Cost Audit represents the verification of cost accounts and check on the adherence to cost accounting plan. Cost Audit ascertain the accuracy of cost accounting records to ensure that they are in conformity with Cost Accounting principles, plans, procedures and objective. Cost Audit comprises following;
Contents
- Verification of the cost accounting records such as 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 accounting principles, plans, procedures and objective.
Objectives of Cost Audit
- Prospective Objective: Under which cost audit aims to identify the undue wastage or losses and ensure that costing system determines the correct and realistic cost of production.
- Constructive Objectives: Cost audit provides useful information to the management regarding regulating production, economical method of operation, reducing cost of operation and reformulating Cost accounting plans .
Types of Cost Audit
- Cost Audit on behalf of the management:
- Cost audit on behalf of a customer
- Cost Audit on behalf of Government
- Cost Audit by trade association
- Statutory Cost Audit
Qualification
Basic qualification for a cost auditor is the prescribed examinations and practices by the professional & Regulatory body for Cost & Management Accountancy of the country or in case a person is the member of other professional bodies, exemption should be allowed to him/her under the mutual recognition agreements (MRAs) to become a cost auditor.
Cost Audit Procedures
Cost audit comprises following three steps;
- Review
- Verification
- Reporting
References
Cost auditing Wikipedia(Text) CC BY-SA