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

Cost Auditor Rights, Duties and Penalties under Section 148

Updated 11 October 2026 · Fact-checked

Section 148 of the Companies Act, 2013 gives the cost auditor the rights and duties of a company auditor, so far as applicable. The company must give all assistance and facilities. The cost auditor reports to the Board. Default makes the company, its officers and the cost auditor punishable under Section 147.

Understand Rights, Duties and Penalties for Default

Section 148 lets the Central Government direct certain classes of companies to include particulars of cost items in their books of account. For companies covered by that direction, and which have the prescribed net worth or turnover, it can also order an audit of the cost records if it thinks this necessary. The audit applies only to companies that meet the threshold. That audit is done by a cost accountant, appointed by the Board. The members decide the remuneration in the prescribed manner.

The cost auditor is not given a separate list of powers in Section 148. Sub-section (5) says the qualifications, disqualifications, rights, duties and obligations of auditors under the same Chapter apply to the cost auditor so far as may be applicable. So you borrow the company auditor's position. This includes the right of access to books and the duty to report honestly.

The company also has duties. It must give the cost auditor all assistance and facilities. After it receives the cost audit report, it must send a copy to the Central Government within thirty days. It must attach full information and explanation on every reservation or qualification in the report. The Government may then ask for more information, and the company must give it within the time specified.

The cost audit is in addition to the audit under Section 143. The person appointed as company auditor under Section 139 cannot be appointed for the cost audit. The cost auditor must follow the cost auditing standards, issued by the Institute of Cost Accountants of India with Central Government approval.

For default, Section 148(8) splits the liability. The company and every officer in default are punishable as provided in Section 147(1). The cost auditor in default is punishable as provided in Section 147(2) to (4). The fine amounts and imprisonment terms are in Section 147, so check that section before you quote them.

Key rules to remember

Rights and duties of cost auditor: Section 148(5): auditor's qualifications, disqualifications, rights, duties and obligations apply to the cost auditor, so far as applicable; This is why the cost auditor has the company auditor's right of access to books and records.
Company's duty to assist: Company must give all assistance and facilities to the cost auditor (Section 148(5)); Cite this when a question says management refused records or access.
Report recipient: Cost audit report goes to the Board of Directors (proviso to Section 148(5)); The cost accountant submits it to the Board, not directly to the Government.
Filing with Government: Within 30 days of receiving the report: furnish Central Government the report with full information and explanation on every reservation or qualification (Section 148(6)); The duty is on the company. The 30 days run from receipt of the copy of the report.
Further information: Central Government may call for further information; company must furnish it within the time specified (Section 148(7)); Triggered after the Government considers the report and the company's explanation.
Penalty on default: Company and officers in default: Section 147(1). Cost auditor in default: Section 147(2) to (4). Source: Section 148(8); Two different limbs. Do not mix them.
Relationship with other audits: Cost audit is in addition to Section 143 audit; the Section 139 auditor cannot be appointed as cost auditor (Section 148(3) and (4)); A common one-line MCQ point.

How to solve Rights, Duties and Penalties for Default questions

Use this method for any case or theory question on rights, duties and penalties under Section 148.

1Identify who defaulted: the company, an officer of the company, or the cost auditor.
2Identify the default: no assistance or facilities, report not filed in 30 days, no reply to a Government query, a wrong appointment, or the auditor's own failure.
3Quote the matching provision of Section 148, for example sub-section (5), (6) or (7).
4State the consequence: Section 148(8)(a) for the company and officers, Section 148(8)(b) for the cost auditor.
5Add that the punishment is as provided in Section 147, with the sub-section limb that applies. Give amounts only if you are sure of them.
6Close with a clear conclusion and, where useful, a practical step such as filing the report with explanations or asking the Board for access.

Quickest way: Who defaulted, which limb

When to use it: Use it for MCQs and short case questions where you must pick the consequence in under two minutes.

Company or officer in default: answer Section 147(1) via Section 148(8)(a).
Cost auditor in default: answer Section 147(2) to (4) via Section 148(8)(b).
Rights question: answer that Section 148(5) gives the cost auditor an auditor's rights so far as applicable.
Report question: Board receives it; the company files with the Government within 30 days of receipt.

Common mistakes in Rights, Duties and Penalties for Default

Saying the cost auditor files the report with the Central Government.
Students link a report with a filing and forget who is addressed.
Fix: The cost accountant submits the report to the Board. The company furnishes it to the Central Government within 30 days of receipt under Section 148(6).
Applying one penalty to everyone in default.
Section 148(8) is read as a single rule.
Fix: Remember the two limbs: the company and officers fall under Section 147(1), the cost auditor under Section 147(2) to (4).
Believing the cost audit replaces the statutory audit.
Both are audits of the same company, so they are treated as alternatives.
Fix: Section 148(4) says the cost audit is in addition to the Section 143 audit.
Appointing the company's Section 139 auditor as cost auditor.
Students assume one firm can save fees by doing both.
Fix: The first proviso to Section 148(3) bars it. A cost accountant must be appointed.
Quoting rights of the cost auditor from memory with no source.
Section 148 has no standalone list of powers.
Fix: Say that Section 148(5) applies the auditor's rights and duties so far as applicable. Then list the access right as flowing from it.
Counting the 30 days from the balance sheet date or the Board meeting.
Other filing deadlines run from those events.
Fix: The 30 days run from the date of receipt of a copy of the cost audit report.

Worked examples

Example 1

Verma Steels Ltd is covered by a cost audit direction and meets the prescribed threshold. Its cost auditor reported a qualification on stock valuation. The company received a copy of the cost audit report on 5 September and has not sent anything to the Central Government by 15 October. Advise on the position.

Show the solution

The duty arises under Section 148(6): the company must furnish the report to the Central Government within thirty days from the date of receipt of a copy of the cost audit report.
Assume that 5 September is the date on which the company received the copy. Thirty days from 5 September ends on 5 October.
If that assumption holds, by 15 October the time has passed and the company has not complied.
The report must also carry full information and explanation on every reservation or qualification, so the stock valuation qualification needs an explanation.
If there is a default, Section 148(8)(a) says the company and every officer in default are punishable as provided in Section 147(1).

Answer: On the assumption that 5 September is the date the company received the copy, the 30 days ended on 5 October and the company has not complied with Section 148(6). In that case the company and its officers in default are punishable as provided in Section 147(1), through Section 148(8)(a). The company should file the report with full explanations without further delay.

Example 2

The management of Kaveri Chemicals Ltd refuses to give the cost auditor access to the cost records on the plea that the statutory auditor has already seen the books. What are the cost auditor's rights and what follows?

Show the solution

Section 148(5) applies the rights, duties and obligations of auditors under the Chapter to the cost auditor, so far as applicable. The right of access to books and records is the auditor's right under Section 143(1), and it reaches the cost auditor through Section 148(5).
Section 148(5) also makes it the company's duty to give all assistance and facilities to the cost auditor.
Section 148(4) says the cost audit is in addition to the Section 143 audit, so the statutory audit does not replace it.
Refusal is a failure to comply with Section 148(5). Under Section 148(8)(a) the company and every officer in default are punishable as provided in Section 147(1).
The cost auditor should record the refusal and report to the Board, since the report goes to the Board.

Answer: The plea is not valid. The cost auditor has the auditor's right of access under Section 143(1), applied to the cost auditor through Section 148(5) so far as applicable, and the company must give assistance and facilities. If the refusal is a default, the company and its officers in default are punishable as provided in Section 147(1) through Section 148(8)(a).

Exam tips

Learn Section 148(5) to (8) in order. Most questions test one sub-section at a time.
Write the two penalty limbs side by side in your answer: company and officers versus cost auditor.
In a case question, name the party in default first. Then cite the provision.
Do not give fine amounts unless you are sure of Section 147. The marks are for the correct limb and the reason.
For MCQs, watch for the 30 days from receipt, the Board as report recipient, and the bar on the Section 139 auditor.

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

Rights, Duties and Penalties for Default in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Rights, Duties and Penalties for Default: frequently asked questions

What is the penalty for non-compliance with Section 148?

Section 148(8) provides it. The company and every officer in default are punishable as provided in Section 147(1). A cost auditor in default is punishable as provided in Section 147(2) to (4).

What are the rights of a cost auditor under the Companies Act, 2013?

Section 148(5) applies the rights, duties and obligations of auditors under the Chapter to the cost auditor, so far as applicable. The company must also give all assistance and facilities for auditing the cost records.

To whom does the cost auditor submit the report?

The cost accountant submits it to the Board of Directors. The company then furnishes a copy to the Central Government within thirty days of receiving it, with full information and explanation on every reservation or qualification.

What happens if a company does not appoint a cost auditor?

Where the Central Government has ordered a cost audit for a company covered by Section 148(1) that meets the prescribed net worth or turnover threshold, Section 148(3) requires the Board to appoint the cost auditor. Not doing so is a failure to comply with Section 148. Section 148(8) then makes the company and officers in default punishable as provided in Section 147(1).