The terms ‘cost Audit’ management audit and efficiency audit have been used synonymously by many auditors. It is performed by an independent, professionally qualified Cost and Management Accountant or Chartered Accountant. By the term cost audit is meant the detailed checking of the costing system technique and accounts to verify their correctness and to ensure adherence to the objective of cost accountancy.
R.W Dobson in his book Introduction to cost accountancy defines it. Cost audit is the verification of the correctness of the cost accounts and of the adherence to the cost accountancy plan.
From the above definitions, it would be observed that correctness of their accounts as far as the cost of manufacture of turnover is concerned and also to see whether the plans regarding the plans regarding the costs have been adhered to or not.
Objectives of cost audit
- To find out wittier any particular industry should be given any prize or subsidiary in order to encourage develop and expand that industry.
- To determine whether differential pricing within the industry is desirable.
- To assist the tariff board to consider the extension or removal of protection.
- For the purpose of comparison of cost between.
- To curb the profiteering by the manufacturing concerns.
- To reduce the cost of essential commodities.
- To fix the selling price in order to protect the interest of the consumers.
- To avoid wastes and unnecessary expenditure by the manufactures.