Accountancy And Auditing

FEDERAL PUBLIC SERVICE COMMISSION COMPETITIVE EXAMINATION FOR RECRUITMENT TO POSTS IN B.P.S.-17UNDER THE FEDERAL GOVERNMENT, 2000. ACCOUNTANCY AND AUDITING. PAPER-Il TIME ALLOWED: 3 HOURS MAXIMUM MARKS:100 =========================================================================== ========= 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. sate 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 design and manufactures electronic computing machines. For the of October the following information is available from the records: Jobs Completed Job l-Rs. Job 2-Rs. Job 3-Rs. Selling Price of job 350,000 300,000 330,000 Mate4al costs 120,000 120,000 105,000 Labour cost – Direct 79,000 84,000 67,000 Manufacturing coat applied on the basis of 125% of Direct Labour cost Unite made and sold (Number) 150 175 140 Required: 1. Prepare an income statement for the month of October. 2. Compute operating profit or loss for each job, 3. 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 payrol1 f 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 of these deductions with brief description. 6. The following information of .Mr. Muhammad Latif for the 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 50,000 listed companies 4. Interest’ received on approved 2,000 government savings schemes 5. Investment in approved securities/shares 50,000 Required: 1. Calculate taxable income. 2. Compute tax liability. Relevant tax rates f or computing tax liability are as under: on Rs.100,000 @ 5% Rs. 5,000 on next Rs.l00,000 @ 10% on next Rs.100,000 @ 15% PART (D) : BUSINESS ORGANIZATION AND FINANCE 7. Identify various financial institutions in 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. ‘ Twenty multiple choice questions are given below. You are required to present your answers in your answers book in the shape of following suggested format. No mark(s) will be awarded for an overwritten answer: S.No. of Question Correct alphabet of correct answer Rationale for answer --------------------------------------------------------------------------------------

(1) Fixed Cost: (a) Changes with production (b) Never changes even if production capacity is doubled. (c) None of 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 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 Accounting (c) If it enables management to increase prodüctivity and rationalise Cost structure (6) Verification includes: (a) Checking Vouchers (b) Examining audit report (c) None of 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) Vouching (c) Balance Sheet Audit (10) An auditor is liable for his annual audit of accounts to: (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 Behaviour. (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 is 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 best 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 patents: (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 increased by: (a) Decreasing selling prices (b) Increasing expenditure (c) None of above ********************************