\CWA ICWA Final - Group IV Cost Audit and Operational Audit and Ethics December 2008

This Paper has 50 answerable questions with 0 answered.

FP17(COA) Syllabus 2008 Time Allowed : 3 Hours The figures in the margin on the right side indicate full marks. Answer Question No. 1 and Question No. 5 which are compulsory and two each from the remaining questions of Sections I & II. SECTION I (Marks 50) Marks 1. (a) State whether the following statements are "True" or "False" No justification/reason need be given for your answer: (i) The annexure to the Cost Audit Report is to be prepared by the cost auditor. (ii) The cost auditor is appointed by the Board of Directors subject to the approval of the Central Government. (iii) A company which is sick and close can seek exemption from Cost Audit even through an order has been issued to that company earlier under section 233B of the Companies Act. (iv) Nonmoving stock of raw materials and components are those stocks which have not moved for more than 24 months. (v) If any of the products under audit is incurring losses, the cost auditor should work out the breakeven level for the product, and report the same in his Cost Audit Report. (vi) A footwear unit in the Cooperative sector need not maintain cost accounting records u/s 209(1)(d) of the Companies Act. (vii) The Central Excise authorities have the right to call for a copy of the Cost Audit Report. (viii) A nominee director is covered by the definition of "related party". (b) Which of the following answers is correct? (i) The Annexures to the Cost Audit Report and Proforma should be signed by A. B. C. D. The Chief Finance Officer and the Managing Director One Director and Secretary The Secretary and the Chief Finance Officer The OfficerinCharge of Cost Accounts and the Secretary. 2x3=6 1x8=8 Full Marks : 100

(0

(0

(0

(0

(0

(0

(0

(0

(0

(ii) The maximum number of audits which can be accepted by a firm of cost accountants having

(0

three partners is A. 30 Products B. 60 companies out of which not more than 30 companies shall be companies with paid up capital of more than Rs. 25 lakhs. C. 60 Products D. 30 companies (iii) Under the existing regulations, a Cost Accountant in practice can take as his partner A. B. C. D. Another practising Cost Accountant; A practising Chartered Accountant; A practising Company Secretary; An Advocate registered with the Bar Council. 8+4

(0

2. (a) The following details are extracted from the accounts of Super Chemicals Ltd., which manufactures only one product in a single location: (Rs. in lakhs) 31.3.2008 31.3.2007 31.3.2006 Gross Fixed Assets Cummulative Depreciation Value of trade marks included under fixed assets (net of depreciation) Capital WorkinProcess Investments in Shares & Debentures Inventories Sundry Debtors Advances for purchase of capital equipment Other Loans & Advances Other Current Assets Sundry Creditors Term loans due for repayment within 12 months Provision for Expenses Net Sales Interest Depreciation Profit before taxes 13,845 3,936 240 819 2,172 1,875 1,002 72 195 96 642 100 87 11,772 1,842 162 696 12,636 3,789 360 675 2,136 1,740 951 183 174 87 561 120 102 9,636 1,491 141 435 11,535 3,672 480 951 2,079 1,533 876 141 159 78 522 80 84 8,793 1,248 132 591

(0

Compute the following ratios as required in para 24 of the Annexture to the Cost Audit Report for the year 20072008 and 20062007: (i) Profit as a percentage of capital employed. (ii) Profit as a percentage of Sales. (b) What are the duties of the Cost Auditor? 6

(0

3. (a) Saleswell Ltd. sells a range of products. Each territory is alloted to a salesman and the salesman 5+2+5=12 are given the discretion of increasing or reducing the catalogue prices within a certain range. In their respective territories, if the circumstances so warrant. This they do, by levying a surcharge or by offering discounts. For each quarter sales quotas are fixed for each salesman and a 5% commission is given on actual orders booked, in addition to a fixed monthly salary. The quantum

(0

of commission earned serves as an indication of the efforts made by salesmen. The new Cost Accountant who has joined the company recently has devised a management information system for quarterly appraisal and the following are figures called out from his records: For the quarter AprilJune 2008 Salesmen A B C D Rs. Rs. Rs. Rs. Commission earned Standard cost of quota sales Selling Price variance Sales volume variance Contribution margin mix variance [U = Unfavourable: F = Favourable] You re required to: (i) Compute the sales quota given to each salesman and their actual contribution made. (ii) Rank the salesmen according to performance explaining the basis (iii) Comment on the uses of commission as an incentive. (b) How will you treat the following items in the Cost Accounting Records? (i) Commission paid to the Managing Director as a percentage of profit, included in the financial accounts under the head "Salaries and Wages". (ii) Profit on sale of fertilisers to cane growers by a Sugar Company. (c) Can a Cost Accountant who is appointed as the concurrent auditor of a company accept appointment as Cost Auditor of the same company? 4. (a) Calculate the installed capacity, available capacity, normal capacity, actual capacity, idle capacity, abnormal idle capacity from the following data and as per CAS2; Manufactures specification capacity per hour = 600 units No. of shifts (each shift 8 hours = 3 shifts Holidays in a year (365 days): Sundays 52 days Other holidays 13 days Annual maintenance is done within 13 holidays Preventive weekly maintenance for the machine on Sunday Normal idle capacity for batch change Over, lunch, personal need etc. = 1 hr. per shift Production bases on sales expectancy in past 5 years = 36.12, 32.28, 35.64, 29.28 and 36.24 lakh units. Actual production for the year = 36.12 lakh units. (b) What type of manufacturing organisations are exempt from the maintenance of cost accounting records through they are engaged in the industries in respect of which section 209(1)(d) Rules have been prescribed? (c) What is the application fee along with form 23C payable to Govt. of India, Ministry of Corporate Affairs where the nominal share capital of the limited company is Rs. 10 crores and how payment is to be made? SECTION II (Marks 50) 2 2 2 12 2,380 29,400 600 U 800 U 900 U 1,650 26,000 6,000 U 1,000 U 14,000 U 2,985 28,400 2,300 U 14,000 F 42,000 U 2,110 24,000 2,700 F 500 U 1,800 F

(0

(0

(0

(0

(0

(0

5. (a) State whether the following statements are "True" or "False". No reason for justification need be given: (i) Cost of production of goods produced for captive consumption as per CAS4 for Central Exercise purpose should be certified in the prescribed form. (ii) The statutory auditor (which term includes Cost Auditor) can only be an invitee and not a member of the audit comittee. (iii) Audit of records of manufacturing operations in customs bonded warehouse is compulsory in all cases. (iv) In computing cost of production for captive consumption, administrative overheads which are not directly related to production activity may be excluded. (v) Interest cost should be included in inventory valuation for purposes of bank audit. (vi) Verification of compliance with various provisions of all applicable laws is part of the job or the internal auditor. (vii) Operational audit is termed as micro level management audit. (b) Fill up the blanks: (i) The audit committee shall meet at least _________ a year as per the SEBI listing aggrement. (ii) For the purpose of antidumping law, injury margin means the difference between the noninjurious price due to the domestic industry and the _________ of the dumped imports. (iii) CERA (Central Exercise Revenue Audit) is conducted by the organisation of_________. (iv) The scope of work of an insurance surveyor is laid down in section _________ of the Insurance Act. (v) _________ is the highest decision making body of the W.T.O. (vi) The audit of cenvat availed can be ordered only by the_________ (vii) Operational audit (or value for money audit) has been defined as an organized search for ways of improving _________ and _________. 6. (a) State the salient features of an ideal flow chart. (b) Define Opportunity cost and Imputed cost as per CASI. (c) Management Audit and Operational Audits are complementary and supplementary to one another. Discuss. (d) Which of the following acts amount to professional misconduct on the part of a practising cost

1x7=7

(0)

(0)

(0)

(0)

(0)

(0)

(0)

1x7=7
(0)

(0)

(0)

(0)

(0)

(0)

(0)

4 4 4 3x2=6

(0)

(0)

(0)

accountant? (i) A cost accountant gives a certificate of cost of production for attaching with a tender for a costplus contract. He comes to know after signing the certificate that his client has won a case with a supplier on account of which the client is entitled to get a refund of substantial portion of the purchase price of the raw material. The certificate is not corrected. (ii) X is a shareholder, in PQ Ltd. holding 100 shares. The companys paid up capital is Rs. 5 crores (50 lakhs shares of Rs. 10 each). X accepts a certificate work from the company. 7. (a) What is meant by "Corporate Services Audit"? Describe the areas of Corporate Services Audit, the scrutiny thereof and the evaluation criteria uses in audit? (b) Write short notes on (any two): (i) GATT; (ii) W.T.O; (iii) SOX Audit. 8. (a) Write short notes on any three of the following: (i) Due Deligence Audit; (ii) Audit under EA2000; (iii) Concurrent Audit; (iv) Professional misconduct in relation to members of the institute (ICWA) in service. Discuss. (b) Answer any two of the following: (i) The Cost Audit and Assurance Standard Board (CAAB)Explain. (ii) A cost accountant give a certificate of cost for a product manufactured by an SSI unit owned by his sonwhether his acts amounts to professional misconduct or not? Explain. (iii) Productivity Audit. 3x2=6
(0) (0)

(0)

12 3x2=6

(0)

(0)

(0)

(0)

4x3=12
(0)

(0)

(0)

(0)

(0)

(0)

CWA ICWA Final - Group IV Cost Audit and Operational Audit and Ethics June 2009

This Paper has 52 answerable questions with 0 answered.

FP17(COA) Syllabus 2008 Time Allowed : 3 Hours 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 Sections I & II. SECTION I (Marks 50) Marks 1. (a) State whether the following statements are "True" or "False": (i) The Shareholder of the company has no statutory right to demand a copy of cost Audit Report. (ii) Presently cost audit report should be sent to the Department of Company Affairs after binding. (iii) Cost audit report can be submitted with provisional figures if the audited accounts are not finalized. (iv) Para 27 of the Annexure to the cost Audit Report will help to minimize the litigations under Central Excise and Valuation Audit under Section 14A. CENVAT Audit under Section 14AA and Audit by Excise officials 2000. (v) Relevant costs are costs relevant for a specific purpose or situation. (vi) Cost auditor can not be appointed as internal auditor of the same company. (vii) Dividend can be declared out of Revaluation Reserve. (b) Choose the correct answer: (i) The company has to give documents to the cost auditor within (1) 180 days; (2) 135 days; (3) 90 days. (ii) For Physical verification of inventory under para 19B, figures are provided for (1) Current year and previous year; (2) Current year and previous two years;
(0)

Full Marks : 100

1x7=7
(0)

(0)

(0)

(0)

(0)

(0)

(0)

1x3=3
(0)

(3) Current year. (iii) For written off stock under Para 18B figures are provided for (1) Current year and previous two years; (2) Current year; (3) Current year and previous year. (c) Fill up the blanks with appropriate word/words; (i) Before starting cost audit work, an auditor should study the _________ industry concerned. (ii) Value addition is the difference between ___________ and the cost of bought out materials and services. (iii) In DebtEquity Ratio, Long Tern Liabilities are the liabilities due for settlement more than _________months after the data of the Balance Sheet. (iv) For Calculation of Profit as a percentage of Capital Employed profit should be _______ before arriving at the ratio. 2. (a) What informations are provided under "Central Excise Reconciliation for the product under reference" under Para 27 for; (i) Quantitative details; (ii) Details of clearances; (iii) Reconciliation of duty paid. (b) What credit can a company avail under "CENVAT"? (c) State the industry where detail information of central excise is not provided under Para 27. 3. (a) Under what circumstances will the appointment of Cost Auditor for conducting of cost audit be appointed in firms name. Who will authenticate such reports and how? (b) How would you treat the following items in the cost accounting Records? (i) Voluntary retirement compensation paid to workers, included under wages. (ii) CENVAT availed as credit on purchased raw materials. (c) XYZ Ltd. has furnished the following information from the financial books for the year ended 31st March 2009: Profit & Loss A/c Rs. To Opening Stock (500 units at Rs.140 each) To Materials consumed 70,000 10,40,000 By Sales (10250 units) By Closing Stock Rs. 28,70,000 50,000 10
(0) (0)

1x4=4
(0)

(0)

(0)

(0)

3+3+6=12

(0)

(0)

(0)

3 3 4

(0)

(0)

(0)

(0)

To wages To Gross Profit C/d

6,00,000 12,10,000 29,20,000 Rs. 3,79,000 4,24,000 2,20,000 6,000 30,000 1,92,000 12,51,000

(250 units at Rs.200 each) 29,20,000 Rs. By Gross Profit B/d By Interest By Rent 12,10,000 5,000 36,000

To factory overhead To Administrations overhead To Selling Expenses To Bad Debts To Preliminary Exp. To Net Profit

12,51,000

The Cost Sheet shows the cost of materials at Rs.104 per unit and the labour cost at Rs.60/per unit. The factory overheads are absorbed at 60% of labour cost and administration overheads are 20% of factory cost. Selling Expenses are charged at Rs.24 per unit. The Opening Stock of finished goods is valued at Rs.180 per unit. You are required to prepare: (i) A statement showing profit as per cost A/c for the year ended 31.03.2009. (ii) A statement showing the reconciliation of profit as disclosed in cost A/c and the profit shown in financial A/c. 10
(0)

4. (a) From the following figures extracted from the Cost Accounting Records of a company, calculate the Value Addition and its ratio as percentage of sale and also show how the value added is distributed to the different claimant thereto: (Rs. in lakhs) Gross Sale (included ED Rs.1,240 lakhs) Raw materials Increase in value of stock of finished goods Salaries and wages Power and fuels Other overheads (Excluding Depreciation) Depreciation Interest Dividend income from Investment Provision for taxation Dividend proposed (b) Define Cost Audit and State its purpose. (c) Define in not more than one/two sentences: (i) Non moving stocks; (ii) Capitalization; (iii) Cost pools; (iv) Arms length price. SECTION II (Marks 50) 16,500 6,250 42 2,800 2,220 215 900 760 75 220 300

4 4

(0)

(0) (0) (0) (0)

5. (a) State whether the following statements are "True" or "False". Justify with reasons: (i) Management Audit Report is to be submitted to the Cost Audit Branch. (ii) The Ministerial Conference shall establish five functional Committees for discharge of functions agreed to them under the Multilateral Trade Agreements. (iii) The Companies Amendment Act, 2000 had introduced a new section 192A regarding Constitution of Audit Committees. (iv) The Consumer Service Audit critically examines the outstanding payment of consumers. (v) Energy Audit means monitoring the energy efficiency of different equipment and process. (vi) The Secretariat of the WTO will be headed by a Secretary. (vii) The goods can be imported without payment of customs duty and can be reexported after repairs, reconditioning etc. and such reexport must be made within Five Years from the date of import. (b) Fill up the blanks with appropriate word/words: (i) Authority can be delegated but not the _________. (ii) Dumping is an ___________ practice. (iii) The Audit Committee shall meet at least ___________ a year. (iv) ____________ is a movement protecting the interest of the consumers. (v) The _________________ is the highest body of the structure of the WTO. (vi) Personnel development, a vital aspect of corporate development calls for special _________. (vii) Audit Committee which shall consist of not less than _____________ directors and such number of other directors as the Board may determine. 6. (a) State the aspects to be covered in report of "Audit when goods are manufactured in Customs Bonded Warehouse". (b) Enumerate Six areas where disputes in determining the assessable value of the goods for excise duty liability may arise. (c) Prepare a checklist for carrying out an audit under Section 14AA of the Central Excise Act. 7. (a) A nationalized Bank which has extended cash credit to a manufacturing company on the security of the inventory holding is periodically receiving stock statements from the company indicating the value of stocks held. The company is sick and the Bank wants to reassure itself that its loans are fully secured and covered by stocks. You have been appointed by the Bank to certify the value of the inventory. How would you conduct the inventory Audit?

1x7=7
(0)

(0)

(0)

(0)

(0)

(0)

(0)

1x7=7
(0)

(0)

(0)

(0)

(0)

(0)

(0)

(0)

(0)

8 10

(0)

(0)

(b) State briefly the salient feature of the traditional form of internal audit and operational audit. (c) Distinguish between GATT and WTO. 8. Write short notes (any three): (a) Industrial Sickness; (b) Swot Analysis; (c) Productivity Audit; (d) Energy conservation.

4 4 6x3=18

(0)

(0)

(0)

(0)

(0)

(0)

CWA ICWA Final - Group IV Cost Audit and Operational Audit and Ethics June 2010

This Paper has 44 answerable questions with 1 answered.

FP17(COA) Syllabus 2008 Time Allowed : 3 Hours 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 Sections I & II. SECTION I (Marks 50) Marks 1. (a) State whether the following statements are True or False, with justification/reasoning for your answer: (i) A concurrent auditor of a company can accept appointment as the cost auditor of the same company. (ii) Absorption of new technology treated as normal cost. (iii) Cost Audit is applicable to enterprise like partnership firms, Cooperative societies etc. (iv) Cost Audit in India appears to be synonymous with Efficient Audit. (v) A Cost Auditor of a company can also be appointed as its internal audit. (b) Choose the correct answer: (i) In Cost Audit Report, auditors observations and suggestions are given in: (a) Para 1 of the Annexure (b) Para 3 of the Annexure (c) Para 13 of the Annexure (d) Form of cost Audit Report (ii) Abnormal Nonrecurring costs are being dealt with Annexure to the Cost Audit Rules in (a) Para 15 (b) Para 16 (c) Para 17 (d) Para 18 (iii) Clarification on Cost Audit Report to be given to the Cost Audit Branch by Cost Auditor within
(0) (0)

Full Marks : 100

1x5=5

(0)

(0)

(0)

(0)

(1)

1x5=5
(0)

(a) 45 days (b) 180 days (c) 30 days (d) 60 days (iv) Capital Employed under Para 24 means (a) Average of Fixed Assets (excluding intangible assets, effect of revaluation of fixed assets, Capital WIP) less average of net current assets minus current liabilities and provisions. (b) Share Capital plus Reserves (c) Total Assets less current liabilities (d) All the above (v) For Physical verification of inventory under Para 19(b), (a) Current year and Previous year (b) Current year and Previous two years (c) Current year (d) Previous year (c) Fill in the blanks: (i) As per Section 292A of the Companies Amendment Act.,2000, every public Company having paid up Capital of not less than ______________ of rupees shall constitute a committee of the Board, know as Audit Committee. (ii) Nonmoving Stock of Stores and Spares are those stocks which have not moved for more than ___________ months. (iii) The ceiling on the number of cost audit to be undertaken by a Cost Auditor is laid down in Section _____________ of the Companies Act. 1956. (iv) The debit balance in the Profit and Loss Account is to be _____________ in computing Net Worth of the Company. 2. (a) State the constitution and scope of the Cost Accounting Standard Board (CASB) in India and mention at least five Cost Accounting Standards (CAS No.5) with Title, objective and useful for. Out of five CAS mention the names which are mainly aimed at principles for assessment of Cost. (b) There was a strike from 17.8.2009 to 28.10.2009 in a Company of which you are Cost Auditor for the year ending 31.3.2010. Although the Company began working from 29.10.2009 production could effectively begin only from 30.11.2009. The expenses incurred during the year ending 31.03.2010 were: Rs.in lakh Salaries & Wages (Direct) 3,000 8 1x4=4
(0) (0) (0)

(0)

(0)

(0)

(0)

10

(0)

Salaried & Wages (Indirect) Power (Variable 90%) Depreciation Other Fixed Expenses Repairs and Maintenance (Variable Rs.1100 lakhs) Total

2,000 1,200 1,800 2,400 1,400 11,800

Detailed examination of the records that of the above the following relate to the period 17.8.2009 to 29.11.2009. Rs.in lakh Salaries & Wages (Indirect) Depreciation (NonProductive) Other Fixed Expenses Repair and Maintenance (Indirect) Total 700 600 900 100 2,300

Calculate the amount which, in your opinion, should be treated as abnormal for exclusion from the Product Costs and under which para it should be shown. 3. (a) An establishment footwear/tannery Unit has for a long time let out its chemical effluents into a canal resulting in contamination of ground water in its neighborhood. The Company ordered to put up an effluent treatment plant and also make arrangements for supply of potable (drinking) water in tankers free of cost to the 500 residents affected on a regular basis till ground water becomes potable again. As a cost Auditor of the Company, how will you treat the cost of such an operation? Explain with reasons, taking into account the social responsibility of the Company in regard to environmental pollution. (b) How will you treat the following items in the Cost Accounting Records? (i) Interest received on security deposit with the Electricity Board. (ii) Voluntary Retirement Compensation paid to workers, included under wages. (iii) Convert availed as credit on purchased raw materials. (iv) Profit on Sale of fertilisers to canegrowers by a sugar company. (c) Who are the representative from various high powered Advisory body to form Government Accounting Standard Advisory Board in India including stewards of major Accounting Departments of the Government of India. 4. (a) As a cost auditor, suggest different measures to rectification of imbalance in production facilities. (b) The following figures are extracted from the statement prepared by the cost Accountant and the Trial Balance of ABC Ltd., Which is a single product company: Year ending 31.3.09 Gross sales inclusive of excise duty 2,040 31.3.08 (Rs. in lakhs) 1,985 1,875 31.3.07 5+5=10
(0)

(0)

(0)

6 6+6

(0)

(0)

Excise duty Raw materials consumed Direct wages Power and fuel Stores and spares Deprn. charged to production cost centres Factory overheads Salaries and wages Depreciation Rates and Taxes Other overheads Administrative overheads Salaries and wages Rates and Taxes Other overheads Selling and Distribution overheads Salaries and wages Packing and Forwarding Depreciation Other overheads Interest Bonus and Gratuity Gross current Assets Current liabilities and Provisions

295 1,140 35 30 6 16 5 2 1 6 10 2 162 7 6 1 124 85 12 840 324

280 1,060 32 27 5 15 4 2 1 5 9 2 154 6 6 1 118 74 10 724 305

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 Additions as percentage of Net Sales Note: The Computation should be based on EBDIT as Operating Profit SECTION II (Marks 50) 5. (a) Explain whether the following activities amount to professional misconduct: (i) A cost Accountant takes voluntary retirement from his employer and starts practice. He continues his association with the previous employers as an advisor, on a monthly retainer. (ii) A practising lawyer, specializing in antidumping cases comes to an informal understanding with an independent practising cost Accountant to assist him in preparing accounting statements to support his cases and agrees to share his fees on a percentage basis. (iii) A cost Accountant gives a certificate of cost for a product manufactured by an SSI Unit, owned entirely by his son. (iv) A Practising Cost Accountant brings disrepute to the profession, as a result of his action in his professional work. 1x5
(0)

(0)

(0)

(0)

(v) A practising Cost Accountant uses for his personal advantage certain confidential information acquired as a result of his cost Auditing. (b) State what these following abbreviations stands (i) P C A O B (ii) C E R A (iii) D T A (iv) E R P (v) L F A R (c) Fill up the blanks with appropriate words: (i) ______________ controls aims at ensuring compliance with applicable laws and regulations. (ii) The qualifications of the statutory auditors are prescribed under the provisions of section _________ of the Companys Act. (iii) ______________ audit are concerned with the objectives of efficiency and effectiveness. (iv) The concept of Management Audit was developed by ___________ . 6. (a) Enumerate the points to be considered for assessing the requirements of working capital requirements and borrowing limits on behalf of the lending bank. (b) List the items to be included in the Report on Corporate Governance in the Annual Report of the Company. 7. (a) Write a not on Excise Audit 2000. (b) Enumerate ten statutory and specific fields of audit, verification and certification open to cost accountants in practice, other than Cost Audit. (c) List the provisions in the first schedule regarding Professional Misconduct in relation to a cost accountant in Practice. 8. Write short notes (any three): (a) Assurance Services; (b) C E R A Audit of C and AG; (c) State the fields of Due Diligence ought to investigate; (d) Audit Committee. 8 1x4 1x5

(0)

(0)

(0)

(0)

(0)

(0)

(0)

(0)

(0)

(0)

(0)

10

(0)

5 5

(0)

(0)

8 6x3=18

(0)

(0)

(0)

(0)

(0)

CWA ICWA Final - Group IV Cost Audit and Operational Audit and Ethics December 2010

This Paper has 51 answerable questions with 0 answered.

FP17(COA) Syllabus 2008 Time Allowed : 3 Hours 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 are True or False, with justification/reasoning for your answer: (i) Detection of errors and fraud is one of the social objectives of Cost Audit. (ii) In case of delay in furnishing the Cost Accounting Records, etc. by the company, the Cost Auditor may still be advised to write a letter within 10 days from the expiry of 135 days from the close of the financial year to the company for nonreceipt of Cost Accounting Records/Statements, Annexure/Proforma to the Cost Audit Report, as the case may be, and get it acknowledged by the company. (iii) Financial position including financial ratios as required to be stated in para 24 of the Annexures to the Cost Audit Report. (iv) The Cost Auditor of a company is appointed by the Board of Directors subject to the approval of the Central Government. (v) Two companies simply have a common Director shall not be deemed as Related Party Relationship. (b) Choose the correct answer: (i) The Annexures to the Cost Audit Report and proforma should be signed by (a) the Secretary and the Finance Officer (b) the Secretary and the Chief Finance Officer of the company (c) one Director and one Secretary (d) the Chief Finance Officer and the Managing Director (ii) A Cost Audit firm has three partners. State how many companies Cost Audit can be conducted where the paid up Capital of all the companies is less than Rs.25 lakhs. (a) 30 companies
(0)

Full Marks : 100

1x5=5

(0)

(0)

(0)

(0)

(0)

1x5=5
(0)

(b) 60 companies (c) 15 companies (iii) Application for appointment of Cost Auditor should be sent to the Department of Company Affairs within (a) 30 days of commencement of financial year (b) 50 days of commencement of financial year (c) 45 days of commencement of financial year (d) 60 days of commencement of financial year (iv) CAS9 deals with (a) Packing materials cost (b) Direct materials cost (c) Indirect materials cost (d) All of the above (v) Excisable clearances means. (i) only sale of goods from factory (ii) total clearances from factory (iii) despatch from bonded warehouse (c) Fill in the blanks: (i) Cost Accounting Record Rules were made first for ______ industry. (ii) Para 13 of the Annexure to Cost Audit Report Rules deals with _______. (iii) Outward transportation cost, as per CAS5 shall form part of cost of _______. (iv) CERA (Central Excise Revenue Audit) is conducted by the organisation of ---------. 2. (a) State with reasons whether a person can be appointed as Cost Auditor in the following cases: (i) A person has been appointed as Cost Auditor for 20 products manufactured in seven companies. He is again proposed for appointment as Cost Auditor, for three more products, manufactured by two other companies. (ii) A person is doing internal audit on one of the factories manufacturing Textile located at Ahmedabad. He was proposed for appointment as Cost Auditor in another factory of same company of manufacturing Textile for the same period located at Gwalior. (b) (i) As per cost Audit Report Rules, 2001, the Cost Auditor shall suggest measures for making further improvements in the performance in respect of Cost Control and Cost Reduction. You list out at least eight main points (headings). (ii) Which of the following acts amount to professional misconduct on the part of a practicing 2 2x2=4
(0) (0) (0) (0)

1x4=4
(0)

(0)

(0)

(0)

(0)

(0)

1x2=2

(0)

Cost Accountant? (Preferably in one sentence.) A firm of Cost Accountants undertake the Cost Audit of a company. The audit work is (1) conducted by one of the partners and two assistants. The report is however, signed by another partner. Mr. Ashim Roy is a shareholder in Hicks Ltd. holding 100 shares. The companys Paid (2) Up Capital is Rs.5 crores (50 lakh shares of Rs. 10 each) accepts a certification work from the company. (iii) Following data of B. K. Ltd. is available relating to the Cost of Production of a product subjected to Cost Audit. Prepare the Export Profitability Statement to be included in the Annexure to the Cost of Production of 12,000 units: Rs. Sales (Local) 10,000 units @ Rs.25 Sales (Export) 2,000 units @ Rs.21 Materials Consumed 25 tonnes @ Rs.6 Imported Components 12,000 units @ Rs.3 Direct Labour Factory Overhead Administrative Overhead Freight and Packing (Local Sales) Packing for Export Handling at Port Opening WorkinProgress Closing WorkinProgress Additional Information: (1) Export incentive of 12% on FOB is receivables. (2) Draw Back on duty paid on Raw Materials and components available on Export is Rs.3,000. 3x2=6
(0)

5+5=10

(0)

2,50,000 42,000 1,50,000 36,000 12,000 17,000 6,000 5,000 2,500 600 12,000 6,000

3. (a) How would you treat the following as per CAS7 related to Employee Cost? (i) Separation Cost due to voluntary retirement, retrenchment, termination etc., (ii) Idle time Cost. (b) The following figures are taken from the accounts of XYZ Ltd.: Rupees in lakhs 31.3.2007 Gross Fixed Assets Cumulative Depreciation Capital WorkinProgress Investments in Shares & Debentures Inventories Sundry Debtors Advances for Purchase of Capital Equipments Other Loans and Advances Other Current Assets 4,615 1,312 273 724 625 334 24 65 32 31.3.2006 4,212 1,263 225 712 580 317 61 58 29 31.3.2005 3,845 1,224 317 693 511 292 47 53 26

6+6=12

(0)

Sundry Creditors Provisions for Expenses Net Sales Depreciation Interest Profit before Taxes

214 29 3,924 54 614 232

187 34 3,212 57 497 145

174 28 2,931 44 416 197

Compute the following ratios as defined in para 3 of the Cost Audit Report Rules, for the year ended 31.3.2006 and 31.3.2007: (i) Profit as a percentage of Capital. (ii) Profit as a percentage of Net Sales. 4. (a) How would you treat the following as per CAS7 related to Employee Cost? (i) Recruitment Cost; (ii) Overtime premium; (iii) Coproducts. (b) Which number of Form is to be used for application for appointment of Cost Auditor(s)? (c) The following is the abridged Balance Sheet of BEEKAY Ltd.: Rupees in lakhs 31.3.2010 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 30 40 125 150 45 292 110 1,092 Assets Gross Block Accumulated Depreciation Capital WorkinProgress Investments Current Assets Inventories Sundry Debtors Advances for Capital Equipments Other Loans & Advances Cash & Bank Balances Current Liabilities Sundry Creditors for Others Capital Expenses 740 (320) 420 45 15 420 180 25 140 20 (180) (18) 31.3.2009 300 35 40 140 110 30 300 114 1,069 690 (300) 390 35 17 430 200 20 135 22 (190) (20) 1 7+7
(0) (0)

1x3=3

(0)

Provision for Taxes Miscellaneous Expenses Total Notes:

(65) 90 1,092

(70) 100 1,069

(1) Fixed Assets include Goodwill and Patents Rs.120 lakh (previous year Rs.125 lakh). (2) Term Loan due for repayment within 12 months are Rs.90 lakh (previous year Rs.85 lakh). Calculate the following for the company as a whole: (i) Capital Employed for the year ended 31.3.2010 and in which Para No. it is to be filled up. (ii) Net worth as on 31.3.2009 and 31.3.2010. SECTION II (Marks 50) 5. (a) State whether the following statement are True or False. Justify your answer: (i) The Internal Audit function in any organisation can be broadly categorized into three major functions namely (a) Financial audit (b) Compliance audit and (c) Operational audit. (ii) Operational Audit is a micro level management audit. (iii) Depreciation in excess of that computed under section 205(2) of the Companies Act cannot be taken for determination of cost under the Cost Accounting Record Rules. (iv) Physical verification of Stock is not a part of Stock Audit conducted by a Bank or their authorised person. (v) Excise Audit, 2000 was initiated from 1st April, 2000. (b) Fill up the blanks with appropriate word/words: (i) _______ is to know best that has been said and thought in the world. Mathew Arnold. (ii) SOX Audit is known as _______. (iii) Annexure 27 of Cost Audit Report Rules, 2001 relating to Central Excise Reconciliation for product under reference as the information will be useful for Conducting Valuation Audit _______ u/s 14A and 14AA of the CEA. (iv) The GATT was transformed in a _______ with effect from January, 1995. India is one of the founder member of IMF, World Bank, GATT and the _______. (v) Outward transportation cost, as per CAS5 shall form part of cost of _______. (c) What do the following abbreviations stand for? (i) MAR; 1x4=4
(0)

1x5=5
(0)

(0)

(0)

(0)

(0)

1x5=5
(0)

(0)

(0)

(0)

(0)

(ii) CPSE; (iii) IFAC; (iv) EIA. 6. (a) (i) Define Management Audit and Operational Audit (ii) Who are the members of the Audit Committee? (b) (i) Define extract of section 292A of the Companies Act, 1956 i.e. Audit Committee. (ii) What is the full form MAOCARO? 7. (a) What is Due Diligence Audit? Why it is undertaken? (b) (i) Enumerate eight 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. (ii) What is IFAC and who are members of how many countries? (iii) What is meant by COSO Report? 8. Write short notes (any three): (a) Professional Misconduct in Relation to Members of the Institute in Service; (b) Difference between Cost Accountants in Practice and Firm of Cost Accountants (c) Quality Review Board (QRB); (d) Management Audit Programme (MAP); (e) Productivity Audit and main objectives. 2+2=4 2 11 1 10 4

(0)

(0)

(0)

(0)

(0)

(0)

(0)

(0)

(0)

3 1 6x3=18

(0)

(0)

(0)

(0)

(0)

(0)

(0)

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

This Paper has 45 answerable questions with 0 answered.

FP17(COA) Syllabus 2008 Time Allowed : 3 Hours 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: (i) Cost Audit Order is Product specific. (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. (iii) Power Transformers are covered by Cost Accounting Records (Electric Cables and Conductors Rules). (iv) CAS 9 deals with Indirect Material Cost. (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. (b) Choose the correct answer: (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 (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
(0)

Full Marks : 100

1x5

(0)

(0)

(0)

(0)

(0)

(0)

1x5=5
(0)

(d) 1% of the Raw Material Cost (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 (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 (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 (c) Fill in the blanks with appropriate word/words: (i) GASAB stands for _________ ________ _______ _________ __________ in India. (ii) Nonmoving stock is being dealt with in Annexure to the Cost Audit Report Rules vide _________. (iii) Cost Audit was initially introduced in the year _____________. (iv) According to CAS 8 on utilities the cost of maintaining standby utilities is __________cost. 2. (a) List the duties to be performed by a Cost Auditor. (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 31.3.09 31.3.10 (Rs. in lakhs) 1,985 280 1,060 32 27 5 1,875 265 975 27 24 4 6 6+6 1x4
(0) (0) (0) (0)

(0)

(0)

(0)

(0) (0)

Gross sales inclusive of Excise Duty Excise Duty Raw Materials consumed Direct Wages Power and Fuel Stores and Spares

2,040 295 1,140 35 30 6

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

16

15

13

5 2 1 6

4 2 1 5

3 2 1 4

10 2 162

9 2 154

8 2 148

7 6 1 124 85 12 840 324

6 6 1 118 74 10 724 305

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 3. (a) State the areas of a applicability of Cost Accounting Record Rules. (b) The profit as per financial accounts of XY Cement Ltd., for the year 201011 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 intercorporate deposits Donations given Loss on sale of fixed assts Value of cement taken for own consumption Cost of power drawn from own windmill: 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 23,45,720 2,72,16,930 36,35,345 4,15,24,148 3,45,200 48,58,415 34,10,420 6 12
(0) (0)

4. (a) Write a brief note on Cost Accounting Standards. (b) Differentiate between Cost Accounting Standards and Cost Accounting Record Rules. (c) Discuss the requirements relating to the following in the Cost Accounting Records Rules: (i) Salaries and Wages, (ii) Depreciation, (iii) Royalty and Technical knowhow, (iv) Research and Development Expenses, (v) Related Party Transactions, (vi) Pollution Control. 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. (i) An Operational Audit is an extension of Financial Audit. (ii) The concept of Management Audit was developed by T.G.Rose. (iii) The term "image" of a company refers to how it is perceived by the public at large. (iv) Due Diligence is not a process of valuation of a business. (v) Central Excise is the single largest source of revenue through indirect taxes for the Central Government of India. (b) Fill in the blanks with appropriate word/words: (i) __________ _____________ in banks traditionally implies transaction audit. (ii) EA 2000 is a ______________ _______________ and interactive method of audit. (iii) The ___________ ______________ is the highest body of WTO. (iv) Dumping occurs, if a company exports its product at a ___________ price than the __________ price charged by it in the domestic market. (v) A profession is an _______________ _____________ or career. (c) What do the following abbreviations stands for? (i) SOX (ii) PCAOB (iii) IFAC (iv) CAAB

6 6 1x6

(0) (0) (0)

1x5

(0)

(0)

(0)

(0)

(0)

1x5
(0)

(0)

(0)

(0)

(0)

1x4
(0)

(0)

(0)

(0)

6. (a) Given below are the abridged balance sheets and profit & loss account of AB spinning Mills Ltd.: 200910 Balance Sheet: Share Capital Reserves and Surplus Long term borrowings Working Capital Loans Sundry Creditors Other Provisions Total Net Block Investments Current Assets: Inventory Bad debts Loans and advances Cash and bank balances Total Profit & Loss Account: Sales Other Income Total 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 Total Sales for the year (kgs) 5,091 446 5,537 3,728 162 377 826 7 38 43 11 57 66 277 4,303 2,775 215 322 673 18 54 33 14 43 26 130 3,938 365 4,557 2,964 206 295 710 15 48 24 16 48 30 152 4,215 342 245 726 287 1,639 1,616 389 4,902 1,009 19 1,160 11 2,641 62 4,902 3,523 3,523 541 19 1,521 114 1.286 42 3,710 245 1,077 180 451 1,255 315 3,710 612 19 1,641 172 1,231 35 245 1,313 160 672 1,015 305 200809 (Rs. in lakhs) 200708

12

(0)

138 71 87 ()351 5,537 4350890

94 59 83 ()236 303 3436921

82 41 80 ()154 4,557 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. (b) Enumerate the circumstances which have brought about the development of Management Audit. 7. (a) What is Marketing Audit? What are its essential features? (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. (c) What is the basis of differences between Management Audit and Operational Audit? 8. Write short notes (any three): (a) State the function of IAASB; (b) Sefeguard Duty; (c) ISA 500; (d) Margin of Dumping. 6 2+4 2+4 3+3 6x3
(0) (0) (0) (0) (0) (0) (0)

(0)

CWA ICWA Final - Group IV Cost Audit and Operational Audit and Ethics December 2011

This Paper has 47 answerable questions with 0 answered.

FP17(COA) Syllabus 2008 Time Allowed : 3 Hours 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) 1. (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: (i) Financial position and Ratio analysis are being dealt with under Para-16 of the Cost Audit. Report Rules. (ii) Cost Audit is to be conducted only when the shareholders of the company direct such an audit at the Annual General Meeting. (iii) In case of appointment of Cost Auditor in Partnership firm's name, all the partners of the firm must be the Cost Accountants but the partners need not be the practicing Cost Accountants. (iv) A Cost Accountant who has been appointed as Cost Auditor of the company can authenticate the Compliance Report of the same company. (v) CAS6 deals with determination of capacity of a unit. (b) In each of the cases/statements given below, one out of four alternatives is correct. Indicate the correct answer: (i) The structuring of Cost Audit includes A. Audit Programmes B. Audit working papers C. Checking including test checking D. All of the above (ii) Time limit for submission of Compliance Report is within A. one hundred and twenty days B. one hundred and eighty days
(0)

Full Marks : 100

1x5=5

(0)

(0)

(0)

(0)

(0)

1x5=5

(0)

C. fortyfive days D. one hundred and thirtyfive days (iii) Under Para 23, cost of bought out services includes A. Raw Materials B. Cost of Utilities C. Indirect Material D. All of the above (iv) CAS4 deals with A. Determination of Cost of Production for Captive consumption B. Determination of Average (equalized) Cost of Production C. Determination of Capacity of a Unit D. None of the above (v) The role of Cost Auditor in respect of nonmoving stock is to review A. The causes explained by the company for nonmovement of the items B. How the company deals with the nonmoving stock C. The policy of the company regarding determination on nonmoving items D. All of the above (c) Fill in the blanks in the following sentences by using appropriate words/phrases: (i) Section 209(i)(d) of the Companies Act, 1956 requires prima facie that the Cost Accounting records are to be maintained in the __________________ of the company. (ii) The Annexure to the Cost Audit Report and Proforma should be signed by the ____________ and _____________ of the company. (iii) In view of efiling,_____________________ is required to be submitted to the Cost Audit Branch. (iv) Form No. __________ is used for seeking the approval of the Central Government for appointment of a Cost Auditor. 2. (a) How do you define a Service Cost Centre according to CAS13? (b) How is Cost Computed of Services in the following cases as per CAS13? (i) Inhouse (ii) By Contractor (c) ASHLEEN SUGAR MILLS LTD., a sugar manufacturing company, located at Utter Pradesh has a boiler which is used for its own by-product, bagasse as fuel. The steam generated is first used for generation of power and the exhaust steam is used in the process of sugar manufacture. The following details are extracted from the financial accounts and cost accounting records of (5+4) +3=12
(0) (0) (0) (0)

1x4=4
(0)

(0)

(0)

(0)

2 2+2=4

(0)

(0)

ASHLEEN SUGAR MILLS LTD. for the year ended March 31,2011: Sugar produced 28,70,000 Quintals Steam generated and consumed 14,65,000 Tonnes Fuel (Bagasse) consumed for production of steam 6,85,000 Tonnes Cost of generation of steam including cost of water (other Rs.64,5,30,000 than Fuel Cost) Steam used for generation of power 6,20,000 Tonnes Power purchased from Electricity Board @ Rs. 5.40 per 52,70,000 KWH KWH 4,85,25,000 KWH Power generated from Steam Turbine Rs.4,22,18,000 Variable conversion cost of generation of power (excluding cost of steam) Notes: (1) The Sale Value of bagasse if sold in the open market is Rs. 1,820 per Tonne. (2) The exhaust steam (after generation of power) transferred to sugar manufacturing process is 82% of the cost of production of steam. Required

(i) Prepare two separate Cost Sheet for steam and power as per Cost Accounting Record Rules. (ii) Compute the average Cost of Power as per PARA7(A) of the Annexure to the Cost Audit Report Rules. 3. (a) Who can authenticate the Compliance Report as per the Companies (Cost Accounting Records) Rules, 2011? (b) Write a note on social objectives of Cost Audit. 4 5
(0)

(0) (0)

(c) You are the Cost Auditor of INDIA JUTE MILLS LTD. for the year ended March 31, 2011. That 3+2+2 Company had a strike from 15.9.2010 to 17.11.2010. Although the company resumed working from +2=9 18.11.2010, normal production was achieved only from 12.12.2010. The expenses incurred during the year ended March 31, 2011 were: (Amount in Rs. lakh) Salaries and wages (Direct) 450 Salaries and wages (Indirect) 220 Power (Variable) 160 Depreciation 140 Other fixed expenses 260 Detailed examination of the records revealed that of the above, the following relate to the period 15.9.2010 to 17.11.2010: (Amount in Rs. lakh) Salaries and wages (Indirect) Depreciation (Non-productive) Other fixed expenses 80 50 110

Required: As a Cost Auditor you are requested to calculate abnormal cost which will be excluded from the product cost. 4. (a) State whether the following companies are covered by Cost Accounting Records Rules, with 2+2=4
(0)

reasons for your conclusions: (i) A small scale industrial unit manufacturing formulations which is subject to Statutory Price Control under Druge Price Control Order. (ii) A construction company which runs a mini cement plant to manufacture cement for its own use. (b) How would you compute the cost of utilities as per CAS8 in the following circumstances? (i) Utilities generated for the purpose of inter unit transfer. (ii) Utilities generated for the purpose of inter company transfer. (iii) Utilities generated for the sale to outside parties. (c) (i) What are "Waste Multipliers" in textile costing? (ii) The following details of the process-wise wastages on inputs are taken from the Cost Accounting Records of ANUSUA COTION MILLS LTD., a yearn manufacturing company, for the year ended March 31, 2011: PROCESS % of Wastages on Input Mixing and Blow Room Carding Drawing Roving (Simplex) Ring frame (Spinning) Reeling and Winding 8.85 6.95 1.22 1.10 6.90 1.50 2+6=8
(0)

2x3=6

(0)

Required: Calculate the process-wise Waste Multiplier factors for the year ended March 31, 2011. SECTION II (Marks 50) (Operational Audit) 5. (a) Fill in the blanks in the following sentences by using appropriate words/phrases: (i) Management Audit requires ___________________ approach. (ii) _________________ is needed to create corporate culture of transparency. (iii) ISO 9000 certification is an ____________________ service. (iv) Salvage is considered as ____________________ by insurer against what is owed under the policy for an insured loss. (v) The _________________ is the highest body of the structure of the WTO. (b) State whether the following statements are TRUE or FALSE with justification for your 1x4=4 answer. No credit will be given for merely answering TRUE or FALSE without giving any justification/reasoning: (i) The Managing Director of a company can be appointed as Chairman of Audit Committee. (ii) Corporate image of a company is built up exclusively by its product quality but is not
(0)

1x5=5
(0)

(0)

(0)

(0)

(0)

(0)

affected by its attitude towards its other stakeholders (iii) Productivity is defined as ratio of production and sales. (iv) Energy Audit means monitoring the energy efficiency of different equipment and process. (c) What do the following abbreviations stand for? (i) IAASB (ii) CEGAT (iii) TRAI (iv) GATT (v) OECD 6. (a) Explain whether the following activities amount to Professional Misconduct on the part of a Cost Accountant: (i) Mr. S. JAIN, a practicing Cost Accountant takes up job as a full time lecturer in XBL Management Institute at Jamshedpur affiliated to Ranchi University. (ii) Mr. P. DHAR, a practicing Cost Accountant uses a visiting card in which he designates himself besides as Cost Accountant, as "Tax Consultant". (iii) Mr. P. NADKARNI, a Cost Accountant practicing in India enter into partnership with MR. R. D. HONES, CMA, USA. (b) Explain in brief the basic differences between Internal Audit and Operational Audit. (c) "Todays customer is the more demanding than the customer of yesterday."In view of this how would you evaluate, as a Management Auditor, the performance of "Customer Services Department". 7. (a) Enumerate the main areas to be covered by the Auditor in the case of Environment Audit of an Industrial unit. (b) What is Corporate Governance? State any 8 of the 14 key aspects of the CII (Confederation of Indian Industries) code which should be shared by the Board. (c) Some of the risks covered by General Insurance are: fire, marine (transit), loss of profit, malicious damage, SRCC (Strike, Riots and Civil Commotion) etc. What are the risks for which a Cost Accountant as a Surveyor can effectively use the methods and techniques of Cost Accounting for assessing the loss? 8. Write short notes on any three out of the following: (a) Assurance Services; (b) Professional Behaviour; 4 8
(0) (0)

(0)

1x5=5
(0)

(0)

(0)

(0)

(0)

2x3=6

(0)

(0)

(0)

2+6=8

(0)

(0)

6x3=18
(0)

(0)

(c) The major characteristics of ERP systems necessitating change in Audit Approach; (d) Functions of the WTO.

(0)

(0)