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CMA Final · Cost and Management Audit · Cost Audit Documentation, Audit Process and Execution

A Cost Auditor of a small manufacturing entity explains to the reviewer that he verified scrap disposal controls but did not record the work, saying he can explain it orally if needed. Under SCA 102, this position is:

The position is not acceptable. Audit documentation must be sufficient and appropriate, and oral explanations by the Cost Auditor cannot substitute for it. Even for smaller entities, documentation may be less detailed but must still exist and cover the minimum items.

  1. AAcceptable, provided the explanation is given before the report is signed
  2. BAcceptable for smaller entities, whose documentation need not be maintained
  3. CNot acceptable, since oral explanations cannot substitute for sufficient and appropriate audit documentationCorrect
  4. DAcceptable if the management confirms the explanation in writing

Explanation

SCA 102 says audit documentation must be sufficient and appropriate, and oral explanations by the Cost Auditor cannot substitute for it. Smaller entities may have less detailed documentation, but not none.

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