Cost auditors need to pay close attention to the objectives of an organization's cost audit, ensuring that the cost audit plan is executed efficiently and cost-effectively. To manage the procedure for a cost audit, the cost auditor should distribute any excess work to their subordinates. Also, to complete the audit properly, the cost auditor must possess detailed knowledge of the organization. The cost audit program should be designed in such a way that the work can be finished within the minimum period and at the minimum cost. The main items that a cost auditor focuses on are discussed below. The cost auditor should observe the following while auditing materials: Cost auditors should note the following points when conducting an audit of labor: Overhead refers to the ongoing costs of running a business such as electric bills, gas, coal, rent, and salaries (excluding costs that are directly related to creating or selling a product or service). The cost auditor should check the distribution of overhead expenses for each department. Alongside this, the following actions should be taken into consideration: Cost auditors should note the following points when auditing a plant: For stock auditing, cost auditors should consider the following:1. Audit of Materials
2. Audit of Labor
3. Audit of Overheads
4. Audit of Plant
5. Audit of Stock
Procedure of Cost Audit FAQs
Capital Expenditures are not related to day-to-day operations. They may have long-term hassles, but they will generally provide additional benefits for the business. Revenue expenditure is incurred by a business in order to generate income or profit.
The owner records of the assets, liabilities, and equity of a business is called chart of accounts. In simple terms, the chart of accounts is simply a list of all asset accounts used in your organization. It can also include liability and equity accounts if necessary.
There are three types of cost-direct, indirect, and period cost. Direct costs can be easily identified with a particular product or service. Indirect costs cannot be easily associated with a particular product or service, but they are related to the overall production process. Period costs are expenses that are not related to the production of a product or service, but they are incurred during a specific period of time.
Standard Costing is a method of Cost Accounting that uses predetermined rates to assign indirect costs to products or services. Actual costing is the process of assigning actual direct and indirect costs to products or services.
Depreciation is a decrease in the value of an asset. There are two types of Depreciation: straight-line and accelerated. Straight-line Depreciation spreads the cost evenly over the useful life of an asset, while accelerated Depreciation assigns more of the cost to earlier years. In accounting, it is treated as an expense that must be paid in order to use an asset.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.
