CENTRAL UNIVERSITY OF SOUTH BIHAR

SCHOOL OF LAW & GOVERNANCE

COMPANY LAW-II
TOPIC
Legislative Development In India On Cost Audit & Social Audit:
Recent Development

Submitted to: Dr. Pradip Kumar Das

Assistant Professor

SubmittedBy:-
RAJEEV RAJ
B.A. LL.B. (Hons.) 8th Semester
Enrolment - CUSB1513125033

1
 ACKNOWLEDGEMENT

During the course of writing this project, I have received the help, encouragement from my
teacher, colleagues, friends and others. I am very thankful to all of them.

I am practically very thankful to my “COMPANY LAW” Assistant Professor, Dr. Pradeep

Kumar Das for encouragement and support that he provided during the preparation of the
project.

I am deeply indebted to the eminent legal experts and company law experts and other
scholars of repute whose valuable work has been highly useful in writing this project.

RAJEEV RAJ

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RESEARCH TITLE- Analysing the recent developments: A critical Analysis of the legislative

Development in India on Cost Audit & Social audit.

RESEARCH METHODOLOGY

The research is based on legislative developments in India on cost audit & social audit:
Recent development. Basically the data which has been collected for the research purpose is
particularly of qualitative nature. It has been collected from various sites, magazines and
newspaper articles. So it was very difficult to use some typical statistical tools and
techniques. So basically the analysis has been done through editing and coding
the information.

RESEARCH OBJECTIVE

 Understanding the legal provisions regarding cost audit & social audit.
 Compare rules and regulations with practical
 Understanding the attitude of companies regarding cost audit & social audit.
 Evaluate the awareness level of the companies.
 Evaluate rules and regulation regarding cost audit & social audit is suitable
accordance with current industrial requirements.
 Evaluate whether cost audit objectives accomplish successfully.
 Examining the main problem regarding cost audit & social audit

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RESEARCH QUESTIONS

1. Do you think cost audit & social audit need to impose mandatory for every
organization?
2. Do you think cost audit & social audit as only approach for reducing cost in an
organization?
3. Cost auditor should be independent. Will it be beneficial for every organization?

HYPOTHESIS

This project deals with cost audit and social audit. The company is going through profit because
of good utilisation of cost control method and due to cost audit moreover Social Audit in business
intends to examine an organization’s efforts in enriching the general welfare of the whole community
and the whole society.

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 CONTENT

SERIAL NUMBER TOPIC PAGE NUMBER

1. Introduction to cost audit 6-7

2. Origin of cost audit 7-8

3. Relevance of cost audit 8-10

4. Feature of cost audit 10

5. Objective of cost audit 11

6. Scope of cost audit 11-13

7. Appointment of cost auditor 13-15

8. Social audit 16

9. Scope and objective of social 16-17

audit
10. C.S.R. and Corporate and 18
accountability
11. Difficulties in social audit 19

12. Conclusion 20

13. Bibliography 21

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Introduction to Cost audit:

Cost audit is the audit of cost records. According to Chartered Institute of Management Accountants1,
London, cost audit is “the verification of the correctness of cost accounts and of the adherence to the
cost accounting plan”. In other words, cost audit is the verification of the cost of production of any
product, service or activity on the basis of accounts maintained by an enterprise in accordance with
the accepted principles of cost accounting. This definition of Cost Audit is relevant to the voluntary
Cost Audit without any statutory backing.

The Institute of Cost and Works Accountants of India on the other hand, defines cost audit as “a
system of audit introduced by the Government of India for the review, examination and appraisal of
the cost accounting records and attendant information, required to be maintained by specified
industries.” Thus the concept and scope of cost audit as defined in India is more specific and lays
emphasis on the evaluation of the efficiency of operations and the propriety of management actions
as introduced by the Government of India for specified industries. In this sense, cost audit in India
appears to be synonymous with efficiency audit mainly as a guide for management policy and
decision making besides being a barometer of actual performance.

The justification for mandatory Cost Accounting and Cost Audit provisions has been very well
explained in the Parliamentary Debate that led to the adoption of Companies Amendment Bill 2 ,
incorporating the provisions related to Sections 209 (1) (d) and 233B. Smt. Tara Ramchandra Sathe3
stated during the relevant Rajya Sabha Debate as under: What is Cost Audit? The Cost Audit is quite
different from the Financial Audit. It is to see whether the labour is efficient or not, whether the
industry has provided efficient labour or the labour which is required by that industry is less than
what is required, whether every material and every part of the machinery is used to the optimum,
whether any material is wasted, etc. As we all know, we are short of material, there is so much
material which is imported, when we are short of foreign exchange. In these circumstances, it is very
essential that there should be cost audit. In fact, it should be introduced in almost all the industries,
but the Government is trying this in certain cases only. So by this we will know whether there is a

1
CIMA, Concepts of Cost Audit, LEGAL SERVICES INDIA, (April 11, 2019, 10.00 A.M.)
http://www.legalservicesindia.com/cost_audit/htm.
2
Companies Amendment Bill, 1965, Act of Parliament (1965).
3
Ibid.

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proper utilization of the material or not. It is very essential, no doubt, and in factories and industries,
everywhere, this cost audit should be emphasized4.

Thus Cost Audit in India refers to the statutory Cost Audit of the selected companies covered under
the relevant provisions of the Companies Act, 1956. These requirements are mandatory and non-
compliance may invite penal provisions also.

Origin of Cost Audit:

Methods and techniques of ‘cost accounting’ and audit of ‘cost accounts’ in India can be traced back
to the year5 when large number of firms were given contracts by the Government of India on “cost
plus” basis and the Government started verifying and investigating the cost structure of such firms.

Need for large scale industrialization immediately after the independence required lot of concessions
and facilities to the entrepreneurs to establish industrial undertakings for production of common
man’s goods and essential services. Power, electricity and other inputs were provided at concessional
rates. Liberal finances were provided by the banks and other financial institutions. Land was made
available with all infrastructures. Transport facilities were also provided. However, there were only
very few industrial groups and it was a suppliers market in almost all the areas. There were many
bureaucratic hurdles in opening of new industries along with need for licenses and permits. Imports
were mostly prohibitive due to scarce foreign exchange and very high rate of custom duties on
imports. Therefore, consumers had very few choices and there were often complaints of excessive
pricing, which encouraged smuggling and other malpractices like under invoicing of imports to save
custom duties or over-invoicing of exports to get higher export benefits. The high prices were often
justified on the basis of higher indigenous cost of production. Thus the government felt the need for
price controls.

The investigations of Dalmia-Jain group of companies further brought out the need for more effective
audit. Thus “cost audit” gained recognition, both as an effective tool of cost-control in the hands of
management to control costs and produce at competitive rates and also as a monitoring mechanism
on behalf of other stakeholders including the consumer and the government. Cost Audit as a tool in
the hands of Management enabled them to identify the inefficiencies. It acts as a review of the

4
Proceedings of Rajya Sabha, 14th September, 1965: Columns 3944 and 3945.
5
Supra note, 3.

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activities of the various cost centres of the company and points out the avoidable wastages and losses.
The expertise and experience of the Cost Auditor helps them in knowing the exact areas having the
scope for cost control and cost reduction through inter-firm comparison with standard industrial
norms or peers in the industry. Government in turn ensured that the consumers are able to obtain their
requirements at a fair price and do not pay for the inefficiency of manufacturers.

Consequently, the Companies Act, 1956 was amended in the year 1965 to incorporate the provisions
relating to the maintenance of Cost Accounting Records and Cost Audit. These amendments were
made on the basis of recommendations from the Vivian Bose Commission, Dutta Commission and
the Shastry Committee.

Relevance of Cost Audit:

In the initial years, Cost Audit was taken merely as a tool for ‘price control mechanism’ for consumer
and infrastructure industries in India. The main objective of Cost Audit when statutorily introduced
under the provisions of Companies Act6, was to meet the Government requirements for regulating
the price mechanism in core industries like Cement, Sugar, Textiles and consumer industries like
Vanaspati, Formulations and Automobiles. The objective was to provide an authentic data to the
Government to regulate the demand and supply in the country through a price control mechanism.

The liberalization of the economy and consequential globalization has further enhanced the need for
authentic data. Therefore, the Cost Audit Report Rules have been amended from time to time to
ensure that the comprehensive authentic information is available in the format required. The basic
structure of the cost audit was laid down by the Cost Audit (Report) Rules, 1968 as prescribed under
the relevant provisions of Companies Act, 1956. They were superseded by the Cost Audit (Report)
Rules 1996, which were notified vide GSR 511(E) dated 5.1.1996. These Cost Audit (Report) Rules
1996 were also subsequently superseded by the Cost Audit Report Rules 2001, which were notified
vide GSR 294(E) dated 27.12.2001.

The necessity for and utility of properly documented information is more keenly felt now than ever
before. In most parts of the world, free competition co-exists with appropriate rules and regulations
to ensure free trade and absence of unfair practices. Therefore, in the present competitive scenario of
globalization, the Cost Audit Reports have assumed greater importance and significance being the

6
The Companies Act, 1956, Act of Parliament (1956).

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important source of reliable and authentic feedback to the government and its various departments
and agencies. It may be clarified here that the Cost Audit Reports do not only contain merely the cost
details, but are full of information related to all aspects of business organization which, if harnessed
properly can provide a comprehensive analysis about the company, the industry and the economy as
a whole. The Cost Audit Report serves as an effective tool of information in the hands of directors
on the Board ensuring good corporate governance.

In an environment of increasing foreign trade under WTO7 regime, dumping of products at very low
prices have become a serious issue in the international trade. This dumping of products, often well
below the cost price, if not properly countered may harm the indigenous industry. The cost records
and the cost audit report play a very critical role in defence of local industry to substantiate their fair
approach against any allegation of dumping. Similarly, when dumping allegations are levied against
the exports by the Indian companies to any foreign company, the Cost Audit Reports can provide the
valuable feedback to protect the interest of Indian companies.

The practice of selling below cost to ward off competition attracts the penal provisions of the
Competition Law. This necessitates the availability of authentic cost details of the products marketed
by industry and business houses to determine normative pricing or fair pricing. In fact, Competition
Law to be effective against any anti-competition activity presupposes the availability of reliable and
authentic cost data.

The transfer pricing issue has gained considerable momentum in international scenario. Cost Audit
Report Rules8 include the provisions to take care of this aspect in right perspective. The fundamentals
of transfer pricing are based on “arm’s length” throughout the world. The cost details form the very
basis of determining arm’s length transfer pricing policy of any country. An audited cost records and
the resultant Cost Audit Report becomes a major source of information, which can be effectively
used by both Indirect and Direct Tax Authorities. The Central Excise Authorities also use Cost Audit
Reports for verifying claim of the companies relating to ex-factory prices of the excisable goods
especially in the case of inter-unit transfers.

The Tariff Commission relies on authenticity of the cost audit reports and makes use of these reports
extensively in fixation of tariffs for the products covered under Cost Accounting Records Rules. The
Cost Audit Reports are also made use of by the respective administrative Ministries of Government

7
Foreign trade under World trade organization, WIKI, (April 11, 2019, 10.00 A.M.),
http://www/wikipedia.org/foreign_trade.htm.
8
Cost Audit Report Rules, 2001.

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of India for fixation of administrative prices and working out subsidy, etc. Fertilizer Industry
Coordination Committee9 under the Department of Fertilizers and the Directorate of Sugar under
Ministry of Food use Cost Audit Reports extensively in taking decision with respect to the Industries
under their purview. The Cost Audit Reports relating to Bulk Drugs and Formulations are used by
the National Pharmaceutical Pricing Authority for fixation of prices of various drugs and
formulations covered under the Drug Price Control Order10.

Features of Cost Audit:

The cost audit of the companies under the relevant provisions of the Companies Act, 1956 has the
following features:

 Assessing compliance of the relevant cost accounting records rules as applicable to the
product under review.

 Study of the costing system to assess whether it is adequate for the cost ascertainment of the
product under review.

 Evaluation of the operating and other efficiencies of the organization under audit with special
reference to the product under review; to ensure the submission of necessary details required
under the Cost Audit Report Rules, 2001 as amended from time to time.

 Submission of Cost Audit Report in the format prescribed.

Since cost audit is carried out under the various provisions of the Companies Act, 1956, a thorough
and comprehensive knowledge of the Indian Companies Act including various rules prescribed
thereunder and the circulars issued by the Ministry of Corporate Affairs is essential for conducting
an effective Cost Audit.

9
National Pharmaceutical Pricing Authority, FICC.
10
Drug Price Control Order, 1995.

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Objectives of Cost Audit:

Cost Audit has both general and social objectives. The general objectives can be described
to include the following:-

 Verification of cost accounts with a view to ascertaining that these have been
properly maintained and compiled according to the cost accounting system
followed by the enterprise.
 Ensuring that the prescribed procedures of cost accounting records rules are
duly adhered to.
 Verification of the cost of each “cost unit” and “cost center” to ensure that
these have been properly ascertained.
 Facilitating the fixation of prices of goods and services.
 Periodical reconciliation between cost accounts and financial accounts.
 Ensuring optimum utilization of human, physical and financial resources of
the enterprise.
 Detection and correction of abnormal loss of material and time. Inculcation
of cost consciousness.
 Advising management, on the basis of inter-firm comparison of cost records,
as regards the areas where performance calls for improvement.
 Promoting corporate governance through various operational disclosures to
the directors.

Scope of Cost Audit

Section 227(2) of the Companies Act11, requires the auditor of a company to state whether
the accounts in his opinion give a true and fair view of the state of the company’s affairs in
the case of the balance sheet and of the profit or loss for its financial year in the case of the
profit and loss account. Therefore, statutory financial audit of a company conducted by the
Chartered Accountant is an essential annual feature of all the companies registered under the
provisions of Companies Act, 1956. The Board of Directors of every company has a statutory

11
The Company Act, 1956, Act of parliament (1956).

11
obligation to place its audited annual accounts viz. Profit and Loss Account and Balance
Sheet before the shareholders in the Annual General Meeting, duly certified by a Chartered
Accountant appointed as an ‘Auditor’ under the provisions of Section 224 of the Act 12 .
However, there is no corresponding statutory provision for compulsory annual audit of cost
accounts of a company covered under Section 209(1) (d) of the Companies Act or under
relevant Cost Accounting Records Rules.

One of the pre-requisites of cost audit is the maintenance of cost accounting records by the
Company. Section 209(1) (d) makes it obligatory for a company pertaining to any class of
companies engaged in production, processing, manufacturing or mining to maintain such
particulars relating to utilization of material or labour or to other items of cost as may be
prescribed, if such class of companies is required by the Central Government to include such
particulars in the books of accounts. The rules provide that only those companies, which are
covered under Section 209(1) (d) of the Companies Act and a specific Cost Audit Order has
been issued with reference to a specified product by the Cost Audit Branch of Ministry of
Corporate Affairs are required to get their cost accounts audited with respect to that specific
product. Moreover, Cost Audit Report is not placed before the shareholders during the
Annual General Meeting.

The Central Government prescribes the separate cost accounting records for each class of
companies i.e. companies manufacturing a particular class of product or activity13 these are
called the Cost Accounting Records Rules for that specific industry or class of companies.
When cost accounting records/formats are prescribed, they apply to those companies
engaged in the manufacture of a particular product or activity. In the case of companies
engaged in production or processing of other products or activities also in addition to
production, processing or manufacture of the specified product, the records will have to be
maintained only for the manufacture of particular product for which rules are issued and not
necessary for other products. A company manufacturing bulk drugs, formulation and
watches need not necessarily maintain cost accounting records in respect of watch making

12
Ibid.
13
Separate Cost Accounting, WIKIPEDIA, See also, cement, steel, chemicals and electricity etc.

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activity if no statutory rules are prescribed for watch making activity. The detailed provisions
relating to the manner of prescription of cost accounting records, selection of the product,
the contents of the rules and the list of products/ industries covered by the statutory rules
under Section 209(1) (d) of the Companies Act. Thus Cost Audit under section 233 B does
not embrace a particular activity of the company unless a separate cost accounting record
rule is already notified for that particular activity under Section 209(1) (d) detailing the
nature of cost accounting records to be maintained.

The legal provisions relating to statutory cost audit are applicable only to companies
registered under the provisions of Companies Act, 1956. Therefore, cost audit is not
applicable to other enterprises like partnership, cooperative societies, etc. The Cost Audit is
conducted by a Cost Accountant in practice within the meaning of the Cost and Works
Accountants Act, 1959. The cost auditor is appointed by the Board of Directors of the
company with the previous approval of the Central Government. The report of cost auditor
is to rendered to the Central Government with a copy to the Company

Appointment of Cost Auditor

(a) Procedure
The cost auditor is to be appointed by the Board of Directors on the recommendation of the
Audit Committee, where the company is required to have an Audit Committee. The cost
auditor proposed to be appointed is required to give a letter of consent to the Board of
Directors 14. The company shall inform the cost auditor concerned of his or its appointment
as such and file a notice of such appointment with the Central Government within a period
of thirty days of the Board meeting in which such appointment is made or within a period of
one hundred and eighty days of the commencement of the financial year, whichever is earlier,
through electronic mode in form CRA-2 along with the fee as specified in Companies15.

Any casual vacancy in the office of a cost auditor, whether due to resignation, death or

14
See Also, Appendix-2 for specimen consent letter.
15
Registration Offices and Fee Rules 2014.

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removal, shall be filled by the Board of Directors within thirty days of occurrence of such
vacancy and the company shall inform the Central Government in Form CRA-2 within thirty
days of such appointment of cost auditor.16

(b) Who can be appointed cost auditor?

Only a Cost Accountant, as defined under section 2(28) of the Companies Act, 2013, can be
appointed as a cost auditor.

Clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959
defines “Cost Accountant”. It means a Cost practice under sub-section (1) of section 6 of the
Cost and Works Accountants Act, 1959 and is in whole-time practice. Cost Accountant
includes a Firm of Cost Accountants and a LLP of cost accountants.

(c) Eligibility criteria for appointment as a cost auditor

Eligibility Criteria under Section 141 of the Companies Act, 2013 read with Rule 10 of the
Companies (Audit and Auditors) Rules, 2014 and Section 14817.
The following persons are not eligible for appointment as a cost auditor:

a) A body corporate. However, a Limited Liability partnership registered under the Limited
Liability Partnership Act, 2008 can be appointed. [Section 141(3)(a)].

b) An officer or employee of the company. [Section 141(3)(b)].

c) A person who is a partner, or who is in the employment, of an officer or employee of the

company. [Section 141(3)(c)].

d) A person who, or his relative or partner is holding any security of or interest in the
company or any of its subsidiary or of its holding or associate company or a subsidiary

16
See Also, Copy of specimen Board Resolution at Appendix-4.
17
The Companies Act, 2013, Act of parliament, (2013).

14
 of such holding company. [Section 141(3)(d)(i)].

e) Relatives of any partner of the firm holding any security of or interest in the company of
face value exceeding Rs. 1 lakh. [Section 141(3)(d)(i) and Rule 10(1)18.

Remuneration of the Cost Auditor:

For the purpose of sub-section (3) of section 148-

A) In the case of companies which are required to constitute an audit committee-

(i) the Board shall appoint an individual, who is a cost accountant in practice, or a
firm of cost accountants in practice, as cost auditor on the recommendations of the
Audit committee, which shall also recommend remuneration for such cost auditor;

(ii) the remuneration recommended by the Audit Committee under shall be considered
and approved by the Board of Directors and ratified subsequently by the
shareholders;

B) In the case of other companies which are not required to constitute an audit committee,
the Board shall appoint an individual who is a cost accountant in practice or a firm of
cost accountants in practice as cost auditor and the remuneration of such cost auditor
shall be ratified by shareholders subsequently.

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Companies (Audit and Auditors) Rule, 2014.

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SOCIAL AUDIT

The term ‘social audit’ may be interpreted in several ways. As far as common understanding goes, it
is an essential assessment of how well a company has discharged its social obligations. However
experts see it as a systematic and comprehensive evaluation of an organization’s ‘social performance’
which is interpreted as organizational efforts in enriching the general welfare of the whole community
and the whole society.
The need for social audit arises because of various reasons. In order to reach the objective of enriching
economic wealth for the shareholders, the firm do it at the cost of social and environmental disorder.
And since many would not take into account the social costs of such negative implications, their
prices do not reflect the real cost. The organizations do it more because of competitive reasons.
However if the larger interest of society is to be preserved, there has to be some consideration for
social good.
The company is expected to behave and function as a socially responsible member of the society like
any other individual. It cannot shun moral values nor can it ignore actual compulsions. There is a
need for some form of accountability on part of the management which is not only limited to
shareholder alone. In modern times, the objective of business has to be the proper utilization of
resources for the benefit of others. A profit may still be a necessary part of the total picture but it
should not be the only purpose. The company must accept its obligation to be socially responsible
and to work for the larger benefit of the community. Society expects businesses to share the fruits of
progress and growth. Moreover, the social concern by the organization proves to be an asset for them
in the long run especially under environmental distress because of the goodwill and the positive image
earned all through these years.

SCOPE AND OBJECTIVES

Social audit tries to make the traditional economic and technical values as two subsystems within the
larger social system. Social audit primarily tries to cover the following areas:

i.) Ethical Issues: They offer a basis for determining what is right and what is wrong in terms of a
given situation. Ethics is best understood when we cite examples relating to unethical conduct. Few
such examples can be price discrimination, unfair trade practices, cheating customers, pirating
employees’ ideas, leaving the job without observing job contract.

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ii) Equal opportunity: A second relevant social issue which comes under social audit is the equity
of treatment in employment and a fair justice system in the organization. Employment decisions in
an organization should be based on merit and ability and not on the basis of arbitrary quotas based
on gender, race or religion.

iii) Quality of Work Life: Besides demands for safe, healthy and human work environment people
are seeking greater meaning in their lives. Greater responsibility, growth, freedom and flexibility,
fair reward system are few things which employees have preference for. There is also a growing
demand for employee assistance programmes keeping in mind the present day stressful situations
they are exposed to.

iv) Consumerism: Business has a special obligation towards the consumer as the business exists to
serve and satisfy the needs of the consumers. It is the principal duty of business to make available to
the consumer items of daily needs in the right quantity at a right time, price and of the right quality.
However many Indian products are not safe at all and the consumers suffer at hands of corrupt, and
dishonest corporate houses.

v) Environmental Protection: Growing water, air and environmental pollution by various industries
in recent times has led to a public outcry demanding ‘environmental protection’ at any cost.

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CSR AND CORPORATE ACCOUNTABILITY

One of the most significant developments in the field of corporate social responsibility (CSR) over
the past few years has been the growth in public expectations that companies not only make
commitments to CSR, but also develop systems to manage, implement and systematically assess and
report on progress relative to those commitments. Corporate accountability encompasses the systems
a company establishes to develop policies, indicators, targets, and processes to manage the full range
of its activities. The scope of operations for which companies are expected to be accountable has
increased dramatically in recent years to include not only companies’ own performance but also that
of business partners and other actors throughout the company’s value chain. The mechanism a
company uses to demonstrate accountability are varied and inevitably need to change and grow as a
company evolves, but effective systems for increasing accountability generally allow a company to
be inclusive, responsive, and engaged with its stakeholders. Corporate accountability today spans
emerging CSR issues like business ethics, diversity, marketplace behaviour, governance, human
rights, and labour rights as well as more and more traditional areas of financial and environmental
performance. Interest in the inter-relationships between issues will also increase the complexity of
the corporate accountability debate; in many areas of the world, social issues are now in ascendance,
and these qualitative, complex issues are likely to be the ones against which companies find it hardest
to measure and verify performance.
Effective and accountable management systems help companies shape cultures that support and
reward CSR performance at all levels. As part of this effort, many companies are working to increase
accountability for CSR performance at the board level. This can lead to changes in who serves on the
board, how directors handle social and environmental issues, and how the board manages itself and
fulfils its responsibilities to investors and other stakeholders. Companies are also seeking to build
accountability for CSR performance at the senior management level, in some cases by creating a
dedicated position responsible for broad oversight of a company’s CSR activities. Finally, many
companies are working to integrate accountability for CSR performance into actions ranging from
long-term planning to everyday decision making, including rethinking processes for designing
products and services and changing practices used to hire, retain, reward, and promote employees.
Demand for increased corporate accountability today comes from all sectors. Evidence of this is
found in the increasing number of sustainability-related market indices and by external demands for
certification or labelling of certain products. Underpinning this demand for increased corporate
accountability is the expectation that companies can and should be more transparent, which
essentially means measuring, reporting on, and continuously improving social, environmental, and

18
economic performance. These increased demands are in part a result of recent events that have
contributed to erosion in the trust extended to companies. Stakeholders now expect companies to
provide access to information on impact of their operations, to engage stakeholders in meaningful
dialogue, and to be responsive to particular concerns unearthed in the dialogue process. To increase
the credibility of what is disclosed, leadership companies are also investigating carefully the value of
various types of assurance that might support their reporting efforts.

Difficulties in Social Audit

Social audit presents numerous problems; its scope cannot be determined precisely. If we go for
listing all activities undertaken by an organization, say in an accounting year it may be difficult to
find out which activities are to be treated as ‘social’ and which not. After all most of the activities of
a company may have some sort of social relevance somewhere or the other. To avoid this if we take
only those activities that have tangible social advantage, the ‘scope of social audit’ is severely
constrained. The requirements of various groups such as employees, customers, shareholders,
general public, government, etc. may not be accurately and readily convertible into ‘social rhetoric’
always. Another serious problem as explained previously is with regard to the ‘determination of
yardsticks’ for measuring the cost and accomplishment of activities shown in the social audit.

19
Conclusion:
The company is following all the required cost accounting sanders. They follow all the procedure need
to conduct cost audit. The company is going through profit because of good utilisation of cost control
method and due to cost audit.

Social Audit in business intends to examine an organization’s efforts in enriching the general welfare
of the whole community and the whole society. In modern times, the objective of business is to provide
benefits to others and the society expects businesses to share the fruits of progress and growth.
Corporate accountability.

Corporate Social Responsibility

encompasses the systems which a company establishes in order to develop policies, indicators, targets
and processes to manage the full range of its activities towards society. Demand for increased corporate
accountability today comes from all sectors and various types of social audit system is being developed
in order to take such accounts. Few key developments enabled by technology and information
revolution has broadened the scope for such an audit to be made within organizations and shared

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Bibliography:

BOOKS

 “Singh Avtar”, Company Law, Eastern Book Company, 2008

 “Tripathi S. C.”, Modern Company Law, Central Law Publications, 2006

WEBSITES

 http://www.wikipedia.org
 http://www.indiankanoon.com
 http://www.manupatra.com
 http://www.scconline.com
 http://www.advocatekhoj.com
 http://www.legalservisesindia.com

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