Cost and Management Audit · Cost Auditor

Cost Auditor Appointment under Section 148 of Companies Act

Updated 11 October 2026 · Fact-checked

Under Section 148(3), a company that must get its cost records audited appoints a cost accountant through its Board. The Board acts on the Audit Committee's recommendation where one exists, and members ratify the remuneration. The company then files Form CRA-2 with the Central Government within the prescribed time.

Understand Cost Auditor Appointment under Section 148

Section 148 works in two steps. First, the Central Government may require certain classes of companies to keep cost records. Second, for those with a prescribed net worth or turnover, it may order an audit of those cost records. Which companies fall in this net is decided by the Cost Records and Audit Rules, not by Section 148 alone. This topic starts after that point: the company is already required to have a cost audit, and now it must appoint the auditor.

The Act says the audit under sub-section (2) is conducted by a cost accountant appointed by the Board. The Board appoints on a remuneration that the members determine in the prescribed manner. In the Rules, this works as follows: the Board appoints on the recommendation of the Audit Committee (where the company has one), and the members later ratify the remuneration. The auditor is not chosen by the members at the AGM in the way a statutory auditor is.

The Act also protects independence. A person appointed under Section 139 as the company's statutory auditor cannot be appointed to conduct the audit of cost records. The cost audit is in addition to the audit under Section 143 (sub-section 4), so it never replaces the financial audit.

The cost auditor must follow the cost auditing standards issued by the Institute of Cost Accountants of India with Central Government approval. Qualifications, disqualifications, rights and duties of auditors under the Chapter apply to the cost auditor so far as applicable. The company must give all assistance and facilities. The cost auditor reports to the Board of Directors.

In practice the procedure is: check eligibility and obtain written consent, Audit Committee recommendation, Board appointment, intimation to the auditor, Form CRA-2 filing, and ratification of remuneration by members. Time limits matter. The Rules require the company to inform the Central Government in Form CRA-2 within 30 days of the Board meeting that appointed the auditor, or within 180 days of the start of the financial year, whichever is earlier.

Key rules to remember

Who conducts the audit: Cost audit under S.148(2) is conducted by a cost accountant appointed by the Board; Section 148(3). The Board appoints; members determine the remuneration in the prescribed manner.
Statutory auditor bar: Auditor appointed under S.139 cannot be appointed as cost auditor of the same company; First proviso to Section 148(3). Protects independence.
Cost auditing standards: Cost auditor must comply with cost auditing standards issued by the Institute of Cost Accountants of India with Central Government approval; Second proviso and Explanation to Section 148(3).
Relation to financial audit: Cost audit is in addition to audit under Section 143; Section 148(4).
Report recipient: Cost auditor submits the report to the Board of Directors; Proviso to Section 148(5).
Company's filing after report: Furnish report to Central Government within 30 days of receiving a copy, with explanation on every reservation or qualification; Section 148(6). This is the company's duty after the audit, not the appointment filing.
Form CRA-2 timeline: Earlier of: 30 days from the Board meeting appointing the cost auditor, or 180 days from the start of the financial year; Stated in the Cost Records and Audit Rules. Calculate both dates and take the earlier.
Audit Committee role: Board appoints on the recommendation of the Audit Committee, where one exists; From the Rules. Remuneration is then ratified by members.

How to solve Cost Auditor Appointment under Section 148 questions

Use this order for any question on appointment of a cost auditor. It keeps law, procedure and dates separate so you do not mix them.

1Confirm the company is covered: cost records and cost audit must apply to it under the Rules. If not, there is no appointment duty.
2Identify the appointing authority: the Board, acting on the Audit Committee's recommendation if the company has one. Members only deal with remuneration.
3Check eligibility: the person must be a cost accountant, and must not be the company's statutory auditor appointed under Section 139.
4Note the pre-appointment steps: written consent from the auditor and confirmation of eligibility and independence.
5Work out the Form CRA-2 due date: 30 days from the Board meeting date and 180 days from the start of the financial year. Take the earlier date.
6State the post-appointment steps: inform the auditor, file CRA-2, place the remuneration for ratification by members.
7Close with the link to reporting: the report goes to the Board, and the company sends it to the Central Government within 30 days of receipt.
8Give a clear conclusion in one line: valid or invalid appointment, and the due date if asked.

Quickest way: Four-check test for an appointment question

When to use it: Use this when a case gives you an appointment and asks if it is valid or what the company must do next.

Who: Board, on Audit Committee recommendation.
Whom: cost accountant, not the statutory auditor.
When: compute the CRA-2 date as the earlier of 30 days from the Board meeting and 180 days from the financial year start.
What next: CRA-2 filing, remuneration ratification by members, and the report to the Board.

Common mistakes in Cost Auditor Appointment under Section 148

Saying members appoint the cost auditor at the AGM.
Students copy the statutory auditor procedure from Section 139.
Fix: Remember Section 148(3): the Board appoints. Members only determine or ratify the remuneration.
Allowing the statutory auditor to also do the cost audit.
Both are audits and the same firm may be a cost accountant too.
Fix: The first proviso to Section 148(3) bars a person appointed under Section 139 from the cost audit of the same company.
Using only 30 days from the Board meeting for CRA-2.
Students remember one limit and forget the 180-day outer limit.
Fix: Compute both dates and pick the earlier one.
Treating cost audit as a replacement for the Section 143 audit.
The word 'audit' is used for both.
Fix: Quote Section 148(4): the cost audit is in addition to the audit under Section 143.
Mixing the 30-day limit for CRA-2 with the 30-day limit in Section 148(6).
Both are 30 days and both involve the Central Government.
Fix: CRA-2 is about appointment, counted from the Board meeting. Section 148(6) is about the cost audit report, counted from the company's receipt of the report copy.
Saying the cost auditor reports to the members or the Central Government directly.
Confusion with the statutory audit report, which goes to members.
Fix: The proviso to Section 148(5) says the report is submitted to the Board. The company then furnishes it to the Central Government.

Worked examples

Example 1

Rao Steels Ltd. is covered by cost audit for the financial year 2026-27, which began on 1 April 2026. Its Board appointed a cost auditor at a meeting held on 10 August 2026. By what date must Form CRA-2 be filed?

Show the solution

Limit 1: 30 days from the Board meeting. 10 August plus 30 days: 21 days remain in August (to 31 August), then 9 days into September. The date is 9 September 2026.
Limit 2: 180 days from the start of the financial year. April 30, May 31, June 30, July 31, August 31 total 153 days. The remaining 27 days run into September. The date is 27 September 2026.
The rule takes the earlier of the two dates.
9 September 2026 is earlier than 27 September 2026.

Answer: Form CRA-2 must be filed by 9 September 2026.

Example 2

The Board of Sharma Pharma Ltd., which is required to have a cost audit, proposes to appoint its existing statutory auditor, a firm that also employs cost accountants, as cost auditor. The managing director says the shareholders will approve this at the AGM. Advise the company.

Show the solution

Section 148(3) says the cost audit is conducted by a cost accountant appointed by the Board. It is not an AGM appointment by members.
The first proviso says no person appointed under Section 139 as the company's auditor may be appointed to conduct the audit of cost records.
So the statutory auditor cannot be the cost auditor, even if it has cost accountants.
Under Section 148(4), the cost audit is in addition to the Section 143 audit. So the company needs a separate cost auditor.
Correct procedure: choose an eligible cost accountant, take written consent, get the Audit Committee's recommendation, have the Board appoint, file CRA-2 within the time limit, and put the remuneration before members for ratification.

Answer: The proposal is not valid. The Board must appoint a separate eligible cost accountant on the Audit Committee's recommendation, and the members only ratify the remuneration.

Exam tips

Write the section number with the rule. 'Board appoints under Section 148(3)' scores better than a general statement.
In a case question, check independence first. A link to the Section 139 statutory auditor is usually the planted issue.
For CRA-2 date questions, show both calculations and then say 'whichever is earlier'. Marks go for the method.
Keep three reports apart in your answer: appointment (CRA-2), the report to the Board, and the company's filing with the Central Government.
In a short note, mention that the cost auditor must follow cost auditing standards and that the company must give all assistance and facilities.

Practice questions from Cost Auditor

Cost Auditor Appointment under Section 148 in other exams

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

Cost Auditor Appointment under Section 148: frequently asked questions

Who appoints the cost auditor under Section 148?

The Board appoints the cost accountant. Under the Rules, the Board acts on the Audit Committee's recommendation where the company has one. Members determine or ratify the remuneration.

Can the statutory auditor be the cost auditor of the same company?

No. The first proviso to Section 148(3) says a person appointed under Section 139 as the company's auditor cannot be appointed to audit the cost records. The two audits are separate.

What is the time limit for filing Form CRA-2?

The Rules require the company to file it within 30 days of the Board meeting that appointed the cost auditor, or within 180 days of the start of the financial year, whichever is earlier. Always compute both dates.

To whom does the cost auditor submit the report?

The cost auditor submits the report to the Board of Directors. The company then furnishes it to the Central Government within 30 days of receiving a copy, with full information and explanation on every reservation or qualification.