May, 2021Responsible Office
The conversion cycle includes transaction flows pertaining to the production of goods and services, resources held, used or transformed, and related controls over such activities as inventory transfers and charges to production for labor and overhead.
In order to make and/or support the entries in the inventory records, control should be established over:
Accurate inventory records should be maintained of work-in-progress.
General ledger entries arising from the conversion cycle should be accurately determined.
Accurate records should be maintained of internal production projects (e.g., construction of property, plant and equipment, major maintenance or overhauls) so as to determine the amounts to be capitalized, deferred or written off.
Accurate records should be maintained of goods held on behalf of third parties (e.g., customers’ goods to be returned after processing) so as to: