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Cost Audit – Monitoring Cost Records

Who Files This?

Certain classes of companies engaged in manufacturing or providing regulated services are required to maintain cost records and have them audited under Section 148 of the Companies Act, 2013.

Applicability Criteria

  • Companies engaged in regulated sectors (e.g., telecommunication, electricity, petroleum, drugs & pharmaceuticals, fertilizer, etc.) with:

    • Turnover from all products/services > ₹35 crore.

  • Companies engaged in non-regulated sectors with:

    • Turnover from all products/services > ₹100 crore, and

    • Aggregate turnover of individual products/services covered under cost audit rules > ₹35 crore.

Why It Matters

Cost Audit provides transparency on the true cost of production and operations, prevents overpricing, and enables the government to monitor sectors critical to the economy.

Process of Filing

  1. Appointment of a Cost Auditor (Form CRA-2 filed within 30 days of Board Meeting or 180 days of FY start).

  2. Cost records prepared and maintained as per CRA Rules.

  3. Cost Auditor submits Cost Audit Report in CRA-3 to the company.

  4. Company files CRA-4 with ROC within 30 days of receipt.

Penalty

  • Company: Penalty of ₹25,000 to ₹5 lakh.

  • Officers: Penalty up to ₹50,000 or imprisonment up to 1 year.

  • Cost Auditor: Penalty of ₹25,000 to ₹5 lakh for wrong certification.

How LTC Helps

  • Checking applicability of cost audit to your company.

  • Coordinating with Cost Auditors for smooth filing.

  • Drafting & filing CRA-2 and CRA-4.

  • Ensuring accurate maintenance of cost records.