The 'Test of Controls' is performed when: MCQ with Answer and Explanation

The 'Test of Controls' is performed when:
A. No controls exist
B. Never performed
C. Internal controls are weak
D. Auditor intends to rely on the entity's internal controls
Answer: Option D
Solution (By JKSSB Mock Tests)
Test of controls evaluates the operating effectiveness of internal controls.

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Practice More Accountancy and Book Keeping Questions

Question #1
A: Goodwill is valued when there is a change in the profit-sharing ratio. R: The change in ratio means some partners sacrifice and some gain, requiring compensation. Choose the correct option.
A. A is false but R is true
B. Both A and R are true but R is NOT the correct explanation of A
C. Both A and R are true and R is the correct explanation of A
D. A is true but R is false

Correct Answer: Option C


Explanation:
Goodwill is valued during admission, retirement, death, or change in profit-sharing ratio. This is because partners who sacrifice their share must be compensated by those who gain. R correctly explains the reason for valuation.

Question #2
The primary purpose of preparing a Bank Reconciliation Statement (BRS) is to:
A. Correct errors in the ledger
B. Determine the net profit
C. Identify causes of difference between cash book and pass book balances
D. Calculate bank interest

Correct Answer: Option C


Explanation:
BRS is prepared to reconcile the bank balance as per the cash book with the balance as per the bank statement (pass book).

Question #3
In the context of PFMS, the 'Core Banking Solution' (CBS) integration ensures that:
A. Tax collections are automatically deposited into the Consolidated Fund
B. Funds are credited to the beneficiary's account in real-time without manual intervention
C. The RBI can monitor all private bank transactions
D. Government departments can open bank accounts directly

Correct Answer: Option B


Explanation:
CBS integration with PFMS ensures that once a payment instruction is processed, the funds are credited directly to the beneficiary's bank account in real-time, eliminating manual handling and delays.