CSS Accountancy & Auditing 2016

PART-II

SECTION-A (AUDITING)

Q.No. 2. As an Auditor of an entity, during your interim visit you observed that Internal Control were not in use throughout the period under Audit. What are the Control Objectives you would like to consider for your purpose? (20)

Q.No. 3. What is materiality? Discuss materiality in planning and performing an Audit in relations to ISA-320. (20)

Q.No. 4. Financial Statements of a company are prepared in accordance with International Financial Reporting Standards. Being an Auditor what consideration would be taken while planning & performing Audit based on this condition? (20)

SECTION-B (BUSINESS TAXATION)

Q.No. 5. (a) What is Income from Property? What are possible deduction allowed under Income from Property, explain in detail?

(b) You are Manager of a Tax Consultant Firm. One of your internee is assigned to prepare an assessment report of your client. Following is the information provided by client

Basis Salary Rs. 40,000 p.m

(30,000-5,000-60,000),

Free accommodation facility provided

Cost of motor Vehicle provided for personal use only Rs. 700,000

Concessional loan @8% p.a Rs. 3000,000 whereas the benchmark rate was

10%.

Medical Allowance Rs. 50,000

Flying allowance Rs. 200,000

Agricultural Income Rs. 90,000

Special allowance Rs. 5,000

Dearness Allowance Rs. 12,000

Q.No. 6. (a) What is Sales Tax? What procedure a person should follow to get himself registered under Sales Tax Act, 1990? What are conditions under Sales Tax Act, 1990, where registration becomes compulsory?

(b) Shahid Dairy Products Ltd is registered manufacturer of Ice-Cream. Data regarding its business for the month of May-2015 is given below.

1. Sales to registered persons Rs. 300,000

2. Sales to consumer (Including tax) Rs. 150,000

3. Sales to Non registered person Rs. 100,000

4. Sales to school children during factory visit Rs. 20,000

5. Sales of Dairy products to retailers Rs. 200,000

6. Purchase of Milk & vegetables without brand name Rs. 70,000

7. Purchase of Milk & vegetables from registered person Rs. 50,000

8. Purchase of cream from non-registered person Rs. 80,000

9. Ice Cream flavour imported Rs. 30,000

10. Purchase of syrup from wholesaler (used in ice cream) Rs. 18,000

 

Required: Compute the sales Tax liability of Shahid Dairy Products Ltd for month of May-2015 (Note: Purchase of Milk & Ice cream at Sr. No 6 & 7 is Zero rated)

SECTION-C (BUSINESS STUDES & FINANCE)

Q.No. 7. (a) Explain the Contemporary challenges posed by business now a days in

Pakistan.

(b) You have just the following information about ABC Ltd, which pays tax @ 35% p.a

(i) 7000 Bonds with 8% coupon, face value of $1000 & maturity period of 15 years, payments to be made semi-annually, currently sold at 90% of par value.

(ii) 300,000 common shares outstanding, currently selling at $ 60 per share having beta of 1.10.

(iii) 20,000 outstanding shares of $6 preferred shares, selling at $95 per share.

Required: Work out overall cost of capital assuming 7% market risk premium and 5% risk free rate of return.

No. 8.

(a) Define & explain Business Cycle and discuss its implications in detail.

(b) Mr. Tom has $ 50,000/- that he can deposit in any of the three saving accounts for a period of three years. Bank A compounds interest on annual basis, Bank B compounds interest on semi-annually basis and bank C compounds interest on quarterly basis. All these banks have a stated rate of 5% per annum.

Required:

(1) Compute Effective Annual Rate (EAR), Mr. Tom can earn from each bank.

(2) What amount would Mr. Tom have at the end of 3rd year, leaving all interest paid on deposit (no withdrawals), from each bank?