Financial statements prepared in accordance with income tax accounting makes recognition of expenses and income based on taxation law over generally accepted accounting principles. Net profit calculated using taxation accounting often differs from net profit derived from following GAAP because of differential treatment of items of financial statements. The framework for preparation of financial statements is selected by the management based on the purpose for which the statements are to be used, the auditor ensures that the disclosure of framework followed is made in his audit report and ensures that the statements are as per the required framework. To select: The correct option.

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Chapter 18, Problem 18.20MCQ

To determine

Introduction:

Financial statements prepared in accordance with income tax accounting makes recognition of expenses and income based on taxation law over generally accepted accounting principles.

Net profit calculated using taxation accounting often differs from net profit derived from following GAAP because of differential treatment of items of financial statements.

The framework for preparation of financial statements is selected by the management based on the purpose for which the statements are to be used, the auditor ensures that the disclosure of framework followed is made in his audit report and ensures that the statements are as per the required framework.

To select: The correct option.

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