1 Board of Studies The Institute of Chartered Accountants of India Curriculum for Final (New) Course Group I Paper 1: Financial Report ing (100 Marks) Paper 2: Strategic Financial Management (100 Marks) Paper 3: Advanced Audi t ing and Professional Ethics (100 Marks) Paper 4: Corporate and Al l ied Laws (100 Marks) Sect ion A: Company Law (70 Marks) Sect ion B: Al l ied Laws (30 Marks) Group I I Paper 5: Advanced Management Account ing (100 Marks) Paper 6: Informat ion Systems Control and Audi t (100 Marks) Paper 7: Di rect Tax Laws (100 Marks) Paper 8: Indi rect Tax Laws (100 Marks) Sect ion A: Central Excise (40 Marks) Sect ion B: Service Tax & VAT (40 Marks) Sect ion C: Customs (20 Marks)2 Paper 1: Financial Reporting (One paper – Three hours – 100 marks) Level of Knowledge: Advanced knowledge Objectives: (a) To gain abi l i ty to analyze f inancial statements including consol idated f inancial statements of group companies and f inancial reports of various types of ent i t ies, (b) To gain abi l i ty to apply valuat ion principles, (c) To fami l iarise wi th recent developments in the area of f inancial report ing, (d) To gain abi l i ty to solve f inancial report ing and valuat ion cases. Contents: 1. Account ing Standards, Account ing Standards Interpretat ions and Guidance Notes on various account ing aspects issued by the ICAI and thei r appl icat ions. 2. Overview of Internat ional Account ing Standards (IAS)/ Internat ional Financial Report ing Standards (IFRS), Interpretat ions by Internat ional Financial Report ing Interpretat ion Commi t tee (IFRIC), Signi f icant di f ference vis-a-vis Indian Account ing Standards. Understanding of US GAAP, Appl icat ions of IFRS and US GAAP. 3. Corporate Financial Report ing - Issues and problems wi th special reference to publ ished f inancial statements. 4. Account ing for Corporate Restructuring (including inter-company holdings). 5. Consol idated Financial Statements of Group Companies Concept of a Group, purposes of consol idated f inancial statements minori ty interest , Goodwi l l , Consol idat ion procedures – Minori ty interests, Goodwi l l , Treatment of pre- acquisi t ion and post-acquisi t ion prof i t . Consol idat ion wi th two or more subsidiaries, consol idat ion wi th foreign subsidiaries. Consol idated prof i t and loss account , balance sheet and cash f low statement . Treatment of investment in associates in consol idated f inancial statements. Treatment of investments in joint ventures in consol idated f inancial statements. 6. Account ing and Report ing of Financial Instruments Meaning, recogni t ion, derecogni t ion and of fset , compound f inancial instruments Measurement of f inancial instruments Hedge account ing Disclosures3 7. Share based payments Meaning, Equi ty set t led transact ions, Transact ion wi th employees and non- employees Determinat ion of fai r value of equi ty instruments Vest ing condi t ions Modi f icat ion, cancel lat ion and set t lement Disclosures 8. Financial Report ing by Mutual funds, Non-banking f inance companies, Merchant bankers, Stock and commodi ty market intermediaries. 9. Valuat ion (a) Concept of Valuat ion (b) Valuat ion of Tangible Fixed Assets (c) Valuat ion of Intangibles including Brand Valuat ion and Valuat ion of Goodwi l l (d) Valuat ion of Liabi l i t ies (e) Valuat ion of Shares (f) Valuat ion of Business 10. Developments in Financial Report ing (a) Value Added Statement (b) Economic Value Added, Market Value Added, Shareholders’ Value Added (c ) Human Resource Report ing (d) Inf lat ion Account ing Note: I f ei ther old Account ing Standards (ASs), Account ing Standards Interpretat ions (ASIs), Guidance Notes (GNs), Announcements and Limi ted Revisions to ASs are wi thdrawn or new ASs, GNs, Announcements and Limi ted Revisions to AS are issued by the Inst i tute of Chartered Accountants of India in place of exist ing ASs, ASIs, GNs, Announcements and Limi ted Revisions to AS, the syl labus wi l l accordingly include/exclude such new developments in the place of the exist ing ones wi th ef fect from the date to be not i f ied by the Inst i tute.4 Paper 2: Strategic Financial Management (One paper – Three hours – 100 marks) Level of Knowledge: Advanced knowledge Objective: To apply f inancial management theories and techniques for strategic decision making. Contents: 1. Financial Pol icy and Corporate Strategy Strategic decision making framework Interface of Financial Pol icy and strategic management Balancing f inancial goals vis-à-vis sustainable growth. 2. Project Planning and Capital Budgeting Feasibi l i ty study Cash f low Project ions – Impact of taxat ion, depreciat ion, inf lat ion and working capi tal Capi tal Budget ing Decisions - Certainty Equivalent approach, Evaluat ion of Risky Investment Proposals, Risk and Return analysis, Simulat ion and decision tree analysis, Sensi t ivi ty analysis, Capi tal Rat ioning, Adjusted Net Present Value, Replacement decisions, Appl icat ion of Real Opt ions in capi tal budget ing, Impact of inf lat ion on capi tal budget ing decisions Preparat ion of Project Report Social cost benef i t analysis. 3. Leasing decision including cross border leasing 4. Dividend Decisions Dividend theories, Determinants of dividend pol icies. 5. (a) Indian Capital Market including role of various primary and secondary market inst i tut ions (b) Capital Market Instruments Financial derivat ives – stock futures, stock opt ions, index futures, index opt ions Opt ion valuat ion techniques : Binomial model , Black Scholes Opt ion Pricing Model , Greeks – Del ta, Gamma, Theta, Rho and Vega Pricing of Futures – Cost of carry model Imbedded derivat ives5 (c) Commodity derivatives (d) OTC derivatives -Swaps, Swapt ions, Forward Rate Agreements (FRAs), Caps, Floors and Col lors. 6. Security Analysis Fundamental analysis - Economic analysis, Industry analysis and Company Analysis Bond valuat ion, Price Yield relat ionship, Bond Price forecast ing – appl icat ion of durat ion and convexi ty, Yield curve strategies Technical Analysis – market cycle model and basic trend ident i f icat ion, di f ferent types of chart ing, support and resistance, price pat terns, moving averages, Bol l inger Bands, momentum analysis. 7. Portfol io Theory and Asset Pricing Ef f icient Market Theory – Random walk theory ; Markowi tz model of risk return opt imizat ion Capi tal Asset Pricing Model (CAPM) Arbi trage Pricing Theory (APT) Sharpe Index Model Port fol io Management - Formulat ion, Moni toring and Evaluat ion Equi ty Style Management Principles and Management of Hedge Funds Internat ional Port fol io Management . 8. Financial Services in India Investment Banking Retai l Banking On Line Share Trading Deposi tory Service. 9. (a) Mutual Funds: Regulatory framework, formulat ion, moni toring and evaluat ion of various schemes of Mutual funds, Money market mutual funds. (b) Exchange Traded Funds. 10. Money Market operations 11. (a) Foreign Direct Investment, Foreign Institutional Investment. (b) International Financial Management Raising of capi tal abroad - American Deposi tory Receipts, Global Deposi tory Receipts, External Commercial Borrowings and Foreign Currency Convert ible Bonds6 Internat ional Capi tal Budget ing Internat ional Working Capi tal Management . 12. Foreign Exchange Exposure and Risk Management Exchange rate determinat ion, Exchange rate forecast ing Foreign currency market Foreign exchange derivat ives – Forward, futures, opt ions and swaps Management of transact ion, translat ion and economic exposures Hedging currency risk. 13. Mergers, Acquisitions and Restructuring Meaning of mergers and acquisi t ion, categories, purposes Process of mergers and acquisi t ion – Ident i f icat ion and valuat ion of the target , acquisi t ion through negot iat ion, due di l igence, post – merger integrat ion Legal and regulatory requi rements Merger and Acquisi t ion agreement Reverse merger Potent ial adverse compet i t ive ef fects of mergers Corporate Takeovers: Mot ivat ions, Co-insurance ef fect , Cross-border takeovers, Forms of takeovers, Takeover defenses Going Private and Other Control Transact ions: Leveraged Buyouts (LBOs), Management Buyouts (MBOs), Spin Of fs and Asset Divest i tures Corporate Restructuring : Ref inancing and rescue f inancing, reorganizat ions of debtors and credi tors, Sale of assets, targeted stock of ferings, downsizing and layof f programmes, negot iated wage give-backs, employee buyouts.7 Paper 3: Advanced Auditing and Professional Ethics (One Paper- Three hours - 100 marks) Level of Knowledge: Advanced knowledge Objectives: (a) To gain expert knowledge of current audi t ing pract ices and procedures and apply them in audi t ing engagements, (b) To develop abi l i ty to solve cases relat ing to audi t engagements. Contents: 1. Auditing Standards, Statements and Guidance Notes Audi t ing and Assurance Standards (AASs); Statements and Guidance Notes on Audi t ing issued by the ICAI ; Signi f icant di f ferences between Audi t ing and Assurance Standards and Internat ional Standards on Audi t ing. 2. Audit strategy, planning and programming Planning the f low of audi t work; audi t strategy, planning programme and importance of supervision: review of audi t notes and working papers; draf t ing of reports; principal ’s ul t imate responsibi l i ty; extent of delegat ion; control over qual i ty of audi t work; rel iance on the work of other audi tor, internal audi tor or an expert . 3. Risk Assessment and Internal Control Evaluat ion of internal control procedures; techniques including quest ionnai re, f lowchart ; internal audi t and external audi t , coordinat ion between the two. 4. Audit under computerized information system (CIS) environment Special aspects of CIS Audi t Envi ronment , need for review of internal control especial ly procedure controls and faci l i ty controls. Approach to audi t in CIS Envi ronment , use of computers for internal and management audi t purposes: audi t tools, test packs, computerized audi t programmes; Special Aspects in Audi t of E-Commerce Transact ion. 5. Special audit techniques (a) Select ive veri f icat ion; stat ist ical sampl ing: Special audi t procedures; physical veri f icat ion of assets, di rect conf i rmat ion of debtors and credi tors (b) Analyt ical review procedures (c) Risk-based audi t ing. 6. Audit of l imited companies Statutory requi rements under the Companies Act 1956; Audi t of branches: joint audi ts; Dividends and divisible prof i ts % f inancial , legal , and pol icy considerat ions. 7. Rights, dut ies, and l iabi l i t ies of audi tors; thi rd party l iabi l i ty.8 8. Audi t reports; qual i f icat ions, notes on accounts, dist inct ion between notes and qual i f icat ions, detai led observat ions by the statutory audi tor to the management vis-a-vis obl igat ions of report ing to the members. 9. Audi t Commi t tee and Corporate Governance 10. Audi t of Consol idated Financial Statements, Audi t Reports and Cert i f icates for Special Purpose engagements; Cert i f icates under the Payment of Bonus Act , import /export control authori t ies, etc. ; Speci f ic services to non-audi t cl ients; Cert i f icate on Corporate Governance. 11. Special features of audi t of banks, insurance companies, co-operat ive societ ies and non-banking f inancial companies. 12. Audi t under Fiscal Laws, viz, Di rect and Indi rect Tax Laws. 13. Cost audi t 14. Special audi t assignments l ike audi t of bank borrowers, audi t of stock and commodi ty exchange intermediaries and deposi tories; inspect ion of special ent i t ies l ike banks, f inancial inst i tut ions, mutual funds, stock brokers. 15. Special features in audi t of publ ic sector companies. Di rect ions of Comptrol ler and Audi tor General of India under Sect ion 619; Concepts of propriety and ef f iciency audi t . 16. Internal audit, management and operational audit Nature and purpose, organisat ion, audi t programme, behavioural problems; Internal Audi t Standards issued by the ICAI ; Speci f ic areas of management and operat ional audi t involving review of internal control , purchasing operat ions, manufacturing operat ions, sel l ing and distribut ion, personnel pol icies, systems and procedures. Aspects relat ing to concurrent audi t . 17. Invest igat ion and Due Di l igence. 18. Concept of peer review 19. Sal ient features of Sarbanes – Oxley Act , 2002 wi th special reference to report ing on internal control . 20. Professional Ethics Code of Ethics wi th special reference to the relevant provisions of The Chartered Accountants Act , 1949 and the Regulat ions thereunder.9 Paper 4: Corporate and Al l ied Laws (One paper – Three hours – 100 marks) Section A: Company Law (70 Marks) Level of Knowledge: Advanced knowledge Objective: To be able to analyze and apply various provisions of the Companies Act in pract ical si tuat ions Contents: 1. The Companies Act , 1956, Rules and Regulat ions thereunder in i ts ent i rety wi th speci f ic reference to (a) Accounts and audi t (b) Dividend (c) Di rectors - powers, managerial remunerat ion (d) Meet ings, powers of the Board and related party transact ions (e) Inspect ion and Invest igat ion (f) Compromises, Arrangements and Reconstruct ions (g) Prevent ion of Oppression and Mismanagement (h) Revival and Rehabi l i tat ion of Sick Industrial Companies (i ) Corporate Winding up and Dissolut ion (j ) Producer Companies (k) Companies incorporated outside India (l ) Of fences and Penal t ies (m) E-governance 2. Corporate Secretarial Pract ice – Draf t ing of Resolut ion, Minutes, Not ices and Reports Section B: Al l ied Laws (30 Marks) Objective: To develop abi l i ty to analyse the requi rements of laws stated in the Sect ion. Contents: 3. An overview of the fol lowing laws – (a) The Securi t ies and Exchange Board of India Act ,1992, Rules, Regulat ions and Guidel ines issued thereunder. (b) The Securi t ies Contracts (Regulat ion) Act , 195610 (c) The Foreign Exchange Management Act , 1999 (d) The Compet i t ion Act , 2002 (e) The Banking Regulat ion Act , 1949, The Insurance Act , 1938. The Insurance Regulatory and Development Authori ty Act , 1999. The Securi t isat ion and Reconstruct ion of Financial Assets and Enforcement of Securi ty Interest Act , 2002 (f) The Prevent ion of Money Laundering Act , 2002 4. Interpretat ion of Statutes, Deeds and Documents.11 Paper 5: Advanced Management Accounting (One paper – Three hours – 100 marks) Level of Knowledge: Advanced knowledge Objective: To apply various management account ing techniques to al l types of organizat ions for planning, decision making and control purposes in pract ical si tuat ions. To develop abi l i ty to apply quant i tat ive techniques to business problems 1. Cost Management (a) Developments in the business envi ronment ; just in t ime; manufacturing resources planning; (MRP); automated manufacturing; synchronous manufacturing and back f lush systems to ref lect the importance of accurate bi l ls of material and rout ings; world class manufacturing; total qual i ty management . (b) Act ivi ty based approaches to management and cost analysis (c) Analysis of common costs in manufacturing and service industry (d) Techniques for prof i t improvement , cost reduct ion, and value analysis (e) Throughput account ing (f) Target cost ing; cost ascertainment and pricing of products and services (g) Li fe cycle cost ing (h Shut down and divestment . 2. Cost Volume Profit Analysis (a) Relevant cost (b) Product sales pricing and mix (c) Limi t ing factors (d) Mul t iple scarce resource problems (e) Decisions about al ternat ives such as make or buy, select ion of products, etc. 3. Pricing Decisions (a) Pricing of a f inished product (b) Theory of price (c) Pricing pol icy (d) Principles of product pricing (e) New product pricing (f) Pricing strategies12 (g) Pricing of services (h) Pareto analysis 4. Budgets and Budgetary Control The budget manual , Preparat ion and moni toring procedures, Budget variances, Flexible budgets, Preparat ion of funct ional budget for operat ing and non-operat ing funct ions, Cash budgets, Capi tal expendi ture budget , Master budget , Principal budget factors. 5. Standard Costing and Variance Analysis Types of standards and sources of standard cost informat ion; evolut ion of standards, cont inuous -improvement ; keeping standards meaningful and relevant ; variance analysis; disposal of variances. (a) Invest igat ion and interpretat ion of variances and thei r inter relat ionship (b) Behavioural considerat ions. 6. Transfer pricing (a) Object ives of transfer pricing (b) Methods of transfer pricing (c) Conf l ict between a division and a company (d) Mul t i -nat ional transfer pricing. 7. Cost Management in Service Sector 8. Uni form Cost ing and Inter f i rm comparison 9. Prof i tabi l i ty analysis - Product wise / segment wise / customer wise 10. Financial Decision Model ing (a) Linear Programming (b) Network analysis - PERT/CPM, resource al locat ion and resource level ing (c) Transportat ion problems (d) Assignment problems (e) Simulat ion (f) Learning Curve Theory (g) Time series forecast ing (h) Sampl ing and test of hypothesis13 Paper 6: Information Systems Control and Audit (One Paper – Three hours – 100 marks) Level of knowledge: Advanced knowledge Objective: To gain appl icat ion abi l i ty of necessary controls, laws and standards in computerized Informat ion system. Contents: 1. Information Systems Concepts General Systems Concepts – Nature and types of systems, nature and types of informat ion, at tributes of informat ion. Management Informat ion System – Role of informat ion wi thin business Business informat ion systems –various types of informat ion systems – TPC, MIS, DSS, EIS, ES 2. Systems Development Life Cycle Methodology Introduct ion to SDLC/Basics of SDLC Requi rements analysis and systems design techniques Strategic considerat ions : Acquisi t ion decisions and approaches Sof tware evaluat ion and select ion/development Al ternate development methodologies- RAD, Prototype etc Hardware evaluat ion and select ion Systems operat ions and organizat ion of systems resources Systems documentat ion and operat ion manuals User procedures, training and end user comput ing System test ing, assessment , conversion and start-up Hardware contracts and sof tware l icenses System implementat ion Post-implementat ion review System maintenance System safeguards Brief note on IS Organisat ion Structure 3. Control objectives (a) Informat ion Systems Controls14 Need for control Ef fect of computers on Internal Audi t Responsibi l i ty for control – Management , IT, personnel , audi tors Cost ef fect iveness of control procedure Control Object ives for Informat ion and related Technology (COBIT) (b) Information Systems Control Techniques Control Design: Prevent ive and detect ive controls, Computer-dependent control , Audi t trai ls, User Controls (Control balancing, Manual fol low up) Non-computer-dependent (user) controls: Error ident i f icat ion controls, Error invest igat ion controls, Error correct ion controls, Processing recovery controls (c) Controls over system select ion, acquisi t ion/development Standards and controls appl icable to IS development projects Developed / acqui red systems Vendor evaluat ion Structured analysis and design Role of IS Audi tor in System acquisi t ion/select ion (d) Controls over system implementat ion Acceptance test ing methodologies System conversion methodologies Post implement review Moni toring, use and measurement (e) Control over System and program changes Change management controls Authorizat ion controls Documentat ion controls Test ing and qual i ty controls Custody, copyright and warrant ies Role of IS Audi tor in Change Management (f) Control over Data integri ty, privacy and securi ty Classi f icat ion of informat ion Logical access controls15 Physical access controls Envi ronmental controls Securi ty concepts and techniques – Cryptosystems, Data Encrypt ion Standards (DES), Publ ic Key Cryptography & Fi rewal ls Data securi ty and publ ic networks Moni toring and survei l lance techniques Data Privacy Unauthorised intrusion, hacking, vi rus control Role of IS Audi tor in Access Control 4. Audit Tests of General and Automated Controls (a) Introduct ion to basics of test ing (reasons for test ing); (b) Various levels/ types of test ing such as: (i ) Performance test ing, (i i ) Paral lel test ing, (i i i ) Concurrent Audi t modules/Embedded audi t modules, etc. 5. Risk assessment methodologies and appl ications: (a) Meaning of Vulnerabi l i t ies, Threats, Risks, Controls, (b) Fraud, error, vandal ism, excessive costs, compet i t ive disadvantage, business, interrupt ion, social costs, statutory sanct ions, etc. (c) Risk Assessment and Risk Management , (d) Prevent ive/detect ive/correct ive strategies 6. Business Continuity Planning and Disaster recovery planning: (a) Fundamentals of BCP/DRP, (b) Threat and risk management , (c) Sof tware and data backup techniques, (d) Al ternat ive processing faci l i ty arrangements,(e) Disaster recovery procedural plan, (f) Integrat ion wi th departmental plans, test ing and documentat ion, (g) Insurance 7. An over view of Enterprise Resource Planning (ERP) 8. Informat ion Systems Audi t ing Standards, guidel ines, best pract ices (BS7799, HIPPA, CMM etc.) 9. Draf t ing of IS Securi ty Pol icy, Audi t Pol icy, IS Audi t Report ing - a pract ical perspect ive 10. Informat ion Technology Act , 200016 Paper 7: Direct Tax Laws (One paper – Three hours – 100 marks) Level of Knowledge: Advanced knowledge Objectives: (a) To gain advanced knowledge of the provisions of di rect tax laws, (b) To acqui re the abi l i ty to apply the knowledge of the provisions of di rect tax laws to various si tuat ions in actual pract ice. Contents: I . The Income-tax Act , 1961 and Rules thereunder (90 marks) I I . The Weal th-tax Act , 1957 and Rules thereunder (10 marks) Whi le covering the di rect tax laws, students should fami l iarise themselves wi th considerat ions relevant to tax management . These may include tax considerat ions wi th regard to speci f ic management decisions, foreign col laborat ion agreements, internat ional taxat ion, amalgamat ions, tax incent ives, personnel compensat ion plans, inter-relat ionship of taxat ion and account ing, wi th special reference to relevant account ing standards and other precaut ions to be observed to maximise tax rel ief . Further, they should have a basic understanding about the ethical considerat ions in tax management and compl iance wi th taxat ion laws. Note – I f new legislat ions are enacted in place of the exist ing legislat ions relat ing to income tax and weal th tax, the syl labus wi l l accordingly include such new legislat ions in the place of the exist ing legislat ions wi th ef fect from the date to be not i f ied by the Inst i tute.17 Paper 8: Indirect Tax Laws (One paper – Three hours – 100 marks) Level of Knowledge: Advanced knowledge Objectives: (a) To gain expert knowledge of the principles of the laws relat ing to central excise customs and service tax, (b) To acqui re the abi l i ty to apply the knowledge of the provisions of the above-ment ioned laws to various si tuat ions in actual pract ice. Contents: Section A: Central Excise (40 marks) Central Excise Act , 1944 and the related Rules, Ci rculars and Not i f icat ions; Central Excise Tari f f Act , 1985 and the related Rules. Section B: Service tax & VAT (40 marks) Law relat ing to service tax as contained in the Finance Act , 1994 as amended from t ime to t ime and the related Rules, Ci rculars and Not i f icat ions. Issues related to Value Added Tax: 1. Backdrop for State-Level VAT in India 2. Taxonomy of VAT 3. Input tax credi t , tax invoices 4. Smal l dealers and composi t ion scheme 5. VAT procedures 6. VAT in relat ion to incent ive schemes, works contract , lease transact ions and hi re purchase transact ions. 7. VAT and Central Sales Tax Section C: Customs (20 marks) Customs Act , 1962 and the related Rules, Ci rculars and Not i f icat ions; Customs Tari f f Act , 1975 and the related Rules. Whi le covering the above laws, students should fami l iarize themselves wi th the interrelat ionship of account ing wi th excise, customs and service tax and also the ethical considerat ions involved in the compl iance of these laws. Note – I f new legislat ions are enacted in place of the exist ing legislat ions relat ing to central excise, customs and service tax, the syl labus wi l l accordingly include such new legislat ions in place of the exist ing legislat ions wi th ef fect from the date to be not i f ied by the Inst i tute. Students shal l not be examined with reference to any particular State VAT Law.
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