Accounting Multiple Choice Question – 10 October 2025

Which ONE of the following statements correctly describes the principal purpose of an external audit of a limited company?

Select ONE answer:

1. To help in the preparation of the company’s financial statements
2. To prevent fraud within the company
3. To examine and express an opinion on the company’s financial statements
4. To help the directors improve the company’s financial reporting process

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 => It is management’s responsibility to prevent fraud within a company (option 2). There are auditor independence issues regarding external auditors’ involvement in the preparation of financial statements and in assisting management to improve reporting processes (options 1 and 2). It should therefore be apparent that option (3) is the correct one
4. Not correct

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