CSS Exam Info
Home » CSS Past Paper MCQs » Accountancy and Auditing » Paper-II 2025
Accountancy and Auditing Past Paper MCQs
Accountancy & Auditing-II 2025 MCQs
1 / 20
Which of the following statements is generally correct about the reliability of audit evidence?
Strong internal controls reduce error risk, making evidence more reliable. External evidence is most reliable, but if routed through the client, its reliability may diminish.
2 / 20
Taxes are an important instrument of which of the following policies?
Taxes are central to fiscal policy (managed by the government), unlike monetary policy (central bank tools like interest rates).
3 / 20
When a tax on a good starts small and is gradually increased, tax revenue:
This reflects the Laffer Curve: revenue rises until an optimal rate, after which higher taxes discourage economic activity, reducing revenue.
4 / 20
______ is a systematic examination of the books and records of a business.
Auditing is the systematic process of examining financial records, transactions, and operations to ensure accuracy, compliance, and reliability. Vouching and verification are subsets of auditing, while "checking" is a general term and not a formal auditing process.
5 / 20
You are considering investing in a zero - coupon bond that sells for $250. At maturity in 16 years, it will be redeemed for $1,000. What approximate annual rate of growth does this represent?
6 / 20
When the market's required rate of return for a particular bond is much less than its coupon rate, the bond is selling at:
Investors pay more than face value (premium) for higher coupon payments when market rates drop.
7 / 20
A progressive tax system is one where?
Progressive taxes impose higher rates on higher incomes (e.g., income tax brackets). It’s about the percentage, not just the absolute amount.
8 / 20
An auditor should not accept a loan on favourable commercial terms from an audit client because of the threat to his or her independence. The threat would be a:
A loan creates a conflict of interest (self-interest threat), compromising independence because the auditor may favor the client to secure personal benefits.
9 / 20
Internal check is carried on by:
Internal check is an ongoing process where employees cross-verify each other’s work (e.g., segregation of duties). It’s distinct from internal audit, which is conducted by specialized staff.
10 / 20
A project’s profitability index is equal to the ratio of a project’s future cash flows to the project’s:
Profitability Index (PI) = PV of future cash flows / Initial investment. A PI > 1 indicates a viable project.
11 / 20
If a tax on a good is doubled, the deadweight loss from the tax:
Deadweight loss (DWL) rises with the square of the tax rate. Doubling the tax quadruples DWL due to amplified market inefficiency.
12 / 20
An auditor is like a:
An auditor acts as a watchdog (ensuring compliance and detecting errors) and a bloodhound (actively searching for fraud or misstatements). The role depends on the situation—routine checks (watchdog) vs. suspicion of fraud (bloodhound).
13 / 20
The authority to remove the first auditor before the expiry of the term is with:
Shareholders hold ultimate power to appoint/remove auditors via majority vote in a general meeting (per most corporate laws).
14 / 20
In normal circumstances, taxes are charged on:
Taxable income is gross income minus allowable deductions/exemptions. It’s the legal basis for tax calculation
15 / 20
The fundamental objective of the audit of a company is to:
The primary purpose of an audit is to provide an independent opinion on whether financial statements present a true and fair view, enhancing their reliability for stakeholders.
16 / 20
The trade terms "2/15, net 30" indicate that:
This trade term offers a 2% discount if paid in 15 days; otherwise, the full amount is due in 30 days.
17 / 20
The discount rate at which two projects have identical ______ is referred to as Fisher’s rate of intersection.
Fisher’s rate is the discount rate at which the NPVs of two projects intersect, helping compare mutually exclusive projects.
18 / 20
Which of the following enjoys limited liability?
Shareholders in a corporation are liable only up to their investment. Sole proprietorships and general partnerships have unlimited liability.
19 / 20
When issuing an unqualified opinion, the auditor who evaluates the audit findings should be satisfied that the:
An unqualified opinion means financial statements are free of material misstatements. The auditor ensures errors are below the materiality threshold.
20 / 20
Which of the following is the main tool of Fiscal Policy?
Fiscal policy uses taxation and government spending to influence the economy. Taxes are a direct lever for revenue and economic control.
Your score is
The average score is 40%
Restart quiz Exit
How was the test? Please submit your Rating and give feedback!
Your email address will not be published. Required fields are marked *
Δ
