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CMA Final · Cost and Management Audit · Cost Auditing and Assurance Standards

A cost auditor relies on a management representation that unit costs of a product were correctly computed, and does not collect further evidence because the management is believed to be honest. According to SCA 103 guidance on professional skepticism, what is the position?

It is not acceptable. SCA 103 states that the auditor should not accept less-than-persuasive evidence because management is believed honest, and that representations are no substitute for sufficient appropriate audit evidence to support the opinion, even if given in writing.

  1. AAcceptable, since honest management reduces the need for evidence
  2. BAcceptable, provided the representation is in writing
  3. CAcceptable if the amount involved is below the cost audit threshold
  4. DNot acceptable, because representations are not a substitute for sufficient appropriate audit evidenceCorrect

Explanation

SCA 103 says the auditor should not be satisfied with less-than-persuasive evidence on a belief that management is honest and has integrity. It adds that management representations are not a substitute for sufficient appropriate audit evidence. A written form does not change this.

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