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Advanced management accounting assignment
- 2. PROCEDURE OF COST AUDIT The Cost Auditor should keep in mind while preparing the Plan of Cost Audit. He should distribute the work to his subordinates. He should have detailed knowledge about the organization. The Cost Audit programe should be designed in such a way that the work should be finished within minimum period and at a minimum cost. The following are the main items of Cost Auditor: 1. Audit of Materials i. He should see the purchase of material, receipt, wastage and return of material if any. ii. He should also see whether the materials issue price is more than the prescribed level. iii. He must ensure that there is no misappropriation or theft of material. II. Audit of labor :-The cost auditor should note the points while audit of labor i. He should see Attendance Register, Supervisor Register, leaves, and Gate-keepers Records. ii. The Wages Record, its payments are subject to Internal Audit. He should see that it is satisfactory.
- 3. III. Audit of Overhead :- The overheads are Electric Bill, Gas, Coal, Rent, Salary etc. The Auditor should see the distribution of these expenses according to each department. The following other actions should be taken into Account. He should see that actual expenditure should not more than standard expenditure. IV. Audit of Stock i. The stock should be checked seriously and must be verified and physically counted. ii. The stock should be in proportion to proposed output.
- 4. COST AUDIT REPORT The cost auditor has to prepare a report after he has conducted the cost audit. This report has to be submitted to the Company Law 2013. The cost auditor has to send the report to the company concerned but not to the members. He is not an employee of the company, nor is he the agent of the shareholders. In spite of the fact that his remuneration is paid by the company, he is not responsible to the company. His position is just like that of a special auditor appointed under Section 233 A. a) He should state whether the cost records maintained by the company were adequate for the purpose of audit. b) He should state whether the broad policy laid down by the management was faithfully followed.
- 5. COST AUDIT VS FINANCIAL AUDIT BASIS FOR COMPARISON COST AUDIT FINANCIAL AUDIT Meaning Cost audit is an independent examination of the correctness of the cost statements and accounts and its conformity with the cost accounting plan. Financial audit is a systematic unbiased examination of a company or institution's finance books and records, so as to express the opinion on it. Audit Performed by a practicing Cost Accountant. Performed by a practicing Chartered Accountant. Appointment of auditor Board of Directors Shareholders Analyzes Cost records, cost statements and cost accounts. Financial Statement, Books of Accounts, Documents, Vouchers, etc.
- 6. Emphasis Analysis of the efficiency of operations and propriety of actions of the management. Compliance with the accounting standards and effectiveness of the internal control system. Compulsion Compulsory for all companies. Compulsory for the companies engaged in the manufacturing business. Report submission To the Shareholders at the Annual General Meeting of the company. To the Board of Directors at the Board Meeting, which is then submitted to Central Government.
- 7. Cost Audit Management Audit It is an audit of cost ascertainment and control. It mainly applies its attention to future planning and performance. It is conducted by a qualified Chartered or Cost Accountant with the prior approval of the Central Government. It begins where the work of financial audit ends It evaluates economy and output. It may be conducted by any independent expert or a consultant. It covers both the records of actual expenses incurred as well as the estimated cost of material, labor and other items It is concerned with the performance profitability of the concern It examines the records of materials, labor and other expenses as components of total cost of operation It is an attempt to assess efficiency and suggest its further improvement COST AUDIT VS MA
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