Introduction: The Ministry of Corporate Affairs (MCA) mandates strict adherence to the timelines for the Cost Audit of the 2023-24 fiscal year. Any deviations from these prescribed schedules must be reported without delay. Recent notifications from MCA, coupled with advisories from the Institute of Cost Accountants of India (ICMAI), emphasize the importance of precise data, timely completion, and proper filing of cost audit reports.
Notify the Ministry of Corporate Affairs (MCA) without delay if there are any deviations from the prescribed timeline for the Cost Audit of the 2023-24 fiscal years, as per regulatory obligations.
MCA has recently issued multiple notifications subsequent to scrutinizing the cost audit reports submitted by cost auditors. Concurrently, ICMAI has released advisory dictating guidelines that practicing cost accountants or cost accounting firms must adhere to. These guidelines focus on ensuring precision in data, timely completion of tasks, and the proper filing of cost audit reports.
The essence of the advisory is summarized as follows:
1. Any failure to comply with deadlines concerning the approval of cost audit annexures, submission of cost audit reports, and filing of such reports along with annexures, mandates immediate reporting to MCA by the respective cost auditor.
2. In cases where non-compliance arises regarding the reporting of specific units of measurement according to relevant HSN codes, the cost auditor may be required to report such discrepancies by qualification. It is imperative for organizations to ensure compliance with designated timelines and accurately report the units of measurement to prevent any potential issues in the future.
Attention is directed towards a recent advisory issued by the Institute of Cost Accountants of India, emphasizing the necessity to strictly report units of measurement as specified under the Customs Tariff Act/Companies Cost Records and Audit Rules in the Cost Audit Annexures.
The cost auditor is obligated to highlight, through qualifications, emphases, or disclosures, any instances of non-compliance with Rule 31 as specified below. Additionally, proper management representation must be obtained in cases of deviation and reported in the cost audit report. This implies that during the course of the cost audit, Management Representation Letters (MRL) must be obtained, elucidating any deviations for inclusion in the cost audit reports.
Rule 31 Companies (Cost Records & Audit) Rules: Unit of Measurement (UOM)
The Unit of Measurement (UOM) for each Customs Tariff Act Heading, where applicable, shall align with the specifications provided in the Customs Tariff Act, 1975 (51 of 1975), corresponding to the relevant Customs Tariff Act Heading.
Furthermore, the cost auditor is mandated to report to MCA in instances of any delays in complying with the specified timelines for the completion of the cost audit by September 27, 2024 (for financial years ending on March 31, 2024), and/or the filing of the cost audit report in XBRL within 30 days from the date of receipt by the cost auditors.
Filing of the Cost Audit Report
Rule 6(6) of the Companies Cost Records and Audit Rules stipulates that every company covered under these rules must, within thirty days from the receipt of the cost audit report, furnish the Central Government with such report. This must be done along with comprehensive information and explanations for every reservation or qualification contained therein, in Form CRA-4 in Extensible Business Reporting Language format, in accordance with the specified guidelines in the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2015, along with the fees specified in the Companies (Registration Offices and Fees) Rules, 2014
Advisory for the Members for U.O.M at compilation of Annexures to Cost Audit Report
An advisory has been issued to all members of the ICMAI regarding the compilation of Annexures to the Cost Audit Report under the Companies Act 2013. It emphasizes strict adherence to the specified Unit of Measure (UOM) as outlined in the Customs Tariff Act 1975. Any deviations from these standards must be explicitly noted in the cost audit report through appropriate qualifications, points of emphasis, or disclosures. Additionally, companies must provide explanations or justifications for such deviations in the form of a Management Representation Letter (MRL), which should be incorporated into the cost audit report.
For instance, in industries such as pharmaceuticals, where the unit of measure pertains to weight, the weight of the drug (excluding excipients) should be utilized for compiling the Annexure to the Cost Audit Report.
Timely submission of Cost Audit Report
Following a comprehensive review of cost audit reports by cost auditors, MCA has issued several notices. Simultaneously, ICMAI has released an advisory for practicing cost accountants or cost accounting firms, emphasizing the importance of accuracy in data, timely completion of tasks, and the proper filing of cost audit reports.
The core of the advisory is as follows:
All members are urged to strictly adhere to the statutory timeline for submitting the Cost Audit Report in accordance with the Companies Cost Audit & Record Rules 2014. Any delays must be promptly communicated to the appropriate authorities, including the Cost Audit Branch of MCA and the Government of India.
Conclusion: Adhering to the Cost Audit timelines for the 2023-24 fiscal year is crucial for regulatory compliance. Cost auditors and companies must ensure that all requirements are met and any deviations are promptly reported to the MCA. Following the guidelines set by ICMAI will help maintain the accuracy and integrity of the cost audit reports, thereby supporting transparent and effective financial oversight.
Also Read:
Applicability & Non-Compliance in Cost Records/Audit: MCA Notices & ICMAI Advisory
ICMAI Advisory: Unit of Measure & Cost Audit Report Submission
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