Appointment of Cost Auditors
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S. No.
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Particulars
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Who can be appointed as Cost Auditors
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The company required to get its cost audited under section 233(B)1 of the Companies Act, 1956 shall appoint a cost auditor who is a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Work Accountant Act, 1959 and who hold a valid certificate of practice under sub-section (1) of section 6 of the said Act and includes a firm of cost accountants.
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Reference by Audit Committee
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The Audit Committee of the Board shall be the first point of reference regarding the appointment of cost auditors.
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Cost Auditor shall be free from disqualifications
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(i) The Audit Committee shall ensure that the cost auditor is free from any disqualifications as specified under section 233B (5) read with section 224 and sub-section (3) or sub-section (4) of section 226 of the Companies Act, 1956.
(ii) While a Cost Auditor shall have the prime responsibility to ensure that he does not violate the limit specified under section 224(1-B) of the Companies Act, 1956, the Audit Committee shall also be responsible for such compliance by the cost auditor.
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Certificate from the Cost Auditor
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The Audit Committee shall obtain a certificate from the cost auditor certifying his/its independence and arms length relationship with the company.
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Company to file e-form 23C
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The Company shall e-file its application with the Central Government on www.mca.gov.in portal, in the prescribed Form-23C within 90 days from the date of commencement of each financial year, along with the relevant documents i.e.
(i) Certified copy of Board Resolution proposing appointment of the cost auditor; and
(ii) Copy of Certificate obtained from the Cost Auditor regarding compliance of section 224(1B) of the Companies Act, 1956.
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CG to approve form 23C within 30 days from the date of filing
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On filing of application, the same shall be deemed to be approved by the Central Government, unless contrary is heard within 30 days from the date of filing of such application.
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Resubmission of Form 23C
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If within 30 days from the date of filing of such application, the Central Government directs the company to re-submit the said application with such additional information or explanation, as may be specified in that direction, the period of 30 days for deemed approval of the Central Government shall be counted from the date of re-submission by the company.
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Issuance of Appointment letter to the Cost Auditor
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After the expiry of 30 days, as the case may be, the company shall issue formal letter of appointment to the cost auditor, as approved by the Board.
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Auditor to file form 23D
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Within 30 days of receipt of formal letter of appointment from the company, the cost auditor shall inform the Central Government in the prescribed Form-23D, along with a copy of such appointment.
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Disclosure by Company in the Annual Report
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The Company shall disclose full particulars of the cost auditor, along with the due date and actual date of filing of the cost audit report by the cost auditor, in its Annual Report for each financial year.
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If no Audit Committee in the Company
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In those companies where constitution of an “Audit Committee” of the Board is not required by law, the words “Audit Committee” shall stand substituted by the words “Board of Directors”.
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Powers of the Cost Auditors
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The cost auditor has the same powers and duties in relation to the audit of cost accounts, as are provided for statutory auditor under section 227 of the Companies Act, 1956. His remunerations are fixed by the Board of Directors of the Company.
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