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ACCOUNTING AND AUDITING, PAPER - ll

Time Allowed: 3 Hours
Maximum Marks: I00

Note: Attempt FIVE questions in all, including Question No. 9 which is Compulsory. ONE question must be attempted from each PART. All questions carry equal marks.

PART (A): COST ACCOUNTING

1. Explain the concept of standard cost accounting. State how will you compute various variances relating to material labour and factory overheads in an industrial enterprise, which is following standard cost accounting system.

2. An electronic manufacturing company designs and manufactures electronic computing machines. For the month of October the following information is available from the records:
Jobs completed……………………………………..Job. 1………………………….Job. 2………………………...Job. 3
……………………………………………………………….(Rs.)……………………………(Rs.)……………………………(Rs.)
Selling price of job………………………………..350,000……………………..300,000……………………….330,000
Material costs……………………………………….120,000……………………..120,000……………………….105,000
Labor cost – DM cost applied on the
basis of 125% of DL cost……………………….79,000…………………………84,000………………………….67,000
Units made and sold (number)……………….150……………………………..175……………………………....140

DM - Direct Manufacturing
DL - Direct Labour

Required:
a. Prepare an income statement for the month of October.
b. Compute operating profit or loss for each job.
c. Calculate profit or loss per unit for each job completed.

PART (B): AUDITING

3. Through a tabulated approach differentiate between Audit and Investigation. How will you investigate suspected cash fraud in payroll of an industrial organization?

4. Explain major constituents of Auditors Report prepared for a listed company on annual basis audit work. Also state four types of qualifications, which an audit report may possibly contain.

PART (C): INCOME TAX

5. For determining taxable profits of a business, Income Tax Ordinance, 1979 lists several allowable deductions. State at least ten deductions with brief description.

6. The following information of Mr. Muhammad Latif for three year ended on June 30, 2000 is available:
……………………………Particulars…………………………………………………………………………………Rs
1. Salary Income……………………………………………………………………………………………..140,000
2. Part time work income……………………………………………………………………………..……36,000
3. Dividend received from listed companies…………………………………………….….….…50,000
4. Interest received on approved government savings schemes……………..….….…2,000
5. Investment in approved securities/shares………………………………………….…….…..50,000
Required:
1. Calculate taxable income.
2. Compute tax liability.
Relevant tax rates for computing tax liability are as under:
On Rs.100,000 @ 5% Rs.%,000.
On next Rs.100,000 @ 10%.
On next Rs.100,000 @ 15%

PART (D): BUSINESS ORGANISATION AND FINANCE

7. Identify various financial institutions of Pakistan. State their role and major contributions to the economy of the country.

8. Joint Stock Companies now are popularly known as Corporate Sector. State various types of Joint Stock Companies, which can be set up under the Companies Ordinance, 1984 in Pakistan. Describe the procedure of establishing a public limited company in our country.

COMPULSORY QUESTION

9. MCQs

1. Fixed Cost:
a. Changes with production
b. Never changes even if production capacity is doubled
c. None of the above

2. Conversion cost is:
a. Material Cost + Overhead Cost
b. Direct Labour + Material Cost
c. Labour Cost + Overhead Cost

3. Process Costing is relevant to:
a. Cement industry
b. Job Order cost oriented Projects
c. None of the above

4. Operating Profit is:
a. Profit after deducting financial costs
b. Profit after deducting taxes
c. Profit after deducting normal operating expenses including depreciation

5. A good Cost Accounting System is:
a. If it computes estimated cost only
b. If it cannot be reconciled with financial accounts
c. If it enables management to increase productivity and rationalize cost structure

6. Verification includes:
a. Checking Vouchers
b. Examining audit report
c. None of the above

7. Stratified audit sample means:
a. Randomly selected items for audit
b. Purposively selected items for audit
c. Items carefully selected from each group

8. Internal Control is totally synonymous with:
a. Internal check
b. Internal audit
c. None of above

9. Audit of a bank is generally conducted through:
a. Routine checking
b. Couching
c. Balance sheet audit

10. An auditor is liable for his annual audit of accounts o:
a. Creditors
b. Bankers
c. Owners

11. Income Tax is levied on:
a. Agricultural Income
b. Presumptive Income
c. None of above

12. If a firm has paid super-tax, its partners may follow any one of the following behaviours:
a. No need to pay income tax, even if the income exceeds the taxable limit.
b. Pay income tax, even if the income does not exceed the taxable income.
c. Pay income tax as required under the law.

13. A resident multinational company need not:
a. Pay income tax, if it s caused under Double Taxation agreement.
b. If it is not enjoying tax exemption under the Income Tax Ordinance, 1979 (Second Schedule).
c. None of above

14. Income Tax rates are the same for:
a. Limited Companies
b. Banking Companies
c. None of above

15. Super Tax on companies is:
a. In vogue in Pakistan
b. Not in vogue in Pakistan
c. None of above

16. Current Ratio is calculated as:
a. Fixed Assets/Current Liabilities
b. Current Liabilities/Current Assets
c. Current Assets/Current Liabilities

17. Short-term loan can be described as:
a. If the period is three years
b. If the period is less than one year
c. If the period is over one year

18. A partnership, in today’s Pakistan, under the current law can have the following number of partners:
a. 50
b. 20
c. 100

19. Combination can be best described as:
a. Restructuring of Capital of a Company
b. Reduction of Capital of a Company
c. Amalgamation of two different types of businesses

20. Sources of funds can be I creased by:
a. Describing selling prices
b. Increasing expenditure
c. None of above
__________________
Regards,
P.R.
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