All Free Accounting MCQs with Answers
Every Accounting question in the bank, across all chapters, each with the correct answer and a written explanation. Free and unlimited, with no account needed.
1,971 questions · page 5 of 99
- A. Occurrence of recorded sales
- B. Completeness of recorded sales
- C. Rights over trade receivables
- D. Valuation of trade receivables
Explanation: Tracing starts with source documents and follows them into the accounting records, so it tests whether transactions have been completely…
Correct answer: Completeness of recorded sales- A. Preparing the annual financial statements
- B. Expressing an independent external audit opinion
- C. Evaluating risk management and internal controls
- D. Determining the organisation’s final tax liability
Explanation: Internal audit evaluates and helps improve risk management, governance, and internal controls.
Correct answer: Evaluating risk management and internal controls- A. Management’s commitment to integrity and ethical values
- B. A schedule comparing actual and budgeted expenses
- C. A procedure for identifying new business risks
- D. A report listing exceptions in reconciliations
Explanation: The control environment reflects management’s attitude, ethical values, governance, and commitment to competent personnel.
Correct answer: Management’s commitment to integrity and ethical values- A. A test of controls
- B. A substantive procedure
- C. An engagement acceptance procedure
- D. A subsequent events procedure
Explanation: The recalculation directly tests whether a recorded financial amount is accurate, making it a substantive procedure.
Correct answer: A substantive procedure- A. Accepting management explanations without further work
- B. Maintaining a questioning mind when evaluating evidence
- C. Assuming that every management estimate is fraudulent
- D. Relying only on evidence obtained from outside parties
Explanation: Professional scepticism means maintaining a questioning mind and critically assessing audit evidence.
Correct answer: Maintaining a questioning mind when evaluating evidence- A. The audited company’s shareholders
- B. The company’s chief financial officer
- C. The independent auditor
- D. The company’s external legal adviser
Explanation: Audit working papers are normally the property of the auditor because they document the auditor’s procedures, evidence, and conclusions.
Correct answer: The independent auditor- A. Adjust the factory balance at the reporting date
- B. Disclose the event if it is material
- C. Ignore the event in every circumstance
- D. Recognise the loss in the earlier period
Explanation: A fire caused by conditions arising after the reporting date is generally a non-adjusting subsequent event.
Correct answer: Disclose the event if it is material- A. The date on which the entity prepared its ledger
- B. The date on which the auditor completed necessary audit procedures
- C. The date on which shareholders approved the accounts
- D. The date on which the accounting period began
Explanation: The auditor’s report date normally indicates that the auditor has completed the procedures required up to that date and has obtained…
Correct answer: The date on which the auditor completed necessary audit procedures- A. The entity’s management and those charged with governance
- B. The external auditor alone
- C. The entity’s tax consultant alone
- D. The shareholders acting individually
Explanation: Management and those charged with governance are primarily responsible for designing controls and managing the risk of fraud.
Correct answer: The entity’s management and those charged with governance- A. The quantity of audit evidence obtained
- B. The legal ownership of audit evidence
- C. The source location of audit evidence
- D. The wording used in audit evidence
Explanation: Sufficiency is the measure of the quantity of audit evidence needed to support an audit conclusion.
Correct answer: The quantity of audit evidence obtained- A. The quantity of evidence collected
- B. The relevance and reliability of evidence
- C. The cost of obtaining the evidence
- D. The time spent examining the evidence
Explanation: Appropriateness concerns the quality of audit evidence, especially its relevance and reliability.
Correct answer: The relevance and reliability of evidence- A. To prepare the client’s financial statements
- B. To determine the audit’s scope, timing, and direction
- C. To replace the client’s internal control system
- D. To guarantee that all fraud will be detected
Explanation: An audit plan sets the overall scope, timing, and direction of the audit.
Correct answer: To determine the audit’s scope, timing, and direction- A. Inspecting board meeting minutes
- B. Recalculating depreciation using asset records
- C. Confirming balances with trade creditors
- D. Observing the physical inventory count
Explanation: Recalculation independently checks the mathematical accuracy of an amount recorded in the accounts.
Correct answer: Recalculating depreciation using asset records- A. To list the detailed audit procedures to be performed
- B. To record the company’s accounting policies
- C. To summarise the auditor’s final opinion
- D. To approve the client’s annual budget
Explanation: An audit programme contains the detailed procedures and tests planned for particular audit areas.
Correct answer: To list the detailed audit procedures to be performed- A. Ignore it if the accounts balance
- B. Communicate it to those charged with governance
- C. Transfer responsibility to the cashier
- D. Remove the related transaction from the accounts
Explanation: Significant control deficiencies should be communicated to management or those charged with governance, depending on their nature and…
Correct answer: Communicate it to those charged with governance- A. Fraud affects only cash transactions
- B. Error always causes a material misstatement
- C. Fraud involves an intentional act or omission
- D. Error is committed only by senior management
Explanation: Fraud involves deliberate deception or concealment, while error results from an unintentional mistake or omission.
Correct answer: Fraud involves an intentional act or omission- A. Reducing audit risk through a responsive procedure
- B. Preparing the financial statements for management
- C. Testing the auditor’s independence
- D. Replacing the entity’s control environment
Explanation: The auditor responds to higher assessed risk by designing more effective or extensive substantive procedures.
Correct answer: Reducing audit risk through a responsive procedure- A. The auditor’s personal investment plan
- B. Recommendations concerning control weaknesses
- C. A guarantee of future business profits
- D. The approved schedule of employee holidays
Explanation: A management letter commonly communicates control weaknesses and practical recommendations for improvement.
Correct answer: Recommendations concerning control weaknesses- A. It always changes an unmodified opinion to an adverse opinion
- B. It highlights a matter properly presented in the financial statements
- C. It replaces the auditor’s basis for opinion paragraph
- D. It is used whenever the auditor lacks independence
Explanation: An emphasis of matter paragraph draws attention to an important matter already properly presented or disclosed in the financial…
Correct answer: It highlights a matter properly presented in the financial statements- A. The count is conducted according to stated procedures
- B. All purchases were paid before year-end
- C. Every supplier balance is correctly confirmed
- D. The entity has recorded every sales invoice
Explanation: Attending a physical inventory count allows the auditor to observe the counting process and assess compliance with management’s…
Correct answer: The count is conducted according to stated procedures