ICWAI/ ICMAI/ ICAI - Suggested Answers - June 2012
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Sunday, November 3, 2013
HAPPY DIWALI
Delightful laddoos, Incandescent diyas,
Whole lot of smiles and laughter,
A big stock of masti,
Lots of mithai,
Innumerable fireworks, Wishing you fun, frolic and endless celebration!! HAPPY DIWALI
Whole lot of smiles and laughter,
A big stock of masti,
Lots of mithai,
Innumerable fireworks, Wishing you fun, frolic and endless celebration!! HAPPY DIWALI
Friday, November 1, 2013
Explain the objectives of Cost Audit
Objectives of Cost Audit Cost Audit has both general and social objectives. The general objectives can be described to include the following: Verification of cost accounts with a view to ascertaining that these have been properly maintained and compiled according to the cost accounting system followed by the enterprise.
• Ensuring that the prescribed procedures of cost accounting records rules are duly adhered to Detection of errors and fraud.
• Verification of the cost of each “cost unit” and “cost center” to ensure that these have been properly ascertained.
• Determination of inventory valuation.
• Facilitating the fixation of prices of goods and services.
• Periodical reconciliation between cost accounts and financial accounts.
• Ensuring optimum utilization of human, physical and financial resources of the enterprise.
• Detection and correction of abnormal loss of material and time.
• Inculcation of cost consciousness.
• Advising management, on the basis of inter-firm comparison of cost records, as regards the areas where performance calls for improvement.
• Promoting corporate governance through various operational disclosures to the directors.
• Among the social objectives of cost audit, the following deserve special mention :
• Facilitation in fixation of reasonable prices of goods and services produced by the enterprise.
• Improvement in productivity of human, physical and financial resources of the enterprise.
• Channelising of the enterprise resources to most optimum, productive and profitable areas.
• Availability of audited cost data as regards contracts containing escalation clauses.
• Facilitation in settlement of bills in the case of cost-plus contracts entered into by the Government.
• Pinpointing areas of inefficiency and mismanagement, if any for the benefit of shareholders, consumers, etc., such that necessary corrective action could be taken in time.
• Ensuring that the prescribed procedures of cost accounting records rules are duly adhered to Detection of errors and fraud.
• Verification of the cost of each “cost unit” and “cost center” to ensure that these have been properly ascertained.
• Determination of inventory valuation.
• Facilitating the fixation of prices of goods and services.
• Periodical reconciliation between cost accounts and financial accounts.
• Ensuring optimum utilization of human, physical and financial resources of the enterprise.
• Detection and correction of abnormal loss of material and time.
• Inculcation of cost consciousness.
• Advising management, on the basis of inter-firm comparison of cost records, as regards the areas where performance calls for improvement.
• Promoting corporate governance through various operational disclosures to the directors.
• Among the social objectives of cost audit, the following deserve special mention :
• Facilitation in fixation of reasonable prices of goods and services produced by the enterprise.
• Improvement in productivity of human, physical and financial resources of the enterprise.
• Channelising of the enterprise resources to most optimum, productive and profitable areas.
• Availability of audited cost data as regards contracts containing escalation clauses.
• Facilitation in settlement of bills in the case of cost-plus contracts entered into by the Government.
• Pinpointing areas of inefficiency and mismanagement, if any for the benefit of shareholders, consumers, etc., such that necessary corrective action could be taken in time.
What are the matters that are relevant in formulating audit strategy and drawing up the audit plan?
As per CAAS – 101, matters that are relevant in formulating audit strategy and drawing up the
audit plan are as following:
i. The cost reporting framework generally prescribed by the Cost Audit Report Rules on which the cost information to be audited has been prepared, including need for reconciliation with financial reporting framework.
ii. The specific requirements of industry specific cost accounting record rules.
iii. Industry regulators’ requirement as to how costs will be handled.
iv. Unique features of an industry that influence audit requirements e.g. definition of product in the newspaper industry.
v. Reliance that can be placed on the work of financial auditors, other cost auditors appointed by the entity and internal auditors for example their attendance in annual stocktaking
vi. State of IT implementation, whether the entity is using an ERP system or internally developed systems and the reliance that can be placed on them.
vii. Statutory timelines for cost reporting which can be modified by managements for early completion.
viii. Timelines for Board/ audit committee meetings which can set the time limits for completion of audit work.
ix. Resources required and available in terms of manpower, equipment and others and the assignment of these to specific parts of the work.
audit plan are as following:
i. The cost reporting framework generally prescribed by the Cost Audit Report Rules on which the cost information to be audited has been prepared, including need for reconciliation with financial reporting framework.
ii. The specific requirements of industry specific cost accounting record rules.
iii. Industry regulators’ requirement as to how costs will be handled.
iv. Unique features of an industry that influence audit requirements e.g. definition of product in the newspaper industry.
v. Reliance that can be placed on the work of financial auditors, other cost auditors appointed by the entity and internal auditors for example their attendance in annual stocktaking
vi. State of IT implementation, whether the entity is using an ERP system or internally developed systems and the reliance that can be placed on them.
vii. Statutory timelines for cost reporting which can be modified by managements for early completion.
viii. Timelines for Board/ audit committee meetings which can set the time limits for completion of audit work.
ix. Resources required and available in terms of manpower, equipment and others and the assignment of these to specific parts of the work.
Standard-setting Procedure for Government Accounting Standards
A. The following procedures are adopted by the Government Accounting Standards Advisory Board (GASAB) for formulating Standards
(i) The GASAB Secretariat identifies areas for Standard formulation and places them before the GASAB for selection and approval. While doing so, the Secretariat places before the GASAB all important suggestions, references, proposals received from various sections of the Union and State Governments, members of GASAB, members of Civil Society, Professional Bodies and other stakeholders. The priorities, as approved by the GASAB, guide further functioning of the GASAB Secretariat.
(ii) The GASAB Secretariat thereafter prepares the discussion paper on the selected issues for consideration of the GASAB.
(iii) While doing so, the Secretariat studies the existing rules, codes and principles as internal sources, and documents/pronouncements/Standards issued by other national and international Standard setting and regulatory bodies. The Secretariat may also hold consultation with such other persons as are considered necessary for this purpose.
(iv) On consideration of the Discussion paper and the comments received thereon, the GASAB finalizes the Exposure Draft.
(v) The GASAB may constitute Standing Committee and/or Task based Groups from amongst the Members or their representatives to consider specific areas before finalization.
(vi) The Exposure Draft, as approved for issue by the GASAB, are widely circulated in the public domain and forwarded to all stakeholders. The Exposure Draft is required to be hosted at the website of GASAB.
(vii) Based on the comments received on the Exposure Draft, the Standards are finalized by the GASAB. The Standards, as finalized, are forwarded to the Government for notification in accordance with the provisions of the Constitution of India.
B. The meetings are normally chaired by the Chairperson. In unforeseen circumstances when Chairperson is unable to attend, the senior-most member from the Central Government will chair the meeting. The Comptroller & Auditor General of India will be kept informed of the important developments in the meetings of GASAB.
C. The GASAB may meet as often as is deemed necessary but generally not less than four times in a financial year. The decisions of the GASAB may preferably be by general consensus. In case differences persist, the decision shall be on the basis of voting favoring the recommendation. The dissenting views should also be forwarded to the Government along with the recommendations.
D. GASAB allows an exposure period of 90 days for inviting comments on Exposure Draft.
(i) The GASAB Secretariat identifies areas for Standard formulation and places them before the GASAB for selection and approval. While doing so, the Secretariat places before the GASAB all important suggestions, references, proposals received from various sections of the Union and State Governments, members of GASAB, members of Civil Society, Professional Bodies and other stakeholders. The priorities, as approved by the GASAB, guide further functioning of the GASAB Secretariat.
(ii) The GASAB Secretariat thereafter prepares the discussion paper on the selected issues for consideration of the GASAB.
(iii) While doing so, the Secretariat studies the existing rules, codes and principles as internal sources, and documents/pronouncements/Standards issued by other national and international Standard setting and regulatory bodies. The Secretariat may also hold consultation with such other persons as are considered necessary for this purpose.
(iv) On consideration of the Discussion paper and the comments received thereon, the GASAB finalizes the Exposure Draft.
(v) The GASAB may constitute Standing Committee and/or Task based Groups from amongst the Members or their representatives to consider specific areas before finalization.
(vi) The Exposure Draft, as approved for issue by the GASAB, are widely circulated in the public domain and forwarded to all stakeholders. The Exposure Draft is required to be hosted at the website of GASAB.
(vii) Based on the comments received on the Exposure Draft, the Standards are finalized by the GASAB. The Standards, as finalized, are forwarded to the Government for notification in accordance with the provisions of the Constitution of India.
B. The meetings are normally chaired by the Chairperson. In unforeseen circumstances when Chairperson is unable to attend, the senior-most member from the Central Government will chair the meeting. The Comptroller & Auditor General of India will be kept informed of the important developments in the meetings of GASAB.
C. The GASAB may meet as often as is deemed necessary but generally not less than four times in a financial year. The decisions of the GASAB may preferably be by general consensus. In case differences persist, the decision shall be on the basis of voting favoring the recommendation. The dissenting views should also be forwarded to the Government along with the recommendations.
D. GASAB allows an exposure period of 90 days for inviting comments on Exposure Draft.
Describe the process of election of Public Accounts Committee
Composition
The Committee on Public Accounts is constituted by Parliament each year for examination of accounts showing the appropriation of sums granted by Parliament for expenditure of Government of India, the annual Finance Accounts of Government of India, and such other Accounts laid before Parliament as the Committee may deem fit, such as accounts of autonomous and semi-autonomous bodies (except those of Public Undertakings and Government Companies which come under the purview of the Committee on Public Undertakings).
The Committee consists of not more than 22 members comprising 15 members elected by Lok Sabha every year from amongst its members according to the principle of proportional representation by means of single transferable vote and not more than 7 members of Rajya Sabha elected by that House in like manner are associated with the Committee. The Chairman is appointed by the Speaker from amongst its members of Lok Sabha. The Speaker, for the first time, appointed a member of the Opposition as the Chairman of the Committee for 1967-68. This practice has been continued since then. A Minister is not eligible to be elected as a member of the Committee. If a member after his election to the Committee is appointed a Minister, he ceases to be a member of the Committee from the date of such appointment.
The Committee on Public Accounts is constituted by Parliament each year for examination of accounts showing the appropriation of sums granted by Parliament for expenditure of Government of India, the annual Finance Accounts of Government of India, and such other Accounts laid before Parliament as the Committee may deem fit, such as accounts of autonomous and semi-autonomous bodies (except those of Public Undertakings and Government Companies which come under the purview of the Committee on Public Undertakings).
The Committee consists of not more than 22 members comprising 15 members elected by Lok Sabha every year from amongst its members according to the principle of proportional representation by means of single transferable vote and not more than 7 members of Rajya Sabha elected by that House in like manner are associated with the Committee. The Chairman is appointed by the Speaker from amongst its members of Lok Sabha. The Speaker, for the first time, appointed a member of the Opposition as the Chairman of the Committee for 1967-68. This practice has been continued since then. A Minister is not eligible to be elected as a member of the Committee. If a member after his election to the Committee is appointed a Minister, he ceases to be a member of the Committee from the date of such appointment.
Write a note on the objectives of Indian Government Accounting Standard 4 (General Purpose Financial Statements of Government).
The purpose of this Standard is to lay down the principles to be followed in presentation of general purpose financial reports of Governments and to prescribe the minimum requirements relating to structure and contents of financial statements of government prepared under cash basis of accounting.
The statement of receipts and disbursements during the year and information about cash flows of an Entity enable stakeholders to evaluate the likely sources and uses of cash and the ability of an Entity to generate adequate cash in the future. This information also indicates the expenditure priorities of the Entity in the delivery of goods and services as well as the impact of the taxation policies of the Entity. Stakeholders can then assess the sustainability of the Entity’s activities (whether future budgetary resources will be sufficient to sustain public services and to meet obligations as they become due) and appraise financial accountability.
All Financial Statements need to be standardized to obtain optimal information, to ensure comparability with the Entity’s own financial Statements of previous periods and with those of other entities. The basis and policies of accounting need to be uniform to permit meaningful consolidation to develop Whole of Government Accounts. Desirable attributes need to defined to obtain a basic standard for financial reporting.
To achieve these objectives, this Standard sets out the financial elements for the presentation of financial reports prepared under the cash basis of accounting. It also requires that the selection of accounting policy should ensure certain qualitative characteristics in the information being presented. Desirable attributes of financial reporting are required to heighten their value to the users.
General Purpose Financial Statements (GPFS) essentially consists of Finance Accounts and Appropriation Accounts. The Financial Statements referred to in this standard are the General Purpose Financial Reports (GPFR).
The statement of receipts and disbursements during the year and information about cash flows of an Entity enable stakeholders to evaluate the likely sources and uses of cash and the ability of an Entity to generate adequate cash in the future. This information also indicates the expenditure priorities of the Entity in the delivery of goods and services as well as the impact of the taxation policies of the Entity. Stakeholders can then assess the sustainability of the Entity’s activities (whether future budgetary resources will be sufficient to sustain public services and to meet obligations as they become due) and appraise financial accountability.
All Financial Statements need to be standardized to obtain optimal information, to ensure comparability with the Entity’s own financial Statements of previous periods and with those of other entities. The basis and policies of accounting need to be uniform to permit meaningful consolidation to develop Whole of Government Accounts. Desirable attributes need to defined to obtain a basic standard for financial reporting.
To achieve these objectives, this Standard sets out the financial elements for the presentation of financial reports prepared under the cash basis of accounting. It also requires that the selection of accounting policy should ensure certain qualitative characteristics in the information being presented. Desirable attributes of financial reporting are required to heighten their value to the users.
General Purpose Financial Statements (GPFS) essentially consists of Finance Accounts and Appropriation Accounts. The Financial Statements referred to in this standard are the General Purpose Financial Reports (GPFR).
Discuss the applicability of IGAS 10 (Public Debt and Other Liabilities of Governments: Disclosure Requirements).
The proposed IGAS shall apply to the financial statements prepared by the Union and State Governments and Union Territories with legislature. The IGAS shall also cover “other obligations” as defined in paragraph 4 of this Standard relating to definitions. The IGAS shall not include in its ambit, guarantees and other contingent liabilities and non-binding assurances.
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