Which of the following statements are incorrect? A. Management audit is not compulsory under any law. B. Vouching is concerned only with items of balance sheet. C. Section 148 of the Companies Act, 2013 has made Cost Audit mandatory for some limited companies D. The object of vouching is to satisfy the auditor as to existence, ownership, possession, completeness, valuation and disclosure of items mentioned in the Balance Sheet. E. Independent financial audit has been made compulsory for many entities established under respective Acts. Choose the correct answer from the options given below:
Audit Statements: Analysis
The question requires identifying incorrect statements among the given options related to auditing principles.
Management Audit: Legal Compulsion
Management audit is generally voluntary and not compulsory under law for all entities unless specific regulations or agreements mandate it. Thus, statement A is correct.
Vouching Scope: Balance Sheet Focus
Statement B claims vouching is concerned only with balance sheet items. This is incorrect. Vouching verifies all recorded transactions, including those impacting the Profit and Loss account as well as the Balance Sheet.
Cost Audit: Companies Act 2013
Statement C correctly states that Section 148 of the Companies Act, 2013, makes Cost Audit mandatory for specific classes of companies. Thus, statement C is correct.
Vouching Objective: Verification Purpose
Statement D suggests the object of vouching is only to satisfy the auditor regarding balance sheet items' attributes. This is incorrect. The primary goal of vouching is to verify the authenticity and accuracy of all transactions recorded in the books of account, using supporting documents. This verification applies to both revenue/expense items (P&L) and asset/liability items (Balance Sheet).
Financial Audit: Mandatory Requirement
Statement E is correct. Independent financial audits are indeed compulsory for many entities, including companies and certain other organizations, as stipulated by relevant Acts and regulations.
Incorrect Audit Statements Identified
Analyzing the statements:
- Statement B is incorrect as vouching covers all transactional entries, not exclusively balance sheet items.
- Statement D is incorrect because vouching's primary objective is transaction verification across all accounts, not limited to balance sheet items or their specific attributes.
Therefore, the incorrect statements are B and D.
Important Questions from Auditing
The examination of documentary evidence in support of transactions contained in the books of accounts is termed as which one of the following?
Latin word "audire" means
Auditor gives report on:
Functions of Comptroller and Auditor-General in the Case of Grants or Loans given to other Authorities or Bodies are specified in Section ____ of The Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Amendment ACT, 1971.
Article ____ of the Constitutional Provisions of Comptroller & Auditor General of India relates to Audit Reports.
