Audit of Cost Accounting | Auditing and Attestation | CPA Exam

#auditcourse Design and perform audit tests of cost accounting. Our discussion of the audit of cost accounting begins with the internal transfer of assets from raw materials to work-in-process to finished goods inventory. We also focus on systems and controls related to the transfer of inventory costs, which are accounted for in the cost accounting records. Cost accounting systems and controls of different companies vary more than most other audit areas because of the wide variety of items of inventory and the level of sophistication desired by management. For example, a company that manufactures farm machines may have completely different cost records and internal controls than a steel fabricating shop that makes and installs custom-made metal cabinets. Of course, small companies with owners actively involved in the manufacturing process need less sophisticated records than large, multiproduct companies. Cost Accounting Controls Cost accounting controls are those related to processes affecting physical inventory and the tracking of related costs from the time raw materials are requisitioned to the completion of the manufactured product and its transfer to storage. It is convenient to divide these controls into two broad categories: Physical controls over raw materials, work-in-process, and finished goods inventory Controls over the related costs. Almost all companies need physical controls over their assets to prevent loss from misuse and theft. To protect assets, most...