CFO & Director Accountability for Cost Records & Audit under Corporate Laws Amendment Bill 2026

Enhanced responsibilities and greater accountability for CFOs, Whole-Time Directors, and Managing Directors in relation to cost records and cost audit as per The Corporate Laws (Amendment) Bill 2026

There is a growing focus on the costing field in India keeping in view of the present complex economic and geopolitical environments. The costing and filing of cost audit report is considered to be only a compliance exercise though the costing data brings out very relevant data for decision making apart from providing the insights to the management about various factors of efficiency, wastages, capacity utilisations, manpower utilisation, product wise profitability, Product category wise profitability, customer wise profitability etc.. The recent proposed amendments in section 148 of Companies Act 2013  as per  Corporate Laws (Amendment) Bill 2026 aim to ensure the correctness of data being filed with Ministry of Corporate Affairs, Government of India.

Section 148 and the Costing Ecosystem : The Existing Framework

Section 148 of the Companies Act, 2013, empowers the Central Government to direct prescribed classes of companies to include cost-related particulars in their books of account. Where such companies also satisfy the net-worth or turnover thresholds prescribed under the rules, the Central Government may further direct a cost audit. The audit is conducted by a Cost Accountant appointed by the Board, and the audit report is filed with the Ministry of Corporate Affairs (MCA) within thirty days of submission to the Board.

The Cost Audit Report is submitted at the Harmonised System of Nomenclature (HSN) code level, the data which is being filed with MCA at HSN code level is of unique nature which provides Costing, sales, profit abilities for the HSN codes under cost audit. The data  also provides insights of different aspects  to the different stakeholders for decision making as these capture cost-of-production, net-sales realisation, profitability, capacity utilisation, manpower deployment, and related operational parameters for each product category under audit. This granularity makes the dataset singularly powerful: nowhere else does the government receive product-level costing and profitability intelligence across a broad cross-section of regulated industries in a standardised, audited format.

Ministry of Corporate Affairs, through The Corporate Laws (Amendment) Bill, 2026, has proposed only a few amendments pertaining to cost records and audit. There are eight subsections in the existing section 148 of the Companies Act relating to maintenance of Cost Records and Cost Audit.

Further,  have been issued under section 148 of the Companies Act 2013 which specifies the formats and other provisions regarding applicability and filing of cost audit reports etc.

Now, the proposed  amendments tend to insert three subsections i.e. 1A, 9 & 10.

Subsection 3 and subsection 8 have been proposed to be amended.

Let us discuss in brief about the amendments. A comparative chart has been attached as annexure for better understanding

Recognition of Cost Accounting Standards

Newly proposed Subsection 1A of section 148 mentions about Cost Accounting Standards. ICMA has released 25 Cost Accounting Standards so far. Seems the recognition of by the Central Government to all or some of these cost accounting standards is on the way.

Presently, Only Cost Accountants are required to comply with the Cost Accounting Standards now the companies will be obliged to comply with the cost accounting standards and any non-compliance may entail the adverse consequences.

Appointment of Firm having partners other than cost accountants as Cost Auditor-enabling MDP

Now provision in subsection 3 mentions about the appointment of a firm too as cost auditor  whereof majority of partners practising in India who are qualified for appointment, by its firm name to be the cost auditor of a company,  if  every partner of the firm is  a person who is registered with a statutory institute or body established under a law in India, having powers of such registration.  So practically this is the way forward for the recognition of Multidisciplinary Firms having majority of cost accountants to be the cost auditor of the company. It needs mention that the amendment aims at enabling multi-disciplinary partnerships for cost auditors and secretarial auditors in a similar manner as provided for financial auditors

Subsection 3 provides that Cost Audit Shall be conducted by a ‘cost accountant’.

Cost Accountant” means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 and who holds a valid certificate of practice under sub-section (1) of section 6 of that Act

The proposed amendments in section 148 of the Companies Act 2013 tend to bring a Paradigm Shift in Accountability for maintenance of Cost Records and getting the cost audit done as per provisions.

Special focus on fixing the responsibility primarily on managing director, the whole-time director in charge of finance, the Chief Financial Officer or any other person of a company charged by the Board with duty of complying with the provisions for maintenance of Cost Records and Cost Audit

India stands at a critical juncture in its economic trajectory. In an era of complex geopolitical headwinds, supply-chain disruptions, and a renewed policy emphasis on self-reliance under initiatives such as ‘Make in India’ and the Production-Linked Incentive (PLI) schemes, the quality of economic data available to policymakers has never been more important. At the heart of this data ecosystem lies one underutilised repository of corporate intelligence: cost records mandated under Section 148 of the Companies Act, 2013.

The Corporate Laws (Amendment) Bill, 2026 (hereinafter “the Amendment Bill”) proposes significant revisions to Section 148. These amendments do far more than tinker with compliance mechanics. Few amendments represent a fundamental shift as to who bears personal responsibility for the integrity of cost data, what standards must govern cost accounting, and how the auditor-appointment ecosystem must evolve to meet the demands of a multidisciplinary professional world.

In the proposed amendment, there is explicit naming of the managing director, the whole-time director in charge of finance, the Chief Financial Officer or any other person of a company charged by the Board with duty of complying with the provisions as personally accountable officers for cost-record compliance. This is going to change the way the data is being kept and filed with MCA in XBRL formats till now.

Despite this richness, the costing ecosystem has historically been treated as a compliance exercise rather than a policy instrument. Companies have focused on the mechanics of filing rather than on data quality; regulators have engaged with the filings reactively rather than analytically. The proposed amendments signal a decisive break from this tradition by strengthening both the supply side (quality and standards of cost records) and the accountability architecture (personal liability of named senior officers).

Personal Liability of MDs, CFOs, WTDs and Named Officers — Proposed Sub-sections (8), (9) and (10)

The most consequential change in the Amendment Bill is the splitting of the penalty framework under the existing sub-section (8) into three separate and carefully calibrated sub-sections. The new scheme distinguishes between failures of different kinds and assigns personal liability to named senior functionaries.

(i) Proposed Sub-section (8): Personal Penalties for Non-Maintenance of Cost Records

Proposed S.148(8): “If the managing director, the whole-time director in charge of finance, the Chief Financial Officer or any other person of a company charged by the Board with duty of complying with the provisions of sub-section (1), contravenes such provisions, such managing director, whole-time director in charge of finance, Chief Financial Officer or such other person of the company, shall be liable to a penalty of five lakh rupees in case of a listed company and fifty thousand rupees in case of any other company.”

The section brings to the fore the importance of data submission in case of listed entities where common public is the main stakeholder too. Earlier there was no such segregation of penalties with regard to list or unlisted companies. The introduction of this segregation signifies the attention the government is providing to the accuracy and quality of data especially in case of listed companies.

Seems soon the days of mere filing compliance will go as the CFOs/MDs/WTDs will ensure the correctness of the data personally otherwise they can be held personally liable.

This provision is a watershed moment in corporate financial accountability.

This provision i.e. revised proposed subsection 8 of Section 148  carries profound implications:

• Governance elevation: Cost accounting is lifted from the operational to the governance tier. MDs, CFOs and WTDs-Finance can no longer treat cost-record maintenance as a finance-department routine. It becomes a board-level compliance obligation with named consequences.
• Board-level engagement: The reference to ‘any other person charged by the Board’ introduces flexibility—a company can designate another senior officer if the CFO role is structured differently—but crucially, this designation must be a conscious Board act, creating a formal audit trail of accountability assignment.

(ii) Proposed Sub-section (9): Penalties for Procedural Non-Compliance

Sub-section (9) creates a separate, lighter penalties for procedural defaults like failure to appoint a cost auditor as required by sub-section (3), and failure to furnish information or further information to the Central Government as required by sub-sections (6) and (7). In these cases, the company faces a penalty of ₹10,000 with a continuing daily penalty of ₹100, capped at ₹2 lakh; every officer in default faces ₹10,000 with a daily penalty capped at ₹50,000.

(iii) Proposed Sub-section (10): Residual Penalties Aligned with Section 147

Sub-section (10) serves as a catch-all for defaults under Section 148 not covered by sub-sections (8) and (9). For such residual defaults, the company and every officer in default remain punishable as per Section 147(1), and the cost auditor remains punishable as per Section 147(2) to (4). This preserves the deterrence structure for auditor-specific misconduct and ensures no compliance gap in the overall penalty framework.

The proposed Amendments Benefit Collection of Reliable, Authentic Data for Policy Decision-Making

The amendments are not merely a corporate governance measure. They are an investment in the quality of India’s economic intelligence infrastructure. Consider the following dimensions:

A. Standardised Data: Enabling Sectoral Comparability

The introduction of government-prescribed cost accounting standards under sub-section (1A) ensures that cost records across companies within the same sector are prepared on uniform bases. For a Ministry or a regulator seeking to understand, say, the cost structure of the generic pharmaceutical industry, or the economic viability of domestic defence component manufacturing, data prepared under common standards is the essential prerequisite for credible analysis.

Without standardisation, inter-company comparisons are riddled with methodological noise. One company’s ‘cost of production’ may include items that another’s does not; overhead allocation methods may differ; depreciation bases may vary. Statutory standards extinguish this variability, making aggregated datasets truly comparable.

B. Named Accountability: Improving Data Integrity at the Source

Personal liability for the MD, CFO and WTD–Finance is the strongest possible signal to the finance function that cost-record accuracy is non-negotiable. History shows that the quality of reported data rises when the person who signs off on it faces personal consequences for inaccuracy. The Companies Act 2013 demonstrated this principle with financial statements: the mandatory CEO/CFO certification under Section 134 and the personal liability attaching to directors for the contents of the financial statements have raised the quality of statutory disclosures. The proposed sub-section (8) applies the same logic to the costing domain.

When the CFO personally certifies, in effect through the consequences of sub-section (8), that cost records are maintained as prescribed, the data flowing into the MCA repository—and ultimately into the cost audit report—will be more accurate, complete, and reliable. Policymakers drawing on this data—whether setting price controls, evaluating anti-dumping margins, calibrating PLI disbursement norms, or assessing the competitiveness of domestic industry—will be working with a more trustworthy information base.

C. HSN-Level Granularity: A Unique Policy Resource

The data filed in cost audit reports at the HSN code level is, to the best of institutional knowledge, the only standardised source of product-level cost and profitability data across regulated industries in India. No commercial database, no survey, and no tax return provides this combination of granularity, frequency, and auditability.

Corporate Governance Imperatives: What MDs, CFOs and WTDs Must Now Do

The proposed amendments create a clear action agenda for finance leadership in companies subject to Section 148:

• The CCRAR mandates the Internal Audit of Cost Records which is not being taken serious till now. This is the time when CFOs should commission an immediate review of the internal controls and processes governing cost-data generation, maintenance, and reporting. Gaps must be identified and remediated before the Amendment Bill takes effect.
• Board-level reporting: Cost-record compliance should be added to the agenda of the Audit Committee and the Board. The formal Board designation of the compliance-responsible officer—whether the CFO, WTD–Finance, or another senior official—must be documented in Board minutes.
• ERP configuration: Cost accounting modules in enterprise systems must be configured to capture data in the format prescribed by applicable Cost Records Rules and aligned with the cost accounting standards that will be prescribed under sub-section (1A). IT teams must be brought into the compliance conversation.
• Training and capacity-building: The finance function—particularly management accountants, internal auditors, and the cost accounting team—must be trained on cost accounting standards, their interpretation, and the applicable penalty framework.
• MCA filing discipline: The approval of Cost Audit Annexures and consideration of the Cost Audit Report must be done within the prescribe limit of 180 days form the close of the year and further the thirty-day timeline for filing the cost audit report with the Central Government under sub-section (6) must be tracked rigorously. Non-compliance in filing is now a clearly penalised, specifically enumerated default under sub-section (9).

Conclusion: From Compliance to Contribution

The proposed amendments to Section 148 of the Companies Act, 2013, mark a turning point in the evolution of cost auditing in India. By inserting sub-section (1A) to codify cost accounting standards, by enabling multi-disciplinary partnership firms as cost auditors, and above all by creating direct, named personal liability for the CFO, WTD–Finance, and MD for cost-record compliance, the Companies (Amendment) Bill, 2026 transforms cost accounting from a compliance obligation into a governance priority.

The consequences are far-reaching. Companies will invest in more rigorous cost-data systems. CFOs and WTDs–Finance will bring their authority and attention to bear on cost-record accuracy. Cost auditors will be drawn from a wider, more expert professional pool. The data ecosystem feeding into the MCA repository will become more standardised, more accurate, and more analytically useful.

For India’s policymakers, regulators, and economic administrators, the ultimate dividend is a step-change improvement in the quality of cost and profitability intelligence available for evidence-based decision-making. In a world where the precision of industrial policy, the standardization of regulatory interventions, and the effectiveness of trade remedies depend critically on reliable underlying data, these amendments are not merely a corporate law reform—they are an investment in the informational foundations of good governance.

Finally, these proposed amendments redefine cost audit, moving it beyond a compliance obligation into the realm of strategic governance.

Please feel free to get in touch at navneetic@yahoo.com (9810175020) in case any further information/explanation is required

Disclaimer: The article has been written in the personal capacity as Practicing Cost Accountant. The views/explanations on the amendments are based on the personal experience and interpretation of the proposed amendments as per the understanding of the author.  The author does not take any responsibility in case authorities/any person takes the views other than that of the author. Readers are advised to refer to the Companies Act 2013 and the Corporate Laws (Amendment) Bill 2026 before relying on the interpretation as above.

Annexure

Comparison Original Section and Section and proposals

148. Central Government to specify audit of items of cost in respect of certain companies

Amendment

^1.Substituted by the Companies (Amendment) Act,2017 :- Amendment effective from 9th February 2018

In section 148, in sub-section (3),for the words “Cost Accountant in practice” the following Words shall be substituted, namely :-

Cost Accountant.

^2.Substituted by the Companies (Amendment) Act,2017 :- Amendment effective from 9th February 2018

In section 148, in sub-section (3),in the Explanation for the words “Institute of Cost and Works Accountants of India”, the following Words shall be substituted, namely :-

“Institute of Cost Accountants of India”.

^3.Substituted by the Companies (Amendment) Act,2017 ;- Amendment effective from 9th February 2018 in sub-section (5), in the proviso, for the words Cost Accountant in practice the following Words shall be substituted, namely :-

“Cost Accountant”.