1. Advantages of Cost Audit
Advantages of Cost Audit to the Management
It provides necessary information for prompt decision decisions.
It helps management to regulate production.
Errors, omissions, fraud, and mistakes can be detected and prevented due to the effective auditing of cost accounts.
It reduces the cost of production by plugging loopholes relating to wastage of material, labor, and overheads.
It can fix the responsibility of an individual wherever irregularities or wastage are found.

2. Advantages of Cost Audit to the Management
It improves the organization’s efficiency and the costing system by constantly reviewing, revising, and checking routine procedures and methods.
It helps compare actual results with budgeted results and points out the areas where management action is more needed.
It also enables comparison among different factory units to determine the profitability of the different units.
It exercises a moral influence on employees, which keeps them efficient and alert.
It ensures that the cost accounts have been maintained under the costing principles employed in the industry concerned.

3. Advantages of Cost Audit to the Management
It ensures effective internal control.
It helps to increase the overall efficiency of productivity.
Suitable corrective actions can eliminate inefficiency.
It facilitates cost control and cost reduction.
It assists in the valuation of stock of materials, works in progress, and finished goods.
It ensures maximum utilization of available resources,
It enables the management to choose economic methods of operations and thus earn profits to satisfy the shareholders and the investing public.
It enables the management to chalk out the future policy based on the report by the cost auditor, especially regarding labor, raw material, plant, etc., to maximize production and reduce the cost of production.
It tests the effectiveness of cost control techniques mand evaluates their advantages to the enterprise.

4. Advantages of Cost Audit to the Shareholders
It ensures that proper records are maintained as to purchases, utilization of materials, and expenses incurred on various items, i.e., wages and overheads, etc. It also ensures that the industrial unit has been working efficiently and economically.
It enables shareholders to determine whether or not they are getting a fair return on their investments. It reflects managerial efficiency or inefficiency.
It ensures a true picture of the company’s state of affairs. It reveals whether resources like plants and machinery are properly utilized or not.
It creates an image of the creditworthiness of the concern.

5. Advantages of Cost Audit to the Society
It tells the true cost of production. From this, the consumer may know whether the market price of the article is fair or not. The consumer is saved from exploitation.
It improves the efficiency of industrial units and thereby assists the nation’s economic progress.
Since the price increase by the industry is not allowed without justification as to an increase in the cost of production, consumers can maintain their standard of living.

6. Advantages of Cost Audit to the Government
It assists the tariff board in deciding whether tariff protection should be extended to a particular industry or not.
It helps to ascertain whether any particular industry should be given any subsidy to develop that industry.
It provides reliable data to the government to fix the selling prices of various commodities.
It helps in fixing contract prices in a cost-plus contract.
It determines whether differential pricing within the industry is desirable.
It helps the government to take necessary measures to improve the efficiency of sick industrial units.
It can reveal the fraudulent intentions of the management.

7. Cost statements may be helpful to authorities in imposing taxes or duties at the cost of finished products.
It facilitates the settlement of trade disputes among the companies.
It imposes an automatic check on inflation.
It assists the Tariff Board in considering the extension or removal of protection.

8. Disadvantages of Cost Audit
Cost audits verify expense records and accounts The audit also ensures that accounts and bookkeepers comply with ethical practices.
1. Expensive
One primary disadvantage associated with cost audits is the excessive fees. Auditors are typically independent contractors who can charge relatively high prices for services rendered.
2Lengthy
Cost audits are also lengthy processes that require employee devotion.
Although the auditor may be an outside contractor, employees must provide requested information and be accessible if further explanation of documents is necessary.

9. Lost Time
an auditor’s report is usually given three to five weeks after the balance sheet is released. This means people stealing from an establishment have nearly a month to form an excuse or leave the company.
4. Uncertainty
Because a major part of the process involves estimating, numerical figures can be wrong.
Besides, if receipts and other record-keeping forms are skewed, an auditor relying on such documents may produce an inaccurate report.