Chapter 2: Internal Control — Online MCQ Test
AUDITING · CLASS 12th · Tamil Nadu State Board
Practice Chapter 2: Internal Control with a free chapter-wise online MCQ test.
This chapter covers: Focusing on broad control frameworks this chapter details the meaning objectives principles and types of internal control systems. It examines evaluation methods auditor responsibi....
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Chapter 2: Internal Control — Important Questions & Answers
What is the main objective of internal control?
- A. To prepare annual financial statements
- B. To safeguard assets and ensure reliable accounting records
- C. To reduce the number of employees in an organisation
- D. To increase the market value of shares
Answer: B. To safeguard assets and ensure reliable accounting records
Internal control is designed to protect assets and ensure the accuracy and reliability of records. It also helps in preventing and detecting errors and fraud.
Internal control is designed to protect assets and ensure the accuracy and reliability of records. It also helps in preventing and detecting errors and fraud.
Internal control is mainly a system of ________.
- A. checks and balances
- B. profit distribution
- C. tax assessment
- D. share valuation
Answer: A. checks and balances
Internal control consists of procedures and methods that create checks and balances within an organisation. This helps in proper control over operations.
Internal control consists of procedures and methods that create checks and balances within an organisation. This helps in proper control over operations.
Which of the following is NOT an objective of internal control?
- A. Preventing fraud
- B. Ensuring compliance with policies
- C. Maintaining accurate records
- D. Increasing share price in the stock market
Answer: D. Increasing share price in the stock market
Internal control is intended for safeguarding assets, accuracy, and compliance, not for directly increasing the market price of shares.
Internal control is intended for safeguarding assets, accuracy, and compliance, not for directly increasing the market price of shares.
Which statement best distinguishes internal control from internal check?
- A. Internal control is narrower than internal check
- B. Internal check is a part of internal control
- C. Internal control is only for small businesses
- D. Internal check is done only by auditors
Answer: B. Internal check is a part of internal control
Internal control is the broader system, while internal check is one of its important components. Internal check mainly focuses on division of work and automatic checks.
Internal control is the broader system, while internal check is one of its important components. Internal check mainly focuses on division of work and automatic checks.
Which of the following is the most appropriate statement about internal control evaluation by an auditor?
- A. If internal control is strong, no audit work is needed
- B. Evaluation of internal control helps decide the extent of substantive testing
- C. Internal control evaluation is done only after the audit report is issued
- D. Evaluation of internal control is the same as preparing accounts
Answer: B. Evaluation of internal control helps decide the extent of substantive testing
Auditors evaluate internal control to assess risk and plan the audit. A strong system may reduce the extent of detailed testing, but not eliminate audit procedures.
Auditors evaluate internal control to assess risk and plan the audit. A strong system may reduce the extent of detailed testing, but not eliminate audit procedures.