PRIME/41ST PT/IPC 1

PRIME ACADEMY IPC - 41st SESSION PROGRESS TEST

AUDITING AND ASSURANCE No of pages: 4 Total Marks: 75 Time Allowed: 2 Hrs PART - A

All questions are compulsory (25 Marks)

I. 1. Match the following standards with their name:

S. No. Name of the SA SA number

1 Using the Work of an Auditor’s Expert SA 560

2 Audit Sampling SA 505

3 Subsequent Events SA 620

4 Responsibility of Joint Auditors SA 530

5 External Confirmations SA 299

(5 x 1 = 5 Marks)

II. 1. The working paper which auditor prepares for financial statements audit is

a) Evidence for conclusions b) Owned by the client c) Owned by the auditor d) Retained in auditor office until a change in auditors

2. Which of the following would prevent which of the following factors is most important in

determining the appropriation of audit evidence? a) The reliability of audit evidence and its relevance in meeting the audit objective. b) The objectivity and integrity of the auditor c) The quantity of audit evidence d) All the above.

3. The independence of the source of evidence double payment of the same voucher?

a) The person signing the cheque should cancel the supporting documents b) Cheques should be signed by min two persons c) The date of payment of vouchers of similar nature should be the same or close to each

other d) All the above.

4. While vouching wages auditor should examine whether there is proper segregation of duties. Which

of the following activities should not be done by same department? a) Maintaining personnel records and accruing changes in wage rates b) Proposing payroll summary and disbursement of wages. c) Making salary statements and filing tax returns. d) None of the above.

5. Which of the following statement is, generally, correct about the reliability of audit evidence?

a) To be reliable, evidence should be conclusive rather than persuasive. b) Effective internal control system provides reliable audit evidence. c) Evidence obtained from outside sources routed through the client d) All are correct

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6. For vouching of which item, the auditor is most likely to examine cost records.

a) Commission earned b) Bad debts recovered c) Sale of scrap d) Credit sales

7. In case of vouching, the auditor is least likely to examine authorization by appropriate authority in

case of his work a) Advance paid against an order b) Goods returned c) Wrong debit to supplier account d) All the above

8. What would most effectively describe the risk of incorrect acceptance in terms of substantive audit

testing? a) The auditor has ascertained that the balance is materially correct when in actual fact it is not b) The auditor concludes the balance is materially misstated when in actual fact is not c) The auditor has rejected an item from sample which was not supported by documentary

evidence d) He applies random sampling on data which is inaccurate and inconsistent

9. The board of directors shall appoint first auditor of a company

a) Within one month of completion of capital subscription state of the company b) Within one month of the promotion of the company c) Within one month of the commencement of the business of the company d) Within one month of incorporation of the company

10. ICICI prudential, a life insurance company, holds thirty two percent of subscribed share capital of

Delta Ltd. The statutory auditor of Delta Ltd. would be appointed by__ a) ordinary resolution b) Special resolution c) either of the above d) none

11. In order to vouch bought ledger, the auditor obtain confirmations from creditors. The principal

reason for the auditor to examine suppliers statements at balance sheet date is to obtain evidence that

a) the supplier exist b) there are no unrecorded liabilities c) recorded purchases actually occurred d) to link creditors with cash book entries

12. Which of the following report not result in qualification of the auditor’s opinion due to a scope limitation?

a) Restrictions the client imposed b) Reliance on the report of other auditor c) Inability to obtain sufficient appropriate evidential matter d) Inadequacy of accounting records

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13. When an independent auditor relies on the work of an internal auditor, he or she should

a) examine the scope of internal auditor’s work b) examine the system of supervising review and documentation of internal auditor’s work c) adequacy of related audit programme d) all of the above

14. When an independent auditor decides that the work performed by internal auditors may have

bearing on the nature, timing and extent of planned audit procedures, the independent auditor should evaluate objectivity of the internal auditor. The most important factor influencing it would be

a) organizational level to which he reports b) qualification of internal auditor c) system of quality control of his work d) all of the above

15. When the auditor has determined that an assessed risk of material misstatement at assertion level is

significant risk, then auditor shall undertake a) Testing on sample basis b) Apply substantive procedures c) A combination of substantive analytical procedures and tests of details d) None of the above

16. The form of requesting debtors confirmation may be

a) Positive form b) Negative form c) Either positive form or negative form d) Neither positive form or negative form

17. Analytical review procedures for debtors verification includes:

a) Comparison of closing balance of debtors with the corresponding figures of previous year b) Comparison of current years ageing schedule with the corresponding figures of previous

year c) Comparison of significant ratios relating to debtors with the industry norms. d) All the above

18. Which of the following is the measure to overcome loss of audit trail

a) (a)Testing on a total basis and Programmed interrogation facilities b) (b)Arranging for special printouts containing additional information c) (c)Reliance on alternative tests. d) (d)All of the above

19. For the purpose of restricting detection risk to an acceptable level, the auditor should consider

a) (a)Assessed level of inherent risk and control risk b) (b)Nature timing and extent of substantive procedures c) (c)Both a & b d) (d)None of the above

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20. For verification of customs duty paid which of the following to be verified a) (a)Bill of entry b) (b)PLA register c) (c)Returns filed with ROC d) (d)None of the above (20 x 1 = 20 Marks)

PART –B (50 Marks)

1. (A) State with reasons your views on the following:

i) Ram and Hanuman Associates, Chartered Accountants in practice have been appointed as Statutory Auditor of Krishna Ltd. for the accounting year 2013-2014. Mr. Hanuman holds 100 equity shares of Shiva Ltd., a subsidiary company of Krishna Ltd.

ii) Mr. Rajendra, a fellow member of the Institute of Chartered Accountants of India, working as

Manager of Shrivastav and Co., a Chartered Accountant firm, signed the audit report of Om Ltd. on behalf of Shrivastav & Co (6 Marks)

(B) Comment on the following in relation to SAs: “The work performed by each assistant needs to be reviewed by personnel of at least equal competence.” (5 Marks)

(C) A Limited Company has filed a suit against debtor from whom ` 25 lakhs are receivable. A judgment is received from court in favour of the company after the date of Balance Sheet. Discuss auditors' duty in this regard. (6 Marks)

2. (A) M/s. Seeman & Co. had been the company auditor for Amudhan Company Limited for the year

2013-14. The company had three branches located at Chennai, Delhi and Mumbai. The audits of branches-Chennai, Delhi were looked after by the company auditors themselves. The audit of Mumbai branch had been done by another auditor M/s Vasan & Co., a local auditor situated at Mumbai. The branch auditor had completed the audit and had given his report too. After this, but before finalization, the company auditor wanted to visit the Mumbai branch and have access to the inventory records maintained at the branch. The management objects to this on he grounds of the company auditor is transgressing the scope of audit areas agreed. Comment.

(5 Marks) (B) Write short notes on “Analytical review” (5 Marks) (C) During the year 2013-14, it was decided for the first time that the accounts of the branch office of

AAS Company Limited be audited by qualified Chartered Accountants other than the company auditor. Accordingly, the Board had appointed branch auditors for the ensuing year. One of the shareholders complained to the Central Government that the appointments was not valid as the Board of Directors do not have power to appoint auditors, be they Company Auditor or Branch Auditors (5 Marks)

3.

(A) How will you vouch/verify the followings? I. Purchase with invoice

II. Patterns, dies, loose tools etc. III. Work-in-Progress (3 x 4 = 12 Marks)

(B) State the basic elements of the Auditor’s Report (6 Marks)

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PRIME ACADEMY IPC - 41stSESSION PROGRESS TEST – AUDITING & ASSURANCE

SUGGESTED ANSWERS PART-A

I. 1)

S. No. Name of the SA SA number

1 Using the Work of an Auditor’s Expert

SA 620

2 Audit Sampling

SA 530

3 Subsequent Events SA 560

4 Responsibility of Joint Auditors SA 299

5 External Confirmations SA 505

II.

1) C 2) A 3) B 4) A 5) B 6) C 7) D 8) A 9) D 10) A 11) B 12) B 13) D 14) A 15) B 16) C 17) D 18) D 19) C 20) A

PART B 1.

(A) i) Auditor holding securities of a company : As per sub-section (3)(d)(i) of Section 141 of the

Companies Act, 2013 along with Rule 10 of the Companies (Audit and Auditors) Rule, 2014, a person shall not be eligible for appointments an auditor of a company, who, or his relative or partner is holding any security of or interest inthe company or its subsidiary, or of its holding or associate company or a subsidiary of such holding company. Provided that the relative may hold security or interest inthe company of face value not exceeding rupees one lakh. Also, as per sub-section 4 of Section 141 of the Companies Act, 2013, where a person appointed as an auditor of a company incurs any of the disqualifications mentioned in sub-section (3) after his appointment, he shall vacate his office as such auditor and such vacation shall be deemed to be a casual vacancy in the office of the auditor.

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In the present case, Mr.Hanuman, Chartered Accountant, a partner of M/s Ram and Hanuman Associates, holds 100 equity shares of Shiva Ltd., which is a subsidiary of Krishna Ltd. Therefore, the firm, M/s Ram and Hanuman Associates would be disqualified to be appointed as statutory auditor of Krishna Ltd., which is the holding company of Shiva Ltd., because one of the partner Mr. Hanuman is holding equity shares of its subsidiary.

ii) Signature on Audit Report: Section 145 ofthe Companies Act, 2013 requires that the person

appointed as an auditor of the company shall sign the auditor’s report or sign or certify any other document of the company in accordance with the provisions of sub-section (2) of section 141i.e. where a firm including a limited liability partnership is appointed as an auditor of a company, only the partners who are chartered accountants shall be authorized to act and sign on behalf of the firmTherefore, Mr. Rajendra, a fellow member of the Institute and a manager of M/s Shrivastav& Co., Chartered Accountants, cannot sign on behalf of the firm in view of the specific requirements of the Companies Act, 2013. If any auditor’s reporter any document of the company is signed or authenticated otherwise than in conformity with the requirements of Section 145, the auditor concerned and the person, if any, other than the auditor who signs the report or signs or authenticates the document shall, if the default is willful, be punishable with a fine.

(B) Reviewing the work performed by Assistant:As per SA 220 “Quality Control for an Audit of

Financial Statements” the firm’s review responsibility policies and procedures are determined on the basis that work of lessexperienced team members is reviewed by more experienced team members. However, it has placed the final responsibility of review of audit engagement on engagement partner. Engagement partner is the partner or other person in the firm who is a member of the Institute of Chartered Accountants of India and is in full time practice and is responsible for the engagement and its performance, and for the report that is issued on behalf of the firm, and who, where required, has the appropriate authority from a professional, legal or regulatory body. Reviews at appropriate stages, during the audit engagement allow significant matters to be resolved on a timely basis, to the engagement partner’s satisfaction on or before the date of the auditor’s report. The engagement partner shall ensure that reviews being performed are in accordance with the firm’s review policies and procedures. A review consists of consideration whether, for example:

i. The work has been performed in accordance with professional standards and regulatory and legal requirements;

ii. Significant matters have been raised for further consideration; iii. Appropriate consultations have taken place and the resulting conclusions have been

documented and implemented; iv. There is a need to revise the nature, timing and extent of work performed; v. The work performed supports the conclusions reached and is appropriately documented; vi. The evidence obtained is sufficient andappropriate to support the auditor’s report; and

vii. The objectives of the engagement procedures have been achieved.

(C) Subsequent events: Subsequent events are events occurred after balance sheet date but before the date of audit report. In case of audit of components, such as branch or division the subsequent events are events after the balance sheet date and before the date of audit report of that component.

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The subsequent events, according to AS 4 “Contingencies and Events Occurring after the Balance Sheet Date” and as reproduced in SA 560 “Subsequent Events” are of two types – (a) those which provide further evidence of conditions that existed at the balance sheet date and (b) those which are indicative of conditions that arose subsequent to the balance sheet date.

Depending upon the type of subsequent events, the auditor should decide on adjustment of

accounts based on evidential value gathered for conditions that existed as on the date of balance sheet date or disclosure of the conditions that arose subsequent to the date of balance sheet.

The auditor should perform audit procedures designed to obtain sufficient appropriate audit

evidence that all events occurring between the date of the financial statements and the date of the auditor’s report that require adjustment of, or disclosure in, the financial statements have been identified. These procedures would include inquiring of management as to whether any subsequent events have occurred which might affect the financial statements, reading minutes of Board subsequent to accounting period, contacting lawyers for knowing progress ofpending Cases, inquiry with the company management, scrutinizing subsequent interim accounts etc. The auditor should perform these procedures as near as practicable to the date of his audit report. If the management does not account for the subsequent events in the financial statements where they are to be accounted, the auditor should appropriately comment his report by a qualification or disclaimer

2.

(A) Right of Access of Company Auditor for Branch Records: The audit of the branch of a company is dealt with in Section 143(3) of the Companies Act, 2013. According to this section, the audits of the branches can be done by the company auditor himself or by another auditor. Even where, the branch accounts are audited, the company auditor has right to visit the branch if he deems it necessary to do so for the performance of his duties as auditor.

He has also right of access at all times to the books and accounts and vouchers of the company maintained at the branch office. He can appropriately deal with the repot of the branch auditor in framing his main repot. He will disclose how he had dealt with the branch audit report.

In this case, the audits of two branches were done by the company auditor and one branch was done by a separate branch auditor.

Applying the above provisions, to the instant case, management’s objection that the company auditor is transgressing the scope of audit areas agreed, is absolutely, wrong. The right of company auditor in visiting and accessing the records of branch can not be forfeited. Even where the branch accounts are audited by another local auditor, the company auditor has right to visit the branch and can have access to the books and vouchers of the company maintained at the branch office.

(B) Analytical Review: SA 500 on Audit Evidence defines analytical review as those tests of details which

consist of studying significant ratios and trends and investigating unusual fluctuation and items. Thus, analytical reviews are substantive audit procedure with the help of which auditor can perform tests of details in more efficient and effective manner. Therefore, analytical reviews are nothing best analytical review procedures which have been considered at length in SA 520 on “Analytical Procedures” According to SA 520, analytical procedures include the consideration of comparisons of then entity’s financial information with, for example, comparable information for prior periods or anticipated results of the entity, such as budgets or forecasts. Consideration of relationships among elements of financial information that would be expected to conform to a predictable pattern based on the entity’s experience, such as gross margin percentages, between financial information and relevant non-financial information, such as payroll costs to number of employees also constitute analytical review procedure.

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(C) Appointment of Branch Auditor: The Companies Act, 2013 leaves it to the company to designate or

not to designate any establishment of the company as 'branch office'. Under the Companies Act, 2013, only establishment "described as such by the company" shall be treated as a 'branch office'. Further, as per Section 143(8) of the Companies Act, 2013, where a company has a branch office, the accounts of that office shall be audited either by the auditor appointed for the company (herein referred to as the company's auditor) under this Act or by any other person qualified for appointmentas an auditor of the company under this Act and appointed as such under section 139, or where the branch office is situated in a country outside India, the accounts of the branch office shall be audited either by the company's auditor or by an accountant or by any other person duly qualified to act as an auditor of the accounts of the branch office in accordance with the laws of that country and the duties and powers of the company's auditor withreference to the audit of the branch and the branch auditor, if any, shall be such as may be prescribed: Provided that the branch auditor shall prepare a report on the accounts of the branch examined by him and send it to the auditor ofthe company who shall deal with it in his report in such manner as he considers necessary.

Section 139(1) of the Companies Act, 2013 provides thatevery company shall, at the first annual general meeting, appoint an individual or a firm as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting and thereafter till the conclusion of every sixth meeting.

The shareholders in general meeting, instead of appointing branch auditormay authorize the board of directors to appoint branch auditors.

In the present case, the board has appointed branch auditors without obtaining authorization from the shareholders in general meeting. The board had appointed the auditor where it did not have authority to do so. As such, the appointment is invalid. The shareholder’s complaint is right.

The branch auditor should ascertain before accepting the audit whether his Appointment is valid.

3.

(A) Purchase with invoice: While vouching entries for purchases with the invoices, the following points should be specially observed:

I) a. that the date of invoice falls within the accounting period; b. that the invoice is made out in the name of the client; c. that the supplier’s account has been credited with the full amount of the invoice and that the

deduction in the amount ofthe invoice, if any, has been made on a proper basis; d. that the goods purchased are those that are regularly dealt in by the concern or required for

the process of manufacture carried on by it and that the price payable has been correctly arrived at:

e. that the cost of purchases has been debited to an appropriate nominal account or accounts; f. that the invoice is signed by the accountant to show that he has verified it as well as the store-

keeper to indicate that the delivery of goods have been taken by him. If the invoice relates to the purchase of a technical store or a chemical, the price whereof is dependent on its quality, a copy of the report of a technical person showing that the article purchased is of the specification for which the order has been placed; and

g. That the manager or some other official, competent to sanction payment, has authorized its payment.

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II) Patterns, Dies, Loose Tools, etc.: Several entities have large investments in such assets which have a relatively short useful life and low unit cost. Evidently, it is a difficult matter, under the circumstances, to prepare a separate account for eachsuch asset although a careful control over such property is necessary.On these considerations, some entities charge off small tools and other similar items to Production Account as and when they are purchased and do not place any value on the unused stock on the Balance Sheet. Nevertheless, a record of issues and receipts of tools to workmen is kept, as a check on the same being pilfered and a memorandum stock account of dies and patterns is also maintained. In other concerns, the cost of tools, dies, etc. purchased is debited to appropriate assets account, and an inventory of the unused items at the end of the year is prepared and valued; the sum total of opening balance and purchase reduced by the value of closing stock, as disclosed by the inventory, is charged off to Production Account in respect of such assets. On the other hand, some concerns carry such assets at their book values at the end of the first year and charge off the cost of all the purchases in the subsequent year to the Production Account on the plea that they represent cost of replacement. The most satisfactory method, however, is that of preparing an inventoryof serviceable articles, at the close of each year, and revaluing the assets on this basis, the various articles included in the inventory being valued at cost. It should beseen that the inventory does not include any worn out or defective articles the life of which has already run out.

III) Work-in-Progress: The audit procedures regarding work-in-progress are similar to those used for

raw materials and finished goods. However, the auditor has to carefully assess the stage of completion of the work-in-progress for assessing theappropriateness of its valuation. For this purpose, the auditor may examine the production/costing records (i.e., cost sheets), hold discussions with the personnel concerned, and obtain expert opinion, where necessary. The auditor may advise his client that where possible the work-in-progress should be reduced to the minimum before the closing date. Cost sheets of work-in-progress should be verified as follows: (i) Ascertain that the works engineer and works manager duly attests the cost sheets. (ii) Test the correctness of the cost as disclosed by the cost records by verification of quantities

and cost of materials, wages and other charges included in the cost sheets by reference to the records maintained in respect thereof

(iii) Compare the unit cost or job cost as shown by the cost sheet with the standard cost or the estimated cost expected.

(iv) Ensure that the allocation of overhead expenses had been made on a rational Basis. Compare the cost sheet in detail with that of the previous year. If they vary materially, investigate the cause thereof.

(v) Ensure that the Work-in-Progress as at Balance Sheet date has been (vi) Appropriately disclosed in Balance Sheet as per the requirements of Part I of (vii) Revised Schedule VI (applicable w.e.f. 1.4.2011) to the Companies Act, 1956.

(B) Basic elements of the Auditor’s Report: As per SA 700, “Forming an Opinion and Reporting on

Financial Statements”, the auditor’s report includes the following basic elements, ordinarily, in the following layout:

(i) Title; (ii) Addressee; (iii) Introductory Paragraph (iv) Management’s Responsibility for the Financial Statements. (v) Auditor’s Responsibility (vi) Auditor’s Opinion (vii) Other Reporting Responsibilities (viii) Signature of the Auditor (ix) Date of Auditor’s Report. (x) Place of signature

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PRIME ACADEMY IPC - 41st SESSION PROGRESS TEST

INFORMATION TECHNOLOGY AND STRATEGIC MANAGEMENT No. of Page: 1 Total Marks: 75

Time Allowed: 2 Hrs PART - A

(25 marks) I. Define the following terms:

1. Intrusion Detection System (IDS) 2. Switch 3. Knowledge-Level Systems 4. Cryptography 5. Segregation of Duties 6. Private cloud 7. Serial Data Transmission (7 x 1= 7 Marks)

II. State with reasons which of the following statements are correct / incorrect: 1. Balance scorecard is a combination of strategic and marketing objectives. 2. Liquidation is the last resort option for a business organization. 3. Growth share matrix is popularly used for resource allocation. 4. Portfolio analysis helps the strategists in identifying and evaluating various businesses of a

company. 5. A strategic group consists of rival firms with similar competitive approaches and positions in

the market. 6. Developing annual objectives & short-term strategies that are compatible with the selected

set of long-term objectives are one of the major task of strategic management. 7. “Changes of any type are always disquieting, sometimes they may be threatening.” 8. The rate and magnitude of changes that can affect organizations are decreasing dramatically 9. Strategic actions are always in reaction to the changes in environment.

(9 x 2 = 18 Marks)

PART - B Answer any five out of the following

1. Distinguish between the following: (a) The Three Levels of Strategy Formulation. (b) Expansion Strategy and Retrenchment Strategy

2. Define Vulnerability in a Network. What are the factors responsible for the occurrence of Vulnerabilities?

3. What is turnaround management? What are various stages in its implementation? 4. (a) Discuss advantages and limitations of using Data Flow Diagram.

(b) Write short note on protocols 5. Differentiate between the following:

(a) Thick Client and Thin Client (b) Role-based Access Control (RBAC) and Rules-based Access Control (RAC)

6. Explain how TOWS matrix can generate strategic options within external and internal environment.

(5 x 10 = 50 Marks)

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PRIME ACADEMY IPC - 41stSESSION PROGRESS TEST

INFORMATION TECHNOLOGY & STRATEGIC MANAGEMENT SUGGESTED ANSWERS

PART - A

I. Define the following terms: 1. Intrusion Detection System (IDS): An Intrusion Detection System is a device or software

application that monitors network or system activities for malicious activities or policy violations and produces reports to a Management Station. The goal of intrusion detection is to monitor network assets to detect anomalous behavior and misuse. IDS are primarily of two types: Network Intrusion Detection (NID) and Host-based Intrusion Detection (HID).

2. Switch: Switch is a communications processor that makes connections between telecommunications circuits in a network so that a telecommunications message can reach its intended destination.

3. Knowledge-Level Systems: These are the systems that support discovery, processing and storage of knowledge and data workers. These further control the flow of paper work and enable group working.

4. Cryptography: Cryptography is the practice and study of techniques for secure communication in the presence of third parties (called Adversaries). More generally, it is about constructing and analyzing protocols that overcome the influence of adversaries and which are related to various aspects in information security such as data confidentiality, integrity, authentication, and non-repudiation.

5. Segregation of Duties: Segregation of duties refers to dividing responsibility for different portions of a transaction among several people. This ensures that duties are assigned to individuals in a manner that ensures that no one individual can control both the recording function and the procedures relative to processing a transaction.

6. Private Cloud: This cloud computing environment resides within the boundaries of an organization and is used exclusively for the organization’s benefits. These are also called internal clouds. They are built primarily by IT departments within enterprises who seek to optimize utilization of infrastructure resources within the enterprise by provisioning the infrastructure with applications using the concepts of grid and virtualization.

7. Serial Data Transmission: In Serial data transmission, the bits of each byte are sent along a single path one after another. As one bit follows another, so only one communication channel is required between two communicating devices. RS-232 is an example of serial port used for the mouse or MODEM.

II. State with reasons which of the following statements are correct / incorrect:

1. Incorrect: Balance scorecard is a combination of strategic and financial objectives. It measure company performance, requires setting both financial and strategic objectives and tracking their achievement. Unless a company is in deep financial difficulty, such that its very survival is threatened, company managers are well advised to put more emphasis on achieving strategic objectives than on achieving financial objectives whenever a trade-off has to be made.

2. Correct: Liquidation as a form of retrenchment strategy is considered as the most extreme and unattractive. It involves closing down a firm and selling its assets. It is considered as the last resort because it leads to serious consequences such as loss of employment for workers and other employees, termination of opportunities a firm could pursue, and the stigma of failure. The company management, government, banks and financial institutions, trade unions, suppliers, creditors, and other agencies are extremely reluctant to take a decision, or ask, for liquidation.

3. Correct: Growth share matrix also known for its cow and dog metaphors is popularly used for resource allocation in a diversified company. Primarily it categorizes organizations/products on the basis two factors consisting of the growth opportunities and the market share enjoyed.

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4. Correct: A business portfolio is a collection of businesses and products that make up the organization. Portfolio analysis is a tool by which management identifies and evaluates its various businesses. In portfolio analysis top management views its product lines and business units as a series of investments from which it expects returns. The best business portfolio is the one that best fits its strengths and weaknesses to the opportunities and threats in the environment. Through portfolio analysis, organizations are able to compare its various businesses and categorize them in various strata as promising, growing, without good future and so on.

5. Correct: A strategic group consists of those rival firms that have similar competitive approaches and positions in the market. Organizations in the same strategic group can resemble one another in any of the several ways: they may have comparable product-line breadth, sell in the same price/quality range, emphasize the same distribution channels, use essentially the same product attributes to appeal to similar types of buyers, depend on identical technological approaches, or offer buyers similar services and technical assistance.

6. Correct: A strategic manager has to set the long term objectives, future oriented plans by appreciating the competitive environment. Without bifurcating grand strategies and long-term objectives into annual objectives and short-term strategies, implementation of the strategies is not possible. Dividing objectives, into annual plans help to move forward in a systematic manner.

7. Correct: Changes in strategy may require changes in structure as the structure dictates how resources will be allocated. Structure should be designed to facilitate the strategic pursuit of a firm and, therefore, should follow strategy. Without a strategy or reasons for being, companies find it difficult to design an effective structure.

8. Incorrect: No, the reality is just the other way round. Business environment especially after globalization and liberalization is witnessing changes that are fast paced and have far-reaching implications for businesses. This is true for economic, political, technological, legal, and socio-cultural factors. This has created strong pressures on organization for proactive adaptation to environmental changes for survival growth and competitive edge.

9. Incorrect: Strategic actions are typically a blend of (1) proactive actions on the part of managers to improve the company's market position and financial performance and (2) as needed reactions to unanticipated developments and fresh market conditions and developments.

PART - B 1.

(a) A typical large organization is a multidivisional organization that competes in several different businesses. It has separate self-contained divisions to manage each of these. There are three levels of strategy in management of business - corporate, business, and functional.

The corporate level of management consists of the chief executive officer and other top-level executives. These individuals occupy the apex of decision making within the organization. The role of corporate-level managers is to oversee the development of strategies for the whole organization. This role includes defining the mission and goals of the organization, determining what businesses it should be in, allocating resources among the different businesses and so on rests at the Corporate Level.

The development of strategies for individual business areas is the responsibility of the general managers in these different businesses or business level managers. A business unit is a self-contained division with its own functions - for example, finance, production, and marketing. The strategic role of business-level manager, head of the division, is to translate the general statements of direction and intent that come from the corporate level into concrete strategies for individual businesses.

Functional-level managers are responsible for the specific business functions or operations such as human resources, purchasing, product development, customer service, and so on. Thus, a functional manager's sphere of responsibility is generally confined to one organizational activity, whereas general managers oversee the operation of a whole company or division.

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(b) Expansion strategy is implemented by redefining the business by adding the scope of business substantially increasing the efforts of the current business. On the other hand, Retrenchment Strategy involves redefinition of business by divesting a major product line or market.

Expansion is a promising and popular strategy that tends to be equated with dynamism, vigour, promise and success. Retrenchment or retreat becomes necessary or expedient for coping with particularly hostile and adverse situations in the environment and when any other strategy is likely to be suicidal. Expansion may take the enterprise along relatively unknown and risky paths, full of promises and pitfalls. Retrenchment involves regrouping and recouping of there sources.

2. Vulnerability: Vulnerability is an inherent weakness in the design, configuration, or implementation of

a network or system that renders it susceptible to a threat. The following factors are responsible for occurrence of vulnerabilities in the software:

• Software Bugs - Software bugs are so common that users have developed techniques to work around the consequences, and bugs that make saving work necessary every half an hour or crash the computer every so often are considered to be a normal part of computing. For example - buffer overflow, failure to handle exceptional conditions, access validation error, input validation errors are some of the common software flaws.

• Timing Windows - This problem may occur when a temporary file is exploited by an intruder to gain access to the file, overwrite important data, and use the file as agate way for advancing further into the system.

• Insecure default configurations - Insecure default configurations occur when vendors use known default passwords to make it as easy as possible for consumers to set up new systems. Unfortunately, most intruders know these passwords and can access systems effortlessly.

• Trusting Untrustworthy information - This is usually a problem that affects routers, or those computers that connect one network to another. When routers are not programmed to verify that they are receiving information from a unique host, bogus routers can gain access to systems and do damage.

• End users - Generally, users of computer systems are not professionals and are not always security conscious. For example, when the number of passwords of anuser increases, user may start writing them down, in the worst case to places from where they are easy to find. In addition to this kind of negligence towards security procedures users do human errors, for example save confidential files to places where they are not properly protected.

3. Turnaround Management is the formulation and implementation of a strategic plan and a set of

actions aimed towards corporate renewal and restructuring, during times of severe distress. Rising competition, business cycles and economic volatility create a climate where no business can take viability for granted. Turnaround strategy is a highly targeted effort to return an organization to profitability and increase positive cash flows to sufficient level. Turnaround strategy is used when both threats and weaknesses adversely affect the health of an organization so much that its basic survival is question. When organization is facing both internal and external pressures making things difficult then it has to find something which is entirely new, innovative and different.

Through turnaround the organization’s first objective is to survive and then grow in the market. Once turnaround is successful the organization may turn to focus on growth. Action plan for turnaround strategy

(i) Assessment of current problems: The first step is to assess the current problems and get to the root causes and the extent of damage the problem has caused. Once the problems are identified, the resources should be focused toward those areas essential to efficiently work on correcting and repairing any immediate issues.

(ii) Analyze the situation and develop a strategic plan: Before making any major changes, chances of survival may be ascertained. Identify appropriate strategies and develop a preliminary action plan. For this one should look for the viable core businesses, adequate bridge financing and available organizational resources. Once major problems and opportunities are identified, develop a strategic plan with specific goals and detailed functional actions.

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(iii) Implementing an emergency action plan: If the organization is in a critical stage, an appropriate action plan must be developed to stop the bleeding and enable the organization to survive. The plan typically includes human resource, financial, marketing and operations actions to restructure debts, improve working capital, reduce costs, improve budgeting practices, prune product lines and accelerate high potential products. A positive operating cash flow must be established as quickly as possible and raise enough funds to implement the turnaround strategies.

(iv) Restructuring the business: The financial state of the organization’s core business is particularly important. If the core business is irreparably damaged, then the outlook for the entire organization may be bleak. Prepare cash forecasts, analyze assets and debts, review profits and analyze other key financial functions to position the organization for rapid improvement.

(v) Returning to normal: In the final stage of turnaround strategy process, the organization should begin to show signs of profitability, return on investments and enhancing economic value-added. Emphasis is placed on a number of strategic efforts to take the organization on growth path.

4. a) Advantages of using Data Flow Diagram are as follows:

• It aids in describing the boundaries of the system. • It is beneficial for communicating existing system knowledge to the users. • A straightforward graphical technique which is easy to recognize. • DFDs can provide a detailed representation of system components. • It is used as the part of system documentation file. • DFDs are easier to understand by technical and nontechnical audiences • It supports the logic behind the data flow within the system.

Limitations of using Data Flow Diagram are as follows: • It make the programmers little confusing concerning the system. • The biggest drawback of the DFD is that it simply takes a long time to create, so long that the

analyst may not receive support from management to complete it. • Physical considerations are left out.

b) Protocols: Protocols are software that performs a variety of actions necessary for data transmission

between computers. Stated more precisely, protocols are a set of rules for inter-computer communication that have been agreed upon and implemented by many vendors, users and standards bodies to ensure that the information being exchanged between the two parties is received and interpreted correctly. Ideally, a protocol standard allows heterogeneous computers to talk to each other.

A protocol defines the following three aspects of digital communication. a) Syntax: The format of data being exchanged, character set used, type of error correction

used, type of encoding scheme (e.g., signal levels) being used. b) Semantics: Type and order of messages used to ensure reliable and error free

information transfer. c) Timing: Defines data

5. (a) Thick Client: A Thick client is a client that performs the bulk of any data processing operations itself,

and does not necessarily rely on the server. Unlike thin clients, thick clients do not rely on a central processing server because the processing is done locally on the user system, and the server is accessed primarily for storage purposes. For that reason, thick clients often are not well-suited for public environments. To maintain a thick client, IT needs to maintain all systems for software deployment and upgrades, rather than just maintaining the applications on the server. For example – Personal Computer. Thin Client: A Thin client uses the resources of the host computer. A thin client generally only presents processed data provided by an application server, which performs the bulk of any required data processing. A thin client machine is going to communicate with a central processing server, meaning there is little hardware and software installed on the user's machine. A device using web application (such as Office Web Apps) is a thin client.

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(b) Role-based Access Control (RBAC): RBAC largely eliminates discretion when providing access to

objects. Instead, administrators or automated systems place subjects into roles. Subjects receive only the rights and permissions assigned to those roles. When an employee changes jobs, all previous access is removed, and the rights and permissions of the new role are assigned. Rules-based Access Control (RAC): RAC differs from RBAC methods because it is largely context-based. RBAC, for example, enforces static constraints based on a user’s role. RAC, however, also takes into account the data affected, the identity attempting to perform a task, and other triggers governed by business rules. A manager, for example, has the ability to approve his/her employees’ hours worked. However, when s/he attempts to approve his/her own hours, a rule built into the application compares the employee record and the user, sees they are the same, and temporarily removes approval privilege.

6. Through SWOT analysis organizations identify their strengths, weaknesses, opportunities and

threats. While conducting the SWOT Analysis managers are often not able to come to terms with the strategic choices that the outcomes demand. Heinz Weihrich developed a matrix called TOWS matrix by matching strengths and weaknesses of an organization with the external opportunities and threats. The incremental benefit of the TOWS matrix lies in systematically identifying relationships between these factors and selecting strategies on their basis. Thus TOWS matrix has a wider scope when compared to SWOT analysis. TOWS analysis is an action tool whereas SWOT analysis is a planning tool. The matrix is outlined below:

The TOWS Matrix is a relatively simple tool for generating strategic options. Through TOWS matrix four distinct alternative kinds of strategic choices can be identified.

SO (Maxi-Maxi): SO is a position that any firm would like to achieve. The strengths can be used to capitalize or build upon existing or emerging opportunities. Such firms can take lead from their strengths and utilize the resources to take the competitive advantage.

ST (Maxi-Mini): ST is a position in which a firm strives to minimize existing or emerging threats through its strengths.

WO (Mini-Maxi): The strategies developed need to overcome organizational weaknesses if existing or emerging opportunities are to be exploited to maximum.

WT (Mini-Mini): WT is a position that any firm will try to avoid. An organization facing external threats and internal weaknesses may have to struggle for its survival. WT strategy is a strategy which is pursued to minimize or overcome weaknesses and as far as possible, cope with existing or emerging threats. By using TOWS Matrix, one can look intelligently at how one can best take advantage of the opportunities open to him, at the same time that one can minimize the impact of weaknesses and protect oneself against threats. Used after detailed analysis of threats, opportunities, strength and weaknesses, it helps one to consider how to use the external environment to strategic advantage, and so one can identify some of the strategic options that are available.

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