Chapter 1: Internal Check — Online MCQ Test
AUDITING · CLASS 12th · Tamil Nadu State Board
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This chapter covers: This chapter covers the fundamentals of an internal check system within financial operations. Students study its principles objectives advantages disadvantages auditor duties and s....
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Chapter 1: Internal Check — Important Questions & Answers
What is meant by 'Internal Check' in auditing?
- A. A system where one employee's work is automatically verified by another employee's work
- B. An external audit conducted by government officials
- C. A method of preparing final accounts only
- D. A system of direct supervision by shareholders
Answer: A. A system where one employee's work is automatically verified by another employee's work
Internal check is an arrangement of duties so that the work of one person is independently checked by another. It helps reduce errors and fraud.
Internal check is an arrangement of duties so that the work of one person is independently checked by another. It helps reduce errors and fraud.
Which of the following is an objective of internal check?
- A. To increase the number of vouchers issued
- B. To prevent and detect errors and frauds
- C. To reduce the need for bookkeeping
- D. To avoid all records being maintained
Answer: B. To prevent and detect errors and frauds
A main objective of internal check is to ensure accuracy in records and to detect or prevent fraud and mistakes.
A main objective of internal check is to ensure accuracy in records and to detect or prevent fraud and mistakes.
Which of the following is NOT a principle of internal check?
- A. Rotation of duties
- B. Division of responsibilities
- C. Independent checking
- D. Concentration of all work in one person
Answer: D. Concentration of all work in one person
Internal check avoids concentration of work in one person because that increases the risk of fraud and error.
Internal check avoids concentration of work in one person because that increases the risk of fraud and error.
If the same employee handles both cash receipts and cash recording, the main risk is:
- A. Improved control
- B. Better division of work
- C. Opportunity for misappropriation of cash
- D. Automatic detection of errors
Answer: C. Opportunity for misappropriation of cash
When receipt and recording are handled by one person, concealment of fraud becomes easier.
When receipt and recording are handled by one person, concealment of fraud becomes easier.
In a company, one person prepares the sales invoice, another dispatches the goods, and a third records the sale in the ledger. This arrangement mainly ensures:
- A. Concentration of responsibility
- B. Absence of control
- C. Internal check through segregation of duties
- D. Elimination of all clerical work
Answer: C. Internal check through segregation of duties
This is a classic internal check setup where different persons handle different stages of the transaction to create control.
This is a classic internal check setup where different persons handle different stages of the transaction to create control.