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TMI BlogCost Auditing Standards under the Companies Act, 2013: Part –IIIX X X X Extracts X X X X X X X X Extracts X X X X ..... Cost Auditing Standards under the Companies Act, 2013: Part –III - By: - Rakesh Singh - Accounting - Auditing - Dated:- 29-1-2016 - - Cost Auditing Standards under the Companies Act, 2013: Part III Introduction: The third in line of prescribed Cost Auditing Standards deals with the Overall Objectives of the Independent Cost Auditor and the Conduct of an Audit in Accordance with Cost Auditing Standards . The governing idea behind this standard is to place guidance on the Overall Objectives of the Independent Cost Auditor for Conducting an Audit of Cost Statements in Accordance with Cost Auditing Standards. This standard further describes management responsibility for the preparation and presentation of the Cost Statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, to identify the Cost Reporting Framework and to lay down Cost Accounting Policies. This standard extends to and clarifies that auditor has to ensure compliance with Cost Accounting Standards issued by the Institute of Cost Accountants of India. It may be appreciated that out of 22 Cost Accounting standards (CAS), except for CAS-4 CAS-22 which are special purpose standards, all others are relevant and apply on audit by an auditor. Objective: of this Standard is to lay down the overall objectives of Cost Auditor and ensuring the Conduct of the Audit of Cost Statements in accordance with the Cost Auditing Standards and to: Obtain reasonable assurance about whether the cost statements as a whole are free from materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l misstatement, due to fraud or error and enable the auditor to express an opinion whether the Cost Statements are prepared, in all material respects, in accordance with the applicable Cost reporting framework, Cost Accounting Standards (CAS) and Generally Accepted Cost Accounting Principles (GACAP) as issued by the Institute, and give a true and fair view of the Cost of a product, activity or service. In the case of a Cost Audit under the Companies Act and Rules prescribed there under, the objective is to express an opinion on whether the Cost Statements subject to audit represent a true and fair view of the cost of production, cost of sales and margin of products covered by the Cost Audit. Report of Cost Statements in the form requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by law or by the Cost Auditing Standards in accordance with the auditor s findings. Where reasonable assurance cannot be obtained, the cost auditor should qualify the opinion and in extreme cases disclaim an opinion. It may however be noted that the objective of the auditor may not be limited but may extend to making observations and suggestions where required by regulations etc. Requirements envisaged in this standards: The Cost Auditor shall comply with the relevant ethical requirements including those pertaining to independence in respect of cost audit engagements. (Refer 6.1) While conducting an audit, the cost auditor shall comply with each of the Cost Auditing Standards relevant to the audit. A Cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Auditing Standard is relevant to the audit when the Cost Auditing Standard is in effect and the circumstances addressed by the Cost Auditing Standard exist. (Refer 6.2) The Cost Auditor shall have an understanding of the entire text of the Cost Auditing Standard, including its application and other explanatory material, to understand its objectives and to apply its requirements properly. The Cost Auditor shall not represent compliance with the cost auditing standards in the cost auditor s report unless the auditor has complied fully with all of the Cost Auditing Standards relevant to the audit. In exceptional circumstances, the cost auditor may judge it necessary to depart from a relevant requirement in a Cost Auditing Stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard. In such circumstances, the auditor shall perform alternative audit procedures to achieve the aim of that requirement. {Refer 6.2 (c)} The cost auditor shall plan and perform an audit with an attitude of professional skepticism recognizing that circumstances may exist that cause the Cost Statements to be materially misstated. (Refer 6.3) The auditor shall obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably low level and thereby enable the auditor to draw reasonable conclusions on which to base the auditor s opinion. (Refer 6.4) The cost auditor shall exercise professional judgment in planning and performing the audit. The cost auditor shall determine whether the Cost Reporting Framework ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... followed by management in preparing cost statements is in line with the Companies Act and the Rules prescribed there under. (Refer 6.5) The cost auditor shall not be required to perform audit procedures regarding the entity s compliance with laws and regulations governing cost audit in the absence of identified or suspected non-compliance. (Refer 6.6) If an objective in a relevant Cost Auditing Standard cannot be achieved, the auditor shall evaluate whether this prevents the auditor from achieving the overall objectives of the auditor and there by requires the auditor, in accordance with the Cost Auditing Standards, to modify the auditor s opinion. Some important and relevant terms / definitions used in the standard are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Misstatement:- A difference between the amounts, classification, presentation or disclosure of a reported cost statement item and the amount, classification, presentation, or disclosure that is required for the item to be in accordance with the applicable cost reporting framework. Misstatement can arise from error or fraud. Non Compliance:- Acts of omission or commission by the entity, either intentional or unintentional, which are contrary to the prevailing laws or regulation governing Cost Accounting, Cost Records and Cost Audit. Such acts include transaction entered in to by, or in the name of, the entity, or on its behalf, by those charged with governance, management or employees. Non Compliance does not include p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersonal misconduct (unrelated to the business activities of the entity) by those charged with governance, management or employees of the entity. Professional Judgment:- The application of relevant training, knowledge or experience, within the context provided by cost auditing standards, cost accounting standards and ethical requirements, in making informed decisions about the courses of action that are appropriate in the circumstances of the audit engagement. Professional skepticism:- An attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatements due to error or fraud, and a critical assessment of audit evidence. The cost auditor should comply with relevant ethical re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quirements as per Code of Ethics issued by the Institute of Cost Accountants of India. This code establishes fundamental principles of professional ethics relevant to the auditor while conducting an audit and provides a conceptual framework for applying these principles. The fundamental principles with which the auditor is required to comply are Independence, Integrity, Objectivity, Professional competence and due care, Confidentiality and Professional conduct. In case of an audit engagement, it is in the public interest that the auditor should be independent of the entity subject to the audit. The cost auditor s independence from the entity safeguards the cost auditor s ability to form an opinion without being affected by influences that m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight compromise that opinion. Independence enhances the auditor s ability to act with integrity to be objective and to maintain an attitude of professional skepticism. - - 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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