How is a Cost Audit Performed?

Cost audit refers to the complete verification of the cost records, statements, and data. It also ensures whether the cost accounting is carried out according to the prescribed cost accounting procedures and plan. It keeps a check on all the cost reports and statements, to avoid any mistake, fraud, or any kind of malpractices in cost accounting.



How its Performed


Formulation and implementation of strategies - Through cost audit, the firm can oversee the changes in the cost and they can draw up new plans and strategies to meet the increasing cost, and the firm can make advance changes in the 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.


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.


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

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