Companies Act Section 148 — Central Government to specify audit of items of cost in respect of certain companies
CHAPTER X AUDIT AND AUDITORS
Commercial / Corporate
Summary
Sub-section (1) allows the Central Government to issue an order requiring certain classes of companies — those engaged in producing prescribed goods or providing prescribed services — to include details about the use of material, labour, or other prescribed cost items in their books of account. Before issuing such an order for companies regulated under a special Act, the Government must consult the regulatory body set up under that special Act.
Sub-section (2) lets the Central Government, if it thinks it necessary, order that the cost records of companies covered under sub-section (1) — and which have a prescribed net worth or turnover — be audited in the manner specified in the order.
Sub-section (3) states that the audit under sub-section (2) must be conducted by a cost accountant appointed by the Board, with remuneration determined by the members in the prescribed manner. A person appointed as an auditor of the company under section 139 cannot be appointed for the cost audit, and the cost auditor must comply with cost auditing standards. The explanation clarifies that "cost auditing standards" means standards issued by the Institute of Cost Accountants of India, constituted under the Cost and Works Accountants Act, 1959, with the Central Government's approval.
Sub-section (4) clarifies that an audit conducted under this section is in addition to the audit conducted under section 143.
Sub-section (5) says that the qualifications, disqualifications, rights, duties, and obligations of auditors under this Chapter apply to a cost auditor appointed under this section, as far as applicable. The company must give all assistance and facilities to the cost auditor for auditing its cost records. The proviso states that the cost audit report must be submitted by the cost accountant to the company's Board of Directors.
Sub-section (6) requires a company to furnish the Central Government with a copy of the cost audit report within thirty days of receiving it, along with full information and explanation on every reservation or qualification in the report.
Sub-section (7) allows the Central Government, after considering the cost audit report and the company's information and explanation, to call for further information or explanation if it thinks necessary. The company must furnish this within the time specified by the Government.
Sub-section (8) sets out the consequences of default. Under clause (a), if a company or its officer in default fails to comply with this section, they are punishable as provided in sub-section (1) of section 147. Under clause (b), a cost auditor in default is punishable as provided in sub-sections (2) to (4) of section 147.
Official Text
(1) Notwithstanding anything contained in this Chapter, the Central Government may, by order, in respect of such class of companies engaged in the production of such goods or providing such services as may be prescribed, direct that particulars relating to the utilisation of material or labour or to other items of cost as may be prescribed shall also be included in the books of account kept by that class of companies:
Provided that the Central Government shall, before issuing such order in respect of any class of companies regulated under a special Act, consult the regulatory body constituted or established under such special Act.
(2) If the Central Government is of the opinion, that it is necessary to do so, it may, by order, direct that the audit of cost records of class of companies, which are covered under sub-section (1) and which have a net worth of such amount as may be prescribed or a turnover of such amount as may be prescribed, shall be conducted in the manner specified in the order.
(3) The audit under sub-section (2) shall be conducted by a 3[cost accountant] who shall be appointed by the Board on such remuneration as may be determined by the members in such manner as may be prescribed:
Provided that no person appointed under section 139 as an auditor of the company shall be appointed for conducting the audit of cost records:
Provided further that the auditor conducting the cost audit shall comply with the cost auditing standards.
Explanation.—For the purposes of this sub-section, the expression “cost auditing standards” mean such standards as are issued by the 4[Institute of Cost Accountants of India], constituted under the Cost and Works Accountants Act, 1959 (23 of 1959), with the approval of the Central Government.
(4) An audit conducted under this section shall be in addition to the audit conducted under section 143.
(5) The qualifications, disqualifications, rights, duties and obligations applicable to auditors under this Chapter shall, so far as may be applicable, apply to a cost auditor appointed under this section and it shall be the duty of the company to give all assistance and facilities to the cost auditor appointed under this section for auditing the cost records of the company:
Provided that the report on the audit of cost records shall be submitted by the 5[cost accountant] to the Board of Directors of the company.
(6) A company shall within thirty days from the date of receipt of a copy of the cost audit report prepared in pursuance of a direction under sub-section (2) furnish the Central Government with such report along with full information and explanation on every reservation or qualification contained therein.
(7) If, after considering the cost audit report referred to under this section and the information and explanation furnished by the company under sub-section (6), the Central Government is of the opinion that any further information or explanation is necessary, it may call for such further information and explanation and the company shall furnish the same within such time as may be specified by that Government.
(8) If any default is made in complying with the provisions of this section,—
(a) the company and every officer of the company who is in default shall be punishable in the manner as provided in sub-section (1) of section 147;
(b) the cost auditor of the company who is in default shall be punishable in the manner as provided in sub-sections
(2) to
(4) of section 147.