ACCA BT Business functions, regulation and technology: practice questions with answers

Question 1

Money laundering usually happens in three stages. At which stage are complex transactions used to hide the source of the money?

1. A Placement
2. B Extraction
3. C Layering
4. D Integration

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Answer: C. The stages are placement (getting cash into the system), layering (disguising its origin through complex transactions) and integration (returning it as apparently legitimate funds).

Question 2

Which of the following describes a difference between internal audit and external audit?

1. A Internal auditors must be independent of the company
2. B Only internal auditors are required by law for all companies
3. C External auditors report to shareholders; internal auditors report to management or the audit committee
4. D External auditors review operational efficiency for management

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Answer: C. External auditors give an opinion on the financial statements to shareholders. Internal auditors work for the organisation and report to management or the audit committee.

Question 3

Information is data that has been processed so that it is meaningful to the user.

1. A True
2. B False

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Answer: A. Data is raw facts; information is data processed into a useful form.

Question 4

Hartwell Co makes patio heaters, and 70% of its annual sales occur between October and January. The production director is comparing two plans: producing at a steady rate throughout the year and building up inventory, or matching production to monthly demand by using overtime and temporary staff in the busy months. Which information from the accounting function is most relevant to her decision?

1. A The costs of storing, insuring and financing extra inventory, compared with overtime and temporary staff costs
2. B The total sales revenue expected for the year, which will be the same whichever plan is chosen
3. C The original cost of the factory building, which Hartwell Co bought ten years ago and still owns outright
4. D The selling prices that Hartwell Co's main competitors charged for their patio heaters during last year's winter season

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Answer: A. The accounting function supports production planning by providing information about the costs that will differ between alternatives. Steady (level) production keeps the workforce stable but builds up inventory, which incurs storage, insurance, financing and obsolescence costs. Matching production to demand avoids most of these costs but incurs overtime premiums, temporary labour and possibly quality problems. Costs and revenues that are the same under both plans, or have already been incurred, are not relevant.

Question 5

What is the main purpose of a variance report?

1. A To set out the planned income and expenditure for the coming year
2. B To show the detailed cost of making each unit of a product
3. C To compare actual results with the budget so that managers can investigate significant differences and take action

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Answer: C. Budgets set out plans in financial terms; cost schedules show the detailed costs of products or activities; variance reports compare actual results with the budget so that managers can identify significant differences, investigate their causes and take control action.

Question 6

Aldon Co's external auditor has issued an unmodified opinion on the company's financial statements for the year. What does this mean?

1. A The auditor guarantees that no fraud of any kind took place at Aldon Co during the year
2. B The auditor has checked every transaction that Aldon Co recorded in its accounting records during the year
3. C The auditor confirms that Aldon Co's management ran the business efficiently and that the company is profitable
4. D In the auditor's opinion, the financial statements give a true and fair view under the applicable framework

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Answer: D. The external auditor is independent of the company and reports to the shareholders. The auditor gives an opinion on whether the financial statements give a true and fair view (or are presented fairly) in accordance with the applicable financial reporting framework. An unmodified opinion means the auditor has concluded that they do. The audit provides reasonable assurance, based on testing, not a guarantee that there is no fraud or error, and it does not assess management efficiency.