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Auditing & Costing

April 2006

Time: 3 Hours
Marks: 100
NB:
  1. Question Nos. 1 and 6 are compulsory and answer any two from the remaining fromeach section.
  2. Figures to the right indicate full marks.
  3. Working should be part of answer.
  4. Answer both the sections in the same answer-book.

Section I-(Auditing)

  • Q.1 (a) What do you mean by Vouching? 10
  •  
    How would you vouch the followings?
     
      •  
    1. (i)Cash Sales
      2.  
    2. (ii)Travelling Expenses
  •   (b) Distinguish between Auditing and Investigation. 8
  • Q.2 (a) What is test checking? Discuss its advantages and disadvantages. 8
  •   (b) What are the objectives of verification? 8
  • Q.3 (a) Explain the terms "Internal Control","Internal Check" and "Internal Audit". 8
  •   (b) What are the rights of a Company Auditor? 8
  • Q.4 (a) Discuss the procedure for Removal of a Company Auditor. 8
  •   (b) Scrutinise and comment on the following Ledger Accounts. In the Books of ADD Ltd. 8
  •  
    Plant and Machinery A/c.
    Dr. Cr.
    Date Particulars Rs. Date Particulars Rs.
    01-01-2005 To Balance b/fd. 12,50,000 31-03-2005 By Sale of Machinery A/c. 3,00,000
    01-06-2005 To Bank A/c. 6,50,000 31-10-2005 By Asset Discarded A/c. 1,50,000
    01-07-2005 To Bank A/c. 50,000 31-12-2005 By Balance c/fd. 15,00,000
    (Installation)
    19,50,000 19,50,000
     
  •  
    Provision for Depreciation on Plant and Machinery A/c.
    Dr. Cr.
    Date Particulars Rs. Date Particulars Rs.
    31-03-2005 To sale of Machinery A/c 2,40,000 01-01-2005 By Balance b/fd. 6,30,000
    31-10-2005 To Asset Discarded A/c 1,45,000 31-12-2005 By P & L A/c. 1,22,500
    31-12-2005 To Balance c/fd. 3, 6 7, 500
    7,52,500 7,52,500
     
  • Q.5 Write short notes on any four of the followings:- 16
  •   (a) Errors of Principle  
    •   (b) Auditing in Computer Environment.  
    •   (c) Appointment of an Auditor in Casual Vacancy.  
    •   (d) Audit in Depth.  
    •   (e) Qualified Audit Report.  
    •   (f) Concept of True and Fair View.  

    Section II — (Cost Accounting)

  • Q.6   20
  • Details Process A Process B Process C
    Rs. Rs. Rs.
    Indirect Material 1,00,000 18,750 16,550
    Direct Wages 56,250 35,000 44,900
    Direct Expenses 51,250 6,875 11,500
    Value of Opening Stock per Unit 25 31 40
    Scrap Value per Unit 13.50 11.25 21.00
    Units Units Units
    Output 9,750 9,625 8,000
    Stock of Process Output:
    01-01-2005 1,500 1,375 2,000
    31-12-2005 1,250 2,000 1,000
    Percentage of Wastage 2 5 10
     
  •  
    10,000 units of Direct Material were introduced in Process A at the rate of Rs. 5 per unit. The percentage of wastage is computed on the number of units entering the process concerned. From the above information of `DE' Enterprises prepare :
  • (1) Process Accounts,
  • (2) Process Stock Accounts,
  • (3) Normal Loss Account,
  • (4) Abnormal Loss Account,
  • (5) Abnormal Gain Account.
  • Value closing stock at the respective Process Cost.
    •  
  • Q.7 (a) Calculate material and labour variances from the following data: 6
  •  
    For 5 units of Product A, the Standard Data are
    •  
    • Material — 40 kg. @ Rs. 25 per kg.
    •  
    • Labour — 100 hours @ Rs. 2.50 per hour.
    •  
  •  
    Actual data are :
    •  
    • Actual Production — 1000 Units.
    •  
    • Material — 7,840 kg. @ Rs. 27 per kg.
    •  
    • Labour — 19,800 hours @ Rs. 2.60 per hour.
    • (b) From the following data compute 9  
  •  
    1. P/V Ratio
    2. B.E.P. in Rupees and in Unit.
    3. Number of Units to be sold to earn a profit of Rs. 7,50,000.
    • Sales Price............................... Rs. 20 per Unit
    • Direct Material........................... Rs. 5 per Unit
    • Direct Wages................................ Rs. 6 per Unit
    • Variable Administrative Overheads............Rs. 3 per Unit
    • Fixed Factory Overhead.......................Rs. 6,40,000 per year
    • Fixed Administrative Overheads...............Rs. 1,52,000 per year
    •  
    • Q.8 From the books of accounts of M/s. Avdhoot Enterprises, the following details have been extracted for the Quarter Ending December 31, 2005:- 15
  • Particulars Rs.
    Stock of Materials — Opening 2,70,000
    Stock of Materials — Closing 3,00,000
    Purchases of Materials 12,48,000
    Direct Wages 3,57,600
    Direct Expenses 1,20,000
    Indirect Wages 24,000
    Salaries to Administrative Staff 60,000
    Carriage Inwards 48,000
    Carriage Outwards 37,500
    Manager's Salary 72,000
    General Charges 37,200
    Legal charges for Criminal Suit 20,000
    Commission on sales 28,000
    Fuel 96,000
    Electricity charges (Factory) 72,000
    Directors' Fees 36,000
    Repairs to Plant and Machinery 63,000
    Rent, Rates and Taxes —Factory 18,000
    Rent, Rates and 'Faxes — Office 9,600
    Depreciation on Plant and Machinery 45,000
    Depreciation on Furniture 3,600
    Salesmen's Salaries 50,000
    Audit Fees 18,000
     
    1. The Manager's time is shared between the factory and the office in the ratio of 20:80.
    2. Carriage outwards include Rs. 7,500 being carriage inwards on Plant and Machinery.
    3. Selling Price is the 120% of the cost price.
  • From the above details prepare detailed cost sheet for the quarter ending 31-12-2005 and ascertain sales.
    •  
    •  
    • Q.9 S. V. Construction Ltd. have obtained a contract for construction of a Building. The value of the contract is Rs. 45,00,000. The work commenced on 1st July, 2004 and completed on 31st December, 2005. The following information relates to this contract: 15
    Particulars 31-12-2005 (RS.) 31-12-2004 (RS.)
    Material Issued 13,50,000 3,75,000
    Direct Wages 10,35,000 4,70,000
    Direct Expenses 1,00,000 45,000
    Indirect Expenses 27,000 6,000
    Plant Issued ---- 63,000
    Sub contract charges 60,000 15,000
    Work Certified (cumulative) 45,00,000 10,00,000
    Work Uncertified ---- 35,000
  •  

    • The above plant was specially issued for the contract. The residual value of the plant at the end of the project was estimated to be Rs. 3,000.

    The contractee has agreed to pay 90% of the work certified. The accounts are closed on 31st December, every year. Prepare —

  • (1) Contact Account and
  • (2) contractee Account for two years 2004 and 2005.
  • Show the relevant items in Balance Sheet as on 31-12-2004.
    •  
  • Q.10 (a) Explain the different Overhead Cost Variances. 8
    •   (b) What is Break-Even-Point ? What are the advantages and limitations of Break-Even Point ? 7
    •  
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