The title of AAS-2 issued by Council of ICAI is ___

 Options:

a) Objective and Scope of the Financial Statements b) Objective and Scope of the Audit of Financial Statements c) Objective and Scope of Business of an Entity d) Objective and Scope of Financial Statements Audit

The Correct Answer Is:

b) Objective and Scope of the Audit of Financial Statements

Correct Answer Explanation:

The correct answer is b) “Objective and Scope of the Audit of Financial Statements.” This specific title pertains to the second Auditing and Assurance Standard (AAS-2) issued by the Council of the Institute of Chartered Accountants of India (ICAI).

AAS-2 provides guidelines on the objective and scope of the audit of financial statements. Let’s delve into why this answer is correct and why the other options are not accurate.

Objective and Scope of the Audit of Financial Statements (Option b):

AAS-2 primarily focuses on the objectives that an auditor should aim to achieve while conducting an audit of financial statements. It outlines the scope of an audit engagement, clarifying what should be covered and what should not be included in the audit process.

The standard helps auditors understand their responsibilities, guiding them on how to plan and perform an audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

a) Objective and Scope of the Financial Statements:

This option might seem plausible at first glance as it addresses the broader concept of financial statements. However, AAS-2 is specifically concerned with the audit process rather than solely focusing on the nature, preparation, or purpose of financial statements.

The standard delves into the objectives and scope of auditing financial statements rather than the characteristics or intentions behind the creation of these statements.

c) Objective and Scope of Business of an Entity:

While understanding the business operations and nature of an entity is crucial for auditors, this falls outside the primary scope of AAS-2. The standard primarily concentrates on guiding auditors in comprehending the objectives and scope related to auditing financial statements rather than assessing or defining the entirety of an entity’s business operations.

d) Objective and Scope of Financial Statements Audit:

This option closely resembles the correct answer but differs slightly in terminology. AAS-2, as issued by the Council of ICAI, specifically titles the standard as “Objective and Scope of the Audit of Financial Statements.”

While the concept here is almost identical, the precise wording used in the standard’s title is crucial. Standards are meticulously defined, and the exact phrasing matters significantly in maintaining consistency and precision within the auditing guidelines.

In summary, while these options may touch on related aspects or components of the auditing process, they do not accurately represent the specific title of AAS-2 as issued by the Council of ICAI.

The precise wording and emphasis on the audit of financial statements set AAS-2 apart from broader statements about financial statements themselves, the entity’s business, or variations in the wording regarding the audit’s focus.

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