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CMA Intermediate · Corporate Accounting and Auditing · Nature, Scope, Objectives and Significance of Auditing

Mehta Textiles Ltd appoints a chartered accountant to examine its books of account in detail at the end of each year and to report to its shareholders whether the financial statements give a true and fair view. Which type of audit does this describe?

This is a statutory audit. An independent chartered accountant is appointed for the shareholders and reports to them on whether the financial statements give a true and fair view, as the Companies Act requires. Internal audit serves management, while continuous and interim audits describe timing rather than the legal purpose.

  1. AStatutory auditCorrect
  2. BInternal audit
  3. CContinuous audit
  4. DInterim audit

Explanation

An audit carried out under the Companies Act, 2013 by an independent auditor appointed by shareholders, who reports to members on true and fair view, is a statutory audit. Internal audit is performed for management and is not aimed at reporting to shareholders. Continuous and interim audits relate to the timing of work, not to the legal purpose.

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