Master Circular No. 2/20] 1
521 14/CAB-20 1 1
I * Government of India
Ministry of Corporate Affairs
. .- Cdst Audlf Branch
,) ;' Ir****
i '0-1 ' Wing, 2d Flodr,
CGO Complex, lodhi Road,
New Delhi - 1 10 003
Dated the November 11,201 1 ' .
Institute of Cost cqd Works Accountants of India,
12, Sudder Streei
Kolkata - 700 016'.
SubJecf:Master ocular on Cost Accountlna Records and Cod Audit
Ministry has fromi time-to-time issued number of circulars with regard to
various matters concttrning cost accounting records and cost audit in fhe
corporate sector, All these circulars have been reviewed. In supersession of the
earlier circulars as mentioned in Appendix, a Master Clrcular is issued as under:
(a) As per provisions of the Cost Audit Report Rules that are in force from time-to-
time, a cost audifor is required to comment on the scope and performance
of infernal audit of cost records, Hence if would tend to mitigate against the
proper and dispas~ionafe discharge of his duties if he was also the internal
auditor of the company for the same period for which he is conducting the
cost audit, In view 13f this, the cost auditor cannot also be t h e internal auditor
of a company fo: ,he period for which he is conducting t h e cost audit,
irrespective of the fact whether he is conducting cost audit for one o r all of
the company's prc~:!:zts/activities.
S) The specified number of companies for the purpose of section 2330 (21 read
with recfion 224 (1.bj of the Companies Act. 1956 is to be computed f0r.a
given financial year with reference to the number of companies wherein h e
has been appoiniod as the cost auditor, including those wherein he is
proposed to be appointed for which he has given his consent. The number of
companies in respect of which cost audit reports have not been submitted
and have become overdue shall also be taken into account for the purposes
of ceiling under section 224 ( 1 0).
(c) A cosf auditor shall be deemed fo hove concluded his appointment for the
relevant financial year as soon a s he renders a report to the Central
Government in acmrdance wifh the Cosf Audit Report Rules, us applicable,
with a copy to the Company. His obligation fo answer queries from the
a ~ e arising ouf of review of cost audit reports should
Ministry of ~ o r ~ o r Affairs
not debar him from accepfing another appointmenf us cost audifor of o
(g) Sub-secfion (6)of section 292A of the Companies Act. 1956 states that the
Audit Committee should have discussions with the auditors periodically about
internal control sys-tems, the scope of audit including the observations of the
auditors and review the half yearly and annual financial statements before
submission to the ' Board and also ensure compliance on internal cantrol
systems. It has been already clarified in Deparfrnental Circular No. 6/2001
dated M .08.200 1 '%!pt the term "auditors" includm cosf auditor and hence
"scope of audit inchding observations of the audifon"occurring I n the above
sub-section includ$s the scope of cost audt including observations of the
cost auditors as 'ell. Therefore, the Audit Committee in its duty to ensure
compliance of internal control system shall aSo discuss the suggestions made
in the cost audit bport for implementation, wherever cost audit has been .
directed under sedtion 2338 of the Companies Act, 1956. The presence ' ofthe
cost auditor in such committees will ensure overall cost management,
efficiency in resource utilization, business vertical-wise performance
evaluation, proper pricing of inter-unit/inter-company transfers and valuation
of inventories. However, the cost auditor, wherever appointed, shall attend
and participate a1 .,bemeetings of the Audit Committee or the Board, as the
case may be,but s5all neither be a member nor have the right to vote.
2. The Institute is riqvesfed to bring this to the general information of all
Members in praclice, clnd of the corporafe secfor.
(B.B. o al)
Copy to: ... 4 9"
1. -Governance !$=II, Minishy of Corporate Affairs, Shostri Bhovan. New Delhi
with a request t c ~ ~ p l o a d masler circular on the MCA's website.
/ Registrars of Companies
2. All Regional ~ird;cfofs
3. PS to CAM I to!~OS
4. PS to Secretary X ~ d dSecretarj
5. PS to Joint Secretary (A) / Joint Secretary [R)/ Joint Secretary (MI
6. PS to 01 (OR) / DII (Policy)
7. PS to Economic Adviser
List of old Circblars on Cost Accountina Records and Cost Audit
Sno. Circular No. Date-
-*- ~f Issue Su biect
1. 52/320/80-CAB Janu..~ry 20, Following of the format for submission of ,
1982 Cost Audit Report.
2. 52/826/81 -CAB ~ebrli ary 1 5 , Additional information to be furnished
1 982' along with the Cost Audit Reports.
3. 1/1/1982-C.t.V/ Jannt~ty20, Appointrnenf of Cosf Auditor as an Internal
23/44 / 19 79-C.
L .-Il 1 983 Auditor of a Company.
4. 1/1/83/-C.L.V/ March 18. 1983 Disclosure of full details in Cost Audit Report. *.
52/3 1 8180-CAB
5. 54/409/8@CAB November 19, Appointment of Cost Auditor in Firm's Name
6. 52/409/80-CAB Aug~st 24, 1 984 Authentication of Cost Audit Reporf in
cases where a firm of Cost ~uditors is
approved under U/s 2330 (21 of the
Companies Act, 1956 for.conducting Cost
Aug..f.;i 30, 1988 Clarification relating to sub-section ( 1 0 ) of
1 Section 224 and sub-section (2)of Section
2338 of the Companies Act, 1956 regarding
the appointment of Cost Auditor
January 9, 1990 Authentication of previous year figures in
the Cost Audit Report
Marzh 2.1990 Clarification under Section 224 ( 1 ) of the
Companies Act, 1956.
March 5, 1 990 Clarification under section 224 (1 0) of the
Corn panies Act, 1956 read with section 233 I
of the Act.
1 1. $21 1 1 /93-CAB Junc3 7, 1993 Maintenance of books of cost accounts as
per Cost Accounting Records Rules.
12. 52/ 1 1/93-CAB Jun!; 8,1993 Revised Cost Audit Order on annual basis
issued to the existing companies,
3. 5/21/ZOO1 -C.L.V / Mar.& 18, 2002 Cost Audit Report to be discussed in the
, 52/03/CAB-2002 - ., Audit Committee to be constituted under
section 292A of the Companies Act, 1956.
4. 52/22/CAB-2000 ~o!srnber26, Submission of f he soft copy of the Cost
2002 Audit Reports under section 2338 of the
Companies Act, 1956
1 5. 5/21/2001 -C.L.V / January 9,2003 Participation of Cost Auditor in the
52/323/CAB-87 meetings of Audit Committee to be
constituted under Section 292A of the
Companies Act, 1956 - clarification reg.