The Multiple Choice Questions Blog

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.

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

1. Not correct
2. Not correct
3. Not correct
4. Correct – Control account reconciliations help to identify posting errors. Options 1 and 2 are control deficiencies that do not result directly in the misstatement of liabilities.

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

The following is an example of a deficiency in Alex Manufacturing Ltd.’s purchase system.

For the example below, select the type of internal control activity which would improve the purchase system.

• There has been an increase in theft from the main distribution centre.

Select ONE answer:

1. Authorisation
2. Information processing
3. Physical controls
4. Performance Review

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 – Physical security measures should reduce risk of theft.
4. Not correct

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

The following is an example of a deficiency in Alex Manufacturing Ltd.’s purchase system.

For the example below, select the type of internal control activity which would improve the purchase system.

• Errors have been made in calculating discounts receivable.

Select ONE answer:

1. Authorisation
2. Information processing
3. Physical controls
4. Performance Review

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 – Checking arithmetical accuracy is an information processing control.
3. Not correct
4. Not correct

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