Question

As an auditor, which alternative procedures would you use? Explain and provide an example from both service and manufacturing companies. 

Explain whether you agree or disagree with the implementation of alternative procedures.

Answer 1

Alternative Procedures in auditing for Manufacturing and Service Industires:

Auditing procedures shall get change as per the industry because of the operations and execution of revenues are different in manufacturing and service industries. Manufacturing industry mainly on products and Service industries mainly on delivery of services to clients. Manufacturing companies will have raw materials procurement, storage, work in process and finished products. In service industry there will not be any product procurement, however service orders, their execution, and billing are main aspects. In manufacturing we have to check the material procurement procedures, material handling, stores, material issues and physical verification of inventory. Also valuation of work in progress and finished goods need to be checked. Manufacturing industry majorly depend on the Fixed Assets viz. land, building, plant and equipment etc. In service industries capital expenditure is not required as manufacturing industry.

Hence based on the above we have to check and do audit based on the business operations and industry practices. We cannot deploy the same set of procedures for manufacturing as well as for service industries.