Objectives of Cost Audit
  • Cost Audit has both general and social objectives. The general objectives can be described to include the following :
  • Verification of cost accounts with a view to ascertaining that these have been properly maintained and compiled according to the cost accounting system followed by the enterprise.
  • Ensuring that the prescribed procedures of cost accounting records rules are duly adhered to.
  • Detection of errors and fraud.
  • Verification of the cost of each “cost unit” and “cost center” to ensure that these have been properly ascertained.
  • Determination of inventory valuation.
  • Facilitating the fixation of prices of goods and services.
  • Periodical reconciliation between cost accounts and financial accounts.
  • Ensuring optimum utilization of human, physical and financial resources of the enterprise.
  • Detection and correction of abnormal loss of material and time.
  • Inculcation of cost consciousness.
  • Advising management, on the basis of inter-firm comparison of cost records, as regards the areas where performance calls for improvement.
  • Promoting corporate governance through various operational disclosures to the directors.