All Free Accounting MCQs with Answers

• A. It helps the auditor to study relationship among elements of financial information
• B. Relationship among data exist and continue in the absence of known condition to the contrary
• C. Analytical procedures will not be able to detect unusual relationships
• D. None of the above. Compare Credit Cards

Explanation: Analytical procedures rely on the expectation that meaningful relationships among data generally continue unless a known change or…

• A. It helps to study relationship among balance sheet accounts
• B. It helps to discover material misstatements in the financial statements
• C. It helps to identify possible oversights
• D. It helps to accumulate evidence supporting the validity of a specific account balance

Explanation: At the substantive stage, analytical procedures provide audit evidence about whether a particular account balance appears reasonable by…

• A. helps to determine the nature, timing and extent of other audit procedures
• B. directs attention to potential risk areas
• C. indicates important aspects of business
• D. All of the aboveHire An Accountant

Explanation: Planning-stage analytical procedures help the auditor understand the business, highlight unusual or risky areas, and decide the nature…

• A. Prior year's errors
• B. The auditor's remuneration
• C. Adjusted interim financial statements
• D. Prior year's financial statements

Explanation: Materiality is based on the likely effect of misstatements on users of the financial statements, using information such as prior errors…

• A. Amount of known misstatement is documented in working papers
• B. Estimates of the total likely misstatement is less than materiality level
• C. Estimate of the total likely misstatement is more than materially level
• D. Estimates of the total likely misstatement cannot be made

Explanation: An unqualified opinion is appropriate only when the aggregate estimated misstatement, including known and projected errors, is below the…

• A. Verification of assets and liabilities
• B. Vouching of income and expense accounts related to assets and liabilities
• C. Examination of adjusting and closing entries
• D. Routine checksHire An Accountant

Explanation: A balance-sheet audit focuses on verifying assets and liabilities, related income and expenses, and relevant adjusting or closing entries.

• A. It is conducted at regular interval
• B. It may be carried out on daily basis
• C. It is needed when the organization has a good internal control system
• D. It is expensive

Explanation: Continuous audit is generally used where frequent checking is needed, often because internal controls are weak or transactions are…

• A. Assets
• B. Income and expense accounts where appropriate
• C. Liabilities
• D. All of the above

Explanation: A balance-sheet audit verifies both assets and liabilities and may also examine related income and expense accounts where necessary.

• A. Complete audit
• B. Completed audit
• C. Final audit
• D. Detailed audit

Explanation: An audit in depth traces transactions and supporting records in considerable detail, so it is also called a detailed audit.

• A. Annual audit
• B. Continuous audit
• C. Detailed audit
• D. Statutory audit

Explanation: In Pakistani audit terminology, a balance-sheet audit is generally performed at the end of the accounting year and is therefore associated…

• A. Statutory audit
• B. Balance sheet audit
• C. Concurrent audit
• D. Both (A. and (B.
• E. All of the aboveHire An Accountant

Explanation: Bank audits may be statutory, cover the balance sheet, and also be conducted concurrently through regular transaction checking.

• A. A flowchart of the internal controls
• B. Organisation charts
• C. A copy of financial statements
• D. Copies of bond and debentures

Explanation: The current audit file contains information relevant to the present year's audit, including a copy of the current financial statements.

• A. The working papers may be obtained by third parties when they appear to be relevant to issues raised in litigation
• B. The safe custody of working papers is the responsibility of client, if kept at his premises
• C. The working papers must be retained by an audit firm for a period of 10 years
• D. Successor auditors may have access to working papers of the predecessor auditors. The approval of client is not required.

Explanation: Working papers belong to the auditor, but courts or other authorized third parties may obtain them when they are relevant to litigation.

• A. The assessed level of control risk
• B. The possibility of peer review
• C. The nature of auditor's report
• D. The content of management representation letter Hire An Accountant

Explanation: Control risk, the form of the auditor's report, and the possibility of peer review can materially influence audit documentation.

• A. Extracts from client's bank statements
• B. Past year's financial statements
• C. Attorney's letters
• D. Debt agreements

Explanation: The permanent file contains information of continuing relevance, such as prior financial statements, legal correspondence and long-term…

• A. To provide a basis for review of audit work
• B. To provide a basis for subsequent audits
• C. To ensure audit work is being carried out as per programme
• D. To provide a guide for advising another client on similar issues

Explanation: Working papers support review, future audits and checking whether planned procedures were performed.

• A. Management's integrity
• B. Auditor's experience and professional judgment
• C. Auditor's qualification
• D. Control risk

Explanation: Experienced auditors use professional judgment to decide how much documentation is necessary for the engagement’s risks, complexity and…

• A. The auditor
• B. The client
• C. The audit assistants
• D. The auditor and his audit assistants

Explanation: The auditor has responsibility for the audit programme, while assistants may help prepare and execute its detailed procedures.

• 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 observations provide information that corroborates financial statement assertions.

• 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: Reliable evidence is more likely when it comes from effective controls and dependable sources.