Cost audit programme

MEANING
TYPES OF COST AUDIT PROGRAMMES
PRELIMINARIES FOR AN AUDIT PROGRAMME
STEPS OF A COST AUDIT PROGRAMME
STAGES OF COST AUDIT PROGRAMME
ADAVANTAGES OF COST AUDIT PROGRAMME
DISADVANTAGES OF COST AUDIT PROGRAMME

1. COST AUDIT PROGRAMME MEANING TYPES OF COST AUDIT PROGRAMMES PRELIMINARIES FOR AN AUDIT PROGRAMME STEPS OF A COST AUDIT PROGRAMME STAGES OF COST AUDIT PROGRAMME ADAVANTAGES OF COST AUDIT PROGRAMME DISADVANTAGES OF COST AUDIT PROGRAMME BY: DR ANKITA CHATURVEDI

2. COST AUDIT PROGRAMME " A Cost audit programme is the detailed plan of auditing work to be performed specifying the procedures to be followed in verification of each item in the cost statements and giving the estimated time required.“ It is a plan prepared by the cost auditor showing the details regarding: Audit work to be performed Procedures to be followed in verification of each item in the cost statements Allocation of work to audit staff, and Estimated time duration for the completion of work.

3. STEPS OF A Cost AUDIT PROGRAMME Assessment of amount of work involved:- After going through the basic documents ,an auditor should assess the amount of audit work to be carried out. He must take into consideration- The objectives of the audit to be carried out The system employed for recording cost books. The system and extent of Internal check applied in the organization. The extent of audit needed i.e. partial or complete audit.

4. Frequency of audit to be carried out Frequency of the audit depends on the extent and nature of the test checks to be applied; volume of transactions; the need for cost audit prior to each issue of periodic cost statements ; reliability and effectiveness of the system of internal control. 3. Number and Caliber of the auditors required for the audit Factors like the object of audit system of cost accounting, system of internal control in operation, principles of cost accounting etc, determine the size and type of audit staff required.

5. 4. Assigning the work to the audit staff After determining the work load and audit frequency, the assignment of audit work among the audit staff is very important. Major areas affecting strategic planning and decision-making involves the top management. For rest of the work the assignment to individual audit clerks should be laid down clearly in their audit note books. 5 . Establishing cost audit checking programme Cost audit checking programme is done to know the extent to which the cost items have been checked. For this purpose “Cost Audit Checking Form” is used. The checking record is considered with two things :- The extent of check The period of check

6. 6 . Cost audit attendance programme In the attendance programme , attendance of each auditor at each location is recorded/ this helps in keeping a check on auditors, as well as the amount of work done by them . 7. Audit manual ( Programme ) A suitable audit programme is made out to be adopted for cost audit and various standard forms and documents used for audit are laid down in audit manual. Every rule and principles regarding the audit are specified.

7. STAGES OF COST AUDIT PROGRAMME (A) REVIEW OF COST ACCOUNTING RECORDS - ( i ) Method of costing in use - batch, process or unit. (ii) Method of accounting for raw materials; stores and spares, wastages, spoilage defectives, etc. (iii) System of recording wages, salaries, overtime and spares, wastages, etc. (iv) Basis of allocation of overheads to cost centres and of absorption by products and apportionment of service department’s expenses. (v) Treatment of interest, recording of royalties, research and development expenses, etc. (vi) Method of accounting of depreciation. (vii) Method of stock-taking and its valuation including inventory policies. (viii) System of budgetary control. (ix) System of internal auditing.

8. STAGES OF COST AUDIT PROGRAMME (B) VERIFICATION OF COST STATEMENTS AND OTHER DATA - This will include the verification of: ( i ) Licensed, installed and utilised capacities. (ii) Financial ratios. (iii) Production data. (iv) Cost of raw material consumed, wages and salaries, stores, power and fuel, overheads provision for depreciation etc. (v) Sales realisation . (vi) Abnormal non-recurring and special costs. (vii) Cost statements. (viii) Reconciliation with financial books.

9. ADVANTAGES OF A COST AUDIT PROGRAMME It helps the auditor to know about the progress of audit. It increases the efficiency of the cost audit associates. It facilitates the uniformity in work. It helps to safeguard against omission. It guides for proper distribution of works and fixing responsibility. It serves as a defense against charge of negligence It serves as a reference for the future audit of the same concern.

10. DISADVANTAGES OF A COST AUDIT PROGRAMME For small concern, it would be unnecessary to prepare a programme . Audit associates have no interest and initative since, they perform their work mechanically. As each business has its own problems and procedures, a rigid audit programme cannot be laid for all types of business.