CWA ICWA Final - Group IV : Cost Audit and Operational Audit and Ethics - June2012

CWA ICWA Final - Group IV • Cost Audit and Operational Audit and Ethics • June 2012

This Paper has 44 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.

Please:

(1) Answer all bits of a question at one place.
(2) Open a new page for answer to a new question.
(3) Attempt the required number of questions only.

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)
(Cost Audit)

(a)

State whether the following statements based on the quoted terms are ‘TRUE’ or ‘FALSE’ with justifications for your answer. No credit will be given for any answer without justifications:

1x5=5

(i)

A Cost Accountant, who is appointed as the Concurrent Auditor of a Company, can accept appointment as Cost Auditor of the same Company.

(0)

(ii)

M/s. JTS Company situated in Jamshedpur has been planning to file a single form 23C by appointing BMS & Associates a Cost Audit firm for all the three different types of products covered under Cost Audit.

(0)

(iii)

It is imperative that a Resolution has to be passed by the Board of Directors for the appointment of the Cost Auditor.

(0)

(iv)

The Cost Accounting Record Rules are applicable to all Companies including to other form of business.

(0)

(v)

In view of e–filing of Cost Audit Report, only one hard copy is required to be submitted to the Cost Audit Branch.

(0)

(b)

Fill in the blanks in the following sentences by using appropriate word(s)/phrase(s)/number(s):

1x5=5

(i)

The ______________will be the Secretary of the Cost Accounting Standard Board (CASB).

(0)

(ii)

There _______________violation of section 215 of the Companies Act 1956 where the audit of Accounts is Completed before approval of the Balance Sheet by the Board of Directors.

(0)

(iii)

The Cost Accounting Record Rules were first made for the _______________Industry.

(0)

(iv)

Outward transportation Cost as per CAS–5 shall form part of Cost of_________________.

(0)

(v)

Rectified spirit is covered by the Cost Accounting Record (__________) Rules 1997.

(0)

(c)

In each of the cases/statements given below, one out of four alternatives is correct. Indicate the correct answer (only indicates A or B or C or D as you think correct):

1x4=4

(i)

Abnormal non–recurring Costs are being dealt with Annexure to the Cost Audit Report Rules in

A.	Para–15
B.	Para–16
C.	Para–17
D.	Para–20

(0)

(ii)

Cost Auditor should inform to the Central Government in Form 23D of his appointment within:

A.	90 days from receiving formal letter from the company.
B.	30 days from receiving formal letter from the company.
C.	90 days from the date of commencing of the current financial year.
D.	45 days from the date of commencing of the current financial year.

(0)

(iii)

Cost Auditor is required to provide reply to any clarification sought for, by the Central Government from the Cost Auditor in writing of the receipt of the communication addressed to him calling such clarification within

A.	45 days of the receipt of the communication.
B.	30 days of the receipt of the communication.
C.	180 days of the receipt of the communication.
D.	120 days of the receipt of the communication.

(0)

(iv)

Where default is made by the Cost Auditor in complying with the provisions of Rule 4 or Rule 5 (of the Cost Audit Report Rules) he shall be punishable with fine which may extend to

A.	Rs.7000
B.	Rs.6000
C.	Rs.5000
D.	None of the above

(0)

(a)

ANKRIT PHARMA LTD. uses two ingredients M and N for production of a formulation ‘Z’ in the ratio of 2: 3.
M is procured entirely from indigenous sources, whereas 50% of N is imported. The ratio of imports and indigenous sources is maintained throughout the year. The input/output ratio of raw materials to finished goods is 1 : 0.9. During the year 2011–12, the company produced 270 tonnes of finished product of Z and the consumption of raw materials was as follows:

M
N

—
—

1,21,500 kgs @ Rs. 360 per kg
1,78,400 kgs at an average cost of Rs. 220 per kg

During the year, the company imported 90,000 kgs of N and the break up of landed cost was as follows:

	(Rs.)
CIF Value Import Duty Clearing & Forwarding Charges Landed Cost	1,86,43,000 18,63,600 10,45,000 2,15,51,600

Required:
How will you present the above information in the manner prescribed in Paras-5A, 5B and 6 of the Annexures to the Cost Audit Report ?

7+2+2
+2=13

(0)

(b)

The Companies (Cost Accounting Records) Rules, 2011 have not prescribed any specific formats for the cost statements. In what manner and format would the cost statements be kept under these Rules?

(0)

(a)

How would you treat the following as per CAS–9 related to Packing Material Cost?

(i)	Primary and Secondary packing material cost.

(ii)	self–manufactured packing material.

(iii)

The forex component of imported packing material.

2x3=6

(0)

(b)

The profit as per Financial Accounts of JANARDRAN CEMENT LTD. for the year 2011–12 was Rs. 1,54,28,642. The profit as per Cost Accounting Records for the same period was less.
The following details are collected from the Financial Accounting Schedules and Cost Accounting records:

	Financial Accounts (Rs.)	Cost Accounts (Rs.)
Valuation of Stock: Opening:WIP Finished Goods Closing:WIP Finished Goods Interest income from inter-corporate deposits Donations given Loss on Sale of Fixed Assets Value of cement taken for own consumption Cost of Power drawn from own Wind Mill – At EB tariff –At Cost Non–opening income Voluntary retirement compensation Insurance claim relating to previous year received during the year	25,62,315 2,65,47,520 42,75,640 3,72,59,430 6,15,340 4,85,560 1,22,546 3,82,960 36,20,370 45,36,770 16,76,540 14,35,620	22,65,710 2,92,18,950 37,36,346 4,35,25,149 3,65,426 49,56,325

You are required to Prepare a Reconciliation Statement and arrive at the Profit as per Cost Records

4+6+2=12

(0)

(a)

Is it mandatory to submit performance Appraisal Report to the Company Management or can it be a NIL report? Can Form III relating to performance Appraisal be modified or it has to be strictly followed as prescribed?

(0)

(b)

How would you treat repairs and maintenance Costs resulting from abnormal circumstances as per CAS–12?

(0)

(c)

Based on the following information in respect of GRINDING MILLS LTD. a concern manufacturing cement, you as a Cost Auditor, are required to offer your comments on

(i)

the performance of the company

(ii)

your suggestions for improvements

		Rated Capacity 80 MT/Hr
		2011–2012	2010–2011
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)	Breakdown (Hrs.) Planned maintenance (Hrs.) Power restrictions (Hrs.) Shortfall (there are no order) (Hrs.) Want of wagons (Hrs.) Total stoppage (Hrs.) Total running (Hrs.) Total available (Hrs.) Production during the year (MT) Hourly Rate Production (MT) Capacity utilization Annual Installed Capacity: 400000 MT	2175 252 1236 792 480 4935 3972 8907 2,57,380 64.80 64.35%	1105 435 1475 665 646 4326 4635 8961 3,36,950 72.70 84.24%

7+2=9

(0)

SECTION II (Marks 50)
(Operational Audit)

SECTION II (Marks 50)

(Operational Audit)

(a)

State whether the following statements are ‘TRUE’ or ‘FALSE’ with justification for your answer. No credit will be given for merely answering ‘TRUE’ or ‘FALSE’ —without giving any justification/reasoning:

1x4=4

(i)

Dumping is an ‘illegal’ practice

(0)

(ii)

GATT and its agreement are permanent.

(0)

(iii)

There are no fixed items of evidence to be checked by Management Auditor.

(0)

(iv)

Three–fourths of the members of the Audit Committee shall be independent directors.

(0)

(b)

Fill in the blanks in the following sentences by using appropriate words/phrases:

1x5=5

(i)

The Secretariat of WTO is headed by a ________________.

(0)

(ii)

Quality Review Board (QRB) consists of a Chairperson and _____________other members.

(0)

(iii)

ISO 9000 Certification is an ________________service.

(0)

(iv)

_______________is needed to create a Corporate Culture of transparency.

(0)

(v)

The origin of the term "Due Diligence" owes to _______________.

(0)

(c)

What do the following abbreviations stand for?

1x5=5

(i)

MTA;

(0)

(ii)

TPRB;

(0)

(iii)

CFC;

(0)

(iv)

TRIPS;

(0)

(v)

CERA.

(0)

(a)

What do you mean by the term "Due Diligence"? What are the areas Due Diligence ought to investigate?

4+3=7

(0)

(b)

What is meant by ‘Social Responsibility Management’? Briefly list the different types of Pollution for which a manufacturing Company is responsible.

3+5=8

(0)

(c)

State briefly the adequacy of Budgetary Control System

(i)	in the area of Co–ordination; and

(ii)	in the area of Control.

(0)

(a)

Enumerate ten statutory and specific fields of audit, verification and Certification open to Cost Accountants in practice other than Cost Audit. Indicate a reference to the concerned authority/stature under which the work is prescribed.

(0)

(b)

Explain whether the following activities amount to Professional Misconduct:

(i)	Mr. D. P. Murarka a practicing Cost Accountant gives a certificate of cost of product manufactured by M/s. Subhomoy Pvt. Company owned by Mr.R. P. Murarka who is son of Mr. D. P. Murarka.

(ii)	Mr. B. M. Balabir Singh a Cost Accountant takes voluntary retirement from his employer in Jalandhar and starts practice. He continues his association with his previous employer in Jalandhar as an adviser, on a monthly retainer.

(iii)

Mr. G. S. Kulkarni, Cost Accountant in practice in Agra holds personal discussions/correspondence with prospective client relating to his achievement and capabilities.

2x3=6

(0)

(c)

State the role of the Audit Committee.

(0)

Write short notes on any three out of the following:

6x3=18

(a)

Cost Audit and Assurance Standards Board;

(0)

(b)

Safeguard Duty;

(0)

(c)

Concurrent Audit;

(0)

(d)

Objectives of Operational Audit.

(0)

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