During the audit of Quick Productions Private Limited, CA Naitik notices that inventories of raw materials & consumables and work-in- progress…

To verify that inventories of raw material & consumables and work-in-progress have been valued appropriately and as per generally accepted accounting policies and practices, the following procedures should be performed by CA Naitik: For Raw materials and consumables: Ascertain what elements of cost are included e.g. carriage inward, non-refundable duties etc.If standard costs are used, enquire into basis of standards; how these are compared with actual costs and how variances are analysed and accounted for/ treated in accounting records.Test check cost prices used with purchase invoices received in the month(s) prior to counting.Follow up valuation of all damaged or obsolete inventories noted during observance of physical counting with a view to establishing a realistic net realizable value. For Work in Progress: Ascertain how the various stages of production/ value additions are measured and in case estimates are made, understand the basis for such estimates.Ascertain what elements of cost are included. If overheads are included, ascertain the basis on which they are included and compare such basis with the available costing and financial data/ information maintained by the entity.Ensure that material costs exclude any abnormal wastage factors.