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An inverse relationship exists between detection risk and the assessed risk of material misstatement. Therefore, if the assessed risk of material misstatement is HIGH, the auditor should:
A
B
C
D
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2026 Statistics
Key Facts: CA Inter Auditing and Ethics Exam
100 marks
Total Paper Marks
ICAI Intermediate Paper-5 Syllabus
30%
Compulsory MCQ Weight
ICAI Exam Pattern
3 hours
Exam Duration
ICAI Intermediate Paper-5 Syllabus
40%
Minimum Marks to Pass Paper
ICAI Exam Regulations
12
Official Syllabus Chapters
ICAI Intermediate Paper-5 Study Material
2023
New Scheme Notified
ICAI New Scheme of Education and Training
CA Intermediate Paper 5 (Auditing and Ethics) is a 100-mark, 3-hour Group II paper under the ICAI New Scheme 2023. It is assessed about 30% through compulsory MCQs with no negative marking and 70% through descriptive questions. The syllabus spans 12 chapters from the nature and scope of audit through risk assessment, audit evidence, audit of financial statement items, documentation, completion, the audit report, special and bank audits, ethics, and the Standards on Auditing. To pass, a student needs at least 40% in the paper and 50% aggregate in the group. This free bank offers 100 MCQs mapped to the official ICAI chapters.
Sample CA Inter Auditing and Ethics Practice Questions
Try these sample questions to test your CA Inter Auditing and Ethics exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.
1As per SA 200, what is the overall objective of an independent auditor when conducting an audit of financial statements?
A.To detect every fraud and error in the entity's books of account
B.To guarantee the absolute accuracy and future viability of the entity
C.To obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement and to report on them
D.To prepare the financial statements in accordance with the applicable financial reporting framework
Explanation: SA 200 states that the overall objectives of the auditor are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, thereby enabling the auditor to express an opinion, and to report on the financial statements. Reasonable assurance is a high but not absolute level of assurance.
2The concept of 'reasonable assurance' in an audit recognises that there are inherent limitations of an audit. Which of the following is NOT an inherent limitation of an audit?
A.The use of testing and sampling rather than examining every transaction
B.The persuasive rather than conclusive nature of most audit evidence
C.The nature of fraud, which may involve sophisticated and carefully organised schemes designed to conceal it
D.The auditor's failure to plan the audit and obtain the engagement letter on time
Explanation: Inherent limitations arise from the nature of financial reporting, the nature of audit procedures (testing, persuasive evidence), and the need for the audit to be conducted within a reasonable time and cost. Failure to plan or obtain an engagement letter is a deficiency in the auditor's conduct, not an inherent limitation of the audit itself.
3Which of the following best describes the relationship between auditing and accounting?
A.Auditing precedes accounting in the sequence of work
B.Accounting is the process of recording, classifying and summarising transactions, while auditing is the critical and analytical examination of those records
C.Accounting is analytical and critical in nature, while auditing is constructive
D.Auditing and accounting are the same function performed by the same person
Explanation: Accounting is a constructive activity that records, classifies and summarises business transactions to prepare financial statements. Auditing is analytical and critical: it begins where accounting ends and examines whether the accounts present a true and fair view. Hence auditing follows accounting.
4An audit conducted to verify that an organisation is complying with rules, regulations and procedures laid down by management is best described as a:
A.Compliance audit
B.Cost audit
C.Tax audit
D.Forensic audit
Explanation: A compliance audit examines whether the entity has adhered to specific laws, regulations, policies and procedures. The auditor reports on the degree of conformity with the prescribed criteria.
5The expression 'true and fair view' in the context of financial statements implies that the auditor must be satisfied that, among other things:
A.The financial statements are mathematically accurate to the last rupee
B.There is no misstatement and every figure is exactly correct
C.The financial statements reflect the substance of transactions and are free from material misstatement, with adequate disclosure
D.All the directors of the company have personally certified the accounts
Explanation: A true and fair view requires that the financial statements do not contain material misstatements, that the assets and liabilities are properly valued and disclosed, and that the statements reflect the substance of the underlying transactions. It does not demand absolute arithmetical exactness.
6Which one of the following is an advantage of an independent audit of financial statements?
A.It eliminates the need for the entity to maintain books of account
B.It provides assurance of absolute accuracy and detection of all frauds
C.It transfers the responsibility for preparing the financial statements from management to the auditor
D.It enhances the credibility of the financial statements for users such as banks, investors and tax authorities
Explanation: An independent audit lends credibility and reliability to financial statements, which benefits stakeholders such as lenders, investors, regulators and tax authorities who rely on audited accounts for decision-making.
7Professional scepticism, as required throughout the audit, means that the auditor should:
A.Assume that management is dishonest and approach every assertion as fraudulent
B.Accept management's representations without further corroboration to save time
C.Maintain an attitude that includes a questioning mind and a critical assessment of audit evidence, being alert to conditions indicating possible misstatement
D.Rely solely on the work performed in the prior year's audit
Explanation: Professional scepticism, defined in SA 200, is an attitude that includes a questioning mind, being alert to conditions that may indicate possible misstatement due to fraud or error, and a critical assessment of audit evidence. It does not require assuming management dishonesty.
8The scope of an audit of financial statements is determined by:
A.The personal preference of the auditor alone
B.Only the wishes of the management of the entity
C.The Standards on Auditing, relevant laws and regulations, and the terms of the engagement
D.The size of the audit fee agreed with the client
Explanation: Under SA 200, the scope of an audit is governed by the requirements of the Standards on Auditing, relevant laws or regulations, and the terms of the audit engagement. The auditor cannot reduce the scope merely at management's request when law requires otherwise.
9As per SA 300, the audit strategy and the audit plan are related in that:
A.The overall audit strategy sets the scope, timing and direction of the audit and guides the development of the more detailed audit plan
B.The audit plan is broader and the audit strategy is a detailed sub-set of it
C.The audit strategy and audit plan are identical documents with different titles
D.The audit plan is prepared only after the audit report is signed
Explanation: SA 300 requires the auditor to establish an overall audit strategy that sets the scope, timing and direction of the audit and that guides the development of the audit plan. The audit plan is more detailed than the strategy and covers the nature, timing and extent of planned procedures.
10An audit programme is best described as:
A.A detailed plan of the auditing work to be performed, specifying the procedures to be followed in verification of each item and the estimated time required
B.A statement of the audit fee and out-of-pocket expenses
C.A list of all the clients of the audit firm
D.The auditor's report appended to the financial statements
Explanation: An audit programme is a detailed written plan of the work to be done. It sets out the audit procedures to be applied for each area, the responsibilities of staff, and the time budget, ensuring that no material area is overlooked.
About the CA Inter Auditing and Ethics Practice Questions
Verified exam format metadata for CA Intermediate Paper 5: Auditing and Ethics is pending. The practice questions above remain available while official exam length, timing, passing score, fee, and administrator details are reviewed.