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TMI BlogCOST AUDITX X X X Extracts X X X X X X X X Extracts X X X X ..... COST AUDIT - By: - Mr. M. GOVINDARAJAN - Accounting - Auditing - Dated:- 23-6-2011 - - Sec. 209 of the Companies Act, 1956 ( Act for brevity) deals with the books of account to be kept by the Company. Sec. 209(1)(d) provides that every company shall keep at its registered office proper books of accounts in the case of a company pertaining to any class of companies engaged in production, processing, manufacturing or mining activities, such particulars relating to utilization of material or labor or to other items of cost as may be prescribed, if such class of companies is required by the Central Government to include such particulars in that books of account. Sec.233B of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct deals with the audit of cost accounts in certain cases. This section provides where in the opinion of the Central Government it is necessary so to do in relation to any company required under Sec. 209(1)(d) to include in its books of account the particulars referred to therein, the Central Government may, by order, direct that an audit of the accounts of the company shall be conducted in such manner as may be specified in the order by an auditor who shall be a cost accountant within the meaning of the Cost and Works Accountants Act, 1959. The Cost Audit Branch, Ministry of Corporate Affairs, New Delhiissued an order vide No. F. No.52/26/CAB0-2010, dated 03.05.2011 by virtue of powers conferred on it under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 233B (1) of the Act. In that order it is directed that all companies to which any of the following rules apply: Cost Accounting Records (Cement) Rules, 1997; Cost Accounting Records (Tyres Tubes) Rules, 1967; Cost Accounting Records (Steel Plant) Rules, 1990; Cost Accounting Records (Steel Tubes and Pipes) Rules, 1984; Cost Accounting Records (Paper) Rules, 1975; Cost Accounting Records (Insecticides) Rules, 1993 And wherein- the aggregate value of the turnover made by the company from sale; or supply of all products or activities during the immediately preceding financial year exceeds hundred crores of rupees; or wherein the company s equity or debt securities are listed; or are in the process of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any stock exchange, whether inIndiaor outsideIndia shall get its cost accounting records in respect of its each of its financial year commencing on or after 01.04.2011 audited by a cost auditor who shall be either a cost accountant or a firm of cost accountants, holding valid certificate of practice under the provisions of Cost and Works Accountants Act, 1959. The Cost Audit Branch, Ministry of Corporate Affairs, New Delhiissued an order vide No. F.No.52/26/CAB-2010, dated 02.05.2011 by virtue of powers conferred on its by Section 233 B (1) of the Act. In that order it directed that all companies to which any of the following rules shall apply- Cost Accounting Records (Bulk Drugs) Rules, 1974; Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st Accounting Records (Formulations) Rules, 1988; Cost Accounting Records (Fertilizers) Rules, 1993; Cost Accounting Records (Sugar) Rules, 1997; Cost Accounting Records (Industrial Alcohol) Rules, 1997; Cost Accounting Records (Electricity Industry) Rules, 2001; Cost Accounting Records (Petroleum Industry) Rules, 2002; Cost Accounting Records (Telecommunications) Rules, 2002 and wherein- the aggregate value of net worth as on the last date of the immediately preceding financial year exceeds five crores of rupees; or wherein the aggregate value of the turnover made by the company from sale or supply of all products or activities during the immediately preceding financial year exceeds twenty crores of rupees; or whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein the company s equity or debt securities are listed or are in the process of listing of any stock exchange, whether inIndiaor outsideIndia shall gets its cost accounting records, in respect of each of its financial year commencing on or after the accountings holding valid certificate of practice under the provisions of Cost and Works Accountants Act, 1959. Every company to which the above said orders apply shall follow the revised procedure for appointment of cost auditor as laid down vide Ministry of Corporate Affairs General Circular No. 15/2011(52/5/CAB-2011), dated 11.04.2011. The revised procedure is as follows: The Audit Committee is the first point of reference for the appointment of cost au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors; The Audit Committee shall ensure that the cost auditor is free from any disqualifications as specified under Section 233B(5) read with Section 224 and Sec. 226(3) or Sec. 226(4) of the Companies Act, 1956; While a Cost Auditor shall have prime responsibility to ensure that he does not violate the limits specified under Section 224 (1-B) of the Act, the Audit Committee shall also be responsible for such compliance by cost auditor; The Audit Committee shall obtain a certificate from the cost auditor certifying his/its independence and arm s length relationship with the company; The company shall e-file its application in Form 23C within 90 days from the date of commencement of each financial year, along with the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escribed fee as per the Companies (Fees on Applications) Rules, 1999 as amended from time to time and other documents as per existing practice i.e, - Certified copy of the Board Resolution proposing appointment of the Cost Auditor; and Copy of the certificate obtained from the cost auditor regarding compliance of Sec. 22(1-B) of the Companies Act, 1956 . On filing the application, the same shall be deemed to be approved by the Central Government unless contrary is heard within 30 days from the date of filing such application; If within 30 days from the date of filing such application the Central Government directs the company to re-submit the said application along with such additional information or explanation, as may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be specified in that direction, the period of 30 days for deemed approval of the Central Government shall be counted from the date of re-submission by the company; After expiry of 30 days, as the case may be, the company shall issue formal letter of appointment to the Cost Auditor, as approved by the Board; Within 30 days of receipt of formal letter of appointment from the company, the Cost Auditor shall inform the Central Government in the prescribed form along with a copy of such appointment; The company shall disclose full particulars of the cost auditor, along with the due date and actual date of filing of the cost audit report by the cost auditor, in its Annual Report for each relevant financial year; If a company contravenes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any provisions of this circular, the company and every office thereof who is in default, including the persons referred to in Section 209(6) shall be punishable as provided under Sec. 642(2) read with section 209(5) and 209(7) and Sec. 233(B)(11) of the Act; If default is made by the cost auditor in complying with the aforesaid provisions, he shall be punishable with fine, which may be extended to Rs.5000/-; The above said procedure came into effect from the financial year commencing from on or after 01.04.2011. The two orders as abovementioned are not applicable to a company which is a body corporate governed by any special act. The cost audit shall be conducted in such manner as will enable the cost auditor to prepare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the report in accordance with the Cost Audit (Reports) Rules, 2001 as amended from time to time. The report of the Cost Auditor shall be forwarded to the Central Government in the prescribed format within the time stipulated under the said rules. All companies covered by these orders and wherein cost audit orders have been issued so far in respect of products/activities covered by the above mentioned rules shall continue to comply with the said orders until these orders become applicable on them. If a company contravenes any provisions of these orders, the company and every officer thereof who is in default, including the persons referred to in Sec. 209(6) shall be punishable as provided under Sec. 642(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with Section 233B(11) of the Act. - Reply By BALKRISHNA KULKARNI as = sir i would like to know that we are working in Automobile industary and our turnover is more than 20 crores immediately last Financial ,is the Cost Audit or Cost Recors certification is applicabe to us, Dated: 24-6-2011 - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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