Cost Audit: Its Importance & Procedures

A cost audit is the verification of the cost records, statements, and data. It makes sure that costs are accounted for correctly according to accounting procedures and plans.

It keeps a check on all the cost reports and statements, to avoid any mistake, fraud or any kind of malpractices in cost accounting.



Importance of cost audit

Cost audit is used to evaluate the cost incurred by a firm in manufacturing goods or providing services. The main objectives of this audit are:


Identifying unproductive costs

It helps in classifying the cost whether they are productive or unproductive, through which the firm can reduce the unproductive cost through which they can increase the profits.


Formulation and implementation of strategies

Through its cost audit, the firm can develop strategies to meet changes in costs. The firm can make advanced changes in plans.


Facilitates budgeting

Cost audit reports of past years may help the company to create the budget for the future, as the past cost audit reports will give the firm information about the changes in the trends and variations in the cost etc. it may act as an essential tool to guide in budgeting.


Helps in reduction of indirect or overhead costs

Overhead cost includes insurance, repair, administrative costs, rent, etc. can be reduced through cost audit if required.


Pricing of products

On the basis of the cost audit report, the firm can change the price of the commodities, to earn adequate profits.

Our highly dedicated and sincere team is ready to assist you at any time regarding cost audit analysis. Contact us for more!


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