In this editorial, author shall discuss the provision, applicability of Cost Audit and Cost Auditor on Companies along with reason of issuance of Notice from Cost Department.
Applicability of Cost Records:
As per Rule 3, The class of companies, including foreign companies, engaged in the production of the goods or providing services, specified in the Table A and B of Cost Audit Rules, having an overall turnover from all its products and services of rupees thirty-five crore or more during the immediately preceding financial year, shall include cost records for such products or services in their books of account.
Applicability of Cost Records:
The criteria for applicability of cost audit are different for companies in regulated and non-regulated sector.
For companies under item A:
Every company having annual turnover from all its products and services in the immediately preceding financial year of Rs. 50 crore or more and the aggregate turnover of the individual product or products or service or services for which cost records are required to be maintained of Rs. 25 crore or more.
For companies under item B:
Every company having annual turnover from all its products and services in the immediately preceding financial year of Rs. 100 crore or more and the aggregate turnover of the individual product or products or service or services for which cost records are required to be maintained of Rs. 35 crore or more.
*The criterion is two pronged: overall and product-specific turnover. Both criteria are required to be fulfilled.
Exemptions:
Companies whose revenue from exports in foreign exchange exceeds 75% of its total revenues or companies operating from special economic zones are exempt from the requirement of cost audit.
Reason of issuance of Notice by Department:
As per study of Notices issued by Cost Audit Department, they have given the below mentioned reasons:
I. Company has not maintained Cost Audit Records
II. Company has not conducted Cost Audit
III. Company has not filed Cost Audit Reports with ROC.
What can be reason of receiving of notice from Cost Audit Department?
The foremost reason of receiving of notice form cost audit department can be followings:
√ Misreporting in Financial Statement.
√ Misreporting in AOC-4 (Filing of Financial statement)
√ Misreporting in MGT-7 (Annual Return)
Reason for issuance of Notices:
Corporates/ professional should take proper care while filing the above-mentioned forms and documents.
If any mistake made by professionals/ corporates by mentioning above mentioned details like
√ mentioning of wrong activity code in forms,
√ non-proper bifurcation of turnover in financial statement etc.
may cause issue of notice by the department.
Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com).
Author Bio
