Accounting Multiple Choice Question – 25 June 2026

The auditor of Alex Manufacturing Ltd has tested a sample of receivables and has identified a higher-than-expected number of misstatements.

Which ONE of the following steps would NOT be an appropriate response to this?

Select ONE answer:

1. Investigate the nature and cause of the misstatements
2. Consider the effect of the misstatements on other parts of the audit
3. Estimate the probable overall misstatement by extrapolating the results
4. Increase the tolerable misstatement

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 – as tolerable misstatement is related to the auditor’s judgement about materiality.
3. Not correct
4. Not correct

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