A cost audit involves several steps: 1. Planning: Defining the scope and objectives of the audit. 2. Data Collection: Gathering cost records, financial statements, and relevant documents. 3. Verification and Analysis: Cross-checking data for accuracy and analyzing cost components. 4. Reporting: Preparing an audit report highlighting findings, discrepancies, and recommendations. 5. Follow-up: Ensuring that recommended actions are implemented and improvements are made.