MCQs · Q8
Q.Which of the following audit techniques is most useful for detecting a fraud such as the misappropriation of cash?
(a) Reviewing only the closing Trial Balance for arithmetical accuracy
(b) Conducting a surprise, unannounced verification of cash-in-hand, together with scrutiny of unusual or unauthorised journal entries
(c) Relying solely on management's oral assurance that all cash has been properly accounted for
(d) Checking only the additions and subtractions in the Cash Book
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Start your 14-day free trial to unlock the full solution →Why (b) is correct: Because a fraud (unlike an error) is deliberately hidden, an announced audit visit gives the wrongdoer time to prepare a plausible cover story or temporarily restore a shortfall. A surprise, unannounced check of cash-in-hand removes that opportunity, and scrutinising unusual or unauthorised journal entries targets exactly the kind of after-the-fact adjustments (like teeming-and-lading cover-up entries) a fraud typically requires.
Why the distractors are wrong:
- (a) and (d) are purely arithmetical checks — useful for catching unintentional casting/posting errors, but a deliberately concealed fraud is, by design, arithmetically consistent and will not show up this way. …
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