50+ Audit Executive Interview Questions and Answers

Ind AS 116 is a new lease accounting standard that replaces Ind AS 17.

• Ind AS 116 requires lessees to recognize all leases on their balance sheet, whereas Ind AS 17 only required recognition of finance leases.

• Ind AS 116 eliminates the classification of leases as operating or finance leases, instead requiring lessees to recognize a right-of-use asset and lease liability for all leases.

• Ind AS 116 also changes the way lease expenses are recognized, with a front-loaded expense rec...read more

Stock market is a platform where buying, selling, and issuance of shares of publicly-held companies take place. NSE and BSE are major stock exchanges in India.

• Stock market is a platform for buying and selling shares of publicly-held companies

• NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) are major stock exchanges in India

• Stock market prices are determined by supply and demand, influenced by various factors like company performance, economic indicators, and mark...read more

Audit opinions can be unqualified, qualified, adverse, or disclaimer.

• Unqualified opinion: Auditor concludes that the financial statements are presented fairly.

• Qualified opinion: Auditor concludes that there is a limitation in scope or a departure from accounting standards.

• Adverse opinion: Auditor concludes that the financial statements are materially misstated and not presented fairly.

• Disclaimer opinion: Auditor is unable to form an opinion due to significant limitations or u...read more

Audit is a systematic examination of financial records, transactions, and processes to ensure accuracy and compliance.

• Audit is a process of evaluating and verifying financial information to ensure accuracy and compliance with regulations.

• Internal audit is conducted by an organization's own employees to assess and improve the effectiveness of risk management, control, and governance processes.

• Internal auditors provide independent and objective evaluations of the organization's...read more

Ind AS 16 is a standard for accounting treatment of property, plant and equipment. Depreciation is recognized based on useful life and residual value.

• Ind AS 16 provides guidelines for recognition, measurement, and disclosure of property, plant, and equipment in financial statements.

• Depreciation is recognized based on the useful life and residual value of the asset.

• The useful life and residual value of an asset are determined based on factors such as the expected usage, wear a...read more

Inventory holding period refers to the average number of days that a company holds its inventory before selling it.

• It is a measure of how efficiently a company manages its inventory.

• A shorter inventory holding period indicates faster turnover and better liquidity.

• Calculation: (Average Inventory / Cost of Goods Sold) x 365 days

• Example: Company A has an average inventory of $100,000 and COGS of $400,000. Inventory holding period = ($100,000 / $400,000) x 365 = 91.25 days

Internal audit is conducted to evaluate and improve the effectiveness of risk management, control, and governance processes within an organization.

• To assess the effectiveness of risk management processes

• To evaluate the efficiency of control mechanisms

• To ensure compliance with laws and regulations

• To identify areas for improvement in governance processes

• To provide assurance to stakeholders

• To detect and prevent fraud or mismanagement

• To enhance operational efficiency and effectiv...read more

Asset management refers to the process of managing a company's assets to maximize their value and minimize risk.

• Asset management involves tracking, maintaining, and disposing of assets.

• It includes financial planning, inventory management, and risk management.

• Examples of assets that are managed include cash, investments, equipment, and property.

• Effective asset management can help improve efficiency, reduce costs, and increase profitability.

Threshold limits for stock audit and ASM audit vary based on company policies and regulations.

• Threshold limit for stock audit is typically set by the company based on the value of stock held.

• Threshold limit for ASM audit is usually determined by the turnover of the company.

• For example, a company may require a stock audit for inventory exceeding $1 million and an ASM audit for turnover exceeding $10 million.

• These limits may also be influenced by regulatory requirements and ind...read more

Section 10AA of the Income Tax Act provides tax exemptions for Special Economic Zones (SEZs).

• Section 10AA grants tax benefits to businesses operating in SEZs.

• It allows a deduction of profits and gains derived from SEZ units.

• The deduction is available for a period of 15 consecutive assessment years.

• SEZ units must be engaged in the development, operation, and maintenance of SEZs.

• The purpose of this section is to promote exports and attract foreign investment.

A cooperative society is a voluntary association of individuals who come together to meet their common economic, social, and cultural needs through a jointly owned and democratically controlled enterprise.

• Members pool resources to achieve common goals

• Democratic control and decision-making

• Distribution of profits among members based on their participation

• Promotes mutual assistance and solidarity

• Examples: credit unions, agricultural cooperatives, housing cooperatives

Ind AS 115 is a new revenue recognition standard. The five-step model outlines the process for recognizing revenue.

• Step 1: Identify the contract with the customer

• Step 2: Identify the performance obligations in the contract

• Step 3: Determine the transaction price

• Step 4: Allocate the transaction price to the performance obligations

• Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

Fixed assets can be verified through physical inspection, documentation review, and reconciliation with accounting records.

• Conduct a physical inspection of the fixed assets to ensure their existence and condition.

• Review documentation such as purchase invoices, contracts, and maintenance records to verify the acquisition and maintenance of assets.

• Reconcile the fixed asset register with the general ledger to ensure accurate recording and classification of assets.

• Perform asset t...read more

The current tax rate for direct and indirect depends on various factors such as accounting entries and audit standards.

• The tax rate for direct and indirect taxes may vary depending on the country and state laws.

• Accounting entries such as depreciation, amortization, and inventory valuation can affect the tax rate.

• Audit standards such as GAAP and IFRS can also impact the tax rate.

• It is important to stay up-to-date with changes in tax laws and regulations to ensure compliance.

• Co...read more

Answering questions related to Forms under GST, Accounting treatment of Fixed Assets, Full cycle from PO to payment, and Stock Audit.

• Forms under GST include GSTR-1, GSTR-2, GSTR-3B, etc.

• Fixed assets are recorded at cost and depreciated over their useful life.

• Full cycle from PO to payment involves purchase requisition, purchase order, goods receipt, invoice verification, and payment.

• Stock audit involves physical verification of inventory and reconciliation with book records.

Cash flow statement is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents.

• Cash flow statement shows the inflow and outflow of cash during a specific period.

• It consists of three main sections: operating activities, investing activities, and financing activities.

• Operating activities include cash transactions related to revenue and expenses.

• Investing activities include cash transactions related to purchase and sale ...read more

The benefits of meditation

• Meditation reduces stress and anxiety

• Improves focus and concentration

• Increases self-awareness and emotional intelligence

• Enhances overall well-being and happiness

• Examples: Mindfulness meditation, Transcendental meditation

Drawing power is calculated by subtracting the margin money from the total value of securities pledged.

• Calculate the total value of securities pledged by the borrower.

• Determine the margin money required by the lender.

• Subtract the margin money from the total value of securities pledged to get the drawing power.

• Drawing Power = Total Value of Securities - Margin Money

ASM Audit stands for Area Sales Manager Audit, which involves evaluating the performance of sales managers in specific regions.

• ASM Audit assesses the effectiveness of sales strategies implemented by Area Sales Managers.

• It involves reviewing sales data, customer feedback, and performance metrics to identify areas for improvement.

• The goal of ASM Audit is to ensure that sales managers are meeting targets and driving revenue growth.

• Examples of ASM Audit activities include analyzi...read more

Stock audit is a process of verifying the physical stock of a company to ensure accuracy and prevent fraud.

• Stock audit involves physically counting and verifying the inventory of a company.

• It helps in detecting discrepancies between the physical stock and the records maintained by the company.

• Stock audit is important for preventing theft, fraud, and mismanagement of inventory.

• It ensures that the company's financial statements accurately reflect the value of its inventory.

• Stoc...read more

vlookup is a function in Excel used to search for a specific value in a table and return a corresponding value.

• vlookup stands for 'vertical lookup'

• It is used to find a specific value in the leftmost column of a table and return a corresponding value from a specified column

• It can be used to merge data from two different tables based on a common identifier

• Its limitations include being case-sensitive, only being able to search for values in the leftmost column of a table, and no...read more

Audit provides a unique opportunity to understand and improve business processes.

• Audit allows me to gain a deep understanding of how a business operates

• I enjoy identifying areas for improvement and providing recommendations

• Audit provides exposure to different industries and business models

• I find the work challenging and rewarding

• Examples: identifying control weaknesses, improving efficiency, reducing risk

My 12th standard scores were excellent and helped me secure admission in a top university.

• I scored above 90% in all subjects

• My overall percentage was 95%

• My scores in Mathematics and Accountancy were particularly high

• These scores helped me secure admission in a top university for my undergraduate degree

My best 3 observations are attention to detail, strong analytical skills, and effective communication.

• Attention to detail: I have a keen eye for spotting errors and inconsistencies in financial records.

• Strong analytical skills: I am able to analyze complex data and identify trends or anomalies.

• Effective communication: I can clearly communicate audit findings and recommendations to stakeholders.

ASM Audit is applicable to all entities listed on the stock exchange.

• ASM Audit is applicable to all entities listed on the stock exchange.

• It is also applicable to entities that are required to comply with the Securities and Exchange Commission (SEC) regulations.

• ASM Audit is typically required for public companies, financial institutions, and other regulated entities.

• Entities that are subject to ASM Audit must ensure compliance with auditing standards and regulations.

• Examples ...read more

Revenue recognition refers to the process of identifying and recording revenue earned by a company.

• Revenue is recognized when it is earned, not when payment is received

• Revenue recognition depends on the type of transaction and the terms of the contract

• Revenue can be recognized over time or at a point in time

• Revenue recognition is important for financial reporting and analysis

• Examples of revenue recognition include sales of goods, services rendered, and interest earned

TOE analysis is used to identify the reason for the change in balance sheet and P&L items.

• TOE stands for Time, Ownership, and Extent

• Time refers to the period in which the change occurred

• Ownership refers to who is responsible for the change

• Extent refers to the magnitude of the change

• TOE analysis helps in identifying the reason for the change in balance sheet and P&L items

• For example, a decrease in accounts receivable could be due to a decrease in sales (time), better collectio...read more

I will audit the Borrowing area by reviewing loan agreements, analyzing interest rates, and assessing compliance with borrowing policies.

• Review loan agreements to ensure terms are being followed

• Analyze interest rates to verify accuracy and reasonableness

• Assess compliance with borrowing policies to identify any violations or discrepancies

Audit a P2P process by reviewing policies, procedures, transactions, controls, and system configurations.

• Review P2P policies and procedures to ensure compliance with regulations and company standards.

• Examine transaction records to verify accuracy and completeness of data.

• Assess internal controls in place to prevent fraud and errors in the P2P process.

• Evaluate system configurations to ensure proper segregation of duties and access controls.

• Perform sample testing of transaction...read more

Yes, I have done internal audit. SOP stands for Standard Operating Procedure.

• I have conducted internal audits for various departments in my previous roles.

• SOP is a set of step-by-step instructions that outline how to perform a particular task or process.

• SOPs are important in ensuring consistency and quality in operations.

• For example, an SOP for accounts payable may outline the steps for processing invoices and issuing payments.

• Another example is an SOP for inventory managemen...read more

A contingent liability is a potential liability that may or may not occur depending on the outcome of a future event.

• Contingent liabilities are disclosed in the notes to financial statements.

• They are not recognized on the balance sheet but may have to be recorded if certain conditions are met.

• Examples include pending lawsuits, warranties, and guarantees.

• The likelihood of the contingent liability and the amount involved are considered when determining whether to recognize it.

A walkthrough of balance sheet items involves reviewing and verifying the accuracy of each asset, liability, and equity account.

• Start with cash and cash equivalents, verifying bank balances and reconciling any discrepancies

• Review accounts receivable and payable, ensuring proper aging and allowance for doubtful accounts

• Examine inventory and fixed assets, checking for proper valuation and depreciation

• Verify the accuracy of long-term debt and equity accounts

• Ensure that all accou...read more

Various types of ratios include liquidity ratios, profitability ratios, efficiency ratios, and solvency ratios.

• Liquidity ratios measure a company's ability to meet short-term obligations (e.g. current ratio, quick ratio)

• Profitability ratios assess a company's ability to generate profit (e.g. return on assets, return on equity)

• Efficiency ratios evaluate how well a company utilizes its assets and liabilities (e.g. asset turnover ratio, inventory turnover ratio)

• Solvency ratios i...read more

An escrow account is a financial arrangement where a third party holds and regulates payment of funds for two parties involved in a transaction.

• Used in real estate transactions to hold funds until all conditions are met

• Common in mergers and acquisitions to hold funds for potential liabilities

• Can be used in online transactions to ensure both parties fulfill their obligations

Collateral security is an asset or property that a borrower offers to a lender as a guarantee for a loan.

• Collateral security provides a form of protection for the lender in case the borrower defaults on the loan.

• Common types of collateral security include real estate, vehicles, equipment, or investments.

• The value of the collateral is assessed by the lender to determine the amount of the loan that can be provided.

• If the borrower fails to repay the loan, the lender may seize an...read more

Primary security refers to the first layer of security measures implemented to protect assets, data, or information.

• Primary security is the initial level of protection put in place to safeguard against unauthorized access or threats.

• It includes measures such as passwords, encryption, firewalls, and access controls.

• Examples of primary security measures include setting up strong passwords for accounts, using encryption to protect sensitive data, and implementing firewalls to bl...read more

A stale cheque is a check that is not cashed or deposited by the recipient within a certain period of time, usually 6 months.

• Stale cheques are not valid for payment after a certain period of time, typically 6 months.

• Banks may refuse to honor stale cheques due to the risk of fraud or insufficient funds.

• Recipients should deposit or cash cheques promptly to avoid them becoming stale.

• Stale cheques can be reissued by the issuer if necessary.

• Example: If a recipient receives a chequ...read more

Special states refer to unique conditions or circumstances that require specific attention or consideration.

• Special states may include emergency situations that require immediate action

• They can also refer to exceptional circumstances that deviate from normal procedures

• Examples of special states include natural disasters, financial crises, and regulatory changes

Types of audits include financial audit, operational audit, compliance audit, and forensic audit.

• Financial Audit: Focuses on financial statements to ensure accuracy and compliance with regulations.

• Operational Audit: Evaluates the efficiency and effectiveness of operations within an organization.

• Compliance Audit: Ensures adherence to laws, regulations, and internal policies.

• Forensic Audit: Investigates potential fraud or misconduct within an organization.

Ind AS 115 provides a comprehensive framework for revenue recognition.

• Ind AS 115 establishes principles for recognizing revenue based on the transfer of goods or services to customers.

• Revenue is recognized when control of the goods or services is transferred to the customer.

• The amount of revenue recognized should reflect the consideration to which the entity expects to be entitled in exchange for those goods or services.

• Ind AS 115 requires entities to identify performance obl...read more

Threshold limit for GST registration is based on annual turnover

• Threshold limit for GST registration varies by state and type of business

• For most states, the threshold limit is Rs. 20 lakhs for regular businesses

• For businesses in special category states, the threshold limit is Rs. 10 lakhs

• Certain businesses like e-commerce operators have lower threshold limits

• Voluntary registration can be done even if turnover is below threshold

EBITA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. BRS stands for Bank Reconciliation Statement.

• EBITA is a measure of a company's operating performance without factoring in interest, taxes, depreciation, and amortization.

• BRS is a statement that reconciles the balance in a company's bank account with the balance shown in its accounting records.

• EBITA helps in evaluating a company's profitability from core operations, while BRS ensures accuracy in ...read more

KYC verification involves confirming the identity of customers to prevent fraud and money laundering.

• Collecting and verifying official identification documents such as passports or driver's licenses

• Cross-checking information provided by customers with external databases

• Conducting in-person verification for high-risk customers

• Utilizing technology such as facial recognition or biometric verification

• Regularly updating and reviewing KYC information to ensure accuracy

Executive audit involves overseeing and managing the audit process at a high level within an organization.

• Executive audit involves setting audit strategy and objectives.

• It includes overseeing audit planning and execution.

• The role may involve communicating audit findings to senior management and the board.

• Executive auditors may also be responsible for ensuring compliance with regulations and internal policies.

• Examples of executive audit positions include Chief Audit Executive ...read more

I am a detail-oriented and adaptable individual with strong analytical skills.

• Strengths: Strong analytical skills, detail-oriented, adaptable

• Weaknesses: Can be overly critical of myself, tendency to overthink

• Opportunities: Continuously learning and improving skills, networking with professionals in the field

• Threats: Rapidly changing technology and regulations, potential for burnout in a high-pressure work environment

Audit focuses on verifying financial information for accuracy and compliance, while accounting involves recording, classifying, and summarizing financial transactions.

• Audit is an independent examination of financial information, whereas accounting involves the preparation and maintenance of financial records.

• Auditors provide assurance on the accuracy and reliability of financial statements, while accountants are responsible for preparing those statements.

• Audit is typically pe...read more

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

• Audit is a process of reviewing and evaluating an organization's financial statements, transactions, and internal controls.

• It involves examining financial records, documents, and supporting evidence to verify their accuracy and completeness.

• Auditors assess the effectiveness of internal controls and identify any weaknesses or areas of non-complian...read more