Master of Business Administration
Internal Audit and Control- 4 Credits(Book ID:B1211)
Set- 1 (60 Marks)Note: Each Question carries 10 marks. Answer all the questions.Q1. Discuss, in brief, the advantages and limitations of auditing.
Advantages of Audit We know that the prime objective of an audit is to make a critical review of, the system of book keeping, accounting, and internal control etc. and report to the members stating whether, in theopinion of the auditor, the accounts shows a true and fair view of the affairs of the company. This
report lends credibility to the financial standards prepared by the company’s management.Moreover, the company’s management knows th
at the financial statements, prepared by themwould be subject to an independent professional review. Hence, they remain very vigilant and alert in preparation of financial statements, result in less erroneous and/or fraudulent informationdissemination.Apart from above some other important advantages of audit are as follows:1. It facilitates the early detection and easy prevention of fraud and errors.2. It helps in reducing wastages and chances of losses or damage to business property.3. Banks, financial institutions and Government required audited accounts before granting anyfinancial assistance to the enterprises.4. Liability of the enterprise as to income tax, wealth tax, VAT, etc can easily be determined on thebasis of audited accounts as these are readily believed by the tax authorities. The Income Tax Act also contains a provision for holding tax audit.5. Audited accounts help in determining purchase consideration of enterprise in case of outright sale, merger and acquisition etc.Self Assessment Questions17. Audit keeps management more alert and vigilant. (True/False)18. The Income Tax Act does not contain a provision for holding tax audit. (True/False)1.11 Limitations of Audit