Qualification of Cost Auditor

Qualification of Cost Auditor:-


Section 233(B) of the Companies Act, 1956 provides that the Central Government may, if it considers
necessary, direct that the audit of cost accounts kept by a company for a specifi ed product or activity
under Section 209(1)(d) shall be conducted by an auditor who shall be a cost accountant within the
meaning of the Cost and Works Accountants Act, 1959. In other words, the Sec. 233B(1), in so far as
it relates to qualifi cations of cost auditor provides that a person holding certifi cate of practice from
the Institute of Cost and Works Accountants of India only can be appointed as a cost auditor. The
cost auditor may be an individual cost accountant or a fi rm of cost accountants with at least two
partners. A fi rm of cost accountants can be constituted with the previous approval of the Central
Government/Institute as required under the regulation 113 of the Cost and Works Accountants
Act, 1959 as amended from time to time and in which all the partners are cost accountants holding
certifi cate of practice issued by the Institute of Cost and Works Accountants of India. Section 224
(1-B) of the Companies Act, 1956 further provides that a person can be appointed as a cost auditor
only if he is not in full time employment elsewhere.

A proviso to Section 233B(1) lays down that if the Central Government is of opinion that suffi cient
number of cost accountants within the meaning of the Cost and Works Accountants Act, 1959 are
not available for conducting the audit of the cost accounts of companies generally, the Government
may, by notifi cation in the Offi cial Gazette, direct that, for such period as may be specifi ed in the
said notifi cation, such Chartered Accountant within the meaning of the Chartered Accountants
Act, 1949, as possesses the prescribed qualifi cations, may also conduct the audit of the cost accounts
of companies. It may be clarifi ed here that the Central Government has not so far issued any
notifi cation under the above proviso.


There are several members of the Institute of Cost and Works Accountants of India (ICWAI), who
have qualifi ed the examination of both the Institutes namely ICWAI and the Institute of Chartered
Accountants of India and thus are eligible for membership as well as certifi cate of practice from
both the Institutes. However, none of the members can hold “certifi cate of practice” in more than
one Institute under the provisions of both the Institutes. Therefore, practically there is no possibility
of any fi nancial auditor to practice as cost auditor or vice versa.

However, it is only in the background of the aforesaid proviso that Section 233B(5)(b) provides that
a person appointed under Section 224 as an auditor of the company (fi nancial auditor) shall not be
appointed or re-appointed for conducting the audit of the cost accounts of a company (cost auditor
of the same company).