Audit Analyst

Audit Analyst Interview Questions and Answers for Freshers

Updated 28 Dec 2022

Q1. What is profit and loss account, financial statement and cash flow statement

Ans.

Profit and loss account, financial statement, and cash flow statement are all important financial documents used to track a company's financial performance.

  • Profit and loss account shows a company's revenues, expenses, and net income or loss over a specific period of time.

  • Financial statements provide a comprehensive overview of a company's financial health, including its assets, liabilities, and equity.

  • Cash flow statement shows the inflow and outflow of cash in a company over ...read more

Q2. What are different elements in cash flow statement and explain them.

Ans.

The cash flow statement has three main elements: operating activities, investing activities, and financing activities.

  • Operating activities: cash inflows and outflows from the company's core business operations, such as sales and expenses.

  • Investing activities: cash inflows and outflows from investments, such as buying or selling property, plant, and equipment.

  • Financing activities: cash inflows and outflows from financing, such as issuing or repaying debt, or paying dividends t...read more

Q3. What is Bank Reconciliation Statement and state it’s purpose

Ans.

Bank Reconciliation Statement is a document that compares the bank statement with the company's records.

  • It helps to identify any discrepancies between the two records.

  • It ensures that all transactions are recorded accurately.

  • It helps to detect any fraudulent activities.

  • It is prepared at regular intervals, usually monthly.

  • Example: If a company issues a check but it has not yet cleared the bank, it will be reflected in the company's records but not in the bank statement.

  • Example:...read more

Q4. Difference between current and non current in balance sheet

Ans.

Current assets/liabilities are expected to be used/settled within a year, while non-current assets/liabilities have a longer life span.

  • Current assets include cash, accounts receivable, inventory, and prepaid expenses.

  • Current liabilities include accounts payable, short-term loans, and accrued expenses.

  • Non-current assets include property, plant, and equipment, long-term investments, and intangible assets.

  • Non-current liabilities include long-term loans, deferred tax liabilities,...read more

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Q5. Difference between amortization and depreciation

Ans.

Amortization is for intangible assets while depreciation is for tangible assets.

  • Amortization is the process of spreading the cost of an intangible asset over its useful life.

  • Depreciation is the process of spreading the cost of a tangible asset over its useful life.

  • Amortization is used for assets like patents, copyrights, and trademarks.

  • Depreciation is used for assets like buildings, machinery, and vehicles.

Q6. How working capital is calculated

Ans.

Working capital is calculated by subtracting current liabilities from current assets.

  • Current assets include cash, accounts receivable, inventory, and short-term investments.

  • Current liabilities include accounts payable, short-term loans, and accrued expenses.

  • The formula for working capital is: Current Assets - Current Liabilities.

  • A positive working capital indicates that a company has enough short-term assets to cover its short-term liabilities.

  • A negative working capital indic...read more

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Q7. Rectification entry for wrong posted entry

Ans.

Rectification entry is made to correct a wrong posted entry in accounting records.

  • Identify the incorrect entry and the correct entry to be made

  • Prepare a rectification entry to reverse the incorrect entry and record the correct entry

  • Ensure that the rectification entry is properly documented and approved

  • Post the rectification entry to the accounting records

Q8. 2) what is accounting

Ans.

Accounting is the process of recording, classifying, and summarizing financial transactions to provide information that is useful in making business decisions.

  • Accounting involves keeping track of financial transactions such as sales, purchases, and payments

  • It includes classifying these transactions into categories such as assets, liabilities, and equity

  • The information is then summarized in financial statements such as balance sheets and income statements

  • Examples of accounting...read more

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Q9. Difference between provision and reserve

Ans.

Provision is an estimated liability while reserve is a part of profit set aside for future use.

  • Provision is an estimated liability that a company sets aside to cover a known or potential future obligation.

  • Reserve is a part of profit that a company sets aside for future use, such as for expansion or to cover unexpected expenses.

  • Provisions are usually based on estimates and can be adjusted as more information becomes available.

  • Reserves are not based on estimates and are set asi...read more

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