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

A cost auditor of Bharat Castings Ltd. discussed a significant costing issue orally with the finance head and, as the explanation was convincing, did not record it in the working papers. According to SCA 102, what is the position?

The practice is not acceptable. SCA 102 requires audit documentation to be sufficient and appropriate, and oral explanations by the cost auditor cannot replace it. Even for smaller entities, significant matters and conclusions must be documented, so an unrecorded discussion does not meet the standard.

  1. AAcceptable, if the cost auditor can later explain the matter to a reviewer
  2. BAcceptable, provided the finance head confirms the discussion orally
  3. CNot acceptable, because oral explanations by the cost auditor cannot substitute for sufficient and appropriate audit documentationCorrect
  4. DAcceptable for smaller entities, as they need no documentation of significant matters

Explanation

SCA 102 states that audit documentation must be sufficient and appropriate and that oral explanations by the cost auditor cannot substitute for it. Even smaller entities must document significant matters noted and conclusions reached, so the smaller-entity option is wrong.

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