Cost Audit Program

A suitable program for cost audit should be drawn out in detail, specifying each item of audit work to be carried out.

An audit program is a written plan prepared by the Cost Auditor showing the following salient features:

1. How much work is to be done?
2. Who is going to do a particular portion of work?
3. And what is the duration of time by which the work is to be finished?

Prof. Meig defines, “An audit program is the detailed plan of auditing work to be performed specifying the procedures to be followed in the verification of each item in the financial statements and giving the estimated time required.”

Areas Where Cost Audit Program is Carried Out

The areas which a cost audit program should include are as below:

• Inventory of stores and work in progress;
• Labor;
• Overheads;
• Selling, distribution, office and administrative expenses;
• Capital expenditure;
• Utilization of capacity, plant, and equipment.

Advantages of Cost Audit Program

The following advantages will accrue if a cost audit is carried out with the help of a cost audit program:

1. It helps the auditor to know about the progress of the 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 a charge of negligence.
7. It serves as a reference for future audits of the same concern.

Disadvantages of Cost Audit Program

There are certain disadvantages if the cost audit work is carried out with the help of a cost audit program. They are as follows:

1.       For small concern, it would be unnecessary to prepare a program.

2.       Audit associates have no interest and initiative since they perform their work mechanically.

3.       As each business has its problems and procedures, a rigid audit program cannot be laid for all types of business.