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The main objective is to check if the cost accumulation has been accurate and complete since the total cost will determine the value of work in progress. There the following audit procedures are critical;
- Inspect the job card and verify that the quantity and cost of raw materials used are in line with preset standard quantities and costs.
- Verify that the unit cost of each raw material is a per price inventory listing and cost thereof.
- Inspect the job card for inclusion of only production fixed and variable overheads like labour costs and factory rentals.
- Agree the labour rate to either preset rate or the actual rate as per employment contract.
- Recompute the overhead absorption rate and make sure that the rates used are correct and are based on normal capacity of production.
- Inspect the costing process to verify that over or under absorptions are not included in the valuation of work in progress.
- Inspect the variance production variance analysis reports and verify the abnormal losses are not included in the valuation of work in progress.
-Inspect the job cards for signature of the production Management Accountant as evidence of his/her review of the costing process.
- Inspect the books for processing the following journal; Dr - Finished products Cr - Work in progress with raw materials and labour costs, with value of all finished products.
- recompute all calculations and check if calculations by costing clerk are accurate.
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