Provisions of Cost Audit Report Rules 2001

Provisions of Cost Audit Report Rules 2001:-


Cost Audit was initially introduced in the country about 43 years back in the year 1965, when the Companies

Act, 1956 was amended through Companies (Amendment) Act, 1965 to incorporate the provisions 

relating to the maintenance of Cost Accounting Records and Cost Audit. These amendments were made 

on the basis of recommendations received from Vivin Bose Commission, Dutta Commission and Shastry 

Committee. The basic structure of Cost Audit was implemented through Cost Audit (Report) Rules, 1968. 

These report rules were superceded subsequently by the Cost Audit (Report) Rules, 1996 notified vide 

GSR 511(E) dated 5.11.96. These Report Rules were again been superceded vide Cost Audit Report Rules, 

2001 notified vide GSR 924(E) dated 27.12.2001. The section 233(B) of the Companies Act 1956 requires 

the cost auditor to submit his cost audit report to the Central Government in the prescribed form and 

simultaneously send a copy of report to the company. The Cost Audit Report Rules 2001 prescribe the 

form, procedures and rules regarding the cost audit report. The following are the salient features:

(a) The report is to be sent to the Central Government and to the company within 180 days           f       the end

of the company’s financial year to which the cost audit report relates (Rule 5);

(b) The Cost Audit Report includes auditor’s observation and suggestions, Annexure and   Performa to

the Cost Audit Report. Therefore, these must also be submitted along with the Cost   Audit Report

 (Rule 2(c));
(c) The cost statements as prescribed under Cost Accounting Records Rules are not required to be attached

with the cost audit report to be submitted to the central government. These cost statements and other 

working papers duly audited and signed by the cost auditor remain with the company (Rule 4);

(d) The Annexure and Proforma prescribed with the Cost Audit Report shall be approved by the Board
of Directors before submitting the same to the Central Government by the Cost Auditor;
(e) The Annexure and Proforma, duly audited by the Cost Auditor, shall also be signed by the Company

Secretary and at least one Director on behalf of the company. In the absence of Company Secretary in 

the Company, the same shall be signed by at least two Directors (Rule 7);

(f) The Cost Audit Report (Amendment) Rules 2006 provide that these reports shall be filed through

electronic media or through any other computer readable media as referred u/s 610A of the Companies 

Act, 1956. These shall be authenticated by the authorized signatories using digital signatures.

(g) A copy of the Report is also to be submitted to the Company by the Cost Auditor and a dated
acknowledgement should be obtained from the company;
(h) Clarifications sought by the Central Government from the Cost Auditor should be furnished by the

Cost Auditor within thirty days of the receipt of such communication. It is a statutory duty of the Cost

Auditor;
(i) If the Cost Auditor gives a qualified report, he should indicate the extent to which he has qualified the
cost audit report and the reasons therefore;