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COST AUDIT

A cost audit involves reviewing an entity’s cost records and related information, including those of non-profit organizations. Its primary objective is to assure stakeholders—such as shareholders, management, and regulatory authorities—that the company’s reported cost information is accurate, reliable, and compliant with applicable regulations and standards.

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Cost Audit. Online with Auriga Accounting

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Why Should I Use Auriga Accounting of Cost Audit ?

Auriga Accounting has a team of registration experts who can provide complete guidance to Cost Audit.

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Our team of experts will get in touch with you and collect all necessary documents and details

Resolve all your queries

We fill out and file your application for Audit Report

Complete your Aduit Report

Complete Your Cost Audit

Why Should I Use Auriga Accounting of Cost Audit ?

Auriga Accounting has a team of registration experts who can provide complete guidance to Cost Audit.

book appointment

Our team of experts will get in touch with you and collect all necessary documents and details

Resolve all your queries

We fill out and file your application for Audit Report

Complete your Audit Report

Complete Your Cost Audit

Overview
Applicability
Required
Exemptions
Applicable
Fee & Penalty
Advantage & Disadvantage
Document
Procedure

OVERVIEW - Cost Audit

A cost audit report in India is a comprehensive review of a company’s cost records and accounting practices. It verifies the accuracy of cost data, ensures compliance with cost accounting standards, and assesses the effectiveness of cost control measures. Conducted by a qualified cost auditor appointed by the company, the report provides valuable insights into the cost structure, identifies opportunities for cost reduction, and ensures adherence to relevant regulations. As per the Companies Act, 2013, the report is submitted to the Board of Directors and filed with the Central Government

What is Annual Compliance For a One person Company?

Cost Audit Report Applicability

Cost audit is mandatory for specific companies under the Companies (Cost Records and Audit) Rules, 2014. Its applicability depends on the company’s sector and annual turnover.

Sectors Covered

Companies are classified into two main categories:

  • Table A (Regulated Sectors): Includes electricity, petroleum, drugs, fertilizers, sugar, etc.
  • Table B (Non-Regulated Sectors): Includes automobiles, cement, steel, paper, textiles, etc.

Turnover Criteria

A company must undergo a cost audit if it meets the following thresholds:

  • Regulated Sectors (Table A):
    • Annual turnover of ₹50 crores or more.
    • Aggregate turnover of specific products or services of ₹25 crores or more.
  • Non-Regulated Sectors (Table B):
    • Annual turnover of ₹100 crores or more.
    • Aggregate turnover of specific products or services of ₹35 crores or more.

If a company meets both turnover criteria, a cost audit is mandatory. However, if it falls below either threshold, a cost audit is not required, though maintaining cost records remains obligatory.

Companies Required to Conduct a Cost Record Audit

The following companies must file the Cost Audit Report in Form CRA-4 with the Board of Directors:

Non-Regulated Sectors

  • Companies dealing with specified goods or services with an overall annual turnover of ₹100 crore or more from all products or services.
  • Companies dealing with specified goods or services with an aggregate turnover of ₹35 crore or more from a specific product or service.

Regulated Sectors

  • Companies dealing with specified goods or services with an overall annual turnover of ₹50 crore or more from all products or services.
  • Companies dealing with specified goods or services with an aggregate turnover of ₹25 crore or more from a specific product or service.

Exemptions from Cost Record Audit

The following companies are exempt from conducting a cost record audit:

  • Companies where export revenue in foreign exchange exceeds 75% of total revenue.
  • Companies operating from a Special Economic Zone (SEZ).
  • Companies engaged in the production of electricity through a Captive Generating Plant.

Applicable Forms for Cost Audit Report

Form CRA-1: Specifies the format for maintaining cost records, detailing cost elements and their treatment.

Form CRA-2: Used for intimation of the appointment of a cost auditor to the MCA. It must be filed with the RoC within 30 days of the board meeting approving the appointment or 180 days from the start of the financial year.

Form CRA-3:The Cost Audit Report format, containing details on:

  • Cost accounting system & records
  • Inventory valuation
  • Budgetary control
  • Related party transactions
  • Defaults in payments to Government/Banks
  • Export benefits and incentives
  • Internal audit observations
  • Cost control and reduction suggestions
  • Independent audit opinion

The Cost Auditor must submit Form CRA-3 to the company within 180 days of the financial year-end.

Form CRA-4: Used for filing the Cost Audit Report with the Government. The company must submit this form to the MCA within 30 days of receiving the audit report

Fee Structure for Filing CRA-4

Based on nominal share capital as per the Companies (Registration Offices and Fees) Rules, 2014:

Nominal Share Capital

Fee per Document

Less than ₹1,00,000

₹200

₹1,00,000 – ₹4,99,999

₹300

₹5,00,000 – ₹24,99,999

₹400

₹25,00,000 – ₹99,99,999

₹500

₹1,00,00,000 or more

₹600

  • Companies without share capital: ₹200 per document
  • Foreign companies: ₹6,000 per filing

 Penalty for Late Filing (Additional Fees)

Delay Period

Penalty (Times of Normal Fee)

Up to 30 days

2x

31 – 60 days

4x

61 – 90 days

6x

91 – 180 days

10x

More than 180 days

12x

Advantages of Cost Audit to the Government

  1. Fair Pricing in Contracts – Helps the government determine reasonable pricing in cost-plus contracts.
  2. Price Control – Assists in fixing ceiling prices for essential commodities, preventing excessive profiteering.
  3. Focus on Efficiency – Identifies inefficient units, allowing the government to take corrective measures.
  4. Industry Protection – Aids in making decisions to support and safeguard certain industries.
  5. Promotes Healthy Competition – Encourages fair competition among industry players, which helps curb inflation.
  6. Dispute Resolution – Facilitates the settlement of trade disputes, ensuring smoother industrial relations.

Disadvantages of Cost Audit

  • High Cost & Time-Consuming – Requires specialized auditors, leading to increased expenses and longer audit durations.
  • Complex Process – Involves a detailed examination of cost records, demanding expertise and meticulous analysis.
  • Management Resistance – Companies may perceive it as an intrusion, leading to a lack of cooperation, which can affect audit effectiveness.
  • Limited Fraud Detection – Cost audits are not designed to uncover fraud, making it difficult to identify well-concealed fraudulent activities.
  • Narrow Focus – Primarily assesses cost-related aspects, lacking a holistic view of overall financial performance.
  • Dependence on Historical Data – Relies on past records, without considering future trends or market conditions that could impact costs.

Documents Required for Filing E-Form CRA-4

  • XBRL Document – Contains the cost audit report and company’s explanations on any qualifications or reservations noted.
  • Optional Attachments – Any additional supporting documents deemed necessary.

Procedure for Filing E-Form CRA-4

  • To file E-Form CRA-4 on the Ministry of Corporate Affairs (MCA) portal, follow these steps:

    Step 1: Access MCA Portal & Upload Form

    • Log in to the MCA portal and navigate to the E-Form CRA-4 section.
    • Upload the completed CRA-4 form.

    Step 2: Provide Required Details

    • SRN of Form 23C / CRA-2 (related to cost auditor appointment)
    • Financial year for which the report is being filed
    • Date of Board Meeting approving the cost audit report annexure
    • Number of industries/services covered in the report
    • Details of regulated & non-regulated sectors applicable
    • Exempted industries/sectors, if any
    • Cost auditor details (number, category, membership number, firm registration number)
    • Date of auditor appointment & type of appointment
    • Audit scope description
    • Date of receipt of the cost audit report
    • Summary of the cost auditor’s report

    Step 3: Digital Signature & Submission

    • Attach the Digital Signature Certificate (DSC) of an authorized signatory, which may be:
      • Director, Manager, CEO, CFO, Company Secretary, or Authorized Representative
    • Upload the necessary documents and proceed with the payment of fees.

    Step 4: Processing by MCA

    • Upon successful submission, the Ministry of Corporate Affairs will process the eForm CRA-4 for approval.

  • Corporate Identity Number (CIN) / Foreign Company Registration Number (FCRN)

Get more details

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