Question

5. What are the advantages and disadvantages of cost audit?
కాస్ట్ ఆడిట్ యొక్క ఉపయోగాలు మరియు ప్రతికూలాలు గురించి తెలుపుము​

Answer 1

Explanation:

Advantages...

1. Advantages of Cost Audit to the Management
2. It provides necessary information for prompt decision decisions.It helps management to regulate production.
3. Errors, omission, fraud, and mistakes can be detected and prevented due to the effective auditing of cost accounts.
4. It reduces the cost of production through plugging loopholes relating to wastage of material, labor, and overheads.

DISADVANTAGES:

It can fix the responsibility of an individual wherever irregularities or wastage are found.Disadvantages of Cost Audit

Cost audits verify expense records and accounts. The audit also ensures that accounts and bookkeepers comply with ethical practices.

Effective cost audits provide a complete breakdown of expense that gives a company financial clarity about accounts. Although they provide such transparency, “there are many disadvantages to conducting cost audits.

Expensive:

One primary disadvantage associated with cost audits is the excessive fees. Auditors are typically independent contractors who can charge relatively high prices for services rendered.

Lengthy:

Cost audits are also lengthy processes that require employee devotion.

Although the auditor may be an outside contractor, employees must provide requested information and be accessible in case further explanation of documents is necessary.

Lost Time:

Although thorough, an auditor’s report is usually given three to five weeks after the balance sheet is released. This means people who have been stealing from an establishment have nearly a month to form an excuse or leave the company.

Uncertainty:

Because a major part of the process involves estimating, there’s the possibility of numerical figures being wrong.

Besides, if receipts and other forms of record-keeping are skewed, an auditor relying on such documents may produce an inaccurate report.