The upcoming discussion will update you about the differences between cost audit and financial audit.
Difference # Cost Audit:
1. Covers only select specified industries. Product wise coverage and not the whole company. SSI units are exempted.
2. Applicable only after issue of the order by Central Government.
3. By a Cost Accountant.
4. Appointment of Cost Auditor is made by Board of Directors subject to the prior approval of the Central Government.
5. Submission of Cost Audit Report to Central Government with a copy to the company.
6. Industry wise proforma prescribed under Cost Audit Rules.
7. Time limit of 90 days for completion of cost audit.
8. Time limit of 180 days from close of the year for submission of audit report.
9. It is guided by the Cost Audit (Report) Rules, 1996.
10. Report covers data of two previous years.
11. Audit report is treated confidential and cannot be circulated to the shareholders unless Central Government specifically order for circulation of specific part of the report.
12. Cost audit normally covers two years.
13. The report is on efficiency and propriety.
14. The emphasis is on adequacy or otherwise of the Cost Accounting System.
15. Report covers mention of areas for improvements in performance of the company.
16. Audit report coverage in detail and in questionnaire format.
Difference # Financial Audit:
1. Compulsory for all companies incorporated under the Companies Act, 1956. No exemption is allowed.
2. Automatic application of provisions for all registered companies.
3. By a Chartered Accountant.
4. Appointment of Financial Auditor by the Annual General Meeting of the company.
5. Submission of audit report to the Shareholders in the general meeting.
6. Uniform formats of financial statements to all companies.
7. No specific time limit for completion of Financial Audit.
8. No specific time limit for submission of audit report.
9. Financial audit is guided by Companies (Auditor’s Report) Order, 2003
10. Report covers data of one previous year.
11. Circulated to all shareholders along with annual accounts.
12. Financial audit is an annual feature.
13. The report is on true and fair view of the state of affairs and the profit and loss.
14. Emphasis is on verification and authenticity of transactions.
15. No specific mention.
16. Small and simple report.