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WELCOME
TO

Your Ultimate Guide to CMA Final Success

ACHIEVERS

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Contents
1) INTRODUCTION
...
6
3) Strategy for Success
...
9
a) Definition & Objective
...
9
c) Wider Scope & Benefits
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9
5) Genesis of Cost Audit-
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10
b) History of Cost Audit
...
10
a) General Objectives of Cost Audit
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11
7)

Utility and Advantage of Cost Audit-
...
12

9)

Notes for last-minute revision easy to understand, and perfect
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12
b) Genesis of Cost Audit:
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13
d) Utility and Advantages:
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13

10) Multiple Choice Questions
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16
12) Last Day MCQ
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24

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INTRODUCTION
Preparing for the
exam can feel
overwhelming, but with the right strategy, study material, and proper guidance,
success is within reach
...


♦
♦
♦
♦
♦

– A breakdown of key topics and important concepts
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– Practice with exam-level questions to boost your
confidence
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– Proven techniques to maximize retention
and score high
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The story behind

ACHIEVERS
In a small room filled with books, notes, and endless dedication, a passionate
student once struggled to find the perfect study material
...
That’s when an idea sparked—a dream to create something
meaningful for students like them
...
Every page is crafted
with care, designed to make concepts clearer, preparation smarter, and success
achievable
...
Because success
isn’t just about hard work; it’s about having the right tools
...

We believe that every student deserves access to well-structured and reliable resources
that make exam preparation less stressful and more effective
...

Through meticulously crafted study materials, expert-designed mock tests, and strategic
study plans, we aim to equip students with the right tools to boost confidence, enhance
performance, and achieve their academic dreams
...

As we grow, we strive to continuously innovate and expand, ensuring that our materials are
updated, relevant, and aligned with the latest examination trends
...

🌟 Because success isn’t just about working hard—it’s about having the right strategy,
the right guidance, and the right support
...

This chapter has 5 topics and the question will be asked out these 5
topics only
...

You can find that in syllabus 2022 question paper the question is
being asked from this chapter in question number – 2(a)
...


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Strategy for Success

MODULE
1
2
3
4
7
8
9
10
17
18

MODULE
1
2
3
4
7
8
9
10
12
13
14
16

COST AND MANAGEMENT AUDIT
PLAN-A
CHAPTER NAME
Basics of Cost Audit
Companies (Cost Records and Audit) Rules, 2014 (as amended)
Cost Auditor
Overview of Cost Accounting Standards and GACAP
Cost Audit Documentation, Audit Process and Execution
Preparation and Filing of Cost Audit Report
Basics of Management Audit
Management Reporting Issues and Analysis
Forensic Audit
Anti-Money Laundering
COST AND MANAGEMENT AUDIT
PLAN-B
CHAPTER NAME
Basics of Cost Audit
Companies (Cost Records and Audit) Rules, 2014 (as amended)
Cost Auditor
Overview of Cost Accounting Standards and GACAP
Cost Audit Documentation, Audit Process and Execution
Preparation and Filing of Cost Audit Report
Basics of Management Audit
Management Reporting Issues and Analysis
Evaluation of Corporate Image
Informatin Systems Security Audit
Internal Control and Internal Audit
Audit of Diefferent Service Organisations

Theory
Yes
Yes
Yes
Yes

Practical MARKS
No
7
Yes
14
No
7
Yes
14

Yes
No
Yes
Yes
MCQ Practical
Yes
No
Yes
No

Theory
Yes
Yes
Yes
Yes

7
7
10
7
7

Practical MARKS
No
7
Yes
14
No
7
Yes
14

Yes
No
Yes
Yes
MCQ Practical
Yes
No
Yes
No
Yes
No
Yes
No

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7

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CHAPTER WISE MARKS DISTRIBUTION AS PER WEIGHTAGE AND RECENT EXAMS
Module No
...

Acts as a mirror of an entity’s performance
...

ICMA UK Definition: Verification of cost accounts and adherence to cost accounting plans
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Ensures correctness in costing techniques, systems, and cost records
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Wider Scope & Benefits
1
...

3
...

5
...

7
...


Cost Control – Element-wise cost monitoring
...

Decision-Making Support – Provides insights for managerial actions
...

Standard Setting & Budgetary Control – Establishes benchmarks
...

Inventory Valuation Accuracy – Ensures correct stock valuation
...


Beyond Compliance



More than just a legal requirement (where mandatory)
...

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Genesis of Cost AuditHistory of The Institute of Cost Accountants of India




1944: Established as the Institute of Cost & Works Accountants of India under the Companies
Act, 1913
...

2012: Renamed as The Institute of Cost Accountants of India (ICAI-CMA)
...

1965-2008: Cost records and audits extended to 44 industries on a company-specific basis
...

2009: Expert Group submitted its report to the Central Government
...

2014: New Companies (Cost Records and Audit) Rules, 2014 issued under the Companies
Act, 2013
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Adheres to prescribed Cost Accounting Record Rules and detects errors & fraud
...

Determines inventory valuation for accurate financial reporting
...

Ensures periodical reconciliation between cost & financial accounts
...

Detects & corrects abnormal material & time losses
...

Enhances corporate governance by providing operational disclosures
...


Social Objectives of Cost Audit
Fair Pricing & Market Competitiveness




Ensures justified pricing concerning product quality
...

Prevents cost-based economic imbalances
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Ensures efficient utilization of resources for sustainability
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Evolution & Initial Objective of Cost Audit in India




Initially used as a price control tool for consumer and infrastructure industries
...

Aimed at providing authentic cost data for demand-supply regulation
...
Changing Role in Liberalized & Globalized Economy



Need for accurate cost data has increased
...

Performance Assessment: Measures shareholder & stakeholder value, efficiency,
waste management, and resource allocation
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Decision-Support Tool: Helps in:





Meeting customer expectations & profit targets
Optimizing resource utilization
Guiding product mix & investment decisions
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3
...

Integration of databases improves efficiency and reduces data manipulation
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Cost Audit & IFAC Perspective



Ensures cost records provide a true & fair view of costs in production, processing,
manufacturing, and mining
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o Helps reduce costs by detecting waste & inefficiencies
...


Cost Accounting Standards Summary Notes on Cost Accounting Standards (CAS)





Purpose: Achieve uniformity & consistency in cost accounting principles & practices
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Objective: Structured approach for cost measurement in manufacturing & service sectors
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o Ensure uniformity in cost classification, measurement, assignment & allocation
...

o Guide professionals in attestation of General Purpose Cost Statements
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These standards help in transparency, comparability, and effective cost control in business
operations
...

Good luck with your exams!
Nature and Scope of Cost Audit:
- Cost audit verifies cost accounts and ensures adherence to cost accounting plans
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- Scope includes cost control, pricing, decision-making, and inventory valuation
...

- Formalized in 1965 under the Companies Act, 1956
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Objectives of Cost Audit:
- General Objectives: Verify cost accounts, detect errors/fraud, ensure proper cost computation, and
assist in pricing
...


Utility and Advantages:
- Helps in cost control, pricing, and decision-making
...


Cost Accounting Standards (CAS):
- Provide uniformity in cost accounting practices
...


Alright, the first chapter should be crystal clear
to you by now… or at least as clear as my WiFi
signal on a rainy day
...
Cost Audit was first introduced in the year:

A
...
1965
C
...
1975
Correct Answer: B
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Cost Audit was first introduced for which industry?

A
...
Iron & Steel
C
...
Sugar
Correct Answer: A
...
The Government of India issued an order mandating Cost Audit for companies in the
year:

A
...
2009
C
...
2014
Correct Answer: C
...
The report on the audit of cost records is submitted by the cost auditor to:

A
...
Finance Director
C
...
Board of Directors
Correct Answer: D
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The cost auditor of a company that defaults in compliance with Section 148 shall be
punishable under:

A
...
Sub-sections (1) to (3) of Section 148 of Companies Act, 2013
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C
...
Sub-sections (2) to (5) of Section 147 of Companies Act, 2013

Correct Answer: D
...
The Institute of Cost Accountants of India was set up in the year:

a) 1944
b) 1959
c) 1956
d) 1965

Correct Answer: (a) 1944
7
...


a) Kelkar
b) Vivian Bose
c) Mahalanobis
d) Krishnamurthy

Correct Answer: (b) Vivian Bose
8
...


a) (1) of Section 147
b) (1) of Section 149
c) (2) of Section 148
d) (1) of Section 148

Correct Answer: (a) (1) of Section 147

9
...
Time to wrestle with previous year
questions… because the real boss fight is
still ahead!

Previous Year Questions
...
Which of the following is/are the objective(s) for which cost audit is undertaken?
A
...
To ensure that cost accounting principles are governed by the management objectives and
these are strictly adhered in preparing cost account
C
...
All of the above

The correct answer is: (D) All of the above
Explanation:
Cost audit is undertaken for multiple objectives, including:




(A) Establishing the accuracy of costing data to ensure that cost records are maintained
correctly and systematically
...

(C) Reducing the detailed checking burden of the external auditor if an effective internal
cost audit system is in place, thereby enhancing audit efficiency
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2
...

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A
...

C
...


Cement
Iron and Steel
Jute
Sugar

The correct answer is: (A) Cement
...
The objective was to ensure cost efficiency, transparency, and accountability in
pricing and production costs
...

Later, cost audit requirements were extended to other industries like Iron & Steel, Jute, and Sugar,
but Cement was the first industry where the government implemented this regulation to monitor and
control costs effectively
...
Which of the following audit’s primary objective is ensuring accuracy of cost data,
accumulation and exact computation of the cost of a product? Justify your selection of the
answer: (
A
...

C
...


Cost Audit
Management Audit
Internal Audit
Financial Audit

The correct answer is: (A) Cost Audit
Explanation:
Cost Audit is a systematic and independent examination of the cost records, cost statements,
cost data, and cost accounting system of an organization
...
Accuracy of Cost Data – It verifies whether cost records are maintained as per prescribed
standards and accurately reflect the expenses incurred
...
Proper Accumulation of Costs – Ensures that all cost components (material, labor, and
overheads) are correctly recorded and allocated to products/services
...
Exact Computation of Product Cost – Checks whether the cost of production is computed
correctly, helping in pricing decisions and cost control
...


4
...

Improved Cost Control – Helps in better cost analysis, cost reduction, and efficiency
improvement
...

Regulatory Compliance – Assists in meeting statutory and contractual obligations related to
cost data
...

Facilitates Cost Audit – Enhances cost audit effectiveness by ensuring consistency in cost
recording and reporting
...


These standards play a crucial role in ensuring accuracy, fairness, and accountability in cost
accounting practices
...
What is the Scope of Cost Audit? Explain
...
It
plays a significant role in evaluating an entity's performance
...
Definition of Cost Audit:
o Institute of Cost and Works Accountants of India (ICWAI): Cost audit is an audit
of the efficiency of expenditure, a preventive measure, a guide for management
policy and decisions, and a performance barometer
...

2
...
Cost Audit verifies the
accuracy of costing techniques, costing systems, and cost accounts to ensure that records are
correct and contribute to effective decision-making
...
Wider Scope of Cost Audit:
o Control over element-wise costs: Helps in controlling individual cost components
...

o Management Decision-making: Provides valuable insights for better decisionmaking
...

o Standards and Budgetary controls: Helps set cost standards and implement
budgetary controls
...

o Accuracy in inventory valuation: Ensures inventory is accurately valued, affecting
financial reporting
...

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Conclusion: Cost Audit should not be seen merely as a compliance tool (especially when mandatory),
but as a strategic tool for enhancing operational efficiency, optimizing costs, and driving better
management decisions
...


6
...
Improved Cost Understanding and Communication:
o Cost information helps organizations structure and understand their costs, allowing
effective communication with stakeholders
...
Assessment of Organizational Performance:
o Costing aids in assessing the organization’s performance, focusing on shareholder
and stakeholder value
...

3
...
It is used to appraise performance
based on implemented strategies
...
Support for Decision-Making:
o Good costing practices assist in both regular and non-routine decisions
...

 Continuous improvement in resource utilization
...

5
...

6
...


7
...


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8
...
(

Answer: General Objectives of Cost Audit













Verification of Cost Accounts
Ensure that cost accounts are properly maintained and compiled as per the cost
accounting system followed by the enterprise
...

Detection of Errors and Fraud
Identify errors and fraud in the company’s operations
...

Inventory Valuation
Ensure proper valuation of inventory
...

Reconciliation of Accounts
Periodically reconcile cost accounts with financial accounts
...

Detection of Abnormal Losses
Identify and correct abnormal losses in materials and time
...

Advising Management
Advise management based on inter-firm comparisons, highlighting areas for
performance improvement
...


Objectives of Audit and Management Outlook
The cost auditor should understand if the audit aims solely to fulfil statutory requirements or
if the management has additional objectives, such as:





Cost Optimization or Reduction
Focus on strategies for cost reduction or optimization
...

Product Diversification or Change in Product-Mix
Suggest changes in product diversification or product-mix
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


Marketing Strategy Review
Propose changes in marketing strategies, market expansion, or diversification
...


Last Day MCQ
1
...
1959
B
...
1949
D
...
1965
2
...
Cement
3
...
2011
4
...
Board of Directors

5
...
Sub-sections (2) to (5) of Section 147 of Companies Act, 2013
6
...
Which of the following is/are the objective(s) for which cost audit is undertaken?

a) To establish the accuracy of costing data
b) To ensure that cost accounting principles are governed by the management objectives and
these are strictly adhered in preparing cost account
c) To reduce the amount of detailed checking by the external auditor if effective internal cost
audit system is in operation
d) All of the above

The correct answer is: (D) All of the above
8
...

a)
b)
c)
d)

Cement
Iron and Steel
Jute
Sugar

The correct answer is: (A) Cement
...
Which of the following audit’s primary objective is ensuring accuracy of cost data,
accumulation and exact computation of the cost of a product? Justify your selection of
the answer: (

a)
b)
c)
d)

Cost Audit
Management Audit
Internal Audit
Financial Audit

The correct answer is: (A) Cost Audit

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10
...
Which institute defines cost audit as "the audit of efficiency and expenditure, preventive
in nature, and guiding management decisions"?
a)
b)
c)
d)

ICMA UK
ICAI (Institute of Chartered Accountants of India)
ICMAI (Institute of Cost Accountants of India)
IFAC (International Federation of Accountants)

Correct Answer: C) ICMAI (Institute of Cost Accountants of India)
12
...
When was cost audit first introduced in India under the Companies Act, 1956?
a)
b)
c)
d)

1944
1959
1965
2012

Correct Answer: C) 1965
14
...
What was the initial objective of cost audit in India?
a) Improving shareholder relationships
b) Controlling prices in consumer and infrastructure industries
c) Reducing the tax burden on businesses
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d) Ensuring compliance with banking regulations
Correct Answer: B) Controlling prices in consumer and infrastructure industries
16
...
What is a key role of cost audit in a globalized economy?
a)
b)
c)
d)

Reducing government intervention in pricing
Ensuring accurate cost data for better decision-making
Increasing financial compliance costs
Eliminating the need for external audits

Correct Answer: B) Ensuring accurate cost data for better decision-making
18
...
How does cost audit support corporate governance?
a)
b)
c)
d)

By assisting in regulatory matters like Anti-Dumping Duty and GST Anti-Profiteering
By reducing financial reporting standards
By focusing only on profitability analysis
By eliminating cost control procedures

Correct Answer: A) By assisting in regulatory matters like Anti-Dumping Duty and GST AntiProfiteering

Last Day 7 Marks Question
1
...

Answer:
Cost audit ensures the accuracy of cost data, proper accumulation, and exact computation of product
costs
...

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Key Objectives:
1
...

2
...

3
...

4
...

5
...


2
...

2
...

4
...


Enhances Competitiveness – Helps maintain an appropriate cost structure
...

Drives Better Decision-Making – Provides accurate cost analysis for strategic planning
...

Improves Operational Efficiency – Identifies inefficiencies and reduces wastage
...
Explain the history and evolution of cost audit in India
...
1965 – Introduced under Sec 233B (Cost Audit) and Sec 209(1)(d) (Cost Records) of the
Companies Act, 1956
...
1965-2008 – Extended to 44 industries
...
2008 – Expert Group reviewed the cost accounting system
...
2009 – Expert Group submitted its report to the Central Government
...
2011 – Mandatory Cost Audit introduced for specific companies based on turnover & net
worth
...
2014 – New Companies (Cost Records and Audit) Rules, 2014 were issued under the
Companies Act, 2013
...
Discuss the wider scope and benefits of cost audit
...

2
...

4
...

6
...

Sales Price & Margin Determination – Aids pricing strategies
...

Activity Analysis – Evaluates necessity and results of activities
...

Waste Reduction – Identifies inefficiencies and minimizes losses
...
Inventory Valuation Accuracy – Ensures correct stock valuation
...
Overall Efficiency Improvement – Enhances operational effectiveness
...
How does cost audit contribute beyond compliance?
Answer:
Cost audit is more than a legal requirement as it:
1
...

3
...

5
...

Strategic Growth – Aids in decision-making regarding pricing, budgeting, and investment
...

Regulatory Support – Assists in matters like GST Anti-Profiteering and Price Controls
...


6
...
Verification & Compliance – Ensures proper maintenance of cost accounts
...
Cost & Inventory Control – Verifies cost units and cost centers
...
Pricing & Reconciliation – Facilitates price fixation and reconciles cost & financial
accounts
...
Resource Optimization – Ensures efficient resource utilization
...
Management & Governance – Helps in decision-making, performance analysis, and
corporate governance
...
Explain the social objectives of cost audit
...
Fair Pricing & Market Competitiveness – Helps in justified pricing and eliminates price
disparities
...
Economic & Resource Efficiency – Enhances cost competitiveness in the global market
...
Equitable Cost Distribution – Prevents cost-based economic imbalances
...
Sustainability & Resource Utilization – Ensures effective use of national resources
...
Discuss the role of cost audit in the liberalized and globalized economy
...
Providing Accurate Cost Data – Helps businesses understand their cost structure
...
Enhancing Communication – Aids in structuring costs and interacting with stakeholders
...
Performance Assessment – Measures efficiency, waste management, and resource
allocation
...
Strategic Decision-Making – Supports product and resource-related decisions
...
Optimization of Resources – Helps businesses meet profit targets while maintaining
customer satisfaction
...
Explain the importance of cost audit in integrated costing information systems
...

2
...

4
...


Accurate & Consistent – Uses common data sources for uniform reporting
...

Useful for Decision-Making – Provides a clear view of product/service costs
...

Enhancing Corporate Performance – Identifies weaknesses in cost systems and helps
reduce costs
...
What are Cost Accounting Standards (CAS), and why are they important?
Answer:
Definition:
Cost Accounting Standards (CAS) are issued by the Institute of Cost Accountants of India (ICAICMA) through the Cost Accounting Standards Board (CASB) to achieve uniformity in cost
accounting principles
...

2
...

4
...


Standardization – Ensures consistency in cost classification and measurement
...

Transparency & Comparability – Enables fair comparison across industries
...

Effective Cost Control – Helps in analyzing and controlling costs effectively
...
Waise bhi, duniya toh umeed
par kayam hai, warna hum aur
aap toh already "buffering" mode
mein hote!
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