CWA ICWA Final Stage IV : Cost Audit and Management Audit - December 2003

CWA ICWA Final - Stage IV • Cost Audit and Management Audit • December 2003

This Paper has 40 answerable questions with 0 answered.

F—19(CAM) Revised Syllabus
Time Allowed : 3 Hours	Full Marks : 100

Answer Question Nos. 1 and 5, which are compulsory and two each from the remaining questions of Sections I & II.
Section — I(50 marks)
Marks

Answer Question Nos. 1 and 5, which are compulsory and
two each from the remaining questions of Sections I & II.

Section — I(50 marks)

Marks

(a)

Indicate whether the following statements are ‘True’/‘False’. You need not give any justification in defense of your answer:

1x10=10

(i)

Recently the Central Government has issued Cost audit Order for continuous Cost Audit.

(0)

(ii)

A Sugar mill run by a Cooperative Society promoted by Sugarcane growers having a sales turnover of more than Rs.200 crores need not maintain Cost Accounting Records prescribed under Section 209(I)(d).

(0)

(iii)

The work of Cost Auditor and Financial Auditor are partly interrelated.

(0)

(iv)

A Cost Auditor of a company can also by\r its Internal Auditor.

(0)

(v)

No Government approval is required for appointment of a Cost auditor for the second or subsequent years.

(0)

(vi)

A person can hold of certificate of practice in earlier ICWAI/ICAI.

(0)

(vii)

A Cement Company having three different factories at three different locations can prepare a single set of Annexure to the Cost Audit Report and proformae for the company as a whole.

(0)

(viii)

The Cost Auditor is appointed by the general body at the Annual General Meeting.

(0)

(ix)

A group of practicing Cost Accountants can form a private limited company for undertaking Cost Audit Work.

(0)

(x)

If a Cost Accountant in practice undertake the Internal Audit, he has to comply with the requirements of Para 4(a)(xv) of MAOCARO.

(0)

(b)

which of the following amounts to professional misconduct on the part of a practicing Cost Accountant? Give one line justification. If any,

5x1=5

(i)

X is a shareholder in ‘A’ Ltd. holding 100 shares. The company’s paid up capital is Rs. 5 crores (509 lakhs shares @ Rs.10 each). X accepts a certification work from the company.

(0)

(ii)

X is engaged by a bank to carry out an audit of the inventory of B Ltd.X gives a copy of his report to B.Ltd., with out the knowledge of the bank. There is no adverse findings in the Report.

(0)

(iii)

A Cost accountant in practice gives a certificate of production for attaining with a tender for a “Cost plus Contract&rdquo. It comes to his notice immediately after signing the certificate that his client has just won a case with one of his suppliers, on account of which he is entitled to get a refund of substance\tial portion of the purchase price of the raw material. The certificate is not corrected.

(0)

(iv)

A firm of Cost Accountants undertakes the Cost Audit of a company. The Audit work is conducted by one of the partners and two assistants. The report is, however, signed by another partner.

(0)

(v)

A Cost Accountant in practice hold personal discussions/ correspondence with prospective clients relating to his achievements and capabilities.

(0)

(c)

Give your understanding on:

5x1=5

(i)

Net worth as per Para 28.

(0)

(ii)

Dumping

(0)

(iii)

Permanent File.

(0)

(iv)

Audit Committee.

(0)

(v)

Qualified Cost Audit Report.

(0)

The following is the abridged Balance Sheet of Powerpack Batteries Ltd.

		(Rs, in lakhs)
	31.3.2003	31.3.2002
Liabilities: Share capital Debenture Redemption Reserve Capital subsidy from State government Revaluation Reserve General Reserve Balance in Profit & Loss A/c Secured Loans Unsecured loans	300 25 30 125 160 48 275 123 1086	300 30 30 140 120 32 295 117 1064
Assets: Gross Block Accumulated Depreciation Capital Work-in-progress Investments	725 (315) 43 15	680 (290) 37 15
Current assets: Inventories Sundry Debtors Advances for Capital Equipment Other Loans & Advances Cash & Bank Balances	417 182 24 144 21	441 195 17 137 19
Current Liabilities Sundry creditors For Capital Expenses For others Provision for taxes Miscellaneous Expenses Total	(17) (185) (64) 96 1086	(21) (197) (71) 102 1064

Notes:

(a)	Fixed Assets include Goodwill and patents Rs.122 lakhs (Previous year Rs.137 lakhs)
(b)	Term Loans due for repayment with in 12 months are Rs.96 lakhs (Previous year Rs.84 lakhs)
Calculate the following for the company as a whole:

(a)	Capital Employed for the year ended 31.3.2003.

(b)	Net worth as on 31.3.2003 & 31.3.2002.

(c)	Debt – Equity Ratio as on 31.3. 2003.

5x3=15

(0)

(a)

Following are the data available from a company which has both domestic & export sales. The company is subject to Cost audit. Prepare a statement of export profitability.

Production		10,000	Units
Sales
Domestic		9,000	units @ Rs.22 per unit
Export		1,000	units @ Rs.17 per unit
Raw materials consumed	Rs.	90,000
Imported component used only for Export quality	Rs.	3,000
Direct Labour	Rs.	10,000
Factory Overhead	Rs.	15,000
Administrative Overhead	Rs.	5,000
Export Packing	Rs.	3,000
Freight and Packing for Domestic Sales	Rs.	4,500
Handling at Port	Rs.	500
Opening W.LP	Rs.	10,000
Closing W.LP	Rs.	5,000

For export an imported component is to be used at a cost of Rs.3/– per unit. The indigenously produced component that is used for domestic sales and included in raw material consumption is Rs.4/– per unit.
Draw back on the 1,000 units exported is Rs.1,000

(0)

(b)

It is said that “Cost Audit” is “Efficiency Audit”. Explain this statement. What is the evidence from the Cost Audit Report that Cost Audit is “Efficiency Audit”?

(0)

(a)

The profits as per Financial A/c‘s of XYZ Cement Ltd. for the year 2002–2003 was Rs.1,34,27,516. the profit as per the Cost Accounting Records for the same period was more.
You are required to prepare reconciliation statement and arrive at the profit, as per the cost Accounts. The following details have been collected from the Financial Accounting schedule and cost Accounting .

		Figures in Rs.
	Financial A/cs	Cost A/cs
Value of stock:
Opening W.LP Opening Finished Goods Closing W.LP Closing Finished Goods Interest income form Inter corporate deposits Donations given 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 3,67,51,410 6,14,250 4,75,250 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)

(b)

The management of a very big Public Sector Company suspects omn the existence of "ghost workers". You, as an Internal Auditor of the company are required to formulate a system of internal Control for Payment of wages and salaries.

(0)

Section—II (50 marks)

Section—II (50 marks)

(a)

Indicate whether the following statements are "True"/"False". You need not give any justification in defense of your answer:

1x5=5

(i)

Physical verification is not a part of Stock Audit conducted by a bank.

(0)

(ii)

The management of ICWAI is entrusted to Department of Company Affaira. Govt. of India.

(0)

(iii)

In India, standard Auditing Practices (SAPs) are issued by ICWAI.

(0)

(iv)

A copy of the cost Audit Report must be attached to Company’s Income Tax Return.

(0)

(v)

No Professional qualifications are prescribed for a Management Audit.

(0)

(b)

Fill up the blanks with appropriate words:

1x5=5

(i)

The extent and efficiency of _______ determined the scope of the Auditor’s work.

(0)

(ii)

A Cost Accountant may be appointed as a _______ under the Insurane act.

(0)

(iii)

Management Audit requires _______ approach.

(0)

(iv)

Corporate image and _______ are closely related concepts.

(0)

(v)

An auditor can be held liable under the _______ law if he intentionally makes a false statement in his report.

(0)

(c)

Match the statement under column (A) with the appropriate statement under column (B)

	A		B
(i)	Propriety Audit	(a)	An audit for the management
(ii)	Efficiency Audit	(b)	Evaluates the performance efficiency
(iii)	Operational Audit	(c)	Verifies if activities are in accordance with the system
(iv)	Performance Audit	(d)	To ensure optimum return
(v)	Compliance audit	(e)	An audit of execution action

1x5=5

(0)

what is the role of the audit Committee as per SEBI guidelines and as stipulated in Section 292A of the Companies act?

(0)

Prepare a list of precautions and safeguards a Cost accountant should take before issuing a certificate to a client.

(0)

(a)

List the tasks that can be performed by a Cost Accountant in practice in the following areas:

(i)	Direct Tax Laws;

(ii)	Central Excise.

(iii)

Banks and Financial Institutions

3x3=9

(0)

(b)

The following transactions are extracted from Stores Bin Card relating to a component during the year 2002-2003:

Date	Receipts (units)	Issues (units)	Balance (units)
1.4.2002 18.4.2002 10.1.2003 16.3.2003 23.3.2003 Total consumption	200 — — 200 — —	— 100 50 — 250 400	200 100 50 250 — —

Calculate the Inventory Turnover Ratio.

(0)

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