MCQ Collection
Accounting and Finance MCQs
Practice Accounting and Finance questions with answers and explanations.
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Correct Answer: A. The risk that internal controls fail to prevent or detect a material misstatement
Explanation:
Control risk depends on the design and operation of the client's controls.
Weak controls require more reliance on substantive procedures.
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Correct Answer: A. Independently executing a control or procedure originally performed by the client
Explanation:
Reperformance tests whether a control operates as described.
The auditor performs the procedure rather than merely observing it.
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Correct Answer: B. Custom construction company
Explanation:
Construction projects differ in design, materials, and labor requirements.
Separate job cost records are therefore useful.
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Correct Answer: B. The activity level at which total revenue equals total cost
Explanation:
At break-even, contribution exactly covers fixed costs.
Operating profit is zero.
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Correct Answer: B. The risk that audit procedures fail to detect an existing material misstatement
Explanation:
Detection risk is influenced by the nature, timing, and extent of audit procedures.
Auditors reduce it by performing more effective work.
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Correct Answer: B. Evaluations of relationships among financial and nonfinancial data
Explanation:
Analytical procedures identify unusual trends, ratios, or relationships.
They are used in planning, substantive testing, and final review.
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Correct Answer: C. A record of direct material, direct labor, and overhead assigned to a job
Explanation:
The job cost sheet accumulates all manufacturing costs for one job.
It supports pricing, control, and profitability analysis.
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Correct Answer: C. 4,000 units
Explanation:
Break-even units equal fixed costs divided by unit contribution.
100,000 divided by 25 equals 4,000 units.
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Correct Answer: C. The magnitude or nature of misstatement that could influence users' decisions
Explanation:
Materiality guides planning, testing, and evaluation of misstatements.
It depends on both quantitative and qualitative factors.
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Correct Answer: C. Applying procedures to fewer than all items in a population
Explanation:
Sampling allows the auditor to draw conclusions about a population efficiently.
Selection and sample size should address audit risk.
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Correct Answer: D. Recognizing transactions when economic events occur rather than when cash moves
Explanation:
Accrual accounting matches revenues and expenses to the periods in which they arise.
Cash timing may differ from recognition timing.
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Correct Answer: D. Sales revenue minus cost of goods sold
Explanation:
Gross profit measures the margin from selling goods before operating expenses.
It is an important indicator for merchandising businesses.
