Cost audit is the Combination of two words cost and audit. The term ‘cost’ as an exchange price, a forgoing, a sacrifice made to secure benefit and the term ‘audit’ means authentication of accounts or examination of books of accounts and vouchers so as to ascertain their accuracy.
A financial statement audit is the assessment of an entity’s financial statements and accompanying disclosures by a sovereign auditor. The consequence of this assessment is a statement by the auditor, attesting to the fairness of management of the financial statements and related disclosures.
Cost audit is the verification of the correctness of cost accounts and a check on the adherence to the cost accounting plan. Cost audit as an audit of the efficiency of minute details of expenditure which the work is in progress and not a post-mortem examination.
The first function of cost audit is the verification of cost accounting records according to the cost accounting system and the second function is the checking on the adherence to the cost accounting plan.
A cost audit, therefore, includes verification of correctness of the cost accounts, cost statements, cost reports, cost data, and cost techniques applied anti finally checking these data they adhere to cost accounting principles, plans, procedures, and objectives.
Difference between cost audit and financial statement audit
The audit is the task of careful and in detail checking to examining of cost and financial statements from company or organization to make sure that they are correct and complete, or a report that showing the results of this check.
Financial Audit is the examination of financial record and business accounts by an independent body which is conducted for compliance, taxation or for disclosure purposes and ensures high accuracy in the given reports.
Cost Audit is the verification of accounts and costs records and a careful compliance accounting process.