Cost Audit means the audit of cost records to ascertain their accuracy and to ensure that the cost accounting plan is carried out as determined by the company.
Cost audit involves verification of the cost of accounting records to ensure the accuracy of the cost accounts, cost reports, cost statements, cost data and costing technique, and examination of these records to ensure that they adhere to the cost of accounting principles plans procedures and objectives.
Cost audit procedures review verification reporting one review refer to the review of cost records to ensure that they are properly drawn up and reviewed the effectiveness of internal controls on cost account book implemented by the company to verification includes verification of the accuracy of cost accounting records or information maintained by the company and cost accounting plans principles procedures and objectives adhere to three reporting food certification regarding the correctness of the account and cost audit report objectives of cost audit.
Objectives of Cost Audit
There are two objectives of cost audit on prospective objective two constructive objectives in prospective objective cost audit identifies the Indri wastage auger losses and ensure that the costing system determines the correct and realistic cost of production and unconstructive objective.
cost audit provides useful information to the management regarding regulating production economical method of operation reducing the cost of operation and reformulating costs of accounting plans.
Types of Cost Audit
Types of cost audit one cost audit on behalf of the management to cost audit on behalf of the customer cost audit on behalf of the government for cost audit by trade associations and statutory cost audit, in a nutshell, we can say that cost audit refers to an examination of cost records to verify the accuracy of cost record and information maintained by the company cost audit ensures that the cost records are properly drawn up as per the records and they represent true and fair views of cost of production cost audit verifies the cost records to ensure that they adhere to cost accounting plans principles procedures and objectives.
Also Check: internal audit procedures
Advantages of Cost Audit
- Advantages to the Management
- Advantages to the Shareholders
- Advantages to the Government
- Advantages to the Society
Disadvantages of Cost Audit
- Cost Audit is not Suitable for small Business
- Cost Audit is very expensive.
- Lack of Accuracy Involve.
- Cost Audit System is more Complex.