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CMA Intermediate · Financial Accounting · Introduction to Accounting Standards (GAAP, AS and Convergence to Ind AS)

Which of the following is stated in the Preface as a function of the Accounting Standards Board (ASB) while formulating Accounting Standards in India?

While formulating Accounting Standards, the ASB takes into consideration the applicable laws, customs, usages and business environment prevailing in India. Its main function is to formulate standards for ICAI to establish. It does not ignore local conditions, prescribe audit procedures or set tax rates.

  1. ATo take into consideration the applicable laws, customs, usages and business environment prevailing in IndiaCorrect
  2. BTo ignore local customs so that standards are identical to international standards
  3. CTo prescribe the audit procedures that auditors must follow for each standard
  4. DTo decide the rates of tax payable on business income

Explanation

The Preface says the main function of the ASB is to formulate Accounting Standards for establishment by ICAI, taking into consideration applicable laws, customs, usages and business environment prevailing in India. Ignoring local conditions contradicts this, and audit procedures and tax rates are outside the ASB's stated functions.

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