Cost Audit and Management Audit

ICWA Final : Stage IV :: Paper 19: [One paper: Three hours - 100 marks]

Contents . . .

Section I: Cost Audit [50 Marks]

  1. Provisions relating to maintenance of cost Accounting record under the Companies Act; recording and audit compliance of cooperative societies Act, Customs & Excise Act, WTO, Antidumping processing, export – import policy & special provisions of sick industries Act (SICA) etc
  2. Nature, objects and scope of cost Audit — The concepts of efficiency audit, propriety audit, management audit, social audit.
  3. Appointment of Cost Auditor — procedure for appointment , his rights, responsibilities, status, relationship and liabilities – professional and legal under the Companies Act, 1956 (1 of 1956), the cost and works Accountants Act, 1959 (23 of 1959).
  4. Planning the audit — familiarization with the industry, the organisation, the production process systems and procedures, list of records and reports, preparation of the audit programme.
  5. Verification of records and reports — utilization of statistical sampling methods – verification of performance and statements maintained under the cost Accounting (Records) Rules.
  6. Evaluation of Internal Control Systems — Budgetary Control, capacity utilization, inventory control, management information system.
  7. Assessment of the adequacy of the internal audit function.
  8. Audit notes and Working papers — audit reports to management.
  9. The cost Audit Reports — contents of the Reports, distinction between “Notes and Qualifications” to the Report. Cost Auditor’s observations and conclusions.
  10. Professional Ethics and Code of Conduct.
  11. Relationship between the Statutory Financial Auditors, the internal Auditor and the Statutory Cost Auditor.
  12. Cost Accounting (Records) Rules under clause (d) of sub – section (1) of section 209 (issued one year before the examination) and Cost Audit (Reports) Rules issued under section 233 – B of the Companies Act, 1956 (1 of 1956). Critical study of the rules including the prescribed Annexure and proforma applicable to the industries covered.
  13. Review of Cost Audit Report by the Government: objectives, methods, follow – up actions and disposal of Cost Audit Reports by the Government company and other end – users of the Cost Audit Reports.
  14. Comparative Studies between cost audit and financial audit with special reference to disclosure of information to members, parliament and the general public.
  15. Penal provisions for Companies and Cost Auditors.
  16. Disciplinary proceedings.

Section II: Management Audit leading to other Services [50 Marks]

A. Management Audit

  1. Meaning, nature and scope, organizational needs for Management Audit and its coverage over and above other audit procedure.
  2. Audit of the Management processes and Functions, such as planning, organisation, Staffing, Co – ordination, Communication, Direction and Control.
  3. Evaluation of Management Information and Control Systems with special emphasis on Corporate Image and Behavioural Problems.
  4. Corporate Development and Management Audit, including operational and propriety aspects.
  5. Social Cost and Benefit of business enterprises with particular reference to developing countries.
  6. Audit of social responsibility of management.
  7. Corporate governance and Audit Committees.

B. Other Services

  1. Other service sector to the Management, Certification for various purposes – the records to be verified and the safeguards to be taken – the form and content of the certificates.
  2. Cost audit as an aid to management, Government, shareholders, other external agencies and the public voluntary Cost Audit.
  3. Productivity Audit – labour, material and Capital.
  4. Efficiency audit – audit of sub – systems of an enterprise.
  5. Assessment and quantification of losses under marine, fire and accident insurance policies.
  6. Inventory Audits for Banks and other agencies.
  7. IRDA, Insurance Act, CARC.

Recommended Books

  • Sultan Chand
    1. Cost Audit and Management Audit
      • Saxena & Vashist
    1. Guidance Notes To Cost Audit
      • ICWAI of India
    2. ICWAI’s publication relating to Cost Accounting Record Rules on Various Industries
      • ICWAI of India
    3. The Management Audit
      • ICWAI of India
  • Macmillan
    1. Efficiency Auditing
      • Walley
    2. Cost Audit and Management Audit
      • A. R. Ramanathan
    3. Cost Audit
      • J. P. Berry
    4. A Commentary on Cost Accounting (Records) Rules
      • A. V. Ramana Rao

Other Relevant Books

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