What Are The Various Disadvantages Of Cost Audit?

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While it may not be possible to avoid a cost audit due to regulatory issues and holding such an audit also has numerous benefits there are several reasons why a company may wish to postpone or not hold the audit altogether. Here are some examples of the disadvantages:

  • Holding a Cost Audit can be expensive. This is because a company will often bring in an independent auditor who will bill on a contract basis which will likely be at a high price. These fees also have the potential to rise if the auditor finds there is a necessity to dig deeper into the finances.
  • A Cost Audit can be a long, drawn out process which will likely involve taking up time from regular employees since the contractor will require information which must be provided and explained if necessary. This extra time and effort can impact an employee's day to day routine and it may be necessary to provide an audit road map to guarantee the auditor access to the required documentation within a time frame which would also be the responsibility of the company.
  • If a Cost Audit is carried out in order to find fraudulent activity it can take between three and five weeks to get a report by which time people stealing could have covered their tracks.
  • Cost Audits involve a large amount of estimation and so there is the possibility that figures will be incorrect and if record keeping from the company is not great to start with then inaccuracies will be compounded. Generally disorganized companies may not get much benefit since the process displays the information without really ordering it.

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