Companies Act, 2013 | Audit and cost accounting
Section 148 of the Companies Act, 2013: Cost Records and Cost Audit
Section 148 of the Companies Act, 2013 empowers the Central Government to require specified companies to maintain detailed cost records and, where prescribed conditions are satisfied, obtain a separate cost audit. The Companies (Cost Records and Audit) Rules, 2014, as amended, identify the sectors, thresholds, records, forms and filing requirements.
What are cost records and a cost audit?
Cost records are records of material, labour, overheads and other production or service costs maintained to determine unit cost, cost of operations, cost of sales and margins. A cost audit is an independent examination of the prescribed cost records by an eligible cost accountant. Maintaining cost records and obtaining a cost audit are separate obligations; not every company required to keep cost records must have them audited.
Section 148: provisions explained
Section 148(1): Government power to require cost records
The Central Government may direct prescribed classes of companies producing goods or providing services to include particulars concerning the utilisation of materials, labour and other specified cost items in their books of account. Before directing a class regulated by a special Act, it must consult the regulator constituted under that Act.
Section 148(2): Government power to require cost audit
The Government may order an audit of cost records of companies covered by subsection (1) meeting the prescribed net-worth or turnover criteria. The applicable sector and turnover tests are laid down in the Cost Records and Audit Rules.
Section 148(3): Appointment and standards
The Board appoints a cost accountant as cost auditor, with remuneration determined by members in the prescribed manner. The company's statutory financial auditor appointed under section 139 cannot also conduct its cost audit. The cost auditor must comply with the cost auditing standards issued by the Institute of Cost Accountants of India with Central Government approval.
Section 148(4) and (5): Separate audit and auditor's rights
The cost audit is in addition to the financial-statement audit under section 143. Relevant qualifications, disqualifications, rights, duties and obligations of auditors apply to cost auditors, and the company must provide the necessary assistance and facilities. The cost auditor submits the report to the Board of Directors.
Section 148(6) and (7): Reporting and further information
Within 30 days of receiving the cost audit report, the company must furnish it to the Central Government with complete explanations of reservations or qualifications. The Government may request further information or explanations, which the company must provide within the specified time.
Section 148(8): Consequences of default
For contravention of section 148, the company and officers in default are subject to the consequences in section 147(1), while a defaulting cost auditor is subject to section 147(2) to (4). The precise consequences depend on the nature of the contravention and the applicable amended provisions of section 147.
Which companies must maintain cost records?
Under Rule 3, the sector lists are divided into Table A (regulated sectors) and Table B (non-regulated sectors). Generally, a company engaged in a listed product or service must maintain cost records if its overall turnover from all products and services in the immediately preceding financial year is Rs. 35 crore or more, subject to the rule's exclusions, including companies classified as micro or small enterprises. The precise product or service classification must be checked against the tables and their amendments.
When is cost audit compulsory?
| Sector | Overall turnover in preceding financial year | Turnover of covered product or service |
|---|---|---|
| Table A: regulated | Rs. 50 crore or more | Rs. 25 crore or more |
| Table B: non-regulated | Rs. 100 crore or more | Rs. 35 crore or more |
Rule 4 also contains exclusions, including qualifying export-oriented companies, certain Special Economic Zone operations, and companies generating electricity for captive consumption through a captive generating plant. Apply these exceptions to the facts before concluding that an audit is required.
Cost audit procedure and statutory forms
- Check applicability: determine whether the company, product or service falls under Rule 3 and meets Rule 4.
- Maintain records: prepare and maintain cost records under Rule 5 in CRA-1, including all relevant units and branches.
- Appoint auditor: the Board appoints an eligible cost auditor within 180 days of the start of the financial year, subject to Rule 6.
- File appointment: intimate the Central Government in CRA-2 within 30 days of the Board meeting or 180 days from the start of the financial year, whichever is earlier, as prescribed.
- Obtain report: the cost auditor submits the signed cost audit report in CRA-3 to the Board, generally within 180 days of the close of the financial year.
- File report: file the report and explanations with the Central Government in CRA-4 within 30 days of receipt of the report, in the prescribed electronic format.
2025 update: Notification G.S.R. 361(E), dated 30 May 2025, substituted forms CRA-2 and CRA-4 with effect from 14 July 2025. Use the current forms and instructions available through the Ministry of Corporate Affairs portal.
Official legal resources
- Ministry of Corporate Affairs (MCA): Companies Act, rules, notifications and e-forms
- MCA: Companies (Cost Records and Audit) Amendment Rules, 2016 (sector tables)
- e-Gazette of India: search G.S.R. 361(E) dated 30 May 2025
- Institute of Cost Accountants of India: consolidated Cost Records and Audit Rules and notifications
The applicability of any rule depends on the financial year, business activity, notifications, exemptions and amendments. Consult the current official text when making a statutory filing.