- Definition of Cost Records:
- Defined under rule 2(e) of the Companies (Cost Records and Audit) Rules, 2014.
- Relate to the utilization of materials, labor, and other cost items in production or services.
- Companies Required to Maintain Cost Records:
- Specified class of companies with an overall turnover of Rs. 35 crore or more.
- Engagement in production of goods or provision of services as listed in Annexure A.
- Provisions Governing Cost Audit:
- Section 148 of The Companies Act, 2013, read with relevant rules and the Cost and Works Accountants Act, 1959.
- Cost Audit Defined:
- Verification of cost records, adherence to prescribed cost accounting procedures.
- Ensures relevance and accuracy of cost accounting practices.
- Companies Mandated for Cost Audit:
- Regulated and Non-regulated sectors as per turnover thresholds specified in Annexure A.
- Qualification of Cost Auditor:
- Only Cost Accountants eligible for appointment as Cost Auditors.
- Statutory auditors of the company cannot act as cost auditors to maintain impartiality.
- Appointment Timeline:
- Cost auditor to be appointed within 180 days from the start of the financial year.
- Procedure for Cost Auditor Appointment:
- Drafting notice of board meeting, obtaining engagement/consent letter, convening board meeting.
- Filing necessary e-Forms with the Registrar of Companies within 30 days of board meeting.
- Forms Required for Appointment:
- MGT-14 and CRA-2 to be filed within 30 days from the respective meetings.
- Reporting of Cost Audit:
- Submission of cost audit report to the Board of Directors.
- Furnishing of report along with explanations to the Central Government within 30 days.
- Penalty for Non-Compliance:
- Companies and officers in default liable for fines ranging from Rs. 25,000 to Rs. 5 lakh.
- Criminal liability for fraudulent actions by audit firms or partners.
- Annexure A – Specified Companies:
- List of companies required to maintain cost records based on turnover thresholds.
Conclusion:
Compliance with cost audit provisions is essential for companies falling within the specified turnover brackets to ensure accurate financial reporting and adherence to cost accounting principles. Understanding the requirements, appointment procedures, and penalty provisions is crucial for maintaining regulatory compliance and avoiding legal ramifications.
