The Multiple Choice Questions Blog

Bash and Co, the auditor of Alex Manufacturing Ltd has identified the following deficiency within that business’s
accounting system.

For the deficiency identified below, select the MOST likely consequence which might arise because of this deficiency.

• Goods inwards are not checked.

Select ONE answer:

1. False invoices could be paid
2. Accepting inferior quality goods
3. Services received are not accurately recorded
4. The Supplier Will become unhappy with Alex Manufacturing Ltd

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 – 1 is incorrect as it does not relate to the goods inwards stage of the purchase system. 3 is also erroneous, as the question refers to goods and not services.
3. Not correct
4. Not correct

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For the following example, select the type of internal control activity it represents?

• Numerical sequence checks are undertaken on goods received records.

Select ONE answer:

1. Information processing
2. Authorisation
3. Matching
4. Performance review

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 – Checking numerical sequences helps ensure completeness of records.
2. Not correct
3. Not correct
4. Not correct

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For the following example, select the type of internal control activity it represents?

– Monthly management accounts are compared to budget and differences investigated.

Select ONE answer:

1. Authorisation
2. Information processing
3. Matching
4. Performance review

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 – Analysis of actual performance against budget is performance review.

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Which ONE of the following populations should the auditor start from when testing for the completeness of reported sales of a manufacturing company?

Select ONE answer:

1. Sales receipts
2. Sales invoices
3. Goods dispatch notes
4. Sales orders

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 – Revenue is usually recognised when goods have been despatched to the customer as this is the point at which control transfers to the customer. To test for completeness of sales, auditors should therefore start from the goods despatched notes.
4. Not correct

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Which ONE of the following controls would provide the most positive assurance as to the completeness of the sales figures recorded in the financial statements of an engineering company?

Select ONE answer:

1. Segregation of duties between the preparation of goods dispatched notes and the preparation of the sales invoices
2. The use of a pre-numbered goods despatched note for every sales transaction, and internal checking for completeness of processing
3. The issue of pre-numbered sales invoices for every sales transaction and internal checking for completion of processing
4. Authorisation of all sales invoices by the sales manager before processing

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 sale should be recognised as soon as goods have been safely despatched to a customer and every despatch should be accompanied with a goods despatched note. Consequently to obtain assurance about the completeness of sales, the auditor needs to be confident that all despatch notes have been recorded in the accounting system. Checking that all sales invoices have been processed merely confirms that ‘all sales invoices have been processed (option 3) and similarly the existence of authorisation controls merely provides assurance as to whether transactions have been authorised (option 4). The existence of segregation of duty controls (option 1) does not in itself provide assurance as to completeness of recording of sales transactions.
3. Not correct
4. Not correct

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