CWA ICWA Question Papers Final Group IV Cost Audit and Operational Audit and Ethics June 2011

CWA ICWA Question Papers 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: 1×5 (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: 1×5=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: 1×4
(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.
1×6 (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. 1×5
(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: 1×5
(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? 1×4
(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): 6×3
(a) State the function of IAASB; (0)
(b) Sefeguard Duty; (0)
(c) ISA 500; (0)
(d) Margin of Dumping. (0)

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