Page 257 - DCOM509_ADVANCED_AUDITING

Advanced Auditing

Notes (b) that there is no possibility of loss or pilferage of stock lying in the production
section;
(c) that surplus materials and scraps arising in production shops are returned to stores
correctly and without delay for which necessary credit is given to unit cost of
production. If transferred to other jobs, proper transfer voucher has been prepared
and copies sent to the accounts, stores, etc.
(iv) Work-in Progress: The Cost Auditor will see the following:
(a) that work-in-progress has been physically verified and that it agrees with the balance
in the incomplete cost card;
(b) that valuation of the work-in-progress is correct with reference to stage of completion
of each job or process and the value job cost cards or process cost sheet;
(c) that there is no over-valuation or under-valuation of opening work-in-progress or
closing work-in-progress, thereby artificially pushing up and down net profits or
net assets as the case may be;
(d) that the volume and value of work-in-progress is not disproportionate compared
with the finished out-turn.
(v) Labour
(a) Proper utilization of labour and increase in productivity are now receiving attention,
Several productivity teams have emphasized importance of higher productivity. It
is, therefore, essential to assess the performance efficiency of labour and compare it
with standard performance, so that labour utilization could be progressively
improved. The labour force in Indian industries is generally very high compared to
similar types of industries in other developed countries. Our aim should be to reach
that level, though not immediately but over some time. A study of this nature
would give an idea where the inefficiency lies so that timely and adequate steps
could be taken to ensure maximum utilization of labour to reduce labour cost.
(b) Cost of labour is allocated to different jobs with reference to time or job cards.

(vi) Capacity Utilisation: The cost auditor will see:
(a) that the idle capacity in any production shop or of transport facilities for distribution
is not excessive;

(b) that production volume and overall machine time utilised are commensurate. In
other words, the machine hours utilised have given the optimum output.
(vii) Overheads and Indirect Expenditure: The cost auditor will see and certify:

(a) that allocation of indirect expenditure over production, sales, and distribution is
logical and correct;
(b) that compared with the value of production in a production shop, overhead charges
are not excessive;
(c) that actual indirect expenditure does not exceed budgets or standard expenditure
significantly and that any variations are satisfactorily explained and accounted for;
(d) that the relation of indirect expenditure in keeping with the load on individual
production shop is appropriate;

(e) correctness of appropriate allocation of overhead expenditure (both production and
sales) will be certified by the cost auditor;

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