The Multiple Choice Questions Blog

Which ONE of the following would NOT increase inherent audit risk?

Select ONE answer:

1. A significant number of balances are based on estimates
2. The financial statements include complex transactions
3. The company is seeking to raise finance
4. Audit staff are inexperienced

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 => Incorrect sample sizes and inexperienced audit staff will affect detection risk.

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Which ONE of the following would NOT increase inherent audit risk?

Select ONE answer:

1. Sample sizes have been calculated incorrectly by the auditor and are too small
2. A significant number of balances are based on estimates
3. The financial statements include complex transactions
4. The company is seeking to raise finance

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 == > Incorrect sample sizes and inexperienced audit staff will affect detection risk.
2. Not correct
3. Not correct
4. Not correct

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Audit risk can be split into three components: inherent risk, control risk, and detection risk.

For each of the following examples, select the type of risk illustrated.

• Directors’ pay is related to company profitability…..…..?

Select ONE answer:

1. Inherent
2. Control
3. Detection
4. No Risk

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 == > Profit related pay may motivate the directors to distort the financial information, so constituting an inherent risk.
2. Not correct
3. Not correct
4. Not correct

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Audit risk can be split into three components: inherent risk, control risk, and detection risk.

For each of the following examples, select the type of risk illustrated.

• Senior management regularly override the system of controls….…..?

Select ONE answer:

1. Inherent
2. Control
3. Detection
4. No Risk

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 => The existence of management override increases control risk as controls may be ignored leading to an increased risk of material fraud or error.
3. Not correct
4. Not correct

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For each of the following statements, select whether they are true or false in respect of the concept of materiality.

Statement 1 – Materiality should be calculated at the planning stage of all audits.

Statement 2 – Once established, the materiality level initially set CANNOT be revised during the audit.

Statement 3 – Materiality will influence the audit opinion given..

Identify whether the statements made above are true or false?

Select ONE answer:

1. Statement 1. True and Statement 2. False and Statement 3. True
2. Statement 1. False and Statement 2. False and Statement 3. True
3. Statement 1. True and Statement 2. True and Statement 3. False
4. Statement 1. False and Statement 2. True and Statement 3. True

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 => Statement 1 is True as materiality needs to be calculated at the audit planning stage to provide a guide as to the extent of audit procedures required. Statement 2 is False as materiality can be revised during the audit, as the assessment of audit risk changes. Statement 3 is True — > the materiality level set will have an impact on the audit opinion as the existence of material unadjusted errors and misstatements will lead to a qualified audit opinion.
2. Not correct
3. Not correct
4. Not correct

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