Any business needs the auditing process to not only ensure they are complying with laws and rules but that they are running their company as cost-effectively as possible. All companies, even if they don’t turn a profit, need to have their accounts audited annually by law, but there are two quite different kinds of audits to wrap your head around.
But what are the main differences between a financial audit and a cost audit and why and how they are conducted for businesses in the UK?
What is a financial audit?
A financial audit refers to the examination of financial records and business accounts by an independent body that is conducted for compliance, taxation or for disclosure purposes. It ensures high accuracy in the given reports and is a systematic and completely unbiased examination of a company or institution’s finance books and records.
What is a Cost audit?
A cost audit refers to the verification of accounts and costs of a business and a careful compliance accounting process. It is an independent examination of the correctness of the cost statements and accounts and their conformity with the cost accounting plan. In essence, it’s all about assessing the efficiency of a business.
What are the differences?
Generally speaking, both financial audits and cost audits are important processes suitable for a variety of businesses and situations. One is engineered to serve the interests of shareholders and the other is engineered to serve the interest of management. Both are there to serve a purpose and should be considered by enterprises of all shapes and sizes.
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