Background One of the potential benefits of surgical audit is improved hospital cost-efficiencies arising from lower resource consumption associated with fewer adverse events. The aim of this study was to estimate the potential cost-savings for Australian hospitals from improved surgical performance for colorectal surgery attributed to a surgical self-audit program. Methods We used a mathematical decision-model to investigate cost differences in usual practice versus surgical audit and synthesized published hospital cost data with epidemiological evidence of adverse surgical events in Australia and New Zealand. A systematic literature review was undertaken to assess post-operative outcomes from colorectal surgery and effectiveness of surgical audit. Results were subjected to both one-way and probabilistic sensitivity analyses to address uncertainty in model parameters. Results If surgical self-audit facilitated the reduction of adverse surgical events by half those currently reported for colorectal cancer surgery, the potential cost-savings to hospitals is AU$48,720 (95% CI: $18,080-$89,260) for each surgeon treating 20 cases per year. A smaller 25% reduction in adverse events produced cost-savings of AU$24,960 per surgeon (95%CI: $1,980-$62,980). Potential hospital savings for all operative colorectal cancer cases was estimated at AU$30.3 million each year. Conclusions Surgical self-audit has the potential to create substantial hospital cost-savings for colorectal cancer surgery in Australia when considering the widespread incidence of this disease. The study is limited by the current availability and quality of data estimates abstracted from the published literature. Further evidence on the effectiveness of self-audit is required to substantiate these findings.