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. TYPES OF COST AUDIT PROGRAMMES
GENERAL COST AUDIT
PROGRAMME
Containing standard
Instructions in respect
of…
1.Internal control
2. Auditing Procedures
and Follow-up
3. Co-ordination plan of
specific audit
programme
4. Interviews with the
company officials.
SPECIFIC COST AUDIT
PROGRAMME
Designed to cover all
functional areas as per
the company’s
organizational profile
and in accordance with
the relevant cost
accounting record rules.

4. PRELIMINARIES
FOR AN AUDIT
PROGRAMME
ADMISTRATIVE
SETUP
KEY
DOCUMENTS
CAPACITY
UTILISATION
FLOW OF
PRODUCTION
PRODUCTION
AND SERVICE
DEPARTMENT
REALTIONSHIIP
COST
ACCOUNTING
SYSTEM

5. STEPS OF A COST AUDIT PROGRAMME
1. 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.

6. 2. 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.

7. 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

8. 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.

9. 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.

10. 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.

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

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