WIP refers to raw materials, labor and overhead costs incurred for products that are at various stages of the production process. WIP is a component of the inventory asset account on the balance sheet, and these costs are transferred to the finished goods account and eventually to cost of sales.

So, if you want to verify the authenticity of WIP account, use this checklist:

• Involve a technical expert in verification and valuation of WIP, if necessary.
• Ensure that cost sheets are duly attested by the works manager.
• Test the correctness of the cost sheet by verification quantities, cost of material wages and other charges with reference to the record.
• Verify stage of completion with component of cost involved with underlying records.
• Compare the unit cost as shown by the cost sheet with standard cost for any large variations.
• Ensure that the allocation of overhead expenses has been made on reasonable basis and is same as used in earlier period.
• Compare the cost sheet with that of the previous year and if there is any large variation, investigate the reason thereof.
• Ensure that the Work-in-Progress as at Balance Sheet date has been appropriately disclosed in Balance Sheet as per the requirements of Part I of Schedule III to the Companies Act, 2013.