Cost Audit Documentation, Audit Process and Execution

What this chapter covers

Cost Audit Documentation, Audit Process and Execution: topics in the order to study them

1. 1SCA 102 Scope and Definitions of Cost Audit DocumentationStart here because every later rule uses the terms audit, audit documentation and audit file.
2. 2Cost Audit Process: Planning, Execution and ReportingLearn the process next so you know at which stage each document is created, before studying the detailed rules.
3. 3Requirements of SCA 102: Preparation and Contents of DocumentationWith the process clear, the requirements on what to record, who performed and reviewed, and when, make sense.
4. 4Form, Content and Extent of Cost Audit DocumentationThis explains the factors that decide how detailed the documentation should be, building on the basic requirements.
5. 5Ownership, Confidentiality, Custody and Retention of Audit FilesFinish with the end of the engagement: assembling the file, keeping it safe and not discarding it during retention.

How to prepare Cost Audit Documentation, Audit Process and Execution

1. Read the scope and definitions of SCA 102 and write each definition in your own words, then check it against the standard. Cover audit, audit documentation and audit file.
2. Draw the audit process as a flow from engagement terms and planning to execution and reporting. Note beside each stage the documents it produces.
3. Learn the contents of the engagement letter under SCA 105: objective and scope, auditor's responsibilities, management's responsibilities, the applicable cost reporting framework, and the expected form and content of reports.
4. List what SCA 102 asks you to record about each procedure: the characteristics of items tested, who performed and reviewed the work, the dates and the extent of review.
5. Memorise the factors that decide the form and content of documentation: size and complexity of the auditee, extent of computerisation, assessed risks of material misstatement, methodology and tools, and the nature of the procedure.
6. Practise timing and file rules: documentation should be prepared on time, assembled as the audit goes on, the final file completed within a reasonable time, and nothing deleted during the retention period.
7. Solve past MCQs and write short scenario answers, stating the rule first and then applying it to the facts.

Common mistakes in Cost Audit Documentation, Audit Process and Execution

• Defining audit documentation as only working papers.

  Fix: State that it means records in physical or electronic form, including working papers, prepared by and for, or obtained and retained by, the cost auditor.

• Confusing audit documentation with the audit file.

  Fix: Documentation is the content; the audit file is the folder or storage medium holding that content for a specific assignment.

• Leaving out who performed and who reviewed the work when listing what to record.

  Fix: Include the characteristics of items tested, the persons performing and reviewing, relevant dates and extent of review.

• Saying documentation can be completed at the end of the audit.

  Fix: Say it should be prepared on a timely basis and assembled as the audit goes on, because later documentation is likely to be less accurate.

• Believing documents may be discarded once the final file is assembled.

  Fix: After assembly, no documentation of any nature should be deleted or discarded before the end of its retention period.

• Giving one fixed list for the extent of documentation in every case.

  Fix: Explain that the extent depends on factors such as size, computerisation, assessed risk, tools and the nature of the procedure, then apply them to the case.

Last-day revision: Cost Audit Documentation, Audit Process and Execution

• ✓Audit is an independent examination of financial, cost and other related information, conducted to express an opinion.
• ✓Audit documentation means records, in physical or electronic form, including working papers prepared by, for or obtained and retained by the cost auditor.
• ✓An audit file is one or more folders or storage media containing the records that make up the documentation for a specific assignment.
• ✓SCA 102 covers the auditor's duty to prepare documentation for the audit of cost statements, records and related documents.
• ✓Other standards' documentation requirements do not limit SCA 102, and laws may add further requirements.
• ✓Record the characteristics of items tested, who performed and reviewed the work, relevant dates and extent of review.
• ✓Form and content depend on auditee size and complexity, computerisation, assessed risks, methodology and tools, and the nature of the procedure.
• ✓Documentation prepared during the work is likely to be more accurate than that prepared afterwards.
• ✓Assemble documentation as the audit goes on; complete the final file within a reasonable time after the audit.
• ✓After assembly, do not delete or discard documentation before the end of its retention period.
• ✓Electronic documentation needs special care against accidental deletion or tampering.
• ✓The engagement letter records the terms of the engagement, including the cost reporting framework.

Cost Audit Documentation, Audit Process and Execution practice questions

• Under SCA 102 on Cost Audit Documentation, which statement best describes the effect of preparing audit documentation after the audit work h…
• Which of the following is among the minimum items that SCA 102 guidance says must be included in cost audit documentation even for smaller e…
• Under SCA 102, why is it preferable to prepare cost audit documentation on a timely basis during the audit rather than after the work is com…
• A Cost Auditor of a small manufacturing entity explains to the reviewer that he verified scrap disposal controls but did not record the work…
• As defined in the Standard on Cost Auditing dealing with Cost Audit Documentation (SCA 102), 'audit documentation' refers to which of the fo…
• A cost auditor of a small manufacturing unit explains to the reviewer orally that stock counts were satisfactory but has no written record o…
• According to the Standard on Cost Audit Documentation (SCA 102), which of the following best describes 'audit documentation'?
• Mr. Rao, a Cost Auditor, explains to a reviewer that he verified the scrap disposal records but has no working paper recording the work. Per…

Cost Audit Documentation, Audit Process and Execution in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

• ACCA Applied SkillsAudit planning and documentation
• CS ProfessionalInternal Audit and Performance Audit
• CA IntermediateProcess & Operation Costing
• CMA IntermediateCost Audit