Multiple choice

Directions: Each of the next five items consists of two statements, one labelled as the 'Assertion' (A) and the other as 'Reason' (R). You are to examine these two statements carefully and select the answers to these items using the codes given below. Assertion (A)—The scope of audit of accounts of a limited company may be restricted by the Board of Directors. Reason (R)—The Board of Directors is responsible for adherence to Accounting Standards in preparation of financial statements.

  1. Both (A) and (R) are individually true and (R) is the correct explanation of (A)

  2. Both (A) and (R) are individually true but (R) is not the correct explanation of (A)

  3. (A) is true but (R) is false

  4. (A) is false but (R) is true
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Assertion is FALSE - the scope of audit of a limited company's accounts cannot be restricted by the Board of Directors. Auditors have statutory duties and independence under company law. The Reason is TRUE - the Board IS responsible for adherence to Accounting Standards in financial statement preparation. However, this responsibility doesn't restrict audit scope.

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