Cost Audit and Social Audit

Cost Audit and Social Audit:


Social audit is generally defi ned to be the audit of data or information depicting social performance
of a business in contrast to its normal economic performance as measured in fi nancial audit.


A lot of research and experimentation are being conducted to device techniques or models, which
can measure the contribution of an enterprise to the society. These developments result from an
increasing realization of the fact that business undertakings have social responsibilities also and
that the performance as a whole should be seen in this context


Social performance is discharged by providing some social amenities for the use of community as a
whole e.g. provision of a hospital, a recreation club, a temple, etc. As provision of such amenities
involves diversion of profi ts earned by the business for charitable or philanthropic purposes, it is
advisable to conduct an audit of such expenses spent on welfare which are in no way related to
the main task of business of production or marketing of goods/services and earning profi ts. Such
activities, which apparently are not directly connected with the main business activity, help the
business to create a favorable image for the business and those at the helm of affairs.


Cost audit provides an adequate information on the cost of production, selling price and margin
of profi t in respect of each item of product covered by cost audit. This information is very useful
to the Government in regulating the prices of essential commodities. Therefore, cost audit can be
said to subserve the interest of the community by facilitating the review of prices to be charged to
the customer. A review by the government results in fair prices to the consumers which is a major
social objective which cost audit is subserving. Thus cost audit is also a social audit.