MCQ Bank

Inventory records should be integrated with the main accounting system to ensure accurate recording and reporting of inventory balances. This supports effective control and financial statement preparation.

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Q121

How often Inventory levels should be checked against the inventory records in order to verify internal control effectiveness?

A) Daily
B) Rarely
C) Periodically
D) Never

AI Explanation

Inventory levels should be checked periodically against inventory records to verify that records are accurate and controls are operating effectively. The frequency depends on the nature and risk of the inventory system.

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Q122

which one of the following ways the record of cheques and cash received may be kept?

A) Cash registers
B) Copies of Cash notes
C) Computer database
D) Rough cash book

AI Explanation

Cash registers provide a systematic method for recording cash and cheque receipts at the point of transaction. They help maintain accurate records and strengthen cash handling controls.

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Q123

Auditor has a duty to verify all the assets appearing on the balance sheet. Which aspects they must verify about the assets out of the followings stated?

A) Nature of assets
B) Depreciation of assets
C) Cost, authorization and value
D) Classification of assets

AI Explanation

Auditors verify assets by checking important aspects such as their cost, proper authorization, and valuation. These procedures help ensure that assets are correctly recorded and fairly presented in the financial statements.

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Q124

Which one of the following may NOT be the control procedure at key stages of the purchase cycle?

A) Receipt of goods
B) Invoicing and credit notes
C) Invoicing and returns
D) Purchase ledger and suppliers

AI Explanation

Key stages of the purchase cycle include receipt of goods, invoicing and credit notes, and purchase ledger with suppliers. Invoicing and returns is not normally considered a separate key control stage.

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Q125

GRN (Goods Recieved No)should be checked against which of the following document?

A) Purchase Order
B) Sales Order
C) Invoice received
D) Purchase requisition

AI Explanation

A Goods Received Note (GRN) is checked against the purchase order to confirm that goods received match what was ordered. This helps verify authorization, quantity, and accuracy of purchases.

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Q126

An oil marketing company employs 1000 personnel in local market. Majority of its workers are paid on the piece rate basis. The company should compensate them in which one of the following forms of payment?

A) Salary
B) Cheque
C) Money
D) Wages

AI Explanation

Employees paid on a piece rate basis are compensated through wages because payment depends on the quantity of work completed. Salaries are generally fixed periodic payments.

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Q127

“Input VAT” refers to which one of the following statements?

A) It refers to the tax which a company would charge on items which it sells
B) It refers to the tax which the company is charged when it sells its products to the retailers
C) It refers to the tax which the company is charged when it makes its purchases
D) It refers to the tax which a company would charge on items which it sells internationally

AI Explanation

Input VAT is the VAT paid by a business on purchases of goods or services. It can generally be recovered or offset against output VAT charged on sales.

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Q128

What is the treatment of social security benefit received by a worker of an organization?

A) Subtract it from bonus he received
B) Subtract it from payroll
C) Add it to total pay received
D) Add it to total income received

AI Explanation

Social security benefits received by a worker are additional benefits and are added to the total remuneration received. They are not deducted from payroll or bonus amounts.

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Q129

The access should be _________ for controlling the assets and records in better way.

A) grunted
B) Banned
C) Prohibited
D) Restricted

AI Explanation

Access to assets and records should be restricted only to authorized personnel. This helps prevent unauthorized use, errors, and fraud.

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Q130

Auditor adopts different control procedures for testing of sales system of a company. Which control procedure is Not used in testing the sales system?

A) Return inwards
B) Return outwards
C) Orders
D) Dispatches

AI Explanation

Return outwards relates to purchases and is part of the purchase system, not the sales system. Sales system testing includes orders, dispatches, and return inwards from customers.

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Q131

For the purpose of keeping effective control in the cash system, who should have no access to the cash or the preparation of the paying-in slip?

A) Cash officers
B) Operations manager
C) Sales ledger personnel
D) Teller/cashier

AI Explanation

Sales ledger personnel should not have access to cash or preparation of paying-in slips to maintain segregation of duties. This reduces the risk of fraud and improper handling of receipts.

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Q132

A building company constructs its own office block. How the company should categorize this asset?

A) Intangible fixed asset
B) Liquid asset
C) Non current asset
D) Current asset

AI Explanation

An office block constructed by a company for its own use is a long-term asset used in operations. Therefore, it is classified as a non-current asset.

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Q133

Which one of the following may NOT be the control procedure at key stages of the sales cycle?

A) Receivables
B) Invoicing and credit notes
C) Receipt of goods
D) Bad Debts

AI Explanation

Receipt of goods is part of the purchase cycle rather than the sales cycle. Key sales cycle controls include receivables, invoicing, credit notes, and bad debt management.

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Q134

In which one of the following ways auditors can choose the verification techniques in a given set of circumstances?

A) It depends upon the nature of business operation of the entity
B) It depends upon the available audit evidence to the auditor
C) It depends upon the judgmental skills of the auditor
D) It depends upon the audit procedures planned by the auditor

AI Explanation

Auditors select verification techniques based on the circumstances of the audit, including the nature and type of the entity's operations. The business environment influences which verification methods are most appropriate.

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Q135

Which one of the following is TRUE about Auditing requirements for transparency of the Payroll system of a company?

A) The duties of the wages staff should preferably be rotated with respect to company’s own policies
B) The duties of the wages staff should preferably be rotated according to their performance
C) The duties of the wages staff should preferably be rotated monthly
D) The duties of the wages staff should preferably be rotated during the year

AI Explanation

Rotating payroll staff duties during the year is a control measure that reduces the risk of fraud and helps maintain transparency in payroll operations. It also improves accountability among employees.

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Q136

Creditworthiness of a customer can be shown from which of the following method?

A) By write-off of bad debts
B) By raising the credit note
C) By acceptance of orders
D) By pricing and discounts

AI Explanation

A customer's creditworthiness is assessed before accepting credit orders, based on factors such as payment history and financial reliability. Acceptance of orders indicates that the customer has passed credit evaluation procedures.

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Q137

What is the risk that is of most concern to auditors when auditing cash?

A) Adjunct risk
B) Non-sampling risk
C) Inherent risk
D) Detective risk

AI Explanation

Cash is highly liquid and vulnerable to theft or misuse, making inherent risk a major concern for auditors. It exists before considering the effectiveness of internal controls.

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Q138

For measuring the quality of audit evidence auditor uses the tools of appropriateness; in case if auditor wants to measure quantity of audit evidence which tools from the following should be adopted?

A) Effectiveness
B) Sufficiency
C) Reliability
D) Relevance

AI Explanation

Appropriateness measures the quality of audit evidence through relevance and reliability, while sufficiency measures the quantity of evidence obtained. Auditors use sufficiency to determine whether enough evidence has been collected.

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Q139

Which of the following items are observed while verification of the interest of the owners in net assets of the company?

A) Assets and liabilities
B) Share capital and reserves
C) Investments
D) Retained earnings

AI Explanation

The owners' interest in the net assets of a company is represented by equity, which includes share capital and reserves. These items are verified during the audit of equity balances.