Cost Audit- Important Provision
Maintenance of Cost Records:-
- As per MCA Notification/guidelines every company covers under the `Companies (Cost Records and Audit) Rules, 2014 and Companies (Cost Records and Audit) Amendment Rules,2014′ has to maintain Cost Records in Form CRA-1,
- If the company is engaged in production of goods or providing services covered under Regulated Sector and having aggregate turnover of Rs.35 crores or more in the previous financial year, company has to maintain Cost Records as prescribed in the rules for that particular Financial Year. (Please refer rules for detailed applicability)
- If the company is engaged in production of goods or providing services covered under Non-Regulated Sector and having aggregate turnover of Rs.35 crores or more in the previous financial year, company has to maintain Cost Records as prescribed in the rules for that particular Financial Year. (Please refer rules for detailed applicability)
Exemption from Maintenance of Cost Records:-
- The companies which are classified as Micro Enterprises (having investment in Plant & Machinery not exceeding Rs.25 lakhs) and Small Enterprises (having investment in Plant & Machinery more than Rs.25 lakhs but not exceeding Rs.5 crores) are exempted from maintaining Cost Records as specified in the rules. (Micro Enterprises or Small Enterprises as defined in “Micro, Small and Medium Enterprises Development Act, 2006”)
Applicability of Cost Record Audit Rules:-
- The companies having turnover of Rs.50 crores or more for Regulated Sector (provided that turnover of the product covered under cost audit needs to be Rs.25 crores) in the previous year as specified in the Rules has to get its Cost Records Audited for that particular Financial Year.
- The companies having turnover of Rs.100 crores or more for Non-Regulated Sector (provided that turnover of the product covered under cost audit needs to be Rs.35 crores) in the previous year as specified in the Rules has to get its Cost Records Audited for that particular Financial Year
Appointment of Cost Auditor:-
- The cost auditor is to be appointed by the Board of Directors
- The cost auditor proposed to be appointed is required to give a letter of consent to the Board of Directors (Refer Appendix-2 for Specimen Consent Letter).
- Company shall inform such appointment with the Central Government
within a period of thirty days of the Board meeting in which such appointment is made
or
within a period of one hundred and eighty days of the commencement of the financial year.
whichever is earlier
Cost Audit Report Filing:-
- Every cost auditor shall forward his duly signed report to the Board of Directors of the company within a period of one hundred and eighty days from the closure of the financial year.
- Every company covered under these rules shall, within a period of thirty days from the date of receipt of a copy of the cost audit report, furnish the Central Government.
Penalties for Non Compliance:-
- If the company fails to maintain cost records as specified in the rules, the company shall be punishable with fine ranging from Twenty-Five Thousand to Rs. Five Lakhs and every officer of the company who is in default also punishable with Imprisonment up to one year or fine ranging from Rs. Ten Thousand to Rs. One Lakh or both. So, it is the duty of the compliance officer to ensure that all the legal compliances with regard to the cost records and cost audit are complied with in letter and spirit.
The default attracts fines for
- The company and
- Officers who are in default
Section 2(60) defines “officer who is in default”, for the purpose of any provision in Companies Act 2013 means any of the following officers of a company, namely:—
- Whole-time director;
- Key managerial personnel;
- where there is no key managerial personnel, such director or directors as specified by the Board in this behalf and who has or have given his or their consent in writing to the Board to such specification, or all the directors, if no director is so specified;
- any person who, under the immediate authority of the Board or any key managerial personnel, is charged with any responsibility including maintenance, filing or distribution of accounts or records, authorises, actively participates in, knowingly permits, or knowingly fails to take active steps to prevent, any default;
- any person in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act, other than a person who gives advice to the Board in a professional capacity;
- every director, in respect of a contravention of any of the provisions of this Act, who is aware of such contravention by virtue of the receipt by him of any proceedings of the Board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his consent or connivance;
- in respect of the issue or transfer of any shares of a company, the share transfer agents, registrars and merchant bankers to the issue or transfer;
Broadly, nature of defaults under Section 148 can be as mentioned below by way of examples:
- Non-maintenance of Cost Records
- Cost Auditor has not been appointed by the company
- Late appointment of Cost Auditor
- Cost Auditor appointed but CRA-2 has not been filed with MCA
- Cost Auditor Appointed but Cost Records were not submitted for Cost Audit
- There was non-co-operation regarding the timely completion of cost audit
- Cost Audit Report not approved within the specified time limit
- Cost Audit Report approved but not submitted to the Central Government by the company
- Submission of Cost Audit Report without full information and explanation on every reservation or qualification contained therein
And like-wise…
It also needs mention that apart from the above, the company will be required to pay following additional fees for delay in filing intimation of Cost Auditor to Central Government
ADDITIONAL FEES RULE:
| Period of delays | All forms |
| Upto 30 days | 2 Times of Nominal fees |
| More than 30 days and upto 60 days | 4 Times of Nominal fees |
| More than 60 days and upto 90 days | 6 Times of Nominal fees |
| More than 90 days and upto 180 days | 10 Times of Nominal fees |
| More than 180 days | 12 Times of Nominal fees |