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All you need to know about COST AUDIT and COST AUDIT XBRL

What is cost audit?

Cost audit is the verification of cost accounts to determine the accuracy of cost accounting records. It is a means to ensure that cost accounting records are in track with the costing principles, plans, procedures and objective.

The audit usually involves

  • Verification that costing records are accurate.
  • Detection of errors in cost records
  • Check the maintenance of cost books, accounts & records.

 

Who is required to keep “cost records” and conduct “cost audit”?

Section 148 of the Companies Act, 2013 lays out the provisions and requirements concerning Cost Records and Cost Audit applicability.

Rule 3 of the Companies (Cost Records and Audit) Rules, 2014 identifies the companies who are required to keep Cost Records, undergo a Cost Audit, and submit Cost Audit Report, in two separate sections defined by

  1. Table A , which covers regulated sectors dealing with specified goods/services and
    1. Overall annual total turnover from all products/services is INR 50 Crore or more.
    2. Aggregate turnover from the individual product/service is INR 25 Crore or more.
  1. Table B which covers non regulated sectors dealing with specified goods/services and
    1. Overall annual total turnover from all products/services is INR 100 Crore or more.
    2. Aggregate turnover from the individual product/service is INR 35 Crore or more.

However, companies covered by above rules are exempted from conducting a cost record audit if any of the following situations arise:

  1. The company’s export revenue in foreign exchange exceeds 75% of total revenue
  2. Company operates from a Special Economic Zone (SEZ)
  3. Company is engaged in production of electricity through Captive Generating Plant

 

Who does the audit?

Board of Directors, of qualifying companies, under Section 233-B of the Companies Act has to appoint a Cost Accountant to undertake the Audit and provide a report.

Every company must file notice of appointment of cost auditor with RoC through electronic mode in Form CRA-2 within 30 days of the board meeting in which appointment is made, or within 180 days from date of commencement of financial year.

 

What is Cost audit report?

The cost audit report is a certificate containing five paragraphs on fifteen specific points such as

  1. Cost accounting system and cost accounting records
  2. Inventory valuation
  3. Budgetary control system
  4. Related party transactions
  5. Payments default to the Governments / Banks
  6. Actual exports, Export benefits, and incentives on their profitability
  7. Internal audit
  8. Suggestions in respect to cost control and cost reduction
  9. Independent audit opinion regarding the cost accounting records

After the audit is duly complete, report will be submitted in CRA-3 form by the auditor to the company. The company must then furnish the cost audit report, with full details and explanations to ROC electronically through Form CRA-4 along with digital signature of the Cost Auditor.

 

What is the deadline for filing Cost Audit XBRL report?

The Cost Audit Report in form CRA-3 must be submitted by the Cost Auditor to the Company within 180 days of closure of financial year. The company must file form The CRA-4 to MCA within 30 days from thereon.

Engaging DataTracks, who have expertise in handling various taxonomies across the globe and experience in handling turnarounds of less than a day, can help can help ease the stress of meeting filing deadlines without compromising on quality, and at competitive rates.

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DataTracks, a global leader in regulatory compliance reporting solutions, has been in business since 2005 and has helped prepare more than 172,000 reports since inception. DataTracks provides fully assisted services in selected regulatory regimes where inputs provided by clients in traditional formats are converted to HTML, XML, XBRL or iXBRL formats.