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?
which one of the following is the hiring-related turnover cost when an employee quits an organization?
Objective of energy management and audit invariably includes which of the following in a business enterprises?
A. Minimising cost of energy consumption
B. Minimising waste in energy consumption
C. Scaling harmful impacts of pollution on health of the natives
D. Minimising environmental degradation
Choose the most appropriate answer from the options given below:
Which one of the following is a structured review of the systems and procedures of an organisation in order to evaluate whether they are being conducted efficiently and effectively?
Cost audit for Materials covers :
(A) Goods inward procedure.
(B) Methods of calculating standard cost variance.
(C) Classification of overhead.
(D) Accounting for scrap, wastage, materials transfers
(E) Accounting treatment of under or over absorption
Choose the most appropriate answer from the options given below:
