Regulations on Audit and Accounts, 2007- 100 MCQs
1. The Regulations on Audit and Accounts, 2007 were issued by the Comptroller and Auditor General of India under which provision of the CAG's (Duties, Powers and Conditions of Service) Act, 1971?
A. Section 10
B. Section 18
C. Section 23
D. Section 30
Answer: C
2. The primary purpose of the Regulations on Audit and Accounts, 2007 is to:
A. Regulate recruitment in IA&AD
B. Prescribe detailed provisions relating to audit and accounts consistent with the Constitution and the CAG's DPC Act
C. Prescribe accounting standards for private companies
D. Regulate State Finance Commissions
Answer: B
3. Unless the context otherwise requires, the Regulations apply to:
A. Audit only
B. Accounts only
C. Both audit and accounts entrusted to the Comptroller and Auditor General
D. Commercial audits only
Answer: C
4. The Regulations on Audit and Accounts, 2007 came into force on:
A. 1 April 2007
B. 15 November 2007
C. 1 January 2008
D. 26 January 2008
Answer: B
5. Which constitutional authority is empowered to prescribe these Regulations?
A. President of India
B. Ministry of Finance
C. Comptroller and Auditor General of India
D. Parliament
Answer: C
6. According to the Regulations, audit shall ordinarily be conducted with reference to:
A. Financial statements only
B. Applicable laws, rules, regulations, orders and contracts
C. Audit manuals only
D. Government resolutions only
Answer: B
7. Which of the following is not one of the broad categories of audit recognised by the Regulations?
A. Financial Audit
B. Compliance Audit
C. Performance Audit
D. Income Tax Audit
Answer: D
8. The authority of the CAG to inspect offices under audit is primarily derived from:
A. Companies Act, 2013
B. Constitution and the DPC Act
C. Income Tax Act
D. General Financial Rules only
Answer: B
9. Which of the following is the fundamental objective of Government audit?
A. Detection of every fraud
B. Independent assurance to the legislature and the public
C. Collection of taxes
D. Preparation of Government accounts
Answer: B
10. Audit evidence should primarily be:
A. Oral
B. Documentary or otherwise sufficient and appropriate
C. Based on assumptions
D. Collected only from finance departments
Answer: B
11. Which principle governs the selection of audit topics under Performance Audit?
A. Random selection only
B. Materiality and risk
C. Alphabetical order
D. Budget size alone
Answer: B
12. Materiality in audit refers primarily to:
A. Monetary value alone
B. Matters capable of influencing decisions of intended users
C. Capital expenditure only
D. Audit fees
Answer: B
13. Audit planning should primarily be based on:
A. Availability of audit staff
B. Risk assessment
C. Previous year's audit party
D. Instructions of the Treasury
Answer: B
14. Which of the following best describes audit risk?
A. Risk that Government loses revenue
B. Risk that audit may express an inappropriate conclusion
C. Risk of staff shortage
D. Risk of computer failure
Answer: B
15. Audit evidence is considered appropriate when it is:
A. Voluminous
B. Relevant and reliable
C. Signed by the DDO
D. Obtained only from vouchers
Answer: B
16. The auditable entity is expected to:
A. Restrict access to records
B. Facilitate audit by producing records and information
C. Decide audit observations
D. Approve draft inspection reports
Answer: B
17. Entry Conference is generally associated with:
A. Pension cases
B. Performance Audit
C. Treasury Inspection
D. Voucher Audit
Answer: B
18. Exit Conference is primarily intended to:
A. Close the office permanently
B. Discuss audit findings with the audited entity
C. Approve audit reports
D. Certify accounts
Answer: B
19. Which characteristic is most essential for an audit observation?
A. Lengthy narration
B. Supported by sufficient evidence
C. Personal opinion
D. Anonymous source
Answer: B
20. An Inspection Report is normally issued:
A. Immediately after sanction of expenditure
B. After completion of local audit
C. Before commencement of audit
D. Along with Finance Accounts
Answer: B
21. Draft Paragraphs proposed for inclusion in the Audit Report should generally be communicated to:
A. RBI
B. Concerned Government/Department for comments
C. Parliament directly
D. UPSC
Answer: B
22. Compliance Audit primarily examines whether:
A. Policies achieved intended objectives
B. Activities comply with applicable authorities
C. Financial statements present a true and fair view
D. Budgets were exceeded
Answer: B
23. Performance Audit primarily focuses on:
A. Accuracy of cash book
B. Economy, Efficiency and Effectiveness
C. Stock verification only
D. Pension authorization
Answer: B
24. Financial Audit primarily aims to provide assurance regarding:
A. Recruitment procedures
B. Financial statements
C. Audit planning
D. Procurement policy only
Answer: B
25. According to the Regulations, audit should maintain:
A. Confidentiality, independence and objectivity
B. Confidentiality only
C. Independence only
D. Economy only
Answer: A
26. Under the Regulations, the Accountant General/Principal Accountant General is primarily responsible for:
A. Making laws relating to audit
B. Planning, directing, supervising and controlling audit within his jurisdiction
C. Approving the Union Budget
D. Appointing the Comptroller and Auditor General
Answer: B
27. Audit planning should ordinarily ensure that:
A. Every voucher is checked every year
B. Audit resources are allocated based on risk and materiality
C. Every office is audited by the same audit party
D. Audit is completed before the close of the financial year
Answer: B
28. Audit documentation should be sufficient to enable:
A. The audited entity to rewrite the audit report
B. An experienced auditor, having no previous connection with the audit, to understand the work performed
C. Parliament to prepare the Budget
D. The Finance Department to prepare accounts
Answer: B
29. Audit evidence obtained directly by the auditor through physical inspection is generally:
A. Less reliable than oral evidence
B. More reliable than evidence obtained indirectly
C. Equal to hearsay evidence
D. Not considered audit evidence
Answer: B
30. Which of the following generally provides the highest reliability as audit evidence?
A. Oral explanation by an employee
B. Photocopies without authentication
C. Original documentary records supported by independent confirmation
D. Newspaper reports
Answer: C
31. The purpose of maintaining audit working papers is primarily to:
A. Replace the Audit Report
B. Support audit findings and conclusions
C. Assist the Finance Department in preparing accounts
D. Record only objections
Answer: B
32. According to the Regulations, audit conclusions should be based upon:
A. Suspicion
B. Sufficient and appropriate audit evidence
C. Previous Inspection Reports only
D. Newspaper reports
Answer: B
33. Which of the following best describes an audit criterion?
A. Audit programme
B. Benchmark against which subject matter is assessed
C. Audit note
D. Audit report
Answer: B
34. Internal control is primarily intended to provide:
A. Absolute assurance
B. Reasonable assurance regarding achievement of objectives
C. Assurance against all frauds
D. Legal immunity
Answer: B
35. During audit, if records are not produced despite repeated requests, the auditor should:
A. Ignore the issue
B. Report the matter through appropriate channels and document the non-production
C. Close the audit immediately
D. Certify the accounts without qualification
Answer: B
36. The right of access to records under the CAG's DPC Act extends to:
A. Only cash books
B. All records relevant to audit
C. Only vouchers above ₹10 lakh
D. Only electronic records
Answer: B
37. Audit should ordinarily communicate significant observations to:
A. Media
B. Audited entity at the appropriate level
C. Public directly
D. Parliament before verification
Answer: B
38. An Inspection Report should normally contain:
A. Personal opinions of the audit officer
B. Fact-based observations supported by evidence
C. Only statistical information
D. Budget estimates
Answer: B
39. The principal objective of issuing a Draft Inspection Report is to:
A. Punish officials
B. Obtain the response of the audited entity before finalisation
C. Recover losses immediately
D. Close the audit
Answer: B
40. Replies received from the audited entity should be evaluated by audit:
A. Mechanically
B. Objectively on the basis of evidence
C. Without verification
D. Only by the Head of Department
Answer: B
41. A Draft Paragraph proposed for inclusion in the CAG's Audit Report should ordinarily be:
A. Sent directly to Parliament
B. Communicated to the concerned Government for comments
C. Published on the department's website
D. Sent only to the Finance Ministry
Answer: B
42. If the audited entity disagrees with an audit observation, audit should:
A. Withdraw the observation automatically
B. Examine the evidence objectively before taking a final view
C. Ignore the reply
D. Escalate the matter immediately to Parliament
Answer: B
43. Follow-up action on outstanding Inspection Reports is primarily intended to:
A. Increase the number of audit objections
B. Secure compliance and corrective action
C. Recover audit expenses
D. Prepare Finance Accounts
Answer: B
44. Which of the following best represents the concept of materiality?
A. Every irregularity must be reported irrespective of significance.
B. Matters significant enough to influence users' decisions deserve attention.
C. Only monetary irregularities are material.
D. Materiality depends only on audit fees.
Answer: B
45. Audit sampling is generally adopted because:
A. Complete examination is always prohibited.
B. It enables reasonable conclusions where examination of all items is impracticable.
C. Audit cannot examine original records.
D. It reduces legal responsibility.
Answer: B
46. In the context of Performance Audit, the term "Economy" refers to:
A. Achievement of objectives
B. Minimising the cost of resources while maintaining quality
C. Increasing Government revenue
D. Maximising expenditure
Answer: B
47. In Performance Audit, "Efficiency" primarily refers to:
A. Relationship between outputs and resources used
B. Compliance with financial rules only
C. Budget preparation
D. Internal audit
Answer: A
48. "Effectiveness" in Performance Audit means:
A. Compliance with accounting standards
B. Extent to which intended objectives have been achieved
C. Verification of vouchers
D. Reduction in audit observations
Answer: B
49. Which statement regarding Government Companies is correct under the Regulations?
A. Audit responsibilities are exercised in accordance with the applicable provisions of the Companies Act read with the CAG's DPC Act.
B. Government Companies are audited exclusively under the Income-tax Act.
C. Government Companies are outside the jurisdiction of the CAG.
D. Audit is conducted only when requested by the company.
Answer: A
50. Which principle should govern the conduct of every Government auditor under the Regulations?
A. Confidentiality, independence, objectivity and professional competence
B. Confidentiality only
C. Economy only
D. Administrative convenience
Answer: A
51. Under the Regulations, the primary responsibility for maintaining an effective system of internal control rests with:
A. Comptroller and Auditor General
B. Internal Audit Wing
C. Management of the audited entity
D. Finance Commission
Answer: C
52. Government Audit evaluates internal controls primarily to:
A. Replace the internal control system
B. Determine the nature, timing and extent of audit procedures
C. Prepare annual accounts
D. Fix responsibility for losses
Answer: B
53. Which of the following is not an objective of evaluating internal controls?
A. Assessing reliability of financial reporting
B. Assessing compliance with laws and regulations
C. Assessing safeguarding of assets
D. Preparing budget estimates
Answer: D
54. Audit evidence is regarded as sufficient when it relates to:
A. Quality of evidence
B. Quantity of evidence required to support conclusions
C. Source of evidence
D. Cost of evidence
Answer: B
55. Audit evidence is regarded as appropriate when it is:
A. Voluminous
B. Relevant and reliable
C. Collected within one day
D. Approved by the Head of Office
Answer: B
56. In Government Audit, analytical procedures are primarily used to:
A. Replace substantive testing completely
B. Identify unusual trends, relationships or deviations requiring further examination
C. Prepare Appropriation Accounts
D. Certify inventories
Answer: B
57. When audit identifies significant fraud indicators, it should:
A. Conduct a criminal investigation
B. Expand audit procedures and communicate appropriately
C. Ignore the matter unless instructed
D. Immediately suspend the Head of Department
Answer: B
58. Which statement best reflects the auditor's responsibility regarding fraud?
A. Audit guarantees detection of every fraud.
B. Audit provides reasonable, not absolute, assurance.
C. Audit is responsible for preventing fraud.
D. Audit certifies that fraud never occurred.
Answer: B
59. According to the Regulations, audit findings should be:
A. Based on assumptions
B. Evidence-based, objective and balanced
C. Influenced by media reports
D. Restricted to financial irregularities
Answer: B
60. Which of the following best represents an audit recommendation?
A. A personal opinion
B. A practical suggestion arising logically from audit findings
C. A disciplinary order
D. A statutory direction
Answer: B
61. Performance Audit generally begins with:
A. Issue of Audit Report
B. Selection of topic through risk assessment
C. Preparation of Finance Accounts
D. Budget approval
Answer: B
62. The principal purpose of an Entry Conference is to:
A. Finalize audit observations
B. Explain audit objectives, scope and methodology
C. Approve the audit report
D. Obtain sanctions for expenditure
Answer: B
63. During a Performance Audit, audit criteria should preferably be:
A. Secret
B. Agreed or discussed with the audited entity where appropriate
C. Prepared after field audit
D. Approved by Parliament
Answer: B
64. Which of the following best defines an audit finding?
A. A newspaper report
B. Comparison between audit criteria and actual condition supported by evidence
C. Budget estimate
D. Legislative recommendation
Answer: B
65. The purpose of an Exit Conference is mainly to:
A. Recover audit fees
B. Discuss audit findings and obtain the audited entity's views
C. Approve Government accounts
D. Finalize promotions
Answer: B
66. Which of the following should not ordinarily form the basis of an audit conclusion?
A. Documentary evidence
B. Physical verification
C. Verified analytical procedures
D. Unverified anonymous allegations
Answer: D
67. Audit Reports of the Comptroller and Auditor General are submitted to:
A. Ministry of Finance
B. Parliament or the State Legislature through the President or Governor, as applicable
C. UPSC
D. Reserve Bank of India
Answer: B
68. Public Accounts Committee (PAC) primarily examines:
A. Budget proposals before approval
B. Reports of the Comptroller and Auditor General after they are laid before the Legislature
C. Recruitment rules
D. Audit manuals
Answer: B
69. Which of the following best reflects the relationship between Audit and the Legislature?
A. Audit functions as an executive department.
B. Audit assists the Legislature in exercising financial oversight.
C. Audit replaces the Public Accounts Committee.
D. Audit is subordinate to the Finance Department.
Answer: B
70. Audit observations should ordinarily emphasize:
A. Individual blame
B. Systemic deficiencies and improvements
C. Political implications
D. Public criticism
Answer: B
71. Certification Audit primarily involves expressing an opinion on:
A. Recruitment procedures
B. Financial statements or accounts entrusted for certification
C. Departmental promotions
D. Budget speeches
Answer: B
72. Which of the following bodies may come within the audit jurisdiction of the CAG under applicable laws and arrangements?
A. Autonomous Bodies substantially financed from Government funds
B. Only Central Ministries
C. Private companies with no Government interest
D. Foreign Governments
Answer: A
73. Local Bodies may be audited by the CAG:
A. Only under the Companies Act
B. Where empowered under the Constitution, statutes or entrustment
C. Only at the request of the District Collector
D. Only after approval of the Finance Commission
Answer: B
74. Quality assurance in Government Audit is primarily intended to ensure that audit work is:
A. Completed quickly regardless of quality
B. Performed in accordance with prescribed standards, manuals and regulations
C. Limited to financial audit
D. Outsourced to external agencies
Answer: B
75. Which statement best summarizes the philosophy of the Regulations on Audit and Accounts, 2007?
A. Audit exists to identify every minor accounting error.
B. Audit provides independent, evidence-based assurance to strengthen accountability, transparency and good governance.
C. Audit is primarily a disciplinary mechanism against Government servants.
D. Audit's objective is limited to checking vouchers.
Answer: B
76. According to the Regulations, audit should exercise professional judgment primarily in:
A. Determining staff transfers
B. Planning, conducting, evaluating evidence, and reporting audit results
C. Approving Government schemes
D. Preparing budget estimates
Answer: B
77. Which of the following best describes professional skepticism in Government Audit?
A. Distrusting every auditable entity
B. Maintaining a questioning mind while critically assessing audit evidence
C. Assuming management is dishonest
D. Rejecting all management explanations
Answer: B
78. Audit recommendations should generally be:
A. Punitive in nature
B. Practical, constructive, and linked to audit findings
C. Directed only to the Finance Department
D. Limited to financial recoveries
Answer: B
79. In Government Audit, economy primarily concerns:
A. Spending less regardless of quality
B. Acquiring resources of appropriate quality at the lowest reasonable cost
C. Maximizing expenditure
D. Eliminating all administrative expenses
Answer: B
80. Which of the following situations presents the highest audit risk?
A. Strong internal controls with effective monitoring
B. Weak internal controls over high-value transactions
C. Low-value routine expenditure with excellent documentation
D. Automated controls tested and found effective
Answer: B
81. While auditing grants-in-aid, the auditor's principal concern is whether:
A. The grant was announced in the Budget Speech
B. The grant was utilized for the sanctioned purpose in accordance with the prescribed conditions
C. The recipient earned a profit
D. The grant exceeded ₹1 crore
Answer: B
82. Receipt Audit primarily aims to ensure that:
A. Expenditure remains within budget
B. Government revenues are correctly assessed, realized, accounted for, and safeguarded
C. All receipts are deposited in commercial banks
D. Tax rates are determined by audit
Answer: B
83. During audit of stores and stock, the auditor should primarily verify:
A. Market prices only
B. Existence, custody, accounting, and management of stores
C. Manufacturing quality only
D. Employee attendance
Answer: B
84. Information Technology (IT) Audit primarily evaluates:
A. Programming skills of employees
B. Controls, security, integrity, and reliability of computerized information systems
C. Internet speed
D. Purchase of computer hardware only
Answer: B
85. Environmental Audit in the public sector generally examines whether:
A. Environmental objectives, laws, and programmes are implemented economically, efficiently, and effectively
B. Pollution is measured only by laboratories
C. Forest departments generate profits
D. Weather forecasts are accurate
Answer: A
86. Which source generally provides the most persuasive audit evidence?
A. Oral explanations
B. Independent external confirmations
C. Newspaper articles
D. Anonymous complaints
Answer: B
87. If two pieces of audit evidence contradict each other, the auditor should:
A. Accept the first evidence obtained
B. Ignore both
C. Perform additional audit procedures to resolve the inconsistency
D. Close the audit
Answer: C
88. Which statement regarding audit documentation is correct?
A. It is prepared only after the Audit Report is issued.
B. It should be sufficiently complete to support the audit opinion and facilitate review.
C. It is meant only for court proceedings.
D. It belongs exclusively to the audited entity.
Answer: B
89. Which of the following best reflects the concept of materiality?
A. Every deviation is equally important.
B. Significance depends on the nature and magnitude of the matter in the context of the audit.
C. Materiality depends only on monetary value.
D. Materiality is determined solely by the auditable entity.
Answer: B
90. Audit risk is generally considered as a combination of:
A. Political risk and economic risk
B. Inherent risk, control risk, and detection risk
C. Exchange risk and interest rate risk
D. Operational risk only
Answer: B
91. Which of the following best supports the independence of Government Audit?
A. Audit reporting through the executive
B. Constitutional status of the Comptroller and Auditor General
C. Dependence on audited entities for audit conclusions
D. Approval of audit findings by departments
Answer: B
92. The principal objective of communicating audit findings to the audited entity before finalization is to:
A. Obtain departmental approval
B. Ensure factual accuracy and provide an opportunity for response
C. Delay the audit report
D. Reduce the number of audit observations
Answer: B
93. Audit quality is strengthened primarily through:
A. Increasing the number of audit objections
B. Proper planning, supervision, review, and adherence to standards
C. Conducting surprise inspections only
D. Limiting audit scope
Answer: B
94. Which of the following is not ordinarily an attribute of a high-quality audit report?
A. Objectivity
B. Clarity
C. Evidence-based conclusions
D. Personal criticism without supporting evidence
Answer: D
95. Under the Regulations, confidentiality requires that auditors:
A. Disclose audit information freely to the media
B. Protect information obtained during audit except where disclosure is authorized or legally required
C. Share all working papers with third parties
D. Publish draft reports online
Answer: B
96. Professional competence requires Government auditors to:
A. Rely only on previous audit reports
B. Maintain and continually improve their knowledge and skills
C. Avoid specialized training
D. Depend exclusively on departmental explanations
Answer: B
97. Which statement best distinguishes Compliance Audit from Performance Audit?
A. Compliance Audit examines adherence to authorities, whereas Performance Audit examines economy, efficiency, and effectiveness.
B. Compliance Audit examines financial statements only.
C. Performance Audit examines only vouchers.
D. There is no difference.
Answer: A
98. An audit observation is most likely to result in meaningful corrective action when it:
A. Identifies deficiencies, analyzes causes, evaluates impact, and offers practical recommendations
B. Contains only criticism
C. Focuses solely on individuals
D. Omits supporting evidence
Answer: A
99. The Regulations on Audit and Accounts, 2007 are intended primarily to:
A. Replace the Constitution of India
B. Operationalize the powers and duties of the Comptroller and Auditor General by prescribing detailed procedures and principles for audit and accounts
C. Regulate taxation policy
D. Prescribe accounting standards for private companies
Answer: B
100. Which statement most accurately reflects the overall philosophy of the Regulations on Audit and Accounts, 2007?
A. Government audit exists primarily to detect every error and punish officials.
B. Government audit is an independent constitutional function that promotes accountability, transparency, good governance, and legislative oversight through evidence-based financial, compliance, and performance audits.
C. Audit is merely an accounting exercise.
D. Audit functions only after financial irregularities are detected by departments.
Answer: B
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