The Multiple Choice Questions Blog

The following process describes aspects of the purchase system in operation at Alex plc:

For the process, select whether it represents a significant strength, a significant deficiency, a minor impact or no impact on the system.

• The company buyer orders new inventory over the telephone, initiates orders herself, and maintains a record of telephone orders.

Select ONE answer:

1. a significant deficiency
2. a minor impact
3. no impact
4. a significant strength

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – Deficiency – although a record of orders is kept, there is a lack of segregation of duties as the buyer both places and authorises the order. A director should authorise purchases (particularly those above a certain cost limit) rather than the buyer.
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Which ONE of the following is not a control activity relating to the purchase system?

Select ONE answer:

1. All orders are authorised by a senior staff member
2. Blank order forms are kept in a secure location with restricted access
3. Order forms are sequentially pre-numbered
4. All goods and services received are accurately recorded

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct – Statement 4 is not a control activity, it is a control objective relating to the purchases system.

This work is licensed under a Creative Commons Attribution 4.0 International License.

Tick, Bash and Co are the auditors of Alex Manufacturing Ltd.

They have identified the following deficiency within Alex Manufacturing Ltd’s accounting system.

For the stated deficiency, select the most likely consequence which might arise because of this deficiency.

• Purchase ledger clerks are permitted to amend standing data on the payables master file

Select ONE answer:

1. Prompt payment discounts were not obtained
2. Purchase of inferior goods
3. Payment to fictitious suppliers
4. Suppliers become unhappy with Alex Manufacturing Ltd

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct – By having access to the payables master file, purchase ledger clerks are in a position to create fictitious suppliers and so then enable payments to them.
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Tick, Bash and Co are the auditors of Alex Manufacturing Ltd.

They have identified the following deficiency within Alex Manufacturing Ltd’s accounting system.

For the stated deficiency, select the most likely consequence which might arise because of this deficiency.

• Purchase of goods from unauthorised suppliers

Select ONE answer:

1. Prompt payment discounts were not obtained
2. Purchase of inferior goods
3. Payment to fictitious suppliers
4. Suppliers become unhappy with Alex Manufacturing Ltd

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct – Purchase of goods from unauthorised suppliers is likely to lead to inferior goods being purchased.
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Which ONE of the following deficiencies identified in the purchase system of Alex Manufacturing Ltd could result in a misstatement of liabilities?

Select ONE answer:

1. Purchase invoices are NOT matched with goods received notes
2. The buying department does not always use authorised suppliers
3. Alex Manufacturing Ltd does not always take advantage of prompt payment discounts
4. The payables ledger is reconciled to the payable’s ledger control account

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – Where goods received notes are not matched to purchase invoices, goods may have been received and not invoiced or where invoices not matched to goods received notes invoices could be posted without having received goods leading to a misstatement of liabilities. Options 2 and 3 are control deficiencies that do not result directly in the misstatement of liabilities.
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.