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CMA Intermediate · Corporate Accounting and Auditing · Auditing of Different Types of Undertakings

In the audit of a local body such as a municipal corporation, which feature is most characteristic of the audit compared with a company audit?

Local body audit stresses regularity and propriety of spending, checking that expenditure was authorised and complies with the governing municipal act, rules and sanctioned budget. Profit, dividends and share registers are company matters and are not relevant to a municipality, which exists to deliver public services.

  1. AEmphasis on regularity and propriety of expenditure, checking compliance with the municipal act, rules and sanctioned budgetCorrect
  2. BSole focus on verifying that profit has been maximised for the year
  3. CChecking that dividends are declared out of free reserves
  4. DVerifying the allotment of shares and the register of members

Explanation

A local body exists to provide public services, not to earn profit, so the audit stresses regularity, propriety, authority for expenditure and compliance with the governing act, rules and budget. Profit maximisation, dividends and share allotments are company concepts that do not apply to a municipality.

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