A real estate development company was building an industrial park near Oklahoma City.

An audit team was assigned to examine and evaluate the internal controls for the construction and development of that complex. The internal auditors assigned to the audit were:

Candy Wharton — BBA in accounting, MBA with six years of internal auditing experience, Certified Internal Auditor.
Alan Clarkson — BS in civil engineering, LLB, retired from a law firm that specializes in real estate, auditing part-time to get out of the house once in a while, he says.
Diane Lamar — BS in computer science, new graduate, preparing for CIA exam.

The following is a list of procedures to be performed on the audit:
1. Describe the internal controls for the development company’s MIS and accounting system, which will be computerized and is being designed specifically for the development and operation of the industrial park.
2. Examine the builder’s documentation for construction specifications and test compliance with these specifications.
3. Prepare a schedule of the cost variances in construction so far and evaluate the materiality of these variances individually and in the aggregate.
4. Examine and test the materials inventories at the site and compare your estimated totals, for reasonableness, with totals in the accounting records.
5. Calculate the estimated percentage of completion on the various sectors of the building project. Compare your estimates with the builder’s master building schedule.
6. Vouch a sample of materials purchases and subcontracted costs-to-date on the project.
7. Verify the builder’s payroll expenditures to date and test, with observation, at least one distribution of payroll checks.
8. Examine the county records specifying the property boundaries and the builder’s survey record. Scan the county records for restrictions and covenants affecting the property.
Required:

a. How would you allocate the above procedures among the three auditors?

b. What sources of information would help the auditors perform each of the eight audit procedures? Include both the general classification of evidence and the specific source.
Define your selections based on the quality of your sources and the persuasiveness of the evidence.