The Multiple Choice Questions Blog

Lucy, an audit junior, has been asked to test the completeness of certain items in the income statement.

She has carried out the following tests.

For each test carried out, select whether that test proves the assertion of completeness, does NOT prove the assertion of completeness, it depends on the size of the business, or needs to be referred to a senior colleague for approval.

• Tracing a sample of goods received notes to payables ledger and financial statements

Select ONE answer:

1. Proves completeness
2. Does not prove completeness
3. Consult a senior colleague
4. Depends on the size of the business

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 – Tracing from GRNs to the payables ledger and financial statements proves the completeness of purchases/payables (i.e., that all goods received have been recorded as purchase/payables).
2. Not correct
3. Not correct
4. Not correct

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

Lucy, an audit junior, has been asked to test the completeness of certain items in the income statement.

She has carried out the following tests.

For each test carried out, select whether that test proves the assertion of completeness, does NOT prove the assertion of completeness, it depends on the size of the business, or needs to be referred to a senior colleague for approval.

• Analytical procedures on revenue figures, budget v actual and actual current year v actual previous year

Select ONE answer:

1. Consult a senior colleague
2. Depends on the size of the business
3. Does not prove completeness
4. Proves completeness

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 – Analytical procedures are useful for detecting incomplete figures (i.e., the auditor can calculate what figure he expects and then compare the actual to it).

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

Lucy, an audit senior, has obtained a list of items which make up the cash and cash equivalents balance (£3,556) in the financial statements of Alex Manufacturing Ltd.

Materiality has been set at £4,000.

For the item below, select whether Lucy should test or should NOT test the item, or whether they should consult a senior colleague or a junior colleague.

• Special directors’ cash account £1,294

Select ONE answer:

1. Consult a senior colleague
2. Consult a junior colleague
3. Test
4. Not Test

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 special directors’ cash account should be tested whatever its monetary value. Strict materiality thresholds do not apply to directors’ emoluments which need to be disclosed whatever their amount. In any case the auditor needs to ascertain what this balance represents.
4. Not correct

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

Lucy, an audit senior, has obtained a list of items which make up the cash and cash equivalents balance (£3,556) in the financial statements of Alex Manufacturing Ltd.

Materiality has been set at £4,000.

For the item below, select whether Lucy should test or should NOT test the item, or whether they should consult a senior colleague or a junior colleague.

• Petty cash float £750

Select ONE answer:

1. Test
2. Not Test
3. Consult a senior colleague
4. Consult a junior colleague

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 – The petty cash float is not material and hence need not be tested.
3. Not correct
4. Not correct

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

Lucy, an audit senior, has obtained a list of items which make up the cash and cash equivalents balance (£3,556) in the financial statements of Alex Manufacturing Ltd.

Materiality has been set at £4,000.

For the item below, select whether Lucy should test or should NOT test the item, or whether they should consult a senior colleague or a junior colleague.

• Current account balance (overdrawn) £5,600

Select ONE answer:

1. Test
2. Not Test
3. Consult a senior colleague
4. Consult a junior colleague

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 – The current account balance should be tested as it is over the materiality threshold.
2. Not correct
3. Not correct
4. Not correct

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