Defense Audit Code – Chapter 18 (Audit of Stores Accounts)
Part 1: Questions 1–25
Multiple Choice Questions (MCQs)
1. The primary objective of the audit of stores accounts is to ensure:
A. Adequate supply of stores
B. Proper accounting and safeguarding of stores
C. Fast disposal of surplus stores
D. Physical verification only
Answer: B
Explanation: The main purpose of audit is to ensure that stores are properly accounted for, safeguarded, and economically used.
2. The term “stores” in Defence Audit Code includes:
A. Only consumable items
B. Only capital items
C. All movable property excluding cash and documents
D. Only machinery
Answer: C
Explanation: Stores include all movable property except cash, currency, or negotiable instruments.
3. The audit of stores accounts is mainly the responsibility of:
A. Local Accounts Officer
B. Controller of Defence Accounts
C. Internal Audit Wing
D. Ministry of Defence
Answer: B
Explanation: CDA is responsible for audit of stores accounts of the units and formations under his audit jurisdiction.
4. Verification of receipt and issue of stores should be done:
A. Annually
B. Quarterly
C. At the time of each transaction
D. Once in two years
Answer: C
Explanation: Every receipt and issue of store item should be verified as the transaction occurs to ensure accuracy.
5. The store ledger maintained by the storekeeper is known as:
A. Demand Register
B. Bin Card
C. Stock Ledger
D. Inventory Sheet
Answer: C
Explanation: Stock Ledgers show the accounting of each item of store, reflecting receipts, issues, and balances.
6. The physical verification of stores is done by:
A. Storekeeper only
B. Board of Officers
C. Audit Staff
D. Commanding Officer
Answer: B
Explanation: Physical verification is conducted periodically by a Board of Officers appointed for the purpose.
7. When the value of discrepancy exceeds the prescribed limit, it should be reported to:
A. Commanding Officer
B. Controller of Defence Accounts
C. Ministry of Defence
D. Internal Audit
Answer: B
Explanation: CDA must be informed when discrepancies in store balances exceed financial limits defined in regulations.
8. The audit of stores is mainly conducted through:
A. Physical verification
B. Test check of vouchers and ledgers
C. Full revaluation
D. Surprise inspection
Answer: B
Explanation: Audit adopts test check methods, verifying representative samples rather than every transaction.
9. “Loss Statement” is prepared when:
A. There is a shortage or damage of stores
B. Stores are transferred between units
C. Obsolete items are condemned
D. Stores are reclassified
Answer: A
Explanation: Any loss, damage, or deficiency of stores must be supported by a Loss Statement showing reasons and responsibility.
10. The loss which is not due to negligence is termed as:
A. Avoidable loss
B. Unavoidable loss
C. Recoverable loss
D. Irregular loss
Answer: B
Explanation: Unavoidable losses occur despite due care, such as evaporation, shrinkage, or handling wear.
11. In case of fraudulent loss, responsibility lies with:
A. Ministry of Defence
B. Audit Officer
C. Commanding Officer
D. Concerned individual(s) involved
Answer: D
Explanation: Fraudulent losses are recoverable from the person(s) responsible for the fraud.
12. Which of the following is not a type of store account?
A. Stock Account
B. Manufacturing Account
C. Loan Account
D. Payroll Account
Answer: D
Explanation: Payroll relates to personnel expenditure, not to store accounting.
13. The term “Obsolete Stores” refers to:
A. Worn-out stores
B. Items no longer in use or required
C. Lost items
D. Consumable stores
Answer: B
Explanation: Obsolete stores are those which have become unnecessary due to change in design or requirement.
14. Losses due to normal wear and tear are categorized as:
A. Negligent loss
B. Normal loss
C. Extraordinary loss
D. Recoverable loss
Answer: B
Explanation: Such losses are inherent in the use of stores and thus treated as normal.
15. In audit, “Condemnation” refers to:
A. Approval for disposal of unserviceable stores
B. Writing off stores
C. Procurement of stores
D. Transfer of stores
Answer: A
Explanation: Condemnation is the process of declaring items unserviceable or obsolete for disposal.
16. The stores condemned must be disposed through:
A. Private sale
B. Auction or Board-approved method
C. Return to supplier
D. Free issue
Answer: B
Explanation: Disposal must follow approved procedures ensuring transparency and value for money.
17. The audit of manufacturing accounts is conducted to verify:
A. Cost of production and accounting of material
B. Quality of product
C. Supply timelines
D. Market price
Answer: A
Explanation: Manufacturing accounts are audited to ensure correctness of cost, materials used, and wastage.
18. Losses up to what limit can be written off locally?
A. As per delegated financial powers
B. ₹10,000
C. ₹1 lakh
D. None of these
Answer: A
Explanation: The competent financial authority has delegated powers to write off losses within prescribed limits.
19. Audit must ensure that write-offs are:
A. Arbitrary
B. Properly sanctioned by competent authority
C. Recommended by Board of Officers only
D. Verified physically
Answer: B
Explanation: Write-off must be supported by proper sanction as per delegated powers.
20. True or False:
“The Audit Officer can independently write off store losses.”
Answer: False
Explanation: Audit Officer cannot write off losses; he only verifies that competent authority has approved it.
21. Fill in the Blank:
Store losses due to fire or theft must be supported by a ________.
Answer: Court of Inquiry Report
Explanation: Such losses require a formal inquiry report fixing responsibility.
22. The term “Surplus Stores” refers to:
A. Items damaged in transit
B. Items temporarily not in use
C. Items exceeding authorized scale of requirement
D. Items under repair
Answer: C
Explanation: Surplus stores are those that exceed the sanctioned requirement and may be transferred or disposed.
23. The audit of store accounts includes scrutiny of:
A. Quantity only
B. Value and quantity both
C. Value only
D. None
Answer: B
Explanation: Both quantity and valuation aspects are verified in audit.
24. Which document is used for transferring stores between units?
A. Transfer Voucher
B. Issue Slip
C. Gate Pass
D. Indent Form
Answer: A
Explanation: Transfer Vouchers record movement of stores between units for accounting purposes.
25. True or False:
“All losses, irrespective of value, are subject to audit scrutiny.”
Answer: True
Explanation: Audit reviews all losses to ensure compliance, even if the amount is small.
26. The audit of stores accounts aims to prevent:
A. Excessive procurement and misuse of stores
B. Delays in transportation
C. Quality issues
D. Loss due to natural calamity
Answer: A
Explanation: One key function of audit is to ensure economy by avoiding overstocking or unnecessary purchases.
27. When stores are issued on loan to another unit, the accounting is done through:
A. Issue voucher
B. Loan register
C. Stock card only
D. None of these
Answer: B
Explanation: Loan Register records stores temporarily issued on loan and ensures their return or adjustment.
28. Audit scrutiny of store accounts includes verification of:
A. Authorization and necessity of purchase
B. Quality inspection
C. Vendor’s background
D. Logistic arrangements
Answer: A
Explanation: Audit ensures that all store purchases are authorized, justified, and economical.
29. The term “Reclassification” in store audit refers to:
A. Change in item description
B. Conversion of unserviceable to serviceable stores
C. Shifting of items between classes of stores
D. Change in vendor
Answer: C
Explanation: Reclassification means transferring stores from one accounting class to another as per use.
30. The Board of Survey is convened to:
A. Conduct auction of surplus stores
B. Investigate losses or damages to stores
C. Maintain ledgers
D. Fix prices for sale
Answer: B
Explanation: Board of Survey inquires into shortages, damages, and recommends write-off or recovery.
31. True or False:
“The Board of Survey’s findings are final and not subject to audit.”
Answer: False
Explanation: Audit verifies that Board recommendations are sanctioned and supported by rules.
32. Fill in the Blank:
Audit of stores ensures that purchases are made on the principles of ________.
Answer: Economy and necessity
Explanation: Audit promotes economic use of public funds through justified procurement.
33. Which of the following is not verified during store audit?
A. Authority for purchase
B. Budget provision
C. Payment of income tax by supplier
D. Proper accounting of issue
Answer: C
Explanation: Supplier’s tax matters are outside the scope of store audit.
34. Store ledgers should be balanced and reconciled:
A. Daily
B. Monthly
C. Quarterly
D. Annually
Answer: B
Explanation: Monthly reconciliation ensures early detection of discrepancies between ledger and physical stock.
35. Discrepancies between store ledgers and physical verification should be:
A. Ignored if small
B. Adjusted immediately
C. Reported and investigated
D. Written off automatically
Answer: C
Explanation: Any variation requires reporting and investigation before adjustment.
36. True or False:
“Every store item has a ledger page or bin card allotted to it.”
Answer: True
Explanation: Each item of stock is accounted for separately for effective control and audit.
37. “Numerical Ledger” is maintained to record:
A. Physical quantities only
B. Value only
C. Both value and quantity
D. Date of procurement
Answer: A
Explanation: Numerical Ledgers show quantitative details, not value, for items of stores.
38. The “Valuation Ledger” shows:
A. Quantity only
B. Monetary value of stores
C. Supplier details
D. Inspection dates
Answer: B
Explanation: Valuation Ledgers reflect cost and valuation details of stores held in stock.
39. The abbreviation “SOA” in store audit refers to:
A. Schedule of Adjustments
B. Statement of Account
C. Summary of Audit
D. Stock of Articles
Answer: A
Explanation: SOA (Schedule of Adjustments) summarizes corrections or adjustments during audit.
40. The audit check on condemnation should ensure:
A. Proper authority and disposal
B. Sale price only
C. Mode of transport
D. Quantity verification only
Answer: A
Explanation: Audit ensures condemned items were properly declared and disposed as per rules.
41. Fill in the Blank:
Unserviceable stores are disposed after approval by the ________.
Answer: Competent Financial Authority (CFA)
Explanation: CFA’s sanction is mandatory before disposal or write-off.
42. The Defence Audit Code requires audit to verify that obsolete items are:
A. Retained for spare use
B. Written off or auctioned properly
C. Donated to other units
D. Destroyed without record
Answer: B
Explanation: Audit ensures obsolete stores are correctly written off or disposed through authorized means.
43. True or False:
“Obsolete stores can be retained indefinitely without financial sanction.”
Answer: False
Explanation: Retention of obsolete stores without sanction violates economy and accounting discipline.
44. The main purpose of conducting surprise checks of stores is:
A. To punish staff
B. To detect fraud and discrepancies early
C. To verify physical condition
D. To assess quality
Answer: B
Explanation: Surprise checks help ensure integrity and reliability of store accounts.
45. The difference between book balance and physical balance of stores is known as:
A. Surplus
B. Deficiency or surplus difference
C. Misappropriation
D. Reconciliation item
Answer: B
Explanation: Audit categorizes any variation as surplus or deficiency requiring explanation.
46. When stores are received but not taken on charge, audit detects this through:
A. Reconciliation statements
B. Gate entry register
C. Comparison with vouchers
D. All of the above
Answer: D
Explanation: Audit correlates vouchers, gate entries, and ledgers to identify unrecorded receipts.
47. “Test Audit” of stores means:
A. Detailed audit of all transactions
B. Sample check of representative transactions
C. Re-audit
D. Preliminary audit only
Answer: B
Explanation: Test audit checks representative samples to ensure efficiency and compliance.
48. Fill in the Blank:
Store balances must be reconciled between ledger and ________.
Answer: Physical verification results
Explanation: Physical count is compared with ledger balances to detect discrepancies.
49. True or False:
“Audit is concerned only with the financial value of stores.”
Answer: False
Explanation: Audit checks both quantitative and value aspects to ensure full accountability.
50. The report of store audit findings is submitted to:
A. Unit Commanding Officer and CDA
B. Army Headquarters directly
C. Ordnance Factory Board only
D. Ministry of Defence (Finance)
Answer: A
Explanation: Audit findings are reported to local authorities and the Controller for corrective action.
51. The main objective of internal control over stores is to:
A. Minimize manpower
B. Prevent loss, pilferage, and misappropriation
C. Simplify documentation
D. Increase storage capacity
Answer: B
Explanation: Strong internal control systems prevent misuse and loss of stores.
52. The record showing complete movement of each item of stores is called:
A. Stock Register
B. Indent Form
C. Voucher File
D. Audit Register
Answer: A
Explanation: Stock Register contains full details of receipts, issues, and balances of stores.
53. Audit ensures that purchases are supported by:
A. Manufacturer’s certificate
B. Sanction of competent authority
C. User recommendation only
D. Quality certificate
Answer: B
Explanation: No purchase should occur without sanction from competent financial authority.
54. Fill in the Blank:
All stores purchased must be entered in the ________ immediately on receipt.
Answer: Stock Ledger / Bin Card
Explanation: Immediate entry ensures no item escapes accounting.
55. True or False:
“Surplus stores may be transferred to another unit without any documentation.”
Answer: False
Explanation: Transfers must be supported by Transfer Vouchers and duly recorded in both units.
56. The Defence Audit Code prescribes that stores should be purchased only against:
A. Local demand
B. Authorized indents
C. Verbal instructions
D. Contractor’s proposal
Answer: B
Explanation: Authorized indents ensure control over demand and budget.
57. The responsibility for custody and safe-keeping of stores rests with:
A. Audit Officer
B. Storekeeper or Officer-in-Charge of Stores
C. Commanding Officer
D. CDA
Answer: B
Explanation: The person in charge of stores is responsible for their custody and correct accounting.
58. Audit ensures that all store transactions are:
A. Sanctioned, supported, and correctly accounted for
B. Verified by internal staff
C. Recorded monthly
D. None
Answer: A
Explanation: Audit verifies sanction, documentation, and accounting accuracy.
59. Losses due to negligence of staff are known as:
A. Unavoidable losses
B. Avoidable or preventable losses
C. Casual losses
D. Technical losses
Answer: B
Explanation: Preventable losses arise from carelessness or non-observance of procedure.
60. In Defence Audit Code, losses due to natural causes like flood or fire are called:
A. Negligent losses
B. Accidental or unavoidable losses
C. Financial losses
D. Operational losses
Answer: B
Explanation: These are unavoidable, but proper documentation (like inquiry report) is still required.
61. True or False:
“Every case of store loss must be supported by a Loss Statement.”
Answer: True
Explanation: Loss Statement is mandatory to record details and responsibility for losses.
62. The value of stores written off should be:
A. Charged to a suspense head
B. Adjusted against the unit fund
C. Debited to the final head of account concerned
D. Ignored if small
Answer: C
Explanation: Written-off losses are charged to the final expenditure head.
63. Fill in the Blank:
Audit ensures that no item is written off without the sanction of the ________.
Answer: Competent Financial Authority (CFA)
Explanation: Audit checks CFA sanction before accepting write-off entries.
64. Which of the following documents forms the basis of store accounting?
A. Issue Voucher and Receipt Voucher
B. Supply Order
C. Gate Pass
D. Contract Agreement
Answer: A
Explanation: Store ledgers are posted based on receipt and issue vouchers.
65. When stores are received on loan, they should be:
A. Taken on charge provisionally
B. Ignored till confirmed
C. Treated as gift
D. Written off immediately
Answer: A
Explanation: Loaned stores are accounted provisionally till return or adjustment.
66. “Revaluation of Stores” is necessary when:
A. Market rates fluctuate substantially
B. Physical verification is delayed
C. Stores are issued to other units
D. None of these
Answer: A
Explanation: Major changes in prices may require revaluation of existing stock.
67. True or False:
“The store audit has no role in verifying rates used in valuation.”
Answer: False
Explanation: Audit checks that valuation rates are consistent with rules and price lists.
68. Fill in the Blank:
Disposal of surplus stores must follow ________ procedure to ensure transparency.
Answer: Auction or tender
Explanation: Public auction/tender ensures fair realization of value and prevents malpractice.
69. The “Demand Register” is used to record:
A. Receipts
B. Issues
C. Indents placed for purchase
D. Losses
Answer: C
Explanation: It tracks indents or demands raised for procurement of stores.
70. Audit of stores in field formations is done by:
A. Internal Audit Section
B. Local Audit Officer under CDA
C. Unit Accountant
D. HQ Branch only
Answer: B
Explanation: Local Audit Officers carry out field-level store audits under CDA’s control.
71. True or False:
“Defence Audit Code allows verbal sanctions for urgent store purchases.”
Answer: False
Explanation: All sanctions must be written and properly authorized; verbal approvals are invalid.
72. In audit, “Numerical Control” refers to:
A. Value control of items
B. Physical quantity control
C. Quality control
D. Accounting software control
Answer: B
Explanation: Numerical control maintains strict quantitative record of stores to avoid discrepancies.
73. Fill in the Blank:
Audit checks that purchases are made within the limits of ________ provision.
Answer: Budgetary
Explanation: Expenditure must remain within budget allocation and sanctioned limits.
74. Audit ensures that condemned stores are:
A. Properly segregated and not reissued
B. Retained for spare parts
C. Sent back to manufacturer
D. Ignored in accounts
Answer: A
Explanation: Condemned stores must be kept separately and excluded from active stock.
75. True or False:
“Audit can question the technical necessity of stores demanded.”
Answer: False
Explanation: Audit examines financial propriety and sanction, not technical justification.
76. The main focus of Defence store audit is to ensure:
A. Operational readiness
B. Economy, efficiency, and accountability in store management
C. Procurement speed
D. Price control
Answer: B
Explanation: Audit checks economy and efficiency while ensuring accountability for every store item.
77. Fill in the Blank:
Audit ensures that every issue of store is properly ________ by an authorized person.
Answer: Acknowledged / Certified
Explanation: Proper acknowledgment confirms that stores are issued to the correct person and duly received.
78. True or False:
“All store ledgers should be initialed by the officer-in-charge periodically.”
Answer: True
Explanation: Officer’s authentication ensures proper supervision and prevents manipulation of records.
79. Stores returned to supplier due to rejection are accounted as:
A. Disposal stores
B. Returnable stores
C. Loaned stores
D. Obsolete stores
Answer: B
Explanation: Returned or returnable stores are recorded to maintain full traceability of transactions.
80. “Over-issue” of stores beyond authorization is treated as:
A. Normal procedure
B. Irregular issue
C. Unavoidable loss
D. Adjustment entry
Answer: B
Explanation: Issue beyond authorized limits is irregular and must be investigated.
81. True or False:
“The audit of stores includes checking of physical safety arrangements.”
Answer: True
Explanation: Audit observes storage and safety arrangements to assess risk of losses or deterioration.
82. Fill in the Blank:
Stores declared obsolete must be struck off the stock ledger only after ________.
Answer: Sanction of the Competent Authority
Explanation: Sanction ensures accountability and prevents premature write-off.
83. The process of adjusting shortages or surpluses found during verification is called:
A. Balancing
B. Adjustment of discrepancies
C. Reclassification
D. Reconciliation
Answer: D
Explanation: Reconciliation resolves differences between physical and book balances.
84. Which of the following is not a function of store audit?
A. Checking of accounting accuracy
B. Verification of sanctions
C. Conduct of physical verification itself
D. Examination of write-offs
Answer: C
Explanation: Audit examines the verification reports but does not perform physical stock-taking itself.
85. Losses not due to negligence but arising from unavoidable causes are called:
A. Technical losses
B. Unavoidable losses
C. Casual losses
D. Natural losses
Answer: B
Explanation: These occur despite observance of rules, such as evaporation or shrinkage.
86. True or False:
“All condemnations must be recorded in the ledger as soon as they are approved.”
Answer: True
Explanation: Timely posting maintains correct stock balances for audit and control.
87. Fill in the Blank:
The authority competent to write off losses is known as the ________.
Answer: Competent Financial Authority (CFA)
Explanation: CFA’s sanction is essential for write-off, as per delegated powers.
88. The audit ensures that all adjustments made in store accounts are:
A. Supported by proper authority and documents
B. Made by storekeeper only
C. Deferred till next year
D. Randomly approved
Answer: A
Explanation: Every adjustment must be supported by valid vouchers and competent sanction.
89. “Inter-departmental transfer” of stores is:
A. Movement within same department
B. Transfer between two departments of Government
C. Issue to civil contractors
D. Scrap disposal
Answer: B
Explanation: It refers to movement of stores from one Government department to another.
90. True or False:
“Stores received on loan from another unit are treated as owned stores for audit.”
Answer: False
Explanation: Loaned stores are accounted separately as temporary holdings, not as owned assets.
91. Fill in the Blank:
When stores are issued free of cost, the issue must be supported by ________.
Answer: Proper sanction or authority
Explanation: Free issues require justification and sanction to avoid misuse.
92. Audit scrutiny ensures that condemnations are approved by:
A. Storekeeper
B. Board of Officers and CFA
C. Audit Officer
D. Commanding Officer only
Answer: B
Explanation: Both Board of Officers and Competent Financial Authority play roles in condemnation approval.
93. The periodic review of slow-moving stores is done to:
A. Estimate resale value
B. Prevent obsolescence and overstocking
C. Check expiry dates only
D. Assist audit in valuation
Answer: B
Explanation: Periodic review ensures economy and prevents blocking of funds in idle stock.
94. True or False:
“Audit should question every purchase exceeding ₹10,000.”
Answer: False
Explanation: Audit questions irregular or unauthorized purchases, not merely by value.
95. Fill in the Blank:
When surplus stores are transferred, the transaction should not affect the ________ of total Government stock.
Answer: Aggregate value
Explanation: Inter-unit transfers do not alter total Government ownership or valuation.
96. In audit terminology, “Test check” implies:
A. Examination of selected transactions to judge reliability of entire account
B. Detailed scrutiny of all vouchers
C. Verification of physical stock
D. Checking only high-value items
Answer: A
Explanation: Test check gives reasonable assurance of accuracy through representative verification.
97. True or False:
“Losses due to depreciation or wear and tear need not be sanctioned.”
Answer: False
Explanation: Even normal depreciation must be recognized and sanctioned for write-off.
98. Fill in the Blank:
The ________ is responsible for maintaining numerical control over all store items.
Answer: Officer-in-Charge of Stores
Explanation: The officer ensures accurate quantitative records and stock discipline.
99. Audit of stores accounts is an essential part of:
A. Financial Audit
B. Administrative Audit
C. Performance Audit
D. Any of the above depending on scope
Answer: D
Explanation: Store audit can include financial, compliance, and performance aspects depending on audit plan.
100. True or False:
“The Defence Audit Code authorizes audit to point out both procedural and financial irregularities in store accounts.”
Answer: True
Explanation: Audit ensures compliance with procedures and detects any financial or administrative irregularity.
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