Cost and Management Audit · Companies (Cost Records and Audit) Rules, 2014

Regulated and Non-Regulated Sectors under the Cost Audit Rules, 2014

Updated 11 October 2026 · Fact-checked

The Companies (Cost Records and Audit) Rules, 2014 list industries as regulated (Table A) or non-regulated (Table B). Under Rule 3, cost records apply to a company engaged in production of goods or services covered in Table A or B with overall turnover of ₹35 crore or more. Under Rule 4, cost audit applies at ₹50 crore (regulated) or ₹100 crore (non-regulated), or on covered product turnover of ₹35 crore or more. Rule 4(4) exempts export-heavy and SEZ companies from audit only.

Understand Regulated and Non-Regulated Sectors under the Rules

Section 148 of the Companies Act, 2013 lets the Central Government direct that certain classes of companies keep cost records. It can also direct that those records be audited. The Act leaves the detail to rules. The Companies (Cost Records and Audit) Rules, 2014 supply that detail. Rule 3 deals with cost records. Rule 4 deals with cost audit.

The Rules sort industries into two lists. Regulated sectors (Table A) are industries that a sector regulator or the government controls, for example telecommunication, electricity, petroleum, drugs and pharmaceuticals, fertilisers and sugar. Non-regulated sectors (Table B) are the other industries covered by the Rules, for example cement, steel, automobiles, paints and industrial chemicals. Learn the full lists from the Rules' tables. Do not rely on this page for them.

Two questions must be answered separately. First: must the company keep cost records? Second: must those records be audited? Cost audit is always a subset of cost records. A company can keep cost records and still need no audit.

The tests use turnover of the immediately preceding financial year. The company's overall turnover counts all its products and services, including all units and branches. Rule 4 also looks at the turnover of the products or services that require cost audit. The Act also mentions net worth as a possible criterion. The thresholds you must remember for the Rules are turnover-based. These figures come from the Rules, not from the text of Section 148.

Rule 4(4) exempts two kinds of company from the cost audit requirement even if they cross the limits: companies earning more than 75% of revenue from exports in foreign exchange, and companies operating from a Special Economic Zone. The exemption removes the audit only. The cost records duty under Rule 3 continues.

Key rules to remember

Cost records applicability (Rule 3): Company engaged in production of goods or services covered in Table A or Table B AND overall turnover of preceding year ≥ ₹35 crore; Overall turnover means turnover from all products and services, including all units and branches.
Cost audit: regulated sector (Rule 4): Table A company AND overall turnover ≥ ₹50 crore; The company must also be covered by Rule 3, which it will be at this turnover.
Cost audit: non-regulated sector (Rule 4): Table B company AND overall turnover ≥ ₹100 crore; Below ₹100 crore, check the product-turnover limb of Rule 4.
Cost audit: product turnover limb (Rule 4(3)): Company covered under Rule 3 AND aggregate turnover of the individual product(s) or service(s) requiring cost audit ≥ ₹35 crore; This is an alternative limb in Rule 4, set beside the overall turnover limit. The figure comes from the Rules and is not in Section 148 itself.
Cost audit exemptions (Rule 4(4)): Export revenue in foreign exchange > 75% of total revenue, OR company operates from a Special Economic Zone; These exemptions remove the cost audit requirement only. Cost records under Rule 3 still apply.
Statutory conditions on cost auditor (Section 148): Cost accountant appointed by Board; cannot be the Section 139 statutory auditor; audit is in addition to Section 143 audit; Report goes to the Board. The company sends the report to the Central Government within thirty days of receiving it.

How to solve Regulated and Non-Regulated Sectors under the Rules questions

Use the same sequence for every applicability question. Do the cost records test first and the cost audit test second.

1Identify the product or service. Match it to Table A (regulated) or Table B (non-regulated). If it is in neither table, the Rules do not apply to it.
2Note the turnover of the immediately preceding financial year. Use overall turnover of the whole company, including all units and branches, for the first test.
3Apply the cost records test (Rule 3): overall turnover of ₹35 crore or more means cost records must be kept.
4If cost records apply, apply the cost audit test (Rule 4). For Table A use ₹50 crore overall. For Table B use ₹100 crore overall.
5If overall turnover falls short, check the aggregate turnover of the product(s) or service(s) requiring cost audit under Rule 4(3). If that is ₹35 crore or more, cost audit applies.
6Check the Rule 4(4) exemptions: more than 75% export revenue in foreign exchange, or operation from a Special Economic Zone. If either applies, the cost audit is not required, but cost records under Rule 3 continue.
7State the conclusion for records and audit separately. If audit applies, add one line: the Board appoints a cost accountant who is not the statutory auditor, and the audit is in addition to the Section 143 audit.

Quickest way: Three-number check: 35, 50/100, 35

When to use it: Use this for MCQs and for the first line of a written answer, when you need the answer in under a minute.

Write 35 for cost records.
Write 50 for regulated (Table A) and 100 for non-regulated (Table B) as the overall turnover limits for audit.
Write 35 again for the covered product turnover alternative.
Run the company's figures against these numbers, then scan the question for the words export or SEZ before you answer.

Common mistakes in Regulated and Non-Regulated Sectors under the Rules

Treating cost records and cost audit as the same test.
Both use turnover and both appear in one rule chapter, so the limits blur together.
Fix: Answer in two lines: records applicable or not, audit applicable or not. Remember that records come first and audit is a subset.
Applying ₹100 crore to a regulated-sector company or ₹50 crore to a non-regulated one.
Students memorise the two numbers but not which table each belongs to.
Fix: Tie the lower figure to the regulated sector: ₹50 crore for Table A and ₹100 crore for Table B. Anchor on the sector word in the question.
Ignoring the product-turnover limb of Rule 4 and declaring audit not applicable because overall turnover is under the limit.
Students stop after the overall turnover comparison.
Fix: Always check the aggregate turnover of the products or services requiring cost audit against ₹35 crore under Rule 4(3). If it is met, audit applies.
Using the current year's turnover instead of the immediately preceding financial year.
Case facts mention several years and students pick the latest figure.
Fix: Underline the preceding financial year in the question and use only that figure.
Forgetting exemptions such as export revenue above 75% or SEZ operation.
The exemptions are tucked into the case facts, and students stop once the limit is crossed.
Fix: After the limit test, scan for export, foreign exchange and SEZ. State the Rule 4(4) exemption and its effect on audit.
Appointing the statutory auditor as cost auditor in the answer.
Students link all auditors to Section 139 without noting the proviso to Section 148(3).
Fix: Say that a person appointed as statutory auditor under Section 139 cannot be appointed for the audit of cost records. The cost auditor must be a cost accountant.

Worked examples

Example 1

Shreeji Cements Ltd is in the non-regulated sector (Table B). Its overall turnover for the preceding financial year was ₹80 crore. Of this, ₹40 crore came from products covered by the Rules. It has no export business and no SEZ unit. Is cost audit applicable?

Show the solution

Sector: non-regulated, so use Table B limits.
Cost records: overall turnover ₹80 crore is at least ₹35 crore, so cost records must be kept.
Cost audit, overall test: ₹80 crore is below ₹100 crore, so this test is not met.
Cost audit, product test: turnover of covered products is ₹40 crore, which is at least ₹35 crore, so this test is met.
Exemptions: no export revenue and no SEZ unit, so none applies.

Answer: Cost records apply and cost audit also applies, through the covered product turnover test. The Board must appoint a cost accountant who is not the statutory auditor, and the audit is in addition to the Section 143 audit.

Example 2

Medicare Labs Ltd makes drugs and pharmaceuticals (regulated sector, Table A). Its overall turnover in the preceding year was ₹60 crore. More than 75% of its total revenue was earned from exports in foreign exchange. Is cost audit required? Does the company still need cost records?

Show the solution

Sector: regulated, so the overall limit for audit is ₹50 crore.
Overall turnover ₹60 crore is at least ₹50 crore, so on the limit test alone audit would apply.
Exemption check: export revenue in foreign exchange exceeds 75% of total revenue, so the Rule 4(4) exemption from cost audit applies.
Cost records: overall turnover ₹60 crore is at least ₹35 crore and the sector is covered in Table A, so Rule 3 applies. The Rule 4(4) exemption removes the audit only, so the record-keeping duty continues.

Answer: Cost audit is not required because of the export exemption in Rule 4(4). The company must still maintain cost records under Rule 3 as its overall turnover is ₹35 crore or more.

Exam tips

In case-based MCQs the answer is often decided by one detail: the sector table, the preceding year, an SEZ unit or the export share. Underline these before computing.
In written answers, give a separate conclusion for cost records and for cost audit. Examiners reward the split.
Always compare the product turnover with ₹35 crore when overall turnover is below the audit limit.
Add the Section 148 follow-through in one line when audit applies: Board appoints a cost accountant, who is not the statutory auditor, and the report goes to the Board.
Learn the Table A and Table B industry lists from the Rules' annexure. Group them by sector so you can match a product to its table quickly.

Practice questions from Companies (Cost Records and Audit) Rules, 2014

Regulated and Non-Regulated Sectors under the Rules: frequently asked questions

What is the difference between regulated and non-regulated sectors in the cost audit rules?

Regulated sectors are industries such as telecommunication, electricity, petroleum and pharmaceuticals, placed in Table A. Non-regulated sectors are other covered industries, such as cement and steel, placed in Table B. The difference matters because the overall turnover limit for cost audit is ₹50 crore for Table A and ₹100 crore for Table B.

Is cost audit applicable if a company has to keep cost records?

Not always. Under Rule 3, cost records apply to a company covered in Table A or B with overall turnover of ₹35 crore or more. Cost audit under Rule 4 needs a higher overall turnover, or covered product turnover of ₹35 crore or more, and it can be removed by an exemption.

Are exporters and SEZ units exempt from cost audit?

Yes. Rule 4(4) exempts from cost audit a company whose export revenue in foreign exchange exceeds 75% of its total revenue. It also exempts a company operating from a Special Economic Zone. The exemption covers the audit only. Such a company still keeps cost records under Rule 3 if its turnover meets the records limit.

Does net worth decide cost audit applicability?

Section 148(2) of the Companies Act allows the Central Government to use net worth or turnover as the criterion. The thresholds you apply in exam questions on the 2014 Rules are turnover figures.