Which of the following statements is correct regarding the audit of inventory cost accounting?
A) Cost accounting systems and controls are the same for all manufacturing companies.
B) All companies that have work-in-process must use a perpetual inventory system.
C) Auditors test perpetual inventory master files by examining documentation that supports additions and reductions of inventory amounts in the master files.
D) Manufacturing companies keep their cost accounting records separate from the production and other accounting records.

Question

Quizplus · Accepted Answer

Auditors generally test perpetual inventory master files by examining supporting documentation in order to ensure that inventory additions and reductions are accurately reflected in the cost accounting system. This can involve reviewing invoices, production records, purchase orders, and other relevant documents. While some manufacturing companies may keep their cost accounting records separate from other accounting records, this is not necessarily true for all companies. Similarly, not all manufacturing companies are required to use a perpetual inventory system, and cost accounting systems and controls can vary widely depending on the specific company and industry in question.

Which of the Following Statements Is Correct Regarding the Audit