CMA JANUARY 2023 EXAMINATION

ADVANCED LEVEL II
COST & MANAGEMENT AUDIT

Course Code : AA252 Total Marks : 100

Reading Time : 15 minutes Writing Time : 180 minutes

Instructions to Candidates
 You MUST NOT write anything during the reading time.
 There are 5 (five) questions.
 You should attempt ALL questions.
 Answers should be properly structured and relevant.
 Carefully read ALL the requirements and sub-questions before attempting a specific
question.
 ALL answers must be written in the answer book.
 AVOID WRITING/MARKING on the question paper at any time which may cause
disciplinary action.
 Start answering each question from a fresh sheet.
 Answers should be clearly numbered with the sub-question number.

Allowable Materials
 Writing Stationaries
 Non-programmable Calculator

Assessment Structure

Expected
Sub-
Marks Time
question
Required
Question 1 Essay/Computational/Case 3 20 35 minutes
Question 2 Essay/Computational/Case 3 20 35 minutes
Question 3 Essay/Computational/Case 3 20 35 minutes
Question 4 Essay/Computational/Case 2 20 35 minutes
Question 5 Essay/Computational/Case 3 20 35 minutes
Revision 5 minutes
Total 100 180 minutes

RESTRICTED USE
This paper MUST NOT BE REMOVED from the examination venue

Do not turn the page until instructed

QUESTION 1 [5 + 5 + 10 = 20 MARKS]
(a) How cost auditor can play important role to improve the current economic condition of
Bangladesh.
(b) Discuss the qualities that should be ensured by the cost audit firm to perform cost audit
and deliver quality report as well.
(c) ABC Co Ltd., a soft drinks powder manufacturing company currently using five Filling
and Sealing machines to manufacture soft drinks powder. Among five, two machines
have been fully depreciated but still in good condition to continue production normally.
As the depreciation life of two machines has been expired, these machines are
consuming significant repair maintenance cost and labor hour of maintenance
department. The management of ABC Co Ltd has assigned you to assess the cost
benefit analysis on two old machines.
You, as a cost and management accountant specify your work plan and what will you
consider to perform the cost benefit analysis?
QUESTION 2 [5 + 5 + 10 = 20 MARKS]
(a) Write down the qualifications and disqualifications of Cost Auditor.
(b) Discuss briefly about the fundamental principles of a Cost Auditor.
(c) A nationalized bank which has extended overdraft facility to a manufacturing company
on the security of the Stock (Both Raw and Finished). The banks received monthly
receiving stock statements from the company and determine its value. The Bank
assesses the risk on recovery of outstanding overdraft based on 80% of value of stock
in hand. Due to economic turmoil in the world and local, the business of the company
is declining. The Bank wants to assess the risk of non-recovery and appointed you as
cost auditor to certify the value of stock in hand.
Required:
Write down your engagement plan including audit program to conduct the audit
assignment.
QUESTION 3 [4 + 10 + 6 = 20 MARKS]
(a) Management Audit and Operational Audit are complementary and supplementary to
one another”. Discuss in brief.
(b) In the Financial Accounts of Flex Ltd. for the year ended June 30, 2021 the profit was
BDT 8,50,00,000. The profit as per Cost Accounting records for the same period was
less. The following details are extracted from the accounting schedules and Cost
Accounting records of the company.
Amount in thousand
Particulars Financial A/c Cost A/c
Opening: Semi Finished Goods 45,800 50,900
: Finished Goods 99,300 95,750
Closing : Semi Finished Goods 48,200 52,400
: Finished Goods 1,05,450 97,100
Transport subsidy 520
Expenses on CSR 72
Profit on sale of Fixed Assets 220
Chemical used internally 425 400
Favorable Exch. Rate variation 350
Post-retirement Medical grant 715
Purchase Tax Refund 580
Litigation Recovery-Prior year 175
You are required to prepare a Reconciliation Statement and arrive at the Profit as per
Cost Records for the year ended June 30, 2021
(c) Discus about the responsibilities of Management with regard to Risk Management as
well as corporate governance.
CMA January 2023 Examination, AA252 [Page 2 of 3]
QUESTION 4 [10+10 = 20 MARKS]
(a) Elite Electronics Co (EEC) has made an agreement with TAMARU of Japan for import
of kits of Automatic Washing Machine in completely knocked down (CKD) condition.
The terms of agreement are:
(i) TAMARU will supply some items keeping 15% margin on cost. These imported
items are of value of 50% of FOB price of Washing Machine and balance 50%
will be locally manufactured.
(ii) EEC will pay a lump sum of BDT 200 lakhs for technical know-how and drawing
for manufacturing of 2 lakhs washing machines.
(iii) EEC will also pay a royalty at 8% of selling price fixed by it in the local market
less landed cost of imported kits and cost of locally procured components.
The following related information is also available:
(i) FOB price for washing machine is BDT 8,000.
(ii) Insurance & freight is BDT 200 per set of imported items
(iii) Effective custom duty is @ 30% on CIF price
(iv) Assembling & other overhead costs will be BDT 1,000 per set.
(v) Expected profit is 15% on selling price
You are required to calculate the selling price of Washing machine
(b) Purchase of Materials BDT 3,00,000 (inclusive vat of BDT 15,715); Fee on Board BDT
12,000; Import Duty paid BDT 15,000; Freight inward BDT 20,000; Insurance paid for
import by sea BDT10,000; Rebates allowed BDT 4,000; Subsidy received from the
Government for importation of these materials BDT 20,000. Compute the landed cost
of material (i.e. value of receipt of material).

QUESTION 5 [(5+5+10) = 20 MARKS]

(a) Cost audit should be mandatory before commencement of Annual Financial Audit of a
manufacturing company. Discuss
(b) What are the preliminary information you, as a Cost Auditor, will collect from
the company which is subject to cost audit for the first time?
(c) The Directors of North-West Power Company Ltd. have been keen to increase the
disclosure in the company's annual report about its non-financial KPIs. The Directors
believe that providing this information will improve investors' understanding of the
company's business model and the way that North-West generates value, as well as
helping investors to identify how well the company is performing against its objectives.
However, the audit committee of the company has expressed concern that the KPIs
selected are not appropriate. The audit committee has asked auditor to carry out an
independent review as to whether the KPIs are appropriate.
Required:
What factors or characteristics should the auditor consider when assessing the
appropriateness of the company’s KPIs?

END OF QUESTION

CMA January 2023 Examination, AA252 [Page 3 of 3]