Who is cost auditor

Which provision governs the cost audit? What is cost audit? Which companies are required to do cost audit? The requirement for cost audit under these rules shall not apply to a company which is required to maintain cost records and- i whose revenue from exports, in foreign exchange, exceeds seventy five 75 per cent of its total revenue; or ii Which is operating from a special economic Zone.

Who can be a Cost Auditor? When to appoint a Cost auditor? What is the procedure to appoint a Cost Auditor? The companies which are required to appoint an Internal Auditor have to follow the below given procedure: — 1. Obtaining engagement letter or consent letter. Convene board meeting and pass the following Board Resolution.

Sending of Appointment letter to Appointed Cost Auditor. Making entry in register, minute books, etc of company. What forms are required to appoint a Cost Auditor? What are other important aspects of cost audit? What is penalty for complying with provisions? If any of the provisions of is contravened, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees 2.

Provided that if an auditor has contravened such provisions knowingly or wilfully with the intention to deceive the company or its shareholders or creditors or tax authorities, he shall be punishable with imprisonment for a term which may extend to one year and with fine which shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees or eight times the remuneration of the auditor, whichever is less 3.

Where, in case of audit of a company being conducted by an audit firm, it is proved that the partner or partners of the audit firm has or have acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to or by, the company or its directors or officers, the liability, whether civil or criminal as provided in this Act or in any other law for the time being in force, for such act shall be of the partner or partners concerned of the audit firm and of the firm jointly and severally 4.

Provided that in case of criminal liability of an audit firm, in respect of liability other than fine, the concerned partner or partners, who acted in a fraudulent manner or abetted or, as the case may be, colluded in any fraud shall only be liable Annexure A The companies, including foreign companies, engaged in the production of the goods or providing services, specified in the table below, 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, namely:- Regulated Sectors No.

Non-Regulated Sectors No. Machinery and mechanical appliances used in defence, space and atomic energy sectors excluding any ancillary item or items; Explanation. Production, import and supply or trading of following medical devices, namely:- i.

Cardiac stents; ii. Drug eluting stents; iii. Catheters; iv. Intra ocular lenses; v. Bone cements; vi. Heart valves; vii. Orthopaedic implants; viii. Internal prosthetic replacements; ix. Scalp vein set; x. Deep brain stimulator; xi. Ventricular peripheral shud; xii. Spinal implants; xiii. Automatic impalpable cardiac defibrillators, xiv.

Pacemaker temporary and permanent ; xv. Patent ductus arteriosus, atrial septal defect and ventricular septal defect closure device; xvi. Cardiac re-synchronize therapy ; xvii. Urethra spinicture devices; xviii. Sling male or female; xix. Prostate occlusion device; and xx. Member Since : 06 Jul Total Posts : I am Company Secretary and engaged with this profession from last nine 9 years. Throughout this journey, my moto is to help people start their startups and business.

View Full Profile. Sub-section 5 of Section provides that if any of the persons referred to in sub section 6 fails to take all reasonable steps to secure compliance by the company with the requirements of this section, or has by his own wilful act been the cause of any default by the company thereunder, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to ten thousand rupees, or with both.

Provided that in any proceedings against a person in respect of an offence under this section consisting of a failure to take reasonable steps to secure compliance by the company with the requirements of this section, it shall be a defence to prove that a competent and reliable person was charged with the duty of seeking that those requirements were complied with and was in a position to discharge that duty :.

Provided further that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully. Sub-section 6 of section provides that the persons referred to in sub-section 5 are the following namely:. Sub-section 7 of section provides that if any person, not being a person referred to in sub-section 6 , having been charged by the managing director, manager or Board of Directors, as the case may be, with the duty of seeing that the requirement of this Section are complied with makes default in doing so, he shall in respect of each offence, by punishable with imprisonment for a term which may extend to six months, or with fine which may extend to ten thousand rupees, or with both.

Sub-section 2 of section provides that any rule made under sub-section 1 may provide that a contravention thereof shall be punishable with fine which may extend to five thousand rupees and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day after the first during which such contravention continues. If default is made by the cost auditor in complying with the aforesaid provisions, he shall be punishable with fine, which may extend to five thousand rupees.

The explanation about these is given below:. Provided further that where any partner of the firm is also a partner of any other firm or firms of auditors, the number of companies which may be taken into account, by all firms together, in relation to such partner shall not exceed the specified number in the aggregate:.

Provided also that where any partner of a firm of auditors is also holding office, in his individual capacity, as the auditor of one or more companies, the number of companies which may be taken into account in his case shall not exceed the specified number in the aggregate. Provided also that the provisions of this sub-section shall not apply, on and after commencement of the Companies Amendment Act, , to a private company.

A person who is proposed to be appointed as cost auditor of a company must possess the following qualifications:. A partner of the firm of cost accountants holding a valid certificate of practice is also qualified to be appointed as the cost auditor of the company. It is essential that such cost accountant or a partner of the firm of cost accountants should not be in the employment elsewhere.

In order to perform the of cost audit properly such cost auditor should possess the following qualities and characteristics:. A person cannot be appointed as a cost auditor of a company if he attracts any of the disqualifications listed in sub-sections 3 and 4 of section of the companies act, In addition to the above a person appointed as financial auditor of the company cannot be appointed to do cost audit of the same company.

Cost audit is the verification of the correctness of cost accounts and a check on the adherence to the cost accounting plan. This is, it involves not only the examination of cost accounts but also the fact that the plan prepared in this connection has been duly executed.

Cost audit as an audit of the efficiency of minute details of expenditure in which the work is in progress and not a post-mortem examination. The first function of cost audit is the verification of cost accounting records according to the cost accounting system, and the second function is the checking on the adherence to the cost accounting plan.

A cost audit, therefore, includes verification of correctness of the cost accounts, cost statements, cost reports, cost data, and costing techniques applied and finally checking these data to see that they adhere to cost accounting principles, plans, procedures, and objectives. Cost audits verify expense records and accounts.

The audit also ensures that accounts and bookkeepers comply with ethical practices. Effective cost audits provide a complete breakdown of expense that gives a company financial clarity about accounts. One primary disadvantage associated with cost audits is the excessive fees. Auditors are typically independent contractors who can charge relatively high prices for services rendered.

In addition to initial charges, auditors may increase fees in the middle of the project if companies fail to prohibit such action in the contract. Although the auditor may be an outside contractor, employees must provide requested information and be accessible in case further explanation of documents is necessary. This means people who have been stealing from an establishment have nearly a month to form an excuse or leave the company.

Besides, if receipts and other forms of record-keeping are skewed, an auditor relying on such documents may produce an inaccurate report.