The Multiple Choice Questions Blog

The results of substantive tests in relation to trade payables at Alex Manufacturing Ltd are set out below.

The materiality threshold set for these tests was £17,000.

For each of the following results, select the action which should be taken by the audit senior.

• In a sample of 20 supplier statement reconciliations, statements were unavailable for 10 suppliers. Statements were available for 7 of these 10 suppliers in the previous year.

Select ONE answer:

1. Draw conclusion
2. Extend sample
3. Refer to a junior colleague
4. Refer to a senior 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 4

1. Not correct
2. Not correct
3. Not correct
4. Correct – Missing supplier statements (which should make the auditor suspicious) should be referred to a senior colleague, so that this is investigated and alternative procedures designed if necessary.

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

The results of substantive tests in relation to trade payables at Alex Manufacturing Ltd are set out below.

The materiality threshold set for these tests was £17,000.

For each of the following results, select the action which should be taken by the audit senior.

• Three goods inwards notes dated before the year end, relating to goods worth £16,000, were traced to purchase invoices that were included in the subsequent year and not provided for this year.

Select ONE answer:

1. Draw conclusion
2. Refer to a senior colleague
3. Extend sample
4. Refer to 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 3

1. Not correct
2. Not correct
3. Correct – For the misstatement in cut-off, the sample should be extended to measure the full extent of the cut-off misstatement.
4. Not correct

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

The results of substantive tests in relation to non-current assets at Alex Manufacturing Ltd are set out below.

The materiality threshold set for these tests was £5,000.

For each of the following results, select the action which should be taken by the audit senior.

• A building revalued to £100,000 during the year was vouched to an expert valuation carried out by a firm of chartered surveyors.

Select ONE answer:

1. Extend sample
2. Draw conclusion
3. Refer to a senior colleague
4. Refer to 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 – Vouching the revalued building to a valuer’s report is sufficient to enable a conclusion to be drawn.
3. Not correct
4. Not correct

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

The results of substantive tests in relation to non-current assets at Alex Manufacturing Ltd are set out below.

The materiality threshold set for these tests was £5,000.

For each of the following results, select the action which should be taken by the audit senior.

• A sample of three assets, valued at £2,000 in total, had been excluded from the non-current asset register and the financial statements.

Select ONE answer:

1. Extend sample
2. Draw conclusion
3. Refer to a senior colleague
4. Refer to 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 – Extending the sample of assets inspected will test if the misstatement found to date is an anomaly or represents a larger misstatement.
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 relationships/ratios are reasons why analytical procedures can NOT give strong evidence in relation to the accuracy of purchases?

Select ONE answer:

1. Purchases and payables
2. Purchases and inventories
3. Gross margin
4. Operating margin

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 – Applying analytical procedures to the operating margin which contains the effect of all expenses, not just purchases, will not provide direct evidence as to the accuracy of purchases.

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