Financial Daily from THE HINDU group of publications
Wednesday, Apr 24, 2002
Cos allowed 135 days for cost audit records
KOLKATA, April 23
A COST report, submitted on or after October 1, 2002, has to comply with the Government's Cost Audit Report Rules, 2001 irrespective of the financial year of the company to which it will relate. This has been mandated by the Institute of Cost and Works Accountants of India (ICWAI). The company concerned should make available to its cost auditor within 135 days from the close of its financial year, all cost records and statements. CARR 2001 supercedes CARR 1996.
Such statements, cost accounting circles indicate, should also include annexure and proforma to the cost audit report. These would need approval from the company's board of directors before they are submitted to the Government. At the time of handing over the cost statements (within the 135-days time-frame) to the auditor, it is not necessary to get board approval. The latter can be taken subsequently.
It is obligatory for the auditor to furnish copies of his report to the Government within 180 days from the end of the company's fiscal year. At the moment, there is no provision to grant extension of this time limit.
In case a company fails to comply with the 135-day limit, it will be subject to penalties under Rule 8(2) as well as those under the Companies Act. Similarly, there will be penalties for defaults by the cost auditor.
The main cost audit report, it is pointed out, remains an important tool for the auditor. Recent revisions have ensured that a cluster of areas may be covered by it; these may include service industries such as banking and insurance, mining and plantations.
Accounting experts underline the significance of the newly introduced Para 3, which allows the cost auditor to make his observations on various aspects of the company's performance. A number of issues covered under this para have been brought in from the Report Rules of 1996. A few additional aspects have been embodied as well.
Para 4 covers various suggestions for enhancement of the company's performance with respect to cost control and reduction.
This, it is felt, is akin to its operational and management audit. The cost auditor, according to Para 5, can give other recommendations as well.
Sources further maintain that the auditor would have to state specifically whether the cost accounting system is adequate to "correctly" determine cost of production.
The term "correctly" needs to be treated in the context of the phrase "true and fair view" as used in the main certificate.
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