Correct Answer:
C. Before considering any related internal controls
Inherent risk exists before taking internal controls into account, for example in complex estimates.
November 13, 2026 · Accounting and Finance MCQs, Auditing MCQs
Inherent risk is the susceptibility of an assertion to material misstatement:
Related MCQs
Dividends are Rs. 30,000 and net income is Rs. 100,000. The dividend payout ratio is:
A.
70%
B.
3.3%
C.
300%
D.
30%
Correct answer is:
D. 30%
Do you agree with this answer?
In double-entry bookkeeping, every transaction:
A.
Affects only one account
B.
Is recorded only as a debit
C.
Is recorded only in the cash book
D.
Affects at least two accounts with total debits equal to total credits
Correct answer is:
D. Affects at least two accounts with total debits equal to total credits
Do you agree with this answer?
Which of the following is NOT a component of internal control in the COSO framework?
A.
Audit sampling
B.
Control environment
C.
Risk assessment process
D.
Monitoring of controls
Correct answer is:
A. Audit sampling
Do you agree with this answer?
A flexible budget is a budget that:
A.
Never changes
B.
Includes only fixed costs
C.
Is adjusted to the actual level of activity achieved
D.
Is prepared without forecasting
Correct answer is:
C. Is adjusted to the actual level of activity achieved
Do you agree with this answer?
The Fiscal Responsibility and Debt Limitation Act, 2005 of Pakistan provides a target for:
A.
The ratio of total public debt to GDP
B.
The number of public employees
C.
The exchange rate
D.
The inflation rate only
Correct answer is:
A. The ratio of total public debt to GDP
Do you agree with this answer?
Professional skepticism means the auditor:
A.
Maintains a questioning mind and critically assesses audit evidence
B.
Assumes management is dishonest
C.
Accepts management explanations without verification
D.
Avoids communicating with management
Correct answer is:
A. Maintains a questioning mind and critically assesses audit evidence
Do you agree with this answer?
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