Implementing Authorities of Cost Audit

Cost audit may be conducted on account of the requirements of any of the authorities listed below:

1. Government: The government may order for cost audit for any of the following matters:

(a) For fixation of the fair prices of some basic materials e.g. in order to determine the cost price of materials such as ferrous and non-ferrous metals, cloth, paper, petroleum products, sugar etc. the cost accounts officers of the Tariff Commission examine the actual cost records of some representative factories.

(b) For giving protection to certain industries.

(c) In case of orders placed under cost plus contract system with the private parties.

(d) When there are reasons to doubt that prices are going up due to profiteering or production is hampered due to fraudulent or inefficient management.

Under Section 209 of the Companies Act, the Central Government has the power to order for maintenance of cost records in case of certain classes of industries.

Cost audit done under the orders of the Government is also termed as “statutory cost audit”.

2. Labour tribunals: An industrial tribunal may order for conducting of cost audit for special purposes such as for deciding workers’ claim for move wages, bonus, share in profits etc.

3. Trade associations: In case different units engaged in the same industry are following uniform costing system, the trade association, if vested with such authority by the member concerns, may order for cost audit of member companies to ascertain whether the costing procedure is being followed correctly or not.

4. Management: Cost audit is also a part of general internal control system. The management may order for audit of cost records to see that the costing data placed before the management is reliable and that it has sufficient details to enable it to take appropriate decisions.

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