Pakistan Institute of Public Finance Accountants

Summer Exam-2016
Corporate Sector
Business Laws (02.05.2016)
Marks-100 D u r a t i o n : 3 hrs
Additional time – 15 min for Paper Reading
[Instructions]
 Ensure that the question paper delivered to you is the same, in which you intend to appear.
 Read the instructions given on the title page of Answer Script.
 Start each question from fresh page.

Attempt all Questions

Q.1. In the context of legal systems in Pakistan, what do you understand by Alternate 08
Dispute Resolution (ADR)? Also mention any three advantages and disadvantages of
ADR.

Q.2. a) Baber while renting out his house to Rahim, included a condition in the rent 06
agreement that Rahim would pay water charges. Rahim lost his job and could not pay
rent as well as water charges. A notice was served by the KW & SB and Baber paid
three months water charges to avoid disconnection. Can Baber legally recover this
payment from Rahim? Also discuss what kind of arrangement is there and what are
essential requirements to make this legally enforceable?
b) List down any four key differences between a contract of indemnity and a Contract of 06
Guarantee.

Q.3. a) Mention against each statements whether Correct or Wrong: 06

(i) A surety can be discharged by giving notice to the creditor in case of
continuing guarantee as to past transactions.
(ii) Where no real loss arises nominal damages are awarded.
(iii) The president of Pakistan may hold the office for more than three
consecutive terms.
(iv) The seats for national assembly are determined on the basis of revenue of
provinces.
(v) Rescission means the substitution of a new contract for an old one.
(vi) A contract is not discharged simply on grounds of partial impossibility of
some of the objects of the contract
(vii) An agency is terminated by the insolvency of the Principal.
(viii) Tender of goods or services is said to be conditional when it is made in
accordance with the terms of the contract.
b) List down any four cases where suit for specific performance of a Contract is not 04
maintainable.

Q.4. a) Engineers A, B and C are running a construction business on partnership basis, 07

sharing equal profit and loss. Engineer B purchased a construction equipment for
Rs.500,000/- with testing cost of Rs.150,000/-. There was a dispute with supplier
and the firm refused to pay the testing cost. The supplier sued B for the unpaid
amount of Rs.150,000/-. Can supplier sue B alone, what remedies are available to B if
he has to pay Rs.150,000/-. Also discuss the relevant law in this regard.

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b) List down any six mandatory duties of a partner that cannot be changed by an 03
agreement amongst the partners.
c) Describe the right of an outgoing partner to share in the subsequent profits under 05
Partnership Act 1932.

Q.5. a) Ruby sold 50 lawn suits to Bela for Rs.100,000/- Bela took delivering of 20 suits and 04
requested Ruby to hold the remaining 30 suits for a month. Owing to heavy rain,
without any negligence on the part of Ruby, some lawn suits were damaged. Bela
refused to take the delivery and pay the price.

Discuss the Legal position along with reasons as to who will bear the loss under Sale
of Goods Act, 1930.
b) Briefly describe the rights of an unpaid seller of goods as specified in the Sale of 06
Goods Act, 1930.

Q.6. a) Raja and Rehan two senior cricketers want to establish a Cricket Academy to explore 04
and train new talent. One of their friends advised them to register a company for this
purpose. Advise Raja & Rehan about restrictions, privileges and obligations if they
register a company as an association not for profit.
b) List down any six purpose for which an association not for profit may be formed. 03
c) The business of Zee Foods Limited was acquired by a new group and new group 08
want to change the name of the company. You have been engaged to advise Board of
Directors for legal requirements in this regard. Make a brief for the Board’s guidance.

Q.7. a) Describe members’ rights regarding minutes of proceeding of the General Meeting. 04
b) List down any six powers of the Board Directors shall exercise by passing a resolution 06
in Board Meeting.

Q.8. Describe the Legal Provisions relating to;

(i) First Chief Executive 04
(ii) Removal of Chief Executive 04
(iii) Filing of Special Resolutions 03
Q.9. Write short notes on the following:-
(i) Private Company 04
(ii) Public Unlisted Company 03
(iii) Holding Company 02

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 Pakistan Institute of Public Finance Accountants
Summer Exam-2016
Corporate|AGP|PG|PMAD|PUBLIC Sectors
Business Economics (03.05.2016)
Marks-100 D u r a t i o n : 3 hrs
Additional time – 15 min for Paper Reading
[Instructions]
 Ensure that the question paper delivered to you is the same, in which you intend to appear.
 Read the instructions given on the title page of Answer Script.
 Start each question from fresh page.

Attempt all Questions

Q.1. a) What is Opportunity Cost? Give two examples. 03

b) How does the concept of Opportunity Cost apply to households, firms and the 07
Government?

Q.2. a) Define Cross Elasticity of Demand. 02

b) Anwar Khan sells computer games. During December 2015 Khan sold 10,000 08
computer games at a price of Rs.600 per game. In January 2016, one of Khan’s
competitors reduced the price of similar game from Rs.650/- to Rs.550/- and Khan
could sell only 8000 games.
Find Cross Elasticity of Demand between Khan’s and his competitor’s games.

Q.3. a) What is Indifference Curve? Why is an Indifference Curve convex to the origin? 06

b) Mr. Javed has a budget of Rs. 100. He wants to purchase two goods X and Y. If 04
price of X is Rs. 20 per unit and price of Y is Rs. 10 per unit; draw a Budget Line.
What would happen to this budget line if income of Mr. Javed increases from
Rs. 100 to Rs. 200?

Q.4. a) What is Price Discrimination? Give two examples. 04

b) Allied Private Limited is a perfect competitor firm. It is earning supernormal profit 06

in the short run period. Make a diagram that expresses the supernormal profit of
Allied Private Limited.

Q.5. a) Define the term Marginal Propensity to Consume (MPC) and Marginal Propensity 04
to Save (MPS).
b) What is Multiplier Effect? Find the value of multiplier in ABC country. The given 06
information is :

MPS = 0.3
MPT = 0.2
MPM = 0.1

Q.6. a) What is Direct Tax? From Government’s perspective, briefly explain three 05
advantages of Direct Tax.
b) What is Fiscal Policy? Enlist the main objectives of Fiscal Policy. 05

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Q.7. The following data relates to the economy of a country SUPERLAND over a one year
period.
Rs. (million)
Consumers' expenditure 20,500
General government final consumption 8,000
Gross domestic fixed capital formation 4,920
Exports of goods and services 7,450
Imports of goods and services 6,340
Taxes on expenditure 3,260
Subsidies 500
Capital consumption 1,830
Net income from abroad 1,500
Calculate the following from the above data:
(i) Gross Domestic Product (GDP) 03
(ii) Gross National Product (GNP) 02
(iii) Net National Product (NNP) 02
(iv) GDP at Factor Cost 03

Q.8. a) Briefly explain the following instruments of Monetary Policy:

(i) Open Market Operation 02
(ii) Reserve Ratio 02

b) Government of ALand wants to correct the current account deficit. Give three 06
suggestions in this regard.

Q.9. a) Explain the following types of shares:

(i) Common Stock 03
(ii) Preference Shares 03

b) What is the role of Reserve Ratio in credit creation of Commercial Banks? 04

Q.10. Define the following Economic Terms:

(i) Foreign Exchange Rate 02
(ii) Demand for Money 02
(iii) Balance of Trade 02
(iv) Consumer Credit 02
(v) Capital Market 02

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 Pakistan Institute of Public Finance Accountants
Summer Exam-2016
Corporate|AGP|PG|PMAD|PUBLIC Sectors
Cost Accounting (04.05.2016)
Marks-100 D u r a t i o n : 3hrs.
Additional time – 15 min for Paper Reading
[Instructions]
 Ensure that the question paper delivered to you is the same, in which you intend to appear.
 Read the instructions given on the title page of Answer Script.
 Start each question from fresh page.

Attempt all Questions

Q.1. A company manufactures a single product. The selling price is Rs. 100 per unit. Currently the
capacity utilization is 60% with the sales turnover of Rs. 600,000. The company proposes to
reduce the selling price by 20% but desires to maintain the same profit position by increasing the
output. Assuming that the increased output could be made and sold.
Other relevant data is as under:
 Variable Cost per unit Rs. 20
 Semi-Variable Cost (including a variable element of Rs. 5 per unit) Rs. 60,000.
 Fixed Costs of Rs. 200,000 will remain constant upto 80% level. Beyond this an
additional amount of Rs. 40,000 will be needed.
Required:
Determine the number of units the company should produce and sell to maintain the existing 15
profit. What will be the percentage of capacity utilization at that level of production?
Q.2. Ibrahim Corporation uses a process costing system. Cost data of its finishing department for the
month of September 20XX is as under:
Rs.
Cost from preceding Department 20,000
Cost added:
Materials 18,000
Labour 9,000
Factory Overhead 9,000
Quantity schedule of the department contained the following information:
Units received from preceding department 5,000
Units transferred to finished goods 4,000
Units still in process (50% complete) 1,000

Required:
A Cost of Production Report. 20

Q.3. Following figures are presented to you by Alfa Manufacturing Company:

Budgeted Figures for Actual Figures for Operations

Items Operations during 20XX during January 20XX
Dept. A Dept. B Dept. A Dept. B
Direct Materials (Rs.) 600,000 2,400,000 450,000 250,000
Direct Labour (Rs.) 1,500,000 1,200,000 145,000 105,000
Factory overhead (Rs.) 1,200,000 1,800,000 - -
Direct Labour hours 150,000 100,000 14,000 9,500
Machine hours 300,000 360,000 26,000 28,000

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Required:
(a) Calculate predetermined Factory Overhead Absorption rates for the two departments 05
using five different bases.
(b) Calculate total product cost of output during January 20XX under bases of Direct Labour 10
Cost, Direct Labour Hours and Machine Hour.
Q.4. XY Ltd. manufacturer of product P uses a Standard Cost System. Standard product and cost
specifications for 1,000 kgs. of products are as follows:

Quantity Price per Kg Cost

Ingredients
(kgs.) (Rs.) (Rs.)
A 800 2.50 2,000
B 200 4.00 800
C 200 1.00 200
Input 1,200 - 3,000 = Rs. 2.50 per kg
Output 1,000 - 3,000 = Rs. 3 per kg

Material records indicate:

Consumption in January
A 157,000 kgs @ Rs. 2.40
B 38,000 kgs @ Rs. 4.20
C 36,000 kgs @ Rs. 1.10

Actual Finished production for the month of January is 200,000 kgs.

Required:
Calculate the following Variances:
(a) Material Price Variance 04
(b) Material Mix Variance 04
(c) Material Yield Variance 04

Q.5. Best Company estimated manufacturing overheads for the budget year 2016, at Rs.1,600,000,
while direct labor hours estimated to be worked during the year were 30,770. The direct labor
rate per hour was Rs.40. During the month of January, 2016, four jobs were completed each
involving 500 direct labor hours. The actual manufacturing overheads recorded was Rs.104,500.

Required:

(a) Compute the predetermined manufacturing overhead rate for application of 04

manufacturing overhead to finished jobs during the year 2016.
(b) Compute the amount of manufacturing overhead to be applied to the completed jobs. 04
(c) Compute the over or under applied manufacturing overhead for January, 2016 and advise 04
its disposal.
Q.6. Lucky Enterprise follows Absorption Costing. It reported opening balance of work-in-process at
Rs.540,000 for the year 2015, while the closing balance at Rs.360,000. The direct labor hours
were recorded at 48,000 and the wage rate at Rs.60 per hour. During the period purchases of
direct materials amounted to Rs.3,820,000. The opening inventory of material was stated at
Rs.780,000 while closing inventory was stated at Rs.540,000. The indirect materials were
reported at Rs.120,000, while indirect labor cost was stated at Rs.80,000. Manufacturing
overheads were reported at Rs.1,800,000.
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Required:
Prepare ‘Cost of Goods Manufactured Statement’ for the year 2015. 08

Q.7. Hi-Tech Limited has following cost structure for its core product marketed under the brand
name ‘ROX’:
Direct Material 6 Oz. @ Rs.25\Oz.
Direct Labor 1.5 Hours @ Rs.60\Hour
Manufacturing Overheads (Note 1) Rs. 1,200,000
Selling Costs (Note 2) Rs. 650,000
Administration expenses (Note 3) Rs. 480,000
During the year 2015, Hi-Tech produced and sold 60,000 units of ROX

Notes:
 The variable portion of manufacturing overhead is calculated at 15% of direct labor costs.
 Selling costs reflect decline of Rs.60,000, over the year 2014 when 70,000 units were
produced.
 Administration expenses are fixed costs.
 Sale price of one unit of ROX is Rs.650.

Required:
Prepare Income Statement using Variable Costing. 08
Q.8. 100 units of material ‘M’ costing Rs. 8 per unit were in stores on 1st January, 20XX. Following
are the receipts and issues during January.

Jan. 01 Received 100 units @ 8.50

Jan. 05 Issued 100 units
Jan. 08 Received 200 units @ Rs. 8.85
Jan. 15 Received 100 units @ Rs. 9.25
Jan. 25 Issued 220 units
Jan. 31 Issued 80 units

Required:
Prepare Materials Ledger Card, based on the above information using each of the following 10
methods:
(i) FIFO
(ii) LIFO
(iii) Average Cost

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 Pakistan Institute of Public Finance Accountants
Summer Exam-2016
Corporate Sector
Financial Accounting (05.05.2016)
Marks-100 D u r a t i o n : 3 hrs.
Additional time – 15 min for Paper Reading
[Instructions]
 Ensure that the question paper delivered to you is the same, in which you intend to appear.
 Read the instructions given on the title page of Answer Script.
 Start each question from fresh page.

Attempt all Questions

Q.1. National Investment Limited is finalizing its accounts for the year ended March 31, 2015. How will
the following income be accounted in books of National Investment Limited? Support your answer
keeping in view the IAS - 18.
(a) Alpha Limited has declared Interim Dividend on March 25, 2015 which is not received till 05
31-03-2015 but received on April 25, 2015. The Book Closure date was April 02, 2015.

(b) Zaid Limited has declared dividend on May 10, 2015 for the year ended March 31, 2015 which 05
is approved by shareholder in AGM held on June 30, 2015.

Q.2. Following is the Trial Balance of Basic Poultry (Private) Limited as at June 30, 2015.
PARTICULARS DEBIT CREDIT
Rs. Rs.
Share Capital 10,000,000
Sales 5,000,000
Allowance for Doubtful Debts 30,000
Accounts Payable 400,000
Notes Payable 300,000
General Reserves 200,000
Retained Earnings 3,000,000
8% Debentures Payable 1,000,000
Opening stock 800,000
Purchase 2,000,000
Trade Debtors 1,200,000
Financial Charges on Debentures 40,000
Prepaid Insurance 300,000
Bad Debts Expenses 50,000
Preliminary Expenses 100,000
Dividend Paid 200,000
General Expenses 100,000
Cash and Bank Balance 540,000
Salaries 1,200,000
Land 10,400,000
Plant and Machinery 3,000,000
19,930,000 19,930,000

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Other Information:
 Closing Stock is Rs. 500,000.
 Provision on Uncollectible is maintained at 5% of the Closing Balance of Accounts
Receivables.
 Unexpired insurance as at June 30, 2015 is Rs. 100,000.
 Salaries Paid in Advance Rs. 50,000.
 Salaries outstanding as on June 30, 2015 were Rs. 150,000.
 Six months Financial Charges on Debentures is outstanding.
 Preliminary Expenses has to be write off over 10 years.
 Depreciation is to be provided @ 10% on Plant and Machinery on Reducing Balance
Method.
 Dividend declared and paid Rs. 200,000.
Required:
Prepare the following Financial Statements in accordance with International Financial Reporting 20
Standard / IAS - 1 for June 30, 2015.
(i) Statement of Profit or Loss.
(ii) Statement of Financial Position.

Q.3. The Comparative Statement of Financial Position of Friends Commodities (Private) Limited shows
the following information:

2015 2014
EQUITY AND LIABILITIES
Capital Account 910,000 710,000
Long Term Note Payable 150,000 -
Accounts Payable 300,000 120,000
Bonds Payable 500,000 800,000
Retained Earnings 670,000 620,000
Accrued Liabilities 40,000 50,000
TOTAL EQUITY AND LIABILITIES 2,570,000 2,300,000
ASSETS
Land 560,000 300,000
Fixed Assets 2,000,000 1,900,000
Accumulated Depreciation (800,000) (770,000)
Long Term Investments 50,000 25,000
Trade Receivables (Net) 410,000 460,000
Inventory 300,000 320,000
Prepaid Expenses 20,000 15,000
Cash and Bank Balances 30,000 50,000
TOTAL ASSETS 2,570,000 2,300,000

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 3

Additional data related to June 30, 2015 is as follows:-

 Net Profit for the year was Rs. 110,000.
 Depreciation on Fixed Assets was Rs. 60,000.
 Sold Fixed Assets with a cost of Rs. 50,000 and accumulated depreciation of Rs. 30,000 for
Rs. 17,000.
 Declare and Paid Cash Dividends Rs. 60,000.
 Issued Long Term Note Payable for Rs. 150,000 for Purchase of Building.

Required:
Prepare Statement of Cash Flows for the year ended June 30, 2015 using indirect method in 10
accordance with IAS-7.

Q.4. The Ray Pharma is importer of particular item. Accountant of the Company has prepared the Profit
and Loss Account following average method for valuation of closing inventory.
Following are details of transaction during the year:

Purchases during the period

Date Units Amount (Rs.)
05-Jul-14 5,000 3,250,000
10-Sep-14 14,000 8,750,000
26-Dec-14 9,500 6,650,000
24-Mar-15 18,600 13,857,000
05-Apr-15 15,600 11,310,000
31-May-15 10,100 6,969,000

Opening Stock 1,000

Sales 57,000
Closing Stock 16,800

The Profit and Loss Account prepared by the Accountant on average method of valuation of closing
inventory is as follows:
Rs.
Sales 41,325,000
Cost of Sales
Opening Stock 560,000
Purchase 50,786,000
51,346,000
Less Closing Stock 11,688,520 39,657,480
Gross Profit 1,667,520
Operating and Selling Expenses 1,525,900
Net Profit for the Period 141,620

Required:
Prepare a revised Profit and Loss Account based on FIFO Method for valuation of Closing 12
Inventory at Cost or Net Realizable Value which ever is lower. The Selling Expenses are 2% of
Sales.
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Q.5. Ahmed and Umer are partners sharing profits and losses in the ratio of 3:2. Their Balance Sheet as
on June 30, 2015 is as under

Rs.
EQUITY AND LIABILITIES
Sundry Creditors 28,500
Accrued Expenses 4,000
Reserves 10,000
Capital Account - Ahmed 29,000
Capital Account - Umer 15,000
86,500
ASSETS
Stock in Trade 15,000
Sundry Debtors 9,400
Provision for Bad Debts (400)
Buildings 35,000
Machinery 19,000
Furniture and Fixture 5,000
Prepaid Expenses 1,500
Cash and Bank Balance 2,000
86,500

It has been decided on July 01, 2015 to admit Yousuf as new partner by introducing a capital of
Rs. 21,000. The Capital of partners to be adjusted in the new profit sharing ratio which is 5:3:2 by
taking Yousuf’s Capital as base. Yousuf is unable to bring any premium for goodwill. Therefore, it
is decided to raise Goodwill Account, amount being calculated on the basis of Yousuf’s share in
the Profits and Capital Contribution by him. Following revaluations are agreed to be made:
 Furniture to be depreciated by 10%.
 Stock to be depreciated by 10%.
 Provision for bad debts is to be raised by Rs. 100.
 Building is revalued at Rs. 41,350.
Required:
(a) Revaluation Account 05
(b) Partners Capital Account 08
(c) Balance Sheet of the firm as on July 01, 2015 alongwith necessary computation. 07

Q.6. Green Line Transport Company purchased 10 Buses from Red Line Company on January 01, 2013
at a list price of Rs. 2 Million each with a Salvage Value of Rs. 240,000 each. After negotiation Red
Line Company agreed to give 10% trade discount to Green Line Transport Company.
The Green Line Transport Company incurred and paid the following:
 Custom Duty paid on invoice price for all buses, Rs. 170,000.
 Repainting on buses @ Rs. 10,000 each.

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 Freight Charges were Rs. 13,000 each.

 The expected useful life of bus is ten (10) years.
 The Company uses 15% written down value method to depreciate all buses.
 On January 01, 2016 five (05) out of ten (10) buses were sold for Rs. 6,650,000.

Required:
i) Journalize all the transaction alongwith Computation of the Cost of all buses. 05
ii) Calculate the annual charges of depreciation in the Income Statement for December 31, 03
2013 to 15.
iii) Calculate loss or gain on disposal of the buses and pass necessary journal entry. 04

Q.7. Marahaba (Private) Limited with its Head Office at Karachi has a branch at Lahore. Goods are
invoiced to the branch at cost plus 20%. The following information is given in respect of the
branch for the year ended March 31, 2016.
(Rs.)
Goods sent to Branch (Invoice Price) 350,000
Stock at Branch on April 01, 2015 (Invoice Price) 17,500
Cash Sales during the year 131,250
Credit Sales during the year 204,167
Branch Expenses (Paid in Cash) 39,010
Trade Debtors Branch (April 01, 2015) 21,875
Trade Debtors Branch (March 31, 2016) 26,615
Discount Allowed 729
Bad Debts 1,094
Collection from Debtors 196,875
Branch Debtors Cheques Dishonored 3,646
Stock at Branch on March 31, 2016 (Invoice Price) 35,000
Return of Goods by Customers to the Branch 4,375

Required:
Prepare under the Stock and Debtors System, the following ledger accounts in the books of the
Head Office.
(a) Lahore Branch Stock Account 04
(b) Lahore Branch Debtors Account 03
(c) Lahore Branch Adjustment Account 05
(d) Lahore Branch Profit and Loss Account 04

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 Pakistan Institute of Public Finance Accountants
Summer Exam-2016
Corporate|AGP|PG|PMAD|PUBLIC Sectors
Bus. Com. & Report Writing (06.05.2016)
Marks-100 D u r a t i o n : 3 hrs
Additional time – 15 min for Paper Reading
[Instructions]
 Ensure that the question paper delivered to you is the same, in which you intend to appear.
 Read the instructions given on the title page of Answer Script.
 Start each question from fresh page.

Attempt all Questions

Q.1. (a) List the characteristics of Effective Communication? 06

(b) How ‘Paralanguage’ effects our communication? 03

Q.2. (a) Identify the Ten components included in “Universals of Communication”? 05

(b) Define and compare Formal and Informal Communication in an organization? 10

Q.3. The objective of a well planned negative message is to convey the negative message clearly 09
whilst retaining as much goodwill as possible in a constructive fashion. How will you
ensure it in your message?

Q.4. How many different types of listeners do we find in an organizational setting? What are 06
their qualities?

Q.5. Assuming yourself to be an auditor of a Chartered Accountant firm, write an enquiry letter 10
to a bank for verification of bank balance as reported in your client’s balance sheet.
Assume necessary details?

Q.6. Prepare a Notice and an Agenda for Lucky Textiles Pvt. Ltd. You must assume necessary 10
details. The Agenda must include items related to HR, Finance, Marketing and Quality
Control’?

Q.7. Your organization plans to launch a courier service in Pakistan. You have been assigned to 15
conduct a SWOT analysis of your Company and submit a report to the CEO. You must
assume necessary details. Note that a SWOT analysis describes a business’s Strength (S),
Weaknesses (W), Opportunities (O) and Threats (T).

Q.8. A multinational company advertised for Management Trainees in Accounts and Finance 10
Department. Prepare a ‘CV’ for the same. Assume all necessary details.

Q.9. What benefits do you draw while using ‘email’ for communication in an organization? 07

Q.10. Why is video conference becoming so popular in commercial organization? 09

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 Pakistan Institute of Public Finance Accountants
Summer Exam-2016
Corporate Sector
Taxation (05.05.2016)
Marks-100 D u r a t i o n : 3 hrs
Additional time – 15 min for Paper Reading
[Instructions]
 Ensure that the question paper delivered to you is the same, in which you intend to appear.
 Read the instructions given on the title page of Answer Script.
 Start each question from fresh page.

Attempt all Questions

Q.1. Define the following in view of the Income Tax Ordinance, 2001:
(i) Filer 02
(ii) Imputable Income 02
(iii) Small Company 02

Q.2. Explain the power of parliament to impose tax on the income of certain corporations. 09

Q.3. Describe the unexplained income or assets in the light of Section 111 of the Income 10
Tax Ordinance, 2001 & its consequences. Also explain income and assets which have
protection from charge of Section 111.

Q.4. Mr. Akram provided the following information for the assessment of his income for 15
the tax year ended on 30th June, 2015. Determine his total income and the tax payable
by him.
 Taxpayer was resident during the tax year.
 Received rent of Rs. 50,000 per month for full year.
 Property tax paid Rs. 5,000 outstanding Rs. 6,000.
 Interest of Rs. 10,000 paid on money borrowed for construction of the house.
 Paid during this property tax of Rs. 5,000 for the last year, it was not allowed as
deduction in that year.
 Received interest income of Rs. 5,000 from saving account in bank.
 Received Rs. 200,000 on encashment of Defence Saving Certificates.
Zakat of Rs. 5,000 was deducted thereon.

Q.5. (a) Explain the System of Adjustment of Excise Duty. 06

(b) Explain the drawback of Duty and its prohibition. 06

Q.6. (a) Explain the provision of Minimum Tax. 08

(b) Explain the benefits and conditions of Section 65(B) of the Income Tax Ordinance, 08
2001.

Q.7. Explain provisional assessments in the light of section 122(C) and section 123 of the 10
Income Tax Ordinance, 2001.

Q.8. Discuss the procedure of assessment u/s 11 of the Sales Tax Act, 1990. 10

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Q.9. A company is engaged in business of concrete electric poles. The company purchased
the following material during a tax period:
Rs.
Cement from a registered manufacturer (20,000 bags @ Rs.300) 6,000,000
Sand from a non-registered supplier 300,000
Concrete-crushed from a registered person (20,000 cubic ft.) 700,000
Steel from Pak Steels (50 tons) 1,000,000
Total 8,000,000
The company incurred manufacturing and other costs worth Rs. 2,000,000. During the
month, it supplied the goods worth Rs. 12,000,000. It is further provided that during the
tax period the Company used 1,000 bags of cement, 2,000 cubic ft. concrete and ten (10)
tons of steel for repair and maintenance of the office building.
Required:
Compute the Sales Tax Liability of the company, assuming that the whole supply was 12
made to registered person.

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 Pakistan Institute of Public Finance Accountants
Summer Exam-2016
Corporate Sector
Financial Reporting (02.05.2016)
Marks-100 D u r a t i o n : 3 hrs
Additional time – 15 min for Paper Reading
[Instructions]
 Ensure that the question paper delivered to you is the same, in which you intend to appear.
 Read the instructions given on the title page of Answer Script.
 Start each question from fresh page.
 Book Allowed – International Financial Reporting Standards
Attempt all Questions

Q.1. The following are the Statements of Comprehensive Income of a Parent Co. and its Subsidiary Co.
for the year ended December 31, 2015:

Profit and Loss Account Parent Co. Subsidiary Co.

Rs. (000) Rs. (000)
Revenue 50,250 30,510
Cost of sales (22,225) (12,475)
Gross profit 28,025 18,035
Operating expenses (12,635) (12,610)
Operating profit 15,390 5,425
Finance cost (7,450) (2,500)
Investment income 2,500 --
Profit before tax 10,440 2,925
Tax expense (3,375) (1,236)
Profit after tax 7,065 1,689
Other comprehensive income
Items that may not be reclassified to P&L
Revaluation surplus 10,250 2,450
Other comprehensive income 10,250 2,450
Total comprehensive income 17,315 4,139

Notes to above Statements:

The Parent Co. (P Co.) acquired 85% shares of Subsidiary Co. (S Co.) many years back at the date
of incorporation of the said company. During the year the following intercompany adjustments are
necessary before preparing consolidated financial statements.
 During the year P Co. sold goods costing Rs. 4 million at markup of 20%, 1/4 th of said
goods remained unsold by the year end.
 An item of property, plant and equipment sold by S Co. to P Co. on 30th September 2015
for Rs. 2 million having carrying value of Rs. 1.5 million. The gain on disposal credited to
cost of sales. The remaining useful life of property, plant and equipment on disposal date
was 4 years.
 The S Co. declared final dividend of Rs. 2 million for the year ended December 31, 2014 on
15th March 2015. The investment income of P Co. includes dividend from S Co.
 The P Co. has provided 20% of loan to S Co. the loan remains outstanding for the whole
year.
 An intangible asset not recognized by S Co. at the acquisition date qualifies for recognition
under IFRS 3 and being amortized in group financial statements. The amortization expense
per year is Rs. 1 million.
Contd. on back
 2

 The group has the policy of measuring non-controlling interest at fair value at the date of
acquisition. The goodwill has impaired by Rs. 1.5 million during the year.

Required:
Prepare Consolidated Statement of Comprehensive Income of P Co. group for the year ended 22
December 31, 2015.

Q.2. During finalization of Financial Statements of a large scale company, you came across the following
accounting issues: -

(a) The entity has been sued by one of its customers for supplying faulty goods which resulted in
damage to the property of the customer. At the reporting date the legal advisor was of the
opinion that there is a remote chance the claim will be accepted by the court, therefore no
provision was recognized at the reporting date. However, after the reporting date but before the
authorization of financial statements the court awarded Rs. 250,000 claim to the customer. The
company preferred to file appeal against the decision and appeal is pending before the appellate
authorities. The legal advisor is now of the opinion that the penalty may be upheld up to Rs.
100,000.
Required:
Determine whether provision is to be recognized and if so calculate amount of provision and pass 04
appropriate double entry as well.

(b) The company has declared final dividend after the year end of Re. 1 per share. The share
transfer books will remain close on April 10 to April 15, 2016 for determination of eligible
shareholders. The authorization date of financial statements is March 31, 2016.
Required:
Discuss the appropriate treatment of final dividend in the Financial Statement for the year ended 03
December 31, 2015.

(c) The company has recently started the work on development of a new product and got registered
with the regulatory authorities. A huge advertisement campaign with the cost of
Rs. 5 million launched to introduce the product in the market. The development cost of the
product was Rs. 15 million. The expected useful life of the product is 5 years with no residual
value, however, during this year production lasted only for six months.
Required:
Determine the Cost of Intangible Asset and expense to be recognized in the Profit and Loss 03
Account.

Q.3. A company has been following cost model under IAS 16 for number of years and now on
January 01, 2015 decided to change from cost model to revaluation model. The cost of the asset was
Rs. 450,000 and accounting depreciation on this asset was Rs. 150,000 while tax allowance was
Rs. 290,000. The asset revalued at the start of year to Rs. 350,000 with remaining useful life of 10
years. The tax rate of depreciation has been 25% on reducing balance basis while in accounting asset
is depreciated on straight line basis.
The tax rate has been 33% for 2014 and 32% for current year.

Required:
Prepare note of Deferred Tax Expense and Deferred Tax Liability for/at December 31, 2015 to 10
Financial Statements in comparatives.
Contd. ……..
 3

Q.4. The following is the Statement of Comprehensive Income of an entity for the year ended
December 31, 2015, along with the errors and omissions:

Rs. (000) Rs. (000)

Revenue 25,150
Cost of sales (12,360)
Gross profit 12,790
Operating expenses (2,658)
Operating profit 10,132
Finance cost (1,252)
Dividend income 500 (752)
Profit before tax 9,380
Tax expense (4,650)
Profit after tax 4,730

The following information is also relevant for finalization of Statement of Comprehensive Income
for the year then ended: -
 During the year goods have been sent on sale or return basis amounting to Rs. 1,000,000
have been treated as sales. The company charges markup of 25% on all goods it sells to
the customers.
 At the start of current year the company sold goods along with service contract of three
years. The company received full amount for sale of goods as well as for rendering of
services. The services fee agreed for three years was Rs. 300,000.
 The entity recognized dividend from an investment in other company declared by that
entity after the year end. The tax expense also includes tax on dividend @ 10%.
 The finance cost recognized in the Income Statement includes Rs. 550,000 incurred on
the construction of a qualifying asset, which was completed during the year, having useful
life of 5 years, being depreciated on straight line basis and depreciation for 3 months has
been recognized on that asset.
 The carrying value of assets exceeded the tax base of assets by Rs. 4.5 million however; no
deferred tax has been recognized in the above Financial Statements.
 The tax rate can be taken @ 32% for current and deferred tax calculation.

Required:
Redraft the Statement of Comprehensive Income. 15

Q.5. The entity has recently entered into a contract with the Government to construct a bridge on a river.
The estimated cost of the contract was Rs. 200 million at the time of signing of the contract. After
signing of the contract the cost has been escalated significantly but no escalation clause was agreed
in the contract. The total cost incurred at the year-end was Rs. 120 million and future estimated cost
at the year-end is Rs. 130 million. The entity uses cost to cost basis as method for determination the
stage of completion. The total estimated revenue at the year-end is Rs. 220 million. Progress billings
raised at the year-end are Rs. 100 million however, only Rs. 85 million has been received.

Required:
Prepare Extract to Financial Statements. 08

Contd. on back
 4

Q.6. The company has entered into a sale and back contract on July 01, 2015, the terms and conditions
were as follows: -
 The fair value of the asset and present value of minimum lease payments was Rs. 255,000
 The asset sold to leasing company for Rs. 270,000.
 The remaining useful life and lease term are 5 years.
 The carrying value of the asset is Rs. 150,000.

Required:
Discuss the Accounting Treatment of Sale and Lease Back and pass necessary double entries for 10
recognition of Sale and Lease Back Transaction.

Q.7. A company has started the construction of a qualifying asset and borrowed a specific loan of Rs. 50
million on July 01, 2014 @ 12.5% pa; unused funds can be invested @ 4% pa.

The expenditure incurred on the asset was evenly distributed over the year. Due to Government
intervention project was suspended for one month during the year.

Required:
Calculate the Borrowing Cost to be capitalized. 10

Q.8. An entity has entered into a construction contract during the current year, the detail of which is as
under: -
 The fixed price of the contract is Rs. 2.5 million and construction time agreed to complete is
one and half year. Total estimated cost to complete the contract will be Rs. 2.1 million
excluding penalty. The cost incurred to date is Rs. 1.10 million.
 The mobilization advance received is Rs. 0.5 million to be adjusted entirely against the
progress billings in the current year.
 If the contract is completed before the agreed date, the contractor will get incentive of 5% of
the contract price, however, if there is a delay in the completion of the contract a penalty of
2% will be charged. On June 30, 2015, it is probable that the contract will not be completed
within the stipulated time.
 The progress billings stands at Rs. 1.12 millions and receipts are Rs. 0.75 millions.
 The work certified by the independent surveyor is Rs. 1.3 millions.

Required:
Prepare extract to Statement of Financial Position and Statement of Comprehensive Income. 15

*************************
 Pakistan Institute of Public Finance Accountants
Summer Exam-2016
Corporate|AGP|PG|PUBLIC Sectors
Management Accounting (03.05.2016)
Marks-100 D u r a t i o n : 3 hrs.
Additional time – 15 min for Paper Reading
[Instructions]
 Ensure that the question paper delivered to you is the same, in which you intend to appear.
 Read the instructions given on the title page of Answer Script.
 Start each question from fresh page.

Attempt all Questions

Q.1. Rasheed Textiles has two projects under consideration, Project A and Project B. The cash
flows of the projects are given as follows:
Year Project A Project B
0 (1200) (800)
1 200 50
2 300 50
3 400 400
4 450 500
5 500 600
The discount factor of the company is 10%. Ignore the effect of any taxation.
Required:
Calculate which project is better under each of the following methods: 15
i. Payback
ii. Discounted Payback
iii. NPV
iv. IRR

Q.2. Following data has been collected by the Management Accountant for preparing cash
budget of Superior Business for the year ending on 31st December 2017.
Cash balance on 01.01.2017 will be Rs. 50,000

Sales Purchases
Month Cash Sales Credit Sales Cash Purchases Credit Purchases
(Rs.) (Rs.) (Rs.) (Rs.)
2016
November 3,000 50,000 1,000 40,000
December Nil 60,000 2,000 50,000
2017
January 1,000 90,000 2,000 20,000
February Nil 80,000 1,000 30,000
March 3,000 50,000 Nil 40,000
April 2,000 90,000 3,000 30,000
May 1,000 60,000 Nil 40,000
June 2,000 80,000 1,000 30,000

Contd. on back
 2

NOTE:
 Creditors are paid in the next month of purchases.
 60% Debtors pay in the month of sale; 20% pay in the next month, and 18% pay in the
third month.
Following payments are expected in the months given below:

Payments January February March April May June

Payments of dividends 30,000 - - - - -
Repayment of loan - 20,000 - - 30,000 -
Interest payment - 2,000 - - 3,000 -
Purchase of assets - 25,000 - - 30,000 -
Salaries 10,000 10,000 10,000 10,000 10,000 10,000
Expenses 12,000 5,000 20,000 10,000 15,000 12,000

Following receipts of cash are expected in the months given below:

Receipts January February March April May June

Receipt of dividends 5,000 - - - - -
Sale of assets - 20,000 - - - -

Required:
Prepare Cash Budget for all months of the year 2017 of the Superior Business. Schedule of 20
monthly receipts from the debtors should be presented separately.

Q.3. Following information is available regarding two products produced by ABC Manufacturers
for the coming year:
Product A Product B
Sale price per unit Rs.70 Rs. 65
Variable cost per unit Rs. 35 Rs. 35
Production time per unit 3 hours 2 hours
Available maximum market per year 5,000 units 7,000 units
Present production per year 5,000 units 4,000 units

Total Fixed Costs per year Rs.110,000

Maximum production capacity per year 25,000 hours

Proposal:
A marketing firm has proposed that it can increase the available market for these products.
The details of the proposal are as follows:
Additional marketing cost per year Rs. 50,000
New market after additional marketing for Product A will be 7,000 units and for Product B it
will be 9,000 units.

Contd…..
 3

Required:
Guide the Management as to how many numbers of units of each product should be 15
produced and sold. Make income statement under marginal costing approach to show profit
under the following three options, also give your recommendations:
(i) Existing production
(ii) Maximum possible production without additional marketing
(iii) Production after accepting additional marketing proposed.

Q.4. The Telecom Co. is a company specializing in the provision of telephone systems for
commercial clients. There are two parts to the business:
 Installing telephone systems in businesses, either first time installations or replacement
installations;
 Supporting the telephone systems with annually renewable maintenance contracts.
Telecom Co. has been approached by a potential customer, Plus Co. who wants to install a
telephone system in new offices it is opening. Whilst the job is not a particularly large one,
Telecom co is hopeful of future business in the form of replacement systems and support
contracts for Plus Co. Telecom Co. is therefore keen to quote a competitive price for the
job. The following information should be considered:
 One of the company’s salesmen has already been to visit Plus Co. to give them a
demonstration of the new system, together with a complimentary lunch, the costs of which
totaled Rs.500.
 The installation is expected to take one week to complete and would require three engineers,
each of whom is paid a monthly salary of Rs.5,000. The engineers have just had their
annually renew-able contract renewed with Telecom Co. One of the three engineers has
spare capacity to complete the work, but the other two would have to be moved from
Contract X in order to complete this one. Contract X generates a contribution of Rs.6 per
engineer hour. There are no other engineers available to continue with Contract X if these
two engineers are taken off the job. It would mean that Telecom Co. would miss its
contractual completion deadline on Contract X by one week. As a result, Telecom Co. would
have to pay a one-off penalty of Rs.600. Since there is no other work scheduled for their
engineers in one week’s time, it will not be a problem for them to complete Contract X at
this point.
 Telecom Co.’s technical advisor would also need to dedicate eight hours of his time to the
job. He is working at full capacity, so he would have to work overtime in order to do this.
He is paid an hourly rate of Rs.45 and is paid for all overtime at a premium of 50% above
his usual hourly rate.
 Two visits would need to be made by the site inspector to approve the completed work. He
is an independent contractor who is not employed by Telecom Co. and charges Plus Co.
directly for the work. His cost is Rs.250 for each visit made.
 Telecom Co.’s system trainer would need to spend one day at Plus Co. delivering training.
He is paid a monthly salary of Rs.1,600 but also receives commission of Rs.130 for each day
spent delivering training at a client’s site.
 120 telephone handsets would need to be supplied to Plus Co. The current cost of these is
Rs.18.00 each, although Telecom Co. already has 80 handsets in inventory. These were
bought at a price of Rs.17.00 each. The handsets are the most popular model on the market
and frequently requested by Telecom Co.’s customers.

Contd. on back
 4

 1,000 meters of cable would be required to wire up the system. The cable is used frequently
by Telecom Co. and it has 200 meters in inventory, which cost Rs.1.25 per meter. The
current market price for the cable is Rs.1.35 per meter.
 Plus Co. would also need a computerized control system called ‘Swipe 2’. The current
market price of Swipe 2 is Rs.11,000 although Telecom Co. has an older version of the
system, ‘Swipe 1’, in inventory, which could be modified at a cost of Rs.4,500. Telecom Co.
paid Rs.5,500 for Swipe 1 when it ordered it in error two months ago and has no other use
for it. The current market price of Swipe 1 is Rs.5,400 although if Telecom Co. tried to sell
the one they have, it would be deemed to be ‘used’ and therefore only worth Rs.3,200.
 You should assume that there are four weeks in each month and that the standard working
week is 40 hours long.

Required:
Prepare a Cost Statement, using relevant costing principles, showing the minimum cost that 20
Telecom Co. should charge for the contract. Make DETAILED notes showing how each
cost has been arrived at and explaining why each of the costs above has been included or
excluded from your cost statement?

Q.5. The Rome group comprises two companies, S Co. and Z Co. 15
S Co. is a trading company with two divisions: The Design division, which designs wind
turbines and supplies the designs to customers under licenses and the Gearbox division,
which manufactures gearboxes for the car industry.
Z Co. manufactures components for gearboxes. It sells the components globally and also
supplies S Co. with components for its Gearbox manufacturing division.
The financial results for the two companies for the year ended 31 May 2014 are as follows:

S Co. Z Co.
Design Division Gearbox Division
Rs.’000
Rs.’000 Rs.’000
External sales - - 8,010
Sales 14,300 25,535 7,550
15,560
Cost of Sales (4,900) (16,200)* (5,280)
Administration Costs (3,400) (4,200) (2,600)
Distribution Costs – (1,260) (670)
Operating Profit 6,000 3,875 7,010
Capital Employed 24,000 32,500 83,000

* Includes cost of components purchased from Z Co.

Required:
Discuss the performance of Z Co. and each division of S Co. calculating and using the
following three performance measures:
(i) Return on Capital Employed (ROCE)
(ii) Asset Turnover
(iii) Operating Profit Margin

Contd……
 5

Q.6. Dr. Nadeem has setup a small private clinic, He charges Rs. 500 per patient for consultation
while he estimates variable expenses to be Rs. 180 per patient. It includes nurses’ time for
taking temperature, measuring blood pressure etc. The clinics’ fixed expenses amount to Rs.
2,000,000 per year.

Required:
(a) Compute Contribution Margin per patient. 03
(b) Compute Contribution Margin Ratio. 04
(c) Compute Break-even point in number of patients and in consultation fees. 04
(d) Compute the number of patients that must visit the clinic in order to earn target profit 04
of Rs. 1,800,000 per year.

********************
 Pakistan Institute of Public Finance Accountants
Summer Exam-2016
Corporate Sector
Audit, Assurance & Ethics (04.05.2016)
Marks-100 D u r a t i o n : 3 hrs
Additional time – 15 min for Paper Reading
[Instructions]
 Ensure that the question paper delivered to you is the same, in which you intend to appear.
 Read the instructions given on the title page of Answer Script.
 Start each question from fresh page.
 Book Allowed – International Auditing & Assurance Standards

Attempt all Questions

Q.1. Explain, with reasons, the possible audit opinion which may be given in case of each of
the following cases (each part is to be treated independently and answered separately):
(a) In a company whose fixed assets comprise 60% of total assets, Inventories as per 02
physical count performed in the presence of auditor differ from inventories recorded
in the Financial Statements by a material amount.
(b) The company does not account for provision for environmental damages in its 02
Balance Sheet. As per prevailing laws of the city, a fine of Rs. 1 million is imposed if
chemical released in drainage system of the city is more than 1 ton. As per estimates,
the chemical released for the year is 2.4 tons. The company’s profit for the year is Rs.
10 million.
(c) A beverage-manufacturing company formed a year ago has not tested its fixed assets 02
for impairment
(d) The management does not permit the auditor to send confirmation letters to trade 02
receivables, which are the most significant item on the balance sheet.
(e) A company applies straight-line basis for recording of depreciation whereas the 02
commonly used basis in the industry is the Reducing Balance Method.

Q.2. (a) What is the difference between reasonable assurance and moderate (negative) 04
assurance? Provide one example each of an engagement resulting in reasonable and
moderate assurance.
(b) Differentiate between the procedures performed by the practitioner when he is 04
providing reasonable as compared to moderate assurance.

Q.3. You are an engagement manager in Alba & Co Chartered Accountants, Winterfell
Company Limited, a listed company, is an audit client of your firm. The Company is
engaged in the business of producing and selling packed juices. The Company had a good
year end with 20% increase in profitability.
The Company usually starts building up stock two month in advance of the summer
season. The Company uses the following method to measure its stock.
Raw materials - On weighted average cost comprising inward freight
Finished Goods - On manufactured cost measured using absorption costing
comprising labor, raw material and overheads
You are now reviewing the working papers relating to the planning phase of the
engagement.
Contd. on back
 2

(a) While reviewing the working papers on inventory what are the risks (assertion wise) 08
you expect that the audit team should have identified as part of formulating audit
plan?
(b) Describe eight internal controls over raw material and finished goods handling 08
which you expect to test during the audit of Winterfell Company.

Q.4. As per ISA 620, if information to be used as audit evidence has been prepared using the
work of a management’s expert, the auditor shall evaluate the competence, capabilities and
objectivity of that expert.
(a) Define ‘management’s expert’ and ‘auditor’s expert’ 04
(b) What factors need to be considered when determining the nature, timing and extent 05
of procedures when relying on the work of an expert?
(c) Can an auditor mention / refer the use of the expert in his audit report? If yes, in 03
what circumstances can such a reference be made?

Q.5. Mr. Hameed is Quality Assurance partner in a large sized firm. You are working under
him as Quality Assurance Manager. You received an email from Hameed to address
the following ethical matters:
 Talha Khan is an engagement manager of the audit of Whatoz Cement Company
(WCC) a listed client. Talha and Umer Naeem are friends since school days and
both are neighbors as well.
 The Chief Financial Officer, Mr. Naeem ul Haq, of WCC is the father of Umer
Naeem.
 One of the assurance client Tirmazi Traders (Pvt.) Limited has approached your
firm to facilitate them in preparation of the fixed asset register. The relevant
assurance partner has asked Mr. Hameed whether the firm can provide such
service.
Required:
With reference to the code of Ethics, briefly describe the ethical risk/ threat involve in 10
above situations. For each matter, also describe safeguards that your firm should take to
reduce the ethical risk identified.

Q.6. (a) As required by ISA-320 - Materiality in planning and performing an Audit, the 06
concept of materiality is applied by the auditor both in planning and performing the
audit, and in evaluating the effect of identified misstatements and of uncorrected
misstatements on the audit. Materiality and factors affecting its computation and
evaluation need to be documented.

What are the amounts and factors that the auditor is required to document in
accordance with ISA-320?
(b) How an auditor should prepare sufficient audit documentation to enable an 06
experienced auditor, having no previous connection with the audit, to conclude that
audit documentation has been done in accordance with ISA-230-Audit
Documentation?

Contd……
 3

Q.7. You are part of the audit team engaged on the audit of Salwa Power Limited. In planning 08
meeting of audit, you have been given the area of Revenue and Trade Receivables.
The engagement manager has informed you that after performing test of controls (TOCs),
if the client’s controls are operating effectively, you can use substantive analytical
procedure to bring efficiency in your work without increasing audit risk.
What are the REQUIREMENTS you have to consider, as laid down by ISA 520, when
designing and performing substantive analytical procedures?

Q.8. Explain the impact of following on audit report if management does not agree. Also
suggest one alternative solution in each case.
(a) The management of ABC limited has not allowed audit team to perform stock take 05
at year end (31 December 2015) because stock was not arranged for counting.
Stocks amount to Rs. 300 million at year end.
Total current assets of the Company amounts to Rs. 1000 million and total assets of
the Company amounts to Rs. 2000 million. The profit before tax amounts to Rs. 500
million.
(b) The license of XYZ Pharmaceutical (the Company) has been cancelled after the 05
decision of Supreme Court. The Company cannot operate without having a valid
license. You are of the opinion that the Company is not a going concern. But the
Financial Statements of the Company are prepared on going concern basis.

Q.9. (a) Define Subsequent events as stated in ISA-560 – Subsequent Events? 02

(b) You are an audit partner at Helf and Pott Auditors, responsible for the audit of 12
Light and Life Limited Company (a listed client). All audit work is complete, Board
of Directors has approved the Financial Statements and you have also signed the
audit report. The Financial Statements of the Company are not yet issued for
publication to shareholders and general public.

You came to know that the Executive Management has not disclosed to the audit
team a major litigation, consequently no provision has been recorded in the
Financial Statements nor any contingency has been disclosed. As per the relevant
Financial Reporting Framework (IAS-10), amendment of the Financial Statements
to give effect to the subsequent event has not been made in the Financial
Statements.

State the actions you will have to take in the above situation. Also explain what will
be your course of action if:

(a) The Management amends the Financial Statements.

(b) The Management does not amend the Financial Statements.

****************************