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Chapter 163 4

Specific procedures include:

 Review the payroll costs in the forecast to ensure they have increased
for the new workers:

Average salary per production worker × 15, and

Average salary per administrative worker × 2.

 Inspect the quotations for the new plant and machinery and agree the
cost to the forecast.

 Enquire of management in which month the expenditure is expected to
occur and ensure the payment is included in the correct month of the
forecast.

 Discuss with management the assumptions they have used for the
increased sales expected to be generated from the expanded business,
and consider whether this appears reasonable and review the forecast to
ensure the assumptions are reflected in the forecast cash receipts.

 Review the level of running costs included in the forecast and compare
these with latest management accounts figures to assess whether
running costs have been increased as would be expected when the
business expands e.g. electricity usage, insurance for the new
machinery, etc.

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