Accountancy and Book Keeping MCQs

Accountancy and Statistics

Accountancy and Book Keeping MCQs

Practice the latest Accountancy MCQs with answers and detailed explanations. Explore chapter-wise multiple-choice questions covering important accounting concepts, bookkeeping, financial statements, journal entries, ledger, trial balance, depreciation, ratio analysis, partnership accounts, company accounts, and more. Perfect for Class 11 & 12, B.Com, CA Foundation, CUET, Banking, SSC, JKSSB, JKPSC and competitive exams.

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Practice Questions

Page 86 of 94
Question #1701
The 'Tolerable Error' in audit sampling is:
A. Expected error
B. The maximum error in the population that the auditor is willing to accept and still conclude that the audit objective is achieved
C. Actual error
D. Zero error
Discuss
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Correct Answer: Option B

Explanation:
Tolerable error is a planned level of misstatement.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1702
The 'Expected Error' in audit sampling is:
A. The maximum acceptable error
B. Actual error after testing
C. The error the auditor expects to find in the population
D. Error in the sample only
Discuss
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Correct Answer: Option C

Explanation:
Expected error is estimated before testing; it affects sample size.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1703
The 'Engagement Risk' is different from audit risk; it relates to:
A. Detection risk
B. Risk of loss or injury to the auditor's professional practice from litigation, adverse publicity, etc.
C. Inherent risk
D. Risk of material misstatement
Discuss
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Correct Answer: Option B

Explanation:
Engagement risk is a business risk for the auditor.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1704
The 'Going Concern' assessment: If management concludes that the entity is not a going concern, the financial statements should be prepared on:
A. Going concern basis
B. Accrual basis
C. Break-up basis (liquidation basis)
D. Cash basis
Discuss
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Correct Answer: Option C

Explanation:
If not going concern, financial statements are prepared on a break-up basis.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1705
The 'Key Audit Matters' (KAM) are required to be reported in the auditor's report for:
A. Only insurance companies
B. All entities
C. Listed entities (and certain other cases when required by law or voluntarily)
D. Only banks
Discuss
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Correct Answer: Option C

Explanation:
KAM reporting is mandatory for listed entities as per SA 701.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1706
The 'Emphasis of Matter' vs 'Other Matter' paragraph: Emphasis of Matter refers to:
A. Matters that require a modified opinion
B. Matters not presented or disclosed in the financial statements
C. Matters appropriately presented or disclosed in the financial statements that are fundamental to users' understanding
D. Scope limitation
Discuss
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Correct Answer: Option C

Explanation:
Emphasis of Matter highlights a note/disclosure already in financial statements.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1707
The 'Other Matter' paragraph refers to:
A. Qualification
B. Matters other than those presented or disclosed in the financial statements that are relevant to understanding the audit, auditor's responsibilities, or report
C. Adverse opinion
D. Matters already disclosed in financial statements
Discuss
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Correct Answer: Option B

Explanation:
Other Matter deals with matters not in the financial statements.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1708
The 'Component Auditor' in a group audit is:
A. Tax auditor
B. Internal auditor
C. An auditor who performs audit work on a component for the group auditor
D. The auditor who audits the parent
Discuss
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Correct Answer: Option C

Explanation:
Group auditor may use the work of component auditors.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1709
The 'Group Engagement Partner' is responsible for:
A. Component audit only
B. Only his own work
C. Overall group audit opinion and direction, supervision, and performance of the group audit engagement
D. Tax filing
Discuss
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Correct Answer: Option C

Explanation:
The engagement partner takes overall responsibility.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1710
The 'Sufficient Appropriate Audit Evidence' means:
A. Only quantity
B. Quantity (sufficiency) and quality (appropriateness - relevance and reliability) of evidence
C. Only quality
D. Any evidence
Discuss
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Correct Answer: Option B

Explanation:
Sufficient relates to quantity, appropriate to quality.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1711
The 'External Confirmation' from a bank is an example of:
A. Analytical procedure
B. External evidence obtained directly by the auditor
C. Internal evidence
D. Oral evidence
Discuss
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Correct Answer: Option B

Explanation:
Direct confirmation from bank is highly reliable.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1712
The 'Analytical Procedures' are required:
A. Never
B. Only as substantive
C. Only at planning stage
D. At planning, as substantive procedures, and at final review stage
Discuss
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Correct Answer: Option D

Explanation:
SA 520 mandates analytical procedures at these stages.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1713
The 'Test of Details' includes:
A. Vouching, tracing, and inspection of documents
B. Ratio analysis
C. Budget comparison
D. Trend analysis
Discuss
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Correct Answer: Option A

Explanation:
Test of details are specific tests of transactions and balances.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1714
The 'Direction of Testing' for existence of assets is from:
A. Physical asset to accounting records
B. Both ways
C. Accounting records to physical asset
D. No testing
Discuss
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Correct Answer: Option C

Explanation:
To verify existence, select from records and verify physically. Completeness is opposite.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1715
The 'Substantive Analytical Procedure' involves:
A. Physical verification only
B. Detailed testing of samples
C. Inquiry only
D. Evaluating financial information through analysis of plausible relationships
Discuss
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Correct Answer: Option D

Explanation:
Substantive analytical procedures use ratios, trends, and relationships to detect misstatements.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1716
The 'Audit Documentation' should be sufficient to:
A. Meet legal requirement
B. Only remind the auditor
C. Enable an experienced auditor, having no previous connection with the audit, to understand the nature, timing, extent of procedures, results, and conclusions
D. Satisfy management
Discuss
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Correct Answer: Option C

Explanation:
As per SA 230, working papers must stand alone.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1717
The 'Assembly of the Final Audit File' should be completed within:
A. No time limit
B. 60 days of auditor's report (as per SA 230)
C. 30 days of auditor's report
D. 90 days
Discuss
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Correct Answer: Option B

Explanation:
The final file should be assembled within 60 days from the date of auditor's report.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1718
The 'Fraud' in an audit context refers to:
A. Any error
B. Unintentional misstatement
C. Negligence
D. Intentional act by one or more individuals among management, those charged with governance, employees, or third parties involving deception to obtain an unjust or illegal advantage
Discuss
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Correct Answer: Option D

Explanation:
Fraud is intentional; error is unintentional.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1719
The 'Management Override of Controls' is a risk of material misstatement due to fraud. Auditors must:
A. Assume management override does not exist
B. Test the appropriateness of journal entries, review accounting estimates for bias, and evaluate the business rationale for significant unusual transactions
C. No special procedures
D. Only interview management
Discuss
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Correct Answer: Option B

Explanation:
SA 240 requires specific procedures for management override.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1720
The 'Written Representations' from management are required to:
A. Complement other audit evidence and confirm management's responsibilities
B. Replace all other audit evidence
C. Only for fraud
D. Be the sole evidence
Discuss
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Correct Answer: Option A

Explanation:
Written representations support, but do not substitute for, sufficient appropriate evidence.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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