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

A cost auditor of a steel fabricator has concluded that material cost risk is low because a well documented Bill of Materials exists. During execution he finds heavy use of substitute and alternate materials in production, and revises his risk assessment upward. Under SCA 102, how should this matter be treated?

It is a significant matter. SCA 102 says that matters causing a revision of the cost auditor's previous assessment of the risks of material misstatement are significant, and the use of substitute or alternate materials despite a documented Bill of Materials is the standard's own illustration.

  1. AAs a significant matter, because it causes a revision of the earlier assessment of risks of material misstatementCorrect
  2. BAs an insignificant matter, because a Bill of Materials exists
  3. CAs a matter to be conveyed orally only, without documentation
  4. DAs outside documentation, since it relates to production and not to costing

Explanation

SCA 102 states that a matter causing a revision of the cost auditor's previous risk assessment is a significant matter. The substitute materials example is the one the standard itself gives. Oral explanations cannot replace documentation, so the oral-only option fails.

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