Chapter 5: Verification and Valuation of Current and Intangible Assets — Online MCQ Test
AUDITING · CLASS 12th · Tamil Nadu State Board
Practice Chapter 5: Verification and Valuation of Current and Intangible Assets with a free chapter-wise online MCQ test.
This chapter covers: Focusing on short-term and non-physical assets this chapter covers audit techniques for current assets like stock and receivables. It details verification methods valuation rules a....
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Chapter 5: Verification and Valuation of Current and Intangible Assets — Important Questions & Answers
What is the main objective of verification of current assets in auditing?
- A. To determine future profits of the business
- B. To confirm existence, ownership, and proper valuation of assets
- C. To prepare the income tax return
- D. To calculate depreciation on fixed assets
Answer: B. To confirm existence, ownership, and proper valuation of assets
Verification of current assets aims to ensure that the assets actually exist, belong to the business, and are properly valued in the accounts.
Verification of current assets aims to ensure that the assets actually exist, belong to the business, and are properly valued in the accounts.
Which of the following is a current asset?
- A. Land
- B. Building
- C. Stock-in-trade
- D. Goodwill
Answer: C. Stock-in-trade
Stock-in-trade is a current asset because it is held for sale in the normal course of business and is expected to be converted into cash soon.
Stock-in-trade is a current asset because it is held for sale in the normal course of business and is expected to be converted into cash soon.
While verifying stock, an auditor should mainly ensure that stock is valued at
- A. cost only, even if market price is lower
- B. market price only, always
- C. cost or net realizable value, whichever is lower
- D. selling price plus profit
Answer: C. cost or net realizable value, whichever is lower
The standard valuation rule for stock is cost or net realizable value, whichever is lower, to avoid overstating assets and profit.
The standard valuation rule for stock is cost or net realizable value, whichever is lower, to avoid overstating assets and profit.
An auditor notices that damaged goods are included in closing stock at full cost. What is the most appropriate audit conclusion?
- A. Stock is properly valued because cost is always correct
- B. Stock may be overstated because damaged goods should be valued carefully
- C. No issue, as damaged goods are intangible assets
- D. Stock should be ignored in audit
Answer: B. Stock may be overstated because damaged goods should be valued carefully
Damaged or obsolete stock may have a reduced realizable value, so including it at full cost can overstate inventory and profit.
Damaged or obsolete stock may have a reduced realizable value, so including it at full cost can overstate inventory and profit.
Which of the following is NOT an intangible asset?
- A. Patent
- B. Trademark
- C. Copyright
- D. Inventory
Answer: D. Inventory
Inventory is a current asset, not an intangible asset. Patents, trademarks, and copyrights have no physical form and are intangible.
Inventory is a current asset, not an intangible asset. Patents, trademarks, and copyrights have no physical form and are intangible.