CWA ICWA Final Stage IV : Cost Audit and Management Audit - June 2004

CWA ICWA Final - Stage IV • Cost Audit and Management Audit • June 2004

This Paper has 42 answerable questions with 0 answered.

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

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

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

(a)

State merely whether the following statements are “True” or “False”. You need not give any reason/explanation for your answer:

1x10=10

(i)

A company is declared as a “Sick Industrial Company” if it incurs cash losses continuously for three years.

(0)

(ii)

Investment in a cooperative society for putting up an “effluent treatment plant” is included under capital employed in Para 3 of the Annexure to the Cost Audit Report Rules.

(0)

(iii)

The competent Authority for CENVAT AUDIT is the Asstt. Commissioner/ Dy. Commissioner of Central Excise.

(0)

(iv)

Propriety Audit ensures that every rupee invested in capital gives optimum results.

(0)

(v)

Cost books are open to inspection during business hours by the shareholders of the company.

(0)

(vi)

A Cost Accountant can enter into a partnership with a Charted Accountant.

(0)

(vii)

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

(0)

(viii)

All manufacturing companies are covered under section 209(1) (d) of the Companies Act, 1956.

(0)

(ix)

New Cost Auditor is authorized to submit a supplementary report, if he considers it as necessary.

(0)

(x)

Audit programme is a part of Auditor’s Final Report.

(0)

(b)

Fill in the blanks :

2x5=10

(i)

Before starting Cost Audit Work, an Auditor should study the _____ _____ _____ industry concerned.

(0)

(ii)

Value addition is the difference between _____ and the cost of bought out materials and services.

(0)

(iii)

Para 3 of the Annexure to Cost Audit Report Rules, 1996 deals with _____

(0)

(iv)

Soda Ash is covered by Cost Audit Records (_____) Rules

(0)

(v)

Overheads are dealt with in Para_____ of the Annexure to Cost Audit Report Rules, 1996.

(0)

(c)

Define in not more than one/two sentences:

1x5=5

(i)

Non-moving stocks;

(0)

(ii)

Capitalization;

(0)

(iii)

Debt Equity Ratio;

(0)

(iv)

Flow chart;

(0)

(v)

Compliance Audit.

(0)

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

(Rs, in lakhs)
	31.3.2003	31.3.2002	31.3.2001
Gross Fixed Assets Cumulative Depreciation Capital Work-in-progress Investments in Shares & Debentures Inventories Sundry Debtors Advance for Purchase of Capital Equip. Other Loans and Advances Other current Assets Sundry Creditors Provision 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 as defined in Para 24 of the Cost Audit Report Rules for the years ended 31.3.2003 and 31.3.2002:

(a) Profit as a percentage of Capital Employed:
(b) Profit as a percentage of Net Sals.

8+7=15

(0)

State the requirements of Cost Audit Report Rules in regard to installed capacity and production. Does this information have any bearing on unit cost of production?

(0)

The following date is extracted from the Cost Accounting Records of a Caustic Soda Plant:

Production	48,000 tonnes
Total power generated/consumed: From State Electricity Board From the Captive Power Plant From the Windmill (fed into the EB grid and drawn at the factory site) Cost of Power drawn from EB Total Operating cost of Windmill Norms for power consumption per tonne of caustic soda	5,22,72,540 KWH 6,27,26,720 KWH 4,70,44,816 KWH Rs. 27,44,30,835 Rs.7,33,89,913 3,250 KWH

Note: The Electricity Board detects 10% of the power fed into the grid towards transmission losses and charges.
How will you present the above data in the Annexure to the Cost Audit Report?

(0)

Section — II (50 marks)

Section — II (50 marks)

(a)

Indicate the following statements are “True” or “False”. You need not give any justification in defense of your answer:

1x5=5

(i)

Management Audit is a type of Internal Audit.

(0)

(ii)

Main objective of Internal Audit is to prevent errors and frauds.

(0)

(iii)

Management Audit Report is presented to management.

(0)

(iv)

A practice Cost Accountant can be appointed as a Cost Auditor of a C0–operative Society.

(0)

(v)

MAOCARO, 1988 applies to Banking Companies and Insurance Companies licensed to operate under sec.25 of the Companies Act, 1956 also.

(0)

(b)

Explain the following terms in just one/two sentences only:

1x5=5

(i)

Corporate Governance;

(0)

(ii)

Energy Audit;

(0)

(iii)

Product Image;

(0)

(iv)

Consumerism;

(0)

(v)

Activity Based Costing

(0)

(c)

Fill up the blanks with appropriate words:

1x5=5

(i)

Special Audit Report is like an ______ ______ for legal purposes.

(0)

(ii)

WTO facilitates the management of the ______ Trade Agreement.

(0)

(iii)

‘Corporate Objectives’ representing the ______ that the organization has laid down for itself.

(0)

(iv)

The Audit Committee shall meet at least ______ a year.

(0)

(v)

Dumping is an ______ practice.

(0)

As a Cost Accountant in practice. You are asked to certify the cost of production for Captive Consumption. Briefly outline the procedure involved and statutory requirements to be compiled with.

(0)

The following details are taken from the Cost Accounting Records of an automobile components manufacturing unit:

Rs. In lakhs

Net Sales – Domestic
Export

72,500 Nos
21,200 Nos

6,525
1,679

Raw Materials, Stores & Spares consumed
Packing Materials (includes special export packing Rs.84 lakhs)
Employee Costs and other manufacturing expenses
Inland freight
Transit Insurance
Participation in international trade fair in London
Advertising & Sales promotion
Interest
Value of export benefits received

4,625
215
1,230
162
43
65
509
425
126

The product exported undergoes one additional subcontracting operation costing Rs.300 each, which is included in manufacturing expenses. Compute the profit on exports. State your assumptions.

(0)

(a)

M/s ABC Ltd. makes a single product, which sells for Rs.36 per unit and there is a great demand for the product.

Direct Material
Direct Labour
Variable Overhead

Rs.
10
6
6
22

The labour force is currently working at 100% capacity and no extra time can be made available. A customer has approached the company with a request for a manufacture of a special order at Rs.10,000.
The cost of the order would be Rs.4,000 for Direct Materials and 600 labour hours will be required and variable overhead/hr. will be Rs.3.
Should the company accept this order?

(0)

(b)

Clearly explain the meaning of the two words “Truth and Fairness” as are used in an Audit Certificate.

(0)

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