Meaning of Audit
Audit has been defined as a systematic examination of the books and records of a business or other organisations in order to ascertain or verify, and to report upon the facts regarding its financial operations and results thereof. Recently, the scope of audit function has been extended to new areas. Cost audit is one these areas. According to Chartered Institute of Management Accountants, London, cost audit means, “the verification of cost accounts and a check on the adherence to cost accounting plan”. Thus, cost audit involves checking up the arithmetical accuracy of cost accounts and verifying whether the principles laid down have been followed or not. In other words, it comprises of:
(i) Verification of Cost accounting records, that is, accuracy and correctness of accounts kept, reports and statements prepared, data compiled and techniques applied.
(ii) Examination of cost accounting records in order to ensure that the records adhere to procedures formulated and objectives determined.
Cost auditor, therefore, is required to see whether managerial road map has been followed on one hand and on the other, it is also per the standard norms and established practices and conventions, besides adhering to the legal requirements while preparing and maintaining Cost Accounting Records.
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