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CMA Intermediate · Corporate Accounting and Auditing · Auditing of Different Types of Undertakings

While auditing a partnership firm under the terms of its partnership deed, which of the following is the auditor's primary concern regarding the partners' capital and current accounts?

The auditor's main concern is whether interest on capital, partners' salaries and profit shares were credited according to the partnership deed. The deed is the governing document for appropriations, so deviations would misstate partners' capital and current accounts.

  1. AWhether interest on capital, salaries and profit shares were credited as per the partnership deedCorrect
  2. BWhether the partners hold a valid GST registration
  3. CWhether the firm has appointed an internal auditor
  4. DWhether the firm has issued share certificates

Explanation

The deed governs profit sharing, interest on capital and remuneration to partners. The auditor verifies that appropriations follow its terms, as errors would misstate each partner's account. GST registration, an internal auditor and share certificates are not relevant to partners' account balances.

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