Objectives of Cost Audit

Cost Audit is concerned with the vinification of the correctness of the cost records or cost accounts maintained in a business concern. This aspect will deal with proper ascertainment and control of costs. It is the review of something, usually financial records. The purpose is to control, and if possible, reduce the operating costs.  It also helps in establishing selling prices of various products.

Objectives of Cost Audit

The following are some of the objectives for which cost audit is undertaken:

(1) To establish the accuracy of costing data. Making of accurate periodical financial statements for information and guidance of management. This is done by verifying the arithmetical accuracy of cost accounting entries in the books of accounts.

(2) To ensure that cost accounting principles are governed by the management objectives and these are strictly adhered in preparing cost accounts. Ensures that consumers get the product at a fair price. Advising the management for the adoption of alternative courses of action by preparing the cost plans.

(3) To ensure that cost accounts are correct and also to detect errors, frauds and wrong practice in the existing system. Determination of efficiency of operations by furnishing data as to cost, the volume of produc­tion, etc.

(4) To check up the general working of the costing department of the organization and to make suggestions for improvement. Verification of the total cost of each product, process, operation, and job.

(5) To help the management in taking correct decisions on certain important matters i.e to determine the actual cost of production when the goods are ready. Serves as a measure to determine the managerial efficiency or otherwise.

(6) To reduce the amount of detailed checking by the external auditor if effective internal cost audit system is in operation. The auditor acts in this case of audit in an advisory capacity for the well being of the shareholders of the company.


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