Imagine that you are the internal auditor of an organization that produces and distributes energy. You are assigned to audit the cost and budget function. The following six audit steps are included in your audit program:

1. Determine whether sales forecasts are approved by senior marketing management.

2. Compare sales and production, by producing units, with total plant forecasts.

3. Appraise the propriety of the bases used for distribution of the fixed and semifixed expenses.

4. Determine the usefulness of performance reports by interviews with the various levels of line management and by examining the correspondence initiated by those interviewed.

5. Verify the accuracy of monthly budget reports and determine the adequacy of explanations given for budget variances.

6. Review major inventory adjustments written off to profit or loss.

Required:

Briefly explain the audit objective of each of the audit steps above.