Depending on the controls in the cost accounting system,the auditor may choose
A)to verify raw materials by reviewing purchase orders for raw materials
B)to verify raw materials by reviewing purchase invoices for raw materials
C)to verify direct labor by reviewing department records for direct labor costs
D)to verify direct labor by reviewing payroll budgets for direct labor costs
E)to verify direct labor by reviewing payroll records for direct labor costs
F)both A and C
G)both B and D
H)Both B and E

Question

Quizplus · Accepted Answer

The best choice is to verify raw materials by reviewing purchase invoices for raw materials (option B) and to verify direct labor by reviewing payroll records for direct labor costs (option E).

Reviewing purchase invoices for raw materials would provide the auditor with specific details about the quantity of materials purchased, supplier information, invoice dates, and unit prices. This would allow the auditor to calculate the actual cost of the raw materials, verify the accuracy of the recorded costs and identify any potential discrepancies or errors.

On the other hand, reviewing payroll records would enable the auditor to trace each employee's time and attendance and check whether the proper payroll rates were applied. The auditor can verify the percentage of employee wages that can be allocated to direct labor and verify if there are any potential discrepancies or errors.

Therefore, option H, both B and E, is the best choice.

Depending on the Controls in the Cost Accounting System,the Auditor