The following article is an Detailed Explanation of Cost Auditor Under the Companies Act 2013. Cost Auditor Meaning, Appointment of Cost Auditor, Procedure for Appointment of Cost Auditor, Removal of Cost Auditor and Cost Auditor Remuneration Explained in the Article Under the Companies Act 2013. The provisions relating to appointment of cost auditors’ appointment are dealt in Companies (Cost Record and Audit) Rules, 2014.
The category of companies specified in rule 3 and the thresholds limits laid down in rule 4, shall within one hundred and eighty days of the commencement of every financial year, appoint a cost auditor. “Cost auditor” means a Cost Accountant in practice, as defined in clause (b), who is appointed by the Board [Rule 6].
- A cost Accountant in practice or a firm of cost accountants can be appointed as a cost auditor.
- A cost accountant holding certificate of practiced on part time basis is not entitled to conduct cost audit. Thus, only a cost accountant in whole-time practice can conduct cost audit.
- Statutory Auditor appointed under Section 139 of the Act can’t be appointed as Cost Auditor of the Company.
Appointment of Cost Auditor: Procedure
- The category of companies specified in rule 3 and the thresholds limits laid down in rule 4 of Companies (Cost Records and Audit) Rules, 2014, shall within one hundred and eighty days of the commencement of every financial year, appoint a cost auditor.
- The audit committee, if constituted by the company shall ensure that the cost auditor is free from any dis qualifications.
- The audit committee shall obtain a certificate from the cost auditor certifying his independence.
- Every company referred to in sub-rule (1) shall inform the cost auditor concerned of his or its appointment as such and file a notice of such appointment with the Central Government within a period of thirty days of the Board meeting in which such appointment is made or within a period of one hundred and eighty days of the commencement of the financial year, whichever is earlier, through electronic mode, in form CRA-2, along with the fee as specified in Companies (Registration Offices and Fees) Rules, 2014.
- On filing the application, the same shall be deemed to be approved by the Central Government, unless contrary is heard within 30 days from the date of filing of such application.
- If within thirty days from the date of filing of such application, the Central Government directs the company to re-submit the said application with additional information the period of thirty days for deemed approval of the Central Government shall be counted from the date of re-submission by the company.
- After the expiry of thirty days, the company shall issue formal letter of appointment to the cost auditor.
- The audit committee, if constituted by the company recommends to the Board a suitable remuneration to be paid to the cost auditor. In the case of those companies which are not required to constitute an audit committee, the Board shall consider and approve the remuneration of the Cost Auditor which shall be ratified by shareholders subsequently.
- Every cost auditor appointed as such shall continue in such capacity till the expiry of one hundred and eighty days from the closure of the financial year or till he submits the cost audit report, for the financial year for which he has been appointed.
- Every cost auditor, who conducts an audit of the cost records of a company, shall submit the cost audit report along with his or its reservations or qualifications or observations or suggestions, if any, in form CRA-3.
- Every cost auditor shall forward his report to the Board of Directors of the company within a period of one hundred and eighty days from the closure of the financial year to which the report relates and the Board of directors shall consider and examine such report particularly any reservation or qualification contained therein.
- Every company covered under these rules shall, within a period of thirty days from the date of receipt of a copy of the cost audit report, furnish the Central Government with such report alongwith full information and explanation on every reservation or qualification contained therein, in form CRA-4 along with fees specified in the Companies (Registration Offices and Fees) Rules, 2014.
- The company shall disclose full particulars of the cost auditor, along with the due date and actual date of filing of the cost audit report by the cost auditor, in its Annual Report for each relevant financial year.
- In those companies, where constitution of Audit Committee is not required by law, then the role of Audit Committee shall be discharged by the Board of Directors.
- The provisions of sub-section (12) of section 143 of the Act and the relevant rules made thereunder shall apply mutatis mutandis to a cost auditor during performance of his functions under section 148 of the Act and these rules.
Information for Appointment of Cost Auditor
i. Information to Cost Auditor: Every Company which requires appointment of Cost Auditor shall inform the Cost auditor of his appointment within 30 days of Board Meeting in which resolution for appointment has passed.
ii. Information to ROC: Company will file form CRA-2 with ROC:
- Within 30 days of passing of Resolution in Board Meeting, OR
- Within 180 days of the commencement of financial year.
- Whichever is earlier.
Cost Auditor Remuneration ( Salary )
Rule 14 of Companies (Audit and Auditors) Rules, 2014 deals with Remuneration of the Cost Auditor. For the purpose of sub-section (3) of section 148, –
- in the case of companies which are required to constitute an audit committee-
- the Board shall appoint an individual, who is a cost accountant in practice, or a firm of cost accountants in practice, as cost auditor on the recommendations of the Audit committee, which shall also recommend remuneration for such cost auditor;
- the remuneration recommended by the Audit Committee under (i) shall be considered and approved by the Board of Directors and ratified subsequently by the shareholders;
- in the case of other companies which are not required to constitute an audit committee, the Board shall appoint an individual who is a cost accountant in practice or a firm of cost accountants in practice as cost auditor and the remuneration of such cost auditor shall be ratified by shareholders subsequently.
Removal of Cost Auditor
The cost auditor appointed may be removed from his office before the expiry of his term, through a board resolution after giving a reasonable opportunity of being heard to the Cost Auditor and recording the reasons for such removal in writing.
The above all the information Prepared on the basis of the Relevant Provisions under the Companies Act 2013. For better Understanding Cross check the Companies Act 2013. For any doubts and quarries comment below.