The 'Engagement Risk' is different from audit risk; it relates to: MCQ with Answer and Explanation

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The 'Engagement Risk' is different from audit risk; it relates to:

A. Inherent risk

B. Detection risk

C. Risk of material misstatement

D. Risk of loss or injury to the auditor's professional practice from litigation, adverse publicity, etc.

Answer: Option D

Solution (By JKSSB Mock Tests)

Engagement risk is a business risk for the auditor.

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

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Question #1

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In cost accounting, if the 'Margin of Safety' is 20% of actual sales, and the actual sales are ₹5,00,000, what is the break-even sales?

A. ₹4,00,000

B. ₹3,00,000

C. ₹5,00,000

D. ₹1,00,000

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Correct Answer: Option A

Explanation:
Margin of Safety = Actual Sales - BEP Sales. 20% of 5,00,000 = 1,00,000. Therefore, BEP Sales = Actual Sales - MOS = 5,00,000 - 1,00,000 = ₹4,00,000.

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

Question #2

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In the context of single entry system, 'Net Worth' means:

A. Cash in hand

B. Excess of assets over liabilities

C. Total assets

D. Total liabilities

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Correct Answer: Option B

Explanation:
Net worth = Total assets - Total liabilities, representing owner's equity.

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

Question #3

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Under Ind AS 2, which of the following costs are excluded from the cost of inventory and recognized as expenses in the period they are incurred?

A. Costs of conversion

B. Design costs incurred before the production stage for a specific customer order

C. Fixed production overheads allocated based on normal capacity

D. Abnormal amounts of wasted materials, labor, or other production costs

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Correct Answer: Option D

Explanation:
Ind AS 2 explicitly excludes abnormal waste, storage costs (unless necessary in the production process), administrative overheads not contributing to bringing inventories to their present location/condition, and selling costs from inventory cost.

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

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