MTP_Final_Syllabus 2012_Jun2017_Set 2

Paper – 19 - Cost and Management Audit

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 MTP_Final_Syllabus 2012_Jun2017_Set 2

Paper – 19 - Cost and Management Audit

Full Marks : 100 Time allowed: 3 hours

Answer Question No. 1 which is compulsory and carries 20 marks and any five from Question No.
2 to 8.

Section-A
[20 marks]
1. Answer the following questions:
(a) Fill in the blanks: [5×1=5]

(i) CAS 14 deals with-------------------

(ii) Part B of the Annexure to Cost Audit Report provides information for------------------- sector.
(iii) As per CAS 2 Actual Capacity utilization shall be presented as a percentage of --------------
----capacity.
(iv) Propriety audit stands of verification of transactions in the best interest of the ------------.
(v) Section 138 of the Companies Act 2013 deals with provisions of ------------------.

(b) State whether the following statements are true or false: [5×1=5]

(i) Operational Audit is merely extension of Internal Auditing in operational areas.

(ii)Interest cost should be included in inventory valuation for purposes of bank audit.
(iii)
Productivity Analysis is the evaluation of every resources declared in the industry.
(iv)“Related party transaction” means transfer of resources or obligations among persons
having blood relations.
(v) Donation given to Charitable Institutions should not form part of Cost Accounts.

(c) Answer any five of the following in one or two sentences: [5×2=10]

(i) What is the objective of Cost Auditing Standard 104?

(ii) In the abridged cost statement, what are Industry specific operating expenses?
(iii) How do you define „Depot‟ under Generally Accepted Cost Accounting Principles?
(iv) As per CAS 20 how is Royalty and Technical Knowhow fee assigned?
(v) What is the objective of Consumer Services Audit?
(vi) How would you treat finance cost directly attributable to packing material as per CAS 9
related to Packing Material Cost?

Section-B
[ 80 marks]
Answer any 5 questions from Question number 2 to 8. Each question carries 16 marks.

2.(a) (i) What is the meaning of "Turnover" in relation to the Companies (Cost Records and Audit)
Rules, 2014?

(ii)SHANHITA LTD., a manufacturing company, producing Industrial chemicals had the

following income during the year 2016-17.
Income: (Amount in ` Lakhs)
Sales: Manufactured products 43,750
Traded products 2,830
Income from job Works 780

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Sale of Defectives 130

Export Incentives 85
Cash Discount Received 35
Note: Sales inclusive of Excise Duty 2,840
Required:
Find out the Turnover of the company as per the Companies (Cost Records and Audit)
Rules, 2014. [2+4=6]

(b) The following figures are extracted from the Cost Accounting Records of SINJINI LTD. a
single product manufacturing company:

Year ended 31st March 2017 2016

(Amount in lac)
`
Gross Sales including Excise duty: 5,200 4,160

Excise Duty 400 320

Other Income 300 200

Increase in Value of Stock of Finished Goods 20 10

Raw materials Consumed 1,760 1,440

Direct wages, Salaries, Bonus, Gratuity etc. 440 352

Power & Fuel 240 192

Stores and Spares 160 140

Cess and local Taxes 120 100

Other manufacturing Overheads 430 370

Administrative Overheads:

Audit fees 36 30

Salaries & Commission to Directors 48 40

Other Overheads 260 220

Selling and Distribution Overheads:

Salaries & Wages 36 30

Packing and Forwarding 20 16

Other Overheads 250 200

Total Depreciation 120 120

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Interest Charges:

On Working Capital Loans from Bank 60 25

On Fixed Loans from IDBI 90 70

On Debentures 30 30

Provision for Taxes 316 200

Proposed Dividends 420 230

You are required to calculate the following parameters as stipulated PART-D, PARA-3 of
the Annexure to Cost Audit Report under the Companies (Cost Records and Audit) Rules,
2014 for the year ended March 31, 2015 and March 31, 2014:

(i) Value Addition

(ii) Earnings available for Distribution

(iii)Distribution of Earnings to the different claimants. [4+1+5=10]

3.(a) GLORY LTD., a manufacturing company provides the following extracts from its Cost
Accounting Records for the year ended March 31, 2017:

The total capacity for 5 Machines per hour as per the company's 2500
specification. units

No. of shifts (each shift of 8 hours) per day 3

Paid holidays in a year (365 days):

(i) Weekly holidays 52

(ii) Other holidays 10

Annual maintenance is done within these holidays (i.e. 10)

Preventive maintenance for the machines is carried on during weekly off

day.

Normal idle capacity due to lunchtime, shift changes etc. per shift 0.5 hour

Production based on sales expectancy in past 3 years (units in lakh): 154.50

159.54

166.66

Actual production for the year ended March 31, 2015: 158.80

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You are required to calculate:

(1) Installed Capacity

(2) Actual Capacity Utilization
(3) Normal Capacity
(4) Idle Capacity
(5) Abnormal Idle Capacity—
—Keeping in view of the relevant Cost Accounting Standard (CAS-2).
[8]

(b) The Cost Accountant of TRINCUS TEXTILES MILLS LTD. has arrived at a Profit of ` 20,10,500
based on Cost Accounting Records for the year ended March 31, 2017. Profit as per
Financial Accounts is `22,14,100.

As a Cost Auditor, you find the following differences between the Financial Accounts and
Cost Accounts:

`
(1) Profit on Sale of Fixed Assets 2,05,000
(2) Loss on Sale of Investments 33,600
(3) Voluntary Retirement Compensation included in Salary & Wages in 50,25,000
F/A
(4) Donation Paid 75,000
(5) Insurance Claim relating to previous year received during the year 5,08,700
(6) Profit from Retail trading activity 32,02,430
(7) Interest Income from Inter-Corporate Deposits 6,15,000
(8) Decrease in value of Closing WIP and Finished goods inventory
as per Financial Accounts 3,82,06,430
as per Cost Accounts 3,90,12,500

You are required to prepare a Reconciliation Statement between the two Accounts for the
year ended March 31, 2017. [8]

4.(a) Evaluation of the personnel function of an organization by management auditor is by no

means an easy task. In your view what areas are to be covered and points to be kept in
mind while assessing the personnel function of an organization ? [8]

(b) While performing an Information System Audit, the Management Auditor should make sure
that various objectives are met. Briefly describe them. [8]

5.(a) How the Cost Auditor is under obligation to report fraud identified during course of audit?
[8]

(b) You have been appointed as an internal auditor for M/s KBC Ltd which is a large
manufacturing concern. You are asked to verify whether there are adequate records for
identification and value of Plant and Machinery, tools and dies and whether any of these
items have become obsolescent and not in use. Draft a suitable audit programme for the
above. [8]

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6.(a) ASHIRBAD CEMENT LTD. has a captive power generation plant for its cement factory. The
following information is available with regard to the power generation for the year ended
March 31, 2017:
Coal consumption 2400 tonnes @ `600 per tonne

Oil 3000 liters @ `50.50 per litre

Water 24000 gallons at `60 per gallon

Stores and other consumables ` 55,000

Salaries of power generating plant:

2 supervisors each at `10,600 p.m., 5 skilled workers each at `6,100 p.m., 3 helpers each at
`4,200 p.m.
Salaries to boiler house attendant, 8 workers, each at `4,200 p.m.
Cost of power generating plant— `15,00,000 having life of plant 15 years with ` 60,000
residual value.
Cost of Boiler plant— ``6,00,000 having life of plant 10 years with no residual value.
Miscellaneous income received by sale of ash— ` 50,000.
Repair and maintenance— Power generating plant ` 1,50,000, Boiler house ` 1,26,000.
Share of Administrative Overhead— ` 1,35,000.
Power generated during the year: 3024250 KWH.
Note: No power generated is used by the power generated plant itself.

You are required to prepare the Cost Sheet to calculate cost per kWh of electricity
generated as per the Companies (Cost Records and Audit) Rules 2014 for the year ended
March 31, 2017. [10]

(b) What is the procedure for appointment of Cost Auditor under the Companies Act, 2013? [6]

7.(a) The following data have been collected by you, as a Cost Auditor of a Company:
Particulars 14-15 15-16 16-17
Installed Capacity(lac MT) 2.5 2.5 2.5
Production(lac MT) 2.4 2.3 1.25
Cost/MT of the product(`.) 1000 1077 1660

The poor capacity utilization in 2016-17 was due to abnormal power cut. The escalation in costs
were 5% in 14-15 and 2% over 15-16 in 2016-17.
i)Calculate the abnormal cost due to power cut.
ii)How would you treat these abnormal cost? [6+2=8]

7.(b) As a Management Auditor of a large organization, you have been asked to carry out the
review of “MARKETING POLICIES: as a part of Corporate Development.
Prepare a questionnaire for carrying out such a review. [8]

8. (a) You as a management auditor have been asked to conduct a review of the function of
the personnel department of XYZ Ltd. State the various points which will be covered in the
review. [10]

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(b) The particulars of a Supervisory employee of MAHAVINA LTD., a manufacturing company

show the annual expenses as follows:

i.Basic pay including Industrial D.A.`7,00,000

ii.Lease rent paid for accommodation provided to the employee `2,40,000
iii.Amount recovered from employee `60,000
iv. Employer‟s contribution to P.F. `56,000
v. Employee‟s contribution to P.F. `56,000
vi. Reimbursement of medical expenses `67,000
vii. Hospitalization expenses including Group Medical Insurance borne by the employer
`19,000
viii. Annual Bonus`30,000
ix. Festival Advance `30,000
x. The Employer manages P.F. through a Trust, and the shortfall in the return of the Trust
Account compared to the notified rate is around 0.75% p.a. reimburse to the Trust.
xi. The future benefit (Gratuity) to the employee is insured with L.I.C., the premium of which
costs 4% p.a. approx.
Required:

Calculate the Employee Cost for the year ended March 31, 2016- keeping in view of Cost
Accounting Standard (CAS)-7. [6]

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