Cost & mgt audit ppt
- 1. Presented By JYOTHI B O 1DA16MBA12
- 2. COST AUDIT Meaning:- Cost audit is the specific application of auditing principles and procedures in the field of cost accounting. Definition:- According to CIMA, London “the verification of cost accounts and a check on the adherence to the cost accounting plan”
- 3. Functions:- 1. To verify that cost accounts have been properly maintained and complied. 2. To check their adherence to cost accounting plan. 3. To detect errors and to prevent frauds and possible misappropriations. 4. To guide the management to take a corrective actions related to cost.
- 4. Aspects of cost audit:- TWO important aspects of the cost audit are: 1.Propriety Audit:- This is defined as the ‘audit of executive actions and plans which have a bearing on the finances and profitability of the concern’. 2. Efficiency Audit:- (Performance Audit) This is the appraisal of performance to ascertain whether the plans laid down have been efficiently executed.
- 5. Advantages of cost audit:- To Management: 1.To detection errors, frauds, irregularities and inconsistencies. 2.Data becomes more reliable thereby improving the quality of cost reports. 3.Improves the effectiveness of cost control and cost reduction schemes. 4. Audited cost data is better suited for inter-firm comparison. 5.Cost auditors are usually expert and experienced cost accountants or cost consultants so that they may suggests changes to overcome any weaknesses in the systems and procedures
- 6. To Shareholders: 1.Cost audit highlights the efficiency of the management in the utilization of the resources of the business. 2.Cost audit enables the shareholders to determine whether or not they are getting a fair return on their investment. To Consumers: The consumers get the advantage of fair price for the products of the company. This is because cost audit reveals the true cost of products & price is generally based on such costs.
- 7. To Government: 1.It provides true cost figures to the government for fixing the prices of goods to prevent undue profiteering. 2.The data is taken to be more reliable for providing protection to certain industries in public interest. 3.It contributes to the betterment of national economy. 4. This helps the government in taking effective steps for improving productivity.
- 10. Cost Audit in India:- According to sec209 of the companies act 1956,as amended the govt has powers to order companies engaged in production, processing, manufacturing or mining activities to maintain in their books of accounts certain particulars relating to utilization of material, labour and other items of cost. According to section 233B of the companies act 1956 the govt has powers to order for the audit of cost account. Statutory cost audit can be conducted only by a qualified cost accountant holding a certificate of practice issued by the institute of cost and works accounts of India.
- 11. The cost auditor is appointed by the board of directors of the company with the previous approval of the central govt. Cost auditor shall submit cost audit report in the form prescribed in cost audit (report)rules-2011 Cost auditor shall submit a report in triplicate to the central government and at the same time forward a copy of the report to the company. Time limit for subscription of cost audit report by the cost auditor is 180 days from the company’s financial year. A copy of cost audit report has to be attached to income tax return of the company.
- 12. MANAGEMENT AUDIT Meaning:- Management audit is ‘the evaluation of the performance of management of an enterprise. It is a systematic approach by which various plans, policies and methods of operations etc. of the management are reviewed and appraised’. The purpose of management audit may be to find out whether or not there has been optimum utilization of human resource and available physical facilities and whether the existing system are adequate and effective to management decision making.
- 13. Definition:- According to the British Institute of Management “Management audit is a systematic, comprehensive, critical appraisal of the organization structure, management practices and methods conducted normally by external, independent persons. Its primary objectives is to motivate management to take action which lead to increased efficiency and profitability of the organization.”
- 14. features:- 1.Purey voluntary audit 2.Performed by any management expert or a team of experts 3.It is an audit of managerial policies and their adequacies to meet corporate objectives 4.It may be ordered by the management on an ad-hoc basis for a specific purpose 5. Management auditor has to report to the management 6.Management auditor makes recommendations for improvement in managerial performance.
- 15. Objectives :- 1.To identify the overall objectives of a business enterprise and to see that these objectives are being fulfilled in actual practice. 2.To ensure optimum utilization of human resource and available physical facilities. 3.To see that management is efficient at levels of operations. 4.To suggest improved and better methods of managerial operations. 5.To point out weak spots in the organization structure and in internal control system and suggesting possible improvements.
- 16. 6.To see that enterprise is successful in adopting itself to technologies changes. 7.To anticipate problems and suggests remedies to solve them in time. 8.To see that return on capital employed is satisfactory and to help improve profitability.