Auditing & Corporate Governance MCQ - Top 100 Questions

Q: Why is Auditing & Corporate Governance MCQ critical for CA Final and CS Professional?

It is a consistently high-scoring area. Examiners frequently repeat core concepts from this section, particularly focusing on recent amendments to SEBI LODR and the Companies Act.

Q: Does this mock test cover the full syllabus?

Yes, these questions target the most highly-weighted concepts found in previous years’ papers, including recent changes to the ICAI Code of Ethics and NFRA guidelines.

Q: What are the most repeated topics?

Based on our blueprint, SEBI LODR & Corporate Governance Frameworks and Statutory Audit regulations carry the highest weightage.

Question 1

Consider the following statements regarding High Value Debt Listed Entities (HVDLEs) under the SEBI (LODR) framework applicable for 2025:
1. An entity is classified as an HVDLE if it has listed non-convertible debt securities with an outstanding value of Rupees 500 Crore and above.
2. The calculation of the outstanding value strictly excludes unsecured debt securities and relies only on secured debentures.
3. Corporate governance provisions apply to HVDLEs on a strict mandatory basis rather than a comply or explain basis.
Which of the above statements is/are correct?

Accepted Answer

Only 1 and 3

Answer

Only 1

Answer

Only 2 and 3

Answer

1, 2, and 3

Question 2

Consider the following statements regarding the Business Responsibility and Sustainability Reporting (BRSR) Core framework for the financial year 2025-2026:
1. BRSR Core represents a subset of the comprehensive BRSR format, focusing exclusively on qualitative narratives without quantitative metrics.
2. Reasonable assurance of BRSR Core is mandatory for the top 1000 listed entities by market capitalization for FY 2025-2026.
3. The BRSR Core integrates Key Performance Indicators (KPIs) relevant to the Indian market context, such as job creation in smaller towns.
Which of the above statements is/are incorrect?

Accepted Answer

Only 1 and 2

Answer

Only 1

Answer

Only 2 and 3

Answer

1, 2, and 3

Question 3

Consider the following statements regarding the dematerialization of physical securities under the Companies Act for 2025:
1. Private companies, excluding small companies, are required to issue securities only in dematerialized form and facilitate dematerialization of all existing securities.
2. A shareholder holding physical shares in a covered private company can transfer those shares without converting them to dematerialized form first.
3. The rules mandate that the promoters, directors, and key managerial personnel must hold their entire stake in dematerialized form before making any offer for issue of any securities.
Which of the above statements is/are correct?

Accepted Answer

Only 1 and 3

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

1, 2, and 3

Question 4

Consider the following statements regarding the Audit Committee composition for listed entities as per SEBI regulations applicable in 2025:
1. The Audit Committee must have a minimum of three directors, with all of them being independent directors without exception.
2. At least two-thirds of the members of the Audit Committee must be independent directors.
3. The Chairperson of the Audit Committee must be an independent director and must be present at the Annual General Meeting to answer shareholder queries.
Which of the above statements is/are incorrect?

Accepted Answer

Only 1

Answer

Only 2

Answer

Only 1 and 3

Answer

Only 2 and 3

Question 5

Consider the following statements regarding Related Party Transactions (RPTs) and their materiality thresholds under current SEBI (LODR) Regulations:
1. A transaction with a related party is considered material if it exceeds Rupees 1000 Crore or 10 percent of the annual consolidated turnover, whichever is lower.
2. Prior approval of the shareholders through an ordinary resolution is required for all material RPTs, and no related party can vote to approve such resolutions.
3. Transactions entered into between a holding company and its wholly-owned subsidiary are entirely exempt from the requirement of shareholder approval.
Which of the above statements is/are correct?

Accepted Answer

1, 2, and 3

Answer

Only 1 and 2

Answer

Only 1 and 3

Answer

Only 2 and 3

Question 6

Consider the following statements regarding the applicability of Secretarial Audit under Section 204 of the Companies Act, 2013 for the year 2025:
1. Every listed company and its material unlisted subsidiaries incorporated in India are required to annex a Secretarial Audit Report to their Board Report.
2. A public company having a paid-up share capital of Rupees 50 Crore or more is exempt from conducting a Secretarial Audit if its turnover is below Rupees 250 Crore.
3. The Secretarial Audit must be conducted exclusively by a practicing Chartered Accountant appointed by the Board.
Which of the above statements is/are incorrect?

Accepted Answer

Only 2 and 3

Answer

Only 1 and 2

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 7

Consider the following statements regarding ESG disclosures for the Value Chain under the expanded SEBI guidelines for 2025-2026:
1. Listed entities must disclose ESG metrics for value chain partners that cumulatively account for 75 percent of their purchases or sales by value.
2. Value chain reporting requires the company to look beyond its own direct operations to track greenhouse gas emissions and labor practices of its major suppliers.
3. Assurance of value chain disclosures is implemented immediately on a mandatory basis alongside BRSR Core assurance for all listed companies.
Which of the above statements is/are correct?

Accepted Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 8

Consider the following statements regarding Cyber Security Incident Reporting and Board oversight for listed entities as of late 2025:
1. Listed entities are required to report severe cyber security incidents to the stock exchanges within 24 hours of detecting the breach.
2. The Board of Directors is strictly prohibited from delegating cyber security oversight to the Risk Management Committee.
3. Entities must disclose in their annual report the details of cyber security incidents that caused a material disruption to their operations.
Which of the above statements is/are incorrect?

Accepted Answer

Only 2

Answer

Only 1

Answer

Only 3

Answer

Only 1 and 3

Question 9

Consider the following statements regarding the rotation of Statutory Auditors under the Companies Act for 2025:
1. An individual auditor cannot be appointed for more than one term of five consecutive years.
2. An audit firm is eligible to be appointed for two terms of five consecutive years.
3. The mandatory cooling-off period for both individual auditors and audit firms has been uniformly set to three years after the completion of their maximum tenure.
Which of the above statements is/are correct?

Accepted Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 10

Consider the following statements regarding Corporate Social Responsibility (CSR) compliance and impact assessments in 2025:
1. Any unspent CSR amount relating to an ongoing project must be transferred to a special account within 30 days from the end of the financial year.
2. Companies with an average CSR obligation of Rupees 10 Crore or more in the three immediately preceding financial years must undertake an independent impact assessment.
3. Administrative overheads for CSR activities are capped at 15 percent of the total CSR expenditure for the financial year.
Which of the above statements is/are incorrect?

Accepted Answer

Only 3

Answer

Only 1

Answer

Only 2

Answer

Only 1 and 3

Question 11

Consider the following statements regarding the Minimum Public Shareholding (MPS) norms mandated by SEBI as of 2025:
1. All listed companies must maintain a minimum public shareholding of 25 percent to ensure adequate market liquidity.
2. A newly listed company must achieve the 25 percent MPS compliance within a maximum period of three years from the date of listing.
3. Companies are allowed to temporarily delist their shares if they fail to meet the MPS criteria within the specified timeline.
Which of the above statements is/are correct?

Accepted Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 12

Consider the following statements regarding the jurisdiction of the National Financial Reporting Authority (NFRA) over unlisted public companies in 2025:
1. NFRA has the authority to investigate the auditors of unlisted public companies having a paid-up capital of Rupees 500 Crore or more.
2. An unlisted public company with an annual turnover of Rupees 1000 Crore or more falls strictly under NFRA jurisdiction.
3. Once an unlisted company falls under NFRA jurisdiction, it remains under its purview for a continuous period of five years even if it falls below the financial thresholds in subsequent years.
Which of the above statements is/are incorrect?

Accepted Answer

Only 3

Answer

Only 1

Answer

Only 2

Answer

Only 1 and 3

Question 13

Consider the following statements regarding the mandatory appointment of an Internal Auditor for private companies under Section 138 of the Companies Act for 2025:
1. A private company must appoint an internal auditor if its turnover is Rupees 200 Crore or more during the preceding financial year.
2. A private company is required to appoint an internal auditor if its outstanding loans from banks exceed Rupees 100 Crore at any point in time during the preceding financial year.
3. The internal auditor appointed by the company must mandatorily be a practicing Chartered Accountant and cannot be an employee of the company.
Which of the above statements is/are correct?

Accepted Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 14

Consider the following statements regarding the Vigil Mechanism (Whistle-blower policy) under corporate governance norms for 2025:
1. Every listed company must establish a vigil mechanism for directors and employees to report genuine concerns.
2. Unlisted public companies that have accepted deposits from the public are exempt from establishing a vigil mechanism.
3. The vigil mechanism must provide adequate safeguards against the victimization of persons who use the mechanism.
Which of the above statements is/are incorrect?

Accepted Answer

Only 2

Answer

Only 1

Answer

Only 3

Answer

Only 1 and 2

Question 15

Consider the following statements regarding the disqualification of auditors under Section 141 of the Companies Act, applicable in 2025-2026:
1. A person is disqualified from being appointed as an auditor if their relative holds any security of or interest in the company exceeding a face value of Rupees 1 Lakh.
2. An auditor is immediately disqualified if they or their partner are indebted to the company for an amount exceeding Rupees 5 Lakhs.
3. The provision of specialized investment banking services by the audit firm to the holding company does not attract disqualification.
Which of the above statements is/are correct?

Accepted Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 16

Consider the following statements regarding the mandatory Joint Audit framework for large Non-Banking Financial Companies (NBFCs) updated for 2025-2026:
1. NBFCs with an asset size of Rupees 15,000 Crore and above are required to appoint a minimum of two joint statutory auditors.
2. The joint auditors appointed by the NBFC must not belong to the same network of audit firms.
3. Both joint auditors can be retired and replaced simultaneously at the end of their tenure to ensure a clean transition.
Which of the above statements is/are incorrect?

Accepted Answer

Only 3

Answer

Only 1

Answer

Only 2

Answer

Only 1 and 3

Question 17

Consider the following statements regarding Phase IV of the Peer Review Mandate implemented by the Institute of Chartered Accountants of India (ICAI):
1. Phase IV mandates that practice units proposing to undertake audits of branches of Public Sector Banks must hold a valid Peer Review Certificate.
2. The mandate also applies to practice units rendering attestation services that have three or more partners.
3. The implementation of Phase IV was officially enforced without any extension starting strictly from January 1, 2026.
Which of the above statements is/are incorrect?

Accepted Answer

Only 3

Answer

Only 1

Answer

Only 2

Answer

Only 1 and 3

Question 18

Consider the following statements regarding the Audit Trail requirements for accounting software under the Ministry of Corporate Affairs (MCA) regulations for 2025:
1. Companies are mandated to use accounting software that records an audit trail for every transaction, capturing the date, time, and user details of any modifications.
2. The accounting software must be configured such that the audit trail feature cannot be disabled or tampered with by the management under any circumstances.
3. Under Rule 11(g), statutory auditors are formally required to comment on whether the audit trail feature was operative throughout the year and preserved for the prior period.
Which of the above statements is/are correct?

Accepted Answer

1, 2, and 3

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Question 19

Consider the following statements regarding the regulatory framework for Environmental, Social, and Governance (ESG) Rating Providers (ERPs) formulated by SEBI for 2025:
1. A Core ESG Rating issued by an ERP must be strictly based on third-party assured data, such as the reasonably assured BRSR Core.
2. An entity holding 10 percent or more shares in a registered ERP is permitted to hold up to 25 percent of the shares in another SEBI-registered ERP.
3. ERPs are explicitly prohibited from providing internationally aligned ESG ratings and must exclusively use models tailored to the Indian market.
Which of the above statements is/are incorrect?

Accepted Answer

Only 2 and 3

Answer

Only 1

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 20

Consider the following statements regarding the reporting of fraud by a statutory auditor under Section 143(12) of the Companies Act:
1. A statutory auditor who has reason to believe that a fraud of Rupees 1 Crore or above has been committed against the company must report it to the Central Government in Form ADT-4.
2. The auditor is strictly required to report the suspected fraud to the Central Government even if they are not the first person to discover or identify the fraud.
3. The reporting obligation under this section primarily concerns frauds committed against the company by its own officers or employees.
Which of the above statements is/are correct?

Accepted Answer

1, 2, and 3

Answer

Only 1 and 2

Answer

Only 1 and 3

Answer

Only 2 and 3

Question 21

Consider the following statements regarding the applicability of Cost Audit for manufacturing companies in non-regulated sectors for the 2025-2026 cycle:
1. A company in a non-regulated sector is subject to cost audit if its overall annual turnover exceeds Rupees 100 Crore and revenue from covered products exceeds Rupees 35 Crore.
2. A company is completely exempt from the cost audit requirement if its revenue from exports in foreign exchange constitutes 75 percent or more of its total turnover.
3. Once cost audit becomes applicable, the company must appoint a Cost Auditor within 180 days of the commencement of the financial year.
Which of the above statements is/are correct?

Accepted Answer

1, 2, and 3

Answer

Only 1 and 2

Answer

Only 1 and 3

Answer

Only 2 and 3

Question 22

Consider the following statements regarding the applicability of Internal Financial Controls (IFC) for private limited companies in 2025:
1. A private company is completely exempt from the legal responsibility of designing and maintaining Internal Financial Controls if its turnover is below Rupees 50 Crore.
2. The statutory auditor of a private company with a turnover below Rupees 50 Crore and borrowings below Rupees 25 Crore is exempt from reporting on the adequacy of the company’s IFCs.
3. A private company loses its exemption from auditor reporting on IFCs if it commits a default in filing its financial statements or annual return with the Registrar of Companies.
Which of the above statements is/are incorrect?

Accepted Answer

Only 1

Answer

Only 2

Answer

Only 3

Answer

Only 1 and 3

Question 23

Consider the following statements regarding the Independent Directors Databank and the online proficiency self-assessment test administered by the IICA:
1. An individual enrolled in the databank is required to clear the online proficiency self-assessment test within a maximum period of two years from the date of their inclusion.
2. Professionals such as Chartered Accountants or Advocates who have been in practice for at least 10 years are granted an explicit statutory exemption from passing the proficiency test.
3. The Companies Act strictly sets the minimum age required to register in the databank and attempt the proficiency test at 21 years.
Which of the above statements is/are correct?

Accepted Answer

Only 1 and 2

Answer

Only 1 and 3

Answer

Only 2 and 3

Answer

1, 2, and 3

Question 24

Consider the following statements regarding the Board Evaluation process mandated under the Companies Act and SEBI LODR Regulations:
1. Independent Directors are required to hold at least one separate meeting in a financial year without the presence of non-independent directors and management.
2. The performance evaluation of an individual Independent Director must be conducted exclusively by an external, independent agency rather than the Board.
3. The Nomination and Remuneration Committee is responsible for specifying the criteria and manner for the effective evaluation of the Board and individual directors.
Which of the above statements is/are incorrect?

Accepted Answer

Only 2

Answer

Only 1

Answer

Only 3

Answer

Only 2 and 3

Question 25

Consider the following statements regarding the tenure and rotation of Secretarial Auditors under the amended Regulation 24A of SEBI (LODR), effective from April 1, 2025:
1. A Secretarial Audit firm (Partnership or LLP) registered with the ICSI can be appointed for a maximum of two consecutive terms of five years each.
2. An individual practicing Company Secretary can also be appointed as a Secretarial Auditor for up to two consecutive terms of five years each.
3. Any prior association of the Secretarial Auditor with the listed entity before March 31, 2025, is strictly counted when calculating their maximum allowed tenure under the new rules.
Which of the above statements is/are incorrect?

Accepted Answer

Only 2 and 3

Answer

Only 1 and 2

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 26

Consider the following statements regarding the transition to Indian Standards on Auditing (IndSAs) proposed by the National Financial Reporting Authority (NFRA) for 2025-2026:
1. NFRA proposed a comprehensive transition from the existing Standards on Auditing (SAs) to revised Indian Standards on Auditing (IndSAs), slated to take effect from April 1, 2026.
2. The revised framework introduces updated quality management standards, specifically SQM 1 and SQM 2, to replace the older quality control standards.
3. The transition includes enhanced responsibility requirements for audit engagements, specifically targeting complex group audit scenarios.
Which of the above statements is/are correct?

Accepted Answer

1, 2, and 3

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Question 27

Consider the following statements regarding the determination of market capitalization-based compliance requirements under SEBI (LODR) Regulations updated for 2025:
1. Market capitalization-based compliance requirements for listed entities must now be determined based on the average market capitalization of the preceding six months.
2. Prior to this amendment, compliance applicability was determined based on the market capitalization of the entity on a single specific day (March 31) of the year.
3. The regulations include a “sunset clause” of three years, dictating the timeline for the cessation of applicability of these provisions if an entity falls below the threshold.
Which of the above statements is/are correct?

Accepted Answer

1, 2, and 3

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Question 28

Consider the following statements regarding the amendments to Indian Accounting Standards (Ind AS) notified by the Ministry of Corporate Affairs, effective from April 1, 2025:
1. The amendments included enhanced disclosure requirements in Ind AS 7 specifically regarding the Statement of Cash Flows.
2. Ind AS 115 (Revenue from Contracts with Customers) was completely replaced by a newly drafted standard based exclusively on domestic Indian practices, diverging from IFRS.
3. The Accounting Standards Board issued an exposure draft for Ind AS 118 focusing on presentation and disclosure in financial statements to further converge with global standards.
Which of the above statements is/are incorrect?

Accepted Answer

Only 2

Answer

Only 1

Answer

Only 3

Answer

Only 1 and 3

Question 29

Consider the following statements regarding the Internal Audit Mechanism for Market Infrastructure Institutions (MIIs) mandated by SEBI in May 2025:
1. Market Infrastructure Institutions (MIIs) are exempt from constituting an independent internal audit mechanism due to their legal empowerment as first-line regulators.
2. SEBI mandates that MIIs must maintain the highest standards of governance and risk management to identify, assess, and mitigate risks that could impact their operations.
3. The internal audit function within an MII must report directly to the executive commercial management rather than the Audit Committee to ensure rapid operational adjustments.
Which of the above statements is/are incorrect?

Accepted Answer

Only 1 and 3

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

1, 2, and 3

Question 30

Consider the following statements regarding the Corporate Laws (Amendment) Bill, 2026 introduced in the Lok Sabha:
1. The Bill seeks to amend key provisions of both the Limited Liability Partnership (LLP) Act, 2008 and the Companies Act, 2013.
2. The proposed amendments were finalized after fully incorporating the recommendations of the Company Law Committee (CLC) and undergoing public consultation.
3. Opposition to the Bill highlighted concerns over “excessive delegation,” arguing that core policy matters like audit obligations were left to subordinate legislation rather than defined in the main text.
Which of the above statements is/are correct?

Accepted Answer

1, 2, and 3

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Question 31

Consider the following statements regarding the scale-based threshold proposals for material Related Party Transactions (RPTs) under SEBI guidelines for late 2025:
1. SEBI proposed shifting from a flat absolute threshold for material RPTs to a scale-based mechanism linked directly to the annual consolidated turnover of the listed entity.
2. Under the scale-based system, a listed entity with a turnover exceeding Rupees 40,000 Crore has an absolute upper ceiling of Rupees 5,000 Crore for determining a material RPT.
3. This scale-based threshold was introduced to aggressively increase the volume of RPTs classified as material, ensuring that shareholders must vote on every minor subsidiary transaction in mega-corporations.
Which of the above statements is/are incorrect?

Accepted Answer

Only 3

Answer

Only 1

Answer

Only 2

Answer

Only 1 and 2

Question 32

Consider the following statements regarding the Strategic Action Plan (2025-2029) issued by the Internal Audit Standards Board of the ICAI:
1. The plan actively promotes the integration of Artificial Intelligence (AI) and data analytics in internal auditing and financial decision-making.
2. A core focus of the first year (2025-2026) is revising existing Internal Audit Standards and issuing new sector-specific guidance for domains such as BFSI and PSUs.
3. The plan outlines a strategy to work with policymakers to formally mandate internal audit functions for corporate governance across broader sectors.
Which of the above statements is/are correct?

Accepted Answer

1, 2, and 3

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Question 33

Consider the following statements regarding the adoption of the International Standard on Sustainability Assurance (ISSA) 5000 in India:
1. The ICAI adopted the principles of ISSA 5000 as the overarching standard for assurance engagements on sustainability and ESG reports.
2. A reasonable assurance engagement under this standard is immediately mandatory for all listed entities in India from the financial year 2025-2026.
3. The standard provides a comprehensive framework that covers both limited assurance and reasonable assurance engagements.
Which of the above statements is/are incorrect?

Accepted Answer

Only 2

Answer

Only 1

Answer

Only 3

Answer

Only 1 and 3

Question 34

Consider the following statements regarding the guidelines for the use of Artificial Intelligence (AI) by statutory auditors issued in late 2025:
1. Audit firms are required to maintain a formal register of all approved AI and machine learning tools utilized in their statutory audit engagements.
2. Inputting sensitive, unredacted client financial data into public, open-source Large Language Models (LLMs) constitutes a breach of professional confidentiality.
3. Auditors are strictly prohibited from using generative AI to draft final audit opinions without substantial, documented human review and professional skepticism.
Which of the above statements is/are correct?

Accepted Answer

1, 2, and 3

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Question 35

Consider the following statements regarding the initiation of Forensic Audits for classifying Wilful Defaulters under the 2026 RBI Master Directions:
1. Banks are generally required to initiate a forensic audit before classifying a borrower with an outstanding balance of Rupees 50 Crore or more as a wilful defaulter.
2. A forensic audit to determine fund diversion or siphoning must be completed within 6 months of the account being classified as a Non-Performing Asset (NPA).
3. The forensic auditor appointed for this investigation is permitted to be the same firm that currently conducts the concurrent audit of the lending bank branch.
Which of the above statements is/are incorrect?

Accepted Answer

Only 3

Answer

Only 1

Answer

Only 2

Answer

Only 1 and 2

Question 36

Consider the following statements regarding the requirement of Women Directors on corporate boards under SEBI LODR Regulations for 2025:
1. The top 1000 listed entities by market capitalization are mandated to have at least one independent woman director on their Board of Directors.
2. Any casual vacancy of an independent woman director must be filled by the Board not later than the next board meeting or three months from the date of such vacancy, whichever is later.
3. The specific mandate for an independent woman director does not automatically extend to all unlisted private limited companies under the Companies Act.
Which of the above statements is/are correct?

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 37

Consider the following statements regarding the Omnibus Approval of Related Party Transactions (RPTs) by the Audit Committee:
1. The Audit Committee can grant an omnibus approval for repetitive RPTs, which shall be valid for a period not exceeding one financial year.
2. The maximum value of a single transaction granted under an omnibus approval cannot exceed Rupees 1 Crore under any circumstances.
3. Omnibus approval cannot be granted for transactions in respect of selling or disposing of the undertaking of the company.
Which of the above statements is/are incorrect?

Answer

Only 1

Answer

Only 2

Answer

Only 3

Answer

Only 1 and 3

Question 38

Consider the following statements regarding the auditor’s responsibilities relating to Going Concern under the revised IndSA 570 framework:
1. The auditor must explicitly evaluate management’s assessment of the entity’s ability to continue as a going concern for a period of at least 12 months from the date of the financial statements.
2. If the auditor concludes that a material uncertainty exists regarding the going concern assumption, they must automatically issue an adverse audit opinion regardless of disclosures.
3. If adequate disclosure about the material uncertainty is made in the financial statements, the auditor shall express an unmodified opinion and include a separate section headed “Material Uncertainty Related to Going Concern”.
Which of the above statements is/are incorrect?

Answer

Only 1

Answer

Only 2

Answer

Only 3

Answer

Only 2 and 3

Question 39

Consider the following statements regarding the communication of Key Audit Matters (KAM) in the independent auditor’s report under SA 701:
1. Communicating Key Audit Matters is a mandatory requirement in the audit reports of all listed entities.
2. A matter giving rise to a modified opinion must be described in the Basis for Qualified or Adverse Opinion section, rather than being described in the Key Audit Matters section.
3. The auditor is permitted to communicate Key Audit Matters for unlisted entities if they decide to do so voluntarily or if required by law or regulation.
Which of the above statements is/are correct?

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 40

Consider the following statements regarding the Directors’ Responsibility Statement under Section 134(5) of the Companies Act:
1. The statement must confirm that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures.
2. The requirement to declare that the directors have laid down internal financial controls to be followed by the company is applicable strictly to listed companies.
3. The directors must declare that they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Which of the above statements is/are incorrect?

Answer

Only 1

Answer

Only 2

Answer

Only 3

Answer

Only 1 and 2

Question 41

Consider the following statements regarding the comprehensive restructuring of High Value Debt Listed Entities (HVDLEs) under the SEBI (LODR) (Amendment) Regulations, 2026:
1. The threshold for identifying an entity as an HVDLE was increased from an outstanding value of Rupees 500 Crore to Rupees 1000 Crore of listed non-convertible debt securities.
2. A separate chapter (Chapter VA) was introduced exclusively for the corporate governance norms of pure debt listed entities.
3. The corporate governance provisions for HVDLEs transitioned from a “comply or explain” basis to a strict mandatory basis effective from April 1, 2025.
Which of the above statements is/are correct?

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 42

Consider the following statements regarding the revised definition of a “Small Company” under Section 2(85) of the Companies Act, effective from December 1, 2025:
1. The paid-up share capital threshold for classifying an entity as a small company was increased from Rupees 4 Crore to Rupees 10 Crore.
2. The annual turnover threshold, based on the preceding financial year, was enhanced from Rupees 40 Crore to Rupees 100 Crore.
3. A subsidiary company can avail the benefits and reduced compliance burden of a small company if it strictly meets these new financial thresholds.
Which of the above statements is/are incorrect?

Answer

Only 1

Answer

Only 2

Answer

Only 3

Answer

Only 1 and 3

Question 43

Consider the following statements regarding the Companies (Accounts) Second Amendment Rules, 2025, affecting the Board’s Report:
1. Companies are mandated to electronically file Form AOC-2, which specifically deals with the disclosure of material related party transactions.
2. The Board’s Report must transparently disclose the exact number of complaints formally registered under the Prevention of Sexual Harassment (POSH) Act during the financial year.
3. The rules mandate the inclusion of a compliance statement affirming the company’s adherence to the provisions of the Maternity Benefit Act, 1961.
Which of the above statements is/are correct?

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 44

Consider the following statements regarding the proposed Ind AS 118 (Presentation and Disclosure in Financial Statements) designed to converge with IFRS 18:
1. Ind AS 118 introduces the option of presenting the statement of profit and loss using a functional classification of expenses, in addition to the traditional classification by nature.
2. The standard strictly prohibits the inclusion and disclosure of Management-defined Performance Measures (MPMs), such as adjusted EBITDA, within the audited financial statements.
3. The primary objective of converging with IFRS 18 is to restructure the statement of profit and loss to improve the comparability of financial performance across different entities.
Which of the above statements is/are incorrect?

Answer

Only 1

Answer

Only 2

Answer

Only 3

Answer

Only 1 and 2

Question 45

Consider the following statements regarding the 2026 SEBI LODR amendments on Investor Services and Physical Securities:
1. Regulation 39(2) was amended to mandate direct credit of securities into the investor’s demat account, formally abolishing the Letter of Confirmation (LOC) mechanism.
2. SEBI established a one-year special window starting February 2026 allowing the transfer of physical securities, provided the transfer deed was executed before April 1, 2019.
3. Under the special window, physical share transfers will be approved even if the original share certificate is lost, provided an indemnity bond is submitted.
Which of the above statements is/are incorrect?

Answer

Only 1

Answer

Only 2

Answer

Only 3

Answer

Only 1 and 3

Question 46

Consider the following statements regarding the RBI guidelines for the appointment of Statutory Central Auditors (SCAs) for Commercial Banks for 2025-2026:
1. A bank with an asset size up to Rupees 5,00,000 Crore is permitted to appoint a maximum of four Statutory Central Auditors.
2. To protect independence, the bank must appoint the SCAs for a continuous period of three years, subject to the firms satisfying eligibility norms each year.
3. SCAs are permitted to undertake tax audit assignments for the same bank during their tenure, as this does not normally result in a conflict of interest under RBI norms.
Which of the above statements is/are correct?

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 47

Consider the following statements regarding the Information Systems Audit Standards (ISAS) introduced by the ICAI in February 2026:
1. The ICAI is the first professional accounting institute in India to issue a comprehensive set of native Information Systems Audit Standards.
2. The framework consists of exactly 11 distinct standards designed to strengthen the audit procedures within digital and automated ecosystems.
3. The ISAS framework completely replaces the existing Standards on Auditing (SAs) for any company that generates more than 50 percent of its revenue through e-commerce.
Which of the above statements is/are incorrect?

Answer

Only 1

Answer

Only 2

Answer

Only 3

Answer

Only 1 and 3

Question 48

Consider the following statements regarding the proposed auditing standards for “Less Complex Entities” (LCEs) finalized by the ICAI in early 2026:
1. The LCE standards are specifically tailored for small and medium enterprises that have minimal exposure to public investors and possess less complex organizational structures.
2. These standards significantly reduce disclosure requirements and simplify the audit documentation process to promote the ease of doing business.
3. The application of LCE standards does not compromise the fundamental requirement of audit quality or the application of professional skepticism by the auditor.
Which of the above statements is/are correct?

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 49

Consider the following statements regarding the Structured Digital Database (SDD) requirement under SEBI (Prohibition of Insider Trading) Regulations in 2025:
1. Every listed company must maintain an SDD internally to log the names of persons with whom Unpublished Price Sensitive Information (UPSI) is shared.
2. The database must be maintained for a minimum of eight years after the completion of the relevant transaction to which the UPSI pertains.
3. Companies are permitted to outsource the hosting and maintenance of the Structured Digital Database to a third-party cloud service provider for better security.
Which of the above statements is/are correct?

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 50

Consider the following statements regarding the Social Audit Standards (SAS) applicable to the Social Stock Exchange (SSE) framework for 2025-2026:
1. Social Audit Standards are formulated to guide Social Auditors in assessing the impact of social enterprises listed on the Social Stock Exchange.
2. A statutory financial auditor of a company is automatically qualified to act as its Social Auditor without requiring any additional certification from the National Institute of Securities Markets (NISM).
3. Social Audits must culminate in a Social Audit Report that evaluates the entity’s performance against its stated social impact goals, such as poverty alleviation or education.
Which of the above statements is/are incorrect?

Answer

Only 1

Answer

Only 2

Answer

Only 3

Answer

Only 1 and 3

Question 51

Consider the following statements regarding the NOCLAR (Non-Compliance with Laws and Regulations) provisions in the ICAI Code of Ethics:
1. NOCLAR sets out the professional responsibilities of an auditor when they encounter a suspected or actual non-compliance with laws by a client.
2. The NOCLAR provisions are currently applicable exclusively to the audits of listed entities and do not apply to the audits of unlisted private companies.
3. An auditor is required to report the non-compliance to an appropriate external authority even if it breaches the fundamental principle of client confidentiality, provided it is in the public interest.
Which of the above statements is/are correct?

Answer

Only 1 and 2

Answer

Only 1 and 3

Answer

Only 2 and 3

Answer

1, 2, and 3

Question 52

Consider the following statements regarding the rules for holding Annual General Meetings (AGMs) via Video Conferencing (VC) or Other Audio Visual Means (OAVM) in 2025:
1. Companies are permitted to hold their AGMs entirely through Video Conferencing without the requirement of a physical venue.
2. The company must strictly maintain a recorded transcript of the AGM conducted via Video Conferencing and make it available on its website.
3. Shareholders attending the AGM via Video Conferencing are not counted for the purpose of determining the quorum under Section 103 of the Companies Act.
Which of the above statements is/are incorrect?

Answer

Only 1

Answer

Only 2

Answer

Only 3

Answer

Only 1 and 3

Question 53

Consider the following statements regarding the disciplinary powers and penalty framework of the National Financial Reporting Authority (NFRA):
1. NFRA has the power to impose a monetary penalty of up to ten times the fees received for the audit on an audit firm found guilty of professional misconduct.
2. NFRA can debar an individual auditor or an audit firm from practicing as an auditor for a minimum period of six months and a maximum period of ten years.
3. Appeals against the disciplinary orders passed by NFRA must be filed directly with the Supreme Court of India.
Which of the above statements is/are correct?

Answer

Only 1 and 2

Answer

Only 1 and 3

Answer

Only 2 and 3

Answer

1, 2, and 3

Question 54

Consider the following statements regarding the clawback of managerial remuneration under Section 199 of the Companies Act, 2013:
1. A company is required to recover excess remuneration paid to a Managing Director if the company is required to restate its financial statements due to fraud or non-compliance.
2. The recovery of excess remuneration is limited only to the Managing Director currently in office and does not apply to past executives who have already resigned.
3. The clawback provision applies to any remuneration tied to profitability, including stock options and performance bonuses.
Which of the above statements is/are incorrect?

Answer

Only 1

Answer

Only 2

Answer

Only 3

Answer

Only 1 and 2

Question 55

Consider the following statements regarding the regulatory requirements when an Independent Director resigns from the board of a listed entity:
1. The listed entity must disclose the detailed reasons for the resignation to the stock exchanges within seven days of the resignation.
2. The resigning Independent Director must provide a mandatory written confirmation that there are no other material reasons for resignation other than those provided.
3. If an Independent Director resigns before completing their term, they are strictly prohibited from being appointed as an executive director in the same company or its subsidiaries for a period of one year.
Which of the above statements is/are correct?

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 56

Consider the following statements regarding the prohibition of non-audit services by a statutory auditor under Section 144 of the Companies Act:
1. A statutory auditor is strictly prohibited from providing internal audit and actuarial services to the company they are auditing.
2. The prohibition on providing non-audit services applies only to the company being audited, allowing the auditor to freely provide these services to the company’s holding and subsidiary companies.
3. Any non-audit service that is not explicitly prohibited under Section 144 can only be rendered by the auditor after obtaining prior approval from the company’s Audit Committee or the Board of Directors.
Which of the above statements is/are incorrect?

Answer

Only 1

Answer

Only 2

Answer

Only 3

Answer

Only 1 and 3

Question 57

Consider the following statements regarding the verification of market rumours by listed entities under Regulation 30(11) of SEBI (LODR) Regulations for 2025:
1. The top 250 listed entities by market capitalization are legally mandated to confirm, deny, or clarify any reported event or information appearing in mainstream media that is not general in nature.
2. The listed entity must provide this response to the stock exchanges within a maximum of 24 hours from the reporting of the rumour in the mainstream media.
3. If the rumour is confirmed by the listed entity, the material price movement caused by the rumour is entirely ignored when determining the floor price for subsequent corporate actions like open offers.
Which of the above statements is/are incorrect?

Answer

Only 1

Answer

Only 2

Answer

Only 3

Answer

Only 1 and 2

Question 58

Consider the following statements regarding the Significant Beneficial Ownership (SBO) rules under Section 90 of the Companies Act:
1. A Significant Beneficial Owner is defined as an individual who, acting alone or together with others, holds indirectly (or together with direct holdings) not less than 10 percent of the shares or voting rights in a reporting company.
2. Every reporting company is required to file a return in Form BEN-2 with the Registrar of Companies within 30 days of receiving a declaration from the SBO.
3. The SBO reporting provisions do not apply to shares of the reporting company held by the Investor Education and Protection Fund (IEPF) authority.
Which of the above statements is/are correct?

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 59

Consider the following statements regarding the auditor’s responsibilities under the revised Standard on Auditing (SA) 315 concerning the IT environment:
1. The auditor is required to obtain an understanding of the entity’s IT environment, including the specific IT applications and IT infrastructure relevant to the financial reporting process.
2. If an entity uses complex, automated IT systems for financial reporting, the auditor is permitted to completely bypass testing IT General Controls (ITGCs) as long as they perform extensive manual substantive testing.
3. The revised SA 315 mandates that the auditor evaluate the design of the entity’s risk assessment process, regardless of whether the entity is a massive conglomerate or a smaller enterprise.
Which of the above statements is/are incorrect?

Answer

Only 1

Answer

Only 2

Answer

Only 3

Answer

Only 1 and 2

Question 60

Consider the following statements regarding the reporting of whistle-blower complaints under the Companies (Auditor’s Report) Order (CARO):
1. The statutory auditor is mandated to state whether they have considered the whistle-blower complaints received during the year by the company.
2. This reporting requirement under CARO applies to all companies to which CARO is applicable, including qualifying private limited companies.
3. The auditor’s responsibility is limited to considering the complaints to assess the risk of material misstatement; they are not required to act as forensic investigators to resolve the complaints.
Which of the above statements is/are correct?

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 61

Consider the following statements regarding the “Trading Window Closure” norms for Designated Persons under the SEBI (Prohibition of Insider Trading) Regulations:
1. The trading window must be closed from the end of every quarter till 48 hours after the declaration of financial results to prevent insider trading.
2. Designated Persons are completely prohibited from exercising Employee Stock Options (ESOPs) while the trading window is closed.
3. The restrictions on trading during the window closure period also apply to the immediate relatives of the Designated Persons.
Which of the above statements is/are incorrect?

Answer

Only 1

Answer

Only 2

Answer

Only 3

Answer

Only 1 and 3

Question 62

Consider the following statements regarding the Familiarization Programme for Independent Directors under SEBI LODR Regulations:
1. Listed entities are required to familiarize Independent Directors with the company’s operations, business model, and the specific roles and responsibilities they hold.
2. The company must upload the details of the familiarization programmes, including the number of hours spent by each Independent Director, on its official website.
3. A web link to these detailed familiarization programmes must be explicitly provided in the Corporate Governance Report section of the Annual Report.
Which of the above statements is/are correct?

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Answer

1, 2, and 3

Question 63

Consider the following statements regarding the auditor’s responsibilities for Subsequent Events under Standard on Auditing (SA) 560:
1. The auditor has an active duty to perform audit procedures designed to obtain sufficient appropriate evidence that all material events occurring between the date of the financial statements and the date of the auditor’s report have been identified.
2. The auditor has an active, ongoing obligation to perform audit procedures regarding the financial statements even after the auditor’s report has been formally issued to the shareholders.
3. If, after the financial statements have been issued, a fact becomes known to the auditor that existed at the date of the auditor’s report and would have caused an amendment to the report, the auditor must discuss the matter with management.
Which of the above statements is/are incorrect?

Answer

Only 1

Answer

Only 2

Answer

Only 3

Answer

Only 2 and 3

Question 64

Consider the following statements regarding the resignation of statutory auditors from listed entities under SEBI regulations:
1. If an auditor resigns within 45 days from the end of a quarter, they must issue the limited review or audit report for that specific quarter before resigning.
2. If an auditor has signed the limited review or audit report for the first three quarters of a financial year, they must issue the final audit report for the entire financial year before resigning.
3. Upon deciding to resign, the auditor must formally report their concerns and the reasons for resignation directly to the Chairman of the Audit Committee.
Which of the above statements is/are correct?

Answer

Only 1 and 2

Answer

Only 2 and 3

Answer

Only 1 and 3

Answer

1, 2, and 3

Section / Topic	Question Range	Difficulty Level
SEBI LODR & Corporate Governance Frameworks	Q1 – Q40	Medium
Statutory Audit, NFRA & ICAI Standards	Q41 – Q75	Hard
Specialized Audits, Tech & ESG Disclosures	Q76 – Q100	Medium to Hard

Feature / Metric	Auditing & Corporate Governance	Financial Accounting
Core Definition	Independent verification & ethical oversight of corporate operations.	Recording, summarizing, and reporting daily financial transactions.
Primary Use Case	Ensuring compliance, transparency, and shareholder protection.	Preparing balance sheets, P&L statements, and cash flows.
Exam Importance	Heavy on theoretical provisions, limits, timelines, and penalties.	Heavy on numerical calculations, formats, and journal entries.

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