The Multiple Choice Questions Blog

For the procedure below, select the option that best describes the auditor’s test as performed.

• Reviewing the payments made to suppliers after the year end

Select ONE answer:

1. Testing primarily for completeness of payables
2. Testing primarily for completeness of accruals
3. Testing primarily for the existence of accruals
4. Not a relevant procedure for payables

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 – Reviewing post year-end supplier payments is a test not often conducted – all it could really tell the auditor is whether the entity has the cash to pay its suppliers. This procedure is not to be confused with post year-end receipts from receivables, which is an important test of debt recoverability.

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For the procedure below, select the option that best describes the auditor’s test as performed.

• Reviewing post year-end invoices for amounts which relate to the reporting period

Select ONE answer:

1. Not a relevant procedure for payables
2. Testing primarily for completeness of payables
3. Testing primarily for completeness of accruals
4. Testing primarily for the existence of accruals

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 – Reviewing post year-end invoices begins with the invoices and traces them back to the accounting system. This is an attempt to find expenses which have been omitted from the system.
4. Not correct

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Which ONE of the following procedures would provide the most reliable source of evidence where a company receives an invoice after the year-end, which relates to a period that straddles the year-end?

Select ONE answer:

1. Confirming the purchase amount to a supplier statement at the year-end
2. Recalculating the portion of the invoice amount which relates to the reporting period
3. Vouching the payment of the invoice
4. Testing internal controls over accruals

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 – A supplier statement would not include this invoice, as it was dated after the year end. Vouching the payment would not help to determine whether the expense and the payable were included correctly. Testing internal controls would provide evidence over accruals in general, but would not be relevant to this invoice specifically. Only by recalculating the prorating of the invoice can the auditor be confident that the correct amount has been included.
3. Not correct
4. Not correct

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To gather sufficient and appropriate evidence, the auditor may use external confirmation requests.

For the following statement regarding external confirmation requests, select whether it is of no relevance, depends on the type of business, or is true or false.

• A positive confirmation request ordinarily provides more reliable audit evidence than a negative confirmation request.

Select ONE answer:

1. True
2. No relevance
3. Depends on the type of business
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 1

1. Correct – A positive confirmation is more reliable than a negative confirmation as in the first case, a response is always sought.
2. Not correct
3. Not correct
4. Not correct

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

To gather sufficient and appropriate evidence, the auditor may use external confirmation requests.

For the following statement regarding external confirmation requests, select whether it is of no relevance, depends on the type of business, or is true or false.

• A sample of confirmation requests drawn from the client’s list of balances is more appropriate for receivables than for payables.

Select ONE answer:

1. No relevance
2. Depends on the type of business
3. False
4. True

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 – A sample taken from a list of receivables is more effective than for payables, as in this way testing the balance for overstatement is carried out directly. For payables, the auditor’s key concern is that of understatement and testing a sample from the payables listed will not test understatement.

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