Professional Level November December 2018 all questions ICAB

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AUDIT & ASSURANCE
Time allowed – 3 hours
Total marks – 100
[N.B. – The figures in the margin indicate full marks. Question must be answered in English. Examiner will take account
of the quality of language and of the manner in which the answers are presented. Different parts, if any, of the same
question must be answer in one place in order of sequence.]
Marks
1. (a) You are in charge of audit of Holiday Resort Limited financial statements which is a popular
tourist destination. Your team have completed audit fieldwork. You and your team had a
discussion meeting with General Manager regarding the identified exceptions. At the end of the
discussion, General Manager of the resort (GM) appreciated the audit team for finding all the
improvement areas and thanked the audit team for the hard work. As a token of appreciation, he
offered you and the full team a free stay in the resort including complimentary breakfast and free
access to amenities during any weekend of your choice. You know the resort is very luxurious
and it is very expensive as well as difficult to book the resort during the weekend. What will you
respond to the General Manager? 3
(b) You are engagement manager for the audit of Alpha Technologies Limited (Alpha). During the
audit, your team members has notified you that management of Alpha has decided to dispose
some fully depreciated laptops, desktops and Cars. Most of the times disposed assets are in
workable condition or require minor repair. As per the general practice, Alpha first invites
internal bidding from employees for the assets being disposed. Alpha only calls for public bid if
any asset remains unsold after internal bidding. Accountant of Alpha asked your team whether
they want to participate in the internal bidding. Your team members have expressed their interest
to you and requested your permission to participate in the bidding for laptops and cars. How will
you respond to your team members’ request? 3
(c) Examples of situations when the auditor’s independence may be impaired are:
(1)Providing taxation services to the company and its auditors
(2)Providing accountancy services, including preparing periodic management accounts and
annual financial statements
(3)Providing management consultancy, including advice on new computer systems and systems
of internal control
Requirement:
Describe how each of the situations listed above may compromise auditor’s independence, and
the ways in which an audit firm can minimize the effect which the provision of other services has
on independence. 6
(d) Mesh Apparels Ltd., a well-established garments manufacturing and exporting company where
you have joined recently as financial controller, is owned by Habibur Rahman (40%), Mominur
Rahman (35%) and Rashidul Huq (25%). Upon joining you identified that the company has
documentation lacking specially in revenue and payable segments. The company has various
bank loans amounting to Tk. 180 crore but revenue stream does not match fixed expenses. You
came to know that Mominur Rahman who is the Chairman leads a flamboyant life. A few days
after your joining suddenly Habibur Rahman who was the Managing Director of the company
died of cardiac arrest. After MD’s sudden death Mominur took over all executive authorities of
the company and invited Shafa Habib, who is the widow of Habib and who gave her properties
as mortgage against bank loans, to join the company as MD only as a formality merely to sign
loan related official documents.
In the first week after MD’s demise, the sales director (Chairman’s spouse) brings to you a cheque
in settlement of the account of a major buying house. She explains that the cheque (which appears
to clear the amount due) is in fact an overpayment, as the balance showing on the sales ledger is
before allowing bulk discount (which is calculated retrospectively). The sales director shows you
her calculations and the agreement as authorized by the board. The sales director states that the
buying house’s Managing Director has come to collect the discount in cash. She says that this is
not an unusual occurrence for some of the company’s better parties. It helps to maintain a good
relationship with those parties, which leads to purchasing loyalty. Another benefit of this
arrangement is that it gives the sales director regular face-to-face meetings with the senior staff
of those parties. It also reduces the high charges that the bank makes for handling cash.
PL- Nov-Dec'18

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You ask the sales director why the customers prefer to receive a refund in cash, rather than simply
pay the net amount needed to settle the account. She replies that it is not appropriate for her to
question their motives.
In the second week the production manager gave you a panic call that the workers in the factory
started agitation for demand of paying-off their wages and overtimes, which are pending for last
two months. When you talked to the Chairman he advised you to pursue bank to release more
fund to pay the workers. When you talked the bank manager straight forwardly said that no fund
will be released until a trust worthy Accounts Receivables list is submitted to the bank. You also
received a call from warehouse manager who informed you that there is significant mismatch
between production data and actual physical inventory at the warehouse. At this issue your
chairman advised you to launch an investigation against Rashidul Huq, who was salaried factory
in-charge before being taken as shareholder and director.
The company received a letter from tax authority claiming huge pending tax and penalty. When
you consulted with the company’s tax retainer for submitting appeal petition, he accepted that
the company’s tax returns were submitted based on fake sales figures and using tampered
vouchers so chances of winning the appeal is bleak.
The above situation led you to seriously confronting with ethical choices and moral dilemmas in
the course of discharging your professional duties.
Requirement:
In given situation above, what are the main ethical issues & the ethical choices and moral
dilemmas you are confronting? What should be your responses to those ethical issues as an
individual professional accountant? 8
2. (a) Paradise Limited is one of the oldest audit clients of your firm. You are engagement manager for
the client and currently preparing for the audit of year end 31 December 2018. You have formed
a team who has previous auditing experience with the client. Before starting any auditing
activities, your team senior has informed you in private that there is a vacancy at accounts
department of Paradise Limited and its management has approached him offering the vacant
position as he had understanding of the business and accounting process of Paradise Limited.
Your team senior has not yet decided whether to accept the position.
Requirement:
Identify and explain the issues that have arisen in the above situation. 2
(b) An accountancy firm has previously used the services of an independent provider to conduct cold
reviews of its completed audit engagements. However, the partners have decided to undertake
in-house all aspects of monitoring the quality of audits carried out.
Requirement:
Set out the objectives of conducting cold reviews which in-house system must achieve. 3
(c) A prospective auditor is required to write to the client's existing auditor to seek information which
could influence his decision as to whether he may accept the auditor appointment. Give examples
of relevant matters which could be within this letter and which would influence the prospective
auditor's decision to accept the audit appointment. If previous auditor informs you that their fees
for last audit engagement remains unpaid, should your firm accept the engagement? 4
(d) You are the engagement manager for the audit of a private commercial bank having a network of
more than 150 branches, across the country. During a recent meeting, a member of the audit
committee referred to an instance of irregularity in a branch, whereby the Branch Manager
had extended credit to a close relative without following the bank’s credit disbursement
procedures. The member criticized the auditors for their failure to detect such instances and bring
it to the notice of management and audit committee. The engagement partner to the audit has
advised you to justify your position in writing to the client.
Requirement:
As an engagement manager, write a letter to the audit committee informing your point of view
with specific references to the International Standards on Auditing, where applicable. 3
(e) Fieldwork for the annual audit of Greentec Textile Mills Limited (GTML) has been completed
and the financial statements and the audit report are due to be signed next week. During the

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concluding meeting with the client, the auditor was informed that a fire has destroyed all the raw
cloth placed in the warehouse at the mill. About 60% of the destroyed cloth was purchased after
the reporting date. However, due to certain defect in the insurance policy, the insurance company
settled the claim by paying 80% of the amount of loss.
Requirement:
State the audit procedures and actions that should be carried out by the auditor in the above
situation. 3
3. (a) Walton Motors, produced by Walton Group was established in 1977. Walton is the first motorcycle
manufacturer of Bangladesh with different models of 80cc to 150cc motorcycle. The company
exports products in different countries of the world. Ruhul Amin, Partner announced that your firm
has just received the audit engagement letter of Walton Motors (WM) and instructed you to officially
start the audit planning phase. You assigned Harun and Lima senior associates of the audit team with
the task to gain an understanding of business of Walton Motors. They are in favor of jump start the
field audit than gaining thorough understanding of the client beforehand. You came to know that the
CFO of WM recently resigned and senior management would release him on satisfactory completion
of financial audit. Thus, there is a pressure from the CFO for quick completion of the audit same as
last year audit and internal control documentation.
Requirement:
In your opinion what is the importance of a formal audit plan and what could go wrong if you do
not plan your audit appropriately? 5
(b) Runner Automobiles Ltd. started its production of motorbikes in 2011 in Bhaluka and currently
employs 888 people. It has more than 200 dealers across the country. It produces 80 per cent of
the motorcycle components except the engine and some electronic parts. The company produces
more than 40,000 units of motorbikes a year and controls more than 11 percent of the domestic
market. The plant makes motorbikes with capacities ranging from 80cc to 150cc at between Tk.
54,000 and Tk. 144,000. Its sales have been growing at 20 percent year-on-year.
Audit Manager Mijanur Rahman is preparing a report for the engagement partner of RAL. Rahman
has been reviewing certain aspects of RAL’s business dynamics given the change in economic
conditions over the past 12 months. Motorcycle sales year-on-year have risen nearly 25 per cent to
3.50 lakh units in 2017, after the government lowered the supplementary duty on imported parts
and components of two-wheelers from 25 per cent to 20 per cent. The year 2017 was a boom period
for the industry, in which 3.50 lakh units of motorbikes were sold and the forecast is that this will
reach around 4 lakh units at the end of 2018 due to upcoming general election.
Runner Automobiles has beefed up its marketing efforts in Nepal in a bid to capture 15 percent
of the growing motorcycle market in the Himalayan nation in the next five years. To this end,
RAL recently appointed a distributor, Raman Motors, which is a subsidiary of Nepalese
conglomerate Raman General. Raman has already appointed 11 dealers across the country to sell
Runner motorcycles and plans to employ more and introduce after-sales services. During 2017
RAL has shipped 400 motorcycles of seven models to Nepal. Primarily, Runner has a target to
send 3,000 units of motorcycles to Nepal every year.
Requirements:
(i) Identify the issues that potentially have an impact on the audit of Runner Automobiles Ltd. 5
(ii) How do you develop a plan for successful audit by identifying the risks of financial statements
misstatements that require closer examination? 5
(c) Tabassum a senior audit associate has drafted an audit plan for a new client Bangladesh Honda
Private Limited (BHL), a Bangladesh-Japan joint venture company. Honda’s motorcycle
business joint venture in Bangladesh is a new motorcycle factory on its own property in the Abdul
Monem Economic Zone, Gazaria, Munshiganj. It will have an initial annual production capacity
of 100,000 units of motorcycles with some special features like high speed, affordability and low
CO2 emissions, and enhance customers’ satisfaction and efficiency in Bangladesh. In line with
market trends, BHL plans to continue to invest in expanding its production capacity to 200,000
units by 2021, and will build its full-phase factory to accommodate future market growth. Honda
has invested Tk.1.91 Billion in the new factory where its partner Bangladesh Steel and
Engineering Corporation (BSEC) invested Tk.1.08 Billion. Total capital is Tk.3.6 Billion and
Capitalization ratio is 70% Honda Group (Honda Motor Co., Ltd. and Asian Honda Motor Co.,

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Ltd.) and 30% Bangladesh Steel and Engineering Corporation. Its primary business will be
import, production, and sales of motorcycles and parts. Earlier BHL had a small factory at
Sreepur, Gazipur only for assembling the products but not worthy for manufacturing; and it
showed more interest in imports than manufacturing.
Tabassum’s plan shows that audit time is divided to reflect this revenue pattern, i.e. 20 percent
of the audit time will be spent on the import trade business and 80 percent of the time will be
spent on the manufacturing. Tabassum believes that the significance of the revenue activities
should be the only driver of the audit plan though the client has strong related parties but it has a
simple, effective corporate governance structure.
Requirement:
Being the engagement manager of the audit what additional points would you like to see before
accepting the audit plan? 5
4. Your firm has been appointed as the auditor of Fresh Skincare Products Limited (Fresh) for the year
ended 30 June 2018 and will be auditing Fresh for the first time. You have been assigned as the
manager for the engagement. As part of understanding the entity, you have collected following
information about business & operation of Fresh:
Fresh is one of the oldest and largest manufacturers of skincare products in Bangladesh. It has been
operating successfully for more than two decades. It has its registered office in Dhaka and factory in
Gazipur. Fresh has its own distribution channel which currently consists of one central depot annexed
to the factory and 24 regional depots across the country. Business model of Fresh includes importing
different chemical & acids as ingredients and produces skin care products in its own production
facility. Finished goods are transferred to the central depot and subsequently dispatched to the
regional depots. Fresh does not directly sell to the end consumers. It primarily sells to super shops
and retailers who eventually sell to the end consumers with margin set by Fresh.
Fresh has implemented an Enterprise Resource Planning (ERP) software which contains several modules
in order to synchronize and record purchase of raw material, production, movement of inventory,
capturing sales order, generating invoice, recording sales and salary & wages data. ERP system compile
all transactions and information in the form of ledger through accounting & finance module.
Fresh has a large sales promotion team who collects sales order from the retailers and records it the
ERP system through their portable handheld devices or a mobile app. Super shops can directly place
order in the ERP System. ERP system then automatically selects the nearest depot from where goods
will be delivered. If goods are not available in the nearest depot, ERP system notifies the central
depot. Central depot then delivers the good to that depot. However, in the case of emergency, central
depot arranges delivery from the next nearest depot. The depot that is delivering the goods generates
invoice. ERP records the sales against each customer name and updates sales & customer ledger. In
the case of return, Sales promotion team initiates the return process and sales return is recorded in
ERP only when depot receives the returned goods.
Procurement deportment issues purchase order based on the sales trend and forecast. Purchase orders
and goods receipts are recorded through the ERP system. Purchase is recognized when goods are
received at factory premises. Based on the information entered by the procurement team, ERP system
records inventory purchase and updates inventory and supplier ledger. In the case of return of
purchased goods, return is recorded when goods are returned by the procurement department.
At the time of production in factory, production department records raw material issues, production
related expenses and quantity of finished goods. They manually allocate the overheads and assign
cost per unit of finished goods. All these are then recorded in the ERP.
At the end of each month HR department accumulates monthly salary & wages payable and records
in the ERP system. ERP system then updates the salary & wages expanse and payable ledger. Finance
department then disburses the salary & wages and records the payment in ERP.
Accounts department then posts journals related to depreciation, expense provisions and finalizes the
ledgers. A trial balance is generated by the ERP based on which accounts department prepares
financial statements of the company.
None of the departments are aware of the information posted in ERP by another departments.
Department heads are responsible for monitoring information entered by the employees of that
department. All employees of the departments can access the ERP module related to their department.

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Requirements:
(a) Explain why it is important for you and your team to have an understanding of the ERP system
used by Fresh and take the ERP system into consideration during the audit? 2
(b) How the ERP system will impact in your audit strategy? Describe the procedures your team
should perform related to the EPR system. 3
(c) Based on your understanding of the business, identify and explain the risks involving ERP System
used by Fresh. Design procedures you will perform in response to the risks you have identified. 10
(d) Suggest the controls which Fresh should implement to reduce/ eliminate the risks you have
identified. 5
5. (a) How will you evaluate audit evidence obtained to prepare the auditor’s report? What are the
matters to be communicated with those charged with governance? 4
(b) Write appropriate audit opinions based on the following scenarios: 6
(i) As explained in Note 13, the company has not consolidated the financial statements of subsidiary
XYZ Company it acquired during 2017, because it has not yet been able to ascertain the fair values
of certain material assets and liabilities at the acquisition date. This investment is therefore accounted
for on a cost basis. Under International Financial Reporting Standards, the subsidiary should have
been consolidated, because it is controlled by the company. Had XYZ been consolidated, many
elements in the accompanying financial statements would have been materially affected. The effects
on the financial statements of the failure to consolidate have not been determined.
(ii) We were not able to observe all physical inventories and confirm accounts receivable due to
limitations placed on the scope of our work by the Company. We were unable to satisfy ourselves
by alternative means concerning the inventory quantities and accounts receivable held at
December 31, 2017, which are stated in the balance sheet at Tk. 25.00 crore and Tk. 30.00 crore
respectively. As a result of these matters, we were unable to determine whether any adjustments
might have been found necessary in respect of recorded or unrecorded inventories and accounts
receivable, and the elements making up the income statement, statement of changes in equity,
and cash-flow statement balance.
(c) You are manager of Shovon & Co. Chartered Accountants (SC). Following issues have arisen in
three of your clients which are unrelated to each other.
Aquatic Limited
Aquatic Limited (Aquatic) is a beverage company engaged in selling bottled drinking water. Its
board of directors consists of 1 chairman, 6 directors and 3 independent directors. Aquatic is a
subsidiary of Ocean Limited and Widespread Limited is a subsidiary of Aquatic. Ocean limited
manufactures the bottled water for Aquatic and Widespread distributes the bottles across the
country. Marketing director of Aquatic owns Bottle Label Limited which supplies bottle cap and
label to Ocean Limited. In the financial statements, no disclosure has been made.
Orbit Limited
Orbit Limited (Orbit) is a new client of your firm. You are auditing the financial statements of
first year after incorporation. At the end of your audit. Your team has requested management to
issue management representation. However, management of the company refuses to sign the
management representation letter.
Blaze Limited
Blaze Limited (Blaze) has reported purchase of a land in its financial statements under property,
plant and equipment. Value of land is material for Blaze. While your team was going through the
land purchase documents, your team members noticed that the land has been registered under the
name of company owner Mr. Mamun instead of Blaze. In response to inquiry of your team,
management has explained that it is not a big issue as Mr. Mamun owns the company and
company will be using the land for constructing its factory.
Requirements:
(i) Identify related parties of Aquatic Limited that should be reported in its financial statements.
What additional information should be disclosed? 3
(ii) Help your team to identify risks from the above situations and design appropriate audit
procedures to mitigate the risks. 9
(iii)What will be the audit opinion in respect of each of the items after completing your audit
procedures? 3

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FINANCIAL ACCOUNTING & REPORTING
Total marks – 100
[N.B. – The figures in the margin indicate full marks. Questions must be answered in English. Examiner will take
account of the quality of language and of the manner in which the answers are presented. Different parts, if
any, of the same question must be answered in one place in order of sequence.]
Marks
1. You are the Financial Controller of RACO Ltd, a holding company listed on Bangladesh stock
exchanges. Together with the Finance Director, you have held conversations with external
consultants about accounting policy implementation issues. You have discussed a number of areas
where the Finance Director believes the application of the requirements of a IFRS would not give a
'true and fair view' for users. The Finance Director has sent you the following extract from a note
prepared by the consultants.
'Accounting policies
It is essential that the accounting policies selected when implementing IFRS result in financial
statements that give a fair presentation. The application of the principle of substance over form is
integral in achieving this.
The choice of accounting policies is a matter of judgement and careful consideration is required
particularly where you wish to override the requirements of an accounting standard.'
The Finance Director wishes to discuss the above extract with you. He has a strong personality and he is
adamant that non-compliance with IFRS may be justified where it does not give a true and fair view.
Requirements:
(a) Prepare notes for your meeting with the Finance Director:
(i) Explaining the concept of 'fair presentation' and comparing it with ‘true and fair view'. 3
(ii) Explaining the concept of 'substance over form' and its relationship to ‘fair presentation'. 3
(iii)Explaining the circumstances in which non-compliance with the detailed provisions of a
IFRS is justified. 3
(b) Identify the ethical issues and actions, from the above scenario, that you should consider arising
from the adoption of IFRS and your professional relationship with the Finance Director. 3
2. RESL Ltd. manufactures emergency power equipment. Its most popular generator is a model called the
PraMac, which has a retail price of Tk. 1,500 and costs RESL Tk. 740 to manufacture. It sells the
PraMac on a standalone basis directly to businesses, as well as provides installation services. RESL also
distributes the PraMac through a consignment agreement with GME LLC. Income statement data for
RESL's first quarter of 2018 from operations other than the PraMac generator are as follows:
Revenues Tk. 6,500,000
Expenses 4,350,000
RESL has the following information related to four PraMac revenue arrangements during the first
quarter of 2018.
(1) RESL entered into an arrangement with the Super Stores Ltd. (SSL) to deliver PraMacs for the
meat lockers in the super-stores. RESL provides a 5% volume discount for PraMacs purchased
by SSL if at least Tk. 450,000 of PraMacs are purchased during 2018. By March 31, 2018,
RESL has made sales of Tk. 360,000 (Tk. 1,500 × 240 generators) to SSL. Based on prior
experience with this promotion in two neighboring cities, the discount threshold is met for the
year if more than one-half of the target had been met by mid-year.
(2) On January 1, 2018, RESL sells 20 PraMacs to Grameen Store Ltd (GSL). GSL signs a 6-
month note due in 6 months at an annual interest rate of 12%. RESL allows GSL to return any
PraMacs that it cannot use within 120 days and receive a full refund. Based on prior experience,
RESL estimates that three units will be returned (using the most likely outcome approach).
RESL's costs to recover the products will be immaterial, and the returned generators are
expected to be resold at a profit. No PraMacs have been returned as of March 31, 2018, and
RESL still estimates that three units will be returned in the future.
(3) RESL sells 30 PraMacs to First S. Bank, to provide uninterrupted power for bank branches with
ATMs, for a total contract price of Tk. 50,000. In addition to the PraMacs, RESL also provides
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installation at a standalone selling price of Tk. 200 per PraMac; the cost to RESL to install is
Tk. 150 per PraMac. The PraMacs are delivered and installed on March 1, 2018, and full
payment is made to RESL.
(4) RESL ships 300 PraMacs to GME LLC. on consignment. By March 31, 2018, GME has sold
three-fourths of the consigned merchandise at the listed price of Tk. 1,500 per unit. GME
notifies RESL of the sales, retains an 8% commission, and remits the cash due to RESL.
Requirements:
(a) Determine net income for RESL Ltd. for the first quarter of 2018. (Ignore taxes.) 10
(b) In reviewing the credit history of Grameen Store Ltd, RESL has some concerns about the
collectability of the full amount due on the note. Briefly discuss how collectability of the note
affects revenue recognition and income measurement for RESL. 3
3. You have been appointed as a Finance Controller of Prosperous & Co, a highly promising public
company. The company is considering listing with DSE by issuing 10% of ordinary shares through IPO.
You are a Fellow Member of ICAB and Management has a high expectation that you will guide
them properly to make the IPO journey a success. Before you were appointed, Mr. Chowdhury,
FCA was heading your team. Your first assignment is to prepare a financial statement as of and for
the year ended 30 June 2018. The CFO of your company, who once had strongly recommended
your appointment has a gut feeling that the earlier Finance Controller was too conservative in his
assumptions. He has a high expectation that financial performance will look even better, if you
apply IFRS properly.
The financial period ended June 2018 has just been closed, and your Head of Reporting has come to
you with below trial balance-
Particulars BDT BDT
Sales 50,000,000
Other income 1,640,000
Purchases 20,000,000
Administrative expenses 10,000,000
Other operating expenses 8,000,000
Intangibles – brands 6,500,000
Plant and machinery- Cost 5,400,000
Accumulated depreciation- plant and machinery 3,200,000
Land and buildings- Cost (including land BDT10,000) 7,350,000
Accumulated depreciation- land and building 350,000
Retained earnings 2,400,000
Ordinary share capital (BDT 1 per share) 5,200,000
Share premium account 2,075,000
Revaluation surplus 910,000
Cash at bank 10,300,000
Inventories 4,625,000
Trade and other receivables 7,100,000
Trade and other payables 13,500,000
79,275,000 79,275,000
There are a number of outstanding issues which you were asked to help your team to resolve
before the financial statements can be presented to the board.
a) The company had received a Grant of BDT 100,000 from Ministry of Science and
Technology in 2015. The amount was fully utilized to purchase a piece of land. The grant
amount was netted off from the cost of the land (total cost being BDT 110,000), as per policy.
b) This year the company completed constructing a building on the land acquired in 2015. The
company had to remove debris of an old building in the land before it could start
construction at a cost of BDT 40,000. The amount was charged off as other operating
expense. The construction completed in June 2018.
c) GSM Foundation made a commitment to pay $40,000 as grant if the company can complete the
building project within 2018. 50% of the grant was received on 30 June 2018 and recorded as
other income. (USD to BDT conversion rate 82.00.) The company has just applied for the rest
50% of the grant. USD to BDT Conversion rate on 31 December was 85.00.

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d) Prosperous had appointed Mr. F.R Khan for the building project at a monthly Gross salary
of BDT 100,000 per month. Apart from his salary, he is entitled to full time car
maintenance (rented @ 35,000/month) and an apartment rented at a cost of BDT
25,000/month. Mr. Kahn left his job after September 2018 after handing over the building
to Admin department. At the time of his separation, he was also paid an amount of
BDT200,000 as a special bonus for completion of the project in time. The company has a
policy of reporting all employee related expenses as Administrative expenses. Car and
apartment rents are however reported under Other Operating Expense.
e) The plumber had missed the deadline of his delivery and had to pay a liquidated damage of
BDT100,000. The bank reconciliation reflects that the cheque is still unrecorded.
f) Plant and machinery has an estimated remaining useful life of 5 years, with no salvage value,
while the new building has a useful life of 20 years. Depreciation was not calculated for 2018.
g) Land and building in the trial balance includes the value of a fully depreciated building.
Residual value of the old building was nil. Prosperous contracted with General Motors to
deliver industrial Generator in exchange of the remains of the old building. Although
General Motors delivered the generator on 30 June 2018, it has yet to find a suitable
contractor to demolish the old building. The generator hasn’t yet been booked. A new
generator would cost BDT 100,000 while the Old building is expected to earn BDT 90,000
(for the remains). Generator is classified as plant and machinery.
h) The company has heavily invested on research and development and branding over the last
couple of years. In the process, the company bought “Promiso” from one of its competitors
at a cost of BDT1,500,000. The amount has been charged off as other operating expense.
i) The company also appointed an independent valuation expert to evaluate increase in brand
value due to significant investment in market promotions. In the experts view, overall brand
value of the company may have increased by at least BDT910,000. The increase is recorded as
intangible asset with corresponding impact on revaluation surplus. Estimated recoverable value
of the other brands, based on the same expert report had declined to BDT4,000,000.
j) All the brands have indefinite useful lives.
k) The company also has built a software with the help of IT Manager. Market value of
similar software is BDT100,000. The IT manager was given a Dhaka-Bangkok- Dhaka air-
ticket (BDT50,000) as a recognition of his delivery. Travel expenses are recorded as other
operating expense. The software is expected to serve for 2 years. The software was put into
use on 1 July 2018.
Requirement:
Prepare the statement of profit or loss for Prosperous for the year ended 31 December 2018 and a
statement of financial position as at that date, in a form suitable for inclusion in the prospectus. 25
4. Head of Reporting of your company, A Limited has prepared the following statement of financial
position and profit or loss account for the year ended 30 June 2018.
A Limited
Statement of financial position
As of 30 June 2018
BDT
Assets
Property, plant and equipment 767,571,771
Intangible assets 463,632,762
Non-current assets 1,231,204,533
Current assets 26,654,579,186
Total assets 27,885,783,719
Equity
Ordinary shares 42,797,062
Share premium 2,133,618,396
Retained earnings 903,366,797
Total equity 3,079,782,255
Liabilities
Deferred tax liabilities 135,986,265

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Other non-current liabilities 47,920,033
Total non-current liabilities 183,906,298
Accounts payable 22,749,002,565
Provisions 1,255,758,619
Provision for current tax 617,333,982
Total current liabilities 24,622,095,166
Total liabilities 24,806,001,464
Total equity and liabilities 27,885,783,719
A Limited
Statement of profit or loss and
other comprehensive income
For the year ended 30 June 2018
BDT
Revenue 14,258,343,560
Cost of services (11,299,194,131)
Gross profit 2,959,149,429
Other income, net 1,441,818,627
Operating and administrative expenses (2,478,901,509)
Marketing and promotional expenses (1,091,747,210)
Profit before contribution to WPPF 830,319,337
Contribution to WPPF (39,539,016)
Profit before tax 790,780,321
Income tax expenses (302,962,605)
Profit after tax 487,817,716
Other comprehensive income/(expense) - net of tax -
Total comprehensive income 487,817,716
Your external audit team has raised query on below points-
1. The company had 6% FDR of BDT100,000,000. No interest has been accrued for last 3 months.
2. Provisions include BDT200,000,000 for gratuity fund. NBR does not allow such provision for tax
purpose on the ground the amount has not been transferred to fund. Tax rate is 20%. Current tax
provision is calculated assuming all gratuity expenses will be allowed.
3. Upon completion of actuary valuation this year, it was observed that fair value of plan assets has
declined by BDT70,000,000 due to decline in discount rate. No adjustment was given for the change.
4. The company has a trade liability of USD10,000,000 recorded on below dates-
Date Rate (TK/USD) Amount (USD)
1 July 2017 80 1,000,000
1 September 2017 82 5,000,000
3 June 2018 85 4,000,000
Closing rate on 30 June 2018 was 84Tk per USD. Your Head of reporting told that the company
recognizes any impact of change in exchange rate as an adjustment to corresponding expenses on the date
of such transaction.
This year, BDT 85,000,000 was settled on 1 September 2018. The liability was originally booked on 1
July 2017 for operating and administrative purpose.
Requirements:
a) Help your team in assessing financial impact for each of the transactions. 15
b) Reconstruct the Balance sheet and Profit or loss and other comprehensive income 10
5. Bogura Ltd has investments in two companies, Cumilla Ltd and Jashore Ltd. The draft summarized
balance sheets of the three companies at 30 June 2018 are shown below.
Bogura Cumilla Jashore
ASSETS Tk '000 Tk '000 Tk '000
Non-current assets
Property, plant and equipment 50,500 37,750 21,500
Investment in Cumilla Ltd 50,000 - -
Investment in Jashore Ltd 10,000 - -

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Other investment 417 58 85
Total non-current assets 110,917 37,808 21,585
Current assets
Inventories 8,750 6,750 3,500
Accounts receivables 5,750 4,000 2,250
Advance, deposits and prepayments 10,083 192 113
Cash and cash equivalents 500 750 250
Total current assets 25,083 11,692 6,113
TOTAL ASSETS 136,000 49,500 27,698
EQUITY AND LIABILITIES
Equity
Share capital (Tk 10 ordinary shares) 87,500 37,500 20,000
Retained earnings 15,000 5,750 4,750
Preference share capital (irredeemable) 8,900 - -
Total equity 111,400 43,250 24,750
Non-current liabilities
Borrowings (Term loan) 15,000 2,500 1,250
Current liabilities
Borrowings (Bank overdraft) 1,050 125 160
Accounts payables 8,000 3,000 1,500
Tax payable 550 125 38
Dividends - 500 -
Total current liabilities 9,600 3,750 1,698
Total liabilities 24,600 6,250 2,948
TOTAL EQUITY AND LIABILITIES 136,000 49,500 27,698
The following additional information is relevant.
(a) Bogura Ltd acquired 65% of the Tk. 10 ordinary shares in Cumilla Ltd on 1 April 2016. At that
date the balance on Cumilla Ltd's retained earnings was Tk. 4,500,000.
(b) On 1 April 2018 Bogura Ltd acquired 30% of the Tk. 10 ordinary shares in Jashore Ltd. The
profit for Jashore Ltd for the year ended 30 June 2018 was Tk. 1,500,000, and this profit
accumulated evenly over the year. Jashore Ltd paid no dividends in the year ended 30 June
2018. Jashore Ltd should be accounted for as an associated company of Bogura Ltd.
(c) Bogura Ltd has calculated that the costs incurred in acquiring Jashore Ltd were Tk. 500,000
and this sum has been charged to the statement of comprehensive income of Bogura Ltd. This
comprises Tk. 300,000 allocated overheads from the acquisitions department and Tk. 200,000
of directly attributable costs.
(d) The fair value of the land in Cumilla Ltd was Tk. 2,500,000 in excess of carrying amount at the
date of acquisition.
(e) Bogura Ltd has not recognised the dividend receivable from Cumilla Ltd in its draft statement
of financial position at 30 June 2018.
(f) At 1 April 2016 Cumilla Ltd had a contingent liability relating to a legal claim against the
company of Tk. 1,000,000, for which the fair value was estimated at Tk. 750,000. An out of
court settlement was agreed on 31 December 2017 and Tk. 750,000 was paid to settle the case.
(g) Bogura Ltd has carried out annual impairment reviews on goodwill. On 30 June 2017 an
impairment loss of Tk. 250,000 was recognised on the goodwill relating to Cumilla Ltd, but
there have been no further impairment losses identified.
(h) Cumilla Ltd sold goods to Bogura Ltd valued at Tk. 2,000,000 during the year ended 30 June
2018 and a quarter of these goods have been re-sold by Bogura Ltd. Cumilla Ltd calculated the
transfer price of the goods at cost plus a mark-up of 20%.
(i) Bogura Ltd's draft financial statements at 30 June 2018 included a note explaining a contingent
asset of Tk. 500,000. This sum was received on 31 July 2018. This should now be accounted
for as an adjusting event after the reporting period.
Requirement:
Prepare the consolidated statement of financial position of Bogura Ltd as at 30 June 2018. 25

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BUSINESS STRATEGY
Total marks – 100
N.B. – Questions must be answered in English. Figures in the margin indicate full marks. All workings are to be submitted.
Examiner will take account of the quality of language and of the manner in which the answers are presented.
Different parts, if any of the same questions must be answered in one place in order of sequence.
Marks
1. (a) What are the Drivers of Unethical Strategies and business behavior? 3
(b) Why should company Strategy be ethical? 3
(c) In some situations, it is preferable to find another firm to acquire or seek growth by merger with another
company. Discuss where acquisition or merger would be the most suitable strategy to adopt. 3
(d) Explain how the shareholders of a company could benefit from a Demerger. 3
2. Pride is an IT consultancy business based in Dhaka. Pride specializes in consultancy activities relating
principally to database management and IT security. Since its formation in 2014, Pride has grown
organically and has built a strong reputation within its two areas of specialization. Competition is strong
in the IT consultancy industry and Pride faces competition from a number of local and international IT
consultancy businesses operating throughout Bangladesh. Pride employs highly qualified and skilled IT
staff, whose time is charged out to clients on an hourly basis. Pride’s clients expect high quality service
delivery and many also require Pride to be available to respond 24 hours a day, 7 days a week. Pride has
been highly innovative in the last few years, with a number of its IT staff building upon their areas of
expertise and knowledge to develop new opportunities in Pride’s IT consultancy portfolio.
These new consultancy activities are in the areas of big data and cyber security. Pride’s five senior
partners hold monthly meetings in which they discuss performance. At these meetings, the five senior
partners mainly focus upon comparing actual performance versus budgeted performance for the
revenues and profit generated by Pride. The partners also review the latest market share and client
feedback information, based upon client surveys carried out each month. Pride’s IT staff are paid an
annual salary and individual bonuses are also paid, based upon a team manager's assessment of each
individual’s performance and achievement of targets throughout the year. It is rare that bonuses are not
paid and most IT staff are not consulted directly by their team manager regarding their targets. The five
senior partners receive a fixed salary and a bonus based upon the overall annual business profits.
At a recent monthly meeting, the five senior partners discussed performance targets for Pride for
2018. One of the founding partners, who had recently returned from a conference attended by a range
of consultancy businesses, expressed concern that Pride’s existing performance information is not
focused on the key activities of Pride’s business. He believes that as a service business, Pride must
focus upon a wider range of dimensions beyond just market share and financial performance.
Requirements:
(a) Explain FOUR characteristics of a service business, using Pride to illustrate your answer 8
(b) Evaluate the current process used by the five senior partners when reviewing Pride's performance
and the current process used to set targets. You should use Fitzgerald and Moon's 'Building Block
Model' to assist in structuring your answer. 9
(c) Recommend, with reasons, TWO suitable performance measures which could be used to assist
Pride in measuring those areas of its business in which it must succeed, in order to remain
competitive. 6
3. PHC is an independent charitable clinic working for better public health in a major city. It carries out
research, policy analysis and development activities, working on its own, in partnerships, and through
government funding. It is a major resource to people working in health and social care, as well as
providing health care and advice in its local community through its own dedicated clinic. The clinic
has been chosen to be the subject of a national scheme to measure clinic performance. Amongst a
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number of factors, the ‘quality of care provided’ has been included as an aspect of the service to be
measured. Three features of ‘quality of care provided’ have been listed:
(i) Clinic’s adherence to appointment times
(ii) Patients’ ability to contact the clinic and make an appointment without difficulty
(iii)The provision of a comprehensive patient health monitoring programme, made up of various
stages that need to be completed.
Operating costs for the clinic are currently running at BDT 7 Mn per annum. PHC has just learned
that it is facing large cuts in the amount of money that it receives from the government as a subsidy
to its service, which will threaten the quality of patient care and ultimately its entire operations. It has
nevertheless set itself the task of improving its service, and raising funds to continue its work, through
the creation of a comprehensive online facility which will become fully operational in 2020. This will
include online advice on minor medical matters and online booking of all clinic appointments,
including monitoring and follow up services. The PHC trustees estimate the start-up costs of such a
service to be BDT 2mn and annual operating expenses to be BDT 500,000.
A market research report was commissioned to establish the viability of the project, and the report’s
key findings identified the ‘user friendliness’ of the website as a critical factor in the success of the
service. The market research company then decided to conduct an online survey of 2000 internet
users in PHC’s local area to establish the likely take-up of the service.
A summary of key findings is given below.
Key results from the online survey and market research report.
 60% of those surveyed believed that such a service would be useful.
 50% said that they would be prepared to pay an annual membership fee of between BDT 100 and
BDT 300.
 Up to 200,000 individual users, and 2,000 organizational members, are forecast for the site by 2020.
 Up to 500 organizational members are forecast to be ‘income generating’ advertisers on the site by
2020 – each expected to generate a minimum to BDT 500,000 each year from that presence, of
which 10% will be donated to PHC.
 Internet usage in the local area is set to double over the next four years.
 The market research company indicated that their forecasts of net cash flows could vary between
plus minus 30%.
Two funding models have been developed for the clinic following the market research. First, the
company could allow advertising access to the website to local organizations in return for a flat fee
of BDT 500, plus a 10% commission on any income generate from goods and services sold directly
via the site. Individuals who wish to see the site could do so for free.
Alternatively, memberships could be offered to local organizations, and any individuals who want to
use the site for their own healthcare requirements. Membership would cost BDT 100 for individual
members and BDT 300 for organizations, but there would be no advertising access and hence no
commission revenue.
Requirements:
(a) Provide a financial forecast based upon the funding models identified, showing:
(i) Net annual cash flow. 5
(ii) How the forecasts might vary with the possible errors in the forecast data identified by the
market research company. 3
You should explicitly state any assumptions you need to make.
(b) Provide clear recommendations concerning the project, from both a financial and non-financial
perspective. Consider issues of suitability, feasibility and acceptability in your answer and give
clear justification for the decision reached. 7
(c) Suggest a set of performance measures which can be used by PHC to identify the level of
achievement of each of the three ‘quality of care provided’ features listed. 5
(d) The absence of the profit measure in non-profit seeking organizations causes problems for the
measurement of their performance. With reference to PHC, briefly explain why this is the case. 5
4. M/s. ABC Ltd.’s business is organized as three divisions and Head Office. The divisions are based
on market groupings, which are Retail, Wholesale and Government. The divisions do not trade with

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each other. The main method of control of the divisions has been the requirement to earn a return on
investment (ROI) of 15% per annum. The definition of return and capital employed is provided by
Head Office, as is the criterion rate of 15%. The recent experience of M/s. ABC Ltd. is that the group
as a whole has been able to earn 15% ROI but there have been wide variations between the results
obtained by different divisions.
This infringes upon another group policy that forbids cross-subsidization i.e., each and every division
must earn the criterion ROI.
M/s. ABC Ltd., is now considering divestment strategies and this could include the closure of one or
more of its divisions.
The Head Office is aware that the Boston Product Market Portfolio Matrix (BPMPM) is widely used
within the divisions in the formulation and review of marketing strategies. As it is so widely known
within the group and is generally regarded by the divisions as being useful, the Head Office is
considering employing this approach to assist in the divestment decision.
Requirements:
(a) Evaluate the use by M/s. ABC Ltd., of the ROI and its policy that forbids cross-subsidization. 9
(b) Describe the extent to which the BPMPM could be applied by M/s. ABC Ltd., in its divestment
decision. Evaluate the appropriateness of the use of BPMPM for this purpose. 9
5. Companies have an obligation to provide information to their stakeholders. The financial information
provided tends to be of a historical nature. It has been argued that shareholders in particular should
be entitled to receive forward-looking information. Some companies wishing to communicate
selectively with a subgroup of shareholders are often prevented from doing so, as all shareholders
should receive the same financial information.
Requirements:
(a) Explain why a company may wish to disclose forward looking information to its stakeholders
and in particular to its shareholders. 6
(b) Explain how they might convey this information to the shareholders. 5
6. Consumers Ltd is a large manufacturing firm, dealing in several product lines. Currently, there are
plans to explore other foreign markets for its products. 40 staff are tasked with matching goods
received notes with orders and then with invoices. It has been observed that an appreciable length of
time is spent trying to find out why some of the set of three documents do not agree.
While some managers recommend the computerization of the existing process to facilitate matching,
others propose the use of Business Process Re-engineering.
Requirements:
(a) State FIVE characteristics of a re-engineered business process. 5
(b) Explain SIX examples of how technology can change the way business activities are conducted,
with reference to the Consumers Ltd scenario where appropriate. 6

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FINANCIAL MANAGEMENT
Total marks – 100
N.B. – Questions must be answered in English. Figures in the margin indicate full marks. All workings are to be
submitted. Examiner will take account of the quality of language and of the manner in which the answers are
presented. Different parts, if any of the same questions must be answered in one place in order of sequence.
Marks
1. ABC Ltd is an unlevered firm with expected annual earnings before taxes of Tk 21mn in perpetuity. The
current required return on the firm’s equity is 16%, and the firm distributes all of its earnings as
dividends at the end of each year. The company has 1.3 million shares of common stock outstanding and
is subject to a corporate tax rate of 35%. The firm is planning a recapitalization under which it will issue
Tk 30mn of perpetual 9% debt and use the proceeds to buy back shares.
(a) Calculate the value of the company before the recapitalization plan is announced. What is the
value of equity before the announcement? What is the price per share? 3
(b) Use the Adjusted Present Value (APV) method to calculate the company value after the
recapitalization plan is announced. What is the value of equity after the announcement? What is the
price per share? 3
(c) How many shares will be repurchased? What is the value of equity after the repurchase has
been completed? What is the price per share? 4
2. Suppose your company needs to raise TK 45mn and you want to issue 30 years bonds for this
purpose. Assume the required return on your bond issue will be 6%, and you are evaluating two
issue alternatives: A semiannual coupon bond with a 6% coupon rate and a zero coupon bond. Your
company’s tax rate is 35%.
(a) How many of the coupon bonds would you need to issue to raise the Tk 45mn? How many of
the zeroes would you need to issue? 3
(b) In 30 years, what will your company’s repayment be if you issue the coupon bonds? What if
you issue the zeroes? 3
(b) Based on your answers in (a) and (b), why would you ever want to issue the zeroes? To answer,
calculate the firm’s after tax cash outflows for the first year under the two different scenarios.
Assume the IRS amortization rules apply for the zero coupon bonds. 4
3. Heat Wave Limited (HWL) manufactures and fits large scale heating units for factories and
warehouses. Key information about the company’s equity capital at 31 July 2018 is shown below:
Issued ordinary shares ( BDT 1 nominal value) 55 million
Market value per ordinary share (ex div) BDT 2.20
Price earnings ratio 8.4
Dividend payout ratio 40%
Profit after tax as % of Capital Employed 10%
Equity beta 1.3
Risk free rate 7%
Market rate of return 11%
At 31 July 2018 HWL also had in issue BDT 10 million 9% convertible loan stock with a market
value of BDT 105 (ex interest), which is redeemable at BDT 104 on 31 July 2022 or it could be
converted to 40 ordinary shares at that date. You should assume that the market value of HWL’s
ordinary shares will increase at the same annual growth rate as its ordinary dividends.
The rate of corporation tax is 28% and is payable in the same year as profits are earned.
On 6 August 2018 HWL’s board met with representatives of Quality Household Ltd. (QHL), a
large retailer of household goods. QHL wishes to expand its product line via a new range of small
domestic heaters and would like HWL to manufacture and supply them. HWL would have to
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purchase new equipment to manufacture the heaters and this would cost BDT 18 million. HWL’s
board is proposing to raise the BDT 18 million via an issue of 10% debentures (redeemable in July
2026). Alternatively, it could raise the majority of the BDT 18 million via a one for ten rights issue
of ordinary shares at a 15% discount on the current market price per ordinary share. The balance
would come from retained earnings. However, Ahmed Chowdhury, one of HWL’s directors, is
concerned that a rights issue could be unsuccessful and the company could lose money as a result.
Requirements:
(a) Calculate HWL’s weighted average cost of capital at 31 July 2018 using the Gordon growth (or
earnings retention) model to calculate the cost of equity. 6
(b) Calculate the cost of equity using the CAPM and explain the reasoning behind the CAPM
approach to the cost of equity, comparing the CAPM approach with the earnings retention
model used in part (a). 5
(c) Explain the benefits to a company of using convertible loan stock as a means of raising capital. 3
(d) Assuming that the funds are raised by the debenture issue, discuss whether HWL should use the
cost of the newly issued debentures as the hurdle rate when appraising the Value Shopper
investment. 4
(e) Discuss Ahmed Chowdhury’s concerns. 2
4. Lotus Ltd today expects to earn Tk 8.50 per share for each of the future operating periods
(beginning at Time 1), if the firm makes no new investments today and returns the earnings as
dividends to the shareholders. However, Lotus Karim, President and CEO, has discovered an
opportunity to retain and invest 20% of the earnings beginning three years from today. This
opportunity to invest will continue for each period indefinitely. He expects to earn 10% on this new
equity investment, the return beginning one year after each investment is made. The firm’s equity
discount rate is 12%.
(a) What is the price per share of Lotus Ltd stock without making the new investment? 4
(b) If the new investment is expected to be made, per the preceding information, what would the
price of the stock be now? 5
(c) Suppose the company could increase the investment in the project by whatever amount it
chooses. What would the retention ratio need to be to make this project attractive? 4
5. You should assume that the current date is 1 April 2018
CJ is a logistics company which started trading in 1992. Its financial year end is 31 March. You are
a Chartered Accountant who works in CJ’s corporate treasury team. At a recent meeting with your
manager it was agreed that you will be involved with three tasks: (1) hedging the interest on a
planned loan, (2) hedging CJ’s share portfolio investment using options and (3) hedging CJ’s share
portfolio investment using futures.
You have been asked by your line manager to evaluate whether or not CJ should use interest rate
futures to hedge against interest rate movements on a loan. CJ’s board is planning to borrow BDT
11.5 million for a nine month period from 1 June 2018 to 28 February 2019 and is worried that
interest rates will increase from their current level of 8% pa. The current price of June Taka 3-
month futures is 91.50 and the standard contract size is BDT 500,000.
Requirements:
Demonstrate how Taka interest rate futures can be used by CJ to hedge against interest rate
movements, commenting on your results, if by 1 June 2018:
(a) Interest rates decrease to 6.5% pa and the futures price alters by 1.75%
(b) Interest rates increase to 9% pa and the futures price alters by 1%
(c) Interest rates increase to 10% pa and the futures price alters by 2.25% 12
6. (a) When is EAC (Equivalent Annual Cost) analysis appropriate for comparing two or more
projects? Why is this method used? Are there any implicit assumptions required by his method
that you find troubling? Explain. 4

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(b) Benson Enterprises is evaluating alternative uses for a three-story manufacturing and
warehousing building that it has purchased for Tk 1,450,000. The company can continue to rent
the building to the present occupants for Tk 61,000 per year. The present occupants have
indicated an interest in staying in the building for at least another 15 years. Alternatively, the
company could modify the existing structure to use for its own manufacturing and warehousing
needs. Benson’s production engineer feels the building could be adapted to handle one of two
new product lines. The cost and revenue data for the two product alternatives are as follows:
(Figures in Taka)
The building will be used for only 15 years for either Product A or Product B. After 15 years
the building will be too small for efficient production of either product line. At that time,
Benson plans to rent the building to firms similar to the current occupants. To rent the building
again, Benson will need to restore the building to its present layout. The estimated cash cost of
restoring the building if Product A has been undertaken is Tk 55,000. If Product B has been
manufactured, the cash cost will be Tk 80,000. These cash costs can be deducted for tax
purposes in the year the expenditures occur.
Benson will depreciate the original building shell (purchased for Tk 1,450,000) over a 30 year
life to zero, regardless of which alternative it chooses. The building modifications and
equipment purchases for either product are estimated to have a 15 year life. They will be
depreciated by the straight line method. The firm’s tax rate is 34%, and its required rate of
return on such investments is 12%.
For simplicity, assume all cash flow occur at the end of the year. The initial outlays for modifications
and equipment will occur today (Year 0), and the restoration outlays will occur at the end of Year 15.
Benson has other profitable ongoing operations that are sufficient to cover any losses.
Which use of the building would you recommend to management? 12
7. SJL is a transport operator. It has a financial year end of 31 December. SJL’s board is investigating
capital investment proposals for each of its Bus Division.
The bus division is bidding for a three-year contract to operate a number of bus routes in a large
tourist resort in the north east of Bangladesh. This contract covers the period from 1 January 2019
to 31 December 2021. Your colleagues in SJL’s finance team have produced estimates of the
incremental income and expenses (in 31 December 2018 prices) for the period of the contract as
shown below:
Years to 31 December 2019 2020 2021
BDT BDT BDT
Fares 16,531,200 40,500,000 62,100,000
Fuel costs (7,776,000) (8,035,200) (8,812,800)
Other costs (see note) (13,590,000) (15,120,000) (16,290,000)
Profit/(Loss) before taxation (4,834,800) 17,344,800 36,997,200
Note
SJL is considering hiring eight extra buses to operate on this new contract. The annual hire cost per
bus is BDT 810,000 (which is allowable for tax) and this has been included in the ‘other costs’
figure above.
Bus purchase
As an alternative to the plan to hire the eight new buses, SJL’s directors are considering whether it
would be preferable to purchase them instead. These would cost BDT 3,600,000 each on 31
Product A Product B
Initial cash outlay for building modifications 95,000 125,000
Initial cash outlay for equipment 195,000 230,000
Annual pretax cash revenues (generated for 15 years) 180,000 215,000
Annual pretax cash expenditures (generated for 15 years) 70,000 90,000

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December 2018 and would have a market value of BDT 900,000 each (in 31 December 2021
prices) at the end of the contract. It is company policy to write off buses using the straight-line
depreciation method.
The buses will attract 20% (reducing balance) capital allowances in the year of expenditure and in
every subsequent year of ownership by the company, except the final year. In the final year, the
difference between the buses’ written down value for tax purposes and their disposal proceeds will
be treated by the company either:
- as a balancing allowance, if the disposal proceeds are less than the tax written down value, or
- as a balancing charge, if the disposal proceeds are more than the tax written down value.
Inflation
SJL’s directors estimate that all costs (except for hiring and depreciation) will increase by 4% pa,
but they will cap fare increases at 3% pa.
Corporation tax
Assume that the rate of corporation tax will be 30% pa for the foreseeable future and that tax flows
arise in the same year as the cash flows which gave rise to them.
Cost of capital
SJL uses a money cost of capital of 12% pa for investment appraisal purposes.
Cash flows
Assume that, unless otherwise instructed, all cash flows occur at the end of a financial year.
Requirements:
(a) Using money cash flows, calculate the net present values on 31 December 2018 of the two
proposals – bus hiring or bus purchase – and advise SJL’s board which of the two proposals it
should accept. 10
(b) Calculate how sensitive your decision in (a) above is to the market value of the buses on 31
December 2021. 4
(c) Estimate the internal rate of return of the bus purchase proposal and explain the advantages and
disadvantages of this method of investment appraisal. 5

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TAXATION-II
Total marks – 100
[N.B. – Figures in the margin indicate full marks. Questions must be answered in English. Examiner will take account of
the quality of language and of the way in which the answers are presented. Different parts, if any, of the same
question must be answered in one place in order of sequence.]
Marks
1. Being a newly qualified Chartered Accountant, recently you joined in the tax department of a reputed
FMCG company. You report to the Head of tax, a non-professional, who reports to the CFO. As part
of your new assignment, your tax head has assigned you to look into the ongoing tax assessment by
Tax department for the income year ended on 31st
December’15. On 13th
March’18 upon review, you
have identified the following:
a) The due date for completion of the assessment was 31st
December 2017, accordingly the
assessment order along with demand notice was supposed to be served by 31st
January’18.
b) If it is considered that the assessment order along with demand notice was served on the due date,
there are only few days available for filing the appeal should the company be aggrieved by the
assessment order.
c) Your colleague (a non-professional, who was handling the matter prior to your joining) informed
that the assessment order is ready for collection on 20th
March only but you have to provide a
antedated acknowledgement, which is 31st
January’18.
d) On this, your tax head has strongly advised you not to offend the tax department but collect the
Assessment Order satisfying them by whatever means and it will not be disclosed to anyone.
Requirements:
i) How will you deal the matter in respect of antedated acknowledgement and the advice of your
Tax head? 5
ii) What would be the best possible way to handle the matter with tax authority maintaining the ethics. 5
2. You are the tax manager of SARAL Bangladesh Ltd (the company), a subsidiary of SARAL A.G. In
connection with the assessment made by the DCT for the income tax return filed for the company for
the income year ended on 31st
December, 2015 you have identified the following:
i) DCT disallowed Tk. 15 million claimed as Technical know-how fees payable to SARAL A.G. as on
31st
December, 2015 on the ground that no tax was deducted at the time of creating this provision on
or before 31 December 2015. While expressing opinion on this, DCT mentioned that by creating
provision for payment of Technical know-how fees, credit to the payee’s account was made, hence
tax was supposed to be deducted at the time of making such provision. The company actually paid
Technical know-how fees in November’16 upon due deduction of tax at source after getting approval
from Board of Investment (a requirement under Foreign Exchange Regulations)
ii) DCT disallowed Tk. 25 million claimed as profit participation and welfare funds payable to, or for the
welfare of, the employees and national Labour Welfare Fund, being 5% of profit before tax for the
company for the year ended on 31 December, 2015, as per the provision of Bangladesh Labour Act on
the ground that this is merely an appropriation of profit, hence should not be allowed as expenses.
Requirement:
Write the grounds of appeal against the above assessment order given by the DCT. 10
3. G-Star Ltd is a publicly listed Company, whose 75% share is owned by its non-resident Parent
Company N-star Ltd registered in Germany. G-star manufactures and markets biscuits under the N-
star’s world-wide brand name PANDA. N-star registered PANDA as a trademark in Bangladesh
market. Because of very high quality and taste PANDA biscuit is a household name in Bangladesh
and also market leader in terms of market share
As part of a global restructure, recently N-star Ltd declared that it will go for a restructuring
worldwide and consequent to this, it will sell out its entire biscuits business globally, although it may
continue its operation in other areas.
Globe Bangladesh Ltd., a newly incorporated multinational company in Bangladesh also listed in the
stock exchanges of Bangladesh, is engaged in the business of manufacturing and marketing of biscuits
and allied products. Being a new joiner in this sector in Bangladesh, the parent company, Globe
Nov-Dec'18

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World Ltd (75% holder) considers this announcement by N-star Ltd. as an opportunity to establish
themselves in a ready market and therefore is seriously contemplating as to how they can go for the
acquisition so that PANDA biscuit becomes a part of their products portfolio.
Accordingly, Globe Group is considering evaluation of the acquisition under the following aspects:
a) Acquisition of N-star’s shares in G-star Ltd by Globe World Ltd only
b) Acquisition of N-star’s shares in G-star Ltd by Globe Bangladesh Ltd only
c) Purchase of N-star’s brand PANDA by Globe World Ltd
d) Under acquisition of share, brand rights will also be automatically transferred to the purchaser
In view of this, Globe Bangladesh Ltd has appointed you and requested you to provide a detailed
evaluation report in terms of income tax implications on the proposed acquisition considering all
the options mentioned above.
Requirements:
i) Provide a detailed evaluation report considering the implications of direct tax, both from
buyer’s and seller’s point of view. 6
ii) If acquisition of shares is finalized, recommend which option would be better from Globe
World Ltd.’s dividend earnings point of view. 4
4. Xen Bangladesh Ltd (“Xen BD” or “the company”) is a 100% owned subsidiary of Xen S.A., a
French conglomerate renowned for its famous consumer goods across the world. Xen BD is a public
company but not listed in stock exchange and has been engaged in manufacturing and marketing of
consumer goods under the global brands Xen S.A.
For the year ended on 31 December 2017, following extracts relevant for computing income tax for
Xen BD 2018-19 are available (amount expressed in 000’s Taka):
Turnover 5,800,290
Profit before tax 1,160,300
Depreciation as per book 180,350
Royalty expenses 231,590
Excess perquisite 44,890
Profit on sale of fixed asset 933
Entertainment expenses 76,456
On the above, further following information were provided:
1) Under total tax, deferred tax was charged as Taka 188,900,000 and current tax based on the
nominal marginal tax rate.
2) For Fiscal depreciation following information are available (in 000’s Taka):
Fiscal depreciation based on asset as on 31 December 2016 95,290
WDV of asset sold 517
Addition: Plant & Machinery 170,290
One new car for MD 19,000
3) The fixed asset was sold at Taka 1131,000, which was acquired at Tk.990,000 four years ago.
WDV of the said asset was Taka 198,000 as per book
Consider today is 31st
May, 2018 and you are approaching for preparation of tax return for
submission with the tax authority.
You’re required to provide the following:
1) Computation of total income and tax liability for the relevant assessment year for income
year ended on 31st
December 2017. 12
2) What would be tax rate to be considered for the tax computation and what is the basis of such tax
rate? Can this tax rate be changed before filing the tax return on the scheduled date? Explain. 2
5. (a) X Ltd is a Bangladeshi subsidiary of Y Ltd, based in UK. X Ltd. has entered enter alia into the
following transactions during the year 2017:
1) Taka 95 million equivalent US dollar was paid to Y Ltd for Royalty and Technical know-
how fees.
2) Taka 58 million equivalent US dollar paid to Z Ltd, a subsidiary of Y Ltd. based in Australia
for getting quality testing services.

of 4
3) Taka 63 million equivalent US dollar paid to W Ltd, an independent third party based in
China for which price was determined under a Global Contract between Y Ltd and W Ltd
for procurement of raw materials.
4) Taka 89 million paid to R Ltd, an associated company in Dhaka for insurance service, under
a global contract negotiated by Y Ltd.
Requirement:
Indicate whether the above transactions for the year 2017 will form part of the statement of
international transactions to be submitted under section 107EE of the ITO 1984? Discuss 8
(b) The CFO of X Ltd. seeks your professional opinion on the followings:
Y Ltd. sells some computer monitors to X Ltd. for resale in Bangladesh. Y Ltd. also sells
computer monitors to another computer reseller. It sells 5,000 computer monitors to X Ltd. at
Tk.50,000 per unit. The price fixed for another independent reseller is Tk.35,000 per unit. The
warranty in case of sale of monitors by X Ltd. is handled by X Ltd. However, for sale of monitors
by another reseller, Y Ltd. is responsible for the warranty for 3 months. Both Y Ltd. and X Ltd.
offer extended warranty at a standard rate of Tk, 15,000 per annum.
Requirement:
On these facts, determine the ALP, suggest the most appropriate method and the effect on the
net profit/income of the assessee company. 8
6. Mrs. Khan, an individual assessee, files her tax returns regularly. For the income year to be started
on 1st
July 2018 Mrs. Khan is contemplating following income from salary based on the salary letter
issued to her:
Basic Salary per month 300,000
House rent allowances per month 125,000
Employer’s contribution to recognized provident
Fund per month 10% of basic salary 30,000
Utilities allowances per month 30,000
Special allowances for three months for the period from 1st
July 2018 to 30th
September 2018 to meet expenses for conducting a special project in Cox’s Bazar 45,000
Festival bonus for the year 400,000
Mrs. Khan is also expecting to the following for the income year started from 1st
July 2018:
1) Leave Fare Assistance Taka 200,000, which she planned to use in December’18 for buying air
tickets for her and family for travelling to Australia. Mrs. Khan also travelled to Singapore last
year, which she showed in her tax return as well.
2) As part of management incentives, on 1st
July 2018 Mrs. Khan was granted with 500 shares of
the company, having current market price of Taka 500,000, which will be vested in 2021 subject
to fulfillment of certain employment conditions.
3) Mrs. Khan will also pay similar amount to the provident fund as employee subscription
4) Profit bonus of Taka 300,000 under the Bangladesh Labour law on which tax will be deducted
as per current provision of law
5) An investment in secondary shares of Taka 800,000 is planned to be invested in January 2019.
Mrs. Khan booked a flat having 1,400 square feet area in Bashundhara R/A on 1st
July 2015, which
has been registered in his name on 1st
July 2018 after completion of construction on 30th
June 2018.
In relation to this, following information are available:
1) Cost of the flat is 75,00,000
2) For buying the flat, Mrs. Khan obtained a loan of Taka 40,00,000 from a non-banking financial
institution, which has been planned to settle in 5 years (i.e., by 30th
June 2020. In connection with
this payment schedule for the loan is as follows:
Payment period Principal Amount Interest Remarks
(Taka) (Taka)
1st
July’15 to 30th
June’16 621,160 446,571 Already paid
1st
July’16 to 30th
1st
July’17 to 30th
1st
July’18 to 30th
June’19 888,738 178,996 Expected
1st
July’19 to 30th
June’20 1,001,452 66,282 Expected
Total 40,00,000 13,38,667

of 4
3) If Mrs. Khan rents out this flat, she expects to get Taka 16,000 per month and expenses in relation
to repairs, collection of rent, water, sewerage etc. equivalent to 1/4th
of the rental value. In such
a case, Mrs. Khan will have to stay in a rented house with similar standards, which she may
consider provided it is financially viable at least for the next two years started from 1st
July 2018.
4) Mrs. Khan has two 1500 CC car registered in her name, for which she will require to pay advance
tax as per existing provision of law.
You are required to compute: 20
1) Total income and monthly tax liability of Mrs. Khan’s for the income year starting from 1st
July
2018, if Mrs. Khan rents out her new flat or she does not rent out her new flat.
2) Which one you will recommend, from a financial point of view only?
7. (a) XYZ Ltd. (“Company”) was incorporated in Bangladesh on 01 July 2018 under the Companies
Act, 1994. Now, the Company is planning to establish a factory for export of readymade garments
in Europe. As per decision of the Board of Directors of the Company, commercial operation of
the Company will be started upon obtaining bonded warehouse license. You have joined the
Company recently as Manager (Taxation). While preparing business plan for the financial year
2018-2019, Manager (Business Plan) have come across the following issues relating to VAT:
(i) Payment to suppliers through local letter of credit;
(ii) Commission on letter of credit opened for import of office furniture;
(iii)Commission for establishing back to back letter of credit;
Requirement:
Manager (Business Plan) has requested you to brief him in writing about the implications of VAT
on the said transactions. 8
(b) Being responsible for VAT operations, you are requested to review price computation for the purpose
of submitting a price declarations with VAT authority. In relation to this, following information are
available for the relevant consignment of 120,000 pcs of semi-finished X-coffee packs:
a) C&F value of the consignment Tk.8,350,000
b) Assessable value as per bill of entry Tk.8,400,000
c) Basic duties, regulatory duties and supplementary duty paid Tk.4,502,400
d) AIT paid Tk.420,000
e) VAT paid Tk.1,935,360
f) Clearing other charges are 10% of C&F value
g) Further processing and packing cost 10% of C&F value
h) Overhead costs 20% of C&F value
i) Marine insurance cost for the consignment is Tk.100,000 and VAT paid on insurance
premium is Tk.15,000
j) Advertisement cost is 10% of C&F value on which 15% VAT was paid
k) Profit is 10% of the selling price
Requirements:
i) Compute total input VAT eligible for input tax credit and output VAT one 200g Jar of X-
coffee finished goods. 6
ii) What is the relation of input tax credit and Price declaration? Under what circumstances input
tax credit for certain item can be cancelled, even if there is a price declaration? 2
iii) Under what circumstances a revised price declaration will be required? 2
iv) A person pays VAT under truncated method, as such his truncated VAT rate is 4.5%. What
is his assumed fixed value addition? Can he claim input tax credit, which he pays for his
input purchase? 2

of 4
CORPORATE LAWS & PRACTICES
Total marks – 100
[N.B. – The figures in the margin indicate full marks. Questions must be answered in English. Examiner will take account
of the quality of language and of the way in which the answers are presented. Different parts, if any, of the same
Marks
1. (a) Mr. Shamsul Alam is a retired government officer. Mr. Alam held 50,000 nos. of shares in ABC
(Pvt.) Limited in the year 2018. ABC (Pvt.) Limited declared 50% cash dividend and 10% stock
for the year ended June 30, 2017. Record date for entitlement of the dividend was December 15,
2017. Mr. Alam has been critically ill and was suffering from heart disease a long period.
Suddenly he died on January 15, 2018 due to heart attack. Late Shamsul Alam has left his wife,
one son and one daughter; both of them are adult. The deceased family came to ABC’s office and
claim Mr. Alam’s shares and dividends.
Requirement:
In this case what are the procedures that have to be followed under the provisions of The
Companies Act 1994? 8
(b) Mr. A purchased 3,000 nos. of shares XYZ Company Limited. Later on the certificate was lodged
to the Company for registration of transfer of 1,000 shares (out of 3,000) in the name of Mr. B.
The company certified the transfer but instead of destroying the original certificate, returned it to
the transferor who borrowed money giving it as collateral.
Requirement:
Is the Company liable to the lender? 3
2. (a) Board of Directors of a company proposed cash dividend @ Tk. 5.00 per ordinary share of Tk.
10.00 each. In the Annual General Meeting some shareholders suggested to declare cash dividend
@ Tk. 6.00 per ordinary share while some other shareholders suggested that the cash dividend
recommended by the Board @ Tk. 5.00 per share be converted into stock dividend.
Requirement:
Explain how the Chairman of the meeting should deal with the suggestions of the shareholders. 4
(b) Presently, Alfa Company Limited (“the Company”) has three directors namely A, B and C. Previously,
the Company had five directors out of whom two directors namely D & E (close friends of C) died in
an accident. No other directors were appointed. According to Articles of Association of the Company
quorum for directors’ meeting is three. C resigned from the board due to the fact that his views and
recommendations are not considered by A & B. A & B intends to appoint M who is a shareholder of
the Company in the place of C. But C does not want to appoint M as a director of the Company.
Requirement:
You are required to answer: 4
i) When the resignation of C will be complete?
ii) What procedures should A & B follow to appoint M as a director of the Company?
3. The AGM of PQR Company Limited was called at the factory premises situated at about 25 km away
from its registered office. On the day of the meeting the conveners i.e. the Chairman, the Directors
& the Company Secretary could not be present in the meeting place due to reasons not within their
control. The shareholders who assembled at the factory premises found that the conveners of the
meeting were absent & the meeting place was under lock & key. The shareholders present convened
the meeting in a nearby building. They ascertained that quorum was present, appointed one of them
as the Chairman for that meeting since the Chairman and the Directors were not present within the
waiting time as per articles of association and conducted the meeting as per agenda. Everything was
done according to articles to ensure a valid meeting. They took all resolutions as per agenda of the
meeting except that they approved a higher rate of dividend than the rate recommended by the Board.
Requirement:
Answer the following with reference to the relevant provisions of Companies Act 1994.
a) Is the AGM conducted by the shareholders valid? 4
b) Are the resolutions taken in the AGM binding on the Company? 4
PL- Nov-Dec'18

of 4
c) If the Chairman claims that he has postponed the meeting on the basis of a Board decision made
on way to the meeting place where they were bound to halt, what will be legal status of his claim,
if he wants to hold the AGM on another date? 5
4. (a) ABC Limited is a public limited company and planning to go for IPO (initial Public Offer) where
Mr. Ahmed FCA is holding the positions of Chief Financial Officer, Head of Internal Audit and
Company Secretary. Mr. Ahmed has been serving this company for the last 25 years and mostly
trusted and he is a reliable person in the company.
Requirement:
Comment on the position of Mr. Ahmed FCA regarding holding of 3 positions in ABC Limited
according to the Corporate Governance Guidelines 2018 of the Bangladesh Securities and
Exchange Commission. 3
(b) OMN Ltd. is a publicly traded company listed with DSE & CSE and you are acting as its Company
Secretary. The Company has just closed its accounting year 30th June, 2018 and your time is counting
down until holding of 12th AGM along with 5th EGM. The 11th AGM of the Company was held on
30.10.2017. You have to follow up and coordinate many works with Accounts, Publications and other
Departments of your Company from drafting of financial statements to holding AGM & EGM. Each
and every one is running after time constraints specially you and tremendous pressure is going on to
complete the year until payment of dividend and submission of statutory returns. Chairman of the
Board of Directors of the Company desires to hold the AGM & EGM on 30.10.2018 to reduce the
meeting cost and time. It is mentioned here that 5th EGM is required to pass a special resolution to
change a provision in the Articles of Association of the Company. To complete the entire things, CEO
has called a departmental coordination meeting where you submitted the ‘Chronological Job Flow
Chart’ mentioned below showing deadlines with the object to complete the various tasks in time for
smooth holding of AGM & EGM:
Job ID
No.
Chronological Job Flow Chart Date
01. Preparation of Provisional Financial Statements for the year ended 30th
June 2018.
16.07.2018
02. Issuance of letter to the Auditors to resume audit work. 17.07.2018
03. Preparation of ‘Directors Report’ for approval in the meeting of the Board
of Directors which is statutory requirements to be included in the Annual
Report 2018.
18.07.2018
04. Issuance of letter to the Appointing firm for providing Certificate on
Compliance of Corporate Governance Guidelines.
20.07.2018
05. Drafting of Annual Report 2018 which is required to be sent to the
printing press.
01.08.2018
06. Bilateral discussion with the Management and Senior Audit Partners on
the 1st draft audited financial statements.
24.08.2018
07. Obtain audited draft financial statements from the audit firm, which is
required to be submitted before the Board of Directors for authorization.
27.08.2018
08. Information to the BSEC, DSE & CSE about holding of 57th meeting of
the Board of Directors on 13.09.2018 where Financial Statements for the
year ended on 30th June, 2018 to be approved.
05.09.2018
09. All types of Memo (AGM related) are to be placed to the Board meeting. 11.09.2018
10. Holding of 57th meeting of the Board for adoption of audited Accounts,
Balance Sheet, Profit & Loss Account etc. by the Board of Directors
(ii) Fixation of Date, Time, Venue of AGM
(iii) Recommendation of dividend
13.09.2018
11. Dissemination of Price Sensitive Information to BSEC, DSE, CSE & CDBL 13.09.2018
12. Price Sensitive Information to be sent in the online newspapers 13.09.2018
13. Price Sensitive Information to be published in the two widely circulated
national dailies (one in Bangla and the other one in English).
14.09.2018
14. Issuance of Notice for holding of 58th meeting of the BoD where
‘Directors’ Report’ is to be approved for inclusion in the Annual Report
2017 as per Corporate Governance Guidelines issued by BSEC.
28.09.2018

of 4
15. Obtaining the Certificate of Corporate Governance Guidelines for
inclusion in the Annual Report 2018.
02.10.2018
16. Holding of Audit Committee Meeting for approval of Audit Committee
Report 2018 which shall be included in the Annual Report 2018
03.10.2018
17. Holding of 58th meeting of the BoD for approval of Audit Committee Report
2018 and (i) Directors’ Report for the year 2018, (ii) Report on Internal
Control System for the year 2018 and (iii) Report on Going Concern and
authentication by the Chairman or any three Directors to authenticate the
same on behalf of the Board of Directors of the Company.
03.10.2018
18. Printing order for Annual Report 2018 04.10.2018
19. Fixation of record date 05.10.2018
20. Receiving CDBL Data and calculation for dividend entitlements for the
respective shareholders
08.10.2018
21. Issuance of Notice for holding of 5th
EGM 08.10.2018
22. Taking delivery of Annual Report 2018 for circulations 11.10.2018
23. Sending Audited Financial Statements to BSEC, DSE & CSE 27.09.2018
24. Sending 30 copies of Annual Report to the Regulatory Authorities
(BSEC, DSE, CSE)
12.10.2018
25. Issuance of Notice, Annual Report, Proxy Forms etc. to the Shareholders
for holding of 12th
AGM
15.10.2018
26. Date of holding of 12th
AGM 30.10.2018
27. Date of holding of 5th
EGM 30.10.2018
28. Video Recording (un-edited) to be sent to BSEC, DSE & CSE in
Compact Disc format.
02.11.2018
29. Auditors are to be informed of their appointment and their remuneration
for the next AGM.
05.11.2018
30. 01. Opening 2 (two) BO Accounts in the name of ‘Suspense A/c’ for
keeping the shares without BO ID, Invalid BO & other reasons and
another Account in the name of ‘Fractional Dividend’ for keeping,
Fractional Shares (if Stock Dividend is declared)
02. Opening of Bank Account in the name of Cash Dividend for the year
30th
June, 2018 (if Cash Dividend is declared)
05.11.2018
31. Holding of 59th
meeting of the BoD for approval of Return of Allotment
(Form-XV)
06.11.2018
32. Minutes of AGM & EGM with attendance of the Shareholders is to be
submitted to BSEC, DSE & CSE
14.11.2018
33. Preparation for Printing of Dividend Warrants for the shareholders whose
bank accounts do not have on-line facilities (i.e. EFTN facilities)
08.11.2018
34. Distribution of Stock Dividend in consultation with CDBL. 09.11.2018
35. Submission of Form-XII with the RJSC 14.11.2018
36. Submission of Annual Return and Statements to the RJSC (Form-XII,
Form-IX, Schedule-X, Balance Sheet, Form-23B)
12.11.2018
37. Submission of Special Resolution to the RJSC (Form-VIII) 12.11.2018
38. Submission of Return of Allotment (Form-XV) 12.11.2018
39. Disbursement of Cash Dividend through EFTN. 15.11.2018
40. Delivery of Dividend Warrant to the Address of the Respective Shareholders 16.11.2018
41. Dividend Disbursement report to the Commission and Exchange(s) 15.12.2018
On the above chronological job flow chart, some dates are statutory / regulatory (i.e. jobs are
involved with mandatory time limitation as per laws and regulations, for example: 14 days’
notice is required to hold AGM etc.) and some are based on reality which ultimately lead you to
comply with the statutory dates for smooth holding of AGM & EGM.
Requirement:
You are required to simply pick up the Jobs as per ID number from the above table that are statutory
regulatory in nature and state the time boundary set for the jobs as per Companies Act 1994 and other
directives / notifications of BSEC, DSE, CSE etc. as per the following table: 15
Job ID No. Statutory / Regulatory time boundary / time frame

of 4
5. Discuss the activities and responsibilities of the Financial Reporting Council that are required to be
discharged through four serviceable divisions as per section 22 to 26 of Financial Reporting Act 2015. 10
6. (a) You are an Auditor Manager of ABC & Co., Chartered Accountants who have been appointed
as the statutory auditor of a scheduled bank for the year 2018. While conducting the statutory
audit of the bank, you have identified the following situations:
(i) The financial statements have not been correctly prepared in accordance with the usual
accounting methods;
(ii) The auditor is satisfied to the effect that doubt exists whether the bank has sufficient assets
to meet the demands of the creditors;
(iii)Adequate provisions have not been made for advances and other assets, realization of which
are doubtful;
(iv) The capital of the bank has fallen below 70% on account of loss incurred; and
(v) A criminal offence involving fraud and dishonesty has been committed.
You are required to submit the audit report along with the audited financial statements to the
Board of Directors on 28 February 2019, and the management wants the audit report along with
the audited financial statements by 26 February 2019 so that the same can be circulated along
with the Board Memo on 26 February 2019 and placed before the Board of Directors on 28
February 2019. The AGM has been scheduled to be held on 15 April 2019. Assume that today is
19 February 2019.
Requirement:
What actions ABC & Co. is required to take under the Banking Companies Act 1991 in each of
the above situations? 10
(b) The above bank intends to appoint your firm ABC & Co. urgently to conduct a fixed assets
valuation work of the entire bank as on 31 March 2019. You have adequate manpower to
complete the assignment and submit the report by the required delivery date of 25 April 2019.
Requirement:
Should you accept the appointment? Discuss. 3
(c) Can Bangladesh Bank declare an auditor, holding valid certificate of practice from ICAB, unfit
for all audit works? Discuss. 3
7. ABC Financing limited is operating in the financing industry since 1980. By virtue of the financing
business, the company has gained significant know how of different types of wholesale and retail
business. As a diversification plan, the company is considering if it can start a side business of
wholesale goods in addition to the financing business.
Requirement:
Explain the restrictions regarding the business of financial institutions. 4
8. (a) In view of large decline in the value of shares in Bangladesh market, the foreign investors believe
that now is the appropriate time to invest in such markets as they have almost reached their lowest
limits. One such investor namely Mr. Robert is interested in buying securities listed on Dhaka
Stock Exchange.
Requirement:
With reference to relevant provisions of Foreign Exchange Regulations, you are required to
advise Mr. Robert on the following:
(i) Procedure to be followed in order to trade in listed shares in Bangladesh. 6
(ii) Whether Mr. Robert would be entitled to receive dividends on such securities and are there
any restrictions on repatriation of funds outside Bangladesh? 4
(b) What is meant by Assignment and Nomination of Life Insurance Policies? Mention the various
rules regarding assignment of life policies. 10

of 2
IT GOVERNANCE
Total marks – 100
[N.B. – The figures in the margin indicate full marks. Questions must be answered in English. Examiner will take account of
the quality of language and of the manner in which the answers are presented. Different parts, if any, of the same
Marks
1. One employee of your organization has been associated with writing false and negative write ups about
your company that is harming its reputation. Finding this out, you have decided to take measures against
this action following a legal way.
a. Does this type of behavior fall under the ICT Act, 2006 of Bangladesh? If so, describe the extent of
behavior it covers. 3
b. What is the punishment of such action under this act? 2
2. The government organizations of Bangladesh are currently being equipped with IT infrastructure to
enable IT services. As a result, an important decision to make is whether to buy proprietary software,
operating system and office applications or to use the open source ones.
a. According to the National IT Policy, 2009, what should be the decision in this case? Describe. 3
b. Describe the convenience of the decision according to the National IT Policy, 2009. 2
3. Your company and BitX.com are on a financial agreement that has led to both parties relying on the same
data. To facilitate trade between both parties, a clearing house is formed. However, the clearing house is
a third-party and the centralized point of failure. You want to increase trust in such multi party cross
boundary transactions.
a. How you will achieve such goals? Justify your answer. 5
b. In this connection, explain the blockchain technology. 5
4. You have been appointed as the business analyst of a well-known multi-national company. The company
has some experts who collaboratively work toward providing business solutions. Often, it takes time to
resolve conflict in expert opinions. Furthermore, the company suffers problems after an expert leaves the
organization. You have been assigned the task to overcome these problems.
a. Mention what you will use to solve these problems. Justify your choice. 3
b. Describe the components of such system that will give a good solution. 7
5. You are the manager of a newly opened local restaurant. As a newcomer in the area, you are to compete
with the big names that are available around you. To do this, you have decided to exploit information
technology which the other restaurants have not adopted yet.
What competitive strategy will you follow to provide special services to the most profitable customers? 5
6. Although you have planned on using information technology to gain competitive advantage, you still are
not sure on which area this can be applied. It is important that you understand what and where you need
to apply competitive strategies to get the full picture of the organization’s competitive advantage model.
a. What model you will follow to develop this type of understanding? Justify your answer. 5
b. Draw a diagram of such model mapping specific areas and corresponding information technology
support for that area. 5
Nov-Dec'18

of 2
7. (a) Your company is considering to set up a system for email marketing. During email marketing, you
aim to sign customers for receiving emails about promotions, newsletters etc. However, according
to company policy, the user may back out from receiving emails. What is the email marketing
strategy you would follow in this case? Justify your answer. 5
(b) If a customer tells you that you’ve been sending them strange emails or spamming their social media
pages with posts that you aren’t likely to send, you’re probably already aware what happened: your
email account has been hacked. What are the four things you should do when your email gets
hacked? 5
(c) One of the most important factors of a company is to provide security to its information resources.
As an information security consultant of a well-known company which has recently gone through
security exposures and attacks, you hold the responsibility to design an effective information
security management technique.
What are the key elements you need to ensure for such level of information security? Describe the
inventory and classification of information assets of the company. 5+5
8. You, as a part of the system design team, are planning to perform analysis and design of a new product
of the company. You are thinking about which design approach to follow. The requirement is that parallel
activities should be supported and you may get back to previous activities to improve on them.
a. What is the appropriate system analysis and design approach according to this requirement? Justify
your answer. 3
b. Describe the approach in a step by step manner. 7
9. Your company has been using a software solution for managing its transactions for a long time. Currently,
a more improved version of the software has been developed. To use the new system, the old system has
been directly turned off and the new system has been turned on in place of the old system.
a. What are the dangers associated with such conversion procedure? 3
b. How can you overcome such danger within a limited cost? 2
10. (a) What is an information system (IS) audit? What is focus of an IS audit? 2+2
(b) Why do you think IS Audit is necessary in different Sectors: (i) Telecommunication companies,
(ii) Bank and non-bank financial institutions, (iii) Insurance companies, (iv) Manufacturing
companies like Pharmaceuticals and Textiles? 4x3=12
(c) Describe the role of an IS auditor in governance of Enterprise IT. 4

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