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Auditing and Cost Accounting

Time: 3 Hours

March Ė 2004 Marks: 100
 

N.B.:

(1)

Question NO.1 and 6 are compulsory and answer any two questions each from the rest from each section.

 
 

(2)

Figures to the right indicate full marks.

   
 

(3)

Working notes should form part of your answer.

   
 

(4)

Answers of both the sections should be written in the same answer book.

   
       
    Section I --- (Auditing)  
       

Q. 1.

a)

Define Auditing. How Auditing is different from Accounting?

10
 

b)

Explain the term fraud. What are the different types of frauds?

8
       

Q. 2.

a)

What is test checking in auditing? What precautions an auditor should take while applying test checking? 8
 

b)

What are special considerations which auditor should keep in mind during the course of vouching? 8
       

Q. 3.

a)

How would you read, as an auditor, the Jani's ledger A/c in the books of Miss. Bombay & Co.?
Janiís A/c
Dr. Cr.
Date Particulars Rs. Date Particulars Rs.
2002 Jan. 1

To Bal b/d.

6,000 2002 Jan. 1 By Bills Receivable 4,000
2002 May 25

To sales

5,000   By sales return 1,000
        By bank 950
        By discount 50
      2002 June 5 By bank 2,350
        By discount 150
        By Bills Receivable 2,500
Sept. 8

To bills receivable

2,500 Sept. 8 By bank 2,000
 

To interest

500   By Bills Receivable 8,000
 

To sales

7,000      
Dec. 12

To bills receivable

8,000 Dec. 15 By bank 8,400
 

To interest

400      
Dec. 15

To sales

5,000 Dec. 31 By bal c/d. 5,000
           
    34,400     34,400
8
 

b)

What is internal control? Suggest internal control system for credit purchases.

8
       

Q. 4.

a)

Explain the provisions of the Companies Act, 1956 for appointment of an auditor of a company.

8
 

b)

What are the rights of a company auditor ?

8
       

Q. 5.

 

Write short notes on any four :≠

16
   

(i)

Inspection of Accounts

(iv)

Meaning and objects of valuation

(ii)

Audit in Dept.

(v)

Essentials of a good Audit Report

(iii)

Meaning of Verification

(vi)

Audit Certificate.

 
       
       
       
    Section II --- (Costing)  
       

Q. 6.

  Evershine Industries Ltd. commenced business on 1st April 2002, cost and financial records are maintained for the year ended 31st March 2003. From the following information prepare statements:

(a)

Showing the result as per costing records.

(b)

Showing result as per financial records and

(c)

Reconciling these results.

Particulars As Per costing records As per Financial Records

Material consumed (20000 Kgs)

Rs. 28.50 per kg

Rs. 26 per kg.

Direct Wages (3000 man days)

Rs.80 per man day

Rs. 85 per man day

Factory Overheads

20% of prime cost

Rs. 3,60,000

Administrative Overheads

Rs. 30 per kg. of output produced

Rs. 4,00,000

Selling Overheads

Rs. 50 per kg. of output sold

Rs. 9,60,000

Stock (of output produced)

At cost of production

Rs. 1,50,000

as 31-03-2003 (2000 kgs)

   

Work in progress

as on 31-3-2003

Rs. 1,62,000

Rs. 1,62,000

Sales (16,000 kgs)

Rs. 130 per kg.

Rs. 129.50 per kg.

Rent Income

-

Rs.1,20,000

Preliminary Expenses Written off

-

Rs. 30,000 .

20
       

Q. 7.

  The following data have been extracted from the books of Alfa Ltd.
Year Sales Rs. Profit Rs.
2002 5,00,000 50,000
2003 7,50,000 1,00,000

You are required to calculate :
(i) P/V Ratio
(ii) Fixed cost
(iii) Break-even sales
(iv) Profit on sales of Rs. 4,00,000
(v) Sales to earn a profit of Rs. 1,25,000
15
       

Q. 8.

  The Perfect Construction Company Ltd. has undertaken the construction of a bridge for a value of Rs. 45,00,000 subject to a retention of 20% until one year after the † certified completion of the contract. The following information is available for the year ended 31st March 2003 :
Particulars Rs.

Labour on site

11,55,000

Material sent to site

12,30,000

Material from stores

2,35,500

Plant hire

34,800

Direct expenses

63,000

General overheads allocated to the contract

1,18,200

Material at site (31.3.2003)

22,800

Wages accrued on 31.3.2003

28,800

Direct expenses accrued on 31.3.2003

5,100

Work not yet certified at cost

43,500

Value of work certified

39,00,000

Cash received on account

31,20,000

You are required to prepare:

(i)

Contract account

(ii)

Contractee's account

(iii)

and show relevant items in the Balance Sheet.

15
       

Q.9. 

  In an oil refinery, the product passes through three different processes. viz. crushing, refining and finishing. The following information is available for the month of March 2003 :
Trial Balance
  Crushing Process Rs. Refining Process Rs. Finishing Process Rs.

Raw materials (500 tons Copra)

9,00,000

--

--

Wages

32,000

23,600

23,500

       

Power

4,800

4,000

6,000

Sundry Materials

2,000

7,600

--

Factory expense

2,400

4,000

3,800

200 tons of oil cake was sold for Rs. 60,000 and 275 tons of crude oil was obtained from crushing process.

25 tons of by-product of the crushing process fetched Rs. 3,600.

25 tons of by-product of the refining process was sold for Rs. 3,600 and 250 tons of refined oil was obtained.

10 tons of finished oil were sold for Rs. 4,800 and 240 tons of finished oil was stored in drums.

The establishment expenses for the month amounted to Rs. 14,000 which is to be charged to the three processes in proportion of 3:2:2.

The cost of drums for storing finished oil was Rs. 84,100.

Prepare accounts for all the three processes.

15
       

Q.10.

a)

Write short notes on (any three) :
(1) Joint Product and By - Product in process costing
(2) Under and Over absorption of cost.
(3) Marginal Costing
(4) Importance of Break - even point analysis.
15
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