(12.12.8) cost Audit

section 2338 empowers the Central Government to issue necessary directions for conducting Cost Audit of companies engaged in production, processing, manufacturing or mining activities. The manner of conducting cost audit of a particular company may be specified in the order of the Government.

The cost audit can be conducted by a Cost Accountant within the meaning of the Cost and works Accountants Ac, 1959. However, a chartered accountant can also conduct cost audit if sufficient number of cost auditors are not available and the Central Government issues a notification to this effect.

The cost auditor can be appointed by the Board of Directors in accordance with the provisions of s.224(B) and with the previous approval of the Central Government. The appointment of any person as cost auditor of a company who is in full-time employment elsewhere is also prohibited. The ceilings on number of audits are also applicable to a cost auditor as in the case of financial auditor under s.224. An auditor of the company cannot be appointed cost auditor. Also a person who is disqualified as an auditor is also disqualified for appointment as cost auditor. Further, if the cost auditor, after his appointment as such suffers from any of the disqualifications, he must cease to act as cost auditor. The provisions of s.224 shall also apply in relation to a cost auditor. The cost auditor shall make a report in relation to the audit conducted by him to the Central Government and send a copy of the report to the company.