Jaipuria Institute of Management, Jaipur

Assignment Submission on COST AUDIT AND COST SHEET ANALYSIS OF MOIL Ltd.

Submitted to: Prof. PRASHANT SIPANI

Accounting for Decision Making- II (ADM- II)

Submitted by: Rohan Maheshwari SECTION-B (P12065), B-32

TABLE
NAME OF CONTENT Meaning of Cost audit & Process 4 Cost Audit Regulatory Bodies 5-6 Cost Sheet and Division of Cost 7-9 Cost Sheet of TATA MOTORS 10-13 Cost Sheet Analysis 13 Bibliography PAGE NO. 2-3

COST AUDIT

In simple words the term cost audit means a systematic and accurate verification of the cost accounts and records and checking of adherence to the objectives of the cost accounting. As per ICWA London cost audit is the verification of the correctness of cost accounts and of the adherence to the cost accounting plan. In cost audit, auditor has to perform the following duties Examine the correctness of the cost records maintained by the concern and to report as to whether the cost accounting plans have been adhered to or not. PROCESS Cost audits ascertain whether all of the processes of a business are managed effectively, and if there are areas within a company's business structure that are wasting resources. Cost auditing processes can be used to ensure a company is following its business plan and can help management make the necessary adjustment to get the company back on the right track.

o State the problem/ situation o Define the programme to be analysed o Define measures For cost-efficiency analysis: output measures o For cost-effectiveness analysis: outcome measures o For cost-effectiveness only: Identify alternative ways to achieve outcomes o Develop a costing framework o Identify and measure costs o Identify and measure benefits

REGULATORIES (MINISTRY OF CORPORTAE AFFAIRS Govt. of India)

Cost Audit Branch under the Ministry of Corporate Affairs is manned by professionals drawn from the Indian Cost Accounts Service (ICAS) and primarily deals with sections 209 (1) (d) and 233B of the Companies Act, 1956. The Branch, under section 209 (1) (d) formulates & notifies Cost Accounting Records Rules (CARRs) for various industries. Such rules prescribe the manner in which cost records are to be maintained by specified class of companies. The Branch also undertakes rationalization of existing CARRs to reflect the changes in technology, manufacturing processes and accounting standards.Under section 233B, orders are issued to individual companies for conducting cost audit of cost records in accordance to Cost Audit Report Rules from a Cost Auditor appointed by the Board of Directors with the prior approval of the Ministry. Cost Audit Branch (CAB) under the Ministry of Corporate Affairs performs the following functions: 1. Matters falling under section 209 (1) (d) of the Companies Act, 1956: 2. Matters falling under section 233B of the Companies Act, 1956: 3. To carry-out data mining and industry-wise economic analysis of all industries/sectors. 4. Inspection of companies under Section 209A (1) of the Companies Act. 5. Providing expert opinion on various matters as referred to Cost Audit Branch. 6. Attending to all Court and Parliament matters relating to Cost Audit Branch.

COST SHEET
To determine total cost of production a statement showing the various elements of cost and is called as a statement of cost or cost sheet. Cost sheet is a statement, which provides for the assembly of the detailed cost of the total cost of job operation or order. It brings out the composition of total cost in a logical order, under proper classifications and sub-divisions. The period covered by the cost sheet may be a week, a month or so. In case of multiple products a separate cost sheet may be prepared for each product. Alternatively, separate columns of total cost and unit cost may be provided for each product in the same cost sheet. A cost sheet is prepared under Output or Unit Costing Method.

Purpose: Cost sheet serves the following purposes: 1. 2. 3. 4. 5. 6. It gives the breakup of total cost under different elements. It shows total cost as well as cost per unit It helps comparison with previous years. It facilitates preparation of tenders or quotations It enables the management to fix up selling price It controls cost.

DIVISIONS OF COST 1- Prime Cost: It comprises of all direct materials, direct labour and direct expenses. It is also known as flat cost. Prime Cost = Direct Materials + Direct Labour + Direct Expenses. 2- Works Cost: It is also known as factory cost or cost of manufacture. It is the cost of manufacturing an article. It includes prime cast and factory expenses. Works Cost = Prime Cost + Factory Overheads 3- Cost of Production: It represents factory cost plus administrative expenses Cost of Production = Factory Cost + Administrative expenses 4- Total Cost: It represents cost of production plus selling & distribution expenses Total Cost = Cost of production + Selling & distribution - expenses 5- Selling Price: It is the price, which includes total cost plus margin of profit or minus loss, if any. Selling Price = Total Cost + Profit / Loss

COST SHEET
Particulars Raw Materials Employee cost Prime cost Power & fuel Manufacturing 2009 52.02 235.10 287.12 23.37 69.45 2010 46.01 193.13 239.14 23.59 70.02 2011 51.51 202.05 253.56 38.83 94.97

Factory cost Selling & distribution Miscellaneous expenses Total cost

379.94 13.81 14.25 408

332.75 16.33 5.24 354.32

387.36 23.26 11.81 422.43

Percentage change in cost elements(2010 and 2011)

Raw material Employee cost Prime cost Power & fuel Manufacturing Factory cost Selling & administration Miscellaneous expenses Total expenses -11.55 -17.85 -16.71 -.0009 -.0082 -12.42 -18.24 -63.22 -13.15 11.95 4.61 6.02 64.60 35.63 16.41 42.43 125.38 19.22

ANALYSIS:-

Analysis of cost elements with respect to Total Cost (%)

2009 Prime cost Factory cost 70.3725 93.1225 2010 67.4926 93.9122 2011 60.0241 91.6980

The cost incurred in Net sale is highest in 2011, which amounts to 422.43 cr. 2011 is found to be highest compared to other years, which amounts to 422.43 crores and total income is 1333.36 cr.

AUDITORS REPORT
Auditor's Report (MOIL) We have audited the attached Balance Sheet of MOIL LIMITED, NAGPUR, as at 31st March 2011 and also the Profit & Loss Account and the Cash Flow Statement of the Company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company''s management. Our responsibility is to express an opinion on these financial statements based on our audit We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 1. As required by the Companies (Auditors Report) Order, 2003 as amended by the Companies (Auditors Report) (Amendment) Order, 2004, issued by the Central Government in terms of section 227 (4A) of the Companies Act 1956, we enclose in Annexure A, a statement on the matters specified in paragraph 4 & 5 of the said order. 2. Further to our comments in the Annexure referred to in Para 1 above;

We have to draw attention to note No. 2 of Notes to Accounts (Schedule 19). Due to change in accounting policy in respect of valuation of stock of slag and recording of sale of slag from other income to sales, net profit before tax and net profit after tax for the year is reduced by Rs. 1030.33 lakhs and Rs. 688.08 lakhs respectively. Net valuation of closing inventory is also reduced by Rs. 1030.33 Lakhs. Sales are increased by Rs. 1622.44 lakhs with corresponding decrease in other income. We report that: a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our Audit. b) In our opinion, proper books of account as required by Law have been kept by the Company, so far as appears from our examination of those books. c) The Balance Sheet, Profit & Loss Account & Cash Flow Statement dealt with by this report are in agreement with the books of account of the Company. d) In our opinion, the Balance Sheet, Profit and Loss Account & Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub section (3C) of section 211 of the Companies Act, 1956. e) The Company has informed that, in terms of Notification No. GSR 829 (E) dated 21/10/2003 issued by the Department of Company Affairs, the provisions of Section 274(1)(g) of Companies Act, 1956 are not applicable to Government Companies. f) The company has neither paid nor provided for cess payable under Section 441(A) of Companies Act, 1956 , pending notification from Government specifying the manner of payment. g) In our opinion and to the best of our information and according to the explanations given to us, the said accounts, read together with notes thereon and Statement of Accounting Policies, give the information required by the Companies Act, 1956, in the manner so required, and give a true and fair view in conformity with the accounting principles generally accepted in India. i) In the case of Balance Sheet, of the state of affairs of the Company as at 31st March, 2011 : ii) In the case of Profit and Loss Account, of the Profit of the

Company for the year ended on that date; and iii) In the case of the Cash Flow statement, of the Cash Flows of the Company for the year ended on that date. ANNEXURE-A TO THE AUDITOR''S REPORT REFERRED TO IN PARA 1 OF OUR REPORT OF EVEN DATE ON THE ACCOUNTS OF MOIL LIMITED FOR THE YEAR 2010-11 1. The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. The Management has physically verified fixed assets during the year and no material discrepancies were noticed on such verification. In our opinion verification of fixed assets at the year end is reasonable having regard to the size of the Company and the nature of Assets. Disposal of fixed assets made during the year does not affect going concern status of the company. 2. As explained to us, the stocks of Manganese Ore, Ferro Manganese, E.M.D., Stores and Spares were physically verified by the Management at reasonable intervals, during the year. In our opinion and according to the information and explanations given to us, the procedures of physical verification of Inventories followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business. In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and the discrepancies noticed on such physical verification between physical stock and book records were not material and have been adequately dealt with in the books of account. 3. According to the information and explanations given to us, the Company has neither granted nor taken any loans, secured or unsecured to or from Companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956 4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and for

the sale of goods. During the course of our audit, no major weakness has been noticed in internal control system in respect of these areas. 5. According to the information and explanations given to us there are no transactions that need to be entered in the register required to be maintained under section 301 of the Companies Act, 1956. 6. The company has not accepted any deposits from the Public and consequently the directives issued by the Reserve Bank of India, the provisions of Section 58-A and 58-AA of the Companies Act, 1956 and the rules framed thereunder are not applicable. 7. The Company is having Internal Audit system. However, in our opinion Company''s Internal Audit system needs to be strengthened to make it commensurate with its size and nature of its business. 8. The Central Government has not prescribed maintenance of cost records under Section 209 (1)(d) of the Companies Act, 1956. 9. According to the information and explanations given to us, and on the basis of our examination of the books of account, the company has generally been regular in depositing with appropriate authorities the undisputed statutory dues including Provident Fund, Income-tax, Sales-Tax, Excise duty, Cess and other statutory dues applicable to it during the year. Further, since Central Government has till date not prescribed the amount of cess payable under section 441A of the Companies Act, 1956, we are not in a position to comment upon the regularity or otherwise of the company in depositing the same. There are no dues outstanding of Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise duty and cess on account of any dispute. 10. The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the financial year and in the financial year immediately preceding such financial year. 11. The Company has neither taken any loans from a financial institution and a bank nor issued any debentures. 12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 13. The Company is not a chit fund, nidhi, mutual benefit fund or a society. Accordingly clause 4(xiii) of the order is not applicable.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, clause 4(xiv) of the order is not applicable. 15. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions. 16. According to the information and explanations given to us, the Company has not taken any term loans during the year. 17. According to the information and explanations given to us, the Company has not raised any funds on short-terms basis. All assets have been funded by shareholder''s funds.

BIBLIOGRAPHY

Online sources www.moneycontrol.com www.google.com

www.wikipedia.com