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Auditing & Costing

October 2007

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

Section I-(Auditing)

  • Q.1 (a) What is Internal Control? What are its objectives? 10
  •   (b) What are the advantages and limitations of test check in auditing? 8
  • Q.2 (a) What are the responsibilities of an Auditor for errors and frauds? 8
  •   (b) What are the qualities an Auditor should possess? 8
  • Q.3 (a) Discuss the disclosure requirements relating to "Current Assets, Loans of Advances". as per Schedule VI of the Companies Act, 1956. 8
  •   (b) What are the duties of a company Auditor? 8
  • Q.4 (a) What are the different types of Audit Report? Explain them in brief. 8
  •   (b) As an Auditor how will you make a scrutiny of the following Ledger Account? 8
  • In the books of m/s Ramesh, Rakesh and Ram's Capital A/c
    Dr. Cr.
    Date
    Particulars
    Date
    Particulars
    2005 -2006
    Rs.
    2005 -2006
    Rs.
    April 3 To Ramesh Capital A/c. (ForGoodwill) 1,60,000 April 2 By Bank A/c, 16,00,000
    April 3 To Rakesh Capital A/c. (For Goodwill) 2,40,000 March 31 By Salaries A/c. 4,80,000
    Dec. 20 To BankA/c. 1,60,000 March 31 By Interest on Capital A/c. 32,000
    March 24 To Bank A/c. 1,40,000 March 31 By P/L App: A/c. 86,000
    March 30 To Goods A/c. 40,000
    March 31 To Interest on Drawings 12,000
    March 31 To Balance C/d 14,46,000
    Total
    21,98,000
    Total 21,98,000
  • Q.5 Write short notes on any four of the followings:- 16
  •   (a) Reappointment of a retiring Auditor of a company.  
  •   (b) Auditor's right of access to books of account.  
  •   (c) Vouching of preliminary expenses.  
  •   (d) Objectives of window dressing.  
  •   (e) Auditing in computer environment.  
  • Section II — (Costing)
    .

    Q.6 Following is the Trading and Profit and Loss Account of M/s Vishal Enterprises for the year ended 31-3-2006. 20
  • Particulars
    Rs.
    Particulars
    Rs.
    To Opening Stocks (500 units) 17,500 By Sales (10250 units) 7,17,500
    To Materials 2,60,000 By Closing Stock (250 units) 12,500
    To Wages 1,50,000
    To Factory Overheads 94,750
    To Gross Profit c/fd 2,07,750
    Total
    7,30,000
    Total
    7,30,000
    To Administrative Overheads 1,06,000 By Gross Profit c/fd 2,07,750
    To Selling Overheads 55,000 By Dividend Received on Investments 10,250
    To Loss on Revaluation of Assets 9,000
    To Net Profit 48,000
    Total
    2,18,000
    Total
    2,18,000

    In Cost Accounts, materials charged @ Rs. 25 per unit and wages @ Rs. 15 per unit. Factory overheads taken @ 60% of wages. Administrative overheads applied @ 20% of works cost. Selling overheads taken @ Rs. 6 per unit sold.

    You are required to prepare:–

      (1) Statement of Cost showing total cost and cost per unit.  

      (2) Statement of Reconciliation of Profit/Loss.  

    Q.7 A product passes through three processes. The following cost data have been extracted from the books of manufacturing company:- 15  

    Particulars
    Total
    Process
    Rs.
    I
    II
    III
    Material
    1,50,840
    52,000
    39,600
    59,240
    Direct Wages
    1,80,000
    40,000
    60,000
    80,000
    Production Overhead
    1,80,000
    -
    -
    -

    10,000 units at Rs. 6 each were introduced into process I. There was no stock of material or work-in-progress at the beginning or at the end. The output of each process passes directly to the next process and finally to the finished stock. Production overhead is recovered at 100% of Direct wages. The following additional data are obtained:-

    Process Output unit Percentage of Normal loss to input Value of Scrap per unit
    I
    9,500
    5%
    4
    II
    8,400
    10%
    8
    III
    7,500
    15%
    10

    Prepare Process Accounts and Abnormal Loss Account/Gain Account and Normal Loss Account.

    Q.8 The following information relates to a building contract undertaken by M/s. Asmit Ltd. for Rs. 10,00,000 and for which 80% of the value of work certified by the architect is being paid by the contractee.:- 15
    Particulars
    I Year
    II Year
    III Year
    Material Issued 1,20,000 1,45,000 84,000
    Direct Wages 1,10,000 1,55,000 1,10,000
    Direct Expenses 5,000 17,000 6,000
    Indirect Expenses 2,000 2,600 500
    Work Certified 2,35,000 7,50,000 10,00,000
    Uncertified Work 3,000 8,000
    -
    Plant Issued 14,000
    -
    -
    Material on Site 2,000 5,000 8,000

    The value of plant at the end of I, II and III year was Rs. 11,200 Rs. 7,000 and Rs. 3,000 respectively. Prepare Contract Account for these three years.

    Q.9 (a) M/s Dinesh & Co. produces an article by mixing two inputs. The following standards have been set up for the input.:- 15
    Material
    Standard Mix
    Standard Mix
    per kg.
    X
    40%
    Rs. 4
    Y
    60%
    Rs. 3

    The Standard Loss in processing is 15%. During December, 2006 the company produced 1,700 kg. of finished output. The actual position of inputs were as under.

    Material
    Purchases
    Rate
    (kg.)
    X
    830
    4.25 per kg
    Y
    1,190
    2.50 per kg
    2,020

    Calculate Material Cost Variance, Material Price Variance and Material Usage Variance.

    (b) A company has a fixed cost or Rs. 3,00,000. On sale of 15,000 units which is equal to 40% of margin of safety, it earned a profit of Rs. 60,000
  • Calculate the following:

  • (a) BEP in units.
  • (b) Total present sales in units.
  • (c) Total units sold at which it suffered loss of Rs. 62,492.
  • If the present fixed cost increases by 15%, what is revised BEP in units and how many units should be sold to earn a profit of Rs. 1,15,000?

    Q.10 Write short notes on any three : 15
  • (a) Fixation of cost for the issue of materials for production.
  • (b) Batch Costing.
  • (c) Different basis of overhead allocation.
  • (d) Advantages of cost accounting.
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