Big 4 Audit Interview Question With Answer In Detail
Q1- Describe yourself in detail without looking in CV.
Suggested Answer: I am a highly motivated, detail-oriented and organized professional who is passionate about auditing and compliance. I have built up considerable experience as an auditor for various companies, and I have an effective and systematic approach to my auditing work. I have a strong aptitude for mathematics and am able to work accurately at a fast pace. I am confident that, if hired, I will be able to add value to the organization and help it achieve its long-term objectives.
Q2- What are your long-term objectives, and how do you intend to achieve them?
Suggested Answer: My long-term objective is to become a leading auditor and compliance professional within the industry. To achieve this, I intend to continue to develop my technical skills and knowledge, by staying up to date with changes in auditing and compliance regulations, and also take on additional responsibilities within the role. I am committed to working hard and pushing myself to achieve my long-term goals, and am confident that I can make a positive contribution to the organization.
Q3- Tell me about a time when you had a team member who was underperforming and how you dealt with the situation.
Suggested Answer: During my previous role, I was managing a team of auditors and one team member was consistently underperforming. I addressed this issue by having an honest and open conversation with the team member, where I expressed my concerns and listened to their perspective. I then provided them with tailored training and guidance on specific areas of the audit process, to help them develop their skills and knowledge. Finally, I was able to set clear expectations of the team member and provide regular feedback and support on their progress. This ultimately enabled them to improve their performance and become an effective member of the team.
Q4- Tell me about a time when you had to handle multiple tasks in order to finish a project on time.
Suggested Answer: During one of my previous projects, I was tasked with auditing a large company, with a very tight deadline. To ensure that I was able to complete the project on time, I had to manage multiple tasks simultaneously. This included organizing and scheduling meetings with stakeholders, conducting interviews with employees, and analyzing financial data. To help me stay organized and efficient, I created a detailed project plan outlining all the tasks and milestones, and used project management software to track my progress. I was able to finish the project on time, and the client was very pleased with the outcome.
Q5- What do you have going for you? What is it that isn't? What exactly do you need to know?
Suggested Answer: I have excellent organizational and communication skills, as well as a strong aptitude for mathematics and problem-solving. I also have a good knowledge of auditing and compliance regulations. What I need to know more about is the specifics of the role I am interviewing for, so that I can tailor my answers to the job requirements and demonstrate how my skills and experience are a good fit for the position.
Q6- According to accounting standards, how to value of a tangible asset ?
Suggested Answer: There are several methods for valuing tangible assets, depending on the type of asset and the purpose of the valuation. Some common methods include:
Cost approach: This involves determining the current cost to replace the asset, including the cost of materials, labor, and any other associated expenses.
Market approach: This involves comparing the asset to similar assets that have been recently sold in the market, and adjusting for any differences in features or condition.
Income approach: This involves estimating the future economic benefits that the asset will generate, and discounting those benefits back to their present value using an appropriate discount rate.
It's important to note that the value of a tangible asset can vary significantly depending on the method used to value it, and different methods may be appropriate for different purposes. It's also important to consider any relevant accounting standards and guidelines when valuing tangible assets.
Q7- What exactly do you mean by taxation?
Suggested Answer: Taxation refers to the practice of levying taxes, or mandatory financial charges or other levies, on individuals or legal entities by a government or other competent authority. Taxes are typically imposed by governments to raise revenue to fund public goods and services, such as education, healthcare, infrastructure, and social welfare programs. Taxes can also be used as a means of regulating economic activity, such as by incentivizing or disincentivizing certain behaviors or transactions.
There are many different types of taxes, including income taxes, sales taxes, property taxes, and value-added taxes, among others. The specific tax laws and rates vary widely across countries and jurisdictions.
In general, taxation is a complex and highly regulated area, and individuals and businesses should seek the guidance of a qualified tax professional or seek out reliable resources to ensure that they are complying with all relevant tax laws and regulations.
Q8- In what ways are the profit and loss account, the balance sheet, and the cash flow statement different from one another? The application of theses
Suggested Answer: The profit and loss (P&L) account, balance sheet, and cash flow statement are all financial statements that provide information about a company's financial performance and position. These statements are typically prepared at the end of an accounting period, such as a month, quarter, or year.
The profit and loss (P&L) account, also known as an income statement, shows a company's revenues, expenses, and net income (profit or loss) over a specific period of time. It provides information about a company's ability to generate profits by selling its products or services.
The balance sheet is a snapshot of a company's financial position at a specific point in time. It shows the company's assets, liabilities, and equity. Assets are resources that the company owns, such as cash, property, and equipment. Liabilities are obligations that the company owes to others, such as loans and accounts payable. Equity represents the residual interest in the assets of the company, after liabilities are deducted. The balance sheet helps to provide a picture of a company's financial position and its ability to meet its obligations.
The cash flow statement shows the movement of cash into and out of a company over a specific period of time. It includes information about the sources of cash, such as revenues from sales, and the uses of cash, such as payments to suppliers and employees. The cash flow statement helps to provide insight into a company's ability to generate and manage cash.
While these financial statements are all related and provide important information about a company's financial performance and position, they serve different purposes and provide different types of information. The profit and loss account focuses on a company's profitability, the balance sheet provides a snapshot of a company's financial position, and the cash flow statement shows the movement of cash into and out of a company.
Q9- When it comes to risk and flexibility, what exactly is the difference?
Suggested Answer: Risk and flexibility are two different aspects of decision-making and problem-solving that can be related but are not necessarily the same thing.
Risk refers to the possibility of experiencing negative consequences or losses as a result of a particular action or decision. It is the uncertainty associated with an outcome and can be thought of as a measure of the potential for loss or gain.
Flexibility, on the other hand, refers to the ability to adapt and adjust to changing circumstances or to consider multiple options and courses of action. It is the ability to be open to new ideas, approaches, or perspectives and to adjust one's plans or actions accordingly.
In some cases, there may be a trade-off between risk and flexibility. For example, a decision that carries a high level of risk may also offer the potential for a high level of reward. On the other hand, a decision that is more flexible and adaptable may be less risky because it allows for adjustments to be made based on changing circumstances.
Overall, risk and flexibility are both important considerations in decision-making and problem-solving, and the balance between them will depend on the specific circumstances and goals of the situation.
Q10- What exactly is the PE Ratio? What is the application of this tool?
Suggested Answer: The price-to-earnings (PE) ratio is a financial metric that compares a company's current stock price to its earnings per share (EPS). It is calculated by dividing the current market price of a stock by the company's EPS.
The PE ratio is often used as a tool for evaluating the relative value of a company's stock. A high PE ratio may indicate that investors expect the company to grow and generate higher earnings in the future, while a low PE ratio may suggest that the stock is undervalued or that investors are less optimistic about the company's prospects.
There are several ways in which the PE ratio can be used:
Comparison to industry averages: Comparing a company's PE ratio to the industry average can provide insight into whether the stock is overvalued or undervalued relative to its peers.
Comparison to historical averages: Comparing a company's current PE ratio to its historical average can provide insight into whether the stock is overvalued or undervalued relative to its own history.
Valuation of future growth: By estimating a company's future earnings growth, investors can use the PE ratio to determine the value of the stock. For example, if a company is expected to grow its earnings at a rate of 10% per year, and the current PE ratio is 20, the stock may be considered fairly valued.
It's important to note that the PE ratio is just one tool among many for evaluating a company's stock, and it should be used in conjunction with other financial and non-financial information. The PE ratio can be affected by a variety of factors, such as changes in the market, economic conditions, and the company's performance, and it may not always provide a reliable indication of a stock's value.
Q11- What ERP systems have you worked on, and can you tell me a little about them?
Suggested Answer: I have experience working with several ERP systems, including SAP B1, Sage, Unit4, and Infor. I have successfully completed full-cycle implementations for each of these systems, and have also worked on various modules and functional areas. I specialize in finance and accounting, but have also implemented systems for sales and customer service. I am confident in my ability to understand the complexities of ERP systems, and am eager to work with new systems to expand my knowledge.
Q12- Please explain what cost and profit variances are.
Suggested Answer: Cost variance and profit variance are two types of variance analysis that are used to evaluate the difference between actual results and budgeted or expected results.
Cost variance refers to the difference between the actual cost of a product or service and the budgeted or expected cost. A negative cost variance indicates that the actual cost was higher than the budgeted or expected cost, while a positive cost variance indicates that the actual cost was lower than the budgeted or expected cost.
Profit variance, also known as contribution margin variance, refers to the difference between the actual profit and the budgeted or expected profit. A negative profit variance indicates that the actual profit was lower than the budgeted or expected profit, while a positive profit variance indicates that the actual profit was higher than the budgeted or expected profit.
Cost variance and profit variance are often used by managers and financial analysts to identify and analyze any deviations from budget or expectations, and to take corrective action if necessary. These variances can be calculated for various levels of detail, such as for a particular product, service, customer, or business unit.
It's important to note that variance analysis should be used in conjunction with other financial and non-financial information, and that variances can be affected by a variety of factors, including changes in market conditions, economic factors, and internal factors such as changes in production processes or pricing.
Q13- What is the definition of liquidity ratios?
Suggested Answer: Liquidity ratios are financial metrics that measure a company's ability to meet its short-term financial obligations, such as paying its bills and debts when they are due. These ratios provide insight into a company's financial health and its ability to meet its financial commitments.
There are several commonly used liquidity ratios, including:
Current ratio: This ratio compares a company's current assets (such as cash and accounts receivable) to its current liabilities (such as accounts payable and short-term debt). A higher current ratio indicates that a company has more resources to meet its short-term obligations.
Quick ratio: This ratio is similar to the current ratio, but it excludes inventory from current assets, as inventory may be difficult to convert to cash quickly. A higher quick ratio indicates that a company has more liquid assets to meet its short-term obligations.
Cash ratio: This ratio compares a company's cash and cash equivalents (such as short-term investments) to its current liabilities. A higher cash ratio indicates that a company has more cash available to meet its short-term obligations.
It's important to note that liquidity ratios are just one tool among many for evaluating a company's financial health, and they should be used in conjunction with other financial and non-financial information. Different industries and business models may have different liquidity needs, and it's important to consider these factors when evaluating a company's liquidity ratios.
Q14- I'm wondering how many pens I can fit in this space.
Suggested Answer: That depends on the size of the pen and the size of the space. If you give me the dimensions of the pen and the space, I can provide you with an estimate.
Q15- What is the difference between depreciation and amortization?
Suggested Answer: Depreciation and amortization are two accounting concepts that are used to allocate the cost of a long-term asset over its useful life. Both depreciation and amortization involve spreading the cost of an asset over a period of time, rather than recognizing the entire cost in the year the asset is acquired.
The main difference between depreciation and amortization is the type of asset being allocated. Depreciation is used to allocate the cost of tangible assets, such as buildings, machinery, and equipment, that have a physical presence and a limited useful life. Amortization is used to allocate the cost of intangible assets, such as patents, trademarks, and copyrights, that do not have a physical presence and have an indefinite useful life.
Both depreciation and amortization involve estimating the useful life of the asset and the appropriate allocation period, and then using a systematic and rational method to allocate the cost of the asset over that period. The specific methods and calculations used for depreciation and amortization may vary depending on the asset and the accounting standards being followed.
It's important to note that depreciation and amortization are non-cash expenses, meaning that they do not involve any actual cash outflows. Rather, they represent a reduction in the value of an asset on the balance sheet and a corresponding expense on the income statement.
Q16- Inventory verification is performed as part of a statutory audit.
Suggested Answer: Inventory verification is a process in which the quantity and value of a company's inventory is physically counted and compared to the inventory recorded in the company's accounting records. This process is typically performed as part of an audit, which is a formal review of a company's financial statements and records by an independent third party.
During an inventory verification, the auditor will typically visit the company's warehouses or storage facilities and physically count the inventory on hand. The auditor will also review the company's inventory records, including purchase orders, receiving documents, and sales orders, to ensure that the inventory recorded in the company's accounting records is accurate and complete.
The purpose of inventory verification is to ensure that the company's inventory is accurately reflected in its financial statements, and that the inventory valuation is appropriate. This is important because the value of a company's inventory can significantly impact its financial position and performance.
In addition to inventory verification, an auditor may also perform other procedures to test the accuracy of a company's financial statements, such as reviewing the company's internal controls, testing transactions, and verifying the existence and value of assets. The specific audit procedures performed will depend on the nature and complexity of the company's business, as well as the auditor's professional judgment.
Q17- When was the last time you had moral reservations about the work you were being forced to do?
Suggested Answer: The last time I had moral reservations about the work I was being asked to do was when I was asked to do something that went against my personal values. In that situation, I discussed my concerns with my manager and we were able to come up with an alternative solution that was more in line with my moral values.
Q18- What is the definition of decommissioning liability?
Suggested Answer: Decommissioning liability is the estimated cost of dismantling and removing a facility or asset at the end of its useful life, as well as any other costs associated with returning the site to its original condition. Decommissioning liabilities can arise in a variety of industries, including oil and gas, mining, and power generation, where facilities and assets may have a limited useful life and need to be decommissioned and removed when they are no longer in use.
Decommissioning liabilities are typically estimated based on the expected cost of dismantling and removing the facility or asset, as well as any other costs associated with returning the site to its original condition. These costs may include environmental remediation, disposal of hazardous materials, and any other costs required to ensure that the site is safe and compliant with relevant regulations.
Decommissioning liabilities are recognized as a liability on a company's balance sheet when they are probable and can be reasonably estimated. The liability is then recognized as an expense on the income statement when the decommissioning activities are undertaken.
It's important to note that decommissioning liabilities can be significant, and they should be carefully managed and monitored to ensure that they are adequately funded and accounted for. Companies should seek the guidance of qualified professionals, such as engineers and environmental consultants, to help estimate and manage decommissioning liabilities.
Q19- What is the distinction between a reserve and a provision
Suggested Answer: A reserve is an amount set aside in a company's financial statements to recognize a future event or obligation that is expected to occur. Reserves are typically established to provide for future contingencies, such as potential losses or liabilities, or to cover the cost of future expenditures. Reserves are recorded as a liability on a company's balance sheet, and they are typically classified as either current or non-current, depending on the timing of the expected event or obligation.
A provision is a specific type of reserve that is established to recognize a probable future obligation that is expected to arise as a result of a past event. Provisions are typically recorded when a company has a legal or constructive obligation to make a payment or take other action, and the amount of the obligation can be reasonably estimated. Provisions are also recorded as a liability on a company's balance sheet, and they are typically classified as either current or non-current, depending on the timing of the expected payment or other action.
In general, reserves and provisions are similar in that they both involve setting aside funds or assets in anticipation of a future event or obligation. However, provisions are typically more specific and are established to recognize a specific, probable future obligation that has arisen as a result of a past event.
It's important to note that both reserves and provisions are estimates and are subject to change as new information becomes available. Companies should carefully manage and review their reserves and provisions to ensure that they are adequate and accurately reflected in the financial statements.
Q20- What methods do you use to deal with stress at work?
Suggested Answer: To deal with stress at work, I use a variety of methods such as taking regular breaks, setting realistic goals, prioritizing tasks and blocking time for important projects, saying "no" when necessary, setting boundaries between work and personal life, and practicing relaxation techniques such as deep breathing, yoga, and mindfulness. Additionally, I make sure to take care of my health by getting plenty of sleep, eating a healthy diet, and engaging in regular physical activity.
Q21- Explain an instance in which you successfully adjusted to a new situation.
Suggested Answer: I recently had to adjust to a new situation when my company merged with another. I was tasked with leading the integration of the two companies, which meant I had to quickly acclimate to the new team, processes, and technology. To effectively adjust, I invested time in getting to know the new team members, familiarizing myself with the new processes and technology, and developing an integration plan. Ultimately, I was successful in leading the integration of the two companies.
Q22- What are the primary reasons for conducting an audit, and what actions result in the conduct of an audit?
Suggested Answer: There are several primary reasons for conducting an audit:
To provide assurance: An audit is designed to provide assurance that a company's financial statements are accurate and reliable. This is important for stakeholders, such as shareholders, creditors, and regulatory agencies, who rely on the financial statements to make informed decisions.
To detect errors and fraud: An audit is also designed to detect errors and fraud in a company's financial statements. This is important because errors and fraud can significantly impact the accuracy and reliability of the financial statements.
To comply with regulations: Many companies are required to undergo an audit as part of their regulatory compliance obligations. For example, publicly traded companies are typically required to undergo an audit as part of their reporting requirements to the Securities and Exchange Commission (SEC).
There are several actions that can result in the conduct of an audit. For example, a company may choose to undergo an audit voluntarily, either to provide assurance to stakeholders or to meet regulatory requirements. In other cases, an audit may be required as a result of a legal or contractual obligation, such as when a company is seeking financing or entering into a business partnership.
It's important to note that audits are conducted by independent third parties, typically professional auditors who have the necessary knowledge and expertise to conduct a thorough and objective review of a company's financial statements and records. The specific audit procedures and standards used will depend on the nature and complexity of the company's business and the specific audit objectives.
Q23- What exactly is vouching, and how does it come into play in the auditing procedure?
Suggested Answer: Vouching is a process in which an auditor evaluates and supports the accuracy and reliability of a company's transactions and financial records by examining the underlying documentation and supporting evidence. Vouching is an important part of the auditing process, as it helps the auditor to determine whether the transactions and financial records being audited are properly recorded and presented in accordance with relevant accounting standards and regulations.
There are several types of documents and evidence that an auditor may examine as part of the vouching process, including:
Invoices: The auditor may review invoices to verify the accuracy of the amounts and the existence of the goods or services being recorded.
Receipts: The auditor may review receipts to verify the accuracy of the amounts and the existence of the transactions being recorded.
Bank statements: The auditor may review bank statements to verify the accuracy of the amounts and the existence of the transactions being recorded.
Contracts: The auditor may review contracts to verify the terms and conditions of the transactions being recorded.
Internal documents: The auditor may review internal documents, such as policies and procedures, to ensure that the transactions being recorded are consistent with the company's internal controls and policies.
Vouching is typically performed as part of a wider audit process, which may also include other procedures, such as testing transactions, reviewing internal controls, and verifying the existence and value of assets. The specific vouching procedures and standards used will depend on the nature and complexity of the company's business and the specific audit objectives.
Q24- What are some of the activities you engage in following the completion of an audit?
Suggested Answer: Following the completion of an audit, I typically engage in activities such as summarizing the findings and results, preparing the audit report, and presenting the audit results and recommendations to management. Additionally, I may need to provide further follow-up and support to ensure that all audit recommendations are implemented, and that any issues that were identified are adequately addressed.
Q25- What, in your opinion, are the most important abilities a staff auditor should have?
Suggested Answer: In my opinion, the most important abilities a staff auditor should have are strong analytical and problem-solving skills, excellent communication and interpersonal skills, attention to detail, knowledge of auditing standards and procedures, the ability to handle multiple tasks simultaneously, and the ability to think critically and objectively. Additionally, a staff auditor should have a strong understanding of the organization they are auditing, as well as an understanding of the laws, regulations, and ethics related to the auditing process.
Q26- Can you tell me what steps you should take before beginning an auditing project?
Suggested Answer: Before beginning an auditing project, I typically take the following steps: define the scope of the audit, identify the objectives of the project, research applicable laws and regulations, develop an audit plan, gather relevant documents, perform preliminary data analysis, design and execute the audit tests, document and analyze the results, and prepare a final audit report. Additionally, I make sure to review and update my audit plan throughout the project.
Q27- For the purpose of developing an audit plan, what procedure do you follow?
Suggested Answer: When developing an audit plan, I typically follow a procedure that includes assessing business risks, verifying the appropriateness of accounting policies and procedures, identifying areas where special audit consideration may be necessary, establishing materiality thresholds, developing expectations for analytical procedures, developing audit procedures, and reassessing the plan. Additionally, I ensure that all audit activities are conducted in compliance with applicable laws, regulations, and professional standards.
Q28- Please tell me about a time in your life when your circumstances changed. What steps did you take to adjust?
Suggested Answer: Recently, I had to adjust to a change in my circumstances when I moved to a new city for a job. To adjust, I initially took the time to familiarize myself with the city and local area by exploring the different neighborhoods, attending community events, and getting to know the people in the area. I also took steps to make the transition easier by researching and applying to available jobs, finding an apartment, and setting up various utility services. Additionally, I made sure to keep in touch with my family and friends from my previous home to ensure that I still felt connected.
Q29- What is the point of auditing?
Suggested Answer: The point of auditing is to provide assurance that a company's financial statements are accurate and reliable. An audit is a formal review of a company's financial statements and records by an independent third party, typically a professional auditor, who has the necessary knowledge and expertise to conduct a thorough and objective review.
The primary purpose of an audit is to provide assurance to stakeholders, such as shareholders, creditors, and regulatory