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CS Professional · Internal and Forensic Audit · Internal Audit of Specific Functions

During an internal audit of the production function at Kaveri Engineering Ltd, the auditor wants to confirm that raw materials issued to the shop floor were actually consumed in line with approved standards. Which audit procedure is MOST directly suited to this objective?

The most suitable procedure is comparing material requisition slips with the bill of materials and analysing usage variances against standard consumption. This directly tests whether issued materials were consumed as per approved standards, unlike board minutes, vendor registrations or dividend history, which do not address shop floor consumption.

  1. AComparing material requisition slips with bill of materials and analysing usage variances against standard consumptionCorrect
  2. BChecking the board minutes approving the annual budget
  3. CVerifying the vendor's GST registration certificate
  4. DReviewing the company's dividend declaration history

Explanation

Matching issue documents to the bill of materials and analysing usage variances shows whether consumption conformed to standards. The other options relate to approvals, vendor tax status or dividends and do not test material consumption on the shop floor.

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