Cost Audit Vs Management Audit – What Must You Know?

An audit is a necessary process for business organizations to establish their reputation in the market with fair dealings. Unlike popular opinion, the audit is not just of a single type and is not focused only on finances. There are various types of audits, and business organizations can opt for one or more according to their needs and requirements. Cost audit and management audit are two of the most important types of audits in businesses. As the name suggests, one is focused on the cost of expenses, and the other on the efficiency of management tasks and operations.

Dig deeper into the details of this article to learn and explore what you must know about cost and management audits and implement them effectively.

Top 3 Highlights of Cost Audit

Cost audit is the process of reviewing and examining the accuracy of cost accounts as well as establishing their compliance with the accounting plan. A cost audit is a statutory process and must be conducted to establish fairness and transparency.

Here are the major highlights of cost audits you must be aware of before opting for them.

Verification Process

The first and foremost highlight of a cost audit is that it is a verification process. A business setup tackles numerous cost expenses on an average day in terms of manufacturing, production, and other tasks. The expenses are not in the hand of one person, though only one might be responsible for providing the funds. A cost audit verifies the cost of each and every item in production or manufacturing to align the expenses. It is not an easy or simple job. Click here to hire the best audit companies in Dubai and let experts verify cost expenses in routine.

Audit of Cost Records

Audit of cost records is the next notable highlight of cost audit you must be aware of. Business organizations have to maintain all the cost records to ensure fairness and transparency. The record can include business or financial statements, account data, and expense documents.  Keeping these saved in files is not enough. Cost audit focuses on conducting an audit of all these records in order to ensure they align with the record and evidence. Any discrepancy in cost records can lead to scrutiny and legal repercussions.

Applicable To Special Entities

The next major highlight of cost audit is that it is applicable only to special entities. In other words, cost audit does not apply to every type of firm or business setup. It is only applicable if the setup meets the criteria. The criteria for cost audit is that the business setup should have a production, manufacturing, or processing unit. If the organization is not linked to the production process in one way or the other, it will not have heft cost records that need cost audit. So, check the applicability of cost audit for your setup before implementing it.

Top 3 Highlights of Management Audit

Management audit is an appraisal process focused on the examination of the performance of the management. The key roles and highlight linked to the concepts are discussed below.

Here are the major highlights of management audit you must know to implement it effectively.

Improve Management Efficiency

Improving management efficiency is the first and foremost highlight of management audits. It is a voluntary audit process aimed at boosting the quality and functioning of business operations. Management audit is quite wider in scope as it encompasses the review of all managerial functions. It is strictly focused on improving the performance and planning of the organization in the future. It highlights the mistakes in policies and actions and also offers recommendations to improve the efficiency of the management.

Review the Organizational Structure

Reviewing the organizational structure is one of the major highlights of management audits. The auditors review the structure of the organization and its performance to highlight the gaps or commendable points. They also review the relationship between the management and staff and offer advice about the areas of improvement. The management audit can also suggest role reversals and set up changes in the organization to boost the efficiency of the structure. The structural changes might be hard initially but can offer long-term benefits.

Examine Operations and Control

The last notable highlight of a management audit is that it examines operations and controls. Numerous processes and operations take place in a business organization simultaneously. Nobody can constantly monitor the situation and stop absurdities. There are proper controls and policies implemented in the system to ensure efficient management. The management audit focuses on checking and implementing efficiency in operations and controls. You can even hire audit firms to exercise management audits on your behalf if you are short on time.

Unsure which type of audit your organization needs?

You will not be able to achieve your goals if you fail to implement the right type of audit. Get in touch with professional auditors to review the needs of your setup and conduct the right audit for progress and profitability.