Tag: Topic 18

Which ONE of the following options are a sign of overtrading?

Select ONE answer:

1. Inventory decreasing
2. Payables decreasing
3. Cash decreasing
4. Receivables increasing

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 => Cash would be decreasing in a situation of overtrading, as cash flows out to fund the increases in working capital.
4. Not correct

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Which ONE of the following options is a sign of overtrading?

Select ONE answer:

1. Inventory decreasing
2. Cash Increasing
3. Payables decreasing
4. Receivables increasing

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 == >    Receivables would be increasing as the company expands without the resources to support the expansion.

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 operates in a fast-moving, high-tech environment.

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 => Inherent – a fast-moving, high-tech environment presents inherent risks both at the company level and at the individual account level (e.g., inventory).
2. Not correct
3. Not correct
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 only has a few employees in its accounting 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 => Control – a few employees indicates the risk of limited segregation of duties, which is a control deficiency.
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 with respect to the concept
of materiality.

a. Materiality depends only on the monetary amount of an item.
b. Materiality may depend on either the nature of an item or its monetary amount.
c. Materiality is a matter of professional judgement.

Are these cases True or False?

Select ONE answer:

1. a. True – b. True – c. True
2. a. False – b. True – c. True
3. a. False – b. False – c. True
4. a. False – b. False – c. False

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. = False – materiality can be both quantitative and qualitative. b. = True – materiality may depend on either the nature of an item or its monetary amount. c. True – materiality is determined by the external auditor, and he will use his professional judgement in setting a level of materiality which best addresses the audit risk.
3. Not correct
4. Not correct

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