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

During the audit of a steel fabricator, a Cost Auditor initially relied on a well documented Bill of Materials, but later found extensive use of substitute and alternate materials in actual production, which changed his risk assessment of Material Cost. Under SCA 102, this matter is:

It is a significant matter. Under SCA 102, a matter that causes the Cost Auditor to revise the earlier assessment of risks of material misstatement is significant, as when heavy use of substitute materials undermines reliance on a documented Bill of Materials.

  1. ANot a significant matter, since the Bill of Materials was documented
  2. BA significant matter, because it causes a revision of the previous assessment of risks of material misstatementCorrect
  3. CA significant matter only if the cost statement is eventually qualified
  4. DNot a significant matter unless it involves heaps of bulk material

Explanation

SCA 102 says a matter that causes a revision of the Cost Auditor's previous risk assessment is a significant matter, and gives this very Bill of Materials and substitute materials illustration. Option D confuses it with a separate example about difficulty in applying procedures.

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