The 'Cut-off' procedures in audit relate to: MCQ with Answer and Explanation

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The 'Cut-off' procedures in audit relate to:

A. Ensuring transactions are recorded in the correct accounting period

B. Setting materiality

C. Stopping audit

D. Selecting sample

Answer: Option A

Solution (By JKSSB Mock Tests)

Cut-off tests ensure revenues and expenses are recognised in the proper period.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

The 'Engagement Letter' in audit is:

A. A letter of appointment of auditor

B. The audit programme

C. A written agreement between auditor and client detailing scope and terms of audit

D. Tax notice

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Correct Answer: Option C

Explanation:
Engagement letter formalises the audit engagement.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #2

A Suspense Account is generally closed when:

A. All errors causing the trial balance difference are rectified

B. The auditor approves it

C. The financial year ends

D. The balance sheet is signed

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Correct Answer: Option A

Explanation:
The Suspense Account exists only as a temporary fix. Once all one-sided errors are found and rectified, its balance becomes zero.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #3

A firm's current ratio is 1.5:1. It wants to maintain a current ratio of 2:1 by paying off some current liabilities. Which of the following will happen?

A. Current assets will decrease

B. Working capital will decrease

C. Working capital will remain unchanged

D. Working capital will increase

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Correct Answer: Option C

Explanation:
Paying current liabilities reduces both current assets (cash) and current liabilities equally, leaving working capital (CA - CL) unchanged, though ratio improves.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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