Appointment of Cost Auditor

Every Company on which cost audit is applicable pursuant to Section 148 of the Companies Act, 2013 shall appoint a Cost Auditor within 180 days from commencement of every financial year. Before going further let’s discuss on which Companies Cost Audit is applicable.

Application of Cost Record:- Every Company which is engaged in the production of the goods or provision of services specified in the list as per Rule 3 of Companies (Cost Records and Audit) Rules, 2014 having an overall turnover from all its products and services of Rupees Thirty Five Crore or more during the immediately preceding financial year, shall include cost records for such products or services in their books of account.

Applicability of Cost Audit: –

Every Company specified in item (A) of rule 3 shall get its cost records audited if:

• overall annual turnover of the company from all its products and services is INR 50 Crores or more during immediately preceding financial year; and

• the aggregate turnover of the individual product or services for which cost records are required to be maintained under rule 3 is INR 25 Crores or more.

Every company specified in item (B) of rule 3 shall get its cost records audited if:

• the overall annual turnover of the company from all its products and services is INR 100 crores or more during immediately preceding financial year; and

• the aggregate turnover of the individual product or service or for which cost records are required to be maintained under rule 3 is INR 35 crores or more.

Non-applicability of Cost Audit: – Rule 4(3) of the rules provides exemption from cost audit to the companies covered under Rule 3, which fulfills following criteria:

• Revenue of company from exports in foreign exchange exceeds 75% of its total revenue; or
• Company operating in special economic zone; or
• Company which is engaged in generation of electricity for captive consumption through Captive Generating plant.

The Process to appoint Cost Auditor is as follows: –

Step 1: Obtain Written Consent

Take the consent of Cost Auditor in writing before appointment and a certificate that they are eligible for appointment and not disqualified for appointment.

Step 2: Hold the Board Meeting

In the Board Meeting, propose the appointment of Cost Auditor and take the approval of Directors by passing a Board Resolution and authorise a Director to file the intimation with the Registrar in Form CRA-2.

Step 3: Filing with the Registrar

After passing the Resolution, the Company shall file the intimation with the concerned Registrar in Form CRA-2 along with prescribed fee within 30 days of Board Meeting.

Attachments with Form CRA-2