ROLE OF COST AUDIT AND COST AUDITOR
Government needs authentic and reliable data of cost for various purposes like price fixation of controlled commodities. The information is also useful in various decisions like fixation of duty drawback, export incentives; amount of excise duty the product can bear, deciding whether special incentives are required to a particular industry etc.
MAINTENANCE OF COST RECORDS:
Realizing the importance of proper cost record and control, section 148(1) provides that Central Government can direct that particulars relating to the utilization of material or labour or to other item of cost as may be prescribed shall also be included in the books of accounts kept by that class of Companies.
Who can be appointed as Cost Auditor:
- A Cost Accountant in practice or a firm of Cost Accountants can be appointed as a Cost Auditor.
- A Cost Accountant holding certificate of practice on part time basis is not entitled to conduct Cost Audit. Thus, only a Cost Accountant in whole-time practice can conduct Cost Audit.
Who can’t be appointed as Cost Auditor:
- Statutory Auditor appointed under Section 139 of the Act can’t be appointed as Cost Auditor of the Company.
Process for appointment of Cost Auditor:
- If Company has Audit Committee: Appointment and remuneration will be recommended by Audit Committee and approved by Board.
- If Company doesn’t have Audit Committee:If there is not audit committee, appointment and remuneration fixation will be done by Board. Later, this remuneration shall be ratified by Shareholders.
Information for appointment of Cost Auditor:
- Information to Cost Auditor: Every Company which requires to appoint of Cost Auditor shall inform the Cost auditor of his appointment within 30 days of Board Meeting in which resolution for appointment has been passed.
- Information to ROC: Company will file form CRA-2 with ROC:
- Within 30 days of passing of Resolution in Board Meeting, OR
- Within 180 days of the commencement of financial year.
Whichever is earlier.
Appointment of Cost Auditor in case of Casual Vacancy:
- Any Casual Vacancy in the office of a Cost Auditor whether due to resignation, death or removal, shall be filed by the Board of Directors within 30 days of such Vacancy,.
- Company will file form CRA-2 with ROC within said 30 days
Period within which appointment shall be made-Rule 6(1)
The concerned Companies shall appoint the Cost Auditor within 180 days of the commencement of every financial year.
Limit on the number of Cost Auditor:
Limit on number of audit per person, as are applicable to Statutory Auditors are applicable to Cost Auditors.
Qualifications, Rights, Duties and obligations of Cost Auditor:
The qualification, disqualification, rights, duties and obligations of Cost Auditor/firm of Cost Auditor are same as applicable to Statutory Auditors.
- The auditor conducting the Cost Audit shall comply with the Cost Auditing Standards
Applicability of Cost Audit:
Out of the companies required to maintain cost records as per Rule 3, the following companies shall have its records audited annually:
– Every Company having Annual Turnover from all its products and services in the immediately preceding financial year of Rs. 50 Crore or more and
– The aggregate Turnover of the individual product or products or service or services of Rs. 25 Crore or more.
– Every Company having Annual Turnover from all its products and services in the immediately preceding financial year of Rs. 100 Crore or more and
– The aggregate Turnover of the individual product or products or service or services of Rs. 35 Crore or more.
ROLE OF COST AUDIT AND COST AUDITOR
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