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CMA Final · Cost and Management Audit

Cost Audit Programme for CMA Final Paper 17

A cost audit programme is the cost auditor's written plan of the audit procedures to be performed, their nature, timing and extent. You solve questions by linking each procedure to a risk or objective, agreeing engagement terms under SCA 105, documenting work under SCA 102, and modifying the plan when findings change.

What this chapter covers

This chapter is about how a cost auditor turns an engagement into a plan of work. It starts with what a cost audit programme is and what it is meant to achieve. It then moves through agreeing the terms of the engagement with management (SCA 105), planning and preparing the programme, documenting the work (SCA 102), and carrying out the audit while changing the programme when needed.

The chapter is practical. Examiners rarely ask you to recite a definition alone. They give a short situation, such as a client asking to change the engagement terms or a team member preparing papers late, and ask what the cost auditor should do and why.

It connects to the rest of Paper 17. The programme is the base for the later chapters on audit planning, evidence, reporting and the cost audit of specific industries. If you understand how a programme is built and changed, those chapters become easier because you can see where each procedure fits.

This chapter is compact, rule-based and easy to score on. Section A MCQs can test a single requirement of SCA 105 or SCA 102, and Paper 17 also has a case scenario with MCQs where you must apply such a rule. In the written section, a question on programme design or engagement terms rewards structured answers that name the standard and apply it to the facts. Because the wording of the standards is short and precise, a few hours of careful reading gives you marks that other, heavier chapters do not.

Cost Audit Programme: topics in the order to study them

  1. 1Meaning and Objectives of Cost Audit ProgrammeStart here so you know what the programme is for before learning the standards that surround it.
  2. 2Agreeing Terms of Cost Audit Engagement (SCA 105)The terms are agreed before any planning, so this is the first step in the audit's real sequence.
  3. 3Planning and Preparing the Cost Audit ProgrammeOnce the engagement is agreed, you plan the work. This is the core of the chapter and needs the first two topics as background.
  4. 4Cost Audit Documentation (SCA 102)Documentation records the plan and the work done, so it is easier once you know what the plan contains.
  5. 5Conducting the Audit per Programme and Modifying ItStudy this last because it ties together planning, documentation and judgement when circumstances change.

How to prepare Cost Audit Programme

Treat this chapter as a sequence of decisions a cost auditor makes, not a list of definitions. Read the standard wording closely, then practise applying it to short situations.

  1. Read the meaning and objectives once and write a three-line summary of why a programme exists in your own words.
  2. Read SCA 105 and note who does what: the cost auditor agrees terms with management, and preparing the cost statements remains management's responsibility.
  3. Learn the change rules: if terms change, the auditor and management agree and record the new terms in writing, and the auditor must not agree to a change without reasonable justification.
  4. Note the recurring audit rule: on recurring cost audits, assess whether terms need revising or whether management needs a reminder of the existing terms.
  5. For SCA 102, learn why timely documentation matters and that the names of team members who prepared documents, and details of the auditor's review, form part of it.
  6. Build a simple sample programme for one area, such as material cost, listing objective, procedure, timing, extent and who performs it.
  7. Practise MCQs and short case questions, and for each answer state the rule first and then apply it to the facts.

Common mistakes in Cost Audit Programme

  • Confusing the auditor's duty with management's duty for the cost statements.

    Fix: Remember that preparing cost statements under the applicable framework stays with management. The auditor's duty is to audit and report.

  • Saying terms can be changed whenever the client asks.

    Fix: State that the auditor must not agree to a change without reasonable justification, and that any agreed change is recorded in writing.

  • Ignoring recurring audits.

    Fix: Add the rule that on recurring audits the auditor assesses whether terms need revising or whether a reminder is needed.

  • Treating documentation as something done at the end.

    Fix: Explain that timely documentation improves quality and that later documentation is likely to be less accurate.

  • Writing a generic programme with no link to objectives.

    Fix: Tie each procedure to an objective and state its nature, timing and extent, then explain how it would be modified if findings differ.

  • Quoting paragraph numbers from memory.

    Fix: Use a paragraph number only when you are sure of it. Stating the rule correctly in plain words earns the marks.

Last-day revision: Cost Audit Programme

  • A cost audit programme is the written plan of procedures, their nature, timing and extent.
  • The cost auditor agrees the terms of the engagement with management (SCA 105, para 5.4).
  • The role of management in agreeing terms depends on the entity's governance structure and relevant law or regulation.
  • Agreeing terms helps avoid misunderstanding about the respective responsibilities of management and the auditor.
  • Preparing cost statements under the applicable framework remains management's responsibility, even if a third party helped.
  • If terms change, agree and record the new terms in an engagement letter or other suitable written form.
  • Do not agree to a change in terms where there is no reasonable justification.
  • On recurring audits, assess whether terms need revising or a reminder of existing terms.
  • Documentation prepared during the work is likely to be more accurate than documentation prepared afterwards.
  • Documentation should show who prepared each document and the details of the auditor's review.
  • SCA 102 documentation requirements do not limit SCA 105, and laws may add further requirements.
  • Modify the programme when findings or circumstances change, and record the reason.

Cost Audit Programme practice questions

Cost Audit Programme in other exams

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

Cost Audit Programme: frequently asked questions

Is the Cost Audit Programme chapter important for the MCQs in Paper 17?

Yes. Paper 17 Section A has standalone MCQs and a case scenario with MCQs, and a single requirement of SCA 105 or SCA 102 can be tested in either. Knowing the exact conditions of each rule helps you pick the right option.

Do I need to memorise paragraph numbers of SCA 105 and SCA 102?

Not as a priority. Knowing the rule and applying it matters more. Cite a paragraph number only if you are certain, such as SCA 105 para 5.4 on agreeing terms with management.

When can the terms of a cost audit engagement be changed?

The auditor must not agree to a change where there is no reasonable justification. If a change is agreed, the auditor and management agree on and record the new terms in an engagement letter or other suitable written form.

Why does the standard stress timely documentation?

Documentation prepared during the audit work is likely to be more accurate than documentation prepared after the work. It should also show who prepared each document and the details of the cost auditor's review.