The Multiple Choice Questions Blog

Internal and external auditors provide different services to companies.

For each of the following examples, select whether it is a service which would be provided by internal auditors only, by external auditors only or by either.

• Statutory audit

Select ONE answer:

1. Neither
2. Internal Auditors
3. External Auditors
4. Either

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 – External auditors are responsible for carrying out the statutory audit. Internal auditors are responsible for the monitoring of internal controls. External auditors, as part of their external audit, will not monitor internal controls but must at least ascertain the controls in place and document them. They may then choose to test them for purposes of reliance.
4. Not correct

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Alex Manufacturing is a global group of engineering businesses.

The parent company, Alex Manufacturing plc, employs an internal audit function which carries out audits and investigations on the individual businesses in the group.

Which ONE of the following could the internal audit function carry out and still operate effectively?

Select ONE answer:

1. Special investigation into the canteen food of the Stafford Manufacturing unit, where the PLC group directors suspect the food is not up to group quality levels
2. Testing of the internal controls at the Glasgow Manufacturing unit as part of a routine internal audit cycle
3. Secondment to the accounts department of the Derby Manufacturing unit to cover the maternity leave of the financial controller
4. Identification of risks at the proposed Johannesburg sales and manufacturing unit, which is due to open in twelve months’ time

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 – Secondment to the financial controller role and being involved in the identification of risks should not be carried out by the internal auditor. This is because these roles are operational and would compromise the ability of internal audit to provide a monitoring role. The risk assessment should be undertaken by the risk assessment committee or whoever is responsible for risk assessment.
3. Not correct
4. Not correct

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

Alex Manufacturing is a global group of engineering businesses.

The parent company, Alex Manufacturing plc, employs an internal audit function which carries out audits and investigations on the individual businesses in the group.

Which ONE of the following could the internal audit function carry out and still operate effectively?

Select ONE answer:

1. Special investigation into the profits of the Stafford Manufacturing unit, where the PLC group directors suspect a fraud may have been carried out
2. Testing the canteen food at the Glasgow Manufacturing unit as part of a routine internal audit cycle
3. Secondment to the accounts department of the Derby Manufacturing unit to cover the maternity leave of the financial controller
4. Identification of risks at the proposed Johannesburg sales and manufacturing unit, which is due to open in twelve months’ time

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 – Secondment to the financial controller role and being involved in the identification of risks should not be carried out by the internal auditor. This is because these roles are operational and would compromise the ability of the internal audit to provide a monitoring role. The risk assessment should be undertaken by the risk assessment committee or whoever is responsible for risk assessment.
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 concerning internal audit, select whether it is true, false, of no importance and / or of no material importance.

• Internal audit focuses on the efficiency and effectiveness of a company’s operations by testing its internal controls. They do not carry out substantive testing.

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 – Internal audit uses both testing of internal controls and substantive testing, as appropriate to the task in hand.

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

For the following statement below concerning internal audit, select whether it is true, false, of no importance and / or of no material importance.

• The UK Corporate Governance Code requires all listed companies in the UK to have an internal audit function.

Select ONE answer:

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

1. Not correct
2. Not correct
3. Correct – The UK Corporate Governance Code does not require listed companies to have an internal audit function per se but requires companies to consider the need for one annually, to maintain an adequate system of internal controls.
4. Not correct

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