An Internal Auditor Found That the Cost of Some Material

Multiple Choice

An internal auditor found that the cost of some material installed on capital projects had been transferred to the inventory account because the capital budget had been exceeded. Which of the following would be an appropriate technique for the auditor to use to determine the extent of the problem?

A) Identify variances between amounts capitalized each month and the capital budget.
B) Analyze a sample of capital transactions each quarter to detect instances in which installed material was transferred to inventory.
C) Review all journal entries that transferred costs from capital to inventory accounts.
D) Compare inventory receipts with debits to the inventory account and investigate discrepancies.