Cost Audit:
Cost Audit
is the critical examination of cost records to express their adequacy, trust
and fairness and compliance to cost accounting principles.
Purposes:
Purposes of
cost Audit:
- 1. To verify arithmetic accuracy of cost records.
- 2. To see the complaints of cost accounting principles.
- 3. To verify that cool statements are drawn properly.
- 4. To find out expenditure is properly incurred.
- 5. To see the adherence of management policies.
- 6. To detect errors and frauds.
- 7. To examine the cost plus percentage contracts.
- 8. To assists in reducing the work of statutory auditor.
Distinction between Financial Audit and Cost Audit:
No. |
Point of Distinction |
Financial Audit |
Cost Audit |
|
1
|
Definition
|
|
Cost Audit is the critical examination of
cost records to express their adequacy, trust and fairness and compliance to
cost accounting principles.
|
|
2
|
Compulsion
|
Compulsory.
|
Not Compulsory.
|
|
3
|
Objective
|
Opinion on true and fair view.
|
Opinion in expenses wisely incurred.
|
|
4
|
Scope
|
Widen than cost Audit.
|
Not widen than financial Audit.
|
|
5
|
Stock verification
|
See the existence and value.
|
See the existence and value in addition
adequacy.
|
|
6
|
Storage Costs
|
Entries and Costing.
|
Reasons and adequacy.
|
|
7
|
Issues of materials
|
It is not concerned.
|
Examine in detail.
|
|
8
|
Coverage
|
Financial aspects.
|
Cost aspects.
|
|
9
|
Concerned
|
Protection of shareholders' interest.
|
Interest of Management.
|
|
10
|
Report
|
To AGM.
|
To management.
|
|
11
|
Location of Work
|
Office.
|
Factory.
|
|
12
|
Certify
|
Arithmetic accuracy not utilization of
resources.
|
Utilization of resources.
|
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