What is Cost audit and When it is required
Cost Audit: - It represent the authenticity of cost accounts and cost records which is maintain by the companies who are required to get the cost audit done. Cost audit ascertain the accuracy of cost accounting records and ensures that they are in conformity with cost accountings principles, Cost accounting standards, plans, procedure and objectives.
Cost Records:-Meaning of Cost records define in rule 2 (e) of companies (cost record & audit) rules 2014, cost records are those document which represent the utilisation of material ,labour and other items of cost applicable to the production of Goods or provision of services as provided in sec 148 of companies (Cost record and audit) rules.
When preparation of cost records is necessary:-
According to rule 3 of the companies rules 2014 (Cost records and audits) rule contains two table namely Table A i.e. Regulated sectors & Table B i.e. Non Regulated sectors.
Cost records are required to maintain when companies engaged in the production of goods and provision of services & they are covered under the Table A or Table B and total turnover from all of its production or services in more than INR 35 Crores during the preceding financial year.
In simple words we can say that if products or service covered under table A or table B and its total value crosses INR 35 Crore then cost records are compulsorily maintain by company and it’s become the mandatory part of books of accounts.
Applicability of cost Audit:-
Provision of cost audit are applicable if these conditions are fulfilled:-
Condition Regarding TABLE A:-
1. Overall annual turnover of the company from all the products and service is Rs. 50 Crore or more; and
2. Aggregate turnover from the products and service for which cost records are required to maintain is Rs. 25 Crore or More
Condition Regarding Table B:-
1. Over all annual turnover of the company from all products and services is Rs. 100 Crore or more and;
2. Aggregate turnover from the individual products or service for which cost records are require to be maintain is Rs.35 Crore or more.
It must be noted the for checking the threshold limit year should be preceding financial year
Cost audit will not applicable if following conditions fulfilled:-
Time limit for appointment of Cost auditor:-
Cost audit as mentioned in sec 148(2) of companies act, will only conduct by practicing cost and management accountants (CMA), who is appointed by the board of director of company within 180 days of the commencement of every financial year.
Meaning of Cost and Management accountants (CMA):-
As per the rule 2(b) & 2(c) of the rules mentioned in the cost and work accountants act 1959, Cost accountant in practice define. Cost Accountant in practice means a cost accountant u/s 2(1) (b) of the cost and work accountant act 1959 who hold valid certificate of practice and it include firm and LLP also.
Who can perform cost audit:-
Cost audit exclusively perform by cost auditor who is cost & Management accountants in practice (CMA).
Author: - CMA Praveen Kumar Tiwari
Websites: - https://www.mycorporation.in/