Cost audit

Cost audit in Jharkhand may be defined as “the verification of cost records and accounts and a check on the adherence to the prescribed cost accounting procedures and the continuing relevance of such procedures.”Cost audit is the verification of the correctness of cost accounts and a check on the adherence to the cost accounting plan.

This is, it involves not only the examination of cost accounts but also the fact that the plan prepared in this connection has been duly executed. Cost audit as an audit of the efficiency of minute details of expenditure in which the work is in progress and not a post-mortem examination.

The first function of cost audit is the verification of cost accounting records according to the cost accounting system, and the second function is the checking on the adherence to the cost accounting plan.

A cost audit, therefore, includes verification of correctness of the cost accounts, cost statements, cost reports, cost data, and costing techniques applied and finally checking these data to see that they adhere to cost accounting principles, plans, procedures, and objectives.

A cost audit represents the verification of cost accounts and checking on the adherence to cost accounting plan. Cost audit discovers the exactness of cost bookkeeping records to guarantee that they are in similarity with cost bookkeeping standards, plans, methods and goals. An expense review includes the accompanying;
-Check of the expense bookkeeping records like the exactness of the expense accounts, cost reports, cost proclamations, cost information and costing method
-Assessment of these records to guarantee that they cling to the expense bookkeeping standards, plans, methodology and objective
-To answer to the public authority on ideal usage of public assets.
Cost review might be characterized as “the confirmation of cost records and accounts and a mind the adherence to the recommended cost bookkeeping techniques and the proceeding with pertinence of such systems.”
Cost audit is the confirmation of the accuracy of cost accounts and a keep an eye on the adherence to the expense bookkeeping plan.

This is, it includes the assessment of cost accounts as well as the way that the arrangement arranged in this association has been appropriately executed. Cost review as a review of the proficiency of moment subtleties of use in which the work is underway and not an after death assessment.
A cost audit, consequently, incorporates confirmation of rightness of the expense accounts, cost articulations, cost reports, cost information, and costing methods applied lastly taking a look at these information to see that they hold fast to cost bookkeeping standards, plans, strategies, and destinations.
Under the Companies Act, 2013, the public authority can make rules in regards to the upkeep of cost records by organizations occupied with assembling products or offering types of assistance in determined enterprises, and for getting such records examined. The public authority can select an expense reviewer for an organization – during a period fitting its personal preference.

As per the Companies (Cost Records and Audit) Rules, 2014, cost records are characterized as “books of record connecting with the usage of materials, work, and different things of cost as relevant to the creation of the merchandise or arrangement of administrations.”

Objects of Cost Audit:

The main objects of cost audit are:

(i) To verify that the cost accounting records (or costing books) are accurate.

(ii) To certify that costing principles have been fully adhered to in maintaining cost accounts.

(iii) To find out whether the predetermined cost accounting procedures and processes have been strictly followed by the management.

(iv) To detect errors and frauds, which might have been committed intentionally or otherwise in preparing cost accounts.

3. Verification of cost accounts and other relevant data.

4. Comparison of the actual cost for the year with the cost pertaining to previous two years.

8. It helps in price fixation of goods and services of national importance.

Types of cost audit

  • Cost audit on behalf of management
  • Cost audit on behalf of a customer
  • Cost audit on behalf of government
  • Cost audit by trade association
  • Statutory cost audit
  • Circumstantial cost audit
  • Retention price fixation
  • Cost variation within the industry
  • Inefficient management
  • Tax assessment
  • Trade bargains and dispute

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