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Key PointsAuditing is the systematic and scientific examination of the books of accounts and records of a business so as to enable the auditor to satisfy himself that the Balance Sheet and the Profit and Loss Account are properly drawn up so as to exhibit a true and fair view of the financial state of affairs of the business and profit or loss for the financial period.

Important PointsStatutory audit - 

• Governmental organizations and industry regulators both require statutory audits.
• The statutory audit process is complex and entails knowing how a company entity's operating environment and controls work.
• A statutory audit is a form of audit that is required by law or a statute to ensure that the book of accounts presented to the public and regulators is true and fair.
• A statutory audit is required if the company satisfies specific conditions. Statutory audits typically refer to financial audits.

Additional InformationManagement audit - The objective of a management audit is to analyze and evaluate the skills and capacities of a company's management in achieving its goals.

Cost audit - The audit of cost records is known as a cost audit. Cost auditing is the process of confirming the costs associated with producing any good, service, or activity using records kept by an organization in compliance with approved cost accounting standards.

Internal audit - Internal auditing is a procedure used by firms to identify the system's flaws and enhance the relevant areas to increase productivity.

The correct answer is - The opportunity costs of the factors of production that the firm owns.

Key Points

• Economic Costs vs. Accounting Costs:
• Economic costs include both explicit costs (direct monetary payments) and implicit costs (opportunity costs of resources owned by the firm).
• Accounting costs, on the other hand, only account for explicit costs incurred during production, such as wages, raw materials, and rent.
• The difference arises because economic costs consider the opportunity cost of using resources, such as the potential income the firm could have earned if it had used its resources elsewhere.
• Opportunity Costs:
• These refer to the benefits foregone from the next best alternative use of a resource.
• For example, if a firm uses its own building for production, the opportunity cost is the rent it could have earned if the building was leased out to another party.
• Opportunity costs are a critical factor in economic decision-making and are included in economic costs but excluded from accounting costs.

Additional Information

• Explicit Costs:
• These are the direct, out-of-pocket expenses a firm incurs, such as payments for wages, raw materials, and utilities.
• Explicit costs are included in both accounting and economic costs, so they do not explain the difference between the two.
• Corporate Taxes:
• Corporate taxes are levied on the profits of a firm and are considered an explicit cost.
• Since corporate taxes are included in accounting costs, they do not account for the difference between accounting and economic costs.
• Sunk Costs:
• Sunk costs are past costs that have already been incurred and cannot be recovered.
• These costs are not relevant for future decision-making and are typically excluded from both economic and accounting costs.

The accounting system of Incas was called as Quipu.

Key Points

• The largest of the indigenous civilisations in South America was that of the Quechuas or Incas in Peru.
• In the twelfth century the first Inca, Manco Capac, established his capital at Cuzco.
• Expansion began under the ninth Inca and at its maximum extent the Inca empire stretched 3,000 miles from Ecuador to Chile.
• The basis of the Inca civilisation was agriculture.
• Their weaving and pottery were of a high quality.
• They did not develop a system of writing.
• However, there was an accounting system in place – the quipu, or cords upon which knots were made to indicate specific mathematical units.
• Some scholars now suggest that the Incas wove a sort of code into these threads.

Hence, the correct answer is Quipu.

The correct answer is 1976.

Key Points

• In 1976, Government of India separated Accounting functions from Audit.
• In 1971 the central government enacted the Comptroller and Auditor General (Duties, Powers, and Conditions of Service) Act, 1971.
• The Act made CAG responsible for both accounting and auditing duties for central and state governments.
• In 1976 CAG, was relieved from accounting functions.
• The accounting functions were transferred to the Controller General of Accounts (CGA).

Important Points

• The Controller General of Accounts (CGA), in the Department of Expenditure, Ministry of Finance, is the Principal Accounting Adviser to Government of India and is responsible for establishing and maintaining a technically sound Management Accounting System.
• The Office of CGA prepares monthly and annual analysis of expenditure, revenues, borrowings and various fiscal indicators for the Union Government.
• Under Article 150 of the Constitution, the Annual Appropriation Accounts (Civil) and Union Finance Accounts are submitted to Parliament on the advice of Comptroller and Auditor General of India.
• It further formulates policies relating to general principles, form and procedure of accounting for the Central and State Governments.

The correct answer is Option 2

Mahatma Gandhi National Rural Employment Guarantee Act

Key Points

• MGNREGA is one of the largest work guarantee programmes in the world which was launched in 2005.
• The primary objective of the scheme is to guarantee 100 days of employment in every financial year.
• Unlike earlier employment guarantee schemes, MGNREGA aims at addressing the causes of chronic poverty through a rights-based framework.

Additional Information 

Employees Provident Fund and Miscellaneous Provision Act :

• Employees Provident Fund and Miscellaneous Provisions Act, 1952 is a Social Security Act passed by the Government of India.
• It includes Social Security Schemes namely Provident Fund, Pension and Insurance to industrial employees.
• Under this scheme, every employee is required to make a contribution towards the provident fund at the rate of 12% of the Basic Wages, Dearness Allowance and cash value of food concession.
• Further, the employer also makes an equal amount of contribution as the employee towards the fund.

Indian Institute of Management Act :

• Indian Institutes of Management  Act came in 2017.
• This law brings greater transparency and autonomy to the working of the IIMs.
• The act declares 20 existing Indian Institutes of Management (IIMs) as institutions of national importance and confers on them the power to grant degrees.
• Each IIM will have an executive body i.e. Board of Governors, comprising up to 19 members.

Citizenship Act :

• It is an Act to provide for the acquisition and determination of Indian citizenship.
• The Citizenship Act, 1955 was amended 6 times in 1986, 1992, 2003, 2005, 2015 and 2019.
• The purpose of the Citizenship Amendment Act, 2019 is to give Indian citizenship to illegal migrants of 6 communities i.e. Hindu, Sikh, Buddhist, Christian, Parsi, and Jain) belong to Bangladesh, Pakistan, and Afghanistan.

The Correct Answer is Only monetary transactions.

Important Points

• The money measurement concept states that a business should only record an accounting transaction if it can be expressed in terms of money.
• This means that the focus of accounting transactions is on quantitative information, rather than on qualitative information.
• Thus, a large number of items are never reflected in a company's accounting records, which means that they never appear in its financial statements.
• Only monetary transactions are recorded in accounting.

Additional Information

• The concept of money measurement states that only those transactions and happenings in an organization that can be expressed in terms of money such as the sale of goods or payment of expenses or receipt of income, etc. are to be recorded in the book of accounts.
• All such transactions or happenings which can not be expressed in monetary terms, for example, the appointment of a manager, do not find a place in the accounting records of a firm.
• Another important aspect of the concept of money measurement is that the records of the transactions are to be kept not in the physical units but in the monetary unit.

The correct answer is Journal.

Key Points

• The books known as subsidiary books are used to systematically record transactions with a similar character.
• They are also referred to as Daybooks or particular journals.
• It is difficult to enter all the transactions in one journal and publish them to different accounts in large company organisations.
• The journal is thus separated into numerous subsidiary books in order to facilitate the quick and correct recording of all transactions. There is a separate book for each sort of transaction.

Important PointsJournal Proper: It is a book in which all miscellaneous transactions which are not recorded in any other subsidiary book are called a journal proper, so any special discount given to customers shown in this book.

Additional InformationTypes of Subsidiary Book

1. Cash Book: A cash book is a prime entry book that keeps track of all transactions that a company makes using both cash and bank instruments.
2. Purchase Book - One of the special purpose books, a purchase book is where a business records all of its credit purchases.
3. Sales Book - A business enters all credit sales into a sales book, one of the subsidiary books.
4. Purchase Returns Book - A purchase returns book, often referred to as a returns outward book, is created to document the products that a company returns to its suppliers.
5. Sales Return Book - Also referred to as a returns inward book, a sales return book is created to keep track of the goods that customers return to a business.
6. Journal Proper - A journal proper is a book that contains all unrelated transactions that are not recorded in any other subsidiary books.
7. The Bills Receivable Book is a book that keeps track of all bills owed to a company; its total is displayed on the debit side of the B/R account.
8. The sum of the bills payable book is reported on the credit side of the B/P account. Bills Payable Book is one of the subsidiary books that records all bills payable by a business.

Key Points

Rule 41: Internal Check/ Audit:

• Departments shall arrange internal check/audit of receipts in the subordinate offices by their Internal Check parties. For this purpose they will issue regulations for the guidance of such parties.

Additional Information

• Rule 40: Departments shall make rules defining remission and abandonment of revenue for the guidance of their officers.

Hence, Internal check/audit of receipts in a subordinate office is arranged by The department under rule 41 of GF and AR.

The correct answer is All of the above.

Key Points

• PRIA Soft (Panchayat Raj Institutions Accounting Software) offers a variety of benefits for Panchayats, including:
• 1. Effective monitoring of accounts: PRIA Soft allows Panchayats to track all their financial transactions in a centralized database. This makes it easier to monitor their spending, identify areas where they can save money, and ensure that funds are being used efficiently.
• 2. Increased credibility: By providing accurate and transparent financial information, PRIA Soft helps to increase the credibility of Panchayats. This makes it easier for them to attract funding and secure grants from government and other agencies.
• 3. Enhanced monitoring by higher officials: PRIA Soft allows higher officials in the government to monitor the financial activities of Panchayats more effectively. This helps to ensure that Panchayats are accountable for their actions and that funds are being used for their intended purposes.
• 4. Improved financial management: PRIA Soft provides Panchayats with a range of tools and features that can help them to improve their financial management. This includes features such as:
• Budgeting: PRIA Soft allows Panchayats to create and track their budgets.
• Accounting: PRIA Soft provides a comprehensive accounting system that tracks all of the Panchayat's income and expenses.
• Reporting: PRIA Soft generates a variety of reports that can help Panchayats to track their financial performance.
• Inventory management: PRIA Soft helps Panchayats to track their inventory of assets.

The correct answer is: Government Accounts Standards Advisory Board.

The Indian Government Accounting Standards (IGAS) are formulated and recommended by the Government Accounts Standards Advisory Board (GASAB). This body is responsible for improving government accounting and aligning it with international practices.

Key Points

• GASAB's Role:
• GASAB was established by the Comptroller and Auditor General of India (CAG) to formulate Indian Government Accounting Standards.
• It aims to modernize government accounting and ensure transparency and accountability in financial reporting.
• Alignment with International Practices:
• GASAB ensures that Indian accounting standards are aligned with internationally accepted practices.
• The focus is on adopting accrual-based accounting systems for improved financial management.
• Government Accounting:
• The standards aim to strengthen public financial management and improve the accuracy of government accounts.

Additional Information

• Other Bodies:
• Institute of Chartered Accountants of India (ICAI): ICAI primarily focuses on accounting standards for corporate entities, not government accounting.
• Institute of Cost Accountants of India: This body specializes in cost accounting, not government financial standards.