Benefits of Cost Audit:

Benefits of cost audits are –

1) Cost audit deals with proper ascertainment and control of costs by –

➢Detecting errors, wastage, losses, misuse, corruption and unwarranted expenditure.

➢Verifying that cost accounts are corrects maintained.

➢Examining whether or not the existing procedures are adequate and effective to the management for
taking appropriate decisions.

2) Cost audit examine that whether management prepare and present accounts truthfully and
faithfully.

3) Ensure the maximum utilization of limited resources.

4) Examine whether business execute to profit maximization.

5) Cost audit examine that investment decision was right and return on capital employed and
adequate.

6) Examine whether the plan is effective enough to achieve business goal.

7) Cost audit can identify the reason for price hike and can suggest remedies to control.

8) Cost audit examine the cause of idle time, labor unrest, high maintenance of inventory, high
repair, and maintenance cost etc.

Purposes of Cost Audit:

The purposes of introducing Cost Audit as the normal accounting procedures in the manufacturing
enterprises are:

(a) To verify the arithmetical accuracy of cost transactions recorded in the books of account.

(b) To ensure that the books of cost accounts have been properly maintained according to the principles
and practices of costing employed in such industries.

(c) To verify that the cost statements were properly drawn up as per the records and that they reveal a
true and fair views of the cost of production and marketing.

(d) To verify that whether the cost accounting procedures prescribed by the management have been
adhered to or not.

(e) To detect any error or fraud which might have been committed intentionally or otherwise.

(f) To ascertain the abnormal losses or gains together with their causes.

(g) To check and critically evaluate unit cost of the finished goods.
(h) To determine proper value of inventories of raw materials, work-in-process and finished goods and

(i) To suggest and recommend for maintenance of proper costing records and accounts.