Cost Audit — Section 148

# Cost Audit — Section 148

## Applicability — Section 148(1) & 148(2)

• The Central Government, after consultation with the regulatory body, may direct prescribed class of companies engaged in production of such goods or providing such services to include in their books of accounts particulars relating to utilisation of material or labour or other items of cost.
• If the CG is of opinion that it is necessary, it may, by order, direct that the audit of cost records of class of companies (covered above) shall be conducted in the manner specified.

## Appointment of Cost Auditor — Section 148(3)

• The cost audit shall be conducted by a Cost Accountant in practice (member of ICMAI / Cost Accountants), appointed by the Board of Directors.
• Proviso: No person appointed u/s 139 as auditor of the company shall be appointed as cost auditor.
• Remuneration:
• In case of companies required to have an Audit Committee — recommended by AC, considered and approved by Board, ratified by shareholders subsequently.
• In case of other companies — Board appoints cost auditor and decides remuneration; ratified by shareholders subsequently.

## Qualification & Disqualification — Section 148(5)

• Qualifications and disqualifications applicable to financial auditors u/s 141 shall also apply to cost auditors.

## Cost Audit Report — Section 148(5) & (6)

• Cost auditor submits report to Board of Directors.
• Board may ask for further clarifications.
• Company shall furnish report along with full explanation on every reservation/qualification, to the Central Government within 30 days from date of receipt.

## Power of CG to Call for Further Information

If CG, after considering the report, is of the opinion that any further information or explanation is necessary, it may call for further information.

## Penalty — Section 148(8)

• Company and every officer in default: Punishable u/s 147(1).
• Cost Auditor: Punishable u/s 147(2) to 147(4) — same as financial auditor.

## Key Conditions Summary