What is the difference between Financial Audit, Cost Audit and Management Audit?
The difference between Financial Audit, Cost Audit and Management Audit:
Main elements of Financial Audit are:
- It is an effort to ensure a true and fair view of the state of affairs of the company through the Profit and Loss Account and the Balance Sheet
- It is a process of verification of past records of accounting relating to the previous year.
- Its main aim is to detect errors and frauds.
- It uses the techniques of vouching, verification and valuation for the purpose of forming an opinion.
- It is a statutory audit.
- It is conducted regularly every year.
- It is a verification of transaction recorded in the books of accounts.
- It reports about the actual state of affairs pertaining to financial position as on a particular date.
- It begins where the work of accountancy ends.
- It is conducted by a qualified Chartered Accountant.
Main elements of Cost Audit are:
- It ensures that the cost accounting system followed in the concern serves as a true basis of ascertainment of cost of production.
- It takes into view the current system of cost computation.
- It examines the reliability of the system which produce cost information.
- It examines the records of materials, labor and other expenses as components of total cost of operation.
- It is an audit of cost ascertainment and control.
- It is conducted as per the Instructions issued by the Central Government.
- It evaluates economy and output.
- It confines itself to cost implications of operations.
- It covers both the records of actual expenses incurred as well as the estimated cost of material, labor and other items.
- It is conducted by a qualified Chartered or Cost Accountant with the prior approval of the Central Government.
Main elements of Management Audit are:
- It examines the efficiency of almost every area of operation within the
- It mainly applies its attention to future planning and performance.
- It is an attempt to assess efficiency and suggest its further improvement.
- It determines the adequacy of procedures and control adopted by the
- It is a policy audit and efficiency audit but it is not a statutory obligation.
- It is conducted as per the needs and desires of the company.
- It examines systems, policies, performance and identify the weakness and suggest remedy.
- It is concerned with the performance profitability of the concern.
- It begins where the work of financial audit ends.
- It may be conducted by any independent expert or a consultant.