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Unit 12: Cost Audit

The Audit Committee should also ensure that the cost auditor is independent and is at arm’s Notes
length relationship with the company. After ascertaining the eligibility, the Audit Committee
will recommend to the Board of Directors for appointment of the Cost Auditor.
Cost Auditor to provide a certificate under Section 224 (IB) of the Companies Act, 1956. Board
Resolution to be passed by the Company for appointment of Cost Auditor. Form 23-C to be filed
by the Company, with Cost Audit Branch, Ministry of Corporate Affairs seeking approval for
appointment of Cost Auditor.

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Caution Further, Government approval for appointment of Cost Auditor for carrying out
such Cost Audit was also not considered necessary.

12.1.2 Enclosure with Form 23-C

1. Certified Copy of Board Resolution passed by the Company sanctioning the proposal for
which the Central Government approval has been sought.
2 Copy of Certificate obtained from cost auditor regarding compliance of Section 224 (1B).
Any other information can be provided as an optional attachment. For example:

3. In case of change in cost auditor, letter to the previous auditor informing him about the
change.
4. In case there is extension of financial year, approval letter for such extension.

5. Payment of Application fee is through ON LINE Mode: Credit Card/Debit Card. The
amount fee payable as on date is as follows:

Task Identify different steps carrying out by cost auditor in performing cost audit.

Self Assessment

State whether the following statements are true or false:
1. Government approval for appointment of Cost Auditor for carrying out such Cost Audit
was earlier considered necessary.
2. Cost audit is an audit process for verifying the cost of manufacture or production.
3. Individual Cost Audit Orders for the companies or products are issued by the Cost Audit
Branch, Ministry of Corporate Affairs for year 2011-12.

12.2 MAOCARO to CARO

Through Notification No G.S.R. 480(E) of June 12, 2003, the Department of Company Affairs
(DCA) has replaced MAOCARO with the Companies (Auditor’s Report) Order, 2003 — CARO.
The new order does merely remove the MAO in the old order — it appears much more expansive
in scope. Effective from July 1, 2003, it applies to all companies save banking and insurance
companies, Section 25 companies and private limited companies with paid-up capital and reserves
of less than ` 50 lakh which have not accepted public deposits and do not have a loan liabilities
in excess of ` 10 lakh and whose turnover does not exceed ` 5 crore.

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