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

Mr. Rao, a Cost Auditor, explains to a reviewer that he verified the scrap disposal records but has no working paper recording the work. Per SCA 102 guidance, how should his oral explanation be treated?

Oral explanations cannot replace documentation. SCA 102 guidance requires audit documentation to be sufficient and appropriate, and states that oral explanations by the Cost Auditor cannot substitute for it, regardless of the reviewer or entity size.

  1. AIt substitutes for documentation if the reviewer is a senior member
  2. BIt substitutes for documentation if the entity is a small entity
  3. CIt substitutes for documentation if the management confirms it
  4. DIt cannot substitute for sufficient and appropriate audit documentationCorrect

Explanation

SCA 102 guidance states audit documentation must be sufficient and appropriate, and oral explanations by the Cost Auditor cannot substitute for it. Seniority, entity size or management confirmation does not change this.

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