Meaning and Definition:

Cost Audit is a critical way to analyze and verify the Cost Accounts,
to see if they are according to the cost accounting principles and
guidelines. India is the only country to introduce statutory cost audit
to regulate 45 vital industries in the Indian economy. Cost Audit has
been defined by the Chartered Institute of Management Accountants
(CIMA) of Landon as the verification of cost accounts and a check
on the adherence to the cost accounting plan.

Objectives:

Prospective Objective: Under which cost audit aims to identify the

undue wastage or losses and ensure that costing system determines
the correct and realistic cost of production.

Constructive Objectives: Cost audit provides useful information to

the management regarding regulating production, economical
method of operation, reducing cost of operation and
reformulating Cost accounting plans.

Types of Cost Audit:

On behalf of the Management.

On behalf of a Customer.
On behalf of Government.
By Trade Association.
Statutory Cost Audit.
Cost Audit for Industries:

Cost Audit is applicable to:

o Companies engaged in manufacturing, production or
processing of goods or services.
o Both Private Limited & Public Limited Companies are
covered.

These Companies are covered under Cost Audit if any of the

following criteria is fulfilled:
o Company Listed on Stock Exchange, or
o Turnover of the company exceeds Rs. 100 crores

Cost Audit is mandatory for the financial year 2012-13 and

onwards.

Companies whose Cost Audit Orders were issued on case to case

basis as per earlier Rules, shall continue to be covered under Cost
Audit whether they fulfill the above criteria or not.

Cost Accounting Records:

Cost Accounting Records are to be maintained as per The

Companies (Cost Accounting Records) Rules, 2011.
Cost Accounting Standards issued by the Institute of Cost
Accountants of India.
Cost Accounting Records are required to be maintained for at
least 8 financial years.

Cost Audit Report:

It is to be prepared on the basis of Cost Audit Report Rules,
2011

Submission of Cost Audit Report:

It is to be submitted online to Ministry of Corporate Affairs.
 If Company is following April to March financial year, then the
Cost Audit Report for the Financial year 2013-14 is required to
be submitted by 27th September, 2014 (i.e., 180 days from the
close of financial year)