Section 148: Central Government to specify audit of items of cost in respect of certain companies
This section allows the Central Government to order certain companies to maintain and audit cost records, in addition to their regular accounting records, and specifies the procedures and penalties for non-compliance.
Penalty
(8)(a) the company and every officer of the company who is in default shall be punishable in the manner as provided in sub-section (1) of section 147;
(8)(b) the cost auditor of the company who is in default shall be punishable in the manner as provided in sub-sections (2) to (4) of section 147.
The section, clause by clause
What the section says
In plain terms
(1)Notwithstanding anything contained in this Chapter, the Central Government may, by order, in respect of such class of companies engaged in the production of such goods or providing such services as may be prescribed, direct that particulars relating to the utilisation of material or labour or to other items of cost as may be prescribed shall also be included in the books of account kept by that class of companies:
The Central Government can order certain companies to include details about material, labour, or other cost items in their accounting records, after consulting the relevant regulatory body if the companies are regulated under a special Act.
provisoProvided that the Central Government shall, before issuing such order in respect of any class of companies regulated under a special Act, consult the regulatory body constituted or established under such special Act.
(2)If the Central Government is of the opinion, that it is necessary to do so, it may, by order, direct that the audit of cost records of class of companies, which are covered under sub-section (1) and which have a net worth of such amount as may be prescribed or a turnover of such amount as may be prescribed, shall be conducted in the manner specified in the order.
The Central Government can order an audit of cost records for companies with a prescribed net worth or turnover, to be conducted in a specified manner.
(3)The audit under sub-section (2) shall be conducted by a 3[cost accountant] who shall be appointed by the Board on such remuneration as may be determined by the members in such manner as may be prescribed:
The cost audit will be conducted by a cost accountant appointed by the Board, who must follow cost auditing standards and cannot be the company's auditor.
provisoProvided that no person appointed under section 139 as an auditor of the company shall be appointed for conducting the audit of cost records:
provisoProvided further that the auditor conducting the cost audit shall comply with the cost auditing standards.
explanationExplanation.—For the purposes of this sub-section, the expression “cost auditing standards” mean such standards as are issued by the 4[Institute of Cost Accountants of India], constituted under the Cost and Works Accountants Act, 1959 (23 of 1959), with the approval of the Central Government.
(4)An audit conducted under this section shall be in addition to the audit conducted under section 143.
The cost audit is in addition to the regular audit required under the law.
(5)The qualifications, disqualifications, rights, duties and obligations applicable to auditors under this Chapter shall, so far as may be applicable, apply to a cost auditor appointed under this section and it shall be the duty of the company to give all assistance and facilities to the cost auditor appointed under this section for auditing the cost records of the company:
A cost auditor has similar rights and duties as a regular auditor and must submit a report to the company's Board of Directors.
provisoProvided that the report on the audit of cost records shall be submitted by the 5[cost accountant] to the Board of Directors of the company.
(6)A company shall within thirty days from the date of receipt of a copy of the cost audit report prepared in pursuance of a direction under sub-section (2) furnish the Central Government with such report along with full information and explanation on every reservation or qualification contained therein.
The company must send the cost audit report to the Central Government within 30 days, along with explanations for any reservations or qualifications.
(7)If, after considering the cost audit report referred to under this section and the information and explanation furnished by the company under sub-section (6), the Central Government is of the opinion that any further information or explanation is necessary, it may call for such further information and explanation and the company shall furnish the same within such time as may be specified by that Government.
The Central Government can request further information or explanations from the company after reviewing the cost audit report.
(8)If any default is made in complying with the provisions of this section,—
Failure to comply with this section can result in punishment for the company, its officers, and the cost auditor, as specified in section 147.
(8)(a)the company and every officer of the company who is in default shall be punishable in the manner as provided in sub-section (1) of section 147;
(8)(b)the cost auditor of the company who is in default shall be punishable in the manner as provided in sub-sections (2) to (4) of section 147.
(8)CHAPTER XI APPOINTMENT AND QUALIFICATIONS OF DIRECTORS
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. Subs. by Act 1 of 2018, s. 44, for “or to any other persons” (w.e.f. 9-2-2018).
- 2. The proviso ins. by s. 44, ibid., (w.e.f. 9-2-2018).
- 3. Subs. by s. 45, ibid., for “Cost Accountant in practice”(w.e.f. 9-2-2018).
- 4. Subs. by s. 45, ibid., for “Institute of Cost and Works Accountants of India” (w.e.f. 9-2-2018).
- 5. Subs. by s. 45, ibid., for “cost accountant in practice”(w.e.f. 9-2-2018).
- 1. Subs. by Act 1 of 2018, s. 46, for sub-section (3) (w.e.f. 7-5-2018).
This section refers to
Referred to by
Search the whole Act, or ask it a question, in the interactive browser.
Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.