What is the difference between Cost Audit and Financial Audit?
Difference between Cost Audit and Financial Audit:
Accounts: Cost Audit is an audit of cost accounts, cost statements and cost accounting plan. Whereas, Financial Audit is an audit of financial accounts, supporting vouchers or documents and financial-statements.
Statutory Requirements: Cost audit is not compulsory except in case of those companies which carry on manufacturing or mining business and have been specifically asked by the Central Government to maintain cost accounts under Section 209(d) of the Companies Act and to get their accounts audited under Section 233 B. Whereas, As per the Companies Act, financial audit is compulsory for each company in every financial year.
Qualification: A qualified cost accountant is considered competent to perform cost audit. Whereas, A Chartered Accountant is considered competent for performing financial audit.
Primary Object: The primary object of cost audit is to verify whether cost have been ascertained on the basis of cost accounting principles and plans, whether cost records have been properly maintained and whether the cost of production and sales have been correctly worked out. Whereas, The primary object of financial audit is to see whether necessary accounts, records and documents have been maintained by the organization and whether its Balance Sheet and Profit and Loss Account give a true and fair view of State of affairs and Profit and Loss respectively.
Interested Parties: Cost audit is mainly concerned to serve the interest of the management. Whereas, Financial Audit is primarily concerned to serve the interest of the shareholders.
Conducted: Cost Audit in undertaken only in a particular year and for a specified company. Whereas, Financial audit is conducted every year in companies.
Report: Cost Auditor submits his report to the Company Law Board and also to the company. Whereas, In case of financial audit, an auditor has to submit his report to the shareholders of the company.
Stock: The cost auditor has not only to check the cost of each item of inventory, but also to see whether the inventories of raw material and stores have been kept at proper levels, commensurate with operation efficiency. Whereas, On the matter of stock, the financial auditor has only to see whether all categories of stock have been included in the accounts in true quantities and value.