Cost Audit — Direction, Auditor, Report and Default (Section 148(2)–(8))
# Cost Audit — Section 148(2) onwards
## 1. Direction for Cost Audit — Section 148(2)
The Central Government may order a cost audit in addition to the statutory (financial) audit. This applies to companies meeting prescribed thresholds:
Prescribed Net Worth, or
Prescribed Turnover
## 2. Who Can Be the Cost Auditor — Section 148(3)
The cost audit is conducted by a Cost Accountant in Practice.
The cost statements prepared by the Board of Directors (BOD) are placed before the cost auditor.
Important Bar: The Statutory (Financial) Auditor cannot be appointed as the Cost Auditor of the same company.
## 3. Sections 141 and 143 Apply
The qualifications, disqualifications, rights, duties and obligations applicable to a statutory auditor under Sec 141 & Sec 143 apply mutatis mutandis to the cost auditor.
## 4. Reporting Mechanism — Section 148(5) & (6)
Step
From
To
Time Limit
1
Cost Auditor
Board of Directors
Submits report
2
BOD
Central Government
Within 30 days of receipt of the cost audit report, along with full information & explanation for every reservation / qualification
## 5. Default — Section 148(8)
For any contravention:
The company is punishable under Section 147(1).
Every officer in default and the cost auditor are punishable under Section 147(2) to (4).
Worked example
### Example 1
Example: ABC & Co. is the statutory auditor of XYZ Ltd. The Board now wishes to appoint ABC & Co. as the cost auditor as well.
→ Not permitted. The statutory auditor cannot be appointed as the cost auditor of the same company.
### Example 2
Example: The cost auditor of PQR Ltd. submits the report to the Board on 1 April. The Board must furnish the report to the Central Government by 1 May (within 30 days), along with explanations for every qualification.
⚠️ Common exam mistakes
Confusing who appoints the cost auditor — the Board appoints, not the shareholders.
Stating the cost auditor submits the report directly to the CG — it goes to BOD first, then BOD forwards to CG.
Missing the 30-day timeline for the BOD to forward the report.
Suggesting the statutory auditor may also be the cost auditor — they cannot.
Bare-Act text Section 148(2) to 148(8) · Companies Act, 2013 · click to expand
(2) If the Central Government is of the opinion, that it is necessary to do so, it may, by order, direct that the audit of cost records of class of companies, which are covered under sub-section (1) and which have a net worth of such amount as may be prescribed or a turnover of such amount as may be prescribed, shall be conducted in the manner specified in the order. (3) The audit under sub-section (2) shall be conducted by a Cost Accountant who shall be appointed by the Board... (5) The auditor shall submit the cost audit report along with his or its reservations or qualifications or observations or suggestions, if any, to the Board of Directors of the company. (6) A company shall within thirty days from the date of receipt of a copy of the cost audit report prepared in pursuance of a direction under sub-section (2) furnish the Central Government with such report along with full information and explanation on every reservation or qualification contained therein. (8) If any default is made in complying with the provisions of this section,— (a) the company shall be punishable in the manner as provided in sub-section (1) of section 147; (b) every officer of the company who is in default and the cost auditor of the company shall be punishable in the manner as provided in sub-sections (2) to (4) of section 147.