Correct Answer:
A. Self-interest threat
A financial interest in the client creates a self-interest threat to objectivity.
November 13, 2026 · Accounting and Finance MCQs, Auditing MCQs
An auditor holding shares in the audited client creates which type of threat?
Related MCQs
Who is primarily responsible for preparing the financial statements?
A.
Management of the entity
B.
The external auditor
C.
The tax authority
D.
The internal auditor only
Correct answer is:
A. Management of the entity
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Appropriation audit is carried out to ensure that:
A.
Revenue is maximized
B.
Expenditure is within the grant and incurred for the purpose approved by the legislature
C.
Employees are paid on time
D.
The accounts are printed neatly
Correct answer is:
B. Expenditure is within the grant and incurred for the purpose approved by the legislature
Do you agree with this answer?
Who has primary responsibility for the prevention and detection of fraud?
A.
The external auditor only
B.
The shareholders only
C.
The tax authority
D.
Management and those charged with governance
Correct answer is:
D. Management and those charged with governance
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An audit engagement letter is mainly used to:
A.
Record the agreed terms of the audit engagement between auditor and client
B.
Report the audit findings to the public
C.
Confirm receivable balances
D.
Appoint the internal auditor
Correct answer is:
A. Record the agreed terms of the audit engagement between auditor and client
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Inherent risk is the susceptibility of an assertion to material misstatement:
A.
After considering all internal controls
B.
Only due to auditor's errors
C.
Before considering any related internal controls
D.
Only in government organizations
Correct answer is:
C. Before considering any related internal controls
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Sensitivity analysis in capital budgeting examines:
A.
Only the best case scenario
B.
Past performance of the firm
C.
How changes in one input variable affect the project's NPV
D.
The effect of tax rates on dividends
Correct answer is:
C. How changes in one input variable affect the project's NPV
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