CSS Accountancy & Auditing 2008

PART – I (MCQ)

Q.1 Select the best option/answer and fill in the appropriate box on the Answer Sheet.

  1. A job-order costing system is most appropriate for which of the following types of manufacturing?

a) Flour milling

b) Paper manufacturer

c) Automobile manufacturer

d) Shipbuilders

2. The predetermined overhead is:

a) Determined at the end of the accounting period

b) Determined by dividing the allocation base by the estimated overhead

c) Used in a normal cost system

d) Never applied to the work in process at the end of the period

3. Actual overhead costs appear:

a) On a job cost sheet

b) In the work in process account

c) In the financial goods account

d) In the manufacturing overhead accounts

4. Which of the following is a clearing account?

a) Manufacturing summary

b) Manufacturing overhead

c) Depreciation expense

d) Accumulated depreciation

5. Which of the following is a benefit of a just-in-time (JIT)inventory system?

a) Decreased facility-level activity

b) Reduction in investment funds

c) Reduction in skilled labour

d) Reduction in waste

6. The basic concept which recognizes that the cost of internal control should not exceed the benefits expected to be derived is known as:

a) Reasonable assurance

b) Management responsibility

c) Limited liability

d) Management by exception

7. Which of the following eliminates details from the working trial balance by classifying and summarizing similar or related items?

a) Lead schedules

b) Control accounts

c) Supporting schedules

d) Accounts analysis

8. Which of the following would be least likely to be considered a control objective?

a) Safeguarding assets

b) Detecting management fraud

c) Accuracy of accounting data

d) Adherence to managerial policies

9. Which of the following statements is false?

a) Checklist is a method of internal control for a small business

b) Two types of audit tests are compliance tests and substantive tests

c) Materiality and audit risk have direct relationship

d) Internal control consists of both accounting controls and administrative controls

10. Which of the following is principle purpose of evaluation on internal control?

a) Compliance with auditing standards

b) Checking efficiency of management

c)  Issuance of letter of weakness in internal control

d) Determining nature, timing and extent of substantive audit test

e) None of these

11. Which of the following assets is not eligible for initial depreciation allowance?

a) Vehicle for factory labour

b) Professional books

c) Vehicle plying for hire

d) Ship

12. Which of the following is capital asset under the Income Tax Ordinance, 2001?

a) Shares of a company

b) Copy rights

c) Patents rights

d) Stock of goods

13. Which of the following is an agricultural income?

a) Royalty income for miners

b) Income from cultivation of rice

c) Income from sale of irrigation water

d) Income from poultry farm

14. Which of the following expenditures is admissible under the head income from Business?

a) Cost of issue of shares

b) Wealth tax

c) Loss by fire

d) Interest payable to partner

15. Which of the following rental income is exempted from tax under the head Income from Property?

a) Property income held under trust

b) Self-occupied residential property

c) Income from agricultural building

d) All of these

16. The face values and market value of shares remain the same in case of:

a) Public limited company

b) Co-operative society

c) Single member company

d) Private limited company

17. Which of the following combination of business makes different types of goods and have in common either raw material or final product?

a) Horizontal

b) Vertical

c) Circular

d) Lateral

18. The status of Chamber of Commerce and Industry in Pakistanis:

a) Partnership

b) Association of persons

c) Limited company

d) Club

19. Markets are necessary because:

a) Demand always exceeds supply

b) Barter cannot work properly

c) Competition is encouraged

d) Buyers and sellers are different people

20. Discovery of business opportunities and arrangement of property, funds, and management ability to set up a business is called:

a) Incorporation

b) Integration

c) Amalgamation

d) Promotion

PART II

Section-I (Cost Accounting)

Q.2 The Solo Company uses process cost system. Tailoring department of the company produces cotton shirts. All direct materials are introduced at the process. Conversion costs are incurred uniformly throughout the process. The company started 500 shirts. It completed and transferred 400 shirts. At the end of the month 80 shirts were in process. Each shirt in ending work in process was 75% converted. Cost incurred during May; direct materials Rs. 43200 and conversion costs Rs. 92000.

Required: Prepare Cost of Production for the month of May,2007

Q.3 The materials analyst for moderate Company is asked to determine the number of units of material A to order for March delivery. The production schedule calls for 10000 units of this material for January operations; 13500 units for February; and 14800 units for March. On January 1, the inventory shows 10000 units on hand; 14000 units are on order for January delivery; and 13000 units on order for February delivery; and 7500 units minimum reserve inventory is maintained.

Required: Determine the quantity to order for March delivery.

SECTION-II (Auditing)

Q.4 Draw a specimen of unqualified audit report of a public limited company?

Q.5 Differentiate between internal audit and statutory audit?

SECTION-III (Income Tax)

Q.6 What are various sources of income chargeable to tax under the head “Income from other sources”?

Q.7 Mr. Ali is an officer in AB Company Ltd. He supplied information for the year ending June30, 2007 as started

below:

Basic salary per month Rs. 25000.

Dearness allowance Rs. 14000.

iii. House Rent allowance per month Rs. 12500.

Gas and electricity allowance Rs. 15000.

Conveyance allowance Rs. 2500 per month.

Medical allowance Rs. 1500 per month.

vii. Leave fare assistance including hotel bill Rs. 13000

viii. Insurance money received on maturity of policy Rs. 150000.

Income from Khas Deposit Certificate Rs. 500.

Required: Calculate tax liability of Mr. Ali.

SECTION-IV (Business Organization & Finance)

Q.8 Define business combination? What are the causes of business combinations?

Q.9 Differentiate between unlisted company and listed company in Pakistan?