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Cost and Works Accountants Act, 1959

34. Groups, Papers and Syllabus for the Financial Examination under the Revised Syllabus

(1) The First Final Examination under the revised syllabus after the commencement of the Cost and Works Accountants (Amendment) Regulations, 1993 shall be held in December, 1994. Students who may pass the Intermediate Examination to be held in June, 1994 or later shall, and students who have passed the Intermediate Examination prior to June, 1994, who may so opt, shall and all other students appearing at the Final Examination to be held from December, 1996 shall be examined under the revised syllabus. The groups, papers and syllabus for the Final Examination under old syllabus shall be the same as mentioned in this regulation before the date of the commencement of the Cost and Works Accountants (Amendment) Regulations, 1993. The. last Final Examination under the old syllabus shall be held in June, 1996.

(2) The Stages, papers and syllabus for Final Examination under the revised syllabus under this regulations shall be as follows:


Stage III: Paper 9: Advanced Financial Accounting

(One Paper: 3 hours: 100 marks)

Aim: To provide a detailed insight into accounting principles and their application to complex business and non-business situations.

Level of knowledge: Expert

1. Accounting principles, concepts and conventions-measurement of business income-accounting standards-national and international.

2. Valuation of enterprise-valuation of inventories, goodwill and shares.

3. Preparation of company accounts amalgamation, absorption, reconstruction and capital reduction, holding companies, Merger Accounts.

4. Branch and Departmental Accounts-Hire purchase and Installment Payments Royalty Accounts-Contract Accounts-Investment Accounts.

5. Preparation of Accounts from incomplete records - Self-Balancing Ledger.

6. Accounting in organizations : Farm accounting, hotel accounting - Accounting or non-profit making organizations, e.g., accounting for hospital and educational organizations, accounting for local self-government-Rural and urban.

7. Accounting for bank and insurance companies-accounting for loss of stock, loss of profit and other compensations including marine insurance claims-Electricity Company Accounts.

8. Government Accounting in India : General Principles-comparison with commercial accounting-role of the Comptroller and Auditor General of India and Public Accounts Committee-review of accounts.

Stage III: Paper 10: Information Technology and Computer Applications

(One paper: 3 hours: 100 marks)

Aim: To exercise control and communicate effectively for the exposure of professional accountants to the growing field of computerized information technology and their applications.

Level of knowledge: Basic concepts but not details of technology.

1. Basic concepts of a system : Definition of a system-open and closed system, sub-system, system integration-horizontal and vertical integration. Use of Computer in the process of integration. Input-output and process feed back control, the design of controls concept of boundary, preparation of checklist and analysis of the prerequisite for a proposed system.

2. System design : input and output design layout make up and forms for output, identification for source documents, file design and codification procedures, verification, validation and manual control over input-data, preparation and identification of the file and its controls, the physical security and pass words, output controls, data transmission control, physical security of data within the office life cycle and stages of a system design recording and communicating techniques including flow charts, decision, table and other diagrams.

3. Information and its Processing : Data and information storage and retrieval, characteristics and qualities of goods information, value and source of information, classification of information as strategic, tactical and operational organization of file, security and maintenance, internal storage in computer-RAM, ROM, PROM, processing capabilities and size of internal storage in a computer, output devices of computer in the form of micro film, graph plotters, line printers, visual display, external storage, media and its use of electronic mail, telex.

4. Distributed data processing: Local area network, time sharing and multi-user system, linkage of main frame to micro computer links, advantages and disadvantages of distributed data processing, distributed processing and system design, future prospects of Local Areas Network (LAN) and Wide Areas Network (WAN).

5. Planning, designing and implementation of management information systems : Hardware, Software and communication technology. A computer system : data presentation for computers micro-electronics (Memory chips), human machine productivity trade off, integrated management information system covering marketing, manufacturing financial and personnel, implementation, evaluation and maintenance of Management Information System (MIS).

Section II: Computer Applications (50 marks)

1. Computer Hardware: Computer and its basic components-input, main store, external storage, processing output and control, Central Processing Unit (CPU) and Arithmetic and Logic Unit (ALU) and their elements and functions, Internal storage and representation of date, Random Access Memory (RAM), Read only memory (ROM) and Programmable ROM (PROM and EPROM). Processing capabilities and internal storage, Binary Operations.

2. Computer generations : Mainframes, mini-computers and micro computers. Characteristics of 8 bit., 16 bit and 32 bit computers and their processing capabilities. Future trend of computer developments.

3. Input and output devices : Different types of input devices and their characteristics (magnetic tape, magnetic disk, Winchester disk, cassette, floppy disk, magnetic ink recognition, optical character recognition, voice data entry), Divert data entry, OCR (Optical Character Recognition). Printers (Line, laser, dot matrix, daisy wheel) VDU (Visual display unit), microfilm, graph plotter, graphic terminal.

4. Preparation and maintenance of files : Concepts of files, records files and characters, temporary and permanent file organization, file-transfer, updating, security maintenance, form filling and formatted screen, menus, window, variable and fixed length records and fields, methods of access-sequential, direct and dynamic-their characteristics and uses. Magnetic type layout, inter-record gaps, block and inter-block gaps, blocking factor.

5. Computer processing methods : Types of processing methods-(i)batch input and batch processing of all data; (ii) batch input and batch processing of transactions but on line file enquiries; (iii) on-line input, batch processing and on-line enquiries; (iv) on-line input updating and enquiries, real time system and response time.

6. Computer software and programming : Principles of programming stores instructions, application of computer languages FORTRAN, COBOL, BASIC, PASCAL, C. Level of software, software packages, utility softwares and operating system (OS), Bootstrap programmes, Assembler compiler and interpreters, spreadsheet packages, data base management system (DBMS), word processing software package, graphic software, simple programme writing of BASIC only for application in pay roll, inventory and sales analysis.

7. Control and audit aspects of Management Information System: Edit check, error listing, control of system security, audit trial, control of operating efficiency. Auditing in a computerized environment.

8. Computer aided technology: Computer aided design (CAD), Computer aided manufacturing (CAM). Flexible Manufacturing system.

Stage III: Paper 11 : Operations Management and Control

(One Paper: 3 hours: 100 marks)

Objective : To provide a basic understanding of the methods and techniques of production-the economics of effective utilization of resources and the techniques employed to ensure optimum use of resources.

Level of knowledge: Expert

1. Technology of production techniques : Meaning and implication of technology, different concepts like relevant technology or appropriate technology, high-tech versus low-tech, capital- intensive versus labor-intensive, batch process. Technology forecasting- shape of things to come in the 21st Century. Basic ideas regarding manufacturing techniques including machine tools process technology, productive facilities, productive utilities and manufacturing policies, some broad ideas about the technological aspects involved in the industries covered under the cost audit.

2. Production planning, scheduling and monitoring system : The concept of integrated production planning system, linkage between production planning and sales forecasting, procurement planning and finished goods inventory policy. Actual scheduling of jobs-optimization concept in terms of productive facilities utilization and cost minimization through start-up, change over, etc. Production monitoring system and Management Information System for this purpose, regular review of production planning and monitoring.

3. Production Economics : Analysis of problems involving location, layout multi-shifts product mix, materials handling facilities, utilization of multi-purpose plants, utilization of preventive maintenance, utilization capacity rectification of unbalanced capacity, off-loading of products, stages of production, product plant, process planning, scheduled production stages, controlling quality level, controlling of output costs, products usages and its obsolescence, technological usage and its obsolescence, control of output costs on the basis of its cost of factors of production and utilization of capacities, scaling of capacities with the help of rationalization, modernization, revamping and renovation.

4. Productivity : Meaning and significance of productivity, productivity vis- a- vis absolute production, measurement of productivity-both overall and separately for each factor like man, machine, materials. Productivity and cot productivity improvement techniques, time study, work sampling and other techniques for productivity monitoring, productivity bargaining, tools and techniques, productivity and work ethos as well as quality of work life, job evaluation and merit rating and use of these in productivity of human resources. Cost reduction and value analysis in the context of productivity. Learning curve concepts in the context of productivity.

5. Cost : Implications of multi-shift operations plant shutdown, plant location and expansion, retracting of detectives, automation in productive system utilities management, : placement of machinery and financial impact of technology upgradation and absorption.

Stage III-Paper 12

Project Management and Control (100 marks)

Objectives: To provide export knowledge on formulation, appraisal, financing, administration and control of projects.

Level of knowledge: Expert

1. Project Identification and Formulation : Different types of needs leading to different types of projects under BMRED (Balancing, Modernization, Replacement, Expansion and Diversification) Consideration involved in decisions under each of these types.

Macro and Micro parameters in project selection, different considerations for project under private, public and joint sectors. Project formulation-preparation of project profile, project report and detailed project report, Broad criteria for pre-investment decisions.

2. Project Appraisal : Different types of appraisal-technical, economic, organization and managerial, commercial and financial-financial techniques for project appraisal and feasibility, Discounted Cash Flow and non-discounted cash flow methods, social cost benefit analysis and economic rate of return. Non-Financial justification of projects.

3. Project Financing : Pattern of financing, sources of finance, impact of taxation, public loans, small savings, surplus of public enterprises, deficit financing, foreign aid, Public sector project financing, Role of Tax Planning in Project Financing.

4. Project Cost Systems : Projects cost accounting and monitoring, contractor and its cost system, labor and equipment cost, accounting, codification, development of cost data, labor time, reporting, direct measurement of work quantities, labor cost analysis, equipment accounting, activity based cost accounting, production rates for estimates, control of cost computer application to cost control.

5. Project Administration : Progress payments, expenditure planning, project scheduling and net- work planning, use of Critical Path Method (CPM) activities for pay requests, schedule of payments and physical progress, time cost trade off, cash flow preparing, cash forecast and monitoring of fund and other resources, control of groups of projects under one administration and associated problems in sharing resources.

6. Concepts and uses of Project Evaluation and Review Techniques (PERT) cost and PERT-time: Cost as a function of time : Project Evaluation and Review Techniques/Cost mechanisms. Accountants' role in Project Evaluation and review Techniques / Cost budgeting. Determination of least cost duration.

7. Post project evaluation.

Stage IV: Paper 13: Advanced Management Accounting Techniques and Applications

(One Paper :3 hours: 100 marks)

Aim: To provide adequate knowledge on cost accounting techniques with quantitative bias to be applied for effective planning and control of operation and for improvement of decision making process.

Level of knowledge: Advanced knowledge for formulation of problems and solution of the same.

1. Introduction : Evaluation of management accounting-Full cost allocation, corporate objective, profitability and other objective, product services and market mix, information and decision process, quantitative and qualitative factors, reporting for decision making, performance evaluation and its synchronization with various decision models.

2. Cost allocation: Cost accumulation and allocation, general process of cost allocation and various criteria for decision making, allocation of service department cost interactions amongst service departments-reciprocal methods, allocating cost from one department to other. Joint and by-products cost-joint product problem, treatment of by-product costs, traditional joint cost allocation methods, decision making with joint products, a non-liner programming model for joint cost allocation, decision significance of the joint cost allocation procedures, identifying by-products with mathematical programming methods and accounting methods and accounting for by-products.

3. Quantitative Technique: Business modeling using lined programming, simplex method of solution and sensitivity analysis. Formation of effective matrix and its application to allocation problems (assignments, transportation and traveling salesman), Games theory and its application to marketing problems. Determination of Service level with the help of queuing theory, business modeling using simulation techniques, Replacement models including Discounted Cash Flow-Project planning using network analysis.

4. Cost behavior and regression analysis: Classification and analysis of data for estimation and cost behaviors, standard analysis of cost behavior using regression analysis, goodness of fit and economic possibility, significance of independent variables, statistical interference in regression. Learning curve estimating learning curve with cumulative effects of learning on productivity, cumulative average time learning model and incremental unit time on learning model, learning curve and non-linear cost estimation.

5. Cost-Volume-Profit Analysis : Cost-Volume profit assumptions and inter-relationship of cost, volume and profit.

(a) Deterministic models-models on Cost-Volume-Profit analysis, determination of Break-even point including multi-product situations. Cost-Volume-Profit analysis under multiple products, multiple production constraints, Cost-Volume-Profit models and its uses in decision process.

(b) Models under uncertainty : Building of uncertainty models-probability distribution of sale, determination of breakeven, parametric estimates for normal and non-normal distribution. Multi-product Cost-Volume-Profit analysis under uncertainty in prices and costs parameters, expected value of perfect information and sample information.

6. Pricing and decision Process : Opportunity cost, relevance and contribution approach, irrelevance of past cost profit maximizing pricing model, full cost pricing, incremental cost and return on investment (ROI) pricing strategic pricing on new product. Full cost pricing-advantages and disadvantages. Measuring the cost of product quality-appraisal cost, prevention cost, internal failure cost, external failure cost, optimal price out decision, expected opportunity losses, policies related to optimum inventory model and opportunity losses., Statistical quality control.

7. Variance for sales, profit and cost analysis : Sales and profit analysis-production mix an yield variances-a de-composition approach to variances-planning and control variances. Cost variance investigation models-materiality insignificance-statistical significance, non-normal probabilities-control charts-formal models for multiple observation-decision models with costs and benefits of investigation, difficulties in analysis of variances.

8. Decentralization and transfer pricing : Choice of responsibility centre and decentralization including its merits and demerits, general criteria for transfer pricing outlay cost and opportunity cost under different market situations, multinational and global tax minimization, transfer pricing, different methods of evaluating transfer pricing-absorption cost, marginal cost, cost plus profit and standard cost including the limitations of these techniques in choosing a profit index, return on investment, concept of residential income and human problems with controls of divisional performance.

9. Current issues in management accounting : Inflation and its effect on managerial decision making-social dimensions of business decisions. Human resources accounting-models and their applications. Programme and performance budgeting, zero base budgeting, social accounting and social reporting and human resource planning and optimization of employees costs.

Stage IV : Paper 14: Advanced Financial Management

(One Paper: 3 hours: 100 marks)

Aim : To provide a detailed insight into accounting process and their applications in complex business management.

Level of knowledge: Expert

1. Planning Environment : Financial objectives, policies on financing investments and dividends. Financial forecasting, planning and uncertainties, interest rates, inflation, capital gains and losses, exchange control regulation, government credit policies and incentives, statistics on production, price indices, labor, capital market based on published statistical data.

2. Sources of finance (national) : (a) Medium and long term : Venture Capital, seed capital, equity preference, convertible and cumulative preference shares, debentures, convertible debentures, hire purchases, leasing, public deposits, and Institutional finance-Life Insurance Corporation, Unit Trust of India, Industrial Finance Corporation of India, Industrial Credit and Investment Corporation of India, National Industrial Development Corporation, Industrial Development Bank of India, Small Scale Industrial Development Bank of India (SIDBI), State Finance Corporation (SFC), Industrial Rehabilitation Bank of India (IRBI).

Internal sources, related earnings, provisions, etc. Issues in raising finance, legal form of organization, provisions of the Companies Act, control of capital issues. (b) Short term sources; Trade Credit, Factoring, Bill of Exchange, Bank Loan, Cash Credit, Overdraft.

3. Sources of Finance (International) : Raising funds in foreign markets and investment in foreign projects, exchange rate-risk agencies involved and procedures followed in international financial operation-concepts of balance of trade and balance of payment.

4. Analysis of operating and financial leverages : Concept and nature of leverages-operating risk and financial risk, operating leverages, financial leverages and combined leverages concepts, measures and their interpretations. Operating. leverages and Cost Volume Profit analysis-Earning Before Interest and Tax (EBIT) and Earning Per Share (EPS) analysis-indifference point.

5. Capital structure theories and planning : Concept of capital structure and its perimeters, financial structure and capital structure-simple and complex. Theories of capital structure-net income approach, net operating income approach, traditional and Miller and Modigliani approaches, and their criticism. Factors for capital structure planning. Capital structure trend in private and public sectors, trend in private and public sectors in India.

6. Cost of Capital : Its nature and meaning, relevance of cost of capital in financial decisions, computation of specific cost, selection of weights, overall cost and marginal cost of capital, corporate tax and its impact on cost of capital.

7. Capital budgeting and impact of time lag in analysis of capital utilization and availability-pay back period, present value and internal rate of return including sensitivity analysis, limitations on capital budgeting. Determination of the cost of capital-risk of uncertainty, risk and return in a portfolio context, capital and pricing model (CAPM), inflation, leasing versus buying income taxes, benefits of accelerated cost recovery system (higher rate of depreciation), investment credits.

8. Working capital management: Operating cycle concept, forecasting, working capital requirements, strategies of financing current assets. Working capital and term loans recommendations of the Tandon Study Group, Monitoring advance management of different components. Working capital management under inflation, new projects and working capital management.

9. Financial services-Leasing, Merchant Banking, Hire-purchase, Cash Purchase, Factory.

10. Advance Financial Analysis and Planning : Financial statements, financial ratio analysis, fund flow and cash flow analysis, leverages, Cost-Volume-Profit analysis financial forecasting, interfirm comparison, financial analysis and aspects of inflation.

11. Dividend and retention policies: Formulating a dividend policy, factors for consideration. Dividend theories-Walter's model, Gordon's model, residual theory of dividend, Miller and Modigliani hypothesis, Indian position in private and public sector in general.

12. Financial management in public sector: Management of accounts receivable and inventories in public sector units, source of fund of public sector units-cost of loans, cost of equity, cost of retained earning and debt-equity ratio. Evaluation and control of capital expenditure-determination of cash flows and cost benefit analysis, Pricing policy of public enterprises, project formulation and implementation, Social cost benefit analysis.

Stage IV: Paper 15: Advanced Management Accounting Strategic Management

(One Paper: 3 hours: 100 marks)

Aim: To cover adequate knowledge of organization and its environment, formulation and importance of strategic planning in achieving organizational objectives and role of Management Accountant in the control of marketing and strategic planning.

Level of Knowledge: Expert

1. Strategic Planning:

(i) Planning Environment Economics-forecasts, trend and changes-social, political, legal and technological impacts. Distribution channels and competitive forces. Government policies, economic growth and government expenditure. Public and Private sector investment. International trade- prices and Government policies for capacity expansion, new industries, subsidiaries and substitutes. Government role in controlling inflation.

(ii) Strategies : Meaning and implications of corporate planning, long range planning, business policy planning, strategic planning and strategic management. Processes of developing strategic plan-definition of mission, corporate objectives-(Profit gap, sales gap, risk gap and other strategies, SWOT (Strength, Weaknesses, Opportunities and Threats) analysis, target selling, strategy formulation and implementation, monitoring mechanism, strategies for stagnation versus growth, strategies for growth through expansion versus diversification, Acquisition and merger strategy. Strategy of joint venture-both in India and abroad. Marketing strategy as a part of corporate strategy, growth under inflation and protection of shareholders, real capital. Financial objectives, non-financial objectives, resources, analysis and evaluation.

(iii) Model Building: Strategies in the development of models, Delphi Model, econometric, mathematical programming, budgetary and Heuristic Model. Sensitivity analysis and the characteristics of this Model. Limitations in model building vis-a-vis simulation techniques.

2. Marketing: Concept-production orientation vs. market orientation marketing objectives, framework and management of marketing-mix. (ii) Linkage between strategic planning and marketing strategy-both forward and backward, (iii) research and intelligence-sources for and techniques for acquiring information necessary for marketing decision-making, (iv) control or application of management accounting in marketing-analysis of marketing costs and profitability, pricing policies and strategies, budgetary control in marketing evaluation and control of sales activities.

Evaluation of sales promotion and advertisement Distribution cost analysis and control. Evaluation of marketing research and marketing planning.

Contribution analysis and product-line profitability analysis. Product rationalization including product revamping, product range extension, product elimination and also new product introduction, Evaluation of research information-perfect, imperfect and Bayes' Theorem.

Stage IV : Paper 16: Cost Audit

One Paper: 3 Hours: 100 marks

Aim : To provide an in-depth study of the body of knowledge comprising the techniques and methods of planning and executing as a Cost and Management Audit assignment.

Level of knowledge: Expert

Section I : Cost and Management Audit (50 marks)

1. Nature, objects and scope of cost audit-The concept of efficiency audit, propriety audit, management audit, social audit.

2. Appointment of Cost Auditor-His rights, responsibilities, status. relationship and liabilities-professional and legal under the Companies Act, 1956 (1 of 1956), the Cost and Works Accountants Act, 1959 (23 of 1959).

3. Planning the Audit-Familiarization with the Industry, the organization, the production process systems and procedures, list of records and reports, preparation of the audit programme.

4. Verification of records and reports-Utilization of statistical sampling methods-verification performance and statements maintained under the Cost Accounting (Records) Rules.

5. Evaluation of Internal Control System: Budgetary Control, capacity utilization, inventory control, management information system.

6. Assessment of the adequacy of the internal audit function.

7. Audit notes and working papers-audit reports to management.

8. The Cost Audit Reports-Contents of the Report, distinction between "Notes and Qualifications" to the Report. Cost Auditor's observations and conclusions.

9. Professional Ethics and Code of conduct.

10. Relationship between the Statutory Financial Auditor, the Internal Auditor and the Statutory Cost Auditor.

11. Cost Accounting (Records) Rules under clause (d) of sub-section (l) of section 209 (issued one year before the examination) and Cost Audit (Reports) Rules issued under section 233B of the Companies Act, 1956 (1 of 1956). Critical study of the rules including the prescribed Annexure and Performa applicable to the industries covered.

12. Review of Cost Audit Report by the Government : Objectives, methods, follow-up actions and disposal of Cost Audit Reports by the Government company and other end users of the cost audit reports.

13. Comparative Studies between cost audit and financial audit with special reference to disclosure of information to members of Parliament and the general public.

14. Special Penal Provisions for Cost Auditors.

Section II : Cost Audit Leading to other Services (50 Marks)

A. Management Audit

1. Meaning, nature and scope of organizational needs for Management Audit and its coverage over and above other audit procedures.

2. Audit of the Management Processes and functions such as Planning, Organization, Staffing, Co-ordination, Communication, Direction and Control.

3. Evaluation of Management Information and Control Systems with special emphasis in Corporate Image and Behavioral Problems.

4.Corporate service audit (Customer services) : Product (Research and Development) and import substitution, customers channel (export).

5.Corporate Development and Management Audit, including operational and propriety aspects.

6.Social Cost and Benefit of business enterprises with particular reference to developing countries.

7.Audit of Social responsibility of management.

(B) Other services:

8. (a) Other service to the Management Certification for various purposes-the records to be verified and the safeguard to be taken-the form and content of the certificates.

(b) Cost Audit as an aid to management, Government, shareholders, other external agencies and the public voluntary Cost Audit.

(c) Productivity Audit-Labor, Material and Capital.

(d) Audit of Energy Conservation and Environmental Protection.

(e) Efficiency Audit-audit of sub-systems of an enterprise.

(f) Assessment and quantification of losses under marine, fire and accident policies.

(g) Inventory Audits for Banks and other agencies.]

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