Day: September 30, 2025

Accounting Multiple Choice Question – 30 September 2025

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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In each of the following cases, select whether inherent risk is higher or lower than normal.

Case 1 – The company has recently listed on the local stock exchange with high profit expectations from analysts.

Case 2 – Inventory is the largest balance on the statement of financial position.

Case 3 – The company operates in a slow-moving, stable industry.

Select ONE answer:

  1. Case 1 – Lower and Case 2 – Lower and Case 3 – Lower
  2. Case 1 – Higher and Case 2 – Higher and Case 3 – Lower
  3. Case 1 – Higher and Case 2 – Higher and Case 3 – Higher
  4. Case 1 – Lower and Case 2 – Higher and Case 3 – Higher

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 == > With a recent listing on the stock exchange and high profit expectations, inherent risk is higher than normal as accounts are more susceptible to material fraud and error. Inventory is by its nature more inherently risky as it is susceptible to theft, omission and misstatement. The fact that the company operates in a slow-moving, stable industry, decreases the susceptibility of the financial statements to material fraud and error.
  3. Not correct
  4. Not correct

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