Product/Project Accounting Audit Program

Control Objectives & Activities Test Steps

1) All projects and product developments/launches are valid.

1. Interview management to ensure that all product

developments are authorized by management and
unauthorized activity is prevented.

2. Obtain the list of product developments/launches

1.1 All product developments or projects are authorized and
during the period of review.
ratified by senior management as part of the long-term strategic
direction of the organization and unauthorized product/project
3. Verify if such developments/launches are authorized
activity is prevented.
and ratified by senior management.

4. Interview management on any unauthorized activity

during the period of review and verify appropriate follow
up action was taken.

1. Interview management and determine the methods

used to prevent unauthorized investments.
1.2 Key objectives are set for the product/project (such as the
required rate of return on the investment or target sales income),
2. Perform testing to ensure unauthorized access is
as the basis for performance and achievement monitoring.
prevented by comparing the list of approved personnel
who can invest and with the access granted.

2) Product/projects costs are calculated accurately using the appropriate costing method.
1. Determine if direct and indirect costs are accurately
identified by management.
2.1 Management reviews all the direct and indirect costs
associated with the product/project.
2. Select any project and verify if all direct/indirect costs
associated with the project are accurate.

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 Product/Project Accounting Audit Program
Control Objectives & Activities
2.2 Management establishes the most appropriate costing
method for the product/project and ensures that all the relevant
cost elements and underlying assumptions are identified and
incorporated.
3) All relevant costs are identified and accurately recorded.
3.1 Management evaluates that all the resources (labor and
material) actually expended are being identified and accurately
costed.
3.2 All special costs (such as special tooling, capital equipment,
employing external consultants, etc.) are taken into account.
3.3 Processes exist to prevent the inclusion of invalid or incorrect
costs for a product or project.
3.4 Management ascertain that all the relevant cost data is
accurate, complete, and correctly accumulated in the accounting
system.
Test Steps
1. Interview management regarding the basis of
deciding the costing method for each project/product.
2. Obtain evidence to review the reasonableness of
such decision.
3. Verify that all cost elements and underlying
assumptions are identified.
4. Select a project/product and verify if the relevant
costing method is applied.
1. Select a particular project and obtain its project costs.
2. Verify if all labor and material expense is identified
and adequately costed.
1. Interview management to determine the treatment
given to special costs.
2. Select a project and obtain its related special project
costs.
3. Verify if all the special costs are taken into account.
1. Select a particular project and obtain its project costs.
2. Verify if all labor and material expense is identified
and adequately costed.
3. Verify if any invalid/incorrect costs are included and
identify the reasons for the inclusion.
1. Obtain evidence of the review performed by
management to check for relevant costs and
completeness.
2. Select a project and verify if all the project costs are
identified and accounted for accurately in the
accounting system.
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 Product/Project Accounting Audit Program

Control Objectives & Activities Test Steps

4) Project/product development are considered in relation to the established pricing policy.
1. Interview management to understand the appraisal
process for the projects/products.
4.1 Management has undertaken and evidenced a full appraisal
of all potential products and projects. 2. Select a project and verify that management has
undertaken an appraisal of all potential
products/projects.

1. Interview management to understand how external

factors are taken into account while authorizing the
pricing policy.
4.2 Management has developed an authorized pricing policy
based upon market share, action by competitors, local pricing 2. Verify if all the external factors are factored in the
considerations, supply and demand, geographic differences, etc. pricing policy.

3. Obtain evidence that pricing policy is reviewed

periodically and ratified by the senior management.

1. Interview management to understand how local

factors are taken into account while authorizing the
pricing policy.
4.3 Management has taken adequate account of local factors
such as taxation, pricing controls, competitors strategy, available 2. Verify if all the external factors are factored in the
subsidies and grants, etc. pricing policy.

3. Obtain evidence that pricing policy is reviewed

periodically and ratified by the senior management.

5) Reliable budgets are established.

5.1 Management has determined targets and objectives for each
product/project based in reliable data and assumption.
6) Actual costs, progress and the variances are identified and acted upon.
6.1 Management monitors the cost overruns, failures to achieve
target objectives, etc.
1. Obtain evidence that targets/objectives and a
monitoring mechanism are set for each project.
2. Verify that actual performance are monitored against
targets on a regular basis.
1. Inquire the mechanism implemented to identify a cost
overrun in a project.
2. Obtain evidence that management adequately
monitors costs on a regular basis in order to detect cost
overruns.

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 Product/Project Accounting Audit Program

Control Objectives & Activities Test Steps

1. Inquire if management monitors variations in related

costs for products/projects that involve
6.2 Management takes due regard of the consequences of
materials/services provided by external suppliers.
variations in the related costs for products/projects that involve
materials or services provided by external suppliers.
2. Obtain evidence that such variations in costs are
monitored for all products/projects.

1. Obtain evidence that targets/objectives and a

monitoring mechanism are set for each project.
6.3 Cost targets are established for all the key stages of the
project, and actual costs are monitored against the targets.
2. Verify that targets/objectives are established and
approved.

1. Inquire if standard cost variances are considered in

6.4 The impact of standard cost variances is considered in
relation to the inventory and cost of sales.
relation to inventory and cost of sales.
2. Select a product and verify if the related standard
cost variances are transferred to inventory and/or cost
of sales.

1. Inquire about significant problems or cost variances.

6.5 Significant problems or cost variances are recorded together
with the proposed courses of management action.
2. Verify if variances are recorded accurately.

7) Actual sales or desired project performance is achieved.

1. Obtain evidence that a "break even point",
7.1 A "break even point" is developed for the product/project and
targets/objectives and a monitoring mechanism are
monitored in order to ensure achievement of objectives.
developed for each project.
7.2 Management monitors that products/projects are achieving
2. Verify that actual performance is monitored against
the required objectives.
targets on a regular basis.
7.3 Key project stages, milestones and deliverables are identified
and incorporated into a workable progress monitoring system for 3. Verify if the product/project is achieving the required
management review and action. objectives.
8) The accounting system accurately reflects all the relevant economic events associated with each product/project.

1. Interview management to determine the various

8.1 All of the discrete production and other stages are identified,
and management examines that the associated costs are
accurately reflected in the accounting/costing systems.
discrete production & stages that are identified to
facilitate accounting.
2. Verify that all costs at such discrete production and
other stages are accounted accurately.

3. Obtain evidence that such costs are reviewed

periodically by management.

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