Chapter Exam

Chapter 3: Internal Audit — Online MCQ Test

AUDITING · CLASS 12th · Tamil Nadu State Board

Practice Chapter 3: Internal Audit with a free chapter-wise online MCQ test for Tamil Nadu State Board CLASS 12th AUDITING. This chapter covers: This chapter explores the internal audit function within an enterprise. Students examine its objectives administrative functions advantages and disadvantages while studying compara.... AI-generated questions from basic to board-exam level, with instant results and explanations.

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Chapter 3: Internal Audit — Important Questions & Answers (FAQ)

Frequently asked questions from Tamil Nadu State Board CLASS 12th AUDITING — Chapter 3: Internal Audit, with answers and explanations. These are sample questions; the exam has its own separate question set.

What is the main purpose of internal audit?

A. To certify the annual report for the government
B. To review and improve internal operations and controls ✓
C. To prepare only tax returns
D. To fix the final market price of products

Answer: B. To review and improve internal operations and controls
Internal audit is meant to examine the organization’s activities and improve internal control, efficiency, and effectiveness. It is not mainly meant for statutory certification.

Internal audit is conducted by:

A. An independent external auditor appointed by court
B. The company’s internal staff or appointed internal audit team ✓
C. Only shareholders of the company
D. The stock exchange authorities

Answer: B. The company’s internal staff or appointed internal audit team
Internal audit is performed within the organization by its own staff or by persons appointed for that purpose. It is an internal activity, not an external statutory audit.

The internal audit function is mainly concerned with:

A. Checking whether shares are properly listed
B. Reviewing internal control and operational efficiency ✓
C. Fixing the company’s dividend rate
D. Auditing only the bank balance

Answer: B. Reviewing internal control and operational efficiency
Internal audit reviews the effectiveness of internal control and checks whether operations are carried out efficiently. It is broader than only checking accounts.

Which statement correctly distinguishes internal audit from internal check?

A. Internal audit is a system of division of work; internal check is a review function
B. Internal audit is a review by an independent person; internal check is a division of duties within the system ✓
C. Both mean the same thing exactly
D. Internal check is done only by external auditors

Answer: B. Internal audit is a review by an independent person; internal check is a division of duties within the system
Internal audit is a separate review function, while internal check is a system of arranging work so that one employee’s work is checked by another. They are related but not identical.

In a company, the internal auditor discovers repeated delay in payment approvals due to unclear procedures. What is the most appropriate conclusion?

A. Internal audit has failed because it cannot observe operational delays
B. Internal audit is helping management identify control and process weaknesses ✓
C. The company does not need any control system
D. This issue is outside the scope of internal audit

Answer: B. Internal audit is helping management identify control and process weaknesses
Internal audit is intended to detect weaknesses in systems and processes, including delays caused by poor procedures. Identifying such issues is one of its important functions.