Cost Audit: Definition
In a cost audit, the books of account and vouchers are examined to evaluate their accuracy.
The exact calculation of the cost of a product is called a cost audit.
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Cost Audit: Explanation
Cost audit is an examination of the efficiency of the minute details of expenditurewhile the work is in progress; it does not constitute a post-mortem examination.
The cost auditor can be appointed by the board of directors by taking prior permission of the central government.
The cost auditor enjoys all the rights of a financial auditor.
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Cost Audit: Other Definitions
In the context of accounting, an auditis the systematic examination of the books, vouchers, and records of a businessto enable the auditor to report whether the accounts are properly drawn up (i.e., so as to exhibit a true and fair view of the company's state of affairs).
Initially, the scope of audits was limited to verifying official transactions.
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How do Auditors verify a receivable balance?
For example, auditors may compare source documents to a balance recorded in a company's general ledger to verify that the balance is correct and recorded within the correct date range.
Similarly, an auditor can send a confirmation letter to a client's customer to verify that a receivable balance is correct.
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Merits of Cost Audit
The chief merits of a cost audit are the following: (i)Safeguards against the misuse of raw materials and labor (ii)Useful for evaluating inefficiencies (iii)Useful for highlighting irregularities and instances of fraud (iv)Useful for checking uneconomical activities (v)Provides all information to facilitate immediate action (vi) Enables budgetary .
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Qualifications For A Cost Auditor
Qualifications for the cost auditor are outlined as follows: (i)Any person who is a practicing cost accountant, as per the Cost and Works Accountants Act (ii)Any person who is a practicing charted accountant, according to the Charted Accountants Act (iii)Member of the Institute of Chartered Accountants (iv)Fellow with 10 years of standing
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What is a cost audit?
A cost audit represents the verification of cost accounts and checking on the adherence to cost accounting plan.
Cost audit ascertains the accuracy of cost accounting records to ensure that they are in conformity with cost accounting principles, plans, procedures and objectives. A cost audit comprises the following; .
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What is verification in accounting?
What is Verification.
Verification is the use of various procedures to ensure the accuracy or truth of information.
For example, auditors may compare source documents to a balance recorded in a company's general ledger to verify that the balance is correct and recorded within the correct date range.
