Not for profit organizations Audit MCQs

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Not‐for‐profit organizations (NFPOs) may be required to have an audit performed under local law, may choose to have an audit performed on a voluntary basis
Not‐for‐profit organization Audit MCQs

Not for profit organizations Audit

Not‐for‐profit organizations (NFPOs) may be required to have an audit performed under local law, may choose to have an audit performed on a voluntary basis in order to add credibility to their financial statements. Here on MCQs.club we have prepared easy Multiple-Choice Questions (MCQs) on Not‐for‐profit organizations that cover MCQs on how to audit NPO, not-for-profit organization audit & accounting guide, how to audit NPO with examples. These MCQs are helpful for Competitive exams, Professional accountancy exams and Business management exams.

  1. A charity organisation is an example of not-for-profit organisations (NFPOs).
    1. True
    2. False
  1. NFPOs may be required to have an audit performed ______________ in order to add credibility to their financial statements.
    1. under local law
    2. may choose to have an audit performed on a voluntary basis
    3. Both A or B
    4. None
  1. If the NFPO requests an audit to be performed on a voluntary basis, or requires a review to be carried out, the scope of the work and the nature of any report issued will be agreed in advance between the auditor and the NFPO.
    1. True
    2. False
  1. Key areas of internal control in an NFPO might include:
    1. segregation of duties (although this may be difficult in a small NFPO with only a few employees)
    2. authorisation of spending, cash controls, controls over income (donations, cash collections, membership fees, grants)
    3. the use of funds only for authorised purposes.
    4. All of the above
  1. The key factors to consider while auditing not-for-profit organisations (NFPOs) include:
    1. There may be a limitation on the scope of the audit if obtaining audit evidence is a problem.
    2. There may be a lack of predictable income or identifiable relationship between expenditure and income which could make analytical review less appropriate.
    3. Restricted funds may exist where the organisation is only allowed to use certain funds for specific purposes.
    4. All of the above
  1. Important features of a not-for-profit (NFP) include:
    1. Profit maximisation is not their main objective. Objectives will be either social or philanthropic.
    2. There are no shareholders.
    3. They will not distribute dividends.
    4. All of the above
  1. NFP organisations such as charities which are not established as charitable companies will need to prepare:
    1. A statement of financial activities – similar to a statement of profit or loss.
    2. A balance sheet – showing assets and liabilities
    3. A cash flow statement.
    4. Notes to the financial statements.
    1. All of the above
    2. (I) and (II)only
    3. (I) (II) and (IV) only
    4. None

  1. Some NFP entities, particularly small charities, may have weaker control systems due to:
    1. a lack of segregation of duties, as the organisation may not employ many staff in order to keep overheads down.
    2. the use of volunteers, who are likely to be unqualified and have little awareness of the importance of controls.
    3. the use of less formalised systems and controls.
    4. All of the above
  1. Which of the following is correct?
    1. With many charities, much of the income received is by way of donation. Some of these transactions will not be accompanied by invoices, orders or despatch notes.
    2. Assessing the going concern status of a NFP entity may also be more difficult, particularly for charities who are reliant on voluntary donations.
    3. NFPs may have complex internal and external regulations governing their activities, reporting requirements and taxation system.
    4. All of the above
  1. Quite often, the scope of the external audit of a NFP is much larger than that for a company. Auditors of NFPs may be required to perform additional assignments such as:
    1. Value for money audits – assessing whether the organisation is getting the most out of the money spent.
    2. Regularity audits – ensuring the expenditure of the organisation is in accordance with the regulations/legislation governing it.
    3. Performance indicators – auditing the targets of the organisation that have to be reported to stakeholders
    4. All of the above

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