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

Which statement best describes the nature of auditing as it is understood in the CMA syllabus?

Auditing is an independent examination of financial statements and supporting records so that the auditor can express an opinion on whether they give a true and fair view. It is not bookkeeping or preparation of accounts, which are management responsibilities.

  1. AAn independent examination of financial statements to enable the auditor to express an opinion on whether they give a true and fair viewCorrect
  2. BA process of preparing the books of account and final accounts for the management of an entity
  3. CA detailed arithmetical check of all ledger postings carried out by the accountant of the entity
  4. DA verification of the profits of the entity solely for the purpose of computing income tax

Explanation

Auditing is an independent, critical examination of the financial statements and the underlying records, ending in an opinion on whether they show a true and fair view. Preparing the books is the management's accounting function, not auditing. Arithmetical checking and tax computation are only parts of work, not the nature of auditing.

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