Tag: Ethics

Which one of the following is normally designed to detect possible material monetary errors in the figures in financial statements?

Select ONE answer:

1. Test of control
2. Walk-through test
3. Analytical procedure
4. Observation of a procedure

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 => Analytical procedures help identify material monetary errors in the financial statements (which could be due to changes in account balances or key ratios because of mis-postings, misclassification errors or under/overstatements). The other techniques are all concerned with systems assessment or testing of controls.
4. Not correct

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Which ONE of the following would NOT be used in understanding the entity in accordance with ISA 315 (UK), Identifying and Assessing the Risks of Material Misstatement Through Understanding of the Entity and Its Environment?

Select ONE answer:

1. A preliminary review of Industry, regulatory and other external factors
2. A preliminary review of internal controls
3. A preliminary review of previous audit work done by the auditors
4. The results of a review of events after the date of the financial statements

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 == > Tests of details and review of events after the date of the financial statements are normally performed after the initial planning stage of the audit.

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

Which ONE of the following would NOT be used in understanding the entity in accordance with ISA 315 (UK), Identifying and Assessing the Risks of Material Misstatement Through Understanding of the Entity and Its Environment?

Select ONE answer:

1. A preliminary review of Industry, regulatory, and other external factors
2. A preliminary review of internal controls
3. A preliminary review of the previous audit work done by the auditors
4. The results of tests of details

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 == > Tests of details and review of events after the date of the financial statements are normally performed after the initial planning stage of the audit.

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

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.

The auditor will be using samples in testing……..?

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 3

1. Not correct
2. Not correct
3. Correct => The use of samples in testing, represents a sampling risk: that the sample tested will not represent the population. Sampling risk is part of detection risk.
4. Not correct

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

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.

• The organisation has a high turnover of staff in the accounts department..…..?

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 => High staff turnover increases the risk that the internal controls in place will not be effective.
3. Not correct
4. Not correct

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