Procedure for Appointment of Cost Auditor: 2014-15 onward

The enactment of new Companies Act  2013 has brought far reaching changes. On the one hand it has tried to fix up the responsibilities of promoters/Directors/Auditors/Professionals and on the other hand it has tried to ensure that the frauds are minimized. Section 148 has been introduced to replace Section 209(1)(d) of the Companies Act, 1956. The release of new Cost Records and Audit Rules 2014 has ushered in a new era with regard to the appointment of Cost Auditor

The procedure for appointment of cost auditor has undergone major changes

1. Approval of Central Government not required

Now the approval of the Central Government for appointment of Cost Auditor is not required

2. Filing of Form 23C & 23D not required:

The filing of form 23C (Form for approval of Appointment of Cost Auditor) and 23D (Form for Acceptance of Appointment by the Cost Auditor) has been dispensed with keeping in view of the relevant sections under the Companies Act

3. Time Limit for Intimation for appointment of Cost Auditor to be filed with MCA enhanced:

The company is required to file an intimation in Form CRA-2 with Ministry of Corporate Affairs within 30 days of the Board Meeting in which the Cost Auditor was appointed or within 180 days of the beginning of the year whichever is earlier. (CRA-2 Form has not been released by Ministry till date i.e 25th July)

4. Nominal Fee for intimation of appointment of Cost Auditor:

The fee for intimation with regard to the appointment of Cost Auditor will be paid as per the following table:

Extract of Table of Fees (pursuant to rule 12 of the Companies (Registration of Offices and Fees) Rules, 2014)

Fees for  submitting, filing, registering or recording any document by this Act required or authorised to be submitted, filed, registered or recorded is given in the table below

5. Fee of Cost Auditor to be ratified by shareholders

Reference to appointment of Cost Auditor has also been made in Companies (Audit and Auditors) Rules, 2014 under rule 14. It states that:

In case, the company is 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 on the recommendations of the Audit committee, which shall also recommend remuneration for such cost auditor.

The remuneration shall be approved by Board of Directors and also ratified by the shareholders, it clearly shows that now shareholders will have say in finalization of remuneration of the Cost Auditor

If the company is  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

Penal Provisions:

To ensure the compliance with regard to the maintenance of Cost Records and implementation of Cost Audit mechanism, MCA has increased the penalties manifold in case of non-compliance with the relevant section/rules.

The company will be required to pay amount which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees

Apart from the above, every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees, or with both

The penalty has increased manifold in the Companies Act 2013

Section 148(8)  states that If any default is made in complying with the provisions of this section,—

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;

The extract of the penal section is also given below:

147. (1) If any of the provisions of sections 139 to 146 (both inclusive) is contravened, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees, or with both.

Please note that even if the companies had filed form 23C for the year 2014-15, the companies are supposed to file the intimation in Form CRA-2 with MCA as and when the same is released by MCA on its website.

In case of any further clarifications, please feel free to contact us at navneetic@yahoo.com.

CMA Navneet Kumar Jain

FCMA, MBA., LL.B., M.COM., PGDTL., AIIISLA., LIII

Delhi