CS Final :: Secretarial Management and System Audit : December 2004

Roll No…………………
Time allowed : 3 hours		Maximum marks : 100
Total number of questions : 7		Total number of printed pages : 3
PART—A
(Answer ANY TWO questions from this part.)

(a)

Anand and Co. is a firm of company secretaries with Anand and Balwant, two qualified Company Secretaries as partners. The firm has been operating from a State capital. The firm opened a branch office at a district headquarters town where there were no practising company secretaries though there were several industries in and around that town. The branch was located in the office of Chander, a Chartered Accountant, a friend of Anand and continues to operate from there. During the financial year 2003-04, Anand and Balwant visited the branch for 25 days and 35 days respectively. However, Dinesh, who has passed the intermediate examination of the Institute of Chartered Accountants of India, was placed in-charge of the branch and has been duly attending the said office. In the light of the above facts, examine the validity of the functioning of the branch office in the district town under the provisions of the Company Secretaries Act, 1980 and the regulations made thereunder.

(7 marks)

(b)

“A secretarial auditor must uphold the interest and sanctity of his profession.” Elucidate.

(7 marks)

(c)

State with reasons whether a Company Secretary in practice may be deemed to be guilty of either professional misconduct or other misconduct, or no misconduct in the following cases:

(i)	Publishing any book or articles, using or indicating association with any firm of company secretaries.
(ii)	Appearing on AIR, TV or any stage in private capacity as a speaker or actor or otherwise on programmes having no nexus with the profession.
(iii)	Requesting the client company to recommend his/their acquaintance to him for professional work.
(iv)	Writing to clients about implications of any new law or amendment to any existing law.
(v)	Making a material mis-representation.
(vi)	Convicted by a competent court of law for any offence under section 8(e) of the Company Secretaries Act, 1980.

(6 marks)

(a)

Give the check points for verification for issuing compliance certificate by a Company Secretary in practice under the Companies (Compliance Certificate) Rules, 2001 in respect of the following and state what remedial course of action is open to the Company Secretary in case of non-compliances noticed, if any:

(i)	Extraordinary general meeting; and
(ii)	Loans to directors.

(3 marks each)

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(b)

State the important provisions and points that are to be checked by a Practising Company Secretary for the purpose of certification in respect of buy-back of shares and other specified securities by a listed company.

(8 marks)

(c)

The Board of directors of Donewell Company Ltd., appointed its managing director (subject to approval in general meeting) for a period of 5 years by an agreement. In this connection, you are required to—

(i)	State the form required to be filed with the Registrar of Companies; and

(1 mark)

(ii)	Prepare a check list for pre-certification.

(5 marks)

(a)

Write notes on pre-certification of the documents to be filed with the Securities and Exchange Board of India/Stock Exchanges and other administrative authorities with regard to the following:

(i)	Dematerialisation procedural requirements.
(ii)	Reconciliation of shares held in depositories/physical form with issued/paid-up and listed capital.

(5 marks each)

(b)

Under section 383(A)(1) of the Companies Act, 1956, the Company Secretary in practice while issuing compliance certificate has to cover various aspects. Prepare a check-list/a list of points for verification in respect of the following:

(i)	Issue of duplicate share certificates.
(ii)	Declaration and payment of dividend.

(5 marks each)

PART—B

(Answer Question No.7 which is compulsory and any two of the rest from this part.)

(a)

“Management audit requires an inter-disciplinary approach.” Discuss outlining the steps involved, management functions appraised and the techniques adopted while conducting management audit.

(8 marks)

(b)

“Financial audit and operational audit are not mutually exclusive and are interconnected.” Discuss and differentiate between the two.

(6 marks)

(c)

State the role of an operational auditor in assessing business controls.

(6 marks)

(a)

The internal auditor of a company with multiple ‘strategic business units (SBUs)’ noticed the following :

(i)	Same components of material are purchased by different units at different prices.
(ii)	Marketing personnel have been offering discounts/price reductions over catalogue/quoted prices beyond the authorised quantum/range without the prior approval of managing director nor were ratifications obtained subsequently.
(iii)	Some of the items of work relating to the manufacture of parts/sub-systems are sub-contracted to outside parties though there is capability and spare capacity available in the other sister SBUs within the company on the plea that it is cheaper to get it done from outside.
Draft the report of the internal auditor covering the above observations. Make assumptions, if necessary.

(15 marks)

(b)

Give a check-list of five aspects for review of ‘inventory’ by a cost auditor.

(5 marks)

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(a)

As a management auditor, how would you conduct a review of the following functions :

(i)	Sales promotion.
(ii)	Credit rating and control.

(4 marks each)

(b)

As an auditor, which are the ratios you would analyse in respect of the following:

(i)	Liquidity.
(ii)	Effectiveness in resource utilisation.
(iii)	Inventory/stock levels.

(3 marks each)

(c)

An effective ‘management information system’ (MIS) is a must for management purposes. Enumerate the purposes served by the MIS.

(3 marks)

(a)

Outline the steps for performing the systems audit of ‘preparation of dividend warrant’ introduced by an organisation as part of the programmes for the computerisation of company’s secretarial functions.

(11 marks)

(b)

Write notes on any three of the following:

(i)	Protection of ‘security of networks’
(ii)	Effects of computers on auditing
(iii)	Norms and procedure for computerisation
(iv)	Role of database administrator.

(3 marks each)

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