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Cost and Management Audit · Cost Auditing and Assurance Standards

Overview of Standards on Cost Auditing (SCA 101-110)

Updated 11 October 2026 · Fact-checked

Standards on Cost Auditing (SCA 101-110) are ten standards issued by the Institute of Cost Accountants of India that set how a cost auditor plans, performs and reports an audit of cost statements. Cost accounting standards (CAS) govern how costs are measured. SCAs govern how the audit is done. In answers, name the standard and apply it to the case.

Understand Overview of Standards on Cost Auditing (SCA 101-110)

A cost audit checks whether cost records and cost statements give a true and fair view of cost. The auditor needs a common rulebook for how to do this work. That rulebook is the Standards on Cost Auditing (SCA), issued by the Cost Auditing and Assurance Standards Board of the Institute of Cost Accountants of India.

The SCAs are numbered 101 to 110. The official text supplied for this page covers the ones listed below. The standards you meet most often in this syllabus are:

  • SCA 101: Planning an Audit of Cost Statements
  • SCA 102: Cost Audit Documentation
  • SCA 103: Overall Objectives of the Independent Cost Auditor and the Conduct of an Audit in Accordance with Standards on Cost Auditing
  • SCA 105: Agreeing the Terms of Cost Audit Engagements
  • SCA 106: Audit Sampling
  • SCA 107: Audit Evidence
  • SCA 108: Materiality in Planning and Performing a Cost Audit

SCA 104, 109 and 110 are part of the same 101-110 series. Learn their titles from your ICMAI study material, because this page does not state them.

The key objective is in SCA 103. The auditor obtains reasonable assurance that the cost statements as a whole are free from material misstatement, whether due to fraud or error. The auditor then expresses an opinion on whether the statements are prepared, in all material respects, in accordance with the applicable cost reporting framework, the Cost Accounting Standards (CAS) and Generally Accepted Cost Accounting Principles (GACAP), and give a true and fair view of the cost of a product, activity or service. For a cost audit under the Companies Act and its Rules, the opinion is on whether the cost statements represent a true and fair view of the cost of production, cost of sales and margin of the products covered.

Do not confuse the two families. CAS tell the company how to measure and present cost. SCA tell the auditor how to audit. SCA 105 links them: the cost accounting standards issued by the Institute are presumed to be acceptable for general purpose cost statements. If law or regulation adds requirements to CAS, the auditor checks for conflicts and agrees with management how to resolve them.

The SCAs also share common definitions. Two you should know: Audit Partner is the partner in the firm who is a member of the Institute, in full time practice, responsible for the audit, its performance and the report issued for the firm, with proper authority where required. Cost Records are books of account on utilisation of materials, labour and other items of cost, which help work out the true and fair cost of production or operations, cost of sales and margin for each product, service or activity, in compliance with the Cost Accounting Standards.

Key rules to remember

Objective of a cost audit (SCA 103)
Reasonable assurance that cost statements are free from material misstatement (fraud or error) → opinion on compliance with the cost reporting framework, CAS and GACAP, and a true and fair view of cost
Reasonable assurance is high but not absolute. Do not write 'absolute' or 'guarantee'.
CAS versus SCA
CAS = how cost is measured and presented by the entity; SCA = how the cost auditor plans, performs and reports the audit
Use this one-line split in every 'difference' question.
Cost Records (definition)
Books of account on utilisation of materials, labour and other items of cost, to compute true and fair cost of production or operations, cost of sales and margin per product, service or activity, in compliance with CAS
Same wording appears in SCA 105 and SCA 106.
Audit Partner (definition)
Partner who is a member of the Institute, in full time practice, responsible for the audit, its performance and the report issued on behalf of the firm
Same wording appears in SCA 101, 102, 103, 106, 107 and 108.
Fundamental ethical principles (SCA 103 guidance)
Independence, Integrity, Objectivity, Professional competence and due care, Confidentiality, Professional conduct
The auditor follows the Code of Ethics issued by the Institute.
Law conflicting with CAS (SCA 105)
Check conflicts → discuss with management → either (a) meet extra requirements through additional disclosures, or (b) amend the description of the framework in the cost statements
The auditor must determine whether conflicts exist before agreeing engagement terms.

How to solve Overview of Standards on Cost Auditing (SCA 101-110) questions

Use this method for any question on the SCAs, whether a definition, a difference or a case on an engagement.

  1. 1Identify what is asked: the purpose of the SCAs, a particular standard, or a comparison with CAS.
  2. 2Name the standard by number and title, for example SCA 105 for engagement terms or SCA 108 for materiality.
  3. 3State the rule in plain words, using the wording of the standard where you remember it.
  4. 4Link the rule to the facts in the case: who the auditor is, what the entity did, what the risk is.
  5. 5Check the ethics angle. Services such as maintaining cost records, designing cost systems or internal audit erode independence.
  6. 6Conclude with a clear position: what the auditor should do, or which standard applies.
  7. 7If comparing, close with the one-line split: CAS measure cost, SCA guide the audit.

Quickest way: Three-line SCA answer

When to use it: Use for 2-mark MCQs and short-note questions when time is tight.

  1. Match the keyword to the standard: planning = 101, documentation = 102, overall objectives = 103, engagement terms = 105, sampling = 106, evidence = 107, materiality = 108.
  2. Ask: is this about how cost is measured (CAS) or how the audit is done (SCA)?
  3. Pick the option that says reasonable assurance, not absolute assurance.

Common mistakes in Overview of Standards on Cost Auditing (SCA 101-110)

  • Treating SCA and CAS as the same thing.

    Both are issued by the Institute and both have numbered standards.

    Fix: Remember: CAS apply to the entity's cost measurement and presentation; SCA apply to the auditor's work.

  • Writing that a cost auditor gives absolute assurance.

    Students equate 'true and fair' with 'certain'.

    Fix: Write that the objective is reasonable assurance that the cost statements are free from material misstatement.

  • Mixing up standard numbers, such as SCA 105 and SCA 106.

    Titles are learnt as a list without a hook.

    Fix: Tie each number to one keyword: 101 planning, 102 documentation, 103 objectives, 105 terms, 106 sampling, 107 evidence, 108 materiality.

  • Saying a cost auditor may also maintain the cost records or design the cost system.

    Students think expertise makes it acceptable.

    Fix: State that such services, and internal audit, erode independence under the guidance to SCA 103.

  • Listing ethical principles incompletely.

    Students recall only independence and integrity.

    Fix: Learn all six: independence, integrity, objectivity, professional competence and due care, confidentiality, professional conduct.

  • Stating the content of SCA 104, 109 or 110 from memory without checking.

    Students guess titles to complete a list.

    Fix: Revise those titles from the ICMAI study material and write only what you know.

Worked examples

Example 1

Distinguish between Cost Accounting Standards and Standards on Cost Auditing. (4 marks)

Show the solution
  1. Issuer: both are issued by the Institute of Cost Accountants of India.
  2. Purpose of CAS: they set principles for measuring, assigning and presenting cost in cost records and statements.
  3. Purpose of SCA: they set requirements and guidance for the auditor on planning, evidence, documentation, materiality, sampling and reporting.
  4. Users: CAS are followed by the entity preparing cost statements. SCA are followed by the cost auditor.
  5. Link: under SCA 103 the auditor's opinion covers compliance with the cost reporting framework, CAS and GACAP and a true and fair view of cost. So the auditor uses SCA to test compliance with CAS.

Answer: CAS govern how cost is measured and presented by the entity. SCA govern how the cost auditor conducts the audit. The auditor applies SCA to judge whether the cost statements comply with CAS and give a true and fair view.

Example 2

A cost auditor of Bharat Metals Ltd. is asked by the management to also design and implement the company's cost system. Another statute adds disclosure requirements that differ from a CAS presentation. Advise the auditor. (6 marks)

Show the solution
  1. Independence: the guidance to SCA 103 says the cost auditor must comply with the Code of Ethics and be independent of the entity. It gives design and implementation of cost systems, maintenance of cost records and internal audit as services that erode independence.
  2. Conclusion on the first point: the auditor should decline to design and implement the cost system while acting as cost auditor.
  3. Conflict with law: under SCA 105 para 5.13, where CAS are supplemented by law or regulation, the auditor must determine whether conflicts exist between CAS and the added requirements.
  4. If conflicts exist, the auditor discusses the nature of the requirements with management.
  5. Agree whether (a) the additional requirements can be met through additional disclosures in the cost statements, or (b) the description of the applicable cost reporting framework in the cost statements can be amended.
  6. Record the agreement in the terms of the engagement.

Answer: The auditor should refuse the cost-system assignment because it erodes independence. For the disclosure conflict, the auditor should identify the conflict, discuss it with management, and agree either additional disclosures in the cost statements or an amended description of the cost reporting framework.

Exam tips

  • Expect MCQs asking which standard deals with a stated topic. Memorise the keyword-to-number link for 101, 102, 103, 105, 106, 107 and 108.
  • In 'distinguish' questions, write the CAS versus SCA split in the first line, then add two or three supporting points.
  • In case questions, check for independence threats first. Services listed in the SCA 103 guidance are favourite traps.
  • Use the phrase 'reasonable assurance' and 'true and fair view of cost' exactly. Examiners look for these.
  • There is no negative marking in Section A, so attempt every MCQ.

Practice questions from Cost Auditing and Assurance Standards

Overview of Standards on Cost Auditing (SCA 101-110) in other exams

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

Overview of Standards on Cost Auditing (SCA 101-110): frequently asked questions

What are the Standards on Cost Auditing (SCA 101-110)?

They are a series of standards issued by the Cost Auditing and Assurance Standards Board of the Institute of Cost Accountants of India. They guide the cost auditor in planning, performing and reporting an audit of cost statements.

What is the difference between cost auditing standards and cost accounting standards?

Cost accounting standards (CAS) deal with how an entity measures and presents cost. Standards on Cost Auditing (SCA) deal with how the cost auditor conducts the audit. The auditor uses SCA to check whether the statements follow CAS.

Which SCA deals with materiality, sampling and audit evidence?

SCA 108 deals with materiality in planning and performing a cost audit. SCA 106 deals with audit sampling and SCA 107 with audit evidence.

Does a cost auditor give absolute assurance?

No. SCA 103 sets the objective as reasonable assurance that the cost statements as a whole are free from material misstatement, whether due to fraud or error.