The best content on costs and profitability

When and why do a cost audit? Check it out!

When and why do a cost audit? Check it out!

Nowadays, in an increasingly competitive market, only institutions with the best practices stand out and continue to grow. In this context, a cost audit provides to the manager the tools he needs to make his decisions based on the actual situation the company is in.

Stay with us and find out when to do a cost audit and how it can help your company! Enjoy your reading!

Why do a cost audit?

Auditing is the process of analyzing the activities of a company and checking if its planning has been followed correctly. Its function is to find faults in the institution’s procedures and recommend solutions for them. The cost audit studies the company’s finances in order to make the use of resources more efficient.

At certain times, the audit may identify that the practices of an employee hurt the company, but only in very specific situations the cause of the organization’s problems is related to the conduct of a person. As it does with all the problems it identifies, the audit reports its findings to the manager.

What are the advantages of the cost audit?

With the data collected by the cost audit, the management of the company’s financial department becomes easier, which translates into many benefits. Among them, it is possible to highlight:

  • the correction of balances is recorded more accurately;
  • the inspection of internal control becomes easier and more efficient;
  • there is an increase in profit margins;
  • there is a reduction in the risk of diversion of company resources;
  • the manager has access to accurate and up-to-date information on the company’s situation.

How to implement a cost audit?

In order to implement a cost audit, the team needs to apply accounting and internal control skills. After all, the idea is to identify the points at which the company procedures can be improved. Learn the steps involved!

Process mapping

First, the auditor needs to know the processes performed in the industry that will be audited. Based on this knowledge, he makes task maps, with the purpose of analyzing the company procedures clearly and accurately.

Identification of potential problems

Once the company procedures are identified, the auditor studies them, looking for potential problems.

Identification of internal control procedures

At this stage of the process, the auditor identifies the means of internal control used by the institution and observes how they are used.

Internal control verification

Once the potential problems and internal control methods of the company are identified, the auditor checks if the control practices fulfill their duty to avoid the occurrence of faults in the processes.

Result analysis

After carefully studying the company procedures, the auditor checks to see if they occur as efficiently as possible. If so, he recommends that they be maintained.

If on the other hand the procedures have faults or can be improved, the auditor informs so in the report and suggests possible solutions or ways to make the processes more effective.

When to do a cost audit?

Since cost audit increases the financial efficiency of the company and makes it more profitable, it is interesting to do it frequently. That way, when there are faults in the company’s processes, they will be identified before they become serious.

Although this whole procedure seems to be laborious, the information obtained is relevant to the management, as they pave the way for a solid and steady company growth.