Audit Associate

90+ Audit Associate Interview Questions and Answers

Updated 18 Dec 2024
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Q1. 8) What is the Bank Reconciliation Statement? Explain with a practical example?

Ans.

Bank Reconciliation Statement is a document that matches the bank balance with the company's balance.

  • It is used to identify any discrepancies between the two balances.

  • It includes items such as outstanding checks, deposits in transit, and bank fees.

  • A practical example would be comparing the company's records of deposits and withdrawals with the bank statement to ensure accuracy.

  • Any differences found are then investigated and resolved.

  • The end result is a reconciled balance that...read more

Q2. 2) Ind AS 116, Its objective, Difference between operating Lease and Financial Lease.

Ans.

Ind AS 116 is a new accounting standard that replaces the old lease accounting standard.

  • Ind AS 116 is effective from April 1, 2019.

  • Its objective is to provide a single lessee accounting model that requires lessees to recognize assets and liabilities for all leases with a term of more than 12 months.

  • Operating leases are treated as off-balance sheet financing, while financial leases are treated as on-balance sheet financing.

  • Under operating leases, the lessee only recognizes lea...read more

Audit Associate Interview Questions and Answers for Freshers

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Q3. 3) How to do audit of Balance Sheet and Profit & Loss A/c.

Ans.

Audit of Balance Sheet and Profit & Loss A/c involves verifying the accuracy of financial statements.

  • Verify the accuracy of account balances and transactions

  • Check for proper classification and presentation of financial data

  • Ensure compliance with accounting standards and regulations

  • Perform analytical procedures to identify unusual transactions or trends

  • Confirm balances with third-party sources

  • Review supporting documentation for transactions

  • Assess the adequacy of disclosures in...read more

Q4. 9) When an Asset increases it must be debited or credited?

Ans.

When an asset increases, it must be debited.

  • Debit increases assets and credit decreases assets.

  • Assets include cash, accounts receivable, inventory, property, and equipment.

  • For example, if a company purchases a new machine, the asset account for machinery will be debited to increase it.

  • This is based on the accounting equation: Assets = Liabilities + Equity.

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Q5. 10) When equity decreases it must be debited or credited?

Ans.

Equity decreases must be debited.

  • Equity is a credit balance account, so when it decreases, it must be debited to reduce the credit balance.

  • Debiting equity reduces the owner's or shareholder's equity in the business.

  • Examples of equity decreasing transactions include paying dividends, recording losses, or issuing treasury stock.

Q6. 8) How to verify particular ledger (Fixed Assets, Creditors, Inventory).

Ans.

To verify a particular ledger, one can perform various procedures such as physical verification, reconciliation, and analytical review.

  • For Fixed Assets ledger, perform a physical verification of assets and reconcile with the register.

  • For Creditors ledger, reconcile the balance with the supplier statements and review the aging analysis.

  • For Inventory ledger, perform a physical count and reconcile with the inventory register.

  • Perform analytical review of the ledger to identify an...read more

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Q7. 11) What is the difference between operating expenses and COGS?

Ans.

Operating expenses are costs incurred in running a business, while COGS are expenses directly related to producing goods or services.

  • Operating expenses include salaries, rent, utilities, and marketing expenses.

  • COGS include the cost of raw materials, labor, and manufacturing overhead.

  • Operating expenses are recorded on the income statement, while COGS is deducted from revenue to calculate gross profit.

  • Operating expenses are usually fixed costs, while COGS can vary with producti...read more

Q8. 4) What is Internal Financial Control over Financial Reporting.

Ans.

Internal Financial Control over Financial Reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting.

  • It involves the establishment and maintenance of policies and procedures

  • It ensures that financial information is accurate and complete

  • It helps in preventing and detecting fraud

  • It involves monitoring and reviewing financial reporting processes

  • Examples include segregation of duties, regular audits, and proper documentation

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Q9. 5) What is Deferred Tax with practical examples.

Ans.

Deferred tax is a liability or asset that arises due to temporary differences between accounting and tax rules.

  • Deferred tax liability arises when taxable income is higher than accounting income, and deferred tax asset arises when accounting income is higher than taxable income.

  • Examples of temporary differences include depreciation, inventory valuation, and revenue recognition.

  • Deferred tax is calculated using the tax rate that is expected to apply when the temporary difference...read more

Q10. What is the ideal sample size suggested by ICAI to carry out ICOFR? How will you select your sample?

Ans.

ICAI suggests a sample size of 60-80% for ICOFR. Sample selection based on risk assessment and materiality.

  • ICAI suggests a sample size of 60-80% for ICOFR

  • Sample selection should be based on risk assessment and materiality

  • The sample should be representative of the population being tested

  • The sample should include both high-risk and low-risk areas

  • The sample should be selected randomly or using a systematic approach

  • The sample size may vary depending on the size and complexity of ...read more

Q11. Show will you do the audit of trade receivables

Ans.

Audit of trade receivables involves verifying the existence, accuracy, and valuation of outstanding customer balances.

  • Obtain a list of all trade receivables and reconcile it with the general ledger.

  • Verify the existence of the receivables by sending confirmation requests to customers.

  • Assess the accuracy of the balances by reviewing supporting documentation such as invoices and sales contracts.

  • Evaluate the valuation of the receivables by assessing the creditworthiness of custom...read more

Q12. 12) Difference between petty cash book and cash book?

Ans.

Petty cash book is used for small cash transactions while cash book is used for all cash transactions.

  • Petty cash book is used for small cash transactions like buying office supplies or paying for small expenses.

  • Cash book is used for all cash transactions including receipts and payments.

  • Petty cash book is maintained by a petty cashier while cash book is maintained by the main cashier.

  • Petty cash book is usually a single column book while cash book can be single or double column...read more

Q13. How much time would you require to audit order to cash cycle

Ans.

The time required to audit order to cash cycle depends on the size and complexity of the organization.

  • The size and complexity of the organization will determine the time required for the audit.

  • The availability and accuracy of data will also impact the time required.

  • The experience and efficiency of the audit team will play a role in the time required.

  • On average, it can take anywhere from a few weeks to several months to complete an audit of the order to cash cycle.

  • Factors such...read more

Q14. What is golden rules in acciunting?

Ans.

Golden rules in accounting are basic principles that guide the recording of financial transactions.

  • The first golden rule is the accounting equation, which states that assets must always equal liabilities plus equity.

  • The second golden rule is the revenue recognition principle, which states that revenue should be recognized when it is earned, not when it is received.

  • The third golden rule is the matching principle, which states that expenses should be recognized in the same peri...read more

Q15. What is Audit Risk? Audit Procedure for an Account Balance Audit Procedure for Cash & Bank Balance

Ans.

Audit risk is the risk that an auditor expresses an inappropriate opinion on financial statements.

  • Audit risk is the risk that the auditor may issue an incorrect opinion on the financial statements.

  • It is the risk that the auditor may fail to detect material misstatements in the financial statements.

  • Audit risk is composed of inherent risk, control risk, and detection risk.

  • Inherent risk is the risk of material misstatement in the absence of internal controls.

  • Control risk is the ...read more

Q16. How will you carry out a risk based assessment

Ans.

Risk based assessment involves identifying potential risks and evaluating their likelihood and impact on the audit process.

  • Identify potential risks based on the nature of the audit and the client's industry

  • Evaluate the likelihood and impact of each risk

  • Determine the level of risk and prioritize areas for further audit testing

  • Document the risk assessment process and findings

  • Update the risk assessment throughout the audit process as new information is obtained

Q17. Types of leases? Can a contract be verbal ? what are the five step approach of revenue recognition ?

Ans.

Types of leases include finance and operating leases. Verbal contracts are valid but harder to enforce. The five step approach of revenue recognition includes identification, separation, transaction price, allocation, and recognition.

  • Types of leases: finance lease (capital lease) and operating lease

  • Verbal contracts are valid but harder to enforce compared to written contracts

  • Five step approach of revenue recognition: identification of the contract, separation of performance o...read more

Q18. What is cash flow and bifurcate its activities?

Ans.

Cash flow is the movement of money in and out of a business. It is bifurcated into operating, investing, and financing activities.

  • Cash flow is the net amount of cash and cash equivalents that flow in and out of a business.

  • Operating activities include cash inflows and outflows related to the day-to-day operations of the business, such as sales and expenses.

  • Investing activities include cash inflows and outflows related to the purchase or sale of long-term assets, such as proper...read more

Q19. What makes audit interesting to you

Ans.

I find audit interesting because it allows me to gain a deep understanding of a company's operations and financial health.

  • I enjoy the challenge of analyzing complex financial data and identifying areas for improvement

  • I appreciate the opportunity to work with a variety of clients and industries, constantly learning and adapting to new situations

  • I find satisfaction in helping clients improve their financial processes and achieve their goals

  • For example, during my internship at X...read more

Q20. What is audit and why it is important?

Ans.

Audit is a systematic examination of an organization's financial records to ensure accuracy and compliance with regulations.

  • Audit is important for ensuring the accuracy and reliability of financial information.

  • It helps in detecting and preventing fraud or errors in financial statements.

  • Audits provide assurance to stakeholders such as investors, creditors, and regulators.

  • It helps in improving internal controls and operational efficiency.

  • Audits are also important for maintainin...read more

Q21. Case study on Ind as 115. Timing of recognition as revenue of Amount provided for training employees for a specific assignment

Ans.

Under Ind AS 115, revenue for training employees for a specific assignment should be recognized when the training services are provided.

  • Revenue should be recognized over time as the training services are provided.

  • The amount provided for training employees should be allocated to each period based on the progress of the training.

  • The timing of revenue recognition should align with the timing of when the training services are actually provided.

  • Examples: If the training is spread ...read more

Q22. What is reconciliation statement?

Ans.

A reconciliation statement is a document that compares two sets of records to ensure they are in agreement.

  • It is used to identify discrepancies between two sets of records.

  • It is commonly used in accounting to compare bank statements with a company's accounting records.

  • The statement lists all the differences between the two sets of records and explains the reasons for the discrepancies.

  • It helps to ensure the accuracy and completeness of financial records.

  • Reconciliation stateme...read more

Q23. What is audit assertion?

Ans.

Audit assertion is a claim made by the management regarding the accuracy of financial statements.

  • Audit assertions are used to evaluate the completeness, accuracy, and validity of financial statements.

  • There are six types of audit assertions: existence, completeness, accuracy, valuation, rights and obligations, and presentation and disclosure.

  • For example, existence assertion ensures that all assets and liabilities in the financial statements actually exist and are owned by the ...read more

Q24. What are recent financial scandals cases and how would you have investigated them

Ans.

Recent financial scandals include Wirecard, Luckin Coffee, and Toshiba. Investigation would involve reviewing financial statements, conducting interviews, and analyzing internal controls.

  • Reviewing financial statements for inconsistencies and irregularities

  • Conducting interviews with key personnel and stakeholders

  • Analyzing internal controls and governance structures

  • Examining audit trails and transaction records

  • Utilizing forensic accounting techniques to uncover fraud

  • Considering...read more

Q25. What are other requirements for audit associate ?

Ans.

Audit associates must have a bachelor's degree in accounting or a related field and possess strong analytical and communication skills.

  • Bachelor's degree in accounting or related field

  • Strong analytical and communication skills

  • Knowledge of accounting principles and auditing standards

  • Ability to work independently and as part of a team

  • Attention to detail and ability to meet deadlines

  • Familiarity with audit software and technology

  • Professional certification such as CPA or CIA is a p...read more

Q26. 7) What is Audit?

Ans.

Audit is a systematic and independent examination of financial statements, records, operations, and performance of an organization.

  • Audit is a process of evaluating an organization's financial and operational activities.

  • It involves examining financial statements, records, and transactions to ensure accuracy and compliance with laws and regulations.

  • Auditors provide an independent opinion on the fairness and reliability of an organization's financial statements.

  • There are differe...read more

Q27. 7) Types of Audit opinion, audit risk.

Ans.

Types of audit opinion include unqualified, qualified, adverse, and disclaimer. Audit risk is the risk of material misstatement.

  • Unqualified opinion means the financial statements are fairly presented.

  • Qualified opinion means there are some limitations or exceptions in the financial statements.

  • Adverse opinion means the financial statements are materially misstated.

  • Disclaimer opinion means the auditor is unable to express an opinion.

  • Audit risk is the risk that the auditor may is...read more

Q28. State two significant findings in Internal audit

Ans.

Two significant findings in Internal audit

  • Inadequate documentation of financial transactions

  • Lack of segregation of duties

  • Inefficient inventory management

  • Non-compliance with company policies and procedures

  • Inadequate IT controls

  • Weaknesses in the control environment

  • Inaccurate financial reporting

  • Fraudulent activities

  • Inadequate risk management

  • Insufficient internal controls over financial reporting

Q29. which standard on auditing is applicable on limited review

Ans.

The applicable standard on auditing for limited review is ISA 810 (Revised).

  • ISA 810 (Revised) is the standard on auditing applicable for limited review engagements.

  • It provides guidance on the responsibilities of the auditor when conducting a limited review.

  • The standard outlines the procedures to be followed and the reporting requirements for limited reviews.

  • ISA 810 (Revised) also addresses the communication of findings and conclusions to the client.

Q30. Difference between internal and external audit

Ans.

Internal audit is conducted by internal employees to assess and improve internal controls, while external audit is conducted by independent third parties to provide an opinion on financial statements.

  • Internal audit is performed by employees within the organization, while external audit is conducted by independent auditors outside the organization.

  • Internal audit focuses on evaluating and improving internal controls and processes, while external audit focuses on providing an op...read more

Q31. What is your underatanding of double entry?

Ans.

Double entry is a fundamental accounting concept where every transaction has equal and opposite effects on at least two accounts.

  • Every transaction involves at least two accounts - one account is debited and another account is credited.

  • Debits and credits must always balance, ensuring the accounting equation (Assets = Liabilities + Equity) remains in equilibrium.

  • Double entry system helps in maintaining accuracy and preventing errors in financial records.

  • For example, when a comp...read more

Q32. Explain the golden rules of accounting

Ans.

The golden rules of accounting are basic principles that guide the recording of financial transactions.

  • The first golden rule is the rule of debit and credit.

  • The second golden rule is the rule of personal accounts.

  • The third golden rule is the rule of real accounts.

  • The rule of debit and credit states that for every debit entry, there must be a corresponding credit entry.

  • The rule of personal accounts states that debit the receiver and credit the giver.

  • The rule of real accounts s...read more

Q33. List 5 risks in order to cash cycle

Ans.

The risks in order to cash cycle include fraud, errors, delays, bad debts, and insufficient controls.

  • Fraudulent activities by employees or customers can lead to financial losses.

  • Errors in recording transactions or reconciling accounts can result in inaccurate financial statements.

  • Delays in receiving payments or processing invoices can affect cash flow.

  • Bad debts or uncollectible accounts can impact profitability.

  • Insufficient controls or lack of segregation of duties can increa...read more

Q34. HOW TO DO AUDIT OF COMPANY?

Ans.

Audit of a company involves examining financial records, internal controls, and compliance with regulations.

  • Understand the company's business operations and industry standards

  • Review financial statements and supporting documents

  • Assess internal controls and identify any weaknesses

  • Test transactions for accuracy and completeness

  • Ensure compliance with laws and regulations

  • Prepare audit reports with findings and recommendations

Q35. What is Audit? EXplain Your views about that

Ans.

Audit is a systematic examination of an organization's financial records, transactions, and processes to ensure accuracy and compliance with regulations.

  • Audit involves reviewing financial statements, transactions, and internal controls.

  • It helps identify errors, fraud, and areas for improvement in the organization.

  • Auditors provide an independent opinion on the fairness of the financial statements.

  • Types of audits include financial audit, operational audit, and compliance audit....read more

Q36. What is financial ratio analysis

Ans.

Financial ratio analysis is the process of evaluating a company's financial performance by comparing different financial ratios.

  • It involves analyzing financial statements to calculate ratios such as liquidity ratios, profitability ratios, and solvency ratios.

  • These ratios are then compared to industry benchmarks or historical data to determine the company's financial health.

  • For example, a high current ratio (current assets/current liabilities) indicates good liquidity, while a...read more

Q37. Difference between Current assets and Financial Assets

Ans.

Current assets are assets that are expected to be converted into cash or used up within one year, while financial assets are assets that are traded in financial markets.

  • Current assets include cash, accounts receivable, inventory, and prepaid expenses

  • Financial assets include stocks, bonds, derivatives, and other securities

  • Current assets are used in day-to-day operations of a business, while financial assets are typically held for investment purposes

Q38. How do you audit cash transaction

Ans.

Cash transactions are audited by examining physical cash, bank statements, receipts, and reconciling with accounting records.

  • Verify physical cash on hand matches accounting records

  • Review bank statements for cash deposits and withdrawals

  • Examine receipts and invoices for cash transactions

  • Reconcile cash transactions with accounting records

  • Perform surprise cash counts to ensure accuracy

Q39. Explain revenue recognition concept

Ans.

Revenue recognition concept refers to the accounting principle that determines when and how revenue is recognized in financial statements.

  • Revenue is recognized when it is earned and realized or realizable

  • The amount of revenue recognized should be based on the fair value of the goods or services provided

  • Revenue recognition can be complex and may require judgment and estimation

  • Different industries may have different revenue recognition rules, such as the percentage of completio...read more

Q40. Difference bw revenue & deferred revenue.

Ans.

Revenue is income earned from sales while deferred revenue is income received in advance for goods or services to be provided in the future.

  • Revenue is recognized when goods or services are delivered to the customer.

  • Deferred revenue is recognized when goods or services are provided to the customer in the future.

  • Revenue is reported on the income statement while deferred revenue is reported on the balance sheet.

  • Examples of deferred revenue include subscription fees, advance paym...read more

Q41. What is Materiality?

Ans.

Materiality refers to the significance of an item or event in relation to financial statements.

  • Materiality is a concept used in auditing to determine the importance of an item or event in relation to financial statements.

  • It is used to determine whether an item or event is significant enough to affect the decision-making of users of financial statements.

  • Materiality is subjective and depends on the context of the financial statements and the users of those statements.

  • For exampl...read more

Frequently asked in,

Q42. HOW TO CALCULATE MATERIALITY?

Ans.

Materiality is calculated based on factors like size, nature, and risk of the financial statements.

  • Determine the base amount for materiality (e.g. total assets, total revenue)

  • Apply a percentage to the base amount to calculate materiality threshold (e.g. 5% of total assets)

  • Consider qualitative factors like the nature of the entity, industry regulations, and potential impact on users of the financial statements

  • Adjust materiality based on specific risks or circumstances of the a...read more

Q43. How to do audit of Fixed Assets

Ans.

Audit of Fixed Assets involves verifying existence, ownership, valuation, and physical condition of assets.

  • Reviewing the fixed assets register to ensure all assets are recorded accurately

  • Physically inspecting the assets to verify their existence and condition

  • Checking ownership documents to confirm legal ownership of the assets

  • Evaluating the valuation method used for fixed assets to ensure it complies with accounting standards

  • Testing the depreciation calculations to ensure the...read more

Q44. 6) Amendments in CARO 2020.

Ans.

CARO 2020 has been amended recently. Can you tell me about the amendments?

  • CARO 2020 has been amended to include reporting on the utilization of Corporate Social Responsibility funds.

  • The auditor is now required to report on the adequacy and effectiveness of internal financial controls.

  • Reporting on the details of proceedings initiated or pending against the company for holding benami property has been added.

  • The auditor is now required to report on the maintenance of cost record...read more

Q45. What is Auditing

Ans.

Auditing is the process of examining and verifying financial records to ensure accuracy and compliance with laws and regulations.

  • Auditing involves reviewing financial statements, records, and transactions.

  • The goal of auditing is to provide assurance that financial information is accurate and reliable.

  • Auditors may also identify areas for improvement in financial reporting and internal controls.

  • Examples of audits include financial statement audits, internal audits, and complian...read more

Q46. What you know about audit

Ans.

Audit is a systematic and independent examination of financial statements, records, operations, and performance of an organization.

  • Audit is conducted to provide an opinion on the financial statements of an organization.

  • It involves examining the financial records, transactions, and internal controls of an organization.

  • The objective of an audit is to ensure that the financial statements are free from material misstatements and are presented fairly.

  • Auditors follow a set of audit...read more

Q47. What is Golden rules of accounting?

Ans.

Golden rules of accounting are basic principles that guide the process of recording financial transactions.

  • Golden rule of accounting states that Debit what comes in and Credit what goes out.

  • It helps in maintaining the balance in the accounting equation.

  • For example, when cash is received, it is debited because it comes into the business.

  • Similarly, when cash is paid out, it is credited because it goes out of the business.

Q48. Difference between depn and amotisation?

Ans.

Depreciation is the decrease in value of tangible assets while amortization is the decrease in value of intangible assets.

  • Depreciation is used for tangible assets like buildings, machinery, and equipment.

  • Amortization is used for intangible assets like patents, copyrights, and trademarks.

  • Depreciation is calculated based on the useful life of the asset.

  • Amortization is calculated based on the estimated useful life of the intangible asset.

  • Both are used to allocate the cost of an ...read more

Q49. What are the different kinds of audit opinions

Ans.

Different kinds of audit opinions include unqualified, qualified, adverse, and disclaimer.

  • Unqualified opinion: The auditor believes the financial statements are accurate and comply with accounting standards.

  • Qualified opinion: The auditor has reservations about certain aspects of the financial statements.

  • Adverse opinion: The auditor believes the financial statements are materially misstated and do not accurately reflect the company's financial position.

  • Disclaimer: The auditor ...read more

Q50. How many financial statements are there

Ans.

There are four main financial statements: balance sheet, income statement, cash flow statement, and statement of changes in equity.

  • Balance sheet shows a company's assets, liabilities, and equity at a specific point in time.

  • Income statement shows a company's revenues and expenses over a period of time.

  • Cash flow statement shows how cash and cash equivalents flow in and out of a company.

  • Statement of changes in equity shows the changes in equity during a specific period.

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