Category Archive for: Cost Audit

Form of Application to the Corporate Law Authority for Appointment of Cost Auditor

1. Name of the company together with the address of its registered office and the date of its incorporation; 2. Status of company; 3. Capital structure of the company; 4. Principal line(s) of business of the company; 5. Proposal of which the Corporate Law Authorities approval is sought indicating the product for which cost audit is ordered:…

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Performing Cost Audit Part Two: Important Elements of Cost

Raw Materials: Raw materials and other materials which can be directly identified with production would normally constitute major part of the cost. The cost of raw materials, both in quantities and value, as given in the statements, should be verified. In case the transport cost of raw materials is a significant element of cost, as in the case of…

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Performing Cost Audit Background knowledge and Audit Procedures

Knowledge of the industry and the entity: Before performing cost audit, the cost auditor must have or obtain knowledge of the industry and its business environments, sufficient to enable him to identify and understand the events, transactions and practices that in the cost auditors judgment, may have a significant effect on the -cost accounting statements of the entity to…

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Planning Cost Audit

General: (i) Cost Audit should be planned with professional care, recognizing that circumstances may exist to cause the cost statements to be materially misstated. For example, management will be providing cost accounting information in the Schedules and Annexures prescribed in the cost accounting record orders/rules, and also statements regarding capacity and inventories. The cost auditor will be finding evidence to support the…

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Principles of Cost Audit

Planning and Performing Cost Audit There are certain principles that the cost auditor has to observe in planning and performing the cost audit. There are also principles that the cost auditor has to see are being observed by the company he is auditing. On the one hand, the cost auditor has to safeguard his independence and professional status in…

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Liabilities

A cost auditor, while examining the cost accounting records is required to exercise, reasonable care and skill. What is reasonable  are and skill, depends on the circumstances of each case. If an auditor does not take reasonable care and does not exercise skill, failing in his duty as a cost auditor even in one instance, he would negligent if…

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Cost of Auditor

Development of Cost Audit Profession: During World War 1, a large number of contracts were awarded on cost plus basis, which made it necessary for the contractors to maintain cost accounting records. Cost Accounting techniques are needed not only to help management exercise cost control, but the cost accounting records are also needed for such clients who place orders…

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Definition

Cost audit is Cost audit is an examination of cost accounting records and verification of the facts to ascertain that the cost of the product under reference has been arrived at in accordance with principles of Cost Accounting and evaluation of adequacy of proper Cost Accounting Records and their maintenance. The cost audit is performed by an independent. Professionally qualified…

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Cost Audit

DEFINITION Cost audit has been defined as “the verification of cost accounts and a check on adherence to the cost accounting plan.” Cost audit thus involves an examination of costing records with a view to express an opinion on cost statements. IMPORTANCE, NEED AND PURPOSE OF COST AUDIT The cost audit is carried out to form an…

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