Accounting Multiple Choice Question – 1 July 2026

For the procedure below, select whether the auditor will be testing primarily for an overstatement or primarily for an understatement.

• The auditor calculates for himself the warranty provision and compares their figure to the balance stated in the statement of financial position

Select ONE answer:

1. Primarily for the overstatement of provisions
2. Primarily for the understatement of provisions
3. Primarily for the overstatement of warranty provision
4. Primarily for the understatement of warranty provision

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 auditor’s primary concern when testing assets is that they may be overstated, whereas the concern with liabilities is that they may be understated. Performing the calculation on the warranty provision and then comparing that figure with the balance stated, is testing a liability and therefore testing for understatement.

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