Cost audit is an independent examination of cost records and other related information of an entity including a non-profit entity, when such an examination is conducted with a view to expressing an opinion thereon.
Cost audit comprises of the followings:
- Verification of the cost accounting records for the accuracy of the cost accounts, cost reports, cost statements and cost data and
- Examination of these records to ensure that they adhere to the cost accounting principles, plans, procedures and objectives.
It, therefore, means that the cost auditors’ approach should be to ensure that the cost accounting plan is in consonance with the objectives set by the organisation and the system of accounting is geared towards the attainment of these objectives. The cost auditor should also establish the correctness or otherwise of the figures by the processes of vouching verification, reconciliation etc.
