All Free Accounting MCQs with Answers

• A. the shareholders in a general meeting
• B. the shareholders in the first annual General meeting
• C. the board of directors
• D. the Central GovernmentHire An Accountant

Explanation: The first auditor is appointed by the directors, but removal before the end of the term requires action by the shareholders in a general…

• A. Board meeting
• B. extraordinary general meeting
• C. General meeting
• D. annual general meeting

Explanation: A resignation creates a casual vacancy that must be filled by the company in a general meeting, unlike some other casual vacancies that…

• A. a general meeting
• B. first annual general meeting
• C. statutory meeting
• D. annual general meetingCompare Business Loans

Explanation: If the directors fail to appoint the first auditor within the prescribed period, the shareholders appoint the auditor by resolution at a…

• A. the conclusion of statutory meeting
• B. the conclusion of first annual general meeting
• C. the conclusion of next annual general meeting
• D. the date of removal

Explanation: The first auditor holds office from appointment until the conclusion of the company’s first annual general meeting, when the shareholders…

• A. With in one month of completion of capital subscription state of the company
• B. With in one month of the promotion of the company
• C. With in one month of the commencement of the business of the company
• D. With in one month of incorporation of the company Get Executive Coaching

Explanation: Under company law, the directors must appoint the first auditor within 30 days of the company’s incorporation.

• A. Directors of the company
• B. Members of the company
• C. The Central Government
• D. All of the above

Explanation: For a limited company, the statutory auditor is generally appointed by the members at the annual general meeting.

• A. The reliability of audit evidence and its relevance in meeting the audit objective
• B. The objectivity and integrity of the auditor
• C. The quantity of audit evidence
• D. The independence of the source of evidence

Explanation: Audit evidence is evaluated primarily by its relevance to the audit objective and its reliability or persuasiveness.

• A. The auditor has ascertained that the balance is materially correct when in actual fact it is not
• B. The auditor concludes the balance is materially misstated when in actual fact is not
• C. The auditor has rejected an item from sample which was not supported by documentary evidence
• D. He applies random sampling on data which is inaccurate and inconsistent

Explanation: Incorrect acceptance occurs when the auditor accepts a materially misstated balance as materially correct.

• A. The auditor concludes balance is materially correct when in actual fact it is not
• B. The auditor concludes that the balance is materially misstated when in actual fact it not
• C. The auditor has rejected an item for sample which was material
• D. None of the above

Explanation: Incorrect rejection occurs when the auditor rejects a population or balance as materially misstated even though it is actually materially…

• A. Authenticated copy of relevant minutes of meetings may be regarded as management representation
• B. It should always be in working
• C. It may be dated prior to the report date
• D. It should be addressed to the auditor

Explanation: Management representations are not necessarily required to be in writing in every circumstance, although written representations are more…

• A. Risk of over reliance
• B. Risk of incorrect rejection
• C. Risk of incorrect acceptance
• D. Both A. and C.

Explanation: Overreliance on controls and incorrect acceptance can cause the auditor to miss a material misstatement, so both threaten audit…

• A. Minutes of meetings
• B. Confirmations from debtors
• C. Information gathered by auditor through observation
• D. Worksheet supporting consolidated financial statements

Explanation: Minutes, debtor confirmations, and the auditor’s observations provide corroborative evidence from supporting sources.

• A. When it constitutes entire population
• B. When it is enough to provide a basis for giving reasonable assurance regarding truthfulness
• C. When it is objective and relevant
• D. When auditor collects and evaluates it independently

Explanation: Evidence is sufficient when its quantity and quality give the auditor a reasonable basis for assurance about the truthfulness of the…

• A. To be reliable, evidence should conclusive rather than persuasive
• B. Effective internal control system provides reliable audit evidence
• C. Evidence obtained from outside sources routed through the client
• D. All are correct. Hire An Accountant

Explanation: A sound internal control system generally produces more reliable accounting information and audit evidence.

• A. randomly
• B. disproportionately
• C. directly
• D. inversely

Explanation: When assessed control risk rises, the auditor generally increases the nature, timing, or extent of substantive procedures; when control…

• A. may be eliminated for an account balance under certain conditions
• B. are designed to discover significant subsequent events
• C. will increase proportionately when the auditor decreases the assessed level of control risk
• D. may be test of transactions, test of balance and analytical procedures

Explanation: Substantive procedures include tests of transactions, tests of account balances, and substantive analytical procedures.

• A. Bank statements obtained from the client
• B. Documents obtained by auditor from third parties directly.
• C. Carbon copies of sales invoices inspected by the auditor
• D. Computations made by the auditor

Explanation: Carbon copies of sales invoices are internally generated documents and therefore provide weaker evidence than direct third-party documents…

• A. To help to corroborate the conclusions drawn from individual components of financial statements
• B. To reduce specific detection risk
• C. To direct attention to potential risk areas
• D. To satisfy doubts when questions arise about a client's ability to continue

Explanation: At the overall review stage, analytical procedures help the auditor assess whether the conclusions from individual audit areas are…

• A. Tracing of purchases recurred in the purchase book to purchase invoices.
• B. Comparing aggregate wages paid to number of employees
• C. Comparing the actual costs with standard costs
• D. All of them are analytical procedure

Explanation: Tracing purchases from the purchase book to invoices is a test of details that verifies recorded transactions, not an analytical…

• A. Substantive tests designed to assess control risk
• B. Substantive tests designed to evaluate the validity of management's representation letter
• C. Substantive tests designed to study relationships between financial and non­financial
• D. All of the above

Explanation: Analytical procedures evaluate plausible relationships and trends between financial and non-financial data, such as wages compared with…