Accounting Best Practices, Fifth Edition

9–13. Limit Access to Unit of Measure Changes

The unit of measure field, an innocuous field in the computer system, can have a major impact on the accuracy of product costs. When the quantity in a bill of material or inventory record is created, it has a unit of measure listed next to it. For example, one inch of tape on a bill of materials will have a quantity of one, and a unit of measure of “IN,” or “inch.” However, if the unit of measure is changed to “RL,” or “roll,” without a corresponding reduction in the amount of tape listed in the quantity field, the amount of tape picked for production will increase from one inch to an entire roll. The same problem applies to the inventory, where a change to the unit of measure field without a corresponding change in the quantity field will result in a potentially massive change in the amount of inventory on the books. This seemingly minor issue can result in a major change in the cost of goods sold.

The solution is to limit access to the unit of measure field in the computer system, preferably to one person or position. By doing so, all changes must be reviewed by one person, who will presumably be trained well enough to realize the relationship between units of measure and quantities. If access by multiple people cannot be avoided, then a less-reliable variation is to require approval by a manager before making a change. However, as someone can make a change without approval, this system is too easy to bypass. A third variation is ...