MCQ for CA Final Audit - Chapter 16 DUE DILIGENCE, INVESTIGATION AND FORENSIC AUDIT

Sample Multiple Choice Questions (MCQ's) for CA Final - Paper 3 - Advanced Auditing and Professional Ethics - Chapter 16: DUE DILIGENCE, INVESTIGATION AND FORENSIC AUDIT - For Practice relevant for May/Nov 23 Examinations

(Unit – 1 Due Diligence)

 

Q:1 Due diligence is a process of _________, into the details of a potential investment such as an examination of operations and management and the verification of material facts.       

 

  1. audit performed by internal auditor.
  2. investigation performed necessarily by statutory auditor
  3. audit performed by statutory auditor.
  4. investigation performed by investors.

Answer: 4

 

Q:2 XYZ Limited, a company engaged in the business of manufacturing and distribution of copper rods and copper wire is interested in acquiring a listed company having a market share of 38% of Insulated Copper Wires. You were appointed to conduct a "Due Diligence" of the target company with the objective that whether the proposed acquisition would create operational synergies. For this purpose, primary area in which due diligence is to be exercised is:        

 

  1. Financial Due Diligence
  2. Commercial due diligence
  3. Tax due diligence
  4. Information System Due Diligence.

Answer: 2

 

Q:3 Which of the following activity will be performed in pre-due diligence period:      

 

  1. Preparation of due diligence request list to target specific areas of concern.
  2. Support for preparation of negotiation terms.
  3. Regular updates with the client.
  4. Involvement of Price adjustment procedures using the findings of due diligence.

Answer:1

 

Q:4 Which of the following activity is not a part of Due Diligence process and negotiation Phase:

 

  1. Flexible approach even after project kick-off.
  2. Q & A Process with management.
  3. Support for preparation of negotiation terms.
  4. Preparation of review of closing documents prepared by the Target.

Answer: 4

 

Q:5 Which of the following activity is part of Due Diligence process and negotiation Phase:

 

  1. Discussion with the client to gain understanding of the transaction.
  2. Assessment of the most appropriate scope of work and methodology.
  3. Centralized coordination of project team.
  4. Report drafting, including assistance in the definition of financial aggregates and wordings of financial clauses.

Answer: 4

 

(Unit – 2 Investigation)

 

Q:1 The shareholders of Kumar Ltd. passed a special resolution that the affairs of the company ought to be Investigated. The company submitted the special resolution to the Central government.

 

  1. Power of the Central Government to order an investigation is discretionary.
  2. Power of the Central Government to order an investigation is mandatory.
  3. Central government is not empowered to pass order of investigation in case of non-government companies.
  4. None of the above.

Answer: 1

 

Q:2 Where it appears to the Central Government that there is a reason so to do, it may appoint one or more inspectors to investigate and report on matters relating to the company, and its membership for the purpose of determining the true persons:      

       

  1. who are or have been financially interested in the success or failure, of the company.
  2. who are or have been able to control or to materiality influence the policy of the company.
  3. who have or had beneficial interest in shares of a company or who have been beneficial owners or significant beneficial owners of a company.
  4. any of the above.

Answer: 4

 

Q:3 Which of the following are the examples of Corporate Frauds?    

   

  1. Cash Misappropriation and teeming and lading
  2. Tempering of Cheques and Off Book frauds.
  3. Bribery and Expense reimbursement Schemes.
  4. Shell Companies and Money laundering Activities

Answer: 4

 

Q:4 Which of the following are the examples of Fraud at Operational Level Employees?     

       

  1. Cash Misappropriation and teeming and lading
  2. Tempering of Cheques and Off Book frauds.
  3. Payroll Fraud and Expense reimbursement Schemes.
  4. All of the above.

Answer: 4

 

Q:5 Which of the following is not an example of Fraud at Operational Level Employees?     

       

  1. Money laundering Activities
  2. Teeming and Lading
  3. Cash Misappropriation
  4. Fraudulent Disbursements.

Answer: 1

 

Q:6 Which of the following fraud comes within the purview of "Fraud for personal gain"?     

   

  1. Advance Billing
  2. Shell Companies
  3. Bribery
  4. All of the above.

Answer: 3

 

(Unit – 3 Forensic Audit)

 

Q:1 An activity that uses accounting, auditing and investigative skills to assist in legal matters, is known as:     

 

  1. Fraud Audit
  2. System Audit
  3. Forensic Audit
  4. Due Diligence

Answer: 3

 

Q: 2 Application of accounting methods to the tracking and collection of forensic evidence, usually for investigation and prosecution of criminal acts such as embezzlement or fraud, is known as:

 

  1. Forensic Accounting
  2. Forensic Audit
  3. Forensic Investigation
  4. None of the above

Answer: 1

 

Q:3 Forensic accounting uses __________________ to conduct investigation into theft and fraud.

 

  1. accounting and investigative skills.
  2. auditing and investigative skills.
  3. accounting and auditing skills.
  4. accounting, auditing and investigative skills.

Answer: 4

 

Q:4 Forensic Auditor is generally involved in the area of:

 

  1. Financial accounting, Financial audit and investigation of fraud.
  2. Financial Audit, System audit and Computer Forensics
  3. Computer Forensics and Expert Testimony.
  4. Fraud detection, Fraud Prevention, Computer Forensics and Expert Testimony.

Answer: 4

 

Q:5 Which of the following is not a skill needed by a Forensic Accountant?       

 

  1. Accounting and Auditing.
  2. Investigative.
  3. Sociology.
  4. Information Technology.

Answer: 3

 

Q:6 Identify the primary differences between a Financial Audit and a Forensic Audit? 

 

  1. Objectives of Financial Audit is to determine whether fraud has taken place. Objective of Forensic Audit is to determine the amount involved in fraud.
  2. Approach of Financial Audit is Risk based with the help of compliance & substantive procedures.Whereas approach of forensic audit is Investigative and substantive.
  3. Financial Audit involves in-depth checking whereas forensic audit involves test checking.
  4. None of the above

Answer: 2

 

CA Final - Paper 3 - Advanced Auditing and Professional Ethics - Chapter 17   

 

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