THE REGULATORY FRAMEWORK OF ACCOUNTING
REVISION QUESTIONS C2
352
1.18 When preparing fi nancial statements in periods of infl ation, directors:
(A) must reduce asset values.
(B) must increase asset values.
(C) must reduce dividends.
(D) need make no adjustments.
1.19 Which of the following statements is correct?
(A) External auditors report to the directors.
(B) External auditors are appointed by the directors.
(C) External auditors are required to give a report to shareholders.
(D) External auditors correct errors in fi nancial statements.
1.20 What is an audit trail in a computerised accounting system?
(A) A list of all the transactions in a period.
(B) A list of all the transactions in a ledger account in a period.
(C) A list of all the items checked by the auditor.
(D) A list of all the nominal ledger codes.
1.21 The concept of capital maintenance is important for:
(A) the sources of fi nance.
(B) the measurement of profi t.
(C) the relationship of debt to equity.
(D) the purchase of non-current assets.
1.22 Internal control includes ‘ detect ’ controls and ‘ prevent ’ controls. Which of the
following is a detect control?
(A) Signing overtime claim forms.
(B) Matching purchase invoices with goods received notes.
(C) Preparing bank reconciliations.
(D) Matching sales invoices with delivery notes.
1.23 Which of the following statements is not correct?
(A) Internal auditors review value for money.
(B) Internal auditors should not liaise with external auditors.
(C) Internal audit is part of internal control.
(D) Internal audit should be independent of the activities it audits.
1.24 The fundamental objective of an external audit of a limited company is to:
(A) give advice to shareholders.
(B) detect fraud and errors.
(C) measure the performance and fi nancial position of a company.
(D) provide an opinion on the fi nancial statements.