Financial audit is conducted mainly to: MCQ with Answer and Explanation

Financial audit is conducted mainly to:
A. Detect frauds and errors
B. Calculate tax liability
C. Express an opinion on the true and fair view of financial statements
D. Evaluate management performance
Answer: Option C
Solution (By JKSSB Mock Tests)
The primary objective of a financial audit is to express an independent opinion on whether the financial statements present a true and fair view.

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Practice More Accountancy and Book Keeping Questions

Question #1
S1: Capital expenditure increases the earning capacity of the business. S2: Revenue expenditure maintains the earning capacity of the business. Which statement(s) is/are correct?
A. S1 only
B. Both S1 and S2
C. S2 only
D. Neither S1 nor S2

Correct Answer: Option B


Explanation:
Capital expenditure is incurred to acquire or improve assets, thereby increasing earning capacity. Revenue expenditure is incurred for day-to-day operations to maintain the existing earning capacity. Both statements are correct.

Question #2
'Benami Transactions' are prohibited under:
A. Benami Transactions (Prohibition) Act, 1988
B. Companies Act
C. GST Act
D. Income Tax Act

Correct Answer: Option A


Explanation:
Benami property transactions are illegal under the Benami Act.

Question #3
Under AS 19 'Leases', a lease is classified as finance lease if:
A. Lease term is less than one year
B. It is an operating lease
C. It transfers substantially all risks and rewards incidental to ownership
D. Lessor retains ownership

Correct Answer: Option C


Explanation:
Finance lease transfers substantially all risks and rewards of ownership to the lessee.