Cost Audit Services

Central Government, in exercise of the powers conferred by clause (b) of sub-section (1) of section 642 read with sub-section (4) of section 233B, and sub-section (1) of section 227 of the Companies Act, 1956 (1 of 1956), and in supersession of the Cost Audit Report Rules, 2001 has issued these rules. 

The Companies (Cost Audit Report) Rules, 2011 have been issued by the Ministry of Corporate Affairs vide Notification no. 430(E) dated 3rd June 2011. Cost Audit Reports submitted on or after 1st day of April, 2012, irrespective of the financial year for which the cost audit report is submitted, shall be governed by these Rules. Cost Audit Reports submitted till 31.3.2012 will be governed by the Cost Audit Report Rules, 2001. “Cost Auditor” means an auditor appointed to conduct an audit of cost records, under sub-section (2) of section 233B of the Act and shall be a cost accountant within the meaning of the Cost and Works Accountants Act,1959. “Cost Accountant” for the purpose of these rules means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959) and who holds a valid certificate of practice under subsection (1) of section 6 and who is deemed to be in practice under subsection (2) of section 2 of that Act and includes a firm of cost accountants. 

These rules shall apply to every company in respect of which an audit of the cost records has been ordered by the Central Government under section 233B(1) of the Act. 

The Companies (Cost Audit Report) Rules, 2011, every cost auditor, who submits a cost audit report shall also furnish Performance Appraisal Report, duly authenticated by the cost auditor, to the Board/Audit Committee of the company in the prescribed format (Form III). There cannot be NIL report since list of the areas to be covered in the report as per Form III are relating to company’s operations being audited by the cost auditor. However, the frequency of this report viz. half yearly/annual (or even quarterly) is to be decided by the Company Management. 

The contents of the Performance Appraisal Report as given in Form III are “indicative”. Depending on the nature of business and activity of the company, the management and the cost auditor in consultation with each other can add or delete the indicative areas to be covered under the Performance Appraisal Report. The intention of the law appears to assign a role to the cost auditor to provide an independent view of the performance of the company to enable the management to take corrective steps wherever necessary. The Institute is also going to bring out a Guidance Note on the subject. 

There is no time limit within which the Central Government can seek clarification from the cost auditor. The Rules have now specified that the Company would be required to maintain the cost accounting records for the preceding eight financial years in good order. The cost auditor is required to provide reply to any clarification sought for by the Central Government from the cost auditor in writing within 30 days of the receipt of the communication addressed to him calling for such clarifications. 

The unit-wise product-wise cost statements duly certified by the cost auditor and the management are to be kept in the Company. The “product group-wise” cost statement of all the products and all units combined together will form part of the cost audit report. 

Cost Accounting Policy of a company should state the policy adopted by the company for treatment of individual cost components in cost determination. The Cost Accounting system of a company, on the other hand, would provide a flow of the cost accounting data/information across the activity flow culminating in arriving at the cost of final product/activity. 

Value Addition statement is to be computed based on audited financial data. 
Export Benefit is to be considered as a part of Sales. 

The Annexure prescribed with the cost audit report shall be approved by the Board of Directors before submitting the same to the Central Government by the cost auditor. The Annexure, duly audited by the cost auditor, shall also be signed by the Company Secretary and at least one Director on behalf of the company. In the absence of Company Secretary in the company, the same shall be signed by at least two Directors. The Cost Audit Report is to be signed by the Cost Auditor.

The cost details, statements, schedules, etc. of every company, as specified in these Report Rules, relating to a period of not less than eight financial years immediately preceding a financial year, or where the company had been in existence for a period less than eight years, in respect of all the preceding years shall be kept in good order. 

The cost auditor shall forward his report referred to in sub rule (1) of the rule 4 to the Central Government and to the concerned company within one hundred and eighty days from the close of the company’s financial year to which the report relates.

Duties of the Company under the Cost Audit Report Rules, 2011

Every company as specified in sub-rule (1) shall, within ninety days of the commencement of every financial year, file an application with the Central Government seeking prior approval for appointment of the cost auditor, through electronic mode, in the prescribed form, along with the prescribed fee as per the Companies (Fees on Applications) Rules, 1999, and requisite enclosures. However, where a company is covered under cost audit for the first time vide cost audit order dated 30th June 2011, the period of 90 days shall be counted from the date of this order. 

Every company shall follow the procedure prescribed vide Ministry of Corporate Affairs’ General Circular No. 15/2011 [File No. 52/5/CAB-2011] dated April 11, 2011. The company and every officer thereof, including the persons referred to in sub-section (6) of section 209 of the Companies Act, 1956 shall make available to the cost auditor, such cost accounting records, cost statements, other books and documents, and Annexure to the Report, duly completed, as would be required for conducting the cost audit, and shall render necessary assistance to the cost auditor so as to enable him to complete the cost audit and submit his report within the time limit specified in rule 5, i.e., within 180 days from the close of the Company’s financial year to which the report relates. 

The Annexure prescribed with the cost audit report shall be approved by the Board of Directors before submitting the same to the Central Government by the cost auditor. 

Internal Audit

Management always strives to balance risk and reward. Internal audit enable organizations to take advantage of opportunities while effectively managing the accompanying business risks. Managing loss potential while consciously taking calculated risks enables optimum utilization of resources to generate fair & reasonable returns.

What Offers emphasizes on ensuring strong internal control systems coupled with risk based internal audit, plans to minimize the risk of accidental or deliberate errors and omissions. Safeguarding of assets, adequate division of authority over key control areas and compliance with internal operating policies and guidelines are other focus areas of procedures. Our objective is to ensure that resources of the organization are optimized to deliver maximum possible value. We provide specialized services for Internal Audit of Construction, Real-Estate, Infrastructure & Power Sector

Tax Audits

To discourage tax avoidance and evasion, the requirement of a tax audit was introduced by the Finance Act of 1984, by inserting a new section “44AB” w.e.f Assessment Year 1985-86. A Tax Audit involves an expression of the tax auditors’ opinion on the truth and correctness of certain factual details, given by assessee to the Income Tax Authorities to enable an assessment of tax.

What Offers

Our endeavor is to mitigate the burden of tax and to review that disallowances and deductions if any, under the various provisions of Income Tax Act, 1961 are properly and correctly calculated, so that the income assessable can be computed correctly.

Management Audits

Productivity and efficiency of management are key determinants of an organization's success. To evaluate effectiveness of management policies and decisions, management audit is required.

What Offers

Our procedures aim to maximize management performance by focusing on processes improvement within the organization i.e. execution of plans, increasing managerial efficiency, and effective and efficient discharge of duties and responsibilities. It also assists in evaluating variances in end results and planned results under both structured and unstructured environment.

Sox Audit & Clause49 Related Services

The Sarbanes-Oxley Act of 2002 ('SOX')" entrusts the management of SEC registrants with the responsibility of annually reporting the effectiveness of their internal control structure and procedures for financial reporting, and attesting the financial statements. Senior management must provide assurance on the existence, adequacy and effectiveness of internal controls - and SOX also requires each firm's external auditor to attest and report on management's assessment.

What Offers

Our service offerings cover the entire SOX Compliance lifecycle, including continuous monitoring and review.

Income Tax

Direct taxation is used as an effective tool to implement various fiscal policies. Various exemptions in taxation is also used as a tool to promote investments in identified industry sectors and geographical boundaries thereby spurring overall economic growth. As such, understanding the impact of continuous change in tax and regulatory aspects and strategically using them to the benefit of business activities is becoming increasingly important. Continuous changes in business methods and consequent changes in legislation also bring out the requirements for new compliances and the challenges of meeting them on regular basis.

What Offers helps its’ clients in developing tax efficient strategies and manage their tax exposures considering their peculiar business needs. keep them abreast of new developments in the taxation arena that affect business by rendering following services:

  • Entry strategy from a tax and regulatory perspective.
  • Choice of appropriate form of entity for setting up business activities
  • Optimum use of tax incentives in proposed business activities
  • Tax planning strategies for profit and dividend repatriation
  • Advising on withholding tax obligations on payments
  • Assistance in filing Tax Returns of different entities
  • Assistance during Tax Assessments, tax litigation, including representation
  • Assistance in filing Appeals before various tax authorities
  • Obtaining advance rulings

Stock Audit Services

Our inventory audit services offer suggestions for the controlling of cost of the stocks of our client’s company. The inventory audit report made available by us involves detailed checking of stock records and also physical verification of all of types of stocks. Internal inventory audit is undertaken to find out shortcoming in inventory records and to give solutions for inventory reduction and its control so that production of items may not stop due to deficiency of stock of material or blockage of money. Inventory reduction and its control are suggested so that production of items will not be stop due to deficiency of stock of material. Moreover, we are reckoned to be the numero uno source of inventory auditing services in India.


© Copyright 2013, CMA INDIA CLUB