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CMA Final · Cost and Management Audit · Overview of Cost Accounting Standards and GACAP

Under the Generally Accepted Cost Accounting Principles (GACAP) issued by ICMAI, which statement best describes their purpose?

GACAP provides a framework of cost accounting principles that supports the Cost Accounting Standards and guides cost treatment where no specific standard applies. It is not a statutory rule, a report format, or a fraud reporting standard, so the other options misstate its purpose.

  1. AThey give a framework of principles that underpins the Cost Accounting Standards and guides cost accounting where no specific standard existsCorrect
  2. BThey replace the Companies (Cost Records and Audit) Rules, 2014 for notified industries
  3. CThey prescribe the format of the cost audit report to be filed with the Central Government
  4. DThey lay down the auditor's responsibilities for reporting fraud in a cost audit

Explanation

GACAP sets out the principles and concepts of cost accounting that form the basis for developing Cost Accounting Standards and for treating items not covered by a specific standard. It does not replace the statutory rules, prescribe the report format, or deal with fraud reporting duties, which sit in the Rules, the Act and the CAAS.

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