Cost audit is the verification of cost accounting systems and accounts to ensure correctness and adherence to cost accounting objectives. It ensures pricing decisions, consumer information, government requirements, and taxation are accurate. Objectives are examined from the perspective of manufacturers and government. Key steps are taken to achieve the objectives. A cost audit report is submitted after examining transactions related to expenses. The cost auditor has the same rights and powers as a financial auditor. Socio-environmental auditing considers social and environmental obligations and risks that could impact financial statements, such as provisions, contingent liabilities, and asset impairments. It also examines reporting on health, safety, compliance, employment, ethics and community contributions.

2. Definition of cost Audit:
“Cost audit is the
verification of the
correctness of cost account
and the adherence to the
cost accounting plan.” - I.
C. W. A London

3. “By the term ‘cost audit’ is
meant the detailed
checking of the costing
system, technique and
accounts to verify their
correctness and to ensure
adherence to the objective
of cost accounting.”
--Smith and Day

4. PURPOSE OF COST
AUDIT:

5. Relevance of cost audit:
a. Mandatory cost Audit
b. For pricing decisions
c. For consumers
d. For Government
e. For taxation

6. Objectives of cost audit:
1. From the point of
view of Govt.

7. 2. From the point of view of
Manufacturers

8. STEPS TAKEN TO
ACHIEVE THE
OBJECTIVES:

10. Distinctions between financial
audit and cost audit:
• 1. Nature
• 2. Ability
• 3. Obligations
• 4. Objectives

11. 5. Examine transaction
6. Judgment of profit
7. Examine transaction
related to expense
8. Submission of Report

12. Right and power of cost
auditor:
The Cost Auditor will
have the same rights &
powers which can be
exercised by an auditor
under Sec.227(1) of the
companies Act, 1956.

13. Cost audit
Report:

14. •Socio-
environmental
audit:

15. Need for Socio-
environmental Auditing:
To take investment decisions.
To handle sudden circumstances.
To handle Pressure from
shareholders, consumers, employees
or other environmental pressure
groups.

16. Auditor’s Main Consideration for Socio-
environmental matters:
i. Auditor must appreciate that their
clients socio & environmental obligation
may lead to liabilities that must be
recognized in the financial statement.
Typical examples are companies
engaged in oil & gas exploration,
shipping & nuclear waste
reprocessing.

17. Possible areas that might lead to the risk of
material miss-statement include the
following …..
 Provisions.
 Contingent liability.
 Impairment of asset value.
 Accounting for capital or revenue
expenditure.
 Product redesign costs.
 Going concern considerations.

18. SOCIO-ENVIRONMENTAL
REPORTING:

19. 1. Health and safety issues.
2.Environmental compliance.
3.Source of materials.
4.Employment and remuneration.
5.Ethical matters.
6.Contribution to society etc.
MATTERS/ISSUES