Page 45 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs

CHAPTER 5. AUDIT OF ITEMS OF FINANCIAL STATEMENTS

PART 1 to 5

AIFS.3 M19R
While auditing the books of accounts of QHMP Ltd., CA. Ranker, the statutory auditor of the
company, came to know that the management of the company has recognized internally generated
goodwill as a fixed asset. CA. Ranker discussed with the management that according to accounting
standards, internally generated goodwill is not recognized as an asset because it is not an
identifiable resource controlled by the enterprise that can be measured reliably at cost. However,
the management is quite rigid to the accounting treatment followed for internally generated
goodwill and not paying attention to the auditor. Thus, through an example, CA. Ranker explained
which type of goodwill may be recognized as a fixed asset for which the management got justified.
State which of the following examples the auditor must have given to the management?
a) If an item meeting the definition of an intangible asset is acquired in a business combination, it
forms part of the goodwill to be recognized at the date of the amalgamation.
b) Only those goodwill needs to be recognized as a fixed asset which can be touched like physical
assets, for example, land and buildings.
c) Goodwill is recognized only when there is a contractual or other legal right for a physical asset
which shall not be amortized over the period.
d) All of the above.

AIFS.4 SM21
ABC's investee company-XYZ declares final dividend for financial year 2016-17 in the meeting of
board of directors held on April 10, 2017. In which financial year should ABC account for the
dividend income:
a) Proportionately i.e. considering 10 days of financial year 2017-18 and 355 days of financial year
2016-17
b) Financial year 2016-17
c) Financial year 2017-18
d) Equally between financial year2016-17 and financial year 2017-18

AIFS.5 SM21
Direct confirmation procedures are performed during audit of accounts receivable balances to

address the following balance sheet assertion:
a) Rights and obligations
b) Existence
c) Valuation
d) Completeness

AIFS.6 SM21
During the course of audit of intangible assets, expenditure incurred during following phase is not

capitalised:
a) Development phase
b) Research phase
c) None of the above
d) Both (a) and (b)

AIFS.7 SM21
Wages paid to workers would qualify as:

a) Revenue expenditure
b) Capital expenditure

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