CWA ICWA Final Stage IV : Cost Audit and Management Audit - June 2009

CWA ICWA Final - Stage IV • Cost Audit and Management Audit • June 2009

This Paper has 48 answerable questions with 0 answered.

F—19(CAM) Revised Syllabus
Time Allowed : 3 Hours	Full Marks : 100

The figures in the margin on the right side indicate full marks.
Answer Question Nos. 1 and 5, which are compulsory and any two each from the remaining questions of Sections I and II.
Section I (50 marks)
Marks

The figures in the margin on the right side indicate full marks.

Answer Question Nos. 1 and 5, which are compulsory and any two each from the
remaining questions of Sections I and II.

Section I (50 marks)

Marks

(a)

State whether the following statements are "True" or "False". No reason or justification need be given:

1x10

(i)

Cost Accounting Record Rules once applicable to a company require cost accounting record to be maintained year after year on a continuous basis.

(0)

(ii)

The Cost Auditor should not exceed the number of audits, as prescribed under Section 233–B(5) of the Companies Act, 1956.

(0)

(iii)

The Cost Auditor has same powers, as Financial Auditor has, under Section 227(1) of the Companies Act, 1956.

(0)

(iv)

Interest received on the Security deposit with the Electricity Board can be considered as an ‘Investment outside the business’.

(0)

(v)

The real beginning of Cost Audit started in India in the year 1956, when the Companies Act, 1956 was amended to incorporate the provisions relating to the maintenance of Cost Accounting Records and Cost Audit.

(0)

(vi)

Financial position and Ratio analysis are being dealt with under Para–16 of the Cost Audit Report Rules.

(0)

(vii)

"Central Excise reconciliation for the product under reference" is being dealt with under Para–27 of the Cost Audit Report Rules.

(0)

(viii)

A copy of the Cost Audit Report must be attached to Company’s Income Tax Return.

(0)

(ix)

Every Cost Auditor shall have to give clarification, if any, required by the Central Government on the ‘Cost Audit Report’ submitted by him, within two months of the receipt of the communications, addressed to him, calling for such clarification.

(0)

(x)

The Cost Auditor shall forward his report to the Central Government and to the concerned company, within one hundred and sixty days from the close of the company’s financial year to which the report relates to.

(0)

(b)

Choose the correct answer:

1x10

(i)

The structuring of cost audit includes

(a)	Audit programmes;
(b)	Audit working papers;
(c)	Checking including test checking;
(d)	All of the above.

(0)

(ii)

Examination of the cost and financial statements by the cost auditor may not include

(a)	Licensed capacity, installed capacity, production and capacity utilized;
(b)	Financial position including financial ratios as per Para–24 of the Annexture to the Cost Audit Report Rules;
(c)	Fixed assets of the company;
(d)	Sales realization–local and export in units and total of each variety or product.

(0)

(iii)

The Cost Auditor shall submit cost audit report to Central Government containing

(a)	Auditors observation and suggestions;
(b)	Annexure to the Cost Audit Report Rules;
(c)	Proforma showing production costs, sales and margin;
(d)	All of these above.

(0)

(iv)

The time limit for submission of Cost Audit Report is within

(a)	100 dasy from the close of the company’s financial year;
(b)	120 days from the close of the company’s financial year;
(c)	60 days from the close the company’s financial year;
(d)	None of the above.

(0)

(v)

If default is made by the Cost Auditor in complying with the provisions of Rule 4 or Rule 5 of the Cost Audit Report Rules, he shall be punishable with fine which may extend to

(a)	Rs.7,000;
(b)	Rs.6,000;
(c)	Rs.5,500;
(d)	None of the above.

(0)

(vi)

In Para–4 of the Annexure to the Cost Audit Report Rules production during the year is

(a)	Self manufactured;
(b)	Third party or job work;
(c)	Loan licence;
(d)	All of the above.

(0)

(vii)

Each major materials for which details to be furnished as per Annexure to the Cost Audit Report Rules should constitute.

(a)	10% of the raw material cost;
(b)	2% of the raw material cost;
(c)	5% of the raw material cost;
(d)	1% of the raw material cost.

(0)

(viii)

The role of Cost Auditor in respect of non–moving stock is to review

(a)	The causes explained by the company for non–movement of the items;
(b)	How the company deals with the non–moving stock;
(c)	The policy of the company regarding determination on non–moving items;
(d)	All of these.

(0)

(ix)

As per the Companies Act, every public company shall constitute ‘Audit Committee’ if the capital of company is not less than.

(a)	Rs.5 crores;
(b)	Rs.10 crores;
(c)	Rs.25 crores;
(d)	None of the above.

(0)

(x)

Royalty and technical know–how charges are being dealt with in Annexure to Cost Audit Report Rules vide

(a)	Para–12;
(b)	Para–16;
(c)	Para–14;
(d)	Para–8.

(0)

(a)

Under what conditions, will the appointment of Cost Auditor for conducting Cost Audit be appointed in firm’s name? Who will authenticate such reports and how? Can the appointment of proprietory firms also be appointed?

2+2+2

(0)

(b)

A Cost Accountant takes voluntary retirement from his employer and starts practice. He continues his association with his previous employer as an auditor, on a monthly retainer. Does his actions amount to professional misconduct?

(0)

(c)

Can a Cost Accountant, who is appointed as the concurrent auditor of a company accept appointment as Cost Auditor of the same company?

(0)

(d)

A Cost Accountant gives a certificate of cost of a product manufactured by an SSI Unit owned entirely by his son. Is he right?

(0)

(a)

There was a strike from 13.09.2008 to 16.11.2008 in a company, of which you were the Cost Auditor for the year ending 31.03.2009. Although the company began working from 17.11.2008, production could effectively begin only from 5.12.2008. The expenses incurred during the year ended 31.03.2009 were:

	Rs. In lakh
Salaries and Wages (direct) Salaries and Wages (indirect) Power(variable) Depreciation Other Fixed Expenses	300 200 120 180 240

Detail examination of the records reveals that of the above, the following relate to the period 13.09.2008 to 16.11.2008.

	Rs. In lakh
Salaries and Wages (indirect) Depreciation Other Fixed Expenses	70 60 90

Calculate the amount which, in you opinion, should be treated as abnormal for exclusion from the product costs.

(0)

(b)

The following figures are taken from the accounts of AB Ltd.:

	31.03.2007 Rs.in Lakh	31.03.2006 Rs.in Lakh	31.03.2005 Rs.in Lakh
Gross Fixed Assets Cumulative Depreciation Capital Work–in–Progress Investments in Shares & Debentures Inventories Sundry Debtors Advances for purchases of Capital Equipment Other Loans and Advances Other Current Assets Sundry Creditors Provisions for Expenses Net Sales Depreciation Interest Profit before Taxes	4,615 1,312 273 724 625 334 24 65 32 214 29 3,924 54 614 232	4,212 1,263 225 712 580 317 61 58 29 187 34 3,212 47 497 145	3,845 1,224 317 693 511 292 47 53 26 174 28 2,931 44 416 197

Compute the following ratios, for the year ended 31.03.2007 and 31.03.2006, as per the Cost Audit Report Rules, 1996:

(i)	Profit as a percentage of Capital Employed.

(ii)	Profit as a percentage of Net Sales.

5+5

(0)

(a)

Distinguish between "Notes" and "Qualifications" in the Cost Audit Report. Give suitable examples.

(0)

(b)

A company receives the Cost Audit Report for a period, after filing of the Income– tax Return. Is the company required to submit a copy of the Report to the Income–tax Officer? If yes, what is the period by which the Report must be so filed?

(0)

(c)

The profit as per financial accounts of XY Cement Ltd., for the year 2008–2009 was RS.1,34,27,561. The Profit as per Cost Accounting Records for the same period was more. You are required to prepare a reconciliation statement and arrive at the profit, as per Cost Accounts. The following details are collected from the financial accounting schedules and cost accounting records.

		Financial Accounts Rs.	Cost Accounts Rs.
Value of Stock;
Opening Balance: Closing Balance:	W.I.P. Finished Goods W.I.P. Finished Goods	29,52,315 2,48,37,410 41,72,635 3,67,51,410	23,45,720 2,72,16,930 36,35,345 4,15,24,148
Interest Income from Inter–company Deposits Donation given Loss on Sale of fixed Assets Value of cement taken for own consumption Cost of Power drawn from own wind Mill: E.B. Tariff At Cost		6,14,250 4,75,250 1,04,148 3,75,920 34,10,420	– – – 3,45,200 48,58,415

(0)

Section II (50 Marks)

Section II (50 Marks)

(a)

Fill in the blanks:

1x5

(i)

Cost audit is ordered by the Government under Section _________ of the Companies Act, 1956.

(0)

(ii)

Cost audit report has to be submitted to the Central Government with a copy to the _________ of the company.

(0)

(iii)

A cost auditor cannot undertake audit of more than _________ companies having a share capital of more than 25 lakhs.

(0)

(iv)

When a clean report is not given by a cost auditor it is called a _________ report.

(0)

(v)

Audit Committee shall meet at least _______ a year.

(0)

(b)

The following figures relate to usage of power for a product:

	2006–07	2005–06	2004–05
Total power consumed(Kwh) Rate/Kwh(Rs.) Total Production in Million kg	24,02,474 2.29 337.730	24,94,872 2.12 333.084	21,75,677 1.90 300.865

Compute necessary productivity measures and compare the efficiency of power usage during the three years.

(0)

(c)

What do the following abbreviations stands for?

(i)

MAR

(0)

(ii)

LTO

(0)

(iii)

OECD

(0)

(iv)

COO

(0)

(v)

SEBI

(0)

(a)

What do you understand by "Corporate Image" and "Brand Equity"? Are they inter related? What are the possible approaches to evaluate Corporate Image?

2+1+5

(0)

(b)

What are the qualities and functions of a Management Auditor?

3+4

(0)

(a)

What do you understand by environment audit? Explain its significance with reference to control of product cost.

(0)

(b)

What do you understand by "Corporate Services Audit"? Describe the areas of Corporate Services Audit, the scrutiny thereof and the evalustion criteria used in such audit.

(0)

Write short notes on any three of the following:

5x3

(a)

Industrial Sickness;

(0)

(b)

Energy Audit;

(0)

(c)

Confederation of Indian Industries(CII);

(0)

(d)

SWOT analysis.

(0)

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