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CS Professional · Compliance Management, Audit and Due Diligence · Concepts of Various Audits

The board of Kaveri Auto Components Ltd. engages an independent firm to review whether the production unit at Pune uses its machines, manpower and materials economically and efficiently, and to suggest improvements to the workflow. The firm is not asked to express an opinion on the true and fair view of the financial statements. Which type of audit is this?

This is an operational audit. It reviews how efficiently and economically a unit uses machines, manpower and materials and recommends improvements, without giving an opinion on whether the financial statements show a true and fair view.

  1. AOperational auditCorrect
  2. BStatutory financial audit
  3. CTax audit
  4. DSecretarial audit

Explanation

Operational audit evaluates the efficiency, economy and effectiveness of a specific function or activity and recommends improvements. A statutory audit concentrates on the true and fair view of financial statements, which is expressly excluded here. Tax and secretarial audits address tax particulars and corporate-law compliance respectively.

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