Cost auditing

Cost Audit represents the verification of cost accounts and check on the adherence to cost accounting plan. Cost Audit ascertain the accuracy of cost accounting records to ensure that they are in conformity with Cost Accounting principles, plans, procedures and objective.[1] Cost Audit comprises following;

  1. Verification of the cost accounting records such as the accuracy of the cost accounts, cost reports, cost statements, cost data and costing technique and
  2. Examination of these records to ensure that they adhere to the cost accounting principles, plans, procedures and objective.

Objectives of Cost Audit

  1. Prospective Objective: Under which cost audit aims to identify the undue wastage or losses and ensure that costing system determines the correct and realistic cost of production.
  1. Constructive Objectives: Cost audit provides useful information to the management regarding regulating production, economical method of operation, reducing cost of operation and reformulating Cost accounting plans .

Types of Cost Audit

  1. Cost Audit on behalf of the management:
  2. Cost audit on behalf of a customer
  3. Cost Audit on behalf of Government
  4. Cost Audit by trade association

5 Statutory Cost Audit

Qualification

Basic qualification for a cost auditor is the prescribed examinations and practices by the professional & Regulatory body for Cost & Management Accountancy of the country or in case a person is the member of other professional bodies(ICWA, ICMAP), exemption should be allowed to him/her under the mutual recognition agreements (MRAs) to become a cost auditor.

Cost Audit Procedures

Cost audit comprises following three steps;

  1. Review
  2. Verification
  3. Reporting

Format of Cost Audit Report


I/We, Prashant & co. having been appointed as Cost Auditor(s) under Section 233B Companies Act of M/S Haryana Power Generation Corp. Ltd.(mention name of the company) having its registered office at Urja Bhavan Sector-6, Panchkula (mention registered office address of the company) (hereinafter referred to as the company), have audited the books of account prescribed under the said Act, and other relevant records in respect of the Electricity (mentions name/s of product group/s) for the period/year 31 March 2011(mention the financial year) maintained by the company and report, in addition to my/our observations and suggestions in para 2.

  1. I/We have/have not obtained all the information and explanations, which to the best of my/our knowledge and belief were necessary for the purpose of this audit.
  2. In my/our opinion, proper cost records, as per companies rule, 2011 prescribed under clause (d)of sub section (1) of section 209 of the companies act 1956, have/have not been maintained by the company so as to give a true and fair view of the cost of production/operation, cost of sales and margin of the product/activity groups under reference.
  3. In my/our opinion, proper returns adequate for the purpose of the Cost Audit have/have not been received from the branches not visited by me/us.
  4. In my/our opinion and to the best of my/our information, the said books and records give/do not give the information required by the Companies Act, in the manner so required.
  5. In my/our opinion, the said books and records are/are not in conformity with the Cost Accounting Standards issued by The Institute of Cost and Works Accountants of India,to the extent these are found to be relevant and applicable.
  6. In my/our opinion, company has/has not adequate system of internal audit of cost records which to my/our opinion is commensurate to its nature and size of its business.
  7. Detailed unit-wise and product/activity-wise cost statements and schedules thereto in respect of the product groups/activities under reference of the company duly audited and certified by me/us are/are not kept in the company.
  8. As required under the provisions of companies (cost audit report) rules, 2011, I/we have furnished Performance Appraisal Report, to the company, on the prescribed form.


Date: 05/05/2012

Place: Chandigarh

   (Prashant Kumar)

Signature of Cost Auditor

Membership Number: 15091

References

  1. ↑ Overview of Cost Audit

See also

This article is issued from Wikipedia - version of the 8/2/2016. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.