The Multiple Choice Questions Blog

In accordance with ISAs 315 and 520, select whether analytical procedures are not allowed, for PLCs only, compulsory or optional in each of the following circumstances.

• At the risk assessment stage of the audit

Select ONE answer:

1. not allowed
2. for PLCs only
3. compulsory
4. optional

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 – In accordance with ISA 315, analytical procedures must be performed at the risk assessment stage of an audit. In line with ISA 520, they must also be applied at the overall review stage of the audit and may additionally be used as substantive procedures.
4. Not correct

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All methods of obtaining audit/assurance evidence have deficiencies.

An example of this is listed below.

For the deficiency, select the method of obtaining evidence which is most likely to result in that deficiency.

• A balance which is overstated may be agreed because it favours the respondent

Select ONE answer:

1. Analytical review
2. Direct confirmation of a payables balance
3. Direct confirmation of a receivables balance
4. Observation of a procedure

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 respondent will agree to an overstated balance if that is direct confirmation in respect of a payables balance (he would disagree if the amount he owed – ie, a receivables balance – were overstated).
3. Not correct
4. Not correct

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All methods of obtaining audit/assurance evidence have deficiencies.

An example of this is listed below.

For the deficiency, select the method of obtaining evidence which is most likely to result in that deficiency.

• Limited by the underlying accounting system

Select ONE answer:

1. Analytical review
2. Direct confirmation of a receivables balance
3. Direct confirmation of a payables balance
4. Observation of a procedure

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 usefulness of analytical review is limited by the underlying accounting system which generates the balances under review.
2. Not correct
3. Not correct
4. Not correct

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

All methods of obtaining audit/assurance evidence have deficiencies.

An example of this is listed below.

For the deficiency, select the method of obtaining evidence which is most likely to result in that deficiency.

• Limited to the point in time that it takes place

Select ONE answer:

1. Direct confirmation of a receivables balance
2. Direct confirmation of a payables balance
3. Analytical review
4. Observation of a procedure

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 – The weakness of observation of a procedure is that the conclusion drawn as a result only applies to the system at the time the observation took place – hence it is limited to the point in time it takes place.

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For the following piece of evidence, select whether it is more reliable, less reliable, no difference, or it depends on the situation than the piece of evidence it is paired with.

• A balance shown on a third-party bank statement is more reliable/less reliable than a business’s own balance generated from the Cashbook.

Select ONE answer:

1. Less reliable
2. No difference
3. More reliable
4. It depends on the situation

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 – A bank statement is more reliable than a cash book as it is generated by a third party.
4. Not correct

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