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Auditing & Cost Accounting
Time : 3 Hrs
October 1997
Total Marks : 100
Q.1. (a) What do you understand by test check ? What precautions should be taken while applying test check ? 8
  (b) What are the features of effective internal control in respect of payment of salaries and wages ? 10
Q.2. (a) As per Companies Act, 1956, under what circumstances can the auditor of a company be appointed.
(i) by an ordinary resolution and (ii) by a special resolution.
  (b) What are the liabilities of an auditor under the Companies Act, 1956 ? 8
Q.3. (a) What steps should be taken by an audit programme ? What are the contents of an audit programme ?  
Q.4 (a) How would you vouch the following ?
(i) Dividend income (ii) Purchase of investments.
  (b) What is deferred revenue expenditure ? What are the duties of an auditor as regards deferred revenue expenditure ? 8
Q. 5 Write short notes (Any Four)
(i) Secret reserve
(ii) Verification
(iii) Interim Audit
(iv) Contingent liability
(v) Ledger scrutiny.


Q. 6

Yuti Space Contractors and Builders have obtained a contract for constructing alternate accommodation to the slum dwellers. The contract work commenced on 1st March. The contract price Rs. 800 lacs

  The contractee agree to pay 90% of the value of the work done as certified by the architect immediately. The entire contract price was received before 31st March, 1997.
A machine costing Rs. 60,00, 000 was specially bought and used for the contract. The residual value of the machine as on 31-01-1997 was Rs. 29,00,000. Depreciation to be effected on straight line basis.
As a cost consultant, you are provided with the following relevant information:
Accounting Years
1994 - 95
1995 - 96
1996 - 97
Materials purchased 27,50,000 86,25,000 19,75,000
Direct Labour 77,52,500 89,36,500 1,02,00,000
Supervision Charges 1,22,000 1,85,000 2,76,000
Architect Fees 2,50,000 4,50,000 5,00,000
Construction Overheads 49,50,000 32,16,500 80,15,000
Administrative overheads 19,25,000 10,50,000 7,96,000
Uncertified work at the end of the year 2,00,000 4,00,000 -
Materials on site at the end of the year 50,000 1,25,000 75,000
Money received by the contractee during the year 1,80,00,000 3,60,00,000 2,60,00,000
  As per the policy of the company no profit is to be considered unless the certified work completed exceeds 20% of the total contract price. Thereafter, profit is to be taken credit for in the same proportion as the amount received bears to the contract price.
Prepare Contract Accounts for all the three years and show the relevant extracts in the Balance Sheet as on 31st March of every year.
Q.7 Ethusiasts Ltd. Commenced business on 1st April, 1996.Cost and Financial records are maintained for the year ended 31st March, 1997. From the following informations prepare statements : 15
  (a) Showing the result as per costing records.
(b) Showing result as per financial records and
(c) Reconciling these results.
Particulars As per costing
As per Financial Records
Material Consumed (20,000 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 the Prime Cost Rs.3,60,000
Administrative Overhead Rs. 30 per kg. Of output produced Rs. 4,00,000
Sales overheads Rs. 50 per kg of output sold Rs. 9,60,000
(of output produced) as on 31-03-97 2,000 Kgs.
At cost of production Rs. 1,50,000
Work in Process as on 31-03-1997 Rs. 1,62, 000 Rs. 1,62, 000
(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
Q.8 Satyug Times Ltd. submits the following information in respect of its product which passes through three consecutive process viz. Ingestion Process, Digestion Process and Assimilation Process, for the month ended 31st January, 1997. 15
Particulars Ingestion Process Digestion Process Assimilation Process
Quantitative Information (Kgs)Basic Raw Material 80,000    
@Rs. 40/- per kg
Normal Yield
80% 60% 50%
Output during the month 62,000 36,000 21,000
Stock of Process output
8,000 8,000 5,000
31-01-1997 10,000 4,000 4,000
Other Additional Information
Process material Rs.3,45,000


Labour man days 2,400 1,500 1,000
Labour rate per man day Rs. 80 Rs. 100 Rs. 150
Machine overheads 60 % of wages 50% of process material Rs. 2,234,000
Other Manufacturing overheads Rs 2,75, 800 Rs.1,63,000 Rs.1,34,000
Value of opening stock per Kg. Rs. 60 Rs. 140 Rs. 300
Scrap value per Kg. Rs.100 Rs.15 Rs.20
Q.9 "Variable Cost per unit is fixed, whereas Fixed Cost per unit is variable". Do you agree ? Illustrate with the help of your own example.
Write short notes (any three):
(a) Items of Reconciliation between financial statements and cost records.
(b) Over absorption and under absorption of overheads.
(c) Treatments of Normal Loss and Abnormal Loss in process costing
(d) Treatment of Profit in contract account.

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