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

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

This Paper has 45 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.
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)
Marks

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

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)

Marks

(a)

State whether the following statements based on the quoted terms are “True” or “False”, with justifications for your answer.If any statement is “FALSE”, you are required to give the correct terms duly quoted. No credit will be given for any answer without justifications:

1x5

(0)

(i)

Cost Audit Order is Product specific.

(0)

(ii)

Para 17 of the Annexure to the Cost Audit Report on Abnormal Non –recurring Costs provides information for the current year and the previous year.

(0)

(iii)

Power Transformers are covered by Cost Accounting Records (Electric Cables and Conductors Rules).

(0)

(iv)

CAS 9 deals with Indirect Material Cost.

(0)

(v)

As per CAS 12, fines, penalties, damages and similar other levies paid to statutory authorities or third parties shall form part of Repairs and Maintenance Cost.

(0)

(b)

Choose the correct answer:

1x5=5

(i)

Rectified spirit is covered by

(a)	Cost accounting Records (Chemical Industries) Rules
(b)	Cost accounting Records (Formuations) Rules
(c)	Cost accounting Records (Industrial Alchohol) Rules
(d)	Cost accounting Records (Bulk Drugs) Rules

(0)

(ii)

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)

(iii)

A Tea Company has twelve garden located at different places and regarded as separate Unit. How many maximum number of Firm can be appointed?

(a)	Two Firms as joint auditors
(b)	Twelve Firms as joint auditors
(c)	Six Firms as joint auditors
(d)	One Firm for Twelve gardens

(0)

(iv)

Copy of Cost Audit Report need not be submitted to

(a)	Company Law Board
(b)	Board of Directors of the Company
(c)	Members at Annual General Meeting of the Company
(d)	Income Tax Officer

(0)

(v)

According to CAS 2 on Capacity Determination, “Normal Capacity” is

(a)	Practical capacity minus the loss of production capacity due to external factors
(b)	Difference between installed capacity and the actual capacity utilisation
(c)	Maximum production capacity of a plant
(d)	Installed capacity minus the inevitable interruptions

(0)

(c)

Fill in the blanks with appropriate word/words:

1x4

(i)

GASAB stands for _________ ________ _______ _________ __________ in India.

(0)

(ii)

Non–moving stock is being dealt with in Annexure to the Cost Audit Report Rules vide _________.

(0)

(iii)

Cost Audit was initially introduced in the year _____________.

(0)

(iv)

According to CAS 8 on utilities the cost of maintaining stand–by utilities is __________cost.

(0)

(a)

List the duties to be performed by a Cost Auditor.

(0)

(b)

The following figures are extracted from the statement prepared by the Cost Accountant and the Trial Balnce of XYZ Ltd., which is a single product company:

	31.3.11	Year ending 31.3.10 (Rs. in lakhs)	31.3.09
Gross sales inclusive of Excise Duty … … … Excise Duty … … … Raw Materials consumed … … … Direct Wages … … … Power and Fuel … … … Stores and Spares … … … Depreciation charged to production cost centres … Factory overheads: Sales and Wages … … … Depreciation … … … Rates and Taxes … … … Other over heads … … … Administratives overheads: Salaries and Wages … … … Rates and Taxes … … … Other overheads … … … Selling and Distribution overheads … … … Salaries and Wages … … … Packing and Forwarding … … … Depreciation … … … Otheroverheads … … … Interest … … … Bonus and Gratuity … … … Gross Current Assets … … … Current Liabilities and Provisions … … …	2,040 295 1,140 35 30 6 16 5 2 1 6 10 2 162 7 6 1 124 85 12 840 324	1,985 280 1,060 32 27 5 15 4 2 1 5 9 2 154 6 6 1 118 74 10 724 305	1,875 265 975 27 24 4 13 3 2 1 4 8 2 148 5 5 1 108 68 9 640 246

You are required to compute the following ratios as per requirement of para 24 of the cost Audit Report Rules, 2001:

(i)	Operating Profit as percentage of value addition

(ii)	Value Addition as percentage of Net Sales

Note: The Computation should be based on EBDIT as Operating Profit

6+6

(0)

(a)

State the areas of a applicability of Cost Accounting Record Rules.

(0)

(b)

The profit as per financial accounts of XY Cement Ltd., for the year 2010–11 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:

Particulars	Financial Accounts	Cost Accounts
Value of stock: Opening : WIP Finished goods Closing : WIP Finished goods Interest income from inter–corporate deposits Donations given Loss on sale of fixed assts Value of cement taken for own consumption Cost of power drawn from own wind–mill: —At EB tariff —At cost	29,52,315 2,48,37,410 41,72,635 3,67,51,400 6,14,250 4,75,250 1,04,148 3,75,920 34,10,420	23,45,720 2,72,16,930 36,35,345 4,15,24,148 – – – 3,45,200 48,58,415

(0)

(a)

Write a brief note on ‘Cost Accounting Standards’.

(0)

(b)

Differentiate between Cost Accounting Standards and Cost Accounting Record Rules.

(0)

(c)

Discuss the requirements relating to the following in the Cost Accounting Records Rules:

(i)	Salaries and Wages,

(ii)	Depreciation,

(iii)

Royalty and Technical know–how,

(iv)	Research and Development Expenses,

(v)	Related Party Transactions,

(vi)	Pollution Control.

1x6

(0)

SECTION II (Marks 50)

SECTION II (Marks 50)

(a)

State whether the following statements based on the quoted terms are "TRUE" or "FALSE" with justification for your answer. If any statements is "FALSE", you are required to give the correct terms duly quoted. No credit will be given for any answer without justification.

1x5

(i)

An Operational Audit is an extension of Financial Audit.

(0)

(ii)

The concept of Management Audit was developed by T.G.Rose.

(0)

(iii)

The term "image" of a company refers to how it is perceived by the public at large.

(0)

(iv)

‘Due Diligence’ is not a process of valuation of a business.

(0)

(v)

Central Excise is the single largest source of revenue through indirect taxes for the Central Government of India.

(0)

(b)

Fill in the blanks with appropriate word/words:

1x5

(i)

__________ _____________ in banks traditionally implies transaction audit.

(0)

(ii)

EA 2000 is a ______________ _______________ and interactive method of audit.

(0)

(iii)

The ___________ ______________ is the highest body of WTO.

(0)

(iv)

Dumping occurs, if a company exports its product at a ___________ price than the __________ price charged by it in the domestic market.

(0)

(v)

A profession is an _______________ _____________ or career.

(0)

(c)

What do the following abbreviations stands for?

1x4

(i)

SOX

(0)

(ii)

PCAOB

(0)

(iii)

IFAC

(0)

(iv)

CAAB

(0)

(a)

Given below are the abridged balance sheets and profit & loss account of AB spinning Mills Ltd.:

	2009–10	2008–09 (Rs. in lakhs)	2007–08
Balance Sheet:
Share Capital Reserves and Surplus Long term borrowings Working Capital Loans Sundry Creditors Other Provisions	245 726 287 1,639 1,616 389	245 1,077 180 451 1,255 315	245 1,313 160 672 1,015 305
Total	4,902	3,523	3,710
Net Block Investments Current Assets: Inventory Bad debts Loans and advances Cash and bank balances	1,009 19 1,160 11 2,641 62	541 19 1,521 114 1.286 42	612 19 1,641 172 1,231 35
Total	4,902	3,523	3,710
Profit & Loss Account:
Sales Other Income	5,091 446	3,938 365	4,215 342
Total	5,537	4,303	4,557
Raw materials, stores and spares consumed Factory Wages Salaries Power and Fuel Repairs and maintenance: Buildings Plant and Machinery Vehicles Depreciation: Buildings Plant and Machinery Vehicles Interest Other overheads (excluding salaries and depreciation): Factory overheads Administrative overheads Selling & distribution overheads Loss for the year	3,728 162 377 826 7 38 43 11 57 66 277 138 71 87 (−)351	2,775 215 322 673 18 54 33 14 43 26 130 94 59 83 (−)236	2,964 206 295 710 15 48 24 16 48 30 152 82 41 80 (−)154
Total	5,537	303	4,557
Sales for the year (kgs)	4350890	3436921	3725405

The bankers to the company have appointed you as a Consultant for identifying the factors which have contributed to the continuing losses. Prepare a short note highlighting the factors which have prima facie led the company to sickness.

(0)

(b)

Enumerate the circumstances which have brought about the development of ‘Management Audit’.

(0)

(a)

What is Marketing Audit? What are its essential features?

2+4

(0)

(b)

What do you understand by ‘Corporate Services Audit’? Describe the areas of Corporate Service Audit, the security thereof and the evaluation criteria used in such audit.

2+4

(0)

(c)

What is the basis of differences between ‘Management Audit’ and ‘Operational Audit’?

3+3

(0)

Write short notes (any three):

6x3

(a)

State the function of IAASB;

(0)

(b)

Sefeguard Duty;

(0)

(c)

ISA 500;

(0)

(d)

Margin of Dumping.

(0)

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