Your company has received an order from the Government of India directing your company to have the cost records maintained by the company under Sec. 209(1)(d) for the year ending 31st March, 2009 and for every subsequent year thereafter audited. List the actions to be taken by the company step by step from cost auditor appointment till the submission of the Cost Audit Report, specifying time schedules. What are the penalties for non compliance?

1. Your company has received an order from the Government of India directing your company to have
the cost records maintained by the company under Sec. 209(1)(d) for the year ending 31st March, 2009
and for every subsequent year thereafter audited. List the actions to be taken by the company step
by step from cost auditor appointment till the submission of the Cost Audit Report, specifying time
schedules. What are the penalties for non compliance?


Answer :

(1) The Central Government issues a specifi c order under Section 233-B (1) of the Companies Act,
1956 to get its cost records audited by a practising Cost Accountant, indicating the product for
which the order is issued and the period for which it is ordered (in this case 31st March, 2009).
The order is also applicable for every subsequent year thereafter.
(2) On receipt of the order, the Board of Directors shall select a Cost Accountant in practice or a
fi rm of Cost Accountants and pass a resolution at the Board meeting appointing the cost auditor
subject to approval by the Central Government. The Board may propose a single auditor for all
the units of the company manufacturing the product under audit, or assign the work to more
than one cost auditor. The cost accountant so appointed should fulfi ll the following conditions:
(a) The cost Accountant or all the partners of the fi rm as the case may be, should be qualifi ed
cost accountants within the meaning of the Cost and Works Accountants Act, 1959 and
holding certifi cate of practice.
(b) In the case of a fi rm, it should have been constituted with the previous approval of the
ICWAI as required under Regulation 113 of the Institute of Cost and Works Accountants
Act, 1959.
(c) The Cost Accountant should not be in whole time employment elsewhere as provided in
Section 224 (1-B) of the Companies Act, 1956.
(d) He/they should not suffer from any of the disqualifi cation mentioned in S. 233-B (5) of the
Companies Act.
(e) He/they should not also exceed the ceiling on the number of audits prescribed u/s 224 (1-B).
(3) The Secretary of the company or a Director should make the application to the Central
Government in Form 23-C, accompanied by the requisite fees, for approval of the appointment
of Cost Auditor. The application should be e-fi led within 45 days from the commencement of
the accounting year for which audit is ordered (in this case 15th May, 2008).
(4) On receipt of approval from Government the company should issue a letter to the cost accountant
confi rming his appointment.
(5) Within 135 days from the end of the accounting year, i.e. before 14th August, 2009, the company
should make available all the cost accounting records maintained in accordance with Section
209 (1) (d) of the Companies Act to the cost auditor and render all assistance to him to carry out
the audit.

(6) The cost auditor should complete the audit and submit his report to the Central Government
within 180 days i.e. before 30th September, 1998.
The company and the executives responsible should ensure that the audit is completed and
report is submitted within the stipulated time.
If the company contravenes the provisions of the Cost Audit Report Rules, the company and every
offi cer of the company who is in default shall be punishable with a fi ne upto Rs. 5000 and where the
contravention is a continuing one, with a further fi ne of up to Rs. 500 for every day after the fi rst day
during which period such contravention continues.