Cost Audit

Legal Provisions
 Maintenance of
Cost Records
 Section 209 (1) (d) deals with
maintenance of cost
accounting records
compulsorily by companies
engaged in specified
industries.
Following records should be
maintained under Cost
accounting Records Rules:
1. Records of raw materials, components,
stores and spare parts.
2. Records for labour.
3. Records for overheads.
4. Records for utilities/ services.
5. Records of Fixed Assets.
6. Records for packing.
7. Records for research & Development.
Following records should be
maintained under Cost
accounting Records Rules:
8. Records for by-product.
9. Records for WIP & Finished Goods.
10. Records for Cost of Production.
11. Computation of variance.
12. Statistical Data.
13. Records for Inter-company transaction.
14. Records for depreciation, interest, packing
expenses etc.
 List of Industries/Products
require to maintain Cost
Accounting Records
Cement Bulk Drugs Textiles Telecommunication
Cycles Sugar Nylon Electricity
Tyres & Industrial Polyester Foot Wear
Tubes Alcohol
Caustic Motor Rayon Steel Plant
Sods Vehicles
Batteries Milk Food Aluminum Plantation Product
Electric Chemical Bearing Cosmetic
Lamps Industries
Audit of Cost Accounts U/s
233-B
1. Power to Order Audit
The Central Government derives the
power to order any company falling
under section 209 (1) (d) to get cost
account audited by a Cost Accountant.
A Cost Accountant should be a Cost
Accountant within the meaning of CWA
ACT,1949. CA may also carry out the
cost audit for a specified period if
sufficient Cost Accountant are not
available.
Audit of Cost Accounts U/s
233-B

2. Appointment
The Cost Auditor shall be appointed by
the board of directors of the company
with the prior approval of the Central
Government.
A written certificate shall be obtained by
the Board from the cost auditor
proposed to be appointed.
Audit of Cost Accounts U/s
233-B

3. Addition to financial Audit

Cost Audit is in addition to a financial Audit.

4. Powers and Duties

Cost Auditor shall have the same powers
and general duties as are applicable to
financial auditor of a company u/s 227(1).
Audit of Cost Accounts U/s
233-B

5. Disqualification
A financial auditor cannot be appointed as a
cost auditor of a same company.

All disqualification which are applicable to a

financial auditor are also applicable to a
cost auditor.
Audit of Cost Accounts U/s
233-B

6. Company to Assist
It shall be the duty of the company to give all
facilities and assistance to the cost
auditor in the conduct of cost
accounts/records.
Audit of Cost Accounts U/s
233-B

7. Information & Explanation

The company shall within 30 days of
receipt of cost audit report furnish to
the Central Government full Information
and Explanations on every qualification
contained in the said report.
Audit of Cost Accounts U/s
233-B

8. Further Explanation
The Central Government may, after
considering the report, call for any
further information or explanation from
the company.
Audit of Cost Accounts U/s
233-B

9. Necessary Action
The Central Government may take
necessary action on the report in
accordance with any law in force for the
time being.
Audit of Cost Accounts U/s
233-B

10. Report to Member

The Central Government may direct the
company to circulate the cost audit
report to its members, along with the
notice for the annual general meeting.
Audit of Cost Accounts U/s
233-B

11. Penalties and Punishment

The company shall be punished with
fine which may extend to Rs. 5,000 for
contravention of any provisions of
section 233B. Every officer who is in
default shall be punished with
imprisonment up to 3 years or a fine
up to Rs. 5,000 or with both.
Cost Audit Report Rules-2001

 These rules shall apply to every

company in respect of which an
audit of the cost accounting records
has been ordered by the Central
Government u/s 233B(1)
 Form of Report

1. Every Cost Auditor shall submit the report ( a

hard & soft copy) along with auditor’s
observation and suggestions, annexure and
pro-forma to the Central Government in the
prescribed form and at the same time forward a
copy of the report to the company.
 Form of Report

2. Every Cost Auditor shall also give

clarifications, if any, required by the
Central Government on the Cost
Audit Report submitted by him
within 30 days of the receipt of the
communication addressed to him
calling for such clarifications
 Form of Report

3. Every Cost Auditor shall also give

clarifications, if any, required by the
Central Government on the Cost Audit
Report submitted by him within 30
days of the receipt of the
communication addressed to him
calling for such clarifications.
 Form of Report

4. The electronic form shall be

authenticated by the authorised
signatories using digital signatures,
as defined under the Information
Technology Act, 2000.
 Form of Report

5. The forms prescribed in these

rules, when filed in physical form,
may be authenticated by
authorised signatory by affixing
his signature manually.
 Time limit
for submission of Report
 The Cost Auditor shall forward his report
to the Central Government and to the
concerned company within 180 days
from the close of the company’s
financial year to which the report
relates.
 Cost Accounting
Record
• Without prejudice to the powers and duties the Cost
Auditor shall have u/s 233B(1) of the Act, the company
and every officer thereof, including the persons
referred to in section 209 (6) of the Act, shall make
available to the Cost Auditor with in 135 days from the
close of the financial year of the company, such cost
accounting records, cost statements, other books and
documents, Annexure and Pro-forma to the Report,
duly completed, as would be required for conducting
the cost audit.
 Authentication of
annexure to the Cost
Auditor
• The Annexure and pro-forma prescribed
with the Cost Audit Report shall be
approved by the Board of Directors
before submitting the same to the Central
Government by the Cost Auditor and also
by the Company Secretary and at least
one Director on behalf of the company.
 Penalties

 If default is made by the Cost

Auditor in complying with the
provisions of rule 4 or rule 5, he shall
be punishable with fine, which may
extend to Rs. 5,000.
 Penalties
 If the company contravenes the provisions of rule 6 or
rule 7, the company and every officer thereof who is in
default, including the persons referred to in section
209(6) of the Act, shall, subject to the provisions of
section 233B of the Act, be punishable with fine which
may extend to Rs. 5,000 & where the contravention is
a continuing one, with a further fine which may extend
to Rs. 500 for every day after the first day during which
such contravention continues.
Any Questions ?