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Dear Tutor,
I came across a question that was asking for substantive procedures in relation to the use of standard costs. I have come up with two procedures and I am not sure whether it correct.
These are:
– Compare the Actual costs of inventory to Standards costs (Variance Analysis) to identify any significant fluctuation both. Discuss with management if there is significant fluctuation as it may indicate that inventory as a whole may be misstated.
– Enquire management as to how often they update their standard costs. Review any past updates made to Standard costs as it may indicate how often it is done to reflect changing circumstances.
Actually, the suggested answer does not match this, but I have the intuition that this is correct.
Are these answers mark-worthy in the exam?
Thank you.
I am sorry but I cannot respond to such “marking” requests for AA/AAA because it would open floodgates to similar – and I simply don’t have the time/resources for such an undertaking. There are, however, some excellent resources “sticky posted” (see the “starred” posts) at the top of this forum – to help students better understand what will earn marks in the exam. I recommend to you both the “Read the mind of an AA marker – ESSENTIAL READING” post.
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