October 2014 Vol SJ5 Issue 10

ICAI Devising New Course Curriculum : Matching Stakeholders' Expectations

October 2014 I The Chartered Accountant Student2

CONTENTS

President and Editor-in-ChiefCA. K. Raghu, Bengaluru

Vice-PresidentCA. Manoj Fadnis, Indore

Chairman and EditorCA. M. Devaraja Reddy, Hyderabad

Vice-ChairmanCA. Prafulla Premsukh Chhajed, Mumbai

MembersCA. Anuj Goyal, GhaziabadCA. Babu Abraham Kallivayalil, KochiCA. Charanjot Singh Nanda, New DelhiCA. Mukesh Singh Kushwah, GhaziabadCA. Nihar Niranjan Jambusaria, MumbaiCA. Sanjeev K. Maheshwari, MumbaiCA. S. Santhanakrishnan, ChennaiCA. Shyam Lal Agarwal, JaipurCA. Subodh Kumar Agrawal, KolkataCA. Sumantra Guha, KolkataCA. Tarun Jamnadas Ghia, MumbaiCA. Vijay Garg, JaipurCA. Vijay Kumar Gupta, FaridabadCA. V. Murali, ChennaiShri Gautam Guha, New DelhiShri J.S.Deepak, New DelhiShri Manoj Kumar, New DelhiShri Salil Singhal, GurgaonShri Sidharth Kumar Birla, New Delhi

Co-opted MembersCA. Ananthanarayana Pai KCA. C S GuptaCA. M R KrishnamurthyCA. Prashant Shekhar PandaCA. Prerak AgarwalCA. Ravinder Singh KalraCA. Sunil Kumar Gulati

Director – Board of StudiesShri Vijay Kapur

Editorial SupportPrem Bhutani, Deputy DirectorK. Sudhakaran, Assistant Director

OfficeBoard of StudiesThe Institute of Chartered Accountants of India,

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InsideOctober

Total Circulation:412,753

3. Message - President

4. Message - Vice President

5. Message - Chairman, Board of

Studies

6 Charting New Frontiers: The

Emerging Role of Chartered

Accountants

9 Tax Audits

12 Examination

31 Announcement

Check your Address : All students should check their mailing address printed

on back cover. In case, there is any change or the PIN Code (Postal Index Code)

is either missing or is incorrect, kindly inform immediately the concerned Regional

Office, giving full particulars of your address alongwith correct PIN Code. This

would enable us to ensure regular and prompt delivery of the Journal.

Editor: CA. M. Devaraja Reddy

Printed and published by Shri Vijay Kapur, on behalf of The Institute of

Chartered Accountants of India, New Delhi. Published at the Institute's Office

at Indraprastha Marg, New Delhi and printed at International Print-O-Pac Ltd.,

B-204, 205, Okhla Industrial Area, Phase-1, New Delhi.

The views and opinions expressed or implied in THE CHARTERED ACCOUNTANT

STUDENT are those of the authors and do not necessarily reflect those of ICAI.

Unsolicited articles and transparencies are sent at the owner’s risk and the publisher

accepts no liability for loss or damage. Material in this publication may not be

reproduced, whether in part or in whole, without the consent of ICAI.

DISCLAIMER: The ICAI is not in any way responsible for the result of any action

taken on the basis of the advertisement published in the Journal.

EDITORIAL BOARD

October 2014 I The Chartered Accountant Student 3

MESSAGE

“Be the change that you wish tosee in the world.” Take to heartthese words of Mahatma Gandhi,one of the greatest changemasters that ever lived. Everyonethinks of changing the world, butno one thinks of changing

themselves. The problems facing the world today are great,and it will surely take the greatness of millions of peopleworking together towards a common goal to overcome them.Changing the world does not happen overnight, but it won’thappen by not making an effort either. The time to act isnow, and our role is just as important as the next person’s.We all know that all significant changes throughout historyhave occurred not because of nations, armies orgovernments. They happened as a result of the courage andcommitment of individuals like Albert Einstein, AbrahamLincoln, Thomas Edison and Rosa Parks. They might nothave done it alone, but they were, without question, thechange makers. As Mother Teresa said that “I alone cannotchange the world, but I can cast a stone across the watersto create many ripples.” Hence, we need to begin with thefoundation, which is us only. If we cannot do it, then howcan we expect other people to?

Working Towards a New Curriculum

As a result of the unprecedented changes induced bytechnology and globalization, all professions includingChartered Accountancy profession are forced to re-thinktheir method of management and delivery of services. Wehave to think globally but act locally. CharteredAccountancy is one of the most dynamic subjects of theworld. Dynamism and professionalism is the life blood ofChartered Accountancy. So, to keep pace with the changingsituation of the world we have also to change, by additionand subtraction of the existing curriculum of the CharteredAccountancy education in India. Otherwise, in future, itwill lose its importance and will turn into a relic of thepast. The Committee for Review of Education and Training(CRET), is in the process of formulating a new scheme ofeducation and training for the new incumbent to the CAcourse. With the advent of globalization, it has becomeincreasingly important to mainstream the CA curriculumwith innovative pedagogic methods.

Examination: Do not mix up with Festivities

As you know, the month of October marks the onset of festiveseason in India. From the start of October till the end ofNovember, it is the time when the entire country is tinged incolours of celebrations, enthusiasm and devotion. It alsoreminds you that your examinations are round the cornerand those of you who submitted the applications have tostart preparations on a war footing. I would like to informyou that the Board of Studies has already published theSuggested Answers of May/ June 2014 Examinations and theRevision Test Papers, RTPs of November 2014 Examination.The RTPs have also been hosted on the Institute website.

The Examiner’s Comments on the May/June 2014 is alsopublished in the latter pages of this Journal.

For many people, exam time is the most stressful part oftheir academic life. With so much riding on the outcome,there can be a high degree of pressure to perform well.

Practicing under Exam Conditions

Knowing the course material is necessary but not sufficientto guarantee success on the exam - you also need to be ableto communicate the answers effectively under examconditions. Practice using sample questions in the sameformat as the exam and answer them in a simulated testenvironment. The sample questions can be sourced fromold exams, which are often similar from year to year withsmall changes. Even though you are only practicing, it isbetter to write full answers to the questions so you can workthrough the entire thought process.

The practice session should serve as a feedback loop. Checkthe answers to the practice questions to diagnose yourstrengths and weaknesses. Mock tests being conducted byvarious branches of the Institute will be helpful to analyzeyour grey areas and rectify them. Those who are appearingfor the ensuing examinations should invariably appear inthe mock tests to avoid the last minute stress and strain.

If you are weak in an area, go back and study it further toaddress any gaps. In this context, I would like exhort youto have a thorough and careful reading of the Institutepublication “How to face CA examinations”. This book willdefinitely help you to boost your confidence level and willguide you to the right track.

In my earlier communications, I had mentioned about thechanges in the Companies Act. Quite number of sectionsand provisions of the new Companies Act, 2013 areapplicable for November 2014 examinations both at IPCCand Final level. Make sure that you all have updated aboutthose changes before the commencement of the examination.

Taking Care of Yourself

Don’t forget to take care of yourself during the exampreparation. It is very important to be in good mental andphysical condition for the exam. A small amount of stress canget you psyched, but too much mental or physical strain canbe detrimental to your performance. The last thing you wantto do is to sabotage your efforts by ignoring your well-being.

After you finish studying, take some time to relax. Don’tstay up too late if you can help it and try to get a goodnight’s sleep. Eat before the exam to build your energy, butavoid heavy foods that can make you drowsy.

Keep a positive attitude about the exam. Think of it as away to demonstrate your knowledge and not as someimposing challenge. Go to the exam focused and relaxed -you have done the work, now it’s time to reap the rewards.

Best wishes

CA. K. RaghuPresident,The Institute of Chartered Accountants of India

President’s

Communication

Dear Students,

October 2014 I The Chartered Accountant Student4

MESSAGE

At the outset, I would liketo offer my rich tributes tothe Father of the Nation,Mahatma Gandhi on his145th birth anniversary on

October 2, 2014. We can learn a lot from the lifeand work of Gandhi ji. The Mahatma’s humility,perseverance, respect to others and followingpath of truth have made him a highly reveredperson both in India and abroad. The virtuouspersonality taught us how simple concepts canbe highly powerful. I am convinced that followingthe traits enunciated by Mahatma can help us inour professional and personal lives. It would notbe an exaggeration to say that in certain respectsthe independence, integrity and excellence, thehallmark of Chartered Accountancy profession,are linked to the traits of Mahatma Gandhi. As astudent, you should endeavour to imbibe at leastsome of his traits to succeed in life.

These are the formative years of your life. Lessonslearnt and values imbibed now would go longway and would define the level of success youachieve. In our profession, honesty is highlyimportant. So you must start inculcating this traitright from now. You should have honesty towardsthe studies as well as the practical training. Thereshould not be a single day when you have notadvanced in studies or learnt something inpractical training.

As far as study efforts are concerned, commonproblems observed in the approaches followedby the students are delay in efforts, not followinga time table, doing selective study, ignoringcertain subjects and not using pen and paper intheir preparations. In last one month or so wehave received queries from some students tryingto figure out applicable edition of study materialfor the forthcoming November, 2014examination. I feel these students need to putlittle more effort as hardly any time is left.Students are expected to refer to study materials,revision test papers, supplementary studymaterials, suggested answers and follow theannouncements hosted by Board of Studies onthe website to remain up-to-date.

Vice President’s

Communication

My Dear Students,

It has also been noticed that some of the studentsignore practical training. Articleship traininghelps you to understand the practical relevanceof theoretical concepts and provide you a soundknowledge base. The theoretical education andarticleship training will synergistically help youto pass examinations and also lead to success infuture professional lives. So, take them seriouslyin an honest manner.

The Chartered Accountancy course is a highlypopular course that is being pursued by the studentsof all economic strata. Although it is a highlyaffordable course, some students belonging tohumble sections may find resource crunch. With aview to provide equal opportunity to such students,the Institute has been extending Scholarshipfacilities under various schemes. The Institute hasrecently increased the number of scholarships beinggiven annually under the “Need Based and WeakerSections” category from 100 to 200 in respect ofIntermediate (IPC) students and from 100 to 300for the students of Final Course. The children ofthe deceased members of ICAI undergoing CACourse shall also be eligible for scholarship underthis category if financial assistance is provided tospouses of the deceased members from theChartered Accountants Benevolent Fund.

The programmmes on General ManagementCommunication skills (GMCS) and InformationTechnology training are effectivelycomplementing your skill-sets. It has beendecided to implement the 100 hours AdvancedIT Training with effect from 1st October, 2014. Ithas also been decided to grant further threemonths’ extension to students, who wereregistered for Practical Training on or after 1st

May, 2012 and have completed one year of theirPractical Training but have not completed GMCS-I, to complete the same latest by 31st December,2014. You must do these programmes at theearliest to meet the regulatory requirements.

Wish you all the best

Yours sincerely,

CA. Manoj FadnisVice PresidentThe Institute of Chartered Accountants of India

October 2014 I The Chartered Accountant Student 5

MESSAGE

Chairman’s

Communication

Dear Students,

Everything can be stable forsometime but time doesn’thalt for anyone in this world.The time has again come towish you all the best for your

forthcoming examinations. I wish all of you whointend to appear in the forthcoming examinationsto study well and make full utilization of the variouseducational aids and time provided to you. Just givein your best and I assure you that success will beyours. I have full faith in Bhagavat Geeta’s Shalok,which says

karmanyevaadhikaaraste maa phaleshu kadaachana |maa karmaphalaheturbhuu maatesangotsvakarmani ||

meaning thereby a person has the right towardsaction alone and not towards the fruit of action. Letnot the fruit of action be the motive for acting. Also,let there not be any attachment to inaction. I conveymy best wishes to all of you who could not pass theexaminations in your previous attempts, and urgeyou to put in your best efforts. Just believe in yourselfand move with an optimistic approach and the resultwill definitely be good. As said by Swami Vivekanda“Go on bravely. Do not expect success in a day or ayear. Always hold on to the highest. Be steady. Avoidjealousy and selfishness. Be obedient and eternallyfaithful to the cause of truth, humanity, and yourcountry, and you will move the world”.

Students need not panic and undergo stress. Youshould read a publication by the Institute “How toface CA examinations”. This book will really boostyour confidence and will show you the right trackand will also make you understand that a certainchange in approach can help you to face theexaminations with more ease and confidence. Mocktests conducted by various branches will also beworthwhile, to analyze your grey areas and improveupon them. So get in touch with the branches andappear in such mock tests to avoid the panic andstress while appearing for the main examinations.

Perhaps you all are aware of the changes in theCompanies Act. A lot of sections and provisions ofthe new Companies Act, 2013 at both IIPCC andFinal level are applicable for November 2014examinations. So you need to focus on such changesand prepare yourself accordingly. The Board ofStudies considering these changes have hosted

Supplementary Study Papers pertaining to theprovisions and sections applicable for theforthcoming exams at the Institute website.Revision Test Papers are also available at the websiteto make you understand level of question paper, soplease read and try to solve such papers to get anidea of your preparation and your weak areas.

Most of you are facing a lot of problems in theInformation Technology paper at IIPCC level andInformation System Control and Audit at Finallevel. It is my suggestion that you understand theconcepts rather than trying to learn them by heart.Make efforts to read and write down the concepts.Writing down and making various notes will proveto be quite helpful in such technical papers. SinceTechnology is the need of the hour, you are requiredto excel in such papers so as to survive in today’scompetitive world.

The Executive Committee recently considered therecommendations of the Board of Studies regardingenhancement of number of Scholarships for thecategory of “Need Based and Weaker Sections”. Theabove decision shall be effective from October, 2014onwards. The Executive Committee also decidedto grant further three months’ extension to studentswho were registered for Practical Training on orafter 1st May, 2012 and completed one year of theirPractical Training but not completed the GMCS-I,are required to complete GMCS-I Course latest by31st December, 2014 considering the requestsreceived from Regional Councils and Branches aswell as the extended date of Tax Audit. Consideringthe importance of IT, ICAI is going to implementan advance course on Information technology forits students. The Executive Committee approvedthe recommendations of the Board of Studies toimplement 100 hours Advanced IT Training witheffect from 1st October, 2014. Students who haveregistered for their practical training on or after 1st

August, 2012 would be required to undergo 100Hours Advanced IT Training any-time aftercompleting 2nd year of practical training but beforeappearing in their Final Examination. The fee forAdvanced ITT course would be ̀ 6,000 per student,which shall be charged by the respective POUs.

Wishing you all a very Happy and a Prosperous Diwali.

Yours sincerely,

CA. M. Devaraja ReddyChairman, BOS

October 2014 I The Chartered Accountant Student6

Present Scenario

Imagine ABC Associates, a traditional Chartered

Accountants’ Firm, in India. It is the time to file tax

returns in India and the whole firm is busy with paper

work. There is lot of information to be entered into

the computers, then checking and rechecking have to

be done to make sure everything is correct. When it is

not the tax season, the firm’s partners are busy getting

data from its clients, doing write-up work, and staying

abreast of regulations and compliance issues. All these

leave little time to them to help their clients with

important, and more interesting, tax planning and

strategic issues. In nut shell, doing nut and bolt

functions of gathering and entering client’s data,

preparing financial reports and tax returns and doing

audit of the companies take the toll of most of the

chartered accountants now a days. But the business

world is changing. Automation is replacing manual

data collection and input. New softwares and

analytical tools are being developed which are making

the job of data entry, book keeping and filing returns

much easier and more sophisticated. The time is fast

approaching when accounting professionals no longer

will focus on preparing financial reports and tax

returns, but ensure that automatically downloaded

data complies with regulatory and tax law

requirements. Although the information technology

is making the job of professional accountants much

easier and faster but then there is an increased risk of

cyber crime, frauds and scams necessitating

strengthening of audit and risk assessment processes

and evolving finer accounting capabilities for having

an effective risk management in place. Moreover, with

firms increasingly operating in multi-nations, the

complexities of business have increased many folds.

These firms are faced with multitude of products,

processes, systems, regulatory requirements,

governance procedures, organizational structures and

cultures. These firms are now expected to know not

only their local laws, rules, processes and procedures

but also of the countries in which they are operating.

The recent financial scams have once again

underlined the importance of good corporate

governance practices and business ethics. Besides

these, the expectations of the public from corporate

are rising. Companies now need to ensure

stakeholders, suppliers and governmental institutions

that they are socially responsible entities and that they

are managing their resources so as to accomplish

sustainable development. In short, there is a move

towards integrated reporting, compliance and

governance.

Future Role of Chartered Accountants

In the system which is evolving, chartered

Accountants would need more than excellent core

accounting and auditing skills as they would be

expected to shoulder wide-reaching responsibilities,

and to contribute to strategy and the forward

development of the organization rather than just

balancing the books. In short, traditional financial

recording and reporting role of the chartered

accountants would pave way for the strategic decision

making role. This would prompt the profession to

sharpen skills in non- traditional areas as well. Under

the emerging complex business scenario, training of

the future chartered accountants needs to be

reinforced to better prepare them for new evolving

system. They need to be rigorously trained in the new

emerging areas so that they are well equipped to face

the challenges thrown by the modern world,

efficiently and effectively. The new evolving system

would necessitate being:

Global Chartered Accountant: The impact of

globalization, in the context of business and finance,

is to be found in many areas: cross-border mergers

and acquisitions, global marketing, foreign direct

investment and outsourced operations and the like.

Global business has demanded for international skills

in accounting, finance, law and management.

Analogously, there have been important developments

in accounting in the international sphere. These

include developments in international standards

regarding, financial reporting, auditing, education and

training, professional development, ethics, practical

experience requirements, corporate governance and

sustainability reporting, driven by bodies such as the

International Federation of Accountants, the

International Accounting Standards Board and the

Global Reporting Initiative.

The future chartered accountant will have to be a

global accountant who is trained in a manner that he

Charting New Frontiers: The Emerging Role ofChartered Accountants

Prem J Bhutani

The contributor is Deputy Director, ICAI

ARTICLE

October 2014 I The Chartered Accountant Student 7

Enhanced Risk Management Capabilities: In view

of increased volatility in the economic world and

enhanced vulnerability to cyber threats, there is a

move towards adopting enterprise risk management.

The future accountants will need to be thoroughly

coached in new accounting capabilities to embed

effective risk management.

The Role of the Institute of Chartered Accountants

of India (ICAI)

ICAI is well aware of the emerging needs and

expectations of all the stakeholders and society from

it. Therefore, it takes steps to ensure that its Members –

present as well as future- are well armed to face the

economic and non economic challenges. The ICAI is

increasingly using technology in delivering education

to its students. Cloud Campus, e-lectures and on line

mentoring are increasingly being used to provide

education at the door step of students who are wide

spread within the country and outside it. The adoption

of modified version of international standards on

accounting and auditing, providing training in

profession relevant softwares etc. and providing post

qualification training in cotemporary professional

areas, all aim at ensuring that the emerging

professionals do not lag behind in any way.

Putting in the New System of Education and Training

The ICAI, from time to time, also reviews its system

of education and training and makes it more

contemporary. The ICAI’s special committee for this

purpose, called Committee for Review of Education

and Training (CRET), reviews the system periodically

to make it relevant, contemporary and up to date. The

present system of education and training is based on

the recommendations of 2004-05 CRET. The CRET

was recently constituted in 2013. It was reconstituted

in 2014 under the Chairmanship of the President,

ICAI. The CRET is in the process of formulating a new

scheme of education and training for the new

incumbent to the course. It has used a multi pronged

strategy for this purpose. Five Regional levels CRET

had brain storming sessions, followed by a mega

discussion by the Council of ICAI. The discussions

revolved around five basic areas namely, Entry

Requirements, Practical Training, Theoretical

Instructions, Assessment and Accounting Technician

Course. High levels of consultations have also been

held with Members, Academicians and Users of CA

services to seek their views and suggestions. Different

questionnaires relating to members, students and

academicians, having a bearing on the system of

education and training, have been prepared, uploaded

on the Institute’s website and their responses have

Global CharteredAccountant

Risk Manager IT expert

Integrated CorporateReporting Expert Governance Expert

Evolving Role of Chartered Accountant

ARTICLE

is equipped with the latest accounting , auditing,

taxation, law and other professional tools which are

useful not only in the national but also in the

international arena. This way he will be able to face

the competitive world with greater ease and aplomb.

An expert knowledge of Information Technology

(IT): Since technology is progressively making inroads

in the accounting profession, the Chartered

Accountant in future will need to be as much an IT

guy as he is an accountant these days. He will be

expected to have knowledge of all relevant softwares

and analytical tools having a bearing on his profession.

Expert in Corporate Governance and Business

Ethics: Trust is the hallmark of the accountancy

profession. But in recent past, there have been a

number of examples of abuse of trusted power. In fact,

the accountancy profession is being challenged to

ensure that accounting regulations and standards

prevent their recurrence. There has been a stress on

improved corporate governance and ethical practices.

This underlines the need to train the future chartered

accountant in good corporate governance practices

and business ethics so that the profession upholds

the respect and worth attached to it.

Adept at Integrated Reporting: Companies of today

cannot work in isolation. They need to ensure

stakeholders, suppliers and governmental institutions

that they are managing their resources so as to

accomplish holistic development comprising of

financial and non financial parameters. The

accountancy profession will have to finds ways as to

how will financial and non financial information be

presented in the annual accounts and the future

professionals will have to be trained in the light of

broader integrated reporting role.

October 2014 I The Chartered Accountant Student8

Announcement

In addition to the Announcement(s) published elsewhere in this issue, the following Conventions/Conclavesfor CA students have also been planned as of September, 2014. For further details, please contact therespective RC/Branch.

S.N Branch Name of the Programme Dates Contact Details

1. Ahmedabad National Convention 22nd & 23rd Nov, 14 Phone: (79) 3989 3989, 2768 0946, Email: ahmedabad@icai.in

2. Gurgaon National Convention 29th & 30th Nov, 14 Phone: (124) 4268 867, Email: gurgaon@icai.org

3. Ernakulam National Convention 2nd & 3rd Dec, 14 Phone: (484) 2369 238, 2372 953, Email: ernakulam@icai.org

4. Hyderabad All India Conference 4th & 5th Dec, 14 Phone: (40) 2331 7026, Email: hyderabad@icai.org

5. Salem Regional Conference 6th & 7th Dec, 14 Phone: (427) 2318 813, Email: salem@icai.org

6. Thrissur National Conclave 6th & 7th Dec, 14 Phone: (487) 2253 400, Email: trichur@icai.org

7. Bhopal National Conclave 6th & 7th Dec, 14 Phone: (755) 2558 066, Email: bhopal@icai.org

8. Faridabad National Convention 6th & 7th Dec, 14 Phone: (129) 4018 598, Email: faridabad@icai.org

9. Hubli National Convention 6th & 7th Dec, 14 Phone: (836) 2288 337, 2283 081, Email: hubli@icai.org

10. Bilaspur National Convention 13th & 14th Dec, 14 Phone: (775) 2428 611, Email: bilaspur@icai.org

11. New Delhi National Convention 17th & 18th Dec, 14 Phone: (11) 3989 3990, 3021 0601-605, Email: nirc@icai.in

12. Coimbatore National Convention 18th & 19th Dec, 14 Phone: (422) 4270 056/58, Email: coimbatore@icai.org

13. Aurangabad National Convention 19th & 20th Dec, 14 Phone: (240) 2342 157, Email: aurangabad@icai.org

14. Mumbai National Convention 20th & 21st Dec, 14 Phone: (22) 3367 1400, Email: wro@icai.in(WIRC)

15. Bangalore International Conference 27th & 28th Dec,14 Phone: (80) 3056 3500, Email: bangalore@icai.org

16. Udupi National Conclave 5th & 6th Jan, 15 Phone: (820) 2536 603, Email: udupi@icai.org

17. Ludhiana National Convention 10th & 11th Jan, 15 Phone: (161) 5091 043, Email: ludhiana@icai.org

18. Karnal National Convention 23rd & 24th Jan, 15 Phone: (184) 4045 666, Email: karnal@icai.org,

19. Pune National Convention 31st Jan &1st Feb, 15 Phone: (20) 2421 2251 / 52, Email: pune@icai.org,

been collected and analyzed. The prevalent and

corresponding system of education and training of

various international accountancy bodies have been

deeply analyzed. The relevant literature in this regard

has also been carefully studied. Once the whole exercise

gets completed, the Institute will frame a new model

outlining the entry requirements, stages of education,

name and number of papers, course curricula, level of

expected competency, duration of training, time of

training, nature of assessment at different levels and all

the related decisions having an impact of CA education

and training. The basic aim behind all this exercise is to

put in place a system of professional education and

training for the chartered accountants, which is not only

dynamic, contemporary and consistent with the

requirements of the stakeholders but also stable.

ARTICLE

Postponement of Date of Applicability ofAdvanced ITT course

As per Regulation 29(c)(iv) of The Chartered Accountants Regulation 1988, students who haveregistered for Practical Training on or after August 1st, 2012 were required to complete Advanced IT Trainingbefore admission to the Final Examination. Having regard to infrastructure and other facilities, the Councilof the Institute decided to defer the implementationdateof Regulation 29(c)(iv) from August 1, 2012 toFebruary 1, 2013. Accordingly, 100 Hours Advanced ITT course will now be applicable to those studentswho have registered for Practical Training on or after February 1st, 2013 but before appearing in the FinalExamination in terms of Regulation 29(c)(iv) of the Chartered Accountants Regulations, 1988.

Students are, however, advised to complete the Advanced ITT well in advance before appearing in theFinal Examination so as to avoid any hardship at a later date.

11.09.2014 Director, Board of Studies

ANNOUNCEMENT

October 2014 I The Chartered Accountant Student 9

The tax regulators need specific information to make assessment of whether theperson is paying tax as applicable in the Act. This concept was first introduced inFinance Act 1984 with effect from Assessment Year 1985-86. The tax audit report

provides such specific information in order to help tax department make correctassessment. Section 44AB of the Income tax act 1961 (Act) stipulates requirement of TaxAudits. In this article we will discuss various aspects of tax audits like to whom it isapplicable, who can carry out these audits etc. We will also discuss position of auditingstandards in tax audits and see how the reports are prepared. What should be themethodology of audit and what kind of documents and audit working papers should becollected by the auditor?

Recently there had been significant changes in the reporting under tax audit through notification no. 33/14dated 25 July, 2014. The Institute of Chartered Accountants of India (ICAI) has published a Guidance Note(revised 2014) on Tax Audit, which can be referred by the auditors to have clarifications on various matters.

Applicable to whom

Section 44AB of the Act is applicable to every person, which might be Individual, Partnership Firm, Associationof Persons, Hindu Undivided Family, Limited Liability Partnership or a Company, if this person is carrying on:

1. Business and his total sales, turnover or gross receipts exceed one crore rupees in the previous year – or

2. Profession and his gross receipt exceed twenty five lakh rupees in the previous year

You may note that limits mentioned above have undergone changes in the past. There are other sections ofthe Act (Section 44AE, 44BB and 44BBB) which require a person to pay taxes on deemed profits and if thatperson is claiming income less than such deemed profits, he will also be required to get the Tax Audit doneunder this section.

Similarly a person carrying business can pay tax on deemed income under section 44AD. If a person iscarrying out business and his income is more than exemption limit under Income Tax Act, but lower thandeemed income in any previous year, he will be required to get tax audit done.

Who can carry out Tax Audits?

Section 288 of the Act mentions about qualifications of tax auditors. The explanation defines accountantmeans a chartered accountant within the meaning of the Chartered Accountants Act, 1949. Hence one cansafely take a view that only a chartered accountant can carry out tax audit.

The tax audit is required to be carried out by such accountant and report to be signed by the accountantbefore due date of submission of tax return. Particulars of such report are discussed later in this article.

Position of Auditing Standards

Tax audit is an audit as required by statute and presently it is mandatory for all chartered accountants toapply auditing standards while carrying out any audit. These Auditing Standards are issued by the ICAI. Asper Standard of Auditing (SA700) audit report to mention responsibility of management and auditor besidesother information. The ICAI exempted application of this standard for tax audit reports related to previousyear (2013-14). Interestingly, tax audit report is requirement of the Act and the format of the report also hasbeen defined in the Act. One may ask a question that if the Act requires reporting in a particular format, andif such format is not according to the auditing standard, what should be the stand or position. A view is takenby various experts that the reporting should be done in such cases as required by the law. So many expertshave taken this view that tax audit reports should be according to the format as prescribed by the Law.

As per auditing standard, following information should be part of audit reports.

Tax AuditsCA Parveen Kumar

The contributor is a Member of ICAI. (Mem.No. 88810)

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October 2014 I The Chartered Accountant Student10

Title Auditor’s Report-

Addressee Contents

Introductory

Management Responsibility

Auditor’s Responsibility

Auditor’s Opinion

Other Reporting Responsibilities

Signature of the Auditor

Date of the Auditor’s Report

Place of Signature

As per regulations, specific formats have been defined to report on tax audit matters. If accounts of thebusiness of a person have been audited under any other law, the Tax Audit report will be as defined in formno 3CA. This format is given below.

FORM NO. 3CA

[See rule 6G(1)(a)]

Audit report under section 44AB of the Income - tax Act, 1961, in a case where the accounts of the businessor profession of a person have been audited under any other law

*I / we report that the statutory audit of M/s. _____________ ( Name and address of the asseessee with PermanentAccount Number) was conducted by *me / us / M/s. ___________________________________________________inpursuance of the provisions of the______________Act, and*I/we annex hereto a copy of *my / our / their auditreport dated _______________________along with a copy of each of :-

(a) the audited *profit and loss account / income and expenditure account for the period beginning from____________________ to ending on ____________

(b) the audited balance sheet as at, _____; and

(c) documents declared by the said Act to be part of, or annexed to, the *profit and loss account / incomeand expenditure account and balance sheet.

2. The statement of particulars required to be furnished under section 44AB is annexed herewith in FormNo. 3CD.

3. In *my / our opinion and to the best of *my / our information and according to examination of books ofaccount including other relevant documents and explanations given to *me / us, the particulars given in thesaid Form No.3 CD are true and correct subject to the following observations/qualifications, if any:

a.

b.

c.

……………...................................................

**(Signature and stamp/Seal of the signatory)

Place : ______________ Name of the signatory ………………….............…

Date : ______________ Full address …………………………………...........

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October 2014 I The Chartered Accountant Student 11

If accounts of business of a person has not been audited under any other act, then the report will be prepared,

signed and submitted by the Tax Auditor in Form 3CB. The format of report is given below.

FORM NO. 3CB

[See rule 6G(1)(b)]

Audit report under section 44AB of the Income - tax Act 1961,

in the case of a person referred to in clause (b) of sub - rule (1) of rule 6G

1. *I / we have examined the balance sheet as on, _________, and the *profit and loss account / income and

expenditure account for the period beginning from ________________ to ending on __________________,

attached herewith, of ________________________ (Name), _______________ (Address), ____________ (Permanent

Account Number).

2. *I / we certify that the balance sheet and the *profit and loss / income and expenditure account are in

agreement with the books of account maintained at the head office at ___________ and ** ___________ branches.

3. (a) *I / we report the following observations / comments / discrepancies / inconsistencies; if any:

(b) Subject to above, -

(A) *I / we have obtained all the information and explanations which, to the best of *my / our knowledge and

belief, were necessary for the purpose of the audit.

(B) In *my / our opinion, proper books of account have been kept by the head office and branches of the

assessee so far as appears from*my / our examination of the books.

(C) In *my / our opinion and to the best of *my / our information and according to the explanations given to

*me / us, the said accounts, read with notes thereon, if any, give a true and fair view :-

(i) in the case of the balance sheet, of the state of the affairs of the assessee as at 31st March, ;and

(ii) in the case of the *profit and loss account / income and expenditure account of the *profit / loss or

*surplus / deficit of the assessee for the year ended on that date.

4. The statement of particulars required to be furnished under section 44AB is annexed herewith in Form

No.3CD.

5. In *my/our opinion and to the best of *my / our information and according to explanations given to *me /

us, the particulars given in the said Form No.3 CD are true and correct subject to following observations/

qualifications, if any:

a.

b.

c.

……………...................................................

***(Signature and stamp/seal of the signatory)

Place : ______________ Name of the signatory ………………….............…

Date : ______________ Full address …………………………………...........

If you notice carefully, both these forms requires an auditor to give his opinion on true and correctness of the

information being provided in form 3CD. Please note that “true and correct” is more specific than giving

opinion on “true and fair” as required in other audits like the companies act. The auditor has to carry out

specific procedures to ensure that his information is correct and in case of any doubt he must qualify his

report or give disclaimer as per guidance given in the auditing standards.

(To be continued in November, 2014 Issue)

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October 2014 I The Chartered Accountant Student12

PAPER – 1: FINANCIAL REPORTING

Specific Comments

Question 1.

(a) Most of the candidates failed to comprehend thatan employee would have got 5 increments @ 10%per year to be entitled to get the benefit of lumpsum payment in the sixth year of service. Fewcandidates, who worked out the last drawn salarycorrectly, did not multiply the same by 5 i.e. thenumber of years completed as the payment wasto be made for each completed year of service.

(b) This question is based on the requirements of AS29 ‘Provisions, Contingent Liabilities andContingent Assets’. Few candidates answered theproblem on the basis of AS 4 considering the caseas an adjusting event. Some candidates gave theiranswers from income-tax perspective instead of‘financial reporting’ and few suggested adjustmentas ‘deferred tax asset’ or ‘deferred tax liability’.

(c) In the question, it was specifically mentioned thatthe supplier will deliver ‘free of cost’ certain heavyduty cables etc. having MRP of ` 5.75 lakhs, stillthe candidates added this cost in determining thecost of new machine. Hence, most of the candidateserred in arriving at the correct cost of the newmachine. Further, the candidates calculated CSTon the new machine also ignoring the fact that theprevailing CST rate, given in the question, was inrespect of the old machine. Some of the candidatesproceeded the calculation of cost of new machinefrom the amount paid to the supplier which resultedin wrong computation of the cost of the newmachine and profit/loss on machine exchanged.

(d) A small number of candidates took the period beforerights and after rights as 3 months and 9 months inplace of 4 months and 8 months for calculating EPSfor the year 2013-14 including effects of rights issue.However, majority of the candidates performed wellin this part of the question.

Question 2.

Many candidates deducted preference dividend whilecomputing the net assets available to equityshareholders. Whereas some of the candidates did notdeduct preference dividend and preference sharecapital from Future Maintainable Profit and Net Assetsavailable for equity shareholders respectively. Manycandidates failed to compute liability for ‘tax provision’

required in respect of adjustments given in thequestion, which would have been deducted whilecomputing the Net Trading Assets. In computing nettrading assets, some candidates erred in adjustmentsof Land & Building, Trade receivables and bank balance.

Question 3.

Overall performance was good in this question.However, some of the candidates got confused whileapplying either the direct method or indirect methodof consolidation for chain holding. The candidateswere also not aware that ‘Notes’ are integral part ofBalance Sheet in terms of Revised Schedule VI andare required to be prepared for providing the requiredinformation and the main balance sheet is not to beloaded with detailed information.

Question 4.

(a) Many candidates wrongly calculated the numberof employees to whom SARs was announced as1060 instead of 1040 by adding the number ofattritions in each year irrespective of the lengthof service.

(b) The answers exhibited lack of knowledge of thecandidates on RBI norms for provisioning in caseof assets of NBFCs dealing with Hire Purchase.Few candidates applied the percentage ofprovision to the amount of interest also insteadof the net book value of the asset.

(c) The question mentioned that ordinary shares arequoted at a premium of 500%. To calculate thesame, the candidates erroneously calculated themarket value of ordinary shares by multiplyingthe nominal value of shares by 5 instead of 6.Many candidates added Reserves and StatutoryFund in working out market value. Somecandidates mistakenly took value of secureddebentures as ` 5,00,000 instead of ` 50,00,000.

Question 5.

Many candidates erroneously calculated the sales valueof shares held by foreign company as ` 50 instead of `60. Some candidates deducted the amount of tax fromamount of gain instead of deducting the same from totalconsideration. Also few candidates in determining theintrinsic value of shares of A Ltd. skipped to considerthe value of investments in B Ltd. at ` 60.00 per share.

Question 6.

(a) Many candidates added provident fund (PF) for

Examiners’ Comments on the Performance of theCandidates – Final Examination – May 2014

EXAMINATION

October 2014 I The Chartered Accountant Student 13

computing the tax amount, though, it wasspecifically given in the question that PFcontribution was tax exempt. Some candidatesadded calls in arrear instead of deducting the samefrom equity share capital. The share capital givenin question paper was number of shares, and thestudents ought to have computed the amount ofshare capital, but they mistakenly considered thefigure of number of shares as ‘amount’ of sharecapital. Similarly, the number of debentures givenin the question was considered as amount ofdebentures by the candidates.

Question 7.

(a) In working out the operating cycle of KAY Ltd.,some of the candidates wrongly added the periodof holding of packing material twice as it wasgiven twice in the question paper i.e. lead timeand holding period. While some of the candidateserred by deducting the period of credit incomputing the operating cycle. Many candidatesgenerally came to the conclusion that as the creditperiod is of 12.5 months, the liability will be ‘non-current’. They failed to understand that whetherthe liability is current or non-current is to betested with reference to the ‘reporting date’ andaccordingly it has to be classified.

(b) The candidates reflected poor knowledge of theSEBI (Mutual funds) Regulations. They were notaware of the limits up to which mutual funds caninvest in unrated debt instruments. They gave ageneral reply that as the instruments are ‘unrated’,the investment cannot be made.

(c) Some candidates failed to give correct definitionfor “Timing Difference” and “PermanentDifference”. However, they were able to providenumber of examples for timing difference andpermanent difference.

(e) Many candidates dealt the problem with referenceto AS 4 instead of AS 9. Therefore, they failed toprovide correct answer to the question. Theyfailed to explain that in case of interim dividend,right to receive gets established when the sameis declared by the board and in case of finaldividend right to receive gets established whenthe same is approved by the shareholders in theannual general meeting (AGM).

PAPER – 2: STRATEGIC FINANCIALMANAGEMENT

Specific Comments

Question 1.

(a) This short question on valuation of shares waswell answered by most of candidates.

(b) This question involved evaluation of alternativessystems. On an average, candidates had answeredwell, however few candidates were unable to dealwith the concept of EAC for two alternatives withdifferent lives.

(c) The question involved the calculation of effectivecost of Commercial Paper. In this questionperformance of majority of candidates has notbeen found satisfactory as given information wasnot properly applied showing poor conceptualunderstanding of the cost components ofCommercial Paper. Further some candidates evenignored the minimum balance in calculations.

(d) This short question on Foreign Exchange has beenwell answered by majority of candidates.

Question 2.

(a) In this question of International CapitalBudgeting, overall performance has not beenfound satisfactory because of following reasons:

♦ Incremental cash flow was not calculatedproperly.

♦ Allocated share of fixed cost was added incost.

♦ Candidates were unable to calculateadditional cash flow after tax properly.

♦ Some candidates even were unable to keeptrack of the problem hence went wrong.

(b) This question was based on valuation of sharesin the context of an acquisition proposal. In thisquestion, the overall performance was of averagelevel as most of them were unable to calculateminimum and maximum value of shares. Furthereven some candidates instead of acquisition ofXYZ Ltd. by PQR Ltd. confused it with the mergerof both the companies.

Question 3.

(a) This question involved the calculation of NetAsset Value (NAV) of units of mutual fund.Despite being an easy question, the overallperformance was found average as majority ofcandidates considered the information ofoperating expenses as relevant and deducted thesame from cash in hand though it was irrelevant.

(b) This question was related to a decision to takeforward cover in a foreign exchange transaction.Overall performance was found of average level.Some candidates had calculated the hedging lossby deducting ‘Forward Rate’ from Expected orFuture Rate instead of Spot Rate on date of export.

Question 4.

(a) This question called for calculation of weighted

EXAMINATION

October 2014 I The Chartered Accountant Student14

Average Cost of Capital (WACC) and using thesame to calculate EVA. Majority of candidates hadcorrectly calculated the WACC but went wrongin calculation of EVA. The common error noticedwas considering Net Income as EBIT instead ofPAT. Even some candidates gone wrong in thecalculation of cost of Equity by consideringmarket risk premium as Market Return.

(b) This question involved calculation of value of afirm. The overall performance was found belowaverage as most of candidates could notcoordinate given information for budgeted 3years. Further due to lack of conceptualknowledge, some candidates even had takenworking capital instead of change (“) in WorkingCapital. Some candidates even ignoreddepreciation in calculation of FCF.

Question 5.

(a) This question involved evaluation of Factoringof Book Debts. The performance was belowaverage as most of the candidates were unable tocalculate amount of reduction in Debtors andInterest Cost.

(b) This question is based on Foreign Exchange hasbeen answered well by the majority of candidates.However, some candidates have ignored the noteof calculating rates in multiple of 0.0001 andhence went wrong. Even some candidates couldnot apply exchange margin correctly. Henceoverall performance was found of average level.

Question 6.

(a) This question was based on Bond Valuation. Theoverall performance has been found satisfactory.However, in some cases candidates calculatedcorrectly up to Conversion Value of Bond butfurther went wrong.

(b) This question requires calculation of flat interestand effective rate of interest of EMI Schemes.Overall performance in this question has beenfound below average as majority of candidatescould calculate flat rate correctly but could notcalculate Effective Rate of Interest.

(c) This theoretical question has been attempted wellby majority of candidates. However, somecandidates have made generalized presentationor instead of writing contents of Project Reporthad written about Project Report only.

Question 7.

(a) In this theoretical question, overall performancewas found of average level as some candidatescould not differentiate between two approachesto Dividend Policy. Even some candidates

confused Traditional Approach with MMApproach of Irrelevance of Dividend.

(b) In this theoretical question, the performance wasfound below average indicating lack of clarity ofconcept. Some candidates explained in detail Calland Put option instead of factors affecting valueof option. Even some candidates thoughmentioned the points but not elaborated them.

(c) In this theoretical question, overall performancewas found poor as candidates confused theconcept of FRA with currency ForwardAgreement. In some case though candidates haveexplained Forward Contract but could not relateit with Interest Rate.

(d) In this theoretical question relating to AmericanDepository Receipt, overall performance has beenfound below average due to lack of conceptualknowledge. Further even some candidateconfused it with Fixed Deposit with Bank. Somecandidates were not clear about the concept ofcustodian bank.

(e) In this question, overall performance was foundof average level. Some candidates were not clearabout the concept of balancing Financial Goal vis-à-vis Sustainable Growth.

PAPER – 3: ADVANCED AUDITING ANDPROFESSIONAL ETHICS

Specific Comments

Question 1.

(a) Candidates, in general, have no clear perceptionof AS-29 & SA-570. Most of them considered it ascontingent liability and thus opined that there isno need to make provision.

(b) Some of the candidates discussed about SA 210but failed to highlight the aspects to be consideredfor acceptance of the assignment as per SAE 3400and audit evidence to be obtained for reportingon the projected financial statements.

(c) Candidates, in general, discussed only about SA240 and SA 580 and gave correct conclusion butthey have no idea of the reporting requirementas per paragraph 4(xxi) of CARO, 2003.

(d) Most of the candidates correctly referred to therelevant SA but failed to explain negativeconfirmation and the need to obtain furtherevidence by the auditor to resolve the doubt.

Question 2.

(b) Majority of Candidates gave correct conclusionin most of the situation but failed to give correctreference to the relevant clause.

EXAMINATION

October 2014 I The Chartered Accountant Student 15

(c) Candidates, in general, correctly referred to theconsequence of not providing relevantinformation to the Institute in the application butfurther mixed it with clause 11 for seekingpermission of the council before engagement inother business.

(d) Many Candidates were confused about thequestion as to how a CA can be both in service aswell as practice. Consequently, most of thecandidates mixed their answer with wrong clauseand explanation but gave correct conclusion.

Question 3.

(b) Candidates failed to mention the importantaspects of financial statements to be reviewed bythe audit committee and they mostly discussedonly about competence of the CA to becomemember and composition of the audit committee.

(c) Candidates, in general, have fair idea of the ruleregarding minimum transfer to reserve but failedto explain the rule regarding transfer of higherpercentage.

(d) Most of the candidates have only general idea ofthe topic and placed more reliance on variousclauses of professional misconduct under CARegulation Act, 1949 rather than the facts of thecase.

Question 4.

(b) Candidates, in general, have fair idea of therelevant paragraph of the CARO, 2003 but in thefirst part their answer lacked understanding ofthe exact reporting requirement.

(c) Most of the candidates correctly mentioned mostof the points requiring current periodconsolidation. However, some candidates mixedtheir answer with permanent consolidationadjustment.

Question 5.

(b) Majority of the candidates showed lack ofknowledge of the topic and explained only generalpoints related to collection of premium andpayment of commission rather than outstandingpremium.

(c) Many candidates discussed only aboutverification of stock but failed to explainverification program of receivables.

Question 6.

(a) Candidates failed to understand the requirementof the question about planning for performanceaudit and instead discussed mainly aboutperformance and functioning of sugar industry.

(b) Most of the candidates concluded correctly buttheir answer lacked knowledge of the scope ofoperational auditor.

(c) Majority of the candidates failed to mention theapproach for investigation asked in the questionand only discussed about requirement of section235 & 237 and various type of investigation underthe company and other laws.

(d) Many candidates were not able to correctlymention the various areas to be excluded fromthe scope of peer reviewer and instead mentionedthose areas which are within the scope of peerreviewer.

Question 7.

Short Notes

(a) This question was not attempted by most of thecandidates. Those attempted lacked theknowledge of the topic and gave only generalanswer.

(e) Candidates, in general, discussed mostly aboutthe concept of misstatement and only few of thecandidates mentioned about fixing of monetarylimit by the auditor.

PAPER – 4: CORPORATE AND ALLIED LAWS

Specific Comments

Question 1.

(a) The performance of the students was satisfactory.Though some of the students could not mentionthat the Central Government is authorised onlyto order for the conduct of a special audit of anycompany under section 233A of the CompaniesAct, 1956.

(b) Performance of the students was average. Mostof the students were unaware of the threeconditions provided under the Companies(Declaration of Dividend out of Reserves) Rules,1975 to declare dividend out of accumulatedprofits of the company.

(c) Many students fairly attempted this question.They were able to answer properly with regardsto amount of compensation payable by M/s ZYXLtd. to Mr. AMR under section 294A(2) of theCompanies Act, 1956.

(d) Performance of majority of the students was poorin this part. Many of them did not know the powerof the Central Government to remove a memberof SEBI. Many students did not attempt this partin spite of the fact that the part was undercompulsory question.

EXAMINATION

October 2014 I The Chartered Accountant Student16

Question 2.

(a) Performance of the students was average. Mostof the students gave the answer in very generalnature. They were very well aware of theprovisions of section 297 of the Companies Act,1956 but many of them did not know how toimplement the provisions in the three conditionsgiven in the question.

(b) Performance of the students was quite satisfactoryin the first part of the question. Though draftingof Board resolution in second part of the questionfor providing guarantee in respect of a loan to beobtained by a director was not upto the mark.

Question 3.

(a) Almost all the students attempted this questionproperly. They answered correctly the provisionsof section 209 of the Companies Act, 1956 relatedto the maintenance of the books of account.

(b) Most of the students were unaware of theconditions for issue of bonus shares under SEBI(Issue of Capital and Disclosure Requirements)Regulations, 2009. They were lacking theknowledge of the SEBI Regulations.

Question 4.

(a) Most of the students were not able to explain theremedies available to the company under Section621A of the Companies Act, 1956. Their answerswere general. The performance of the studentswas below average in this question.

(b) Performance of the students was below averagein this question. Many of them did not know theprovisions of Sections 388B, 388C, 388D and388E of the Companies Act, 1956 regardingpowers of the Company Law Board and theCentral Government in such matters.

Question 5.

(a) Most of the students could not explain therelevant provisions of sections 433, 434 and 439of the Companies Act, 1956 correctly, perhaps forthe reason that they were advised by the Boardof Studies to study only the general provisionsrelating to winding up as covered in paragraph9.4 of the study material. The question asked doesnot fall within these provisions as covered underthe said Paragraph of the Study Material.

(b) Performance of the students was average. Mostof the students were unaware of the provision ofsection 35 of the Banking Regulation Act, 1949regarding power of the RBI and the CentralGovernment to inspect banks and give directionsin this matter.

Question 6.

(a) (i) Performance of the students was very poor.They did not have the knowledge of theadditional matters to be reported by theAuditor of a Producer Company underSection 581ZG of the Companies Act, 1956.

(ii) The performance of the students was quitesatisfactory in this question. Most of themcorrectly stated the list of documentsrequired to be delivered by a foreigncompany at the time of establishment of aplace of business in India as per section 592of the Companies Act, 1956.

(b) Most of the students were not able to explain thepower of the CLB to call for the meeting undersection 186 of the Companies Act, 1956. Theperformance of the students was below averagein this question.

Answer 7.

(a) Students’ performance in this part was foundaverage. Some of the students were confusedregarding acquisition of residential flat and a farmhouse on the outskirts of Mumbai by Mr. V.

(b) Performance of the students was below averagein this question. Many students did not have theknowledge of the term “Predatory Pricing” underthe Competition Act, 2002.

(c) The performance of the students was satisfactoryin the question

(d) Many of the students did not explain the meaningof the term “non-performing asset” and “assetreconstruction” used in the SARFAESI Act, 2002correctly. The performance of the students waspoor in this question.

(e) The performance of the students was poor in thisquestion. Majority of them did not explain themeaning of the term “Money Laundering and evendid not clearly mention the provisions underPrevention of Money Laundering Act, 2002related to punishment.

PAPER – 5: ADVANCED MANAGEMENTACCOUNTING

General Comments

“It is evident that majority of the examinees did notprepare extensively and probably went for selectivereading. This is evident as they lacked in depthknowledge of the various topics of the subject requiredfor sitting in professional examination at this level. Asthey lacked fundamental knowledge, they also lackedin conceptual ability to tackle the questions in correct

EXAMINATION

October 2014 I The Chartered Accountant Student 17

manner. Consequently, the overall performance of theexaminees was not satisfactory. The examinees mustunderstand that there is no short cut to success. Theymust study more intensively and practice to solvenumerical problems from the study material, practicemanual, revision test papers and past years questionpapers.”

Specific Comments

Question 1.

(a) This was a practical question related tocalculation of maximum amount of inspection costto be incurred for accepting export order and % ofdiscount to be given on export price if product isaccepted without inspection. Performance of theexaminees was average. Those who could notattempt this question were due to lack ofknowledge of the concept of ‘Relevant andIrrelevant Cost’.

(b) This was a practical question relating todecision to further process or not by usingincremental cost revenue approach. Theperformance of the examinees was poor. Theyfailed to find out inputs for the various processesafter taking into account the normal loss.Moreover the question asked for incrementalcost - revenue approach, which was not adoptedby many examinees.

(c) This was a theory question from the topic ‘TotalQuality Management’. Average performance ofthe examinees was observed.

(d) This was a practical question relating to topic‘Assignment Problem’ in which examinees haveto calculate least cost route for a travelingsalesman. This was not well answered by mostof the examinees. The circular movement requiredby the salesman was not worked out by most ofthe examinees.

Question 2.

(a) This was a practical question regarding decisionto manufacture or sub contract and to calculatecorresponding profits and breakeven point. Thiswas not well answered by many examinees. Theallocation of assembly hours among the productsto be manufactured internally was wrong. Onlyfew examinees worked out breakeven pointcorrectly. The last part of the question requiring,examinees to advise best strategy if assemblyhours is not limiting factor evoked unclearanswers as they lacked conceptual knowledge.

(b) This was a practical, question relating to topic‘Simulation’. Average performance of theexaminees was observed. Those who could not

answer correctly was due to inability in preparingsimulation sheet correctly showing daily arrival,servicing and closing job figures. It is apparentthat the examinees lack practice to solve suchcommon situations.

Question 3.

(a) This was practical problem related to topic‘Standard Costing’ in which examinees wererequired to analyse the variances of revenue andcost over the year to bring reasons for change inprofit and prepare the profit reconciliationstatement. This was not well answered by manyexaminees. It clearly showed that the examineeshad not prepared well to answer such type ofquestion.

(b) This was a practical problem relating to topic‘Linear Programming’ using ‘Simplex Method’.Poor performance of the examinees was observed.It clearly showed that the examinees had notprepared well to solve this type of problem.

Question 4.

(a) This was a practical problem relating to topic‘Activity Based Costing’ in which examinees wererequired to calculate operating income of eachdistribution channel. This was well answered bymost of the examinees.

(b) This was a practical problem on ‘ProjectCrashing’ in which examinees were required tocalculate normal duration and its cost and tocalculate lowest cost and associated time andlowest time and associated cost. Performance ofmajority of examinees in the question wasobserved satisfactory. However, some examineesfailed to find out lowest cost and associated timeand lowest time and associated cost correctly.

Question 5.

(a) This was a practical question relating to topic‘Transfer Pricing’ in which examinees wererequired to calculate weighted average transferprice and to calculate total profits at various levelsof external demand. Average Performance ofexaminees was observed. Many examinees failedto appreciate that the question itself stipulatedthat “X must satisfy the demand of Y beforemaking external sales”. This requirement closedthe possibility of X meeting external demand of19,000 or 35,000 units. The examinees failed towork out the weighted average prices per unitcorrectly.

(b) This was a theoretical question relating to thebasic concept of ‘Relevant Costing’. This was wellanswered by most of the examinees.

EXAMINATION

October 2014 I The Chartered Accountant Student18

Question 6.

(a) This was a practical problem relating to topic‘Budget and Budgetary Control’. Examineeswere required to find the number of units ofproduct to be sold, its selling price per unit andpreparation of production budget, materialpurchase budget. This was well answered bymost of the examinees.

(b) This was a practical problem relating tocomputation of changes in operating income dueto industry market size factor, productivity andproduct differentiation and to reconcile the profitsof both years. This was not well answered by theexaminees.

(c) This was a theoretical question relating to thebasic concepts of ‘Assignment’ and‘Transportation’. Performance of most of theexaminees was below average. Answer clearlyshowed lack of conceptual knowledge on the partof examinees.

Question 7.

(a) to (e) This question comprises five theoreticalparts and examinees were required to answer anyfour.

(a) This was question relating to ‘Pareto Analysis’and same was well answered by most of theexaminees.

(b) This question relates to benefits of ‘CustomerProfitability Analysis’ was not well answered bymany examinees.

(c) Question relating to classification of items underthe three measures used in ‘Theory of Constraints’was well answered by many examinees.

(d) Question relating to VAM and Least Cost Methodof topic ‘Transportation Problem’ was wellanswered by many examinees.

(e) Question relates to North West Corner Method oftopic ‘Transportation Problem’. Examineesperformance was average.

PAPER – 6: INFORMATION SYSTEMS CONTROLAND AUDIT

Question 1.

It was a simple case study based question comprisingof four sub parts.

(a) Most of the candidates gave a generalized answerabout what is “SRS” but could not describe thecontents of SRS for a typical softwaredevelopment. Performance was not up to the markin this question.

(b) Not many candidates could provide the completeprovisions for the Section. Some candidatesmixed up the “Retention of Electronic Records”with “Recognition of Electronic Records”. Hence,the performance was poor.

(c) Most candidates answered poorly. Many discussedthe “Role of Auditors” in general instead ofexplaining the “Role of Auditor in informationprocessing system design through SDLC.”

(d) Only few candidates provided the correct answer.Most of the candidates did not have theconceptual clarity of ‘Control and Objectives’ ofSystem Development and Maintenance. Hence,performance was not up to the mark for this part.

Question 2.

(a) Only few candidates answered well in this part.Many pointed out; in general, the application ofcomputers in “Finance ManagementManagement” and many others described the“General benefits of ERP” instead of key facilitiesavailable in “Treasury Cash Management of anERP”. The performance was poor in this part.

(b) The performance of the candidates in this partwas average. Many candidates provided theanswers reasonably or partially correct whereasfew candidates presented the general idea of“Access Control”.

(c) Several candidates explained the basic principleof “Water Fall approach” and got confused withstrengths and weaknesses of other approaches.

Question 3.

(a) Many candidates could not define even thepopular concepts of “Encryption, Public Key andPrivate Key”. The performance in this part wasaverage.

(b) Several candidates explained well. Somecandidates did not cover the “RestorativeInformation Protection” and even those whocovered could not explain well. The performancewas average in this part.

(c) Many candidates did not cover all aspects of“Disaster Recovery Plan” and instead gave generalanswers not specific to IT assets. Some candidatesfocused only on backup procedures and provideddetails about various back-ups.

Question 4.

(a) This part dealing with the “Common threats tocyber crimes” was answered well by thecandidates. Hence, performance was very goodfor this question.

EXAMINATION

October 2014 I The Chartered Accountant Student 19

(b) Many candidates wrote the first part ie..“Advantages of Continuous Audit Techniqueswell”, but not fair in the second part ie.. itsdisadvantages. Some candidates provided ageneralized answer.

(c) Only few candidates could discuss the“Methodology of a developing a BCP”. Hence,overall performance was not satisfactory.

Question 5.

(a) Several candidates attempted this question ingood manner.

(b) Several candidates attempted this questionsatisfactorily but some of the candidates namedthe “Categories of software Maintenance”properly but could not explain themappropriately.

(c) Only few candidates could answer it properly.Without explaining the specific section and sub-sections, many narrated the scenario and gavethe ultimate judgment whether service providercan get exemption or not.

Question 6.

(a) It was least attempted question and those whoattempted, performed below average in this part.

(b) Some candidates performed satisfactorily. Somecandidates discussed ERP System instead of TPS.

(c) Many candidates elaborated the types of“Insurance Policies” in general. Only fewcandidates understood the scenario and found thecorrect type of policy and discussed Third PartyInsurance.

Question 7.

(a) Several candidates answered satisfactorily.

(b) Several candidates answered satisfactorily.

(c) Many candidates elaborated about the generalideas of Risk Assessment.

(d) Many candidates did well.

(e) Only few candidates answered this sub-section.Even among those, only few wrote well.

PAPER – 7: DIRECT TAX LAWS

Question 1.

(b) For sub-part (ii), most of the candidates havewrongly answered that commercial property isexempt if the same is given on rent for more than300 days. They were not aware that the conditionof letting out for a minimum period of 300 daysis applicable only for exclusion of let-out

residential house property from the definition ofasset and not commercial property. As regardsother sub-parts, many of the candidates could notsubstantiate their answers with proper reasoning.

Question 2.

(a) Most of the candidates have not understood thetax treatment of foreign exchange loss actuallyincurred on payment to a supplier of raw material.Further, many of them have disallowed the entireexpenditure on professional charges and rent onwhich tax has not been deducted in respect ofservice tax component alone. Some of thecandidates have not provided for additionaldepreciation while some others have wronglyallowed deduction under section 32AC. A fewcandidates were not aware of the enhanced limitof ` 35,000 under section 40A(3) in relation totransport operator.

Question 3.

(a) Very few candidates have attempted this questionand those who have attempted showed lack ofknowledge of the transfer pricing provisions.

(b) This question was attempted by very fewcandidates. The candidates were not aware ofwhether Form 3CA can be revised, and if so, thegrounds on which it can be revised.

Question 4.

(b) Candidates were not aware that the TDSprovisions under section 194A are not applicableon payment of interest by the firm to its residentpartners. Further, many candidates were notaware that Indian branch of a foreign banktransacting the business of banking in India is abanking company to which the BankingRegulation Act, 1949 applies, and hence, TDSprovisions under section 194A are not applicableto income credited or paid to such bank.

(c) Many candidates have not mentioned that thedeeming fiction under section 50 (i.e., deemingcapital gain on transfer of depreciable assets tobe short-term capital gains) applies only withreference to sections 48 and 49, and the same isnot applicable for the purpose of claimingexemption of capital gains under section 54F.

(d) Candidates exhibited lack of knowledge of theprovisions relating to the Settlement Commission.They were not aware of the interpretation of theterm “Consideration” by the High Court to meanindependent examination of the evidence andmaterial brought on record before the SettlementCommission.

EXAMINATION

October 2014 I The Chartered Accountant Student20

Question 5.

(a) Most of the candidates were not aware that the“reason to believe” for issuing notice undersection 148 must be of the Assessing Officer andnot of the revenue audit team.

(b) Even though the candidates were aware of theremedies available for an assessee who isaggrieved by the orders mentioned thereunder,they were not aware of the prescribed time limitswithin which appeal has to be filed before therelevant appellate authority/High Court.

Question 6.

(a) Many of the candidates have calculateddepreciation for windmill @100% or 80%instead of 15%. Some candidates were confusedbetween the provisions of section 32AC andsection 32(1)(iia). They have wronglymentioned that both investment allowance andadditional depreciation are not applicable incase of firm. Further, candidates have notincluded the cost of imported machineryacquired but not installed during the previousyear for computing the written down value ofthe block of assets.

Question 7.

(a) Most of the candidates have not mentioned theconditions for allowing the deduction undersection 91. Further, the quantum of deductionunder section 80C and section 80D were notsupported with reasons.

(b) Some candidates were not aware of either theDelhi High Court ruling in CIT v. Japan AirlinesCo. Ltd. (2010) 325 ITR 298 or the Madras HighCourt ruling in CIT v. Singapore Airlines Ltd.(2013) 358 ITR 237. They have instead statedthat TDS provisions are not attracted sinceAirport Authority of India is a Governmentorganization.

PAPER – 8 : INDIRECT TAX LAWS

General comments

The overall performance of the candidates wasaverage. Majority of the candidates were not ascomfortable solving computational problems as otherquestions based on the provisions of law. They didnot provide the explanatory notes in thecomputational problems which carry marks. Manycandidates failed to attempt the complete paper asthey appear to have spent unduly extra time in solvingcomputational problems. Candidates should keeptheir answers brief and to the point.

Specific Comments

Question 1.

(a) Although different rates of excise duty were givenin the question with respect to clearances ofFactory A and Factory B, majority of thecandidates wrongly clubbed the assessable valueof dutiable clearances of both the factories.Consequently, they failed to arrive at the correctamount of excise duty payable in cash.

(b) Many candidates wrongly took entire credit ofadditional customs duty under section 3(1) of theCustoms Tariff Act, 1975 in the year of receipt ofcapital goods instead of 50%. Although thequestion provides the assessable value of product‘P’ (which is being captively consumed), somecandidates took the assessable value as 110% ofthis value on account of incorrect application ofrule 8 of the Central Excise Valuation Rules.

(c) While providing the reasoning for not chargingservice tax on a service, most of the candidatesgot confused among the negative list of servicesand exemptions from service tax.

(e) Only a very few candidates could correctlydetermine the relevant exchange rate and theperiod for which interest was due.

Question 2.

(c) Some candidates were not conversant with theinterest free period allowed for payment ofcustoms duty and maximum period of storageallowed for warehousing without warehousing.

Question 5.

(c) Most of the candidates were not aware of penalprovisions in customs law on attempt to exportgoods improperly.

Question 6.

(a) Some candidates provided general and vagueanswers instead of providing the procedure to befollowed by the Authority for Advance Rulingson receipt of application for advance ruling asrequired by the question.

(b) Most of the candidates correctly provided thetime-limit for issuance of show cause notice, butfailed to mention that in case service of the noticeis stayed by an order of a Court, the period ofsuch stay should be excluded in computing thesaid period.

Question 7.

(a) Many candidates wrongly stated the purpose offurnishing bonds instead of stating the types ofbonds presently in vogue.

EXAMINATION

October 2014 I The Chartered Accountant Student 21

EXAMINATION

PAPER – 1: ACCOUNTING

Specific Comments

Question 1.

The answers of the candidates reflected inadequateknowledge of the Accounting Standards.

(a) Most of the candidates could not ascertain thecorrect value of closing stock. Many of them werenot aware with the term “replacement cost” andtherefore, could not provide the correct total costof closing stock in situation (i) & (ii).

(b) Majority of the candidates could not calculate thecorrect amount of depreciation in the givensituations.

(c) Number of candidates could not give correctcalculations for the loss on disposal of officeequipments and depreciation on the newmachinery and also could not narrate the properadjustments for Fixed Assets in context of therelevant Accounting Standard.

(d) Most of the candidates were not able to computeamount of loss to be provided for and the amountto be charged to revenue in the current year asper AS 7. The extract of the profit and loss accountas required in the question was either not givenor was incorrect, if given by them.

Question 2.

(a) Many candidates failed to give the Statement ofProfit and Loss in the required format of RevisedSchedule VI (Now Schedule III to the CompaniesAct, 2013).

(b) Few candidates erred in computation of sales ratiowhich resulted in incorrect division of profits andexpenses between pre and post incorporationperiods.

Question 3.

Few candidates erred in (i) Calculation of depreciationand adjustment on sale and purchase of machinery;(ii) Treatment for tax provision in profit and lossaccount; (iii) Fixed assets shown in the Balance Sheetand depreciation thereon and (iv) Adjustment forpartly repaid loan and calculation of interest thereon.Consequently, they could not prepare the TradingAccount and the Balance Sheet, as required in thequestion.

Question 4.

A number of candidates erred in the (i) Calculation ofpurchase consideration; (ii) correct amount ofdebentures issued for discharge of Debentures ofSristhi Ltd.; (iii) Preparation of Equity shareholders’account, Realization account and Debentures accountin the books of Shrishti Ltd.; (iv) Journal entries fortaken over of Assets and Liabilitiesin the books of AnuLtd. Few among them passed journal entries in thebooks of Srishti Ltd. instead of Anu Ltd.

Question 5.

(a) The answer of the candidates exhibited their poorstudy on the topic of Hire Purchase and InstalmentSale. Majority of the candidates could not correctlycalculate the interest included in each instalmentand depreciation on Van and also erred inpreparation of Ganesh Enterprises Account.

(b) Few candidates gave single investment accountfor Bonds and Shares instead of two separateaccounts and therefore, got confused incalculations. Thus they were not able to give therequired investment accounts in the books ofSmart Investments.

Question 6.

Majority of candidates passed the entries regardingadjustment of goodwill and profit and loss onrevaluation through partners’ capital account insteadof partners’ current accounts. Few candidates madecash entries in partners’ capital accounts in spite ofthe fact that it was clearly stated in the question thatexisting partners will not bring cash for further capital.Few among them also erred in computation of newprofit sharing ratio.

Question 7.

(a) Some candidates erred in calculation of thecorrect subscription income for the year endingMarch 31, 2014 and failed to give requiredpresentation under appropriate heads in theExtract of Income and Expenditure account andBalance Sheet.

(b) Lack of conceptual clarity in the context of AS 3was observed among a section of candidates. Theywere not able to give correct advice on thetreatment of the given items in preparation of cashflow statement.

Examiners’ Comments on the Performance of theCandidates – Intermediate (IPC) Examination (IIPCE) –

May 2014

October 2014 I The Chartered Accountant Student22

(c) Some candidates described how to calculateaverage due date instead of giving definition ofaverage due date and also gave incorrect instancesfor when average due date can be used.

(d) Most of the candidates did not give the answerin accordance with AS 6 as asked in the question.

(e) Few candidates were not able to give the requiredjournal entries for Bonus Issue.

PAPER – 2: BUSINESS LAWS, ETHICS ANDCOMMUNICATION

Specific Comments

Question 1.

(a) In respect to the question related to ‘agency coupledwith interest’ covered under section 202 of theIndian Contract Act, 1872, most of the candidateshave not answered the question properly andinstead of stating that ‘the Principal cannot revokethe contract of agency when it is coupled withinterest’, they simply answered on the contract ofagency. Many candidates failed to explain therelevant provision of the Indian Contract Act, 1872.There were lack of conceptual clarity at large.

(b) With respect to question related to membershipof holding company given under section 42 ofthe Companies Act, 1956, large number ofcandidates have given wrong answer by statingthat a company has to surrender its shares whenit becomes a subsidiary to the holding company.

(d) This part of the question related to the ‘factors tomake oral communication effective’ wereanswered by majority of the Candidates weregeneral in nature. Number of students wereconfused and answered on the good listeningskills, and importance of oral communication.

Question 2.

(a) With respect to the part (i) of the question relatedto the Payment of Bonus Act, 1965 , due to lack ofknowledge of the provision stated under section3, large number of candidates have wrongly statedthat the employees of the unit incurring losses canclaim bonus on the ground that the unit incurringlosses is part of single establishment.

Whereas with respect to part (ii) of the questionon the Payment of Gratuity Act, 1972, somestudents failed to mention section 8 related tothe recovery of gratuity .

Question 3.

(a) This question pertains to the provisions related tothe joint liability covered under sections 42, 43 and44 of the Indian Contract Act, 1872. With respect to

the second part related to the practical problem,very few candidates have answered correctly. Somestudents have wrongly interpreted 1/5 of 1,50,000instead of 1/5th of 50,000 (share of the ‘F’).

Question 4.

(a) With respect to question related to ‘InformationMemorandum’ given under the Companies Act,1956, large number of candidates have beenconfused with information memorandum asmemorandum of association of a company.Further, the answers given by the candidates werevague and it indicates lack of adequatepreparation on the part of the candidate.

(c) With respect to the drafting of the notice, most ofthe candidates could not even give a properformat of the notice of the Board meeting. A largenumber of candidates have confused the boardmeeting with the Annual General Meeting orExtraordinary General Meeting of the companyand passed the resolutions in the given question.

Question 5.

(a) In respect to part (ii) of the question related tothe notice of dishonor under the NegotiableInstruments Act, 1881, large number ofcandidates have answered the question wronglyby stating that serving of notice of dishonour isnecessary under the Negotiable Instruments Act,1881. Many students without mentioning theprovisions, concluded the answer.

(b) With respect to the question related to the ‘ordinarymatters to be considered at AGM of a company’dealt under section 173(1)(a) of the Companies Act,1956, most of the candidates have answered thequestion wrongly by stating that the company hasto pass a special resolution for transacting specialbusiness. Some of the students answered thatordinary matters are day to day business.

Question 6.

(a) With reference to the question on the restrictionson the alteration of the Articles of Associationcovered under section 31 of the Companies Act,1956, most of the candidates have given theprocedure for alteration of Articles of Associationof a company instead of giving the limitations/restrictions in respect of such alterations underthe Companies Act, 1956. Some students confusedthe question with the memorandum of associationand stated name clause, object clause etc.

(b) With respect to the question on the drafting ofthe gift deed, most of the candidates have givengeneral answers regarding the gift deed insteadof furnishing the answer in the legal format.

EXAMINATION

October 2014 I The Chartered Accountant Student 23

Question 7.

(a) Pertaining to the question related to the transferof liability as per the section 17 B of theEmployees’ Provident Funds and MiscellaneousProvisions Act, 1952, most of the candidatescould not state that the liability of transferor andtransferee companies is joint and several, butthe liability of the transferee company is limitedupto the period of date of transfer and to theextent of net assets acquired by the transfereecompany.

(b) In relation to the Question on the Return ofallotment as covered section 75 of the companiesAct, 1956, most of candidates have wronglystated that return of allotment means the returnthat is required to be filed by a company whenit refunds the excess money received from thepublic. Students failed to explain the provisioncorrectly.

(c) With respect to the question related to theincorporation of company using the phrase“Electoral Trust’ under the Companies Act, 1956,most of the candidates have wrongly stated thatMr. Prabhu cannot incorporate a new companyusing the words ‘Electoral Trust’ as part of thename. Students were lacking the knowledge ofan amendment made vide General Circular No.12/2013, dated 28.6.13 by the MCA.

(e) With regards to the question on the threatsadversely affecting the fundamental principles ofethics, most of the candidates have given vagueanswers without stating clearly the threatsexisting in environment which adversely affectthe fundamental principles of ethics. Somestudents confused the questions with theessentials of oral communication, formal,informal communications etc.

PAPER – 3: COST ACCOUNTING AND FINANCIALMANAGEMENT

General Comments

Overall performance of the candidates was average.Being a problem oriented paper candidates shouldpractice as many numerical questions as possibleunder examination conditions by referring to the studymaterial, suggested answers, practice manual, etc.Performance revealed lack of in-depth knowledge andrigorous study. The candidates need to understandthe subjects conceptually and also polish up theirpresentation skills. Further, working notes to practicalproblems were either absent or not exhibited by someof the candidates. Some candidates attempteddifferent parts of the same question at random insteadof answering them consecutively.

Specific Comments

Question 1.

(a) This was a practical question relating to topic“Marginal Costing” which required calculationof break-even sales, margin of safety etc. Thisquestion was well attempted by examinees.However, few of them failed to calculate P/Vratio using change in profit to change in salesformula.

(b) This was a practical question relating to preparationof a memorandum reconciliation account. In thisquestion most of the examinees presented thesolution in statement format instead of preparingmemorandum account as per the requirement ofquestion. Moreover, many examinees could not dothe correct adjustment while preparing profitreconciliation. Overall performance of theexaminees in this question was below average.

(c) Majority of the candidates were able to prepareTrading and Profit & Loss Account on correct linesand in proper format. However, few candidatescalculated stock turnover ratio by taking salesinstead of cost of goods sold.

(d) Majority of the candidates were able to computecorrect figure of weighted average cost of capital(WACC). However, some candidates did not showproper steps in arriving at the final figure of WACC.

Question 2.

(a) This was a practical question from the topicinventory control of Material. Requirement of thisquestion was divided into three parts. In the firstand second part of the question, examinees wererequired to calculate E.O.Q and time intervalbetween the two orders. These first two parts werewell attempted by the examinees but in the thirdpart of the question requiring the examinees tocalculate percentage of discount to be negotiatedwith the supplier of goods if the company placesorder for the goods in quarterly basis. Unlike theperformance in first two parts, in this partperformance was not good as most of the examineescould not comprehend the requirement of this partof question correctly and committed mistake.

(b) Majority of the candidates were able to computeEarnings per share, Operating Leverage, FinancialLeverage and Combined Leverages on correctlines and in proper format. However, most of thecandidates did not comment on them.

Question 3.

(a) This was also a practical question from the topicProcess Costing where examinees were requiredto prepare Process account and profit & lossaccount for the processes. Examinees failed to

EXAMINATION

October 2014 I The Chartered Accountant Student24

apply the required concept and consequentlyfailed to calculate cost per unit of abnormal loss,units transferred and profit/ loss. In a nutshellperformance of the examinees was average in thisquestion.

(b) A large percentage of the candidates were unableto solve the question and make recommendationon correct lines. The candidates could not calculateannual cash inflows on correct lines and workedout rest of the problem accordingly and ended upwith incorrect answers. Commission figure wasnot considered by some candidates whilecomputing the cash inflow. Few candidates failedto work out the Profitability Index for the machine.

Question 4.

(a) This practical question was from the topicStandard Costing; examinees were required tocalculate overhead variances. In this question,performance of the examinees has revealed thelack of understanding of the concept of varianceanalysis on the part of the examinees.Performance of the examinees in this questionwas below the average level.

(b) Majority of the candidates have solved thisquestion correctly and with proper working notes.However some candidates failed to arrive atcorrect amount of funds from operations andtreatment of provision for tax.

Question 5.

(a) This was a theoretical question part requiringexaminees to distinguish between cost controland cost reduction. An average level ofperformance was observed in this question.

(b) This was also a theoretical question requiringexaminees to explain explicit costs andengineered costs. Poor performance was observedas most the examinees could not explain theconcept properly.

(c) A large percentage of candidates could not writeabout the emerging issues affecting the futurerole of Chief Financial Officer (CFO) on correctlines. They simply wrote about the traditionalrole of a CFO.

(d) Most of the candidates were not able toadequately express and explain the concepts ofGlobal Depository Receipts (GDRs) andAmerican Depository Receipts (ADRs). Theygave vague answers.

Question 6.

(a) This was a practical question on Contract costingrequiring the examinees to prepare contractaccount, account of contractee, profit/ loss

account and balance sheet. Most of the examineesfailed to present all the requirements of theproblem correctly and properly. This showed lackof practice of the problems on the part of theexaminees. Overall performance of the examineeswas average in this question.

(b) This numerical problem relating to estimation ofworking capital on cash cost basis was wellattempted by most of the candidates. Only ahandful of the candidates could not compute thefigures of Work-in-Process, debtors and provisionfor contingencies correctly.

Question 7.

(a) This was a theoretical question requiringexaminees to distinguish between the allocationand apportionment of cost. Most of the examineescould not answer this question correctly.

(b) This was a theoretical question requiringexaminees to describe the salient features ofbudget manual. Most of the examinees instead ofgiving answer for budget manual written thesalient features of budget. This shows howexaminees do not read the question carefully.

(c) Majority of the candidates were not able toexplain the concepts of Concentration bankingand Lock Box System correctly.

(d) A large percentage of the candidates have writtenabout the concept of Debt Service Coverage Ratio(DSCR). However, most of them did not mentionthe formula correctly.

(e) (i) Most of the candidates were unable to writethe names of the financial instrumentsrelated to international financial market.

(ii) This was also a theoretical question requiringcandidates to state the cost unit of fourindustries. This question was well attemptedby the examinees.

PAPER – 4 : TAXATION

General Comments

Although the overall performance of the candidateswas satisfactory, most of them lacked conceptualclarity. Despite clear instructions, many candidatesdid not provide explanatory notes in thecomputational problems.

Specific Comments

Question 1.

(A) Some of the common mistakes/deficienciesnoticed are –

(i) Lack of knowledge that facility of laptopprovided by the employer to Mr. Kamal is an

EXAMINATION

October 2014 I The Chartered Accountant Student 25

exempt perquisite irrespective of its use forpersonal or official purpose or both.

(ii) Lack of knowledge of the provisions ofsection 56(2)(vii) relating to taxability of giftsunder the head “Income from other sources”.

(iii) Deduction under section 80C wronglyallowed in respect of tax saver deposit withNationalised Bank in the name of his marriedson, though it is available only if the depositis in the name of the assessee himself.

(iv) Provision of deduction under section 80C inrespect of the entire premium of ` 25,000paid towards the life insurance policy takenfor his married daughter, without consideringthat the same has to be restricted to 10% ofactual capital sum assured i.e., ` 20,000,being 10% of ` 2,00,000.

(v) Not providing for exemption of ̀ 1,500 undersection 10(32), while including the incomeof minor son in the hands of Mr. Kamal.

(B) Knowledge of the candidates pertaining to negativelist of services was generally not apposite.Resultantly, majority of the candidates wronglyconsidered supply of farm labour and testing ofsoil of farm land as chargeable to service tax.

(C) Many candidates were not aware that under VAT,one to one correlation between inputs and outputsis not required. They wrongly established suchcorrelation while answering the question.

Question 2.

(A) Most of the candidates showed lack of knowledgeof section 32AC. Majority of the candidates werenot able to arrive at the correct written down valueas on 01.04.2014, which is necessary forcomputing depreciation for A.Y.2015-16. This isbecause they were not aware that additionaldepreciation has to be deducted whereasinvestment allowance under section 32AC is notto be deducted while computing the written downvalue. Consequently, their computation ofdepreciation for the A.Y 2015-16 was not correct.

(B) Most of the candidates did not gross up theamount of professional fee received net of TDS.Consequently, they failed to correctly solve theproblem.

Question 3.

(A) Most of the candidates have allowed exemptionto Ms. Rakhi in respect of reimbursement ofmedical expenses on treatment of her mother-inlaw dependent on her, within the overall limit of` 15,000, whereas mother-in law does not fallwithin the definition of “family”, even though she

is dependent on Ms. Rakhi. Many of thecandidates were not aware of the exemption andtaxability provisions pertaining to medicaltreatment expenses of minor son abroad andconsequent expenditure on travel and stay abroadincurred by the employer.

(C) Few candidates mistakenly wrote the provisionsrelating to registration under VAT instead ofstating the circumstances under which VATregistration can be cancelled.

Question 4.

(A) Many of the candidates have answered thequestion without concluding which house has tobe treated as self occupied and which one asdeemed to be let out. This reflects the lack ofunderstanding of the requirement of the question.Further, some of the candidates have alloweddeduction of ` 55,000 instead of ` 30,000 forinterest on money borrowed for repair of houseproperty II, where the same is treated as selfoccupied property. Some of the candidates havewrongly allowed deduction for municipal taxesfor house property I, even though it was not paidduring the previous year.

(B) Although many candidates gave the correctexample of bundled services, they could notdefine the term ‘bundled service’ properly.

(C) A few candidates provided vague answers insteadof enumerating the deficiencies of VAT systemin India.

Question 5.

(A) Many of the candidates were not aware that whiledetermining the tax on long term capital gains,the unexhausted basic exemption limit of `2,00,000 can be reduced. They were also notaware of the rebate of ` 2,000 available undersection 87A from tax payable, where the totalincome does not exceed ` 5,00,000. Hence, theirtax computation was incorrect.

(B) and (C) Most of the candidates correctly arrivedat the conclusion as to whether the statement istrue or false. However, majority of them couldnot secure full marks as they failed to provideproper reasoning for the conclusion.

Question 6.

(A) Candidates exhibited lack of knowledge of theprovisions of set-off and carry forward of losses.Further, they could not substantiate theiranswers with proper reasoning for carry forwardof losses.

(B) Majority of the candidates were not aware thatdeduction under section 80CCG is available only

EXAMINATION

October 2014 I The Chartered Accountant Student26

if the gross total income does not exceed ` 12lakhs. They were also not aware that thededuction is restricted to 50% of actualinvestment or 50% of ` 50,000, whichever islower, for resident individual-assessees whosegross total income does not exceed ` 12 lakhs.

(C) Many candidates correctly concluded that servicetax shall be charged on the expenditure incurredby Mr. X in course of provision of taxable services.However, their answer was not supported withcorrect reasoning for the same.

Question 7.

(A) In part (1), candidates were not aware of theprovisions of section 194IA. They were also notaware that there is no threshold limit fordeduction of tax at source under section 194J inrespect of directors sitting fees. In part (2), manyof the candidates have not noticed that the returnfiled by Mr. Vineet is a belated return and hence,cannot be revised. Further, they were not awarethat in the absence of Karta of the HUF, the returncan only be signed by any other adult member ofthe HUF, whether male or female. In part (3), somecandidates have not mentioned that advance taxliability arises only where such tax payable is `10,000 or more. Further, they have also notmentioned that senior citizens, who do not haveany income chargeable under the head “profitsand gains from business or profession, are notrequired to pay advance tax.

PAPER – 5: ADVANCED ACCOUNTING

Specific Comments

Question 1.

The answers of the candidates reflected inadequateknowledge of the Accounting Standards.

(a) Few candidates were not able to give the requiredanswer in line with provisions of AS 4“Contingencies and Events occurring after thebalance sheet”.

(b) Most of the candidates could not explain thenature of assets and failed to show the requiredtreatment of interest as per AS 16 “BorrowingCosts”.

(c) Many of them were not well versed with theprovisions of AS 19 “Leases” and therefore couldnot answer the question.

(d) Few among them were not able to give the restatedbasic earnings per share for the rights issue, inline with provisions of AS 20 “Earnings per share”.

Question 2.

Majority candidates failed to prepare schedule of cash

payments amongst the partners by Highest RelativeCapital Method.

Question 3.

(a) Most of the candidates could not draw theDebentures account and Debenture RedemptionSinking Fund Account. They also could not givethe necessary working notes.

(b) Many candidates got confused regarding thecondition given in the question that the benefitof firm underwriting is not given to the individualunderwriter and gave calculations on the basisof alternative assumption. Consequently, theyfailed to give the correct liability of eachunderwriter.

Question 4.

Few candidates did not consider Debentures whilecalculating purchase consideration. Consequently,they did not arrive at the basis of issue of shares inAmalgamated Company to the shareholders of theexisting companies and failed to draw up the BalanceSheet of the Amalgamated Company as at 1st April,2014, the date of completion of amalgamation

Question 5.

(b) Many candidates were not able to calculatepremium/Claims for Direct and Indirect Businessseparately in the books of the insurance company.

Question 6.

(a) Very few candidates gave correct journal entriesin the books of independent branch to rectify/adjust the items given in the question.

(b) Some of the candidates though calculatedunrealized profit correctly but failed to co-relateit with the concerned department. Few amongthem failed to give the correct adjustment forManager’s commission.

Question 7.

(a) Few candidates were not able to calculateprovision for unsecured portion correctly.

(b) Many candidates could not give correctclassification of the given items under theappropriate heading of the balance sheet as perSchedule VI of the Companies Act (Now ScheduleIII to the Companies Act, 2013).

(c) Few candidates wrongly answered the questionon the basis of receipt of grant instead of refund.

(d) Most candidates failed to list the criteria forcalculation of refund amount.

(e) Majority candidates were able to give theconditions to be fulfilled by a joint stock companyto buy back its own equity shares.

EXAMINATION

October 2014 I The Chartered Accountant Student 27

PAPER – 6: AUDITING AND ASSURANCE

Specific Comments

Question 1.

(a) Majority of the candidates have no clarity about“Statements” and “Guidance Notes”. They havementioned mandatory or recommendatory to both.

(c) Some of the candidates wrongly related thepayment of interest out of capital duringconstruction with Borrowing Cost.

(d) Candidates showed lack of understanding of thetopic and mentioned irrelevant points viz,Original Audit Report getting modified, varioustype of reports etc in place of Modified Reportand disclosure pattern of an Emphasis of Matterparagraph.

Question 2.

(iv) Many candidates failed to explain all threeconditions relating to exemption from CAROcorrectly.

(ix) Candidates have no clarity about Section 293Aand simply mentioned as Government companycannot donate, unaware of the initial 3 yearsrestriction.

Question 3.

(c) Candidates could not extend intricately to theCourt Notifications to be checked, CreditManagers aspect or the acknowledgement receiptsissued to the debtors.

(d) Majority of the candidates commented upon mereseparation part of the ensuing period, withoutestablishing that it hits Purchases or Sales andtheir elaboration.

Question 4.

(b) Many candidates explained financial and otherconditions instead of operating conditions.

(c) Most of the candidates explained all the qualitiesof the auditor like skill, competence,confidentiality etc. and failed to answer correctmeaning of professional skepticism.

Question 5.

(a) Many Candidates misunderstood the questionwhich was about precautions in adoption textchecking technique and mentioned the generalconsiderations in framing a system of Internalcheck.

(b) Most of the candidates explained all the pointsof Government audit or attempted in a generalmanner as an Audit Programme under normalcourse of Audit.

Question 6.

(a) Instead of call for Comparative Analysis whetherbetween two periods, actual with budgeted, DebtorsRatio which again need two factors, candidateswrongly mentioned as Confirmation from debtors,their scheduling under Secured/Unsecured, AgeingSchedule more than 6 months etc.

Question 7.

(b) Most of the candidates mentioned the issue w.r.t.CLB and not Central Government which happensto be the right authority.

(c) Technical advantages as elaborated weremissing, rather candidates wrote about how totake sample, its representation, time saving, etcerroneously.

(d) Candidates attempted in a very general mannerrather than commenting on the intricate part ofthe audit through computer.

(e) Rather than mentioning the facts as specificallyrequired, candidates went ahead quoting aboutManagement’s Responsibility, Auditors Opinionetc. which had no call in the answer.

PAPER – 7: INFORMATION TECHNOLOGY ANDSTRATEGIC MANAGEMENT

SECTION – A: INFORMATION TECHNOLOGY

Specific Comments

Question 1.

Being compulsory question, almost all the examineesanswered this question.

(a) Most of the examinees could name devices usingdevice drivers but could not explain the conceptof ‘Device Drivers’.

(b) Though some examinees got confused between‘Bit’ and ‘Byte’; many of the examinees respondedfairly well in this part.

(c) Many examinees could not differentiate between‘Backup’ and ‘Recovery’ and performance waspoor in this part.

(d) The function of the ‘Transport Layer in TCP/IP’was not majorly understood by the examinees.‘Internet Layer’ was confused with InternetBrowser.

(e) Most of the examinees provided the literalmeaning of ‘Integrity’ and ‘Authenticity’ and notwith reference to e-Commerce.

Question 2.

(a) This is a question on describing the ‘Benefits ofDatabase Management Solution’, where most of

EXAMINATION

October 2014 I The Chartered Accountant Student28

the examinees answered fairly well, but someexaminees answered generally and insteadexplained about the ‘DBMS’.

(b) This question is on features of Operating Systems.Many examinees could attempt fairly well in‘Multiprogramming, Multiprocessing, andMultitasking’; but most of the examinees were notable to explain ‘Multithreading’.

Question 3.

(a) Most of the examinees could explain about‘Threat’ but could not explain the three types of‘Network Security Threat’.

(b) Most of the examinees could explain about‘Distributed Database’ but gave a generalizedanswer while explaining the ‘Methodologies ofdistribution of a database’.

Question 4.

(a) & (b) Most of the examinees did not attempt thisquestion based on ‘Application Servers’ and ‘3-tier architecture’.

Question 5.

(a) In this question, only few examinees couldanswer satisfactorily on ‘SDSL connection’ and‘Satellite connection’.

(b) This question on explaining ‘Step by step onlinetransaction processing in an e commerceenvironment’ was attempted by almost all theexaminees and their performance was satisfactory.

Question 6.

This is the flowchart based question. Most of theexaminees did fairly well, however, few examineesmade mistakes in computing Service Tax and TotalAmount to be paid.

Question 7.

In this question, short notes on any four of ‘Firewall’,‘Data mining’, ‘VoIP’, ‘Object Oriented Programming’and ‘Front End Communication Processors’ wererequired to write.

(a) Many examinees had the conceptual clarity about‘Firewall’ but could not write to-the-point answer.

(b) Most examinees confused the term ‘Data Mining’with ‘Database Searching’ and thus could notperform well in this part.

(c) Most of the examinees did not attempt this partand those who attempted did not have theknowledge about it.

(d) Most of the examinees were not aware of ‘ObjectOriented Programming’ and could not attemptthis part properly.

(e) Most of the examinees confused the term ‘’FrontEnd Communication Processors’ withMultiplexers.

SECTION – B: STRATEGIC MANAGEMENT

General Comments

Although some of the candidates were able to writegood answers, the performance in general was foundlacking in terms of conceptual clarity, language andpresentation. Answers in many cases were sketchyand unplanned. Some of the examinees have alsowasted their time by writing more than what wasrequired. They should avoid unnecessary lengthytext.

It was also felt that the students need to put-in moreefforts to improve the understanding of the subject.Apart from the subject matter they also need to workon the vocabulary, language and presentation of theanswers. Performance can be improved if the studentsare able to develop habit of regular reading andwriting.

Special Comments

Question 8.

(a) The performance of most of the candidates wasbelow average. Some candidates have confusedthe mission statement with the vision statementof a company.

(b) Many candidates have vaguely explained thefactors without highlighting those that areinfluencing the competence of employees.

(c) Substantial number of candidates have explainedthe factors of macro environment in generalterms. They were not able to bring out the typesof information required to determine externalopportunities and threats relating to macroenvironment.

(d) The performance was average as examinees haveeither given the meaning or the characteristics ofcorporate strategy instead of what the corporatestrategy ensures.

(e) A number of candidates were not able to writethat corporate culture has negative connotationsas well.

Question 9.

(a) In most of the cases candidates understood thepart (i) related to concept of stability strategy.However, in part (ii) the performance was averageas examinees were not able to support theiranswers with appropriate reasoning.

(b) The performance was below the expected levelas many examinees lacked clarity on the stagesin strategic management process.

EXAMINATION

October 2014 I The Chartered Accountant Student 29

Question 10.

The answers, in general, were good as candidatesunderstood the concept of business processreengineering.

Question 11.

(a) Many examinees have written the traits of a goodleader instead of the leadership role played bythem in pushing for good strategic execution.Accordingly, the performance was belowaverage.

(b) The answers were found to be lacking insubstance. Many examinees wrote aboutfunctional strategy instead of functional structure.

Question 12.

(a) A few candidates were not able to explain thatthe organisations focus on multiple objectives.Otherwise the performance was good asthe answer written were mostly on expectedlines.

(b) In a large number of cases candidates haveexplained the meaning of SWOT analysis insteadof its significance.

Question 13.

(a) The performance was good as the answers werebased on concepts with sound reasoning.

(b) In a majority of cases answers lacked conceptualknowledge. It appeared that many candidateshave avoided learning these concepts.

Question 14.

(a) In a few cases examinees fumbled and havegiven wrong answers. Some have also explainedthe product life cycle instead of experience curvereflecting their confusion and lack of knowledge.

(b) Candidates, in general, understood the concept ofstrategic business units and were able to explainits characteristics. However, understanding ofproduction system was found to be below theexpected level.

EXAMINATION

ANNOUNCEMENT Availability of Subject-wise compilation of SuggestedAnswers of Intermediate (IPC) &

Final Examinations.

We are pleased to inform that the Board of Studies has brought out the following subject-wiseCompilation of Suggested Answers of past 10 years PCC/IPCC/Intermediate (IPC) and Final Examinations.These compilations will serve as a useful and handy reference guide for the students while preparing fortheir forthcoming examinations.

Intermediate (IPC) Course Final Course

Paper-1 Accounting Paper-1 Financial Reporting

Paper-3 Part-I: Cost Accounting Paper-2 Strategic Financial Management

Paper-3 Part-II: Financial Management Paper-5 Advanced Management Accounting

Paper-5 Advanced Accounting Paper-6 Information Systems Control and Audit

Paper-6 Audit and Assurance

Paper-7 Part-I: Information Technology

Paper-7 Part-II: Strategic Management

The aforesaid Compilations are hosted on the Institute’s website as well as their printed copies are alsoavailable at Sale Counters of Regional Offices and Branches.

Director, Board of Studies

ANNOUNCEMENT Final Paper 1: ‘Financial Reporting’ Study Material andPractice Manual

Final students may note that Chapter 5 “Consolidated Financial Statements of the GroupCompanies” of the Study Material and Practice Manual, hosted on the website, has been modified toincorporate the Companies (Specification of Definitions Details) Rules, 2014 and further updated to reflectthe latest provisions. The updated chapter has been hosted on the institute’s website. Students may referto the link www.icai.org>>Students>>BoS Knowledge Portal>>Final Course>>Paper-1: FinancialReporting>>Study Material, Practice Manual>>Chapter 5: Consolidated Financial Statements of GroupCompanies for the same.

Director, Board of Studies

October 2014 I The Chartered Accountant Student30

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, PART III,SECTION 4, DATED 29th AUGUST, 2014]

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

New Delhi, the 29th August, 2014

NOTIFICATION

No.1-CA(7)/166/2014.- In exercise of the powers conferred by sub-section (1) of section 21 of the CharteredAccountants Act, 1949 (38 of 1949), and in supersession of the Notification No. 1-CA(7)/121/2008 Dated 19TH

August, 2008, the Council of the Institute of Chartered Accountants of India hereby designates Shri C.S. Ravi,Joint Secretary of the Institute as the Director (Discipline) to head the Disciplinary Directorate and for makinginvestigations in respect of any information or complaint received by it. He shall perform such functions asare assigned to him under the said Act and the rules and regulations framed thereunder.

Sd/-T. Karthikeyan

Secretary

Corrigendum

Intermediate (IPC) CourseCorrigendum to Practice Manual of Part-II: Indirect Taxes of Paper 4: Taxation

Students are advised to ignore Question nos. 14 and 15 of Chapter-4: Valuation of Taxable Service given atpage nos. 4.13-4.15 in the printed copy of Practice Manual of Part-II: Indirect Taxes of Paper 4: Taxation[April and July 2014 (Reprint) edition].

Director, Board of Studies

EXAMINATION

ANNOUNCEMENT Availability of Suggested Answers of Intermediate(IPC) & Final Examinations of May, 2014.

We are pleased to inform that the Suggested Answers for Intermediate (IPC) and Final Examinationsheld in May 2014 are hosted on the Institute’s website as well as their printed copies are also available atSale Counters of Regional Offices and Branches.

Students are advised to benefit from the above publication while preparing for their forthcomingexaminations.

Director, Board of Studies

ANNOUNCEMENT Attention: Intermediate (IPC) Course students –November 2014 Examination

Paper 2: Business Laws, Ethics and Communication

Non applicability of Sections 407 to 414 of the Companies Act 2013, for the Intermediate (IPC) Examinationto be held in November 2014

It is hereby informed that Sections 407 to 414 of the Companies Act, 2013 relating to NCLT and NCLAT(notified on 12th September, 2013) formed part of the syllabus of the abovementioned paper as applicablefor November, 2014 examinations. Consequently, the said sections were also incorporated in, Para 1.19 ofUnit 1 from Page Nos. 22 to 26 of the Supplementary Study paper prepared for the said examinations.

However, keeping in view the fact that the NCLT and NCLAT are not in operation till date, students are herebyinformed that the notified Sections 407 to 414 of the Companies Act, 2013 are not applicable for Intermediate(IPC) examination, to be held in November 2014 (Paper 2: Business Laws, Ethics and Communication).

Director, Board of Studies

October 2014 I The Chartered Accountant Student 31

ANNOUNCEMENT On Line Articles Placement Portal for selection ofArticled Assistants by CA Firms/Individual

Chartered Accountants in practice

The Board of Studies of the ICAI has been providing Optional Online Placement facility for selectionof Articled Assistants by CA Firms/Individual Chartered Accountants in practice through its ArticlesPlacement Portal on pan India basis. It provides a platform to the firms of Chartered Accountants/ IndividualChartered Accountants in practice having vacancies for Articled Assistants to shortlist eligible studentsfor selection of articled assistants, and call them for Interview at their offices, as per date and time convenientto them. The eligible candidates who have passed Group-I or both Groups of the Intermediate (IntegratedProfessional Competence) Course or have been admitted under the Direct Entry Scheme and are willing tojoin articled training can register themselves on the portal. The services to the Online Placement Portal areavailable free of charge for both CA Firms/Individual Chartered Accountants in practice and students andthey can register themselves online through the Portal at http://bosapp.icai.org.

The services on the Portal would be available for two months, twice a year from the date of registration bythe firms/ Individual Chartered Accountants in practice. Similarly the biodata of a student will also beavailable on the portal for a maximum period of 2 months from student’s registration. The candidatesshortlisted by CA Firms/ Individual Chartered Accountants in practice would be informed by e-mailsthrough the Portal, to appear for interview at their respective Offices, at the designated date and time.

Detailed guidelines are available at the institutes’ website www.icai.org and on the Portal. In case of anyfurther clarification, please contact the Board of Studies, ICAI Bhawan, A-29, Sector-62, Noida-201309,Tel. No. 0120-3045930/931; eMail: bosapp@icai.org.

CA. M. Devaraja ReddyChairman, Board of Studies

ANNOUNCEMENT Intermediate (IPC) Course Students: November 2014Examination

Applicable sections of the Companies Act, 2013- for Group II: Paper 6 Auditing &Assurance Intermediate (IPC) November 2014 Examination,

Students may note that given below is the list of sections of the Companies Act, 2013 (notified on 12th Sept,2013) which are applicable for Group II: Paper 6 Auditing & Assurance subject Intermediate (IPC) LevelNovember 2014 Examination.

S. No. Section No of the Description of SectionCompanies Act, 2013

1 39 Allotment of Securities by Company

2 51 Payment of Dividend in proportion to amount paid-up

3 70 Prohibition for buy back in certain circumstances

4 133 Central Government to Prescribe Accounting Standards

5 180 Restrictions on Powers of Board

6 181 Company to contribute to bona fide and Charitable Funds

7 182 Prohibitions and restrictions regarding political contribution

8 183 Power of board and other persons to make contribution toNational Defence Fund etc.

These sections are also discussed for the convenience of the students as “Academic Update in view ofLegislative Amendments in the Companies Act, 2013” in Group II: Paper 6 Auditing and AssuranceRevisionary Test Paper for November 2014 Examination at following link:

http://220.227.161.86/34566rtp_nov14_ipcc-6.pdf

Director, Board of Studies

ANNOUNCEMENT

October 2014 I The Chartered Accountant Student32

ANNOUNCEMENT Online Mentoring on ICAI Cloud Campus -http://cloudcampus.icai.org

The ICAI Cloud Campus launched by Hon’ble Finance Minister on CA Day – July 1, 2014, enablesStudents to learn anytime and from anywhere using e-Learning, Audio Lectures, Video Lectures and OnlineMentoring. Students can even learn through Mobile Enabled e-Learning facility on the Students LearningManagement System (LMS) on their Mobile Phones/Smart Phones/Tablets. Online Mentoring is one of themajor value added features on the Cloud Campus. The schedule of online mentoring sessions from 3.00p.m. to 4.00 p.m. is as follows:

Online Mentoring Schedule

Date Course Topic Faculty

Oct 7 Final Paper 6: Information System Control and Audit Chapter-5 Acquisition, Ms Sukriti AroraDevelopment and Implementation of Information Systems Board of Studies

Oct 14 IIPC Paper 1: Accounting Chapter -14 Issues in Partnership Accounts CA. Seema GuptaBoard of Studies

Oct 28 Final Paper 1: Financial Reporting Chapter-5 Consolidated Financial Statement CA. Shilpa AgrawalBoard of Studies

Nov 5 CPT Section A: Fundamentals of Accounting Chapter-8 Partnership Accounts CA. Seema GuptaBoard of Studies

Nov 11 CPT Section C: General Economics Section-I Micro Economics Price Ms. Prem J BhutaniDetermination in Different Markets Board of Studies

Nov 18 CPT Section D: Quantitative Aptitude Part-2 Statistics Chapter-12 Dr. N V RaviCorrelation and Regression Board of Studies

Nov 25 CPT Section B: Mercantile Laws Chapter-1: Indian Contract Act,1872 Ms. Nisha Gupta- An Overview Board of Studies

Students are advised to make register on the ICAI Cloud Campus for the Online Mentoring Sessions andprovide specific questions/queries that they need to be discussed, and benefit from this online facility.Links to access the aforementioned webcasts are also available on the http://cloudcampus.icai.org underOnline Mentoring.

Director, Board of Studies

ANNOUNCEMENT

CROSSWORD

September, 2014

Solution

1C 2A P I T 3A 4L 5G 6A I 7N 8S9A L T 10S T O O L P O11P P 12F 13C O A L O S

14H 15I R 16E 17P L O18A M E N 19D 20C R P 21F

22P E D I 23B A L T I24C O 25S W O T F

26T O U 27T T 28O I 29L T30H O N C 31H O 32K O O K Y33R E D H E R 34R I N G

E D 35T E N 36O 37D E

E 38T W O 39D G I 40O N

October 2014 I The Chartered Accountant Student 33

National Convention for CA Students – Jalgaon

Dates: 12th & 13th December 2014

Venue: Senate Hall, North Maharashtra University, Jalgaon

Organized by: Board of Studies, ICAI

Hosted by: Jalgaon Branch of WIRC of ICAI & Jalgaon Branch of WICASA

Theme: Dedicated to Bridge Talent & Opportunity

DAY-1

11.00 am to 01.00 pm Technical Session 1 – Companies Act 2013

(i) Inter-corporate Loan, Loan to Directors, Acceptance of Deposits (Chapter V &

Sec. 185 to 187), (ii) One Person Company, (iii) Auditors Responsibilities in Case

of fraud by Corporate

02.00 pm to 03.00 pm Special Session

03.00 pm to 05.00 pm Technical Session 2 – Service Tax

(i) Reverse Charge & Partial Reverse Charge, (ii) Negative List under Service Tax,

(iii) Construction Industry including Works Contract

DAY-2

09.30 am to 11.30 am Technical Session 3 – Information Technology

(i) Excelling in Excel- Financial Analysis, (ii) Social Networking Websites- New

Avenue to Expand the Business?, (iii) Cloud Computing- Opportunities and

Challenges

11.30 am to 01.00 pm Spiritual/Motivational Session

02.00 pm to 04.00 pm Technical Session 4 – Direct Tax

(i) Scrutiny Assessment, (ii) Valuation Under Wealth Tax, (iii) Domestic Transfer

Pricing

The Inaugural Session will be on Day-1 and the Valedictory Session on Day-2

Students are requested to register for the Conference at the earliest as per the following details:-

Registration fees ` 400/- per student Accommodation @ `1000/- per student for 2 Days.

Payment Mode Cash/DD/Cheque to be drawn in favour of “Jalgaon Branch of WIRC of ICAI” payable at

Jalgaon.

For registration queries contact:-

Jalgaon Branch of WIRC of ICAI, ICAI Bhawan, Plot no.10, Gajanan Colony, Ring Road, Jalgaon

Phone: 0257-2224305,2232213 & Email - jalgaon@icai.org & Website- www.jalgaon-icai.org

Students are invited to contribute papers for presentation (1500 to 2000 words) for topics in Technical Sessions

and submit for approval a soft copy of the Paper at jalgaon@icai.org by 31st October 2014 and a hard copy of

the same along with Student’s Photograph (with his/her name on the back of the photograph), Registration

Number, Course pursuing, complete postal address, Mobile, Landline numbers and e-mail ID be also sent to

the Branch. Paper Presenters selected for presentation of paper at the Conference are exempted from payment

of registration fees. All selected outstation Paper Presenters will be reimbursed to and fro AC 3 tier railway

fare by the shortest route on production of necessary proofs (both ways ticket). To & fro arrangements will be

made by Jalgaon branch for the students staying in Jalgaon. Interested students may register for cultural

programme before 15th November 2014 at the Branch.

CA. M. Devaraja Reddy CA. Prafulla Premsukh Chhajed CA. Jayesh R Lalwani CA. Kaushal K. Mundada

Conclave Chairman & Conclave Co-Chairman & Chairman Vice Chairman

Chairman Vice-Chairman Jalgaon Branch of WIRC Jalgaon Branch of WIRC &

Board of Studies, ICAI Board of Studies, ICAI Chairman, Jalgaon Branch of

WICASA, 09823116005

ANNOUNCEMENT

October 2014 I The Chartered Accountant Student34

CROSSWORD

ACROSS1. As per Schedule III to the Companies Act, 2013, a

reserve specifically represented by earmarkedinvestments.

5. A recently constituted committee by ICAI councilto look into the CA course curriculum.

9. The foremost investigating police agency in Indiaunder the jurisdiction of the Government of India.

10. An entry in account.11. As per the Companies Act, 2013 _____ company

is exempt from inclusion of cash flow statementas a part of its financial statements?

12. To __________ one’s wagon means treat someonevengefully.

13. A formal expression of opinion or choice, eitherpositive or negative, made by an individual orbody of individuals.

14. _______ Friday’s is an American restaurant chainfocusing on casual dining.

17. A formal organization composed of parents,teachers and staff that is intended to facilitateparental participation in a school.

18. A telecommunication medium that is used fortransmitting and receiving moving images andsound.

20. Exemption under section 54 and 54F is availablefor investment in ___________ residential housesituated in India.

21. ____- vera : A widely used plant in the cosmeticsbeing marketed as variously having rejuvenating,healing, or soothing properties.

23. Pledging assets against a loan.25. A point of intersection.26. An operating system used in computers in 80s and

90s: MS- ____.27. A student of Chartered Accountancy as to do 100

hours of ______ training before starting articledtraining.

28. Twisted or crooked.30. Start31. COBIT 5 framework describes ________ categories

of enablers.34. Lead - ___ factors are important in market research.36. An intergovernmental military alliance based on

the North Atlantic Treaty which was signed in 1949.37. ________ can be appointed as an auditor.38. Plural of I.

DOWN

1. Method of inventory valuation.

2. Now known as Axis bank.

3. Subsequent

4. The computational process of discovering patterns

in large data sets.

6. A French phrase requesting for a response from

the invited people.

7. Text-based graphical substitutes for body language

over the Internet are known as _______.

8. Informal Bye.

9. 150 in roman numerals.

15. The part of value of a business that is based on

good customer relations, high employee morale

and other factors.

16. Statutory auditor appointed shall not render the

services of _______ audit.

19. Which types of errors are detected by assemblers?

21. _______________ is used to indicate a location or

place.

22. 51 in roman numerals.

24. A political and economic organization of ten

countries located in Southeast Asia.

29. Informal term for wager.

32. A multi-point destination based system of

taxation, with tax being levied on value addition

at each stage of transaction in the production/

distribution chain.

33. Consolidation of Financial Statement is _______

mandatory as per Section 129 of the Companies

Act, 2013 for the companies having one or more

subsidiaries.

1 2 3 4 5 6 7 8 9

10 11

12 13

14 15 16 17 18

19 20 21 22

23 24

25 26

27 28 29

30 31 32 33

34 35 36

37 38

October 2014 I The Chartered Accountant Student 35

GLIMPSES

ICAI Vice-President, CA. Manoj Fadnis and Chief of Staff(Southern Army Command)Lt.Gen. K. Surendranath jointlyhands over certificate to a newly qualified member at theConvocation ceremony at Pune while Chairman, Board ofStudies, , CA. M. Devaraja Reddy, Vice Chairman, Board ofStudies, CA. Prafulla Chhajed along with Central Councilmembers CA. Tarun Jamnadas Ghia, CA. Jay Chhaira andCA. S. Zaware share the dais.

ICAI President CA. K. Raghu inaugurates the InformationTechnology Lab at Sirsa Branch in the presence of Vice-President, CA. Manoj Fadnis, Chairman, Board of Studies,CA. M.Devaraja Reddy and Central Council member CA.Sanjiv Chaudhary.

ICAI President CA. K. Raghu hands over certificate to a newlyqualified member at the Convocation ceremony atAhmedabad while ICAI Vice-President, CA. Manoj Fadnis,Chairman, Board of Studies, CA. M. Devaraja Reddy, ViceChairman, Board of Studies, CA. Prafulla Chhajed along withCentral Council members CA.Dhinal Shah, CA. TarunJamnadas Ghia and CA. Jay Chhaira share the dais.

ICAI President CA. K. Raghu, Vice-President, CA. ManojFadnis, and Central Council members CA.Sanjay Agarwal,CA. Sanjiv Chaudhary and CA. Vijay Gupta along withnewly-qualified members at the Convocation ceremony atChandigarh.

ICAI President CA. K. Raghu hands over certificate to a newly-qualified member at the Convocation ceremony at Delhiwhile ICAI Vice-President, CA. Manoj Fadnis, along withCentral Council CA.Sanjay Agarwal, CA. Sanjiv Chaudhary,CA. Charanjot Singh Nanda and CA. Vijay Gupta share thedais.

ICAI President CA. K. Raghu hands over certificate to a newlyqualified member at the Convocation ceremony at Mumbaiwhile ICAI Vice-President, CA. Manoj Fadnis, Vice Chairman,Board of Studies, CA. Prafulla Chhajed along with CentralCouncil members CA. Tarun Jamnadas Ghia, CA. JayChhaira and CA. Nilesh Vikamsey share the dais.

REGISTERED: DL- (C)-01/1280/2012-2014LICENSED TO POST WITHOUT PREPAYMENT U(C)-208/2012-2014

POSTED AT LODHI ROAD HO ON 26th to 30th September 2014Date of Publication: 26.09.2014

ICAI President CA. K. Raghu inaugurates the National Convention for CA Students at Guntur by lighting the auspicious lamp in the presence of Vice-President, CA. Manoj Fadnis, Chairman, Board of Studies, CA. M. Devaraja Reddy and other dignitaries.

ICAI President CA. K. Raghu addressing the National Convention for CA Students at Guwahati while Vice-President, CA. Manoj Fadnis, Chairman, Board of Studies, CA. M.Devaraja Reddy, Central Council Member, CA. Sumantra Guha and EIRC Chairman, CA. Subhash Chandra Saraf and other dignitaries share the dais.

ICAI President CA. K. Raghu inaugurates the Reading Room at Aurangabad in the presence of Vice Chairman, Board of Studies, CA. Prafulla Chhajed and Central Council Member CA.Dhinal Shah and other dignitaries.

ICAI President CA. K. Raghu inaugurates the ITT Lab at Aurangabad in the presence of Vice Chairman, Board of Studies, CA. Prafulla Chhajed and other dignitaries.