You’re on a roll
Create a free account to save your ACCA progress, track your accuracy by topic, and pick up right where you left off.
Free Questions › ACCA › Business and Technology
Free ACCA Business and Technology Practice Questions & Answers
300 exam-style Business and Technology questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 121
An external audit provides:
Select an option first.
Correct answer: B — An independent opinion on whether the financial statements give a true and fair view
Explanation: External auditors give an independent opinion on whether financial statements are free from material misstatement. They do not provide a guarantee, review all transactions, or assess operational efficiency.
Question 122
Which of the following is an example of a preventive internal control?
Select an option first.
Correct answer: B — Requiring authorisation before a purchase is made
Explanation: Preventive controls aim to stop errors or fraud before they occur. Detective controls identify problems after they happen — such as variance analysis, reconciliations, and fraud reporting.
Question 123
Fraud is best defined as:
Select an option first.
Correct answer: B — Intentional deception to gain an unfair or unlawful advantage
Explanation: Fraud is deliberate and intentional — it involves deception for financial or other gain. Accidental errors are not fraud. Poor controls may facilitate fraud but are not fraud themselves.
Question 124
Money laundering involves:
Select an option first.
Correct answer: B — Disguising the proceeds of criminal activity to make them appear legitimate
Explanation: Money laundering is the process of making illegally obtained funds appear legitimate by passing them through a series of transactions. Tax avoidance through legal means is not money laundering.
Question 125
The three stages of money laundering are:
Select an option first.
Correct answer: B — Placement, layering, and integration
Explanation: The three stages are: Placement (introducing criminal proceeds into the financial system), Layering (concealing the trail through complex transactions), and Integration (re-entering funds as apparently legitimate money).
Get the full ACCA question bank — free
Drop your email and we'll send you fresh ACCA practice questions, fully worked solutions and exam-deadline reminders. No spam — unsubscribe in one click.
Want to save your score and take a full mock exam? Create a free account →
Question 126
Which of the following is a key responsibility of an internal auditor?
Select an option first.
Correct answer: B — Evaluating and improving the effectiveness of risk management, control, and governance processes
Explanation: Internal auditors review and improve internal controls, risk management, and governance. Expressing an opinion for external users is the external auditor's role. Tax strategy is finance's responsibility.
Question 127
Corporate governance refers to:
Select an option first.
Correct answer: B — The system by which companies are directed and controlled
Explanation: Corporate governance is the framework of rules, relationships, systems, and processes by which authority is exercised and accountability enforced in corporations.
Question 128
The agency problem in corporate governance arises because:
Select an option first.
Correct answer: B — Managers (agents) may act in their own interests rather than those of shareholders (principals)
Explanation: The agency problem occurs when agents (managers) have different interests from principals (shareholders) and may act for their own benefit. Governance mechanisms aim to align these interests.
Question 129
A non-executive director (NED) differs from an executive director primarily because:
Select an option first.
Correct answer: B — NEDs are not involved in day-to-day management but provide independent oversight
Explanation: NEDs provide independent scrutiny and oversight without being involved in daily management. They are typically paid fees. Executive directors manage day-to-day operations.
Question 130
Which of the following best describes the purpose of an audit committee?
Select an option first.
Correct answer: B — To oversee financial reporting, internal controls, and the relationship with external auditors
Explanation: The audit committee oversees financial reporting integrity, internal control systems, and liaises with auditors. Remuneration is set by the remuneration committee. Finance department prepares financial statements.
Question 131
Transparency in corporate governance means:
Select an option first.
Correct answer: B — Disclosing relevant information to stakeholders in a clear and timely manner
Explanation: Transparency requires open and timely disclosure of relevant information to stakeholders. Opacity and secrecy are contrary to good governance principles.
Question 132
The UK Corporate Governance Code is based on the principle of:
Select an option first.
Correct answer: B — Comply or explain — companies must comply or explain why they have not
Explanation: The comply or explain principle allows listed companies flexibility — they must either follow code provisions or explain their non-compliance to shareholders.
Question 133
Which of the following best describes the prudence concept in accounting?
Select an option first.
Correct answer: B — Revenues and gains should not be anticipated; losses should be provided for as soon as they are foreseen
Explanation: Prudence requires caution: do not overstate assets or income, and recognise potential losses as soon as they are identified. This protects users from over-optimistic financial statements.
Question 134
The accruals concept requires that:
Select an option first.
Correct answer: C — Income and expenses are matched to the period in which they are earned or incurred, regardless of cash flow
Explanation: The accruals (or matching) concept requires income and expenses to be recognised in the period they are earned or incurred. This contrasts with the cash basis, which records only cash receipts and payments.
Question 135
A bank reconciliation is an example of which type of internal control?
Select an option first.
Correct answer: B — Detective control
Explanation: A bank reconciliation compares the cash book with the bank statement to identify discrepancies — it detects errors or fraud after they have occurred. Preventive controls stop errors before they happen.
Question 136
Which of the following best describes a directors remuneration report?
Select an option first.
Correct answer: B — A disclosure of how executive directors are paid, including salary, bonuses, and share options
Explanation: Listed companies must disclose executive remuneration in a remuneration report, covering salary, bonuses, pension contributions, and share-based payments. This promotes transparency and accountability.
Question 137
Which of the following is an example of a liability on a balance sheet?
Select an option first.
Correct answer: B — Money owed to a supplier (trade payable)
Explanation: Liabilities are amounts owed by the business. Trade payables (money owed to suppliers) are current liabilities. Machines, cash, and inventory are assets.
Question 138
Equity on the balance sheet represents:
Select an option first.
Correct answer: B — The owners residual interest in the assets after deducting liabilities
Explanation: Equity = Assets minus Liabilities. It represents the owners claim on the business. It includes share capital, retained earnings, and reserves. It is not the same as total debt or market capitalisation.
Question 139
Which of the following best describes the concept of materiality in auditing?
Select an option first.
Correct answer: B — Misstatements are material if they could influence the economic decisions of users of the financial statements
Explanation: Materiality is a threshold — misstatements above it could influence users decisions. Auditors focus their work on material items. Both quantitative (size) and qualitative (nature) factors determine materiality.
Question 140
Which of the following is a key objective of financial reporting?
Select an option first.
Correct answer: B — To provide relevant and reliable financial information useful to a wide range of users in making economic decisions
Explanation: Financial reporting aims to give a true and fair view of financial performance and position, serving investors, lenders, regulators, and other stakeholders. Minimising tax is a separate objective.
Question 141
A cash flow statement is primarily used to:
Select an option first.
Correct answer: B — Show how cash has been generated and used during a period
Explanation: The cash flow statement tracks actual cash inflows and outflows, helping users assess liquidity and financial flexibility. Profit calculation is the income statement role. Valuation and transaction recording are separate.
Question 142
Which of the following best describes a substantive test in auditing?
Select an option first.
Correct answer: B — A test providing direct evidence about the completeness and accuracy of financial statement figures
Explanation: Substantive testing gathers direct evidence on amounts and disclosures in the financial statements. Controls testing evaluates whether controls are designed and operating effectively. Both are part of the audit evidence process.
Question 143
Which of the following is an example of a capital expenditure?
Select an option first.
Correct answer: B — Purchasing a new manufacturing machine expected to last 10 years
Explanation: Capital expenditure (capex) is spending on long-term assets that provide benefit over multiple periods. Revenue expenditure covers day-to-day operating costs like salaries, stationery, and utilities.
Question 144
The income statement (profit and loss account) shows:
Select an option first.
Correct answer: B — Revenue, expenses, and profit or loss over a reporting period
Explanation: The income statement reports income and expenses over a time period, resulting in net profit or loss. The balance sheet shows position at a date. The cash flow statement tracks cash movements.
Question 145
The main difference between an internal audit and an external audit is:
Select an option first.
Correct answer: B — Internal audit serves management; external audit serves shareholders and external stakeholders
Explanation: Internal audit is an internal management tool improving controls and governance. External audit provides independent assurance to shareholders and others that financial statements are reliable.
Question 146
The stewardship role of directors refers to:
Select an option first.
Correct answer: B — Directors managing company resources responsibly on behalf of shareholders
Explanation: Stewardship means directors act as custodians of shareholder assets, managing them responsibly and reporting honestly. This accountability relationship is at the heart of corporate governance.
Question 147
Liquidity in a business context refers to:
Select an option first.
Correct answer: B — The ability to meet short-term financial obligations as they fall due
Explanation: Liquidity measures whether a business has enough short-term assets (cash, receivables) to pay its short-term liabilities when due. Poor liquidity can cause insolvency even for profitable businesses.
Question 148
Which of the following ratios measures a company's ability to pay short-term debts?
Select an option first.
Correct answer: C — Current ratio (current assets divided by current liabilities)
Explanation: The current ratio compares current assets to current liabilities, measuring short-term liquidity. ROCE measures profitability relative to capital. Gross margin measures trading profitability. Gearing measures long-term debt levels.
Question 149
Which of the following best describes a management letter issued by external auditors?
Select an option first.
Correct answer: B — A letter to management highlighting weaknesses in internal controls identified during the audit
Explanation: A management letter (also called a letter of recommendations) is sent by external auditors to management, detailing internal control weaknesses found during the audit and recommending improvements.
Question 150
Which of the following is a potential consequence of poor corporate governance?
Select an option first.
Correct answer: B — Increased risk of fraud, financial misstatement, and loss of stakeholder trust
Explanation: Poor corporate governance raises fraud risk, can lead to financial misstatements, undermines stakeholder confidence, and increases the cost of capital. Good governance has the opposite effects.
More free ACCA topics
Management Accounting401
Financial Accounting400
Corporate and Business Law400
Performance Management400
Financial Reporting400
Financial Management400
Strategic Business Reporting400
Advanced Financial Management400
Advanced Performance Management400
Advanced Taxation400
Taxation300
Audit and Assurance300
Strategic Business Leader300
Advanced Audit and Assurance296
Ten questions in
- The ones you miss are saved as a drill you can repeat
- Your place is kept, on this device and any other
- A streak, if that is the thing that gets you back tomorrow
Every question on this page stays free and open either way.