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Unit 12: Cost Audit

2. The draft audit will detail what was done and what was found, a distribution list of parties Notes
to receive preliminary results, and a list of concerns. The draft is given to management to
review, edit and suggest changes, probe areas of concern and correct errors. Upon making
final corrections, the report is given to management for the seventh step, the management
response.

3. Management is requested to answer the report by stating whether they agree with the
problems cited, the plan to correct noted problem and the expected date by which all
issues will have been addressed.

Ending the Auditing Process–Final Meeting, Report Distribution and Feedback

1. The final meeting is designed to close loose ends, discuss the management response and
address the scope of the audit.
2. Reviewing the actual performance- Auditor should review the actual performance of the
various work centers. The performance should be carefully and critically evaluated. Any
scope of the improvement or inefficient working should be reported.
3. The next step is the report distribution, where the final audit report is sent to appropriate
officials inside and outside the audit area.
4. Report: On the basis of the above steps, auditor should prepare a report and
submit to the appointing authority. The report should point out all the weak and inefficient
points present in the organization.
5. Feedback: The last step is the audit feedback whereby the audited company implements
the recommended changes and the auditors review and test the quality, adherence and
effects of the adopted changes. This continues until all issues are adopted and the next
audit cycle begins.
6. Correlation of Information: The information collected through various techniques has to
be correlated so that proper conclusions can be arrived at. The management auditor has to
compare the actual performances with the standards laid down.

12.3.8 Conduct Management Audit

Management audit requires an inter-disciplinary approach since it involves a review of all
aspects of the management function. It should be conducted by a team of experts because the
variety of skills required cannot be mustered by one individual.
This team may consist of the accountant, the operations research specialist, the industrial engineer,
and the social scientist. Each member of the team should have an analytical mind and an ability
to look at a management function from the point of view of the organisation as a whole.
The members of the management audit team should have proper training. They should have an
expert knowledge of the science of management. They should also be acquainted with salient
features of various functional areas. Experience of actual work situations would also be useful.
To conduct its work properly, the management audit team should have a clearly defined authority
from the management. Management audit cannot be conducted unless it is supported fully by
the top management.

12.3.9 Keys Areas in which Management Audit can be undertaken in
Co-operatives

Organizational Structure: In a service institution like cooperatives, organizational structure
should have a strong basis. The extent of accountability of each functionary, the areas of

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