The Multiple Choice Questions Blog

The scope and objectives of the internal audit function vary widely and depend on the size and structure of the entity and the requirements of its management.

Which ONE of the following functions could the internal audit perform and still operate effectively?

Select ONE answer:

1. Authorisation of unusual transactions
2. Development of internal control systems
3. Examination of financial and operating information
4. Review of the company’s compliance with website design standards

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 – Authorising unusual transactions and developing internal control systems are part of the accounting function in an entity. For the internal audit function to operate objectively and independently, it should not be involved in these activities.
4. Not correct

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For the following statement below about internal controls over payroll, select whether they are true, false, of no importance and / or of no material importance.

• Reconciling this month’s payroll with the previous month’s payroll, without performing any other procedures, ensures that starters and leavers are accounted for correctly.

Select ONE answer:

1. True
2. False
3. Of no importance
4. Of no material importance

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 – Performing this reconciliation would flag up changes from the previous month’s payroll, which would then need to be verified.
3. Not correct
4. Not correct

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

For the following statement below about internal controls over payroll, select whether they are true, false, of no importance and/or of no material importance.

• Agreeing gross earnings and total tax deducted with taxation returns helps to ensure that employees are being paid the correct amounts.

Select ONE answer:

1. False
2. True
3. Of no importance
4. Of no material importance

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 – This helps ensure that the correct amounts are paid to HMRC, rather than employees.Not correct
2. Not correct
3. Not correct
4. Not correct

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

For the following statement below about internal controls over payroll, select whether they are true, false, of no importance and/or of no material importance.

• Approving the wages and salary summary for payment helps to ensure that there is adequate segregation of duties.

Select ONE answer:

1. True
2. Of no importance
3. Of no material importance
4. False

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 – This is an authorisation control, rather than segregation of duties specifically.

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At Alex Manufacturing Ltd, potential employees are interviewed by the production manager, Arthur, who then forwards successful candidates’ details, the job title and the rate of pay to the company’s personnel manager, Karen,  for an employment offer to be made.

Which ONE of the following controls could be most effective at ensuring that wages are paid accurately?

Select ONE answer:

1. Payments should be authorised by a director before being submitted for processing
2. Employees should NOT be interviewed by the production manager, Arthur, and another responsible personnel official, i.e. Karen
3. Hours paid should be reconciled to timesheets
4. Reconciliations should be performed between the payroll and the company’s cash records

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 – The key problem here is a lack of segregation of duties: Arthur, the production manager may be tempted to introduce non-existent employees into the system, leading to the misappropriation of company funds by way of wages payments for non-existent employees. Controls to curb this would therefore seek to verify that the employees being paid do in fact exist and have done work for the company. Authorisation by a director would not help because the director would not know whether the employees were legitimate. Reconciliation of payroll to cash records would not control the amounts included on the payroll in the first place.
4. Not correct

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