Types of Cost Audit
TYPES OF COST AUDIT * Cost Audit to assist Management : The main object of this type of cost audit is to make available accurate, relevant and prompt information to management to assist it in taking important managerial decisions. * Cost Audit on behalf of the Government: The government may appoint a cost auditor to conduct cost audit where it is necessary(a) to do so in the opinion of the government under section 233-B of the companies Act, 1956; (b) to ascertain correct cost of certain units when government is approached for protection or financial help;
(c) to ascertain correct cost of contract given to private firms under µcost plus¶ basis; (d) to fix reasonable prices of certain items of production so as to prevent undue profiteering. vCost Audit on behalf of a customer : Sometimes, cost audit may be conducted on behalf of a customer when he agrees to pay price for a certain product on ³cost plus´ basis
A. Advantages Of Cost Audit To The Management
1. Cost audit provides reliable cost data for managerial decisions.
2. Cost audit helps management to regulate production.
3. Cost audit acts as an effective managerial tool for the detection of errors, frauds and irregularities so that reliable and smooth functioning of the system is continued.
4. Cost audit reduces the cost of production through plugging loopholes relating to wastage of material, labor and overheads.
5. Cost audit can fix the responsibility of an individual wherever irregularities or wastage are found.
6. Cost audit improves efficiency of the organization as a whole and costing system in particular by constant review, revision and checking or routine procedures and methods.
7. Cost audit helps in comparing actual results with budgeted results and points out the areas where management action is more needed.
8. Cost audit also enables comparison among different units of the factory in order to find out the profitability of the different units.
9. Cost audit
(c) to ascertain correct cost of contract given to private firms under µcost plus¶ basis; (d) to fix reasonable prices of certain items of production so as to prevent undue profiteering. vCost Audit on behalf of a customer : Sometimes, cost audit may be conducted on behalf of a customer when he agrees to pay price for a certain product on ³cost plus´ basis
A. Advantages Of Cost Audit To The Management
1. Cost audit provides reliable cost data for managerial decisions.
2. Cost audit helps management to regulate production.
3. Cost audit acts as an effective managerial tool for the detection of errors, frauds and irregularities so that reliable and smooth functioning of the system is continued.
4. Cost audit reduces the cost of production through plugging loopholes relating to wastage of material, labor and overheads.
5. Cost audit can fix the responsibility of an individual wherever irregularities or wastage are found.
6. Cost audit improves efficiency of the organization as a whole and costing system in particular by constant review, revision and checking or routine procedures and methods.
7. Cost audit helps in comparing actual results with budgeted results and points out the areas where management action is more needed.
8. Cost audit also enables comparison among different units of the factory in order to find out the profitability of the different units.
9. Cost audit