The 'Tolerable Error' in audit sampling is: MCQ with Answer and Explanation

Question
The 'Tolerable Error' in audit sampling is:
A. The maximum error in the population that the auditor is willing to accept and still conclude that the audit objective is achieved
B. Actual error
C. Expected error
D. Zero error
Answer: Option A
Solution (By JKSSB Mock Tests)
Tolerable error is a planned level of misstatement.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
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Practice More Accountancy and Book Keeping Questions

Question #1
Hidden goodwill at the time of admission of a partner is calculated by comparing:
A. Assets and outside liabilities
B. Total capital based on new partner's share and actual total capital of all partners
C. Super profit and normal rate of return
D. Average profits of last 5 years
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Correct Answer: Option B

Explanation:
Hidden goodwill is the excess of the firm's inferred total capital (based on the new partner's contribution and share) over the actual combined capital balances.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #2
Overhead absorption rate is calculated as:
A. Actual overheads / Actual base
B. Budgeted overheads / Actual base
C. Budgeted overheads / Budgeted base
D. None
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Correct Answer: Option C

Explanation:
Overhead absorption rate is usually predetermined based on budgeted figures to absorb overheads into products.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #3
The 'Audit Documentation' (working papers) is the property of:
A. Auditor
B. Shareholders
C. Client
D. Government
Discuss
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Correct Answer: Option A

Explanation:
Working papers belong to the auditor; client does not have a right to them.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
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