Accounting Best Practices, Fifth Edition

18–6. Costing Policies for Best Practices (Chapter 9)

• The company shall maintain material and labor record accuracy of at least ___%, which shall be verified on a regular basis by the internal audit staff. This policy supports the operation of a materials planning system, which requires high levels of record accuracy. However, it is also of considerable use to the cost accountant, who needs the same level of record accuracy to conduct various types of cost analyses.

  Impacted best practices:

  • Audit bills of material

  • Audit labor routings

• A materials review board shall conduct an ongoing review of the inventory to ascertain which items should be disposed of, and to direct this disposition in the most profitable manner. This policy is intended to keep a company from accumulating an excessive amount of inventory, and also helps the controller by ensuring that obsolete inventory is located and valued on a regular basis.

  Impacted best practices:

  • Follow a schedule of inventory obsolescence reviews