Financial Audit Cost Audit

Though both financial audit and cost audit primarily aim at independent scrutiny of the accounts of an organisation yet they differ from each other in certain vital respects. These differences are being summarised below:

1. Accounts covered: Financial audit covers financial accounts while cost audit covers cost accounts.

2. Objectives: The main objective of financial audit is to certain whether the final statements of accounts present a true and fair view of the state of affairs of the business or not. It is therefore more of an honesty audit while cost audit is concerned with analysis of figures so as to establish the cost of each identifiable activity. It mainly lays emphasis on propriety of expenditure and efficiency of performance.

3. Approach: Financial audit is generally a post-mortem check to ascertain that expenditure recorded has been really incurred. It is concerned with historical data only and has no suggestions to make for the future. Cost audit is concerned with budgets and standards and hence it has a forward looking approach. Moreover, the approach to treatment of different items such as interest on capital, depreciation, valuation of stocks etc. is also reflected in the difference between cost audit and financial audit.

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