What it is
For a manufacturer the inventory number is only as good as the cost system behind it. Standards that drift from actual cost, overhead absorbed on idle capacity and reserves that lag the market all end up in the balance sheet. This program tests the cost system first and then the count and valuation.
It is paired with the inventory checklist and count sheets in this library, and goes further into standard cost, variance capitalization and overhead. The workbook has procedures, a risk tab, completion tracking and tie-outs to the trial balance.
When to use it
- At planning for the audit of a manufacturer that uses standard, job or process costing.
- Before the year-end count, to plan observation and roll-forward procedures.
- When margins moved and the team needs to test the variances behind them.
What’s inside
- Standard cost, roll-up and variance capitalization procedures
- Overhead pool, normal capacity and abnormal cost procedures
- Physical count, roll-forward and third-party inventory procedures
- Net realizable value, obsolescence, cutoff and purchase commitment procedures
- Risk assessment tab and tie-outs
Standard cited
This template follows ASC 330 / AU-C 501. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use. See AU-C 501 explained.
Questions
How is overhead tested?
The pool is agreed to the ledger, the rate is recomputed, and fixed overhead is absorbed at normal capacity with unallocated amounts expensed.
What if the entity counts only by cycle count?
The program has the auditor evaluate count frequency, adjustment approval and accuracy, and test unresolved variances at year end.
Does it replace the inventory checklist?
No. Use both. The checklist covers the engagement view and this program covers the cost accounting detail.
Related templates
- Manufacturing Standard Cost Variance Analysis
- Manufacturing Overhead Absorption and Inventory Costing
- Audit Program: Inventory
- Manufacturing Inventory and Cost Accounting Audit Checklist
Last updated 11/05/2026. All free templates.