CWA/ICWA Final :: Cost Audit and Management Audit : June 2006

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 two each from the
remaining questions of Sections I & II.
Section — I(50 marks)
Marks
1. (a) State whether the following statements are "True" or "False". No reason or explanation need be given:
(i)

Every company required to maintain Cost Records under section 209(1)(d) of the Companies Act is required to get such records audited under section 233(B) of the Companies Act,

(ii)

There is a set of Cost Accounting Records Rules prescribed under section (209)(1)(d) of the Companies Act, which is applicable to all the Companies requiring Cost Audit.

(iii)Royalty is an item of Cost of Production under the Cost Accounting Records Rules,
(iv)Cost Audit is statutorily recognized form of audit in most of the countries.
(v)Efficiency Audit ensures an optimum return on the Capital Employed.
(vi)

Depreciation in excess of that computed under section 205(2) of the Companies Act cannot be taken for determination of cost under the Cost Accounting Record Rules.

(vii)Cost Auditor is entitled to get the Notice of the General Body Meeting.
(viii)Capital Work-in-progress is required to be shown in the Cost Records.
(ix)Cost Auditor has right of access to the Financial Books of the Company.
(x)Cost Auditor has a Statutory right to the Financial Books of the Company.
1x10=10
(b)

Which of the following is correct?

(i)

The time limit for submission of the Annexure to the Cost Audit Report by the Company to the Cost Auditor is
(a)90 days;
(b)135 days;
(c)180 days;
(d)Six months.

(ii)The authority competent to approve the appointment of Cost Auditor is
(a)General Body;
(b)Board of Directors;
(c)The CEO of the Company;
(d)Central Government.
(iii)

The maximum member of audit which can be accepted by a firm of accountants having three partners is
(a)Fir 30 products;
(b)60 companies, out of which do more than 30 companies shall be companies with paid up capital partner is;
(c)60 products;
(d)30 companies.

(iv)

The maximum amount of penalty payable by a Cost Auditor for non-compliance with the provisions of Cost Audit Report Rules , 2001, is
(a)Rs. 500;
(b)Rs. 1500;
(c)Rs. 5000;
(d)Rs. 1000 per day.

(v)Under the existing regulations, a Cost Accountant in practice can take as a partner:
(a)Another Cost Accountant in full time practice
(b)A practicing Chartered Secretary
(c)A practicing Company Secretary
(d)An advocate registered with the Bar Councils
5x1
Please turn over

( 2 )

F—19(CAM)
Revised syllabus
Marks
2. (a)

Following data is available for a company relating to the cost of production of a product subjected to Cost Audit.
Prepare the Export Profitability Statement to be included in the Annexure to the Cost Audit Report.
Production 10,000 Units
Rs.
Sales (Local)
Sales (Export)
Material consumed
Imported Component @ Rs. 3/unit
Direct Labour
Factory Overhead
Administrative Overhead
Freight & Packing (Local Sales)
Packing for Export
Handling at Port
Opening Work-in-progress
Closing Work-in-progress
9,000 units
1,000 units
20 Tonnes @ Rs. 5 Kg.
2,02,500
20,000
1,00,000
30,000
10,000
15,000
5,000
4,500
2,000
500
10,000
5,000

7
Additional Information:
(i)Export incentive of 10% on F.O.B. is receivables.
(ii)Draw Back-on-Duty paid on Raw Materials and Components available on exports is Rs. 2,500.
(b)
(i)

Why is Cost Audit Report not made public? Whether the members of Parliament have access to the Cost Audit Report?

(ii)

A company, manufacturing Cotton Textiles, wrote off in the same year, the expenditure in replacement of Copper Rollers used for Printing Fabrics and Stainless Steel frames used for Dying Yarn whose life are more than one year. State whether the Cost Auditor can qualify the report for these?

(iii)

A person has been appointed as Cost Auditor for twenty products manufactured in seven companies. He is again proposed for appointment as a Cost Auditor for three more products manufactured by two other companies. Will this appointment be 'in order'?

(iv)

A person is doing Internal Audit on one of the factories manufacturing 'Cement' in a company. He was proposed for appointment as Cost Auditor in another factory of the same company manufacturing cement for the same period. Is this appointment as Cost Auditor 'in order'?

2x4=8
3.

List the steps to be taken by a company from the time the Cost Audit is ordered for its product and the Report is submitted by the Cost Auditor to the Government, specifying the time schedules and penalties for non-compliance.

15
4.

What are the requirements of the Cost Audit Report Rules 2001, in regard to inventory? Discuss the relevance of the information called for in different paragraphs of the Annexure to the Cost Audit Report to the product cost.

15
Please turn over

( 3 )

F—19(CAM)
Revised syllabus
Marks
5. (a) State whether the following statements are "True" or "False". No reason or explanation need by given:
(i)

Management Audit in certain specified companies may be ordered by the Government by a special notification.

(ii)Management Audit can be conducted efficiently only by an expert in the area of Cost Audit,
(iii)Audit of Human Resource Development is outside the scope of Management Audit,
(iv)Operational Audit is merely an extension of Internal Auditing into Operational Areas.
(v)

Management Auditors should not only be qualified Cost/Chartered Accountant but have sound understanding of Audit Procedures.

(vi)A practicing Cost Accountant cannot be appointed as Cost Auditor of a Co-operative Society.
(vii)Under utilization of capacity has no impact on the Cost of Production of a product.
(viii)Main objective of Internal Audit is to prevent errors and frauds.
(ix)Internal Audit is compulsory in all manufacturing companies.
(x)Physical verification is not a part of Stock Audit conducted by a Bank.
1x10=10
(b) Expand the Abbreviations:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
GATT, 1994 & W.T.O., 1995
GAAP
GAAP
QECD
CII
MCA
TPRM
MTA
TRIPS
CAB
1x10=10
6.

What do you understand by "Anti-dumping duty"?
Briefly explain the provisions in the Cost Accounting Records Rules and Cost Audit Report Rules, 2001 covering this aspect.

3+12=15
7.

What is the purpose of the audit prescribed u/s. 14AA of the Central Excise Act? As a Cost Accountant in practice, Commissioner of Central Excise has appointed you to examine and report for correctness for the credit of duty availed and utilised under the Rules by a manufacturer is within the normal limit. What are the possible areas for misuse/malpractice?

15
8. (a) Write short notes on:
(i)Energy Audit,
(ii)Valuation Audit and Cenvat Audit.
5x2=10
(b) Define the following terms:
(i)Energy Audit,
(ii)Safeguard Duty,
(iii)Management Audit,
(iv)SWOT Analysis,
(v)Productivity Audit.
1x5=5
__________

 

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