In this audit plan for the audit of Keystone Computers & Networks, Inc., there is a section on significant accounting and auditing matters. The second matter described involves capitalizing the costs of developing a software program for sale.

Required:

a. Research this issue and write a brief memorandum for the working papers describing the issue and summarizing the appropriate method of acounting for the development costs.

b. Based on year research, describe the major audit issue that you be;ieve will be involved in auditing the software development costs.