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Subject: Accountancy & Auditing

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Paper: Accountancy & Auditing (200 Marks)

Paper-I (MARKS-100)
(A) Financial Accounting (50 Marks)

I. Fundamental Accounting Principles, Concepts, Assumptions and Conventions: Nature and Scope of
Accounting, Accrual/Matching Concept, Consistency of Presentation and Comparability, True and Fair
View, Neutrality, Materiality, Prudence, Completeness, Understandability and Usefulness, Going Concern,
and Substance over Form.

II. Accounting Cycle/Process and Financial Statements: Transactions and/or Events, General Journal,
General Ledger, Trial Balance (Unadjusted),Adjusting Entries and Adjusted Trial Balance, Work Sheet,
Financial Statements including Income Statement, Statement of Financial Position (Balance Sheet),
Statement of Cash Flows and Statement of Changes in Equity in accordance with the Financial Reporting
Framework as specified by International Accounting Standard Board (IASB) through IFRSs/IASs, and by
Securities and Exchange Commission of Pakistan throughCompanies Ordinance 1984, and Closing and
Reversing Entries.

III. Attributes, and Significance of Accounting Information: Attributes of Accounting Information,

Information/Reporting Requirements of various Users/Stakeholders of Financial Statements including
External (Investors/Shareholders, Creditors, Suppliers, Lenders/Financiers, Government Agencies etc.)
and Internal (Board of Directors, Partners, Managers, Employees etc.) Stakeholders.

IV. Accounting for common Legal Forms of a Business: Accounting Principles and Financial
Statements of Sole-proprietorships, Partnerships and Joint Stock Companies including Banking
Companies (Excluding Advanced Topics likeAmalgamation, Capital Reduction, Consolidation etc.)

V. Accounting for Associations Not-for-profit, and for Public Sector: Accounting Principles and
Financial Statements - of Associations Not-for-profit, and – of PublicSector Entities as per Standardized
Financial Reporting Framework provided by International Public Sector Accounting Standards (IPSAS)
Board and Practices beingfollowed in the country.

VI. Accounting for Non-current Tangible Assets: Fundamental Concepts and Principles concerning
Non-current Assets: Cost; Depreciable Amount; Depreciation; Fair Value; Property, Plant and
Equipment; Residual Value; and Useful Life. Depreciation Methods and their Application (as specified
by International AccountingStandards Board):Straight-line Method; Reducing Balance Method; Number
of Units Produced and basic know-how of other Methods/Techniques being commonly used by the
Industry.

VII. Fundamental and Technical Analysis of various Forms of Organizations: Financial Statements’
Analysis including both Horizontal (Measuring Change) and Vertical (Ratio) Analysis including Liquidity
Ratios, Activity Ratios, Debt Ratios, Profitability Ratios and Market Ratios; Technical and Industry
Analysis.
(B) Cost and Managerial Accounting (50 Marks)

VIII. Fundamental Cost Accounting Principles and Concepts: Nature and Scope of Cost and Managerial
Accounting; Cost Concepts, Elements and Classification; Underlying Differences among Financial, Cost,
and Management Accounting.
IX. Accounting for Material, Labour and Factory Overheads (FOH):Recognition andValuation Principles
for Material Inventory, and Methods to control Material Inventory; Calculation/Measurement and
Accounting for Payroll for all forms of Labour, Time Rate and Piece Rate Systems; Commonly used
Group Incentive Schemes; Factory Overhead Costs and FOH Rate, Departmentalization of FOH Costs,
their Allocation,Apportionment and Reapportionment (Primary and Secondary Distributions), Methods for
Secondary Distribution including both Repeated Apportionment/Distribution and Algebraic Method.

X. Costing for Specific Jobs, and Process Costing: Nature of a Specific Job, and Job-order Costing;
Process Flow and Process Costing by the use of Cost of Production Report (CPR).

XI. Management Accounting for Planning, Decision-making and Control:

Budgeting and its Use: Meaning and Nature of a Budget; Major Forms of a Budget including Production
and Sales Budget, Cash Budget, Flexible Budgets, Zero-basedBudget, Master Budget etc.

Break-even Analysis: Difference between Marginal and Absorption Costing Techniques; Concept of
Relevant Cost; Application and Use of Contribution Margin and other Concepts for Planning and
Decision-making (under Break-even Analysis)

Variance Analysis: Meaning and Use of Standards and Variances; Major Classification of Variances
including Material, Labour and FOH Variances, and their Computation.

Paper-II (MARKS-100)

(A) Auditing (40 Marks)

I. Fundamental Auditing Principles and Concepts: Audit and Auditing, True and Fair View, Audit
Assertions, Reasonable Assurance, Documentation and Audit Evidence,Audit Program, Audit Risks,
Computer Information Systems (EDP Systems) and Computer-assisted Audit Techniques (CAAT),
Inspection, Fraud, Going Concern, Audit Materiality, Misstatement, Governance and Premise, Tests of
Control and Substantive Procedures.

II. Audit Considerations, Dimensions and Conduct: Internal Control System and Internal Audit, Internal
VS External Audit, Responsibility for Financial Statements, Audit Planning, Scope of an Audit, Objectives
of an Audit, Inherent Limitations of an Audit, Risk Assessment and Management, Internal Audit and
Corporate Governance,
Classification of Audit, Qualities of an Auditor, Auditing in Computer Information Systems (EDP Systems)
and Computer-assisted Audit Techniques, General Auditing Principles and Techniques commonly
applicable to various Types of Undertakings including Merchandizing, Manufacturing, Banking, Insurance,
Investment Entities etc., Audit Performance and Audit Completion.

III. Role and Responsibilities of an Auditor: Auditor’s professional and legal Rights, Responsibilities &
Duties, and Liabilities; Auditor’s Opinion and Report, and their classification (Types); - as specified under
the Companies Ordinance 1984, and in thehandbook of IFAC.
(B) Business Taxation (30 Marks)

IV. Tax Structure, and Fundamental Concepts vis-à-vis Income Tax in Pakistan: Tax Structure in
Pakistan; Fundamental Definitions/Terminologies defined under Section 2 of the Income Tax
Ordinance 2001.

V. Income Tax and Sales Tax Principles, and their Application: Selected Provisionsfrom Income
Tax - Income for Tax Purposes [Section 4, 9 & 10], Heads of Income [Section 11], Tax Payable
on Taxable Income [First Schedule to the Ordinance], Salary Income and Taxation [Sections 12 to
14], Income from Property [Sections 15 &16], Income from Business[Sections 18 to 20], Capital
Gains[Sections 37 to38], Income from other sources[Section 39, 40, 101(6), 111],Tax Credits
[Sections 61 to 65], Taxation of Individuals, AOPs and Companies [Sections 86, 92, 94], Due Date
forPayment of Tax [Section 137], Deduction of Tax at Source/With-holding Tax [Sections147, 149,
153, 155]and related Income Tax Rules 2002.

Selected Definitions and Provisions from Sales Tax –Scope of Tax [Section 3], Exempt supply
[Section 2(11)], Goods [Section 2(12)], Input Tax [2(14)], Registered person [Section 2(25)],
Supply [Section 2(33)], Tax [Section 2(34)], Retail Price and Retailer [Section 2(27)& 2(28)],
Taxable Activity [Section 2(35)], Taxable Supply [Section 2(41)], Tax Fraction [Section 2(36)], Tax
Period [Section 2(43)], Time of Supply [Section 2(44)], and Determination of Tax Liability [Section
7].

(C) Business Studies, and Finance (30 Marks)

VI. Business Studies: Nature and Scope of a Business Entity, Contemporary Challenges posed to
a Business; Common Legal Forms of a Business Entity – Sole-proprietorship, Partnership, Joint
Stock Company, their Features, Formation and Management; Business Combinations and their
Scope; Business Cycle and its Implications; Role of Information Technology in Business.

VII. Finance: Meaning, Nature and Scope of Finance, and Financial Management;Common Modes
(Types) of Business Finance – Short-, Medium-, and Long-term Financing; Nature and Scope of
Financial Markets and Institutions; Features and Classification of Financial Markets; Financial
Management Techniques for Decision-making: Time Value of Money, Cost of Capital and Capital
Budgeting Techniques.

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 Suggested Reading
S.No. Title of Books Author
Accounting Paper – I (100 Marks)
Financial Accounting, and IntermediateAccounting Kieso, Weygandt and
1
Warfield
2 Fundamentals of Accounting Principles Wild. Larson. Chiappetta
3 Accounting for Decision-making Meigs, William and Haka
4 IFRSs / IASs ICAP / IFAC
Principles and practice of Book Keeping andAccounts
5 Vickery, B.G

6 Financial Accounting M. Hanif and A. Mukherjee

Principles of Accounting, and AdvancedAccounting
7 Sohail Afzal

Principles of Accounting, and AdvancedAccounting

8 M.A Ghani and Ejaz

9 Cost Accounting – Planning and control Usry, Hammer, Matz

Peter C. Brewer, Ray H.
10 Managerial Accounting
Garison, Eric W. Noreen.
11 Cost Accounting Jain and Narang
12 Cost Accounting Nisar ur Din.
Accounting Paper – II (100 Marks)
13 Auditing- Principles and Techniques S. K. Basu
14 Auditing Dickseee, L.R
15 Practical Auditing Spiecer and Pegler
16 Companies Ordinance 1984 SECP
17 Auditing S. K. Millichamp, ELBS
Handbook of International Quality Control,Auditing,
18 ICAP / IFAC
Review and Other Assurance
19 Auditing M. Irshad
20 Advanced Auditing Prof. Dr. Khuaja Amjad Seed
21 Income Tax Ordinance 2001 FBR
Introduction to Taxation / Synopsis of Taxes inPakistan
22 Mirza Munawar Hussain

23 Law in Practice – Income and Sales Tax Abdul Razzaq

24 Business Taxation Ijaz Ali Waince
25 Principles of Managerial Finance Lawrence J.Gitman
26 Fundamental of Financial Management Van Horne. Wachowicz Jr.
 Bhaduri
27 Basic Business Finance Hunt, Williams and Donaldson
28 Business Studies Hall, Jones and Raffo
29 Foundations of Financial Markets and Institutions Fabozzi, Modigliani, Jones and
Ferri
30 Contemporary Business Kurtz and Boone
31 Principles and Practice of Commerce Stephenson
32 Introduction to Business M. Saeed Nasir

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