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 cost records and a careful compliance accounting process.
Difference between Financial Audit and Cost Audit
- Act: Financial audit is mandatory for all companies registered under Companies Act, 1991.
- Objective: The financial audit is done to report on the financial data, consisting of a statement of the balance sheet and profit and loss to ensure fairness of business perspectives.
- Appointment: Financial Auditor is appointed by shareholders.
- Mandatory: Financial audit is mandatory to be conducted every year.
- Demand: Financial audit is the door or conducted as per the demand of the shareholders.
- Stock: Financial auditor has to chock or examines carefully and in detail the exact value of closing the stock for the purpose of the balance sheet.
- Remark: The financial auditors have to give their remarks about the exact expenditures shown on the record.
- Submission: The finance auditor submits the report at the annual general meeting organized by shareholders.
- Act: Only in the cast of companies involved in manufacture or mining business and required to maintain Cost Accounts as per Section 209.
- Objective: Cost audit is done to certify after careful examination or checking of reports on expenditure made on production of intended items.
- Appointment: Cost Auditor is appointed by the board of directors with the previous approval of the Central Government.
- Mandatory: Cost Audit is conducted in a year in which audit is required by the government.
- Demand: Cost audit is done when the government or industrial organization proposes to make an audit.
- Stock: In cost, audit the auditor has to see whether there is sufficient stock maintaining in order to fulfill the needs of the business concern.
- Remark: The cost auditors have to give their remarks about how correctly or wisely the decisions have been taken in the production of items.
- Submission: Cost auditor submits the report to the company and central government within 180 days from the end of financial year.