Cost Audit

Cost Audit

Q.No.01:

What is Cost Audit?

Ans. to the Q.No.01:

Cost Audit:

Cost is expired expenses of all factors that shape the profit, Cost is the prime one. Cost Audit is therefore no loss important. Such an audit concentrates on propriety of expenditure and efficiency of performance shareholders will be able to judge the scale of efficiency, Justification of material cost, Productivility of man machine and materials by cost audit.

So, the cost audit is distinct from the statutory audit which is particularly helpful for price fixation, tariff protection and for measuring capacity utilization.

If also benefits the management through internal control by pointing out actual areas of exceptions.

Q.No.02:

State the provisions of the companies regarding cost audit and cost auditor?

Ans. to the Q.No.02:

There is a specific provision for cost audit in section 220 of the new companies act 1994 ,which are as follows :

1. Where in the opinion of the govt. it is necessary to do in relation to any company required under clause (d) of sub-section (1) of section 181 to include in its books of accounts the particular referred to therein,The government may by order,direct the an audit of cost accounts of the company shall be conducted in such manner as may be specified in the order by an auditor who shall be a “CMA” within the meaning of the cost and management accountants ordinance 1977.
2. An audit conducted by an auditor under this section shall be in addition an audit conducts by an auditor appointed under section 220.
3. The provisions relating to audit of a company specified in this Act.Materials mutandes,and so far as they are appolicable,apply to an audit conducts under this section.
   Q.No.03 :
   Such companies may come within the purview under cost audit as per the said act.
   Ans. to the Q.No.03:
   Section 220 of companies act 1994 speaks about cost audit of records,maintened under section 181 (1) (d) of this act .By a gazette notification dated 11^th  dec. 2001 made it.
   Mendatory for mills under sugar corporation and all public ltd. Companies ,required to maintain cost accounting records as per the above stated section, the report is to be prepared and submitted in accordance with cost audit (report )rules 1997.
   
   
   Q.No.04 :
   X & Y co. has been engaged in an auditor of public limited company as the statutory auditor for the last three years ,Whether  the same auditor can be engaged for the current year as the auditor of the said company.
   Ans. to the Q.No.04 :
   The statutory auditor shall appoint in every company according to company act.1994 ,Section 210 .But a cost auditor is appointment under section 220 of the company act. Cost audit conducted by an auditor under this section shall be in addition to an audit conducted by an auditor appointment under section 210.
   So, from the reference of company act. 1994, We can say that, the statutory auditor engaged by X & co. ltd. Shall be re-appointed unless-

1. Hes written consent has been not obtained prior to such re-appointment.
2. He is not qualification for re-appointment.
3. He has given the notice to the company in writing of his unwillingness to be re-appointed.
4. A resolution meeting appointing somebody else interest of him or providing expressly that.
   
   
   Q.No.05:
   He shall not be re-appointed?
   
   
   Ans. to the Q.No.05:
   Provided that for the purpose of passing such resolution a notice thereof shall in accordance with section 211 be issued prior to the meeting and such resolution cannot be passed except on the ground of death, In capacity or dishonesty or disqualification of the retiring auditor.
   
   
   
   
   Q.No.06:
   Disqualification of a cost auditor
   Ans. to the Q.No.06:
   The person appointed cost auditor should not have the following disqualifications:

1. He should not be a person appointed as the financial auditor under section 224 of the companies act.
2. He should not be a body corporate
3. He should not be can office of the company.
4. He should not be indebted to the company for an amount not exceeding tk.1000 or who has guaranteed or provided any security connection with the indebtedness to may third person of the company for an amount exceeding tk.1000.
5. He should not be in full time employment elsewhere CMA, CA.
   Q.No.07:
   Internal & External auditors
   Ans. to the Q.No.08:
   Auditing of company affairs are carried out broadly by who two agencies who are known as internal auditors and external auditors.
   The internal auditing, wholly an in-house effort, is a continuous review of operations and records within the business and is normally done by specially assigned staff.
   The internal auditing, wholly an in-house effort, is a continuous review of operations and records within the business and is normally done specially assigned staff.
   The external auditing, on the other hand, is a statutory requirement undertaken to satisfy provisions of the company act 1994.
   The following are the main point of deference:
   
   

Basic Points	Internal Auditor	External Auditor
Appointments	Appointed by the management	Appointment by shareholders
Nature	He is an employee of company	He is an outsider
Major concern	To same needs of management	To meet requirements of law
Basic Law	To review operation and internal controls for developing improvements and ensuring compliance policies and procedures.	To report on the correctness of according records and generally on the financial soundness of the company.
Scope of work	Determined by management	Determined by status or statutes
Reports to	Management	Shareholders

The objective of both categories of auditing, however meets at one point, and that is to ensure perfectness of the recording system which in incumbent on the company to action.