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


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    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
    1. (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)
    2. (a) List the duties to be performed by a Cost Auditor. 6 (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)
    3. (a) State the areas of a applicability of Cost Accounting Record Rules. 6 (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

    12 (0)
    4. (a) Write a brief note on ‘Cost Accounting Standards’. 6 (0)
    (b) Differentiate between Cost Accounting Standards and Cost Accounting Record Rules. 6 (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)
    5. (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)
    6. (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.

    12 (0)
    (b) Enumerate the circumstances which have brought about the development of ‘Management Audit’. 6 (0)
    7. (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)
    8. 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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