The Cost Audit
Chapter Thirty-Six
Syllabus topic none, this is an appendix
Pages 96 to 98 of 98
In one line
Section 148 empowers the Central Government to require prescribed classes of company to keep cost records and to have them audited by a cost accountant.
The two powers
Sub-section (1): cost records.
Notwithstanding anything contained in this Chapter, the Central Government may, by order, in respect of such class of companies engaged in the production of such goods or providing such services as may be prescribed, direct that particulars relating to the utilisation of material or labour or to other items of cost as may be prescribed shall also be included in the books of account kept by that class of companies.
And the proviso: before making such an order for a class of company regulated under a special Act, the Government shall consult the regulatory body constituted under that Act.
Sub-section (2): cost audit.
If the Central Government is of the opinion that it is necessary to do so, it may, by order, direct that the audit of cost records of a class of companies covered by sub-section (1), and which have a net worth or a turnover of such amount as may be prescribed, shall be conducted in the manner specified in the order.
| Two thresholds | |
|---|---|
| First | The company must be in a prescribed class, by the goods it produces or the services it provides |
| Second | It must exceed a prescribed net worth or turnover |
Both must be satisfied. A company in a covered industry below the size threshold keeps cost records and is not cost audited.
Who conducts it: sub-section (3)
The audit shall be conducted by a cost accountant, and:
| Appointed by | The Board |
| Who may not do it | The company's statutory auditor appointed under section 139 shall not be appointed for conducting the cost audit |
| Qualifications and disqualifications | The provisions of section 141(3) and (4) and section 143(14) apply, so far as applicable, to a cost auditor |
The prohibition in the middle row is the point of the whole section for an examination. The financial auditor and the cost auditor must be different persons, for the same reason section 144 forbids the auditor to keep the books: nobody audits his own work.
What follows the audit: sub-sections (5) to (8)
| (5) | The cost auditor submits his report to the Board, and the company furnishes it to the Central Government with the full information and explanation on every reservation or qualification, within thirty days |
| (6) | Where the Government calls for further information, the company furnishes it within the time specified |
| (7) | Where the Government orders a cost audit, the company gives all assistance to the cost auditor |
| (8) | Punishment: the company and its officers under section 147(1), and the cost auditor under section 147(2) to (4), so the same penalties as a statutory auditor |
The rest of this chapter
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The rest of this subject
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