By CMA Pradip HDesai Cost Audit Cost Audit is a critical review Undertaken to verify the correctness of Cost Accounts A scertain the accuracy of cost accounting records ID: 1029407
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1. Overview of Standards on Cost AuditingBy:CMA Pradip H.Desai
2. Cost AuditCost Audit is a critical review Undertaken to verify the correctness of Cost Accounts, Ascertain the accuracy of cost accounting records and To check that they are prepared as per CRA 1. It is noteworthy that India is the only country which has introduced statutory cost audit.
3. Objectives of Cost Audit Accuracy of costing dataEnsure that cost accounting principles are governed by the management objectivesDetect errors, frauds and wrong practice in the existing systemCheck up the general working of the costing departmentHelp the management in taking correct decisions Internal Cost audit will reduce the amount of detailed checking by the external auditor
4. Need for SCAs
5. Need for SCAs
6. Need for SCAs
7. Need for SCAsProvided that if an auditor has contravened such provisions knowingly or willfully with the intention to deceive the company or its shareholders or creditors or tax authorities, he shall be punishable with imprisonment for a term which may extend to one year and with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees.
8. Cost Auditing and Assurance Standards Board Constituted by The Council of the Institute of Cost Accountants of IndiaResponsible to formulate standards and develop guidance notes, review the existing StandardsCAASB to provide Interpretations or formulate General ClarificationsGuidance Notes are issued to assist implementation of Standards on Cost Auditing. The CAASB may also publish Technical Guides, Practice Manuals and other pronouncements aimed at providing additional guidance to the CMAs.
9. Why SCAs? There are fundamental differences between the scope and methodology of financial and cost audit. Therefore, it shall not be appropriate to adopt in full or with modifications the International Standards on Auditing issued by the IAASB.
10. Formulation of SCAsHowever in formulating the standards, the CAASB will consider:Framework and other aspects of the International StandardsApplicable laws, usage and business environment prevailing in India. Provisions of Cost and Works Accountants Act, Rules and Regulations, Code of Professional Ethics, Cost Accounting Standards and other Statements issued by the Institute. Aligned with other recognized Standards issued in India and prevailing International Practices.
11. SCAs and their StatusCAASB has formulated 19 no. of SCAs till dateGovernment has approved following 4 Cost Auditing Standards on 11th Sep,2015SCA-101 Planning an audit of Cost StatementsSCA-102 Cost Audit DocumentationSCA-103 Overall objectives of the independent cost auditorSCA-104 Knowledge of business, its processes and the business environment
12. Following 15 standards have been proposed by the institute which are conveyed to MCA for their approval and publication. SCA-105 Agreeing the Terms of Cost Audit EngagementsSCA-106 Audit SamplingSCA-107 Audit EvidenceSCA-108 Materiality in Planning and Performing a Cost AuditSCA-109 Cost Auditor’s Responsibility relating to Fraud in an Audit of Cost StatementsSCA-110 Written RepresentationsSCA-111 Evaluation of Misstatements identified during the Cost AuditSCA-112 Analytical ProceduresSCA-113 Using the work of internal AuditorSCA-114 Using the Work of Cost Auditor's ExpertSCA-115 Communication with Those Charged with GovernanceSCA-116 Communicating Deficiencies in Internal Control to Those charged with Governance and ManagementSCA-117 Identifying and Assessing the Risks of Material MisstatementSCA-118 The Cost Auditor’s Responses to Assessed RisksSCA-119 Related Parties
13. Structure of SCAsEach Standard generally follows a following structure. In case of deviation, suitable explanation is provided by the Task Force/Study Group preparing the Standard:IntroductionObjectivesScopeDefinitionsRequirementsApplications and other Explanatory MaterialEffective DateStatement of Modification (Modification made in comparison to International Auditing Standards)
14. Purpose served by SCAsPrescribe the norms of principles and practices, which the Cost Auditors are expected to followProvide minimum guidance to the cost auditor Helps determine the extent of auditing steps and procedures that should be applied in the cost audit Constitute the criteria against which the quality of audit results are evaluatedConducting audit in accordance with standards gives necessary assurance to stakeholders Cost Audit tends to increase the credibility of cost statements
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