Page 160 - DCOM206_COST_ACCOUNTING_II

Unit 8: Cost Audit

 The responsibilities and duties of a cost auditor have not been clearly given in the companies Notes
act. The cost auditor is also required to perform the duties as are expected from auditors in
general.
 The cost audit was recommended to Indian industries by Vivian Bose Enquiry Commission.
The cost audit is necessary for optimum and proper utilisation of resources by Indian
industries. Section 223-B of the companies act provides for ordering of cost audit by
Central Government.

8.7 Keywords

Continuous Internal Audit: It continues for the year round with the cost accounts. This audit
helps in tracing the faults and errors and provides ready time to correct them.

Cost Audit: It is the verification of cost accounts and a check on the adherence to the cost
accounting plan.
Efficiency Audit: It is the test of the efficiency of organisation. This is the valuation of the
executed action so that it is concluded that the effective efficient implementation of the
predetermined plan has been carried on.
Internal Cost Audit: It means the audit under which the auditors are appointed to help the
managerial decisions of enterprise taken by the top management.
Periodic Internal Audit: It is done after a definite period of time, wherein the accounts of that
period are checked and examined.
Propriety Audit: This audit is the audit of such actions and plans of management which have a
bearing on the finance and expenses of the company or enterprise.
Specific Cost Audit: The specific cost audit is arranged by customers, business enterprises,
government or special undertakings for some specific objectives.

Statutory Cost Audit: Statutory cost audit means that audit which is arranged to fulfil the
provisions of a certain statute.

8.8 Review Questions

1. What is cost audit? Distinguish between financial audit and cost audit. Explain in detail.

2. Describe the objectives, advantages and disadvantages of cost audit.
3. Describe various types of cost audit in detail.
4. Describe the scope or areas of the cost audit in detail.
5. What is cost audit report?
6. Explain the provisions regarding report and give the format of cost audit report.

7. Discuss the appointment, eligibility and responsibilities of a cost auditor.
8. Write short notes on the following:
(a) Internal cost audit,

(b) Specific cost audit, and
(c) Statutory cost audit.

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