| Auditing and Cost Accounting |
| Time: 3 Hours |
March – 2003 |
Marks: 100 |
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| N.B. : |
(1) |
Question NO.1 and 6 are compulsory and answer any two questions each from the rest from each section. |
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(2) |
Figures to the right indicate full marks. |
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(3) |
Working notes should form part of your answer. |
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(4) |
Answers of both the sections should be written in the same answer book. |
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Section I --- (Auditing) |
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| Q. 1. |
a) |
How would you verify the following (any two) :
(i) Cash at Bank (ii) Public deposits (iii) Unclaimed dividend. |
10 |
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b) |
What are the points to be considered by an auditor during verification? |
8 |
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| Q. 2. |
a) |
What are the objectives of auditing? Give the basic principles of auditing. |
8 |
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b) |
What do you understand by the term 'Fraud'? How would you classify the frauds? |
8 |
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| Q. 3. |
a) |
What is internal control? How auditor is concerned about it? |
8 |
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b) |
How will you, as an auditor, make a scrutiny of the following ledger account? What conclusions will you draw?
In the K’s BookBabu’s A/c
| Date |
Particulars |
Rs. |
Date |
Particulars |
Rs. |
| 2000 |
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2000 |
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| Jan. 1 |
To Balance b/d… |
8,000 |
Jan. 1 |
By Purchase A/c |
14,000 |
| Jan. 17 |
To Purchases |
500 |
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(C.N. for excess rate) |
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Mar. 31 |
” Balance c/d… |
20,000 |
| Jan. 20 |
To Bank |
5,000 |
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” Discount |
500 |
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| Mar. 25 |
To Bank A/c |
20,000 |
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34,000 |
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34,000 |
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8 |
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| Q. 4. |
a) |
How would you vouch cash purchases and commission received? |
8 |
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b) |
What is verification? How does it differ from vouching? |
8 |
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| Q. 5. |
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Write short notes on any four : |
16 |
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| (i) |
Good audit report |
(iv) |
Rights of a company auditor |
| (ii) |
Investigation |
(v) |
Qualifications of company auditor |
| (iii) |
Test checking |
(vi) |
Auditing in computer environment. |
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Section II --- (Costing) |
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| Q. 6. |
a) |
From the following particulars you are required to calculate:
| (i) |
Profit volume ratio |
(iv) |
Sales required to earn a profit of Rs.40,000 |
| (ii) |
Break-even-point |
(v) |
Margin of safety in the 2nd year. |
| (iii) |
Profit when sale is Rs. 2,00,000 |
| Year |
Sales Rs. |
Profit Rs. |
| I |
2,40,000 |
18,000 |
| II |
2,80,000 |
26,000 |
You may assume that the cost structure and selling prices remain constant in the two years. |
12 |
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b) |
The following information is gathered from the labour records of KT & Co.
| (i) |
Payroll allocation for direct labour Rs. 20,000 |
| (ii) |
Time card analysis shows that 8,000 hours were worked on production lines. |
| (iii) |
Production reports for the period shows that 4,000 units have been completed each having standard labour time of 1 1/2 hours and standard labour rate Rs. 2/- per hour. |
Calculate :
(i) Labour Variance Ratio (ii) Labour Cost Variance (iii) Labour efficiency variance |
8 |
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| Q. 7. |
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The following is the trading and profit and loss A/c of a company for the year ended on 31-12-02.
Trading and P & L A/c for the year ended 31-12-02
| Dr. |
Cr. |
| Particulars |
Rs. |
Particulars |
Rs. |
| To Raw material purchased |
80,000 |
By sales (2500 units) |
2,50,000 |
| To direct wages |
30,000 |
By Closing stock of raw material |
5,000 |
| To direct expenses |
25,000 |
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| To Factory expenses |
40,000 |
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| To Gross Profit |
80,000 |
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2,55,000 |
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2,55,000 |
| To Office salaries |
25,000 |
By Gross profit |
80,000 |
| To Office rent |
12,000 |
By Dividend received |
10,000 |
| T6'Selling expenses |
12,500 |
By Discount received |
7,500 |
| To Prelim. Exp. written off |
2,500 |
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| To Goodwill written off |
5,500 |
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| To Net profit |
40,000 |
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97,500 |
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97,500 |
For the year 2003 it is estimated that :
| (i) |
Units produced and sold would rise by 20% |
| (ii) |
Price of raw material per unit will rise by 10% |
| (iii) |
Direct wages per unit will increase by 25%. |
| (iv) |
Direct expenses will go up by Rs. 5,000 in total |
| (v) |
Factory expenses per unit will increase by 25% |
| (vi) |
The office premise which was on rental basis in 2002, would be purchased by the company on which depreciation would be Rs. 6,000 in 2003. |
| (vii) |
Selling expenses per unit will remain the same. |
Prepare cost sheet for 2002 and estimated cost sheet, considering the above changes for 2003. The company will charge a profit at 20% sales in 2003. Give maximum details. |
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| Q. 8. |
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KT Ltd. provides you the following information for the year ended 31st March 2002.
| Particulars |
Processes |
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A |
B |
C |
| Raw material (units) |
12,000 |
2,440 |
2,600 |
| Cost of raw material per unit (Rs.) |
5 |
5 |
5 |
| Direct wages Rs. |
34,000 |
24,000 |
15,000 |
| Production overheads Rs. |
16,160 |
16,200 |
9,600 |
| Normal Loss (% of total no. of units entering to the process) |
4% |
5% |
3% |
| Wastage (% of total No. of units entering to the process) Scrap |
6% |
5% |
4% |
| Per unit of wastages Rs. |
3 |
4 |
5 |
| Output transferred to subsequent process |
70% |
60% |
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| Out put sold at the end of the process |
30% |
40% |
100% |
| Selling price per unit Rs. |
12 |
16 |
17 |
Prepare process A, B and C Account. |
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| Q. 9. |
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The following trial balance was extracted on 31-12-2002
Trial Balance
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Rs. |
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Rs. |
| Land and Building |
64,000 |
Share Capital |
1,00,000 |
| Bank Balance |
18,000 |
Sundry Creditors |
12,000 |
| Contract A/c.: Material |
1,00,000 |
Cash Received |
2,70,000 |
| Plant |
40,000 |
(90% of work certified) |
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| Wages |
1,50,000 |
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| Expenses |
10,000 |
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3,82,000 |
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3,82,000 |
The contract price is Rs. 5,00,000. It began on 1st Jan. 2002. Out of the plant and material charged to the contract, plant costing Rs. 4,000 and materials costing Rs. 6,000 were destroyed by an accident. On 31-12-2002 plant costing Rs. 10,000 was returned to store, the value of materials on site was Rs. 5,000 and the cost of work done but not certified was Rs. 10,000. Depreciate plant at 10% p.a. and 2% land & building.
Prepare contract A/c after taking 2/3 profit on cash basis to profit and loss A/c and balance sheet as on 31-12-2002 |
15 |
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| Q.10. |
a) |
Give the advantages of costs accounting. |
7 |
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b) |
What are the items causing difference in profit as per the cost sheet and financial statement? |
8 |
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