Tag: Professional Ethics

The following is an example of an internal control that operates at Elm plc:

• The financial controller reconciles the payables ledger to the payables ledger control account every month.

For the example above, select the type of control activity which it illustrates.

Select ONE answer:

1. Information processing
2. Performance review
3. Segregation of duties
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 => Reconciliations are information processing as they are undertaken to check the completeness and accuracy of information.
2. Not correct
3. Not correct
4. Not correct

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

One of the five elements of internal control is “monitoring of controls”.

• Which ONE of the following is an activity which would be used to monitor controls?

Select ONE answer:

1. Authorisation of purchase invoices before they are paid
2. Authorisation of purchase orders by the department manager
3. Authorisation of sales invoices before being issued to the client for accuracy and completeness
4. Internal auditors’ evaluation of whether the sales team are following company policy regarding customer discounts

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 => All the other options are specific control activities (relating to authorisation).

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

One of the five elements of internal control is “monitoring of controls”.

• Which ONE of the following is an activity which would be used to monitor controls?

Select ONE answer:

1. Authorisation of purchase invoices before they are paid
2. Authorisation of purchase orders by the department manager
3. Management’s review of whether bank reconciliations are being prepared on a timely basis
4. Authorisation of sales invoices before being issued to the client for accuracy and completeness

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 => All the other options are specific control activities (relating to authorisation).
4. Not correct

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

For each of the following statements, select whether they are true or false in respect of business risk:

A – Management is responsible for identifying and controlling business risks.
B – Business risk is of no relevance to the auditor. The auditor is only concerned with audit risk.

Select ONE answer:

1. Statement A – False, and Statement B – False
2. Statement A – True, and Statement B – False
3. Statement A – True, and Statement B – True
4. Statement A – False, and Statement B – 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 2

1. Not correct
2. Correct => Statement A is true – Management are responsible for identifying and controlling business risks although the auditor will assess business risk as part of the audit. Statement B is false – Business risk is of relevance to the auditor as business risks may impact on the financial statements.
3. Not correct
4. Not correct

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

For each of the following statements, select whether they are true or false in respect of business risk:

A – Business risk is the risk inherent to the company in its operations.
B – Business risk is of no relevance to the auditor. The auditor is only concerned with audit risk.

Select ONE answer:

1. Statement A – True, and Statement B – False
2. Statement A – False, and Statement B – False
3. Statement A – True, and Statement B – True
4. Statement A – False and Statement B – 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 B is false – Business risk is of relevance to the auditor as business risks may impact on the financial statements.
2. Not correct
3. Not correct
4. Not correct

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