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Cost Audit Programme Speech

Cost Audit Programme Speech

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Published by Jaymin Shah

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Categories:Types, Speeches
Published by: Jaymin Shah on Oct 09, 2012
Copyright:Attribution Non-commercial

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05/03/2013

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What is audit?
 
The general definition of an audit is an evaluation of a person, organization, system,process, enterprise, project or product.
Introduction
 
Cost audit is the audit of cost records. According to Chartered Institute of Management
Accountants, London (CIMA), cost audit is “the verification of the correctness of costaccounts and of the adherence to the cost accounting plan”. In other words, cost audit is
the verification of the cost of production of any product, service or activity on the basis of accounts maintained by an enterprise in accordance with the accepted principles of costaccounting.
What is cost audit?
According to the Institute of Cost and Management Accountants of England, cost auditrepresents the verification of cost accounts and a check on the adherence to costaccounting plan. Cost audit, therefore, comprises:
 
(a) verification of the cost accounting records such as the accuracy of the cost accounts,cost reports, cost statements, cost data and costing techniques, and(b) Examination of these records to ensure that they adhere to the cost accountingprinciples, plans, procedures and objectives.
Importance of cost audit
 
i.
 
Management will get reliable data for its day-to-day operations like price fixing,control, decision-making, etc.ii.
 
A close and continuous check on all wastages will be kept through a proper systemof reporting to management.iii.
 
Inefficiencies in the working of the company will be brought to light to facilitatecorrection action.iv.
 
Management by exception becomes possible through allocation of responsibilitiesto individual managers
 
Auditor’s rights and duties:
 Rights:
 
(a) Has a right of access at all times to the company's books, accounts and vouchers (inwhatever form they are held)(b) May require any of the following persons to provide him with such information orexplanations as he thinks necessary for the performance of his duties as auditor.
Duties:
(a) whether adequate accounting records have been kept by the company and returnsadequate for their audit have been received from branches not visited by him, and(b) Whether the company's individual accounts are in agreement with the accountingrecords and returns, and(c) In the case of a quoted company, whether the auditable part of the company'sdirectors' remuneration report is in agreement with the accounting records and returns.
Qualification of Cost Auditor
I.
 
There are several members of the Institute of Cost and Works Accountants of India(ICWAI), who have qualified the examination of both the Institutes namely ICWAI andthe Institute of Chartered Accountants of India and thus are eligible for membership aswell as certificate of practice from both the Institutes. However, none of the members can
hold “certificate of practice” in more than one Ins
titute under the provisions of both theInstitutes. Therefore, practically there is no possibility of any financial auditor to practiceas cost auditor or vice versa.II.
 
However, it is only in the background of the aforesaid proviso that Section 233B(5)(b)provides that a person appointed under Section 224 as an auditor of the company(financial auditor) shall not be appointed or re-appointed for conducting the audit of thecost accounts of a company (cost auditor of the same company).
 
Disqualifications of a Cost Auditor
I.
 
The sub-Section (4) of Section 226 provides that a person shall also not be qualified forappointments auditor of a company if he is, by virtue of sub-Section (3), disqualified forappointment as auditor of any other body corporate which is th
at company‟s subsidiary or holding company or subsidiary of that company‟s holding company, or would be so
disqualified if the body corporate were a company. In other words, if a person isdisqualified under any of the aforesaid classes from being appointed as an auditor of anycompany or body corporate, he cannot be appointed as auditor of its holding company,
subsidiary or „co
-
subsidiary‟; and
 II.
 
A person, who is in full time employment elsewhere [Section 224 (1B)].III.
 
If an auditor becomes disqualified after his appointment, under any of the aboveprovisions he shall be deemed to have vacated his office.
Cost Audit Programme
I.
 
A cost audit programme
is the cost auditor‟s plan of action indicating the tests and
procedures to be followed to implement the cost audit plan. The programme should becomprehensive and detailed to serve as a manual to the assistants and as a means toefficiently and effectively execute the audit of each of the element of cost of salesprescribed in the cost accounting records rules.II.
 
The cost audit programme should then be discussed with the management to ensure thatthe programme does not clash with other audits as far as possible. This will also revealthe preparedness of the company for cost audit and any arrears in the compilation of costaccounting records could be taken care of well in advance before the actualcommencement of cost audit.
Scope of Cost Audit
I.
 
Section 227(2) of the Companies Act, 1956, requires the auditor of a company to statewhether the accounts in his opinion give a true and fair view of the state of the
company‟s affairs in the case of the balance sheet and
of the profit or loss for its financialyear in the case of the profit and loss account. Therefore, statutory financial audit of a

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