Cost Audit

A cost audit is the statutory verification of a company's cost records and cost accounting statements by an independent Cost Accountant, governed by Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014. It checks that the cost of production, processing, manufacturing or mining has been correctly captured and that the company complies with the cost accounting standards notified by the Institute of Cost Accountants of India (ICMAI). It is a cost-control and compliance exercise, distinct from the financial (statutory) audit under Section 143.

Who it applies to

Applicability turns on sector and turnover. The rules split covered industries into regulated sectors (such as electricity, petroleum, telecom, drugs, fertilisers, sugar) and non-regulated sectors. Cost audit is triggered when overall turnover crosses the prescribed limit and the individual product or service meets its own threshold.

Who conducts it

Only a Cost Accountant in practice (an ICMAI member), individual or firm, can be the cost auditor. The Board of Directors appoints the auditor within 180 days of the start of the financial year. A company's statutory financial auditor cannot also act as its cost auditor.

Forms and filing

• CRA-1 — format for maintaining cost records.
• CRA-2 — intimation of the cost auditor's appointment to the Central Government (MCA).
• CRA-3 — the cost audit report submitted by the auditor to the Board.
• CRA-4 — the company files the report with MCA in XBRL within 30 days of receiving CRA-3.