Cost and Management Audit · Cost Auditing and Assurance Standards

SCA 103: Overall Objectives of the Independent Cost Auditor

Updated 11 October 2026 · Fact-checked

SCA 103 lays down the overall objectives of the cost auditor and the conduct of a cost audit under the Cost Auditing Standards. The auditor reports on the cost statements in the form required by law or the standards, in line with the findings. If reasonable assurance cannot be obtained, the opinion is qualified, and in extreme cases disclaimed.

Understand Overall Objectives of the Independent Cost Auditor (SCA 103)

SCA 103 is the umbrella standard of the Standards on Cost Auditing. It states what the cost auditor is trying to achieve in every cost audit and what duties apply across all audits, including the duty to comply with the Cost Auditing Standards.

The standard defines cost audit as an independent examination of cost statements, cost records and other related information of an entity, including a non-profit entity, conducted with a view to expressing an opinion on them.

The Objectives section (para 2) says the objective of the standard is to lay down the cost auditor's overall objectives and to ensure the audit of cost statements is conducted in accordance with the Cost Auditing Standards. Para 2.2 is the reporting objective: report on the cost statements in the form required by law or by the Cost Auditing Standards, in accordance with the auditor's findings. Learn the other overall objectives from your study material. This page relies only on the text of the standard quoted here.

The Objectives section also says that where reasonable assurance cannot be obtained, the auditor qualifies the opinion. In extreme cases the auditor disclaims an opinion. Where applicable regulations require it, the objective may also extend to making observations and suggestions.

Responsibility is split. The cost auditor is responsible for forming and expressing an opinion on the cost statements. The standard's scope describes management's responsibility for preparing and presenting them. The auditor is not responsible for designing internal control, selecting cost accounting policies, or making cost estimates (para 6.5(b)).

Key rules to remember

Definition of cost audit (para 4.7): Cost audit = independent examination of cost statements, cost records and related information, to express an opinion; Applies to any entity, including a non-profit entity.
Reporting objective (para 2.2): Report on cost statements in the form required by law or the Cost Auditing Standards, in line with the auditor's findings; Reporting must follow the findings, not management's wishes.
Where assurance is not obtained (SCA 103 Objectives): Reasonable assurance not obtained → qualify the opinion; extreme cases → disclaim; A disclaimer is for extreme cases only.
Evidence requirement (para 5.7): Obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably low level; This lets the auditor draw reasonable conclusions for the opinion.
Responsibility for cost statements (para 6.5): Auditor forms and expresses an opinion. Auditor is not responsible for designing internal control, selecting cost accounting policies, or making cost estimates (para 6.5(b)); Do not mix up the two roles: the opinion is the auditor's, preparation is not.
Cost reporting framework (para 5.9): Framework followed by management must be in line with the Companies Act and the Rules under it; The auditor determines this.

How to solve Overall Objectives of the Independent Cost Auditor (SCA 103) questions

Most questions ask you to state the objectives, explain a term, or decide the right opinion in a scenario. Use this method.

1Identify what is asked: objectives, responsibilities, definition, or an opinion decision.
2Quote the relevant idea in the standard's own terms: cost statements, cost reporting framework, reasonable assurance.
3For objectives, state reporting in the form required by law or the standards, in line with the findings, then qualification or disclaimer where assurance cannot be obtained, then observations and suggestions where regulations require. Add any other objectives you know from your study material.
4For a scenario, decide whether sufficient appropriate evidence was obtained.
5If evidence is lacking, state that reasonable assurance cannot be obtained, so qualify. Disclaim only in extreme cases.
6Separate the roles: the auditor is not responsible for preparing the statements, designing internal control, selecting policies or making estimates. The auditor opines.
7End with a clear conclusion tied to the facts.

Quickest way: Evidence, Report, Qualify

When to use it: For MCQs and short theory answers on SCA 103 objectives.

Recall the chain: sufficient appropriate evidence, reasonable conclusions, report in the required form.
If reasonable assurance cannot be obtained, think qualify, then disclaim only in extreme cases.
Check who is responsible: the auditor is not responsible for preparing the statements, controls, policies or estimates. The auditor gives the opinion.
Pick the option that matches the standard's wording most closely.

Common mistakes in Overall Objectives of the Independent Cost Auditor (SCA 103)

Saying the auditor prepares the cost statements.
Students link cost audit with cost records work.
Fix: The auditor expresses an opinion. Management prepares and presents the statements and keeps internal control.
Disclaiming an opinion whenever evidence is missing.
Qualification and disclaimer look similar.
Fix: The standard says qualify, and disclaim only in extreme cases.
Claiming the auditor gives absolute assurance.
The word assurance sounds like a guarantee.
Fix: The objective is reasonable assurance, with audit risk reduced to an acceptably low level.
Treating observations and suggestions as always required.
Students overgeneralise.
Fix: The objective may extend to them where applicable regulations require it.
Confusing cost audit with a financial audit.
Both use the word audit.
Fix: Cost audit examines cost statements, cost records and related information. Use these terms.
Quoting para numbers wrongly.
Memorising numbers without the content.
Fix: Quote only paras you know, such as 2.2 for reporting and 4.7 for the definition. Otherwise state the rule in words.

Worked examples

Example 1

State the overall objectives of the cost auditor under SCA 103 relating to reporting and to the case where assurance cannot be obtained. (Short answer)

Show the solution

Start with the purpose: SCA 103 lays down the cost auditor's overall objectives and ensures audits of cost statements follow the Cost Auditing Standards.
Reporting: the auditor reports on the cost statements in the form required by law or by the Cost Auditing Standards, in accordance with the findings.
Assurance failure: where reasonable assurance cannot be obtained, the auditor qualifies the opinion.
Extreme cases: the auditor disclaims an opinion.
Add: the objective may extend to observations and suggestions where applicable regulations require.

Answer: The auditor reports on the cost statements in the required form according to the findings. If reasonable assurance cannot be obtained, the opinion is qualified, and in extreme cases an opinion is disclaimed. Observations and suggestions may be added where regulations require.

Example 2

A cost auditor finds that management has chosen the cost accounting policies and made the cost estimates used in the cost statements. The auditor feels responsible for them and wants to redesign the policies. Comment.

Show the solution

Recall the split of responsibility in the application guidance of SCA 103.
The auditor forms and expresses an opinion on the cost statements.
The auditor is not responsible for selecting and applying cost accounting policies or making reasonable cost estimates.
Nor is the auditor responsible for designing and maintaining internal control.
The auditor's job is to examine these and obtain sufficient appropriate evidence, and to check that the cost reporting framework is in line with the Companies Act and the Rules.

Answer: The auditor's view is wrong. Policies, estimates and internal control are management's responsibility. The auditor examines them, gathers evidence and expresses an opinion on the cost statements.

Exam tips

Write the objectives you are sure of as a short list: reporting in the required form, qualification or disclaimer, and observations and suggestions where regulations require.
In MCQs, watch the words qualify and disclaim. Qualify is the normal consequence, disclaim is extreme.
Use the standard's terms: cost statements, cost reporting framework, sufficient appropriate audit evidence.
In case scenarios, state who is responsible for what before giving the conclusion.
Quote para numbers only if you are sure. Wording matters more.

Practice questions from Cost Auditing and Assurance Standards

Overall Objectives of the Independent Cost Auditor (SCA 103) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Overall Objectives of the Independent Cost Auditor (SCA 103): frequently asked questions

What is the main objective of SCA 103?

It lays down the overall objectives of the cost auditor and ensures the audit of cost statements is conducted in accordance with the Cost Auditing Standards. The auditor reports on the cost statements according to the findings.

What does para 2.2 of SCA 103 say?

It says the auditor reports on the cost statements in the form required by law or by the Cost Auditing Standards, in accordance with the findings. The Objectives section also says that where reasonable assurance cannot be obtained, the opinion is qualified, and in extreme cases disclaimed.

Is the cost auditor responsible for preparing cost statements?

No. The auditor is responsible for forming and expressing an opinion. The auditor is not responsible for preparing and presenting the statements, designing internal control, selecting cost accounting policies or making cost estimates.

What is a cost audit under SCA 103?

It is an independent examination of cost statements, cost records and other related information of an entity, including a non-profit entity, to express an opinion on them.