The 'Engagement Letter' in audit is: MCQ with Answer and Explanation

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The 'Engagement Letter' in audit is:

A. The audit programme

B. A letter of appointment of auditor

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

D. Tax notice

Answer: Option C

Solution (By JKSSB Mock Tests)

Engagement letter formalises the audit engagement.

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

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Question #1

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Which of the following describes 'Deferred Revenue Expenditure'?

A. Payment of outstanding wages

B. Heavy initial advertising campaign for a new product

C. Routine repairs to machinery

D. Buying a building

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Correct Answer: Option B

Explanation:
It is a revenue expense whose benefit is expected to extend beyond one accounting period, so it is amortized over a few years.

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Question #2

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Social Accounting in India is mostly used by:

A. Public sector enterprises

B. Households

C. Small traders

D. Manufacturing companies

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Correct Answer: Option A

Explanation:
Public sector enterprises and large corporations often prepare social accounting statements to show their contribution to social objectives.

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

Question #3

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The 'Outstanding Salary' is recorded by:

A. No entry

B. Debit Outstanding Salary A/c, Credit Salary A/c

C. Debit Cash A/c, Credit Salary A/c

D. Debit Salary A/c, Credit Outstanding Salary A/c

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Correct Answer: Option D

Explanation:
To record accrued expense: Salary A/c Dr. To Outstanding Salary A/c.

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

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