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Auditing and Cost Accounting

Time: 3 Hours

October – 2003 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)

What do you understand by the term vouching ? Explain the essence of vouching in auditing.

10
 

b)

How would you verify the following :-

(i) Plant and Machinery     (ii) Motor Cars.

8
       

Q.2.

a)

What is fraud ? What are the different types of fraud ?

8
 

b)

What is auditing ? How it is different from accounting ?

8
       

Q.3.

a)

Explain the terms 'Internal Control', 'Internal Audit' and Internal Check.

8
 

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     2003    
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
      28

By Balance c/d

2,500
    21,950     21,950
8
       

Q.4.

a)

What do you understand by the term valuation ? How valuation of assets and liabilities is important in auditing ?

8
 

b)

How will you vouch purchase ledger and sales ledger ?

8
       

Q.5.

 

Write short notes on any four

16
   

(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.

 
       
    Section II --- (Costing)  

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
 

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.
8
       

Q.7.

  KT manufacturing company gives you the following particulars for the year 2002. production and sales during the year was 10,000 units
  Rs.   Rs.
Materials 2,50,000 Factory overheads —  
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 —  
Profit 2,50,000 Fixed 60,000
    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
       

Q.8.

  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%
Output sold in the market 40% 60% 100%
Sale price per litre Rs. 200 Rs. 205 Rs. 250
Administrative overheads Rs. 36,000      
Marketing overheads Rs. 48,000      

Prepare process A, B & C. A/c. and costing profit and loss A/c.

15
       

Q.9. 

  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
       

Q.10.

a)

Explain the terms contract, contractor and work certified and work uncertified. 8
 

b)

Define overheads and how will you classify them ? 7
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