Maintenance of Cost Records and Audit under Companies Act (Revised)

 

REQUIREMENT OF MAINTENANCE OF COST RECORDS

Sec-209 (1)(d)

Every company shall keep at its registered office proper books of account with respect to

 in the case of a company pertaining to any class of companies engaged in production, processing, manufacturing or mining activities, such particulars relating to utilisation of material or labour 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 the books of account:]

Provided that all or any of the books of account aforesaid may be kept at such other place in India as the Board of directors may decide and when the Board of directors so decides, the company shall, within seven days of the decision, file with the Registrar a notice in writing giving the full address of that other place.]

Companies (Cost Accounting Records) Rules, 2011

Scope : Companies engaged in the production, processing, manufacturing or mining activites, where in –

i.                    Agregate value of Net worth as on last day of immediate preceding financial year exceeds Rs. Five crore

ii.                  Agregate value of Turn over made during the immediate preceeding financial year exceeds Rs. Twenty Crore

iii.                Where the Company’s equity or debt are listed

Requirements :

i.                    Maintenance of Cost Records

ii.                  Filing Compliance Report in Form –A, within 180 days from end of financial year

REQUIREMENT FOR AUDIT OF COST RECORDS

Sec 233B(1)

Where in the opinion of the Central Government it is necessary so to do in relation to any company required under clause (d) of sub-section (1) of section 209 to include in its books of account the particulars referred to therein, the Central Government may, by order, direct that an audit of cost accounts of the company shall be conducted in such manner as may be specified in the order by an auditor ²[who shall be a cost accountant within the meaning of the Cost and Work Accountants Act, 1959 (23 of 1959):

Sec 233B(2)

The auditor under this section shall be appointed by the Board of directors of the company in accordance with the provisions of sub-section (1B) of section 224 and with the previous approval of the Central Government:

Order No. F.No. 52/26/CAB-2010, Dtd 3^rd May 2011

Scope : Companies to which Sec 209(1)(d) is applicable and of which the turnover made during the immediate preceding financial year exceeds Rs. One Hundred Crore

Revised Procedure of Appointment vide Circular No. 15/2011 [52/5/CAB-2011] Dtd 11^th April 2011

i.                    First point of Reference shall be the Audit Committee –

a.      Ensure the Auditor is free from any disqualification

b.      Obtain a Certificate from the cost auditor certifying his independence and arm’s length relationship with the company

ii.                  E-file Application with the Central Government in form 23C

iii.                Issue formal letter of Appointment to the Cost Auditor, as approved by the Board, after 30 days from the date of filing Form 23C