WIP – accounting and procedurs

WIP isn’t as important a topic for the exam as, say inventory counts generally.

Things to remember about WIP:
We’re talking about manufacturing businesses
How it would be accounted for in terms of management accounts (“batch costing”, “process costing”, etc) is not examined
Per IAS 2, cost = direct material + direct labour + production overheads
So, for example, omitting any overheads gives rise to risk of material understatement
But including general overheads gives rise to overstatement

In terms of audit procedures you should bear in mind that there will be production records e.g. standard cost cards, records of input/out, etc
Raw material costs would be vouched to purchase invoices, labour costs to timesheets/clockcards/payroll records (whatever is relevant in the context of the given scenario) and overhead workings would be recalculated with overhead costs agreed to invoices showing they are production-related.