Efficiency aspect of cost audit is concerned with evaluation of performances. It covers the verification of the facts that the expenditure has been incurred according to the plan and the results obtained have also been according to the plan. It covers the examination of the plan prepared in the form of budgets and the comparison of the actual performance with the budgeted performance and

analysing the reasons for variances. Thus efficiency audit ensures that every rupee invested in capital or in other fields gives the optimum return; and investment in different areas of the business has been so balanced that it gives maximum results. Therefore cost audit plays the role both as consultant and financial advisor he assists the chief executive of the business concern in judging the soundness of the financial plans and performances by co­ordinating the results of actions of heads of various departments.


Propriety aspect of audit is concerned with actions and plans of management which affect the finance and expenditure of the business concern. The cost auditor is required to ensure that an item of expenditure is sanctioned or approved by the proper authority. It is done with the help of documents and vouchers. In addition, the cost auditor has to ensure that the item of expenditure is proper and reasonable on the grounds of propriety. Thus the cost auditor has to report whether or not the planned expenditure could give optimum results. Whether channels of investments were designed to produce best results. Whether return from investment in certain channels could be bettered by some alternative plan of action.

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