) 62. (C) 63. (A) 64. (B) 65. (C) 66. (C) 67. (D)

68. (C) An organisation in which each employee reports to both a functional manager and to a project manager as Matrix Structure of organisation.

69. (D) 70. (B) 71. (B) 72. (B) 73. (C) 74. (B) 75. (D) 76. (A) 77. (A) 78. (C)
79. (B) 80. (B) 81. (C) 82. (A) 83. (C) 84. (B) 85. (B) 86. (A) 87. (C) 88. (D)
89. (B) 90. (A) 91. (D) 92. (C) 93. (A) 94. (D) 95. (B) 96. (D) 97. (D) 98. (C)
99. (C) 100. (D) 101. (B) 102. (B) 103. (C) 104. (B) 105. (A) 106. (A) 107. (C)
108. (A) 109. (D) 110. (A) 111. (D) 112. (D) 113. (B) 114. (B) 115. (C) 116. (C)
117. (C) 118. (B) 119. (B) 120. (B)