Types of Cost Audit

The following are the important types of Cost Audit:

• Efficiency Audit.
• Propriety Audit.
• Statutory Audit.

These are explained below;

1.     Efficiency Audit.

Efficiency Audit is directed towards the measurement of whether corporate plans have been effectively executed. It is concerned with the utilization of resources in an economical and most remunerative manner to achieve the objectives of the concern.

For example, the effective utilization of capital in an organization can be gauged by determining the return on capital employed.

2.     Propriety Audit.

The propriety Audit is concerned with executive actions and plans bearing on the finance and expenditure of the company. The auditor has to judge whether the planned expenditure is designed to give optimum results.

3.     Statutory Audit.

It is the compulsory audit that required maintaining the related books and accounts of specified establishments. The chief aims of this type of audit are that the government wants to ascertain the relationship between costs and prices.