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Ceiling on number of audits

Shalaka Chawla (-) (44 Points)

13 September 2012

Is cost audit also included in the ceiling under section 224(1B)?

Please let me know it fast as i have my interview tomorrow. :(

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6 Replies

Sneha (Article) (66 Points)
Replied 13 September 2012

Nope.!!

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CS RAJESH C.CHOUDHARY (ASSISTANT MANAGER) (14607 Points)
Replied 13 September 2012

Dear Shalaka,

Do not get confused between normal audit (under companies act) and tax audit under IT act. Sec 224 is only for audit of companies - For one CA max 30 companies (including pvt ltd out of which not more than 10 public ltd comp can have Share cap >25 lacs) 45 Tax audits for one CA - this includes ind,huf, firms, companies.

Cost Audit is not included in this.

All the Best for your interview.

Regards,

RAJESH CHOUDHARY

RAMESH CHANDRA SHARMA (munka istentisztelet) (899 Points)
Replied 13 September 2012

1.3.7 Ceiling on Number of Cost Audits

1.3.7.1 The sub-Section (2) of Section 233B inter-alia provides that before the appointment of any auditor is

made by the Board, a written certifi cate shall be obtained by the Board from the auditor proposed

to be so appointed to the effect that the appointment, if made, will be in accordance with the

provisions of sub-Section (1B) of Section 224.

Cost Audit & Operational Audit

1.3.7.2 Section 224(1)(B) provides that no company or its Board of directors shall appoint or re-appoint any

person who is in full time employment elsewhere or fi rm as its auditor if such person or fi rm is, at

the date of such appointment or re-appointment, holding appointment as auditor of the specifi ed

number of companies or more than the specifi ed number of companies. The proviso to Section

224(1B) further provides that the provisions of this sub-Section shall not apply, on and after the

commencement of the Companies (Amendment) Act, 2000, to a private company.

1.3.7.3 Explanation I to the Section 224 provides that for the purposes of sub-Sections (1B) and (1C),

“specifi ed numbers” means :

(a) in case of a person or fi rm holding appointment as auditor of a number of companies each

of which has a paid-up share capital of less than rupees twenty-fi ve lakhs, twenty such

companies;

(b) in any other case, twenty companies, out of which not more than ten shall be companies each

of which has a paid-up share capital of rupees twenty-fi ve lakhs or more.

1.3.7.4 Explanation II to the Section 224 provides that in computing the specifi ed number, the number

of companies in respect of which or any part of which any person or fi rm has been appointed as

an auditor, whether singly or in combination with any other person or fi rm shall be taken into

account.

1.3.7.5 In view of aforesaid provisions, the ceilings on the number of cost audits can be clarifi ed as under:

(a) In the case of fi rm of cost accountants: Twenty companies for each such partner of the fi rm

who is not in full time employment. However, not more than ten such companies should

have a paid up share capital of Rs. 25 lakhs or more;

(b) In the case of an individual cost accountant, who is not in full time employment: Twenty

companies, out of which not more than ten should have a paid-up share capital of Rs. 25 lakhs

or more.

1.3.7.6 It can be seen from above that Section 224(1B) and Explanation I to Section 224 refers to the ceilings

for the number of companies and not to the number of cost audit orders or products. Therefore, if

more than one products of a particular company are covered under cost audit for the same year, a

cost auditor should count their number as one company only, since the audits for all the products

relate to the same company despite the fact that separate cost audit orders have been issued with

respect to each such product. Similarly, if that company appoints different cost auditors for different

products, each auditor shall count the company as one company for counting their individual

quota for number of audits.

1 Like

sandeep (student) (188 Points)
Replied 13 September 2012

The maxmium audit a ca in practicecan audit upto20 as per companies act and as per ca insitute stated a ca can audit upto30 public limited company audit maximum upto 10

CA PuRvI M!$rA (-) (2260 Points)
Replied 15 September 2012

cost audit not included....

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CMA Ajay Jaisingh (Ajay Jaisingh & Associates Cost Accountants Ahmedabad) (79 Points)
Replied 01 October 2012

Dear All,

CA can not conduct COST AUDIT. So, please do not mix both. Ceiling as per Companies Act is applicable to CA for Statutory Audits & to CMA for Cost Audits. Pvt Ltd companies are not included under the ceiling of 20 mentioned in Companies Act. Although, CAs have an addl ceiling prescribed by their Institute.

Regards,

CMA Ajay Jaisingh
M.Com, ACMA

Ajay Jaisingh & Associates II Cost Accountants in Practice II

Office: 1204, "MATRIX", B/H Divya Bhaskar House, Nr. Vodafone House, Prahladnagar Corporate Road, Off S G Highway, Ahmedabad-380051.

Mobile: +91-9825895971 II Email: jaisingh.ajay @ gmail.com II