| Auditing and Cost Accounting |
| Time: 3 Hours |
October – 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) |
What do you understand by the term vouching ? Explain the essence of vouching in auditing. |
10 |
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b) |
How would you verify the following :-
(i) Plant and Machinery (ii) Motor Cars. |
8 |
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| Q.2. |
a) |
What is fraud ? What are the different types of fraud ? |
8 |
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b) |
What is auditing ? How it is different from accounting ? |
8 |
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| Q.3. |
a) |
Explain the terms 'Internal Control', 'Internal Audit' and Internal Check. |
8 |
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b) |
How will you, as an auditor, make scrutiny of the following Ledger A/c ? What conclusions will you draw?
In the books of KT & Co. Ramesh's A/c.
| Date |
Particulars |
Rs. |
Date |
Particulars |
Rs. |
| 2003 |
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2003 |
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| Feb. 1 |
To Balance b/f |
2,000 |
Feb.4 |
By Sales Return |
450 |
| 3 |
To Sales |
8,000 |
12 |
By Bank |
9,500 |
| 4 |
To Sales |
450 |
12 |
By Discount |
500 |
| 16 |
To Sales |
5,000 |
18 |
By Bills Receivable |
5,000 |
| 25 |
To Sales |
6,500 |
26 |
By Bills Receivable |
4,000 |
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28 |
By Balance c/d |
2,500 |
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21,950 |
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21,950 |
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8 |
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| Q.4. |
a) |
What do you understand by the term valuation ? How valuation of assets and liabilities is important in auditing ? |
8 |
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b) |
How will you vouch purchase ledger and sales ledger ? |
8 |
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| Q.5. |
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Write short notes on any four : |
16 |
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| (i) |
Investigation |
(iv) |
Test checking |
| (ii) |
Duties of a company auditor |
(v) |
Verification |
| (iii) |
Qualifications and disqualifications of a company auditor |
(vi) |
Auditing in computer environment. |
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Section II --- (Costing) |
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| Q.6. |
a) |
K.T. and Co. has prepared the following budget estimates for the year 2002-2003.Sales 15,000 units, Sales value Rs. 1,50,000, Fixed Expenses Rs. 34,000, Variable cost per unit Rs. 6/-You are required to find-
| (i) |
Profit Volume Ratio |
| (ii) |
Break Even Point |
| (iii) |
Margin of Safety |
Also calculate revised Prof it volume ratio, Break-even point and margin of safety, if selling price per unit is reduced by 10%. |
12 |
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b) |
A manufacturing concern which has adopted standard costing furnishes the following information:
| (i) |
Standard Materials for 70 kg finished products, 100 kg |
| (ii) |
Standard price of material Re. 1 per kg. |
| (iii) |
Actual output 2,10,000 kg. |
| (iv) |
Actual material used 2,80,000 kg |
| (v) |
Cost of material Rs. 2,52,000. |
Calculate :-
| (1) |
Material usage variance |
| (2) |
Material price variance |
| (3) |
Material cost variance. |
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8 |
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| Q.7. |
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KT manufacturing company gives you the following particulars for the year 2002. production and sales during the year was 10,000 units
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Rs. |
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Rs. |
| Materials |
2,50,000 |
Factory overheads — |
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| Direct Wages |
1 ,50,000 |
Fixed |
1 ,00,000 |
| Administrative overheads (fixed) |
1 ,00,000 |
Variable |
2,00,000 |
| Sales |
12,00,000 |
Selling and distribution overheads — |
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| Profit |
2,50,000 |
Fixed |
60,000 |
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Variable |
90,000 |
The company has worked to its maximum capacity of 10,000 units during 2002. The management has decided to increase production capacity to 15,000 units for the year 2003 and it is estimated that :-
| (a) |
There will be allround rise in all variables expenditure by 10%. |
| (b) |
There will be increase of 20% in all fixed overheads. |
| (c) |
There will be no need to change the selling price for the year 2003. |
Prepare a statement showing total as well as unit cost and profit for 2002. Also prepare a statement showing estimated profit for 2003 taking into consideration the changes in 2003. |
15 |
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| Q.8. |
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KT & Co. has three processes A, B & C. It gives you the following information
| Particulars |
Process A |
Process B |
Process C |
| Raw material introduced in litres |
5,000 |
1,920 |
3,576 |
| Material cost per litre |
Rs. 60 |
Rs. 40 |
Rs. 80 |
| Labour Cost |
Rs. 4,28,000 |
Rs. 1 ,06,000 |
Rs. 2,10,000 |
| Direct expenses |
Rs. 88,000 |
Rs. 2,85,200 |
Rs. 1 ,04,000 |
| Wastage as % to total input |
4% |
5% |
10% |
| Output transferred to next process |
60% |
40% |
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| Output sold in the market |
40% |
60% |
100% |
| Sale price per litre |
Rs. 200 |
Rs. 205 |
Rs. 250 |
| Administrative overheads Rs. 36,000 |
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| Marketing overheads Rs. 48,000 |
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Prepare process A, B & C. A/c. and costing profit and loss A/c. |
15 |
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| Q.9. |
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From the following details of KT & Co. compute profit as per P & L A/c as well as, as per cost sheet and reconcile profit between cost sheet and P & L A/c. showing clearly the reasons for the variations of the two profit figures.
| Particulars |
Rs. |
| Sales |
20,000 |
| Purchase of material |
3,000 |
| Closing stock of material |
500 |
| Direct wages |
1,000 |
| Indirect wages |
500 |
| Indirect factory expenses |
2,000 |
| Bad debts |
100 |
| Interest on overdraft |
50 |
| Profit on sale of assets |
1,000 |
| Selling expenses |
2,000 |
| Distribution expenses |
1,000 |
In cost sheet manufacturing overheads recovered at 300% of direct wages, selling overheads recovered Rs. 1,500, and distribution overheads Rs. 700. |
15 |
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| Q.10. |
a) |
Explain the terms contract, contractor and work certified and work uncertified. |
8 |
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b) |
Define overheads and how will you classify them ? |
7 |
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