The 'Materiality Level' in audit is set to: MCQ with Answer and Explanation

Question
The 'Materiality Level' in audit is set to:
A. Determine the significance of misstatements that could influence economic decisions
B. Increase fees
C. Reduce sample size
D. Avoid audit
Answer: Option A
Solution (By JKSSB Mock Tests)
Materiality is a threshold to guide audit procedures and evaluation of misstatements.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
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Question #1
For calculating the Current Ratio, which of the following is excluded from Current Assets?
A. Loose Tools
B. Cash at Bank
C. Prepaid Expenses
D. Sundry Debtors
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Correct Answer: Option A

Explanation:
Loose tools and spares are generally excluded from current assets while calculating liquidity ratios because they cannot be easily converted into cash to pay off liabilities.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #2
What is the maximum rate of CGST prescribed under the CGST Act?
A. 28%
B. 14%
C. 20%
D. 18%
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Correct Answer: Option C

Explanation:
The maximum rate of CGST is capped at 20% by the Act, making the combined maximum GST (CGST + SGST) 40%.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #3
The 'Sale and Leaseback' transaction: If the transfer qualifies as a sale under Ind AS 115, the seller-lessee:
A. No entry
B. Derecognises the asset and recognises a right-of-use asset at the proportion of the previous carrying amount related to the right retained
C. Keeps the asset
D. Treats as operating lease
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Correct Answer: Option B

Explanation:
Under Ind AS 116, the seller-lessee only recognises a right-of-use asset for the part retained.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
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