CWA ICWA Final - Group IV : Cost Audit and Operational Audit and Ethics - December 2011

CWA ICWA Final - Group IV • Cost Audit and Operational Audit and Ethics • December 2011

This Paper has 47 answerable questions with 0 answered.

F—P17(COA) Syllabus 2008
Time Allowed : 3 Hours	Full Marks : 100

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

Please:

(1) Answer all bits of a question at one place.
(2) Open a new page for answer to a new question.
(3) Attempt the required number of questions only.

Answer Question No. 1 and 5 which are compulsory and any two each
from the remaining questions of Section I and Section II.

SECTION I (Marks 50)

(a)

State whether the following statements based on the quoted terms are ‘TRUE’ or ‘FALSE’ with justifications for your answer. No credit will be given for any answer without justifications:

1x5=5

(i)

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

(0)

(ii)

Cost Audit is to be conducted only when the shareholders of the company direct such an audit at the Annual General Meeting.

(0)

(iii)

In case of appointment of Cost Auditor in Partnership firm's name, all the partners of the firm must be the Cost Accountants but the partners need not be the practicing Cost Accountants.

(0)

(iv)

A Cost Accountant who has been appointed as Cost Auditor of the company can authenticate the Compliance Report of the same company.

(0)

(v)

CAS–6 deals with determination of capacity of a unit.

(0)

(b)

In each of the cases/statements given below, one out of four alternatives is correct. Indicate the correct answer:

1x5=5

(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)

Time limit for submission of Compliance Report is within

A.	one hundred and twenty days
B.	one hundred and eighty days
C.	forty–five days
D.	one hundred and thirty–five days

(0)

(iii)

Under Para 23, cost of bought out services includes

A.	Raw Materials
B.	Cost of Utilities
C.	Indirect Material
D.	All of the above

(0)

(iv)

CAS–4 deals with

A.	Determination of Cost of Production for Captive consumption
B.	Determination of Average (equalized) Cost of Production
C.	Determination of Capacity of a Unit
D.	None of the above

(0)

(v)

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 the above

(0)

(c)

Fill in the blanks in the following sentences by using appropriate words/phrases:

1x4=4

(i)

Section 209(i)(d) of the Companies Act, 1956 requires prima facie that the Cost Accounting records are to be maintained in the __________________ of the company.

(0)

(ii)

The Annexure to the Cost Audit Report and Proforma should be signed by the ____________ and _____________ of the company.

(0)

(iii)

In view of e–filing,_____________________ is required to be submitted to the Cost Audit Branch.

(0)

(iv)

Form No. __________ is used for seeking the approval of the Central Government for appointment of a Cost Auditor.

(0)

(a)

How do you define a Service Cost Centre according to CAS–13?

(0)

(b)

How is Cost Computed of Services in the following cases as per CAS–13?

(i)

In–house

(ii)	By Contractor

2+2=4

(0)

(c)

ASHLEEN SUGAR MILLS LTD., a sugar manufacturing company, located at Utter Pradesh has a boiler which is used for its own by-product, bagasse as fuel. The steam generated is first used for generation of power and the exhaust steam is used in the process of sugar manufacture. The following details are extracted from the financial accounts and cost accounting records of ASHLEEN SUGAR MILLS LTD. for the year ended March 31,2011:

Sugar produced
Steam generated and consumed
Fuel (Bagasse) consumed for production of steam
Cost of generation of steam including cost of water (other than Fuel Cost)
Steam used for generation of power
Power purchased from Electricity Board @ Rs. 5.40 per KWH
Power generated from Steam Turbine
Variable conversion cost of generation of power (excluding cost of steam)

28,70,000
14,65,000
6,85,000
Rs.64,5,30,000

6,20,000
52,70,000
4,85,25,000
Rs.4,22,18,000

Quintals
Tonnes
Tonnes

Tonnes
KWH
KWH

Notes: (1) The Sale Value of bagasse if sold in the open market is Rs. 1,820 per Tonne.
(2) The exhaust steam (after generation of power) transferred to sugar manufacturing process is 82% of the cost of production of steam.

Required

(i) Prepare two separate Cost Sheet for steam and power as per Cost Accounting Record Rules.
(ii) Compute the average Cost of Power as per PARA–7(A) of the Annexure to the Cost Audit Report Rules.

(5+4)
+3=12

(0)

(a)

Who can authenticate the Compliance Report as per the Companies (Cost Accounting Records) Rules, 2011?

(0)

(b)

Write a note on ‘social objectives’ of Cost Audit.

(0)

(c)

You are the Cost Auditor of INDIA JUTE MILLS LTD. for the year ended March 31, 2011. That Company had a strike from 15.9.2010 to 17.11.2010. Although the company resumed working from 18.11.2010, normal production was achieved only from 12.12.2010. The expenses incurred during the year ended March 31, 2011 were:

(Amount in Rs. lakh)
Salaries and wages (Direct) Salaries and wages (Indirect) Power (Variable) Depreciation Other fixed expenses	450 220 160 140 260

Detailed examination of the records revealed that of the above, the following relate to the period 15.9.2010 to 17.11.2010:

(Amount in Rs. lakh)
Salaries and wages (Indirect) Depreciation (Non-productive) Other fixed expenses	80 50 110

Required:
As a Cost Auditor you are requested to calculate abnormal cost which will be excluded from the product cost.

3+2+2
+2=9

(0)

(a)

State whether the following companies are covered by Cost Accounting Records Rules, with reasons for your conclusions:

(i)	A small scale industrial unit manufacturing formulations which is subject to Statutory Price Control under Druge Price Control Order.

(ii)	A construction company which runs a mini cement plant to manufacture cement for its own use.

2+2=4

(0)

(b)

How would you compute the cost of utilities as per CAS–8 in the following circumstances?

(i)	Utilities generated for the purpose of inter unit transfer.

(ii)	Utilities generated for the purpose of inter company transfer.

(iii)

Utilities generated for the sale to outside parties.

2x3=6

(0)

(c)

(i)	What are "Waste Multipliers" in textile costing?

(ii)

The following details of the process-wise wastages on inputs are taken from the Cost Accounting Records of ANUSUA COTION MILLS LTD., a yearn manufacturing company, for the year ended March 31, 2011:

PROCESS	% of Wastages on Input
Mixing and Blow Room Carding Drawing Roving (Simplex) Ring frame (Spinning) Reeling and Winding	8.85 6.95 1.22 1.10 6.90 1.50

Required:
Calculate the process-wise Waste Multiplier factors for the year ended March 31, 2011.

2+6=8

(0)

SECTION II (Marks 50)
(Operational Audit)

SECTION II (Marks 50)

(Operational Audit)

(a)

Fill in the blanks in the following sentences by using appropriate words/phrases:

1x5=5

(i)

Management Audit requires ___________________ approach.

(0)

(ii)

_________________ is needed to create corporate culture of transparency.

(0)

(iii)

ISO 9000 certification is an ____________________ service.

(0)

(iv)

Salvage is considered as ____________________ by insurer against what is owed under the policy for an insured loss.

(0)

(v)

The _________________ is the highest body of the structure of the WTO.

(0)

(b)

State whether the following statements are ‘TRUE’ or ‘FALSE’ with justification for your answer. No credit will be given for merely answering ‘TRUE’ or ‘FALSE’ —without giving any justification/reasoning:

1x4=4

(i)

The Managing Director of a company can be appointed as Chairman of Audit Committee.

(0)

(ii)

Corporate image of a company is built up exclusively by its product quality but is not affected by its attitude towards its other stakeholders

(0)

(iii)

Productivity is defined as ratio of production and sales.

(0)

(iv)

Energy Audit means monitoring the energy efficiency of different equipment and process.

(0)

(c)

What do the following abbreviations stand for?

1x5=5

(i)

IAASB

(0)

(ii)

CEGAT

(0)

(iii)

TRAI

(0)

(iv)

GATT

(0)

(v)

OECD

(0)

(a)

Explain whether the following activities amount to Professional Misconduct on the part of a Cost Accountant:

(i)	Mr. S. JAIN, a practicing Cost Accountant takes up job as a full time lecturer in XBL Management Institute at Jamshedpur affiliated to Ranchi University.

(ii)	Mr. P. DHAR, a practicing Cost Accountant uses a visiting card in which he designates himself besides as Cost Accountant, as "Tax Consultant".

(iii)

Mr. P. NADKARNI, a Cost Accountant practicing in India enter into partnership with MR. R. D. HONES, CMA, USA.

2x3=6

(0)

(b)

Explain in brief the basic differences between Internal Audit and Operational Audit.

(0)

(c)

"To–day’s customer is the more demanding than the customer of yesterday."—In view of this how would you evaluate, as a Management Auditor, the performance of "Customer Services Department".

(0)

(a)

Enumerate the main areas to be covered by the Auditor in the case of Environment Audit of an Industrial unit.

(0)

(b)

What is Corporate Governance?
State any 8 of the 14 key aspects of the CII (Confederation of Indian Industries) code which should be shared by the Board.

2+6=8

(0)

(c)

Some of the risks covered by General Insurance are: fire, marine (transit), loss of profit, malicious damage, SRCC (Strike, Riots and Civil Commotion) etc.
—What are the risks for which a Cost Accountant as a Surveyor can effectively use the methods and techniques of Cost Accounting for assessing the loss?

(0)

Write short notes on any three out of the following:

6x3=18

(a)

Assurance Services;

(0)

(b)

Professional Behaviour;

(0)

(c)

The major characteristics of ERP systems necessitating change in Audit Approach;

(0)

(d)

Functions of the WTO.

(0)

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