40+ Assurance Associate Interview Questions and Answers

Journal entries for sales return and purchase return.

• Sales return journal entry: Debit Sales Returns and Credit Accounts Receivable/Accounts Payable.

• Purchase return journal entry: Debit Accounts Payable and Credit Purchase Returns.

The interview questions cover topics related to audit, accounting, cash sales, depreciation, and bank reconciliation statement.

• Audit and accounting are closely related as audit involves examining and verifying financial records prepared by accountants.

• Cash sales are recorded in the cash book and are an important source of revenue for businesses.

• Depreciation is the systematic allocation of the cost of a fixed asset over its useful life.

• BRS is prepared to reconcile the bank bal...read more

Auditing is the process of examining financial records to ensure accuracy and compliance with laws and regulations.

• Depreciation methods include straight-line, double-declining balance, and units of production.

• Basic journal entries include debits and credits to accounts such as cash, accounts receivable, and accounts payable.

• Auditing involves testing internal controls, verifying transactions, and assessing financial statements.

• Examples of auditing procedures include reviewing ...read more

I have X years of experience. Anti-money laundering refers to the laws, regulations, and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income.

• I have X years of experience in the field of anti-money laundering.

• Anti-money laundering (AML) is a set of laws, regulations, and procedures designed to prevent the illegal generation of income.

• AML is intended to prevent criminals from disguising illegally obtained funds as legitimate in...read more

GST is Goods and Services Tax, a comprehensive indirect tax levied on the supply of goods and services in India.

• GST was implemented in India on July 1, 2017, replacing multiple indirect taxes like VAT, excise duty, and service tax.

• It is a destination-based tax system, where the tax is collected at the point of consumption.

• GST aims to simplify the tax structure, eliminate cascading effect, and create a unified market across the country.

• It has different tax slabs for different ...read more

GAAP stands for Generally Accepted Accounting Principles and is a set of accounting standards used in the US.

• GAAP is a set of guidelines for financial reporting that ensures consistency and transparency in financial statements.

• It includes principles for revenue recognition, expense recognition, and asset valuation.

• Examples of GAAP include the matching principle, which requires expenses to be recognized in the same period as the revenue they helped generate, and the going conc...read more

Depreciation is the decrease in value of an asset over time due to wear and tear, obsolescence, or other factors.

• Depreciation is a method used to allocate the cost of an asset over its useful life.

• It is calculated by subtracting the asset's salvage value from its initial cost and dividing it by the asset's useful life.

• There are different methods of calculating depreciation, such as straight-line, declining balance, and units of production.

• Straight-line depreciation evenly dis...read more

Oligopoly is a market structure where a few large firms dominate the market.

• The firms in an oligopoly have significant market power.

• They can influence the price and output in the market.

• The demand curve for an oligopoly is kinked due to the interdependence of firms.

• The kinked demand curve shows that firms will match price cuts but not price increases.

• Examples of oligopolies include the automobile industry and the soft drink industry.

Balance Sheet shows the financial position of a company at a specific point in time, while Profit & Loss Account shows the company's financial performance over a period of time.

• Balance Sheet is a snapshot of a company's assets, liabilities, and equity at a specific date.

• Profit & Loss Account shows the company's revenues, expenses, and net income or loss over a specific period, such as a year.

• Balance Sheet helps in assessing the company's liquidity, solvency, and financial hea...read more

Depreciation methods include straight-line, double-declining balance, and units of production. Cash flow statement comprises of operating, investing, and financing activities.

• Straight-line method depreciates assets evenly over their useful life

• Double-declining balance method depreciates assets more heavily in the early years of their useful life

• Units of production method depreciates assets based on their usage

• Cash flow statement shows the inflow and outflow of cash from opera...read more

Accrued income is income that has been earned but not yet received or recorded in the accounting books.

• Accrued income is recognized as a current asset on the balance sheet.

• It is recorded through an adjusting entry, which debits an accrued income account and credits the corresponding revenue account.

• Examples of accrued income include interest on investments, rent, and services rendered but not yet billed.

• Accrued income is important for accurate financial reporting and forecast...read more

Auditing is the process of examining financial records to ensure accuracy and compliance with regulations.

• Auditing involves reviewing financial statements, transactions, and records.

• The goal of auditing is to provide assurance that financial information is accurate and reliable.

• Auditors may also identify areas for improvement in financial reporting and internal controls.

• Examples of audits include financial statement audits, internal audits, and compliance audits.

Present value is calculated to determine the current worth of future cash flows.

• Present value helps in evaluating the profitability of an investment or project.

• It takes into account the time value of money, as money received in the future is worth less than money received today.

• Present value is used in various financial calculations such as net present value (NPV) and discounted cash flow (DCF) analysis.

• It allows for comparing cash flows occurring at different points in time....read more

Costing is done to determine the cost of production and to make informed decisions regarding pricing and profitability.

• Costing helps in determining the actual cost of production.

• It helps in setting the selling price of the product or service.

• Costing helps in identifying areas where cost reduction can be done.

• It helps in making informed decisions regarding profitability and future investments.

• Examples of costing methods include job costing, process costing, and activity-based ...read more

Audit is a systematic and independent examination of financial statements, records, operations, and performance of an organization.

• Audit is a process of evaluating the financial statements of an organization to ensure their accuracy and reliability.

• It involves examining the records, operations, and performance of an organization to identify any discrepancies or irregularities.

• The purpose of an audit is to provide assurance to stakeholders that the financial statements are fre...read more

Debit and credit are two sides of an accounting transaction. Debit refers to an entry on the left side of an account, while credit refers to an entry on the right side of an account.

• Debit is used to record an increase in assets or a decrease in liabilities or equity.

• Credit is used to record a decrease in assets or an increase in liabilities or equity.

• Debit and credit must always balance in an accounting transaction.

• For example, when a company purchases inventory with cash, th...read more

AML/KYC refers to Anti-Money Laundering and Know Your Customer regulations that financial institutions must comply with.

• AML/KYC regulations are designed to prevent money laundering and terrorist financing.

• Financial institutions must verify the identity of their customers and monitor their transactions for suspicious activity.

• Examples of suspicious activity include large cash deposits, frequent international transfers, and transactions with high-risk countries.

• AML/KYC complian...read more

Covid's impact on business and reporting considerations for Assurance Associate

• Consider the impact of Covid on the business's financial statements

• Assess the impact on revenue, expenses, and cash flows

• Evaluate the adequacy of disclosures related to Covid in the financial statements

• Consider the impact of Covid on internal controls and the audit process

• Assess the going concern assumption in light of Covid

• Consider the impact of government assistance programs on the financial stat...read more

A journal entry of accrued interest is recorded to recognize interest expense that has been incurred but not yet paid.

• Accrued interest is a liability account that represents the amount of interest expense that has been incurred but not yet paid.

• The journal entry for accrued interest involves debiting the interest expense account and crediting the accrued interest payable account.

• For example, if a company has incurred $1,000 of interest expense but has not yet paid it, the jou...read more

Mortgage is a loan taken to purchase a property, where the property itself serves as collateral for the loan.

• Mortgage is a type of secured loan.

• The borrower pledges the property as collateral for the loan.

• The lender holds the right to seize the property if the borrower fails to repay the loan.

• Mortgages are usually long-term loans with fixed or adjustable interest rates.

• Common types of mortgages include conventional, FHA, and VA loans.

A journal entry for rent outstanding is recorded to show unpaid rent expenses.

• Debit Rent Expense account for the amount of rent owed

• Credit Rent Payable account for the same amount

• Example: Debit Rent Expense $1,000, Credit Rent Payable $1,000

Audit risk is the risk that an auditor may give an inappropriate opinion on financial statements.

• It is the risk that the auditor may miss material misstatements in the financial statements.

• It is the risk that the auditor may give an incorrect opinion on the financial statements.

• It is the combination of inherent risk, control risk, and detection risk.

• The auditor must assess and manage audit risk to provide reasonable assurance on the financial statements.

• Examples of audit risk...read more

Provision is an amount set aside for a specific purpose or expense.

• Provision is a financial term used in accounting.

• It is an amount set aside for a specific purpose or expense.

• Provisions are made to cover future expenses or losses.

• Examples include provisions for bad debts, warranties, and taxes.

• Provisions are recorded as liabilities on the balance sheet.

• They are adjusted over time based on changes in circumstances.

• Provisions are important for accurate financial reporting and ...read more

Contingent liabilities are potential liabilities that may arise in the future depending on the outcome of uncertain events.

• Contingent liabilities are not recorded on the balance sheet but disclosed in the footnotes.

• They are dependent on the occurrence of a specific event, such as a lawsuit or warranty claim.

• Examples include pending lawsuits, product warranties, and guarantees on loans.

• Companies must assess the likelihood of the contingent liability occurring and estimate the ...read more

Audit is a systematic examination of an organization's financial records to ensure accuracy and compliance with regulations.

• Audit involves reviewing financial statements, transactions, and internal controls.

• The purpose of an audit is to provide assurance to stakeholders that the financial information is reliable.

• Auditors must be independent and objective in their assessments.

• Examples of audits include external audits conducted by accounting firms and internal audits performed...read more

Audits ensure financial statements are accurate and reliable.

• To provide assurance to stakeholders that financial statements are accurate and reliable

• To comply with legal and regulatory requirements

• To identify and mitigate financial risks

• To improve internal controls and operational efficiency

• To enhance credibility and reputation of the organization

• Example: Auditing a company's financial statements to ensure compliance with GAAP

• Example: Auditing a non-profit organization's fina...read more

Accounting standards are guidelines and rules set by regulatory bodies to ensure consistency and transparency in financial reporting.

• Accounting standards provide a framework for financial reporting

• They ensure consistency and comparability of financial statements

• Examples of accounting standards include GAAP, IFRS, and FASB

• They are set by regulatory bodies such as the SEC and the FASB

Deferred tax is a liability or asset that arises due to temporary differences between accounting and tax rules.

• Deferred tax is calculated using the tax rate that is expected to apply when the asset is realized or liability is settled.

• Examples of temporary differences include depreciation, inventory valuation, and revenue recognition.

• If accounting income is greater than taxable income, a deferred tax liability is created. If taxable income is greater than accounting income, a ...read more

Excel shortcut formulae

• Use Ctrl + D to copy the formula down a column

• Use Ctrl + R to copy the formula across a row

• Use F4 to toggle between absolute and relative references

Current liabilities are debts or obligations that are due within one year or the operating cycle of a business.

• Examples include accounts payable, short-term loans, accrued expenses, and taxes owed.

• They are listed on the balance sheet and are important for assessing a company's liquidity and ability to meet short-term obligations.

• Current liabilities are different from long-term liabilities, which are debts or obligations due in more than one year.

• They can also include provisio...read more

Depreciation is the allocation of the cost of an asset over its useful life.

• Depreciation is a non-cash expense that reduces the value of an asset over time.

• It is recorded as an expense in the income statement and reduces the net income.

• There are various methods of depreciation such as straight-line, declining balance, and sum-of-the-years-digits.

• Depreciation is important for accurate financial reporting and tax purposes.

• Example: A company buys a machine for $10,000 with a use...read more

Prepaid expenses are expenses paid in advance and recorded as assets until they are used or consumed.

• Prepaid expenses are initially recorded as assets on the balance sheet

• As the prepaid expense is used or consumed, it is recognized as an expense on the income statement

• The entry for prepaid expenses is a debit to the prepaid expense account and a credit to the cash account

• Examples of prepaid expenses include rent, insurance, and subscriptions

Working capital is the difference between current assets and current liabilities. Current ratio is a measure of a company's ability to pay its short-term obligations.

• Working capital is calculated as current assets minus current liabilities.

• Current ratio is calculated as current assets divided by current liabilities.

• A high working capital and current ratio indicate a company's strong financial health.

• A low working capital and current ratio may signal liquidity issues.

• For examp...read more

CARO 2020 has introduced new reporting requirements and expanded the scope of the audit compared to CARO 2016.

• CARO 2020 requires reporting on additional matters such as fraud, internal financial controls, and corporate social responsibility.

• CARO 2020 has expanded the scope of the audit to include more types of companies, such as one-person companies and small companies.

• CARO 2020 has increased the threshold for reporting on loans and advances made by the company.

• CARO 2020 has ...read more

VLOOKUP is a function in Excel used to search for a value in a table and return a corresponding value.

• Used to search for a value in the first column of a table and return a value in the same row from a specified column

• Requires four arguments: lookup_value, table_array, col_index_num, and range_lookup

• Example: =VLOOKUP(A2, B2:D6, 3, FALSE) - searches for the value in cell A2 in the table range B2:D6 and returns the value in the 3rd column

Depreciation is the allocation of the cost of tangible assets over their useful life, while impairment is a reduction in the value of assets.

• Depreciation is a non-cash expense that reflects the wear and tear of tangible assets over time.

• Impairment occurs when the carrying amount of an asset exceeds its recoverable amount.

• Depreciation is recorded on the income statement, while impairment is recognized on the balance sheet.

• Examples of assets subject to depreciation include buil...read more

VLOOKUP is a function in Excel used to search for a value in a table and return a corresponding value from another column.

• Used to search for a value in the first column of a table and return a value in the same row from a specified column

• Requires four arguments: lookup_value, table_array, col_index_num, and range_lookup

• Example: =VLOOKUP(A2, B2:D10, 3, FALSE) - searches for the value in cell A2 in the range B2:D10 and returns the value in the 3rd column

• Commonly used for data a...read more

Golden rules of accounting are basic principles that guide the process of recording financial transactions.

• The three golden rules of accounting are: Debit what comes in, Credit what goes out; Debit the receiver, Credit the giver; Debit all expenses and losses, Credit all incomes and gains.

• These rules help ensure that financial transactions are accurately recorded and classified.

• For example, when a company receives cash from a customer, the cash account is debited (increased) ...read more

A pivot table is a data summarization tool used in spreadsheet programs where data can be rearranged and summarized in various ways.

• Pivot tables allow users to quickly summarize and analyze large amounts of data

• Users can rearrange rows and columns to see different perspectives of the data

• Users can apply filters, sort data, and perform calculations within the pivot table

• Pivot tables are commonly used in Excel for financial analysis, sales reporting, and data visualization