CA Intermediate Paper 5

Risk Assessment and Internal Control MCQ

Chapter 3 • 9 Questions from ICAI Study Material

Questions

9

Est. Time

14 min

Source

ICAI Book

Sample Questions: Risk Assessment and Internal Control

Preview 4 of 9 questions from Chapter 3

1. Which of the following is true regarding materiality?

A) It is unaffected by nature of an item.
B) It is unaffected by requirements of law or regulations.
C) It is not a matter of professional judgment.
D) It is not always a matter of relative size. ✓

2. The operations of a company are automated substantially. Which of the following statements is most appropriate in this respect?

A) It results in complex business environment. ✓
B) It results in simple business environment and easier audit.
C) Automation has no relationship with complexity of business environment.
D) It results in simple business environment. However, it increases complexity of audit.

3. Who is responsible for maintaining effective internal financial controls?

A) Statutory auditor
B) Audit Committee
C) Management ✓
D) Shareholders
Correct/Incorrect

4. There is direct relationship between materiality and the degree of audit risk.

Correct
Incorrect ✓

Explanation: There is an inverse relationship between materiality and the degree of audit risk. The higher the materiality level, the lower the audit risk and vice versa. For example, the risk that a particular account balance or class of transactions could be misstated by an extremely large amount might be very low but the risk that it could be misstated by an extremely small amount might be very high.