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Accountancy and Auditing KP PMS Paper II 2022

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Accounting and Auditing Paper-II 2022


KHYBER PAKHTUNKHWA PUBLIC SERVICE COMMISSION
COMPETITIVE EXAMINATION FOR THE POST OF
PROVINCIAL MANAGEMENT SERVICES OFFICERS (BPS-17), 2022
Time Allowed: 03 Hours
ACCOUNTING AND AUDITING PAPER-II
Max Marks: 100

Note: Attempt any five questions. All questions carry equal marks.

Q1:
Answer each of the following questions concerning an audit of the financial statements of a publicly owned company.

  1. What is the basic purpose of this type of audit?
  2. Who performs the audit?
  3. Why is the concept of independence important in a financial audit?
  4. What consideration do these auditors give to the company’s system of internal control?
  5. Briefly distinguish between a financial audit and a review of financial statements by an auditing firm.

Q2:
At the beginning of September, certain ledger accounts in the books and records of Ambler Products Company had the following balances:

Dr Cr
$ $
Work in process——- 2,020
Materials ——– 7,380
Accrued Payroll——– 1,436

The balance in the work in process account is supported by these details appearing in the job order cost sheets:

$
Direct Materials ———- 640
Direct Labor (150 hrs) —— 900
Applied Factory overhead ——– 480
Total $ 2,020

Certain columnar totals in the accounts payable register at the end of September show:

Dr Cr
Accounts payable———— 13820
Discounts lost——— 108
Materials———– 10600
Accrued payroll——— 8704
Employees Income tax payable —– 956

Materials requisitions indicate:

For production $ 8540
For Repair & Maintenance 500
For Factory Supplies 1200

The Labour distribution sheet shows:

$
i. Direct Labor (For Job orders), 2000 hrs 12,000
ii. Factory overhead:
Supervisor’s Salary ——- 1600
Repair & Maintenance — 360
Indirect Labour — 1200 31,60
Total —— 15,160

The finished orders for the month consist of:

$
Direct Materials ——- 8060
Director Labour (1910 hrs)—– 11,460
Applied Factory over head —- 6112
Total —— 25,632

The following subsidiary accounts and their balances controlled by the factory overhead control account appear in the ledger as of September, 30:

$
Supervisory Salary —— 1600
Repair & Maintenance —— 860
Indirect Labour —– 1200
Factory Supplies —- 1200
Depreciation (Factory Equip) —– 240
$
Factory Insurance —- 300
Light & Power —- 320
Water & Heat —– 300
Payroll Taxes —— 1500
Rent-Factory —- 400

At the end of month, the 3-incomplete productions (job) orders can be summarized as follows:

Materials $ 1120
Direct Labour (240 hrs) 1440
Applied Factory Overhead 768
Total —- $ 3,328

Instructions:

  1. Prepare a statement of cost of Goods manufactured for September.
  2. A calculation of the over or under applied factory overhead for September.

Q3:
During February, the Assembly Department received 60,000 units from the cutting Department at a unit cost of $5. Costs added in the Assembly Department were:

$
Material —— 41650
Labour ———- 101,700
Factory overhead —– 56500

There was no beginning inventory of the 60,000 units received, 50,000 units were transferred out; 9,000 units were in process at the end of month (all materials, 2/3 converted); 1,000 lost units were 1/2 complete as to materials and conversion costs. The entire loss is considered abnormal and is to be charged to factory overhead.

Instructions:

Prepare Cost of production Report.

Q4:
Write a detailed comprehensive note on an “Audit Program” explaining its design, advantages and effects to all stake holders having all liabilities fulfilled by the Auditors.

Q5:
The monthly compensation plan of MR. ABC is as follow:

Rs.
Basic Salary ——- 80,000 per month
Entertainment allowance —- 90,000
House rent allowance —— 15,000
Conveyance allowance ——- 60,000
Tax paid by employer —– 25,000
Encashment against un-availed leave — 20,000
Medical allowance ——- 80,000
Telephone bills paid by MR. ABC — 12,000 (500 tax paid with bills)
Tax paid on cash with drawl from bank — 2500
Accommodation paid by employer for official duties— 30,000
Instructions:

Calculate Income Tax payable by MR. ABC for the Tax year ending 30th June 20xx.

Q6:
A perpetual inventory system is used by Black Hawk Inc; and an inventory record card is maintained for each type of product in stock. The following transactions show beginning inventory, purchases and sales of product KR9 for the month of May:

$
May 1. Balance on hand, 20 units, cost $40 each — 800
May 2. Sale, 8 units, sales price $60 each —– 480
May 6. Purchase, 20 units, cost $45 each —- 900
May 20. Sale, 10 units, sales price $60 each —- 600
May 31. Sale, 15 units, sales price $65 each —– 975
Instuctions:
  1. Record beginning inventory, purchases, the cost of goods sold and the running balance on an inventory card using Last-In First-Out (LIFO) method.
  2. Prepare general entire for purchases & sales in May assuming all transactions on Account.

Q7:
The balance sheet of xyz Inc; as on 31-12-20xx was as follow:

Assets Rs.
Plant & Machinery —– 24,000
Land & Building —— 40,000
Furniture & Fixtures —— 16,000
Stock —– 12,000
Debtors —- 12,000
Investments (Short-term) —– 4,000
Cash in hand —- 12,000
1,20,000
Liabilities & Equity:
Equity Share Capital ——- 40,000
Capital Reserve ——- 8,000
8% Loan on Mortgage ——– 32,000
Creditors —— 16,000
Bank overdraft ———- 4,000
Taxation:
Current —— 4,000
Future —- 4,000
Profit & Less a/c —– 12,000
1,20,000
Instructions:

Compute (a) Current Ratio. (b) Quick Ratio. (c) Debt to Equity Ratio. (d) Proprietary Ratio.

Q8:
Explain in detail the concept and the role of all the ratios used during Ratio Analysis of the financial statements. The explanation must include formula, and decision criterion of each ratio.


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