Types of Cost Audit

• Cost Audit on behalf of the management
• Cost audit on behalf of a customer
• Cost Audit on behalf of Government
• Cost Audit by trade association
• Statutory Cost Audit

Basic qualification for a cost auditor is the prescribed examinations and practices by the professional & Regulatory body for Cost & Management Accountancy of the country or in case a person is the member of other professional bodies, exemption should be allowed to him/her under the mutual recognition agreements (MRAs) to become a cost auditor.

Cost audit comprises following three steps:

1. Review
2. Verification
3. Reporting

Cost audit applicability provisions are contained under rule 4 of the Companies (Cost Records and Audit) Rules, 2014. According to the said rule 4, the cost audit is applicable in the following situation –

• Table A specified goods/services –
  • Overall annual total turnover of the company from all the products/services is INR 50 crore or more; and
  • Aggregate turnover from the individual product/service for which cost records are required to be maintained is INR 25 Crore or more.

• Table B specified goods/services –
  • Overall annual total turnover of all the products/services should be INR 100 crore or more; and
  • Aggregate turnover from the individual product/service for which cost records are required to be maintained should be INR 35 crore or more.