EMERGING ROLE OF COST ACCOUNTANTS UNDER THE
COMPANIES ACT 2013
Dr. B RAVI, M.B.A., F.C.S., Ph.D.,
COMPANY SECRETARY IN PRACTICE
GURU NILAYAM
OLD NO.16, NEW NO.42,
RATHINAM STREET, GOPALAPURAM
CHENNAI- 600086
044-28350517/1055, 98400 82545
[email protected]
SEPTEMBER 2015
1. Who is a Cost Accountant?
 Cost Accountant means a cost accountant as defined
in Section 2(1)(b) of the Cost and Works
Accountants Act, 1959.(Section 2(28) of the
Companies Act 2013).
 According to Section 2(1)(b) of the Cost and Works
Accountants Act, 1959 Cost accountant means a
person who is a member of the Institute.
2. Can a Cost accountant be considered
as an “Expert” for the purpose of the
Companies Act 2013?
 Yes. According to Section 2(38) of the
Companies Act 2013, the term Expert
includes besides others, a Cost Accountant also.
3. What is the role of Cost Accountant in
incorporation of a Company?
 Section 7 of the Companies Act 2013 under sub section 1
details various documents and information to be filed with the
Registrar within whose jurisdiction the registered office of a
company is proposed to be situated.
 One such document under Section 7(1)(c) of the Companies Act
2013 is a declaration in the form prescribed under Rule 14 of the
Companies (Incorporation) Rules 2014 to be filed with the
Registrar.
 This declaration in Form No INC 8 can be given by a Cost
Accountant who is engaged in the formation of the company
declaring that all the requirements of this Act and the rules made
thereunder in respect of registration and matters precedent or
incidental thereto have been complied with.
4. Can a Cost Accountant be appointed
as internal auditor?
As per Section 138 read with Rule 13 of Companies (Accounts) Rules 2014 the following class of
companies are required to have Internal Auditor/s:
Class of Companies
Conditions
Listed Company
Unlisted
Applicable irrespective of any criteria
Public Paid-up Share
Company
Turnover
Capital
Outstanding
Outstanding
Borrowings
Deposits
Rs.50 Crore or Rs. 200 Crore Rs.100 Crore or Rs. 25 Crore or
more
Private Company
during or
more more at any more at any
preceding
during
point
financial year
preceding
preceding
preceding
financial year
financial year
financial year.
Turnover
during point
during
Outstanding Borrowings
Rs. 200 crore or more during Rs. 100 crore or more at any
preceding financial year
point of time during preceding
financial year.
 Time Limit for appointing: An existing company covered under any of the
above criteria shall comply with the requirements of section 138 and this rule
within six months of commencement of Section 138. i.e on or before
30.09.2014
 Qualification of Internal Auditor:
He may either be a Chartered accountant or a Cost accountant, or such other
professional as may be decided by the Board. The term “Chartered Accountant”
shall mean a Chartered Accountant whether engaged in practice or not.
The internal auditor may or may not be an employee of the company;
 Scope and Periodicity of Audit: The Audit Committee of the company or
the Board shall, in consultation with the Internal Auditor, formulate the scope,
functioning, periodicity and methodology for conducting the internal audit.
 Report to Board: The internal audit shall be conducted and reported to the
Board.
5. What are the powers and duties of
Cost Auditors?
6. State the class of companies that are
required to include in the books of
accounts kept by them particulars
relating to the utilisation of materials or
labour or to other items of cost?
 Effective 31.12.2014, as per the Companies (Cost Records and Audit)
Amendment Rules 2014 Rule 3 of the Companies (Cost Records and
Audit) Rules 2014 details the class of companies which shall include
cost records for such products or services in the books of accounts
provided that they have an overall turnover of Rs.35 crore or more
during the immediately preceding financial year.
 The companies include foreign companies as defined under Section
2(42) of the Companies Act 2013 except that those covered under
Serial no 33 of the table under Non regulated sectors.
 Companies Cost Records and Audit Rules 2014 shall not apply to a
company which is classified as micro enterprise or a small enterprise
including as per the turnover criteria under Section 7(9) of the Micro,
Small and Medium Enterprises Development Act, 2006.
7. State the categories of companies that
are required to have cost audit?
a) A company which is covered under Rule 3 of the Companies (Cost Records and
Audit) Rules, 2014 and whose revenue from exports on foreign exchange exceeds
75% of its total revenue is not required to get its cost records audited in accordance
with the Rules.
b) A company which is covered under Rule 3 of the Companies (Cost Records and
Audit) Rules, 2014 and operating from a SEZ is not required to get its cost records
audited in accordance with the Rules.
c) Every company covered under Rule 3 item A (regulated sectors) whose overall
annual turnover from all its products and services during the immediately preceding
Financial Year is Rs.50 Crore or more and the aggregate Turnover of the Individual
product/s or service/s for which cost records are required to be maintained is Rs.25
Crores or more shall get its cost records audited in accordance with the Rules.
d) Every company covered under Rule 3 item B (non-regulated sectors) whose overall
annual turnover from all its products and services during the immediately preceding
Financial Year is Rs.100 Crore or more and the aggregate Turnover of the Individual
product/s or service/s for which cost records are required to be maintained is Rs.35
Crores or more shall get its cost records audited in accordance with the Rules.
8. State the formats in which the cost
records are required to be maintained?
 Effective 01.04.2014, every company under these
rules shall in respect of each financial year shall
maintain cost records in form CRA.1.
 However companies covered in S.No.12, 24 to 32
falling under Rule 3, item B is required to maintain
the Cost Records on or after 01.04.2015.
 The term ‘Company’ includes all units and branches
thereof.
 Rule 5(2) and (3) details the purpose of maintaining
Cost Records.
9. What is the time limit within which
Cost Auditor should be appointed?
Cost Auditor shall be appointed by the
category of companies covered in
Rule 3 and meet the threshold limits
laid down in Rule 4 shall within 180
days of the commencement of every
financial year appoint a cost auditor.
Who will appoint the cost auditor?
 The Board of directors shall appoint the cost auditor who shall be
a cost accountant in practice on such remuneration as maybe
determined by the members in such manner as maybe
prescribed-S.148(3)
 Rule 14 of the Companies (Audit and Auditors) Rules 2014
prescribes as follows:
 The board shall appoint an individual who is a cost accountant in
practice, or a firm of cost accountants in practice, as cost auditor on
the recommendations of the Audit committee, which shall also
recommend remuneration for such cost auditor
 The remuneration recommended by the Audit Committee shall be
considered and approved by the board and ratified subsequently by
the shareholders.
 In case of companies which are not required to
constitute an audit committee, the board shall
appoint an individual who is a cost accountant in
practice or a firm of cost accountants in practice as
cost auditor and the remuneration of such cost
auditor shall be ratified by shareholders subsequently.
10. What is the tenure of office of Cost
Auditor?
 As per Rule 6(3), every cost auditor appointed shall
continue in such capacity till the expiry of 180 days
from the closure of the financial year or till he submits
the cost audit report for the financial year for which he
has been appointed.
 Any casual vacancy in the office of cost auditor, the
board has the power to fill up the vacancy within 30
days of vacancy and inform the Central Government in
Form CRA.2 within 30 days of appointment.
11. State the obligation on part of the
company after the appointment of Cost
Auditor.
 As per Rule 6(2), every company shall inform the
Cost Auditor concerned of his appointment and file a
notice of such appointment with the Central
Government within a period of 30 days of the board
meeting in which the appointment was made or
within a period of 180 days of commencement of the
financial year whichever is earlier.
 The notice of intimation shall be in electronic mode
in form CRA.2 along with necessary filing fee.
12. State the requirement relating to cost
audit report.
 The cost auditor who conducts an audit of the cost records
shall submit his report with reservations or qualifications or
suggestions if any in Form CRA.3 to the board of directors
within a period of 180 days from the closure of the financial
year to which the report relates.
 The board of directors shall consider and examine the
report and in particular the reservations or qualifications
contained therein.
 The company shall within a period of thirty days from the
date of receipt of report furnish the Central Government in
Form CRA.4 along with full information and explanation
for every reservation/ qualification along with applicable
fees.
13. Duty of cost auditor in reporting
fraud?
 According to Rule 6(7), the provision of Section 143(12) and the rules made




thereunder shall apply mutatis mutandis to a cost auditor during performance of
his functions under section 148 of the Act read with these rules.
Section 143(12) as amended by the Companies (Amendment) Act 2015, reads as
under:
“Notwithstanding anything contained in this section, if an auditor of a company in the
course of the performance of his duties as auditor, has reason to believe that an offence of
fraud involving such amount or amounts as may be prescribed, is being or has been
committed in the company by its officers or employees, the auditor shall report the matter to
the Central Government within such time and in such manner as may be prescribed:
Provided that in case of a fraud involving lesser than the specified amount, the auditor shall
report the matter to the audit committee constituted under section 177 or to the Board in
other cases within such time and in such manner as may be prescribed:
Provided further that the companies, whose auditors have reported frauds under this subsection to the audit committee or the Board but not reported to the Central Government,
shall disclose the details about such frauds in the Board's report in such manner as may be
prescribed”.
14. Can a Cost Accountant be appointed
as an Independent Director?
 Section 149 mandates certain classes of companies to have
certain number of Independent Directors on the Board. For
this purpose sub section 6 of section 149 details the
conditions to be fulfilled by a director to be appointed as an
Independent Director.
 There is no prohibition for a Cost Accountant to be
appointed as an Independent Director except that neither
himself nor his relatives is/has been an employee/
proprietor/ partner in any of the 3 financial years
immediately preceding the financial year in which he is
proposed to be appointed of a firm of cost auditors of the
company or its holding, subsidiary, associate company.
15. What is the role of Cost Accountants
in
Merger
&
Amalgamation
of
companies?
 Section 232 of the Act deals with merger &
amalgamation of companies which inter alia provides
under sub section 7 that every company in relation to
which an order is made by the tribunal approving the
scheme shall until the completion of the scheme is
required to file a statement in such form and within
such time as may be prescribed with the Registrar
every year duly certified. This certification, certifying
that the scheme is being complied with in accordance
with the order of the tribunal or not can be given by a
Cost Accountant.
16. Can a Cost Accountant be eligible to
be appointed as interim administrator or
administrator by the tribunal on receipt of
an
application
for
revival
and
rehabilitation of a sick company?
 Section 259 of the Act empowers the tribunal to
appoint interim administrator or company
administrator as the case may be from a data bank
maintained by the Central Government or any
agency or Institute authorized by the Central
Government.
 The data bank shall consist names of professionals
which include Cost Accountants.
17. Can a Cost Accountant be appointed
as Company Liquidator?
 For the purpose of winding up of a company
by the tribunal under Section 275 of the Act,
the tribunal at the time of passing the order of
winding up shall appoint an official liquidator
or a liquidator from the panel mentioned
under section 275 (2).
 The panel shall comprise of professionals
including Cost Accountants having atleast 10
years experience in company matters.
18. Can a Cost Accountant provide
professional assistance to Company
Liquidator?
 Section 291 of the Act empowers the Company
Liquidator to appoint Cost Accountants on such
terms and conditions as may be necessary to assist
him in the performance of his duties and functions
under the Act. However the above power can be
exercised by the liquidator only with the sanction of
the tribunal.
 The Cost Accountant so appointed shall disclose
forthwith to the tribunal in the prescribed form any
conflict of interest or lack of independence in
respect of his appointment.
19. Is a Cost Accountant entitled to
appear before the tribunal under section
432 if the tribunal passes an order for
examination of promoters, directors etc.,?
 Pursuant to section 300(4), a person ordered
to be examined under section 300 based on the
order of the tribunal may at his own cost
employ Cost Accountants who shall be at
liberty to put to him such questions as a
tribunal may consider just for the purpose of
enabling him to explain or qualify any answer
given by him.
20. Can a Cost Accountant be appointed
as technical member?
 Yes. A Cost Accountant is eligible for
appointment as a technical member if he
is/ has been in practice as a Cost
Accountant for atleast 15 years.
21. Whether a Cost Accountant is eligible
to present a case before the tribunal or
appellate tribunal on behalf of a party to
any proceedings or appeal before the
tribunal or appellate tribunal?
 Section 432 which deals with right to legal
representation inter alia provides that a party
to any proceeding or appeal before the
Tribunal or the Appellate Tribunal, as the case
may be, may either appear in person or
authorise one or more Cost Accountants to
present his case before the tribunal or the
Appellate tribunal.
THANK YOU