Accounting mcqs

The working papers may be obtained by third parties when they appear to be relevant to issues raised in litigation

The safe custody of working papers is the responsibility of client, if kept at his premises

The working papers must be retained by an audit firm for a period of 10 years

Successor auditors may have access to working papers of the predecessor auditors. The approval of client is not required.

He is responsible for detection and prevention of frauds and errors in financial statements

He should examine whether recognised accounting principle have been consistently

His opinion is no guarantee to future viability of business

The auditor should express an opinion on financial statements.

Reporting to the shareholders on the accuracy of the accounts

Supplying information and explanations to the auditor

Establishment of internal controls

Keeping proper accounting records

Worksheet supporting consolidated financial statements

Minutes of meetings

Confirmations from debtors

Information gathered by auditor through observation

Last year’s written representation letter

Analytical review

The timing of the audit

Obtaining written representations

To provide a guide for advising another client on similar issues

To ensure audit work is being carried out as per programme

To provide a basis for subsequent audits

To provide a basis for review of audit work

Haphazard selection

Systematic selection

Random selection

Pervasive selection

Suppliers’ statements

Internal audit

Analytical review

Board minutes

Carbon copies of sales invoices inspected by the auditor

Computations made by the auditor

Documents obtained by auditor from third parties directly.

Bank statements obtained from the client

The possibility of peer review

The nature of auditor’s report

The assessed level of control risk

The content of management representation letter

The independence of the source of evidence

The objectivity and integrity of the auditor

The reliability of audit evidence and its relevance in meeting the audit objective

The quantity of audit evidence

The risk that the sample does not reflect the population

The risk of the auditor reaching the wrong conclusions from testing

The risk of reliance on unsuitable audit evidence

The risk of the auditor carrying out a test the wrong way round

A matter is material if its omission or misstatement would reasonably influence the decisions of an addressee of the auditors’ report

A matter is material if the auditor and the directors both decide that further work needs to be done in the area under question

A matter is material only if it affects directors’ emoluments

A matter is material only if it changes the audit report

To detect errors or fraud

appropriate evidence

To comply with GAAP

To gather sufficient

Risk of incorrect rejection

Risk of incorrect acceptance

Risk of over reliance

Both A and C

Cost or market price whichever is lower

Cost less depreciation

Market price

cost

When it is objective and relevant

When auditor collects and evaluates it independently

When it constitutes entire population

When it is enough to provide a basis for giving reasonable assurance regarding truthfulness

Compensating errors

Technical errors

None of the above

Errors of principle

The auditor has rejected an item from sample which was not supported by documentary evidence

He applies random sampling on data which is inaccurate and inconsistent

The auditor concludes the balance is materially misstated when in actual fact is not

The auditor has ascertained that the balance is materially correct when in actual fact it is not

The design of the internal control system and the correctness of the accounting records

The design of the internal control system and the implementation of the controls

The implementation of the controls and the correctness of the accounting records

The design of the internal controls and the implementation of the control system

Copies of bond and debentures

Organisation charts

A flowchart of the internal controls

A copy of financial statements

Internal check system

Internal audit system

Continuous audit

None of these

Are responsible for ensuring that the company complies with the law

Are responsible for ensuring that the company pays its tax by the due date

Safeguard the company’s assets and manage them on behalf of the shareholders

Report suspected fraud and money laundering to the authorities

Misappropriation

Lapping

None of these

Embezzlement

Examination of adjusting and closing entries

Verification of assets and liabilities

Routine checks

Vouching of income and expense accounts related to assets and liabilities