Which of the following is not a purpose of financial audit? MCQ with Answer and Explanation

Question

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Which of the following is not a purpose of financial audit?

A. Ensuring compliance with laws

B. Detecting fraud and error

C. Expressing opinion on true and fair view

D. Preparing financial statements

Answer: Option D

Solution (By JKSSB Mock Tests)

Preparation of financial statements is management's responsibility. Auditor expresses opinion on them.

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

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Question #1

Public Financial Management System (PFMS) helps in:

A. All of the above

B. Ensuring last-mile connectivity in fund transfer

C. Monitoring government subsidies

D. Preventing leakages

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Correct Answer: Option A

Explanation:
PFMS aims to track funds, monitor subsidies, ensure DBT, and reduce leakages in public expenditure.

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Question #2

In financial management, the 'Degree of Financial Leverage' (DFL) is calculated at a given level of EBIT as:

A. EBIT / (EBIT - Interest)

B. Both A and B depending on the presence of preference shares

C. EBIT / (EBIT - Interest - Preferred Dividend / (1 - Tax Rate))

D. Contribution / EBIT

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Correct Answer: Option B

Explanation:
DFL measures the sensitivity of EPS to changes in EBIT. If only debt is present, DFL = EBIT / (EBIT - I). If preference shares are also present, the formula includes the pre-tax equivalent of preference dividends, making D option correct.

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Question #3

Which of the following books is known as the 'Principal Book' of accounts?

A. Journal

B. Ledger

C. Trial Balance

D. Cash Book

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Correct Answer: Option B

Explanation:
The ledger is the principal or chief book of accounts because all financial data is ultimately classified and summarized there.

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

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