## CARO 2020 – Clause (vi): Maintenance of Cost Records

### What the Auditor Must Check

Whether the company is required to maintain cost records as specified by the Central Government under Section 148(1) of the Companies Act, 2013.
If so, whether such records have been made and maintained.

### Background

Section 148 empowers the Central Government to direct certain classes of companies to maintain cost accounting records.
The Companies (Cost Records and Audit) Rules, 2014 specify which industries must maintain these records.
Examples of industries covered: cement, steel, sugar, pharmaceuticals, textiles, etc.

### What Auditor Reports

Situation	Report
Company NOT covered by Sec 148	Clause not applicable
Company covered AND records maintained	Complied
Company covered BUT records NOT maintained	Report non-compliance with details

### Note

The auditor under CARO is only checking whether the records exist — not conducting a full cost audit (that is done by a Cost Auditor separately).

Worked example

### Example 1

Cost Records Not Maintained [Clause vi]:

ABC Ltd is a pharmaceutical manufacturer covered under the Companies (Cost Records and Audit) Rules, 2014. During audit, the statutory auditor finds that the company has not maintained the required cost records for the current year.

Answer: The auditor reports under Clause 3(vi) that the company is required to maintain cost records as specified by the Central Government under Section 148(1), but such records have NOT been made and maintained.

⚠️ Common exam mistakes

Confusing the role of the statutory auditor (checking existence of cost records) with the cost auditor (conducting cost audit) — CARO only requires the statutory auditor to check if records exist.
Reporting this clause even when the company is NOT covered under Section 148 — if cost records are not mandated, this clause is simply not applicable.
Failing to state the specific deficiency — just saying 'records not maintained' is insufficient; specify what was missing.

Bare-Act text Clause 3(vi) · Companies (Auditor's Report) Order, 2020 (CARO 2020) · click to expand

3(vi): whether maintenance of cost records has been specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013 and whether such accounts and records have been so made and maintained.

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CARO 2020 – Clause (vi): Cost Records

Worked example

⚠️ Common exam mistakes