GROUP II - Advanced Accounting

GROUP II

Paper 5: Advanced Accounting

(One paper – three hours – 100 marks)

Level of Knowledge: Working Knowledge

Objectives:

(a) To have an understanding of the conceptual framework for the preparation and presentation of financial

statements;

(b) To gain working knowledge of the professional standards and application of accounting principles to

different practical situations; and

(c) To gain the ability to solve advanced problems in the case of different entities.

Contents

1. Conceptual Framework for Preparation and Presentation of Financial Statements

2. Accounting Standards

Working knowledge of:

AS 4 : Contingencies and Events occurring after the Balance Sheet Date

AS 5 : Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies

AS 11: The Effects of Changes in Foreign Exchange Rates (Revised 2003)

AS 12: Accounting for Government Grants

AS 16: Borrowing Costs

AS 19: Leases

AS 20: Earnings Per Share

AS 26: Intangible Assets

AS 29: Provisions, Contingent Liabilities and Contingent Assets.

3. Advanced Issues in Partnership Accounts

Dissolution of partnership firms including piecemeal distribution of assets; Amalgamation of partnership

firms; Conversion into a company and Sale to a company.

4. Company Accounts

(a) Accounting for employee stock option plan, Buy back of securities, Equity shares with differential rights,

Underwriting of shares and debentures, Redemption of debentures

(b) Advanced problems for business acquisition, Amalgamation and reconstruction (excluding problems of

amalgamation of inter-company holding)

(c) Accounting involved in liquidation of companies, Statement of Affairs (including deficiency/surplus

accounts) and Iiquidator’s statement of account of the winding up.

(d) Financial Statements of Banking, Insurance and Electricity Companies

5. Accounting for Special Transactions

Departmental and branch accounts including foreign branches

Note :

If either old Accounting Standards (ASs), Announcements and Limited

Revisions to ASs are withdrawn or new ASs, Announcements and Limited Revisions to ASs are issued by

the Institute of Chartered Accountants of India in place of existing ASs, Announcements and Limited

Revisions to ASs, the syllabus will accordingly include/exclude such new developments in place of the

existing ones with effect from the date to be notified by the Institute.

Paper 6: Auditing and Assurance

(One paper – three hours – 100 marks)

Level of knowledge: Working Knowledge

Objective:

To understand objective and concepts of auditing and gain working knowledge of generally accepted auditing

procedures and of techniques and skills needed to apply them in audit and attestation engagements and solving

simple case-studies.

Contents

1. Auditing Concepts – Nature and limitations of Auditing, Basic Principles governing an audit, Ethical

principles and concept of Auditor’s Independence, Relationship of auditing with other disciplines.

2. Auditing and Assurance Standards – Overview, Standard-setting process, Role of International Auditing

and Assurance Standards Board and Auditing and Assurance Standards Board in India.

3. Auditing engagement – Audit planning, Audit programme, Control of quality of audit work–Delegation

and supervision of audit work.

4. Documentation – Audit working papers, Audit files: Permanent and current audit files, Ownership and

custody of working papers.

5. Audit evidence – Audit procedures for obtaining evidence, Sources of evidence, Reliability of audit

evidence, Methods of obtaining audit evidence, Physical verification, Documentation, Direct confirmation,

Re-computation, Analytical review techniques, Representation by management.

6. Internal Control – Elements of internal control, Review and documentation, Evaluation of internal control

system, Internal control questionnaire, Internal control check list, Tests of control, Application of concept of

materiality and audit risk, Concept of internal audit.

7. Internal Control and Computerized Environment, Approaches to Auditing in Computerised Environment.

8. Audit Sampling – Types of sampling, Test checking, Techniques of test checks.

9. Analytical review procedures.

10. Audit of payments – General considerations, Wages, Capital expenditure, Other payments and expenses,

Petty cash payments, Bank payments, Bank reconciliation.

11. Audit of receipts – General considerations, Cash sales, Receipts from debtors, Other Receipts.

12. Audit of Purchases – Vouching cash and credit purchases, Forward purchases, Purchase returns, Allowance

received from suppliers.

13. Audit of Sales – Vouching of cash and credit sales, Goods on consignment, Sale on approval basis, Sale

under hire-purchase agreement, Returnable containers, Various types of allowances given to customers, Sale

returns.

14. Audit of suppliers’ ledger and the debtors’ ledger – Self-balancing and the sectional balancing system,

Total or control accounts, Confirmatory statements from credit customers and suppliers, Provision for bad

and doubtful debts, Writing off of bad debts.

15. Audit of impersonal ledger – Capital expenditure, deferred revenue expenditure and revenue expenditure,

Outstanding expenses and income, Repairs and renewals, Distinction between reserves and provisions,

Implications of change in the basis of accounting.

16. Audit of assets and liabilities.

17. Company Audit – Audit of Shares, Qualifications and Disqualifications of Auditors, Appointment of

auditors, Removal of auditors, Powers and duties of auditors, Branch audit, Joint audit, Special audit,

Reporting requirements under the Companies Act, 1956.

18. Audit Report – Qualifications, Disclaimers, Adverse opinion, Disclosures, Reports and certificates.

19. Special points in audit of different types of undertakings, i.e., Educational institutions, Hotels, Clubs,

Hospitals, Hire-purchase and leasing companies (excluding banks, electricity companies, cooperative

societies, and insurance companies).

20. Features and basic principles of government audit, Local bodies and not-for-profit organizations,

Comptroller and Auditor General and its constitutional role.

Note: Candidates are expected to have working knowledge of relevant Auditing and Assurance Standards issued

by the ICAI with reference to above-mentioned topics.