Cost and Management Audit · Preparation and Filing of Cost Audit Report

Contents and Format of Cost Audit Report in CRA-3

Updated 11 October 2026 · Fact-checked

The cost audit report is the signed report of the cost auditor on the company's cost records, given in Form CRA-3. It has the auditor's report with observations and qualifications, followed by annexures with proforma statements of cost and profitability. The auditor submits it to the Board of Directors, and the company then furnishes it to the Central Government.

Understand Contents and Format of Cost Audit Report (CRA-3)

A cost audit report is the end product of a cost audit. SCA 109 (para 4.5) defines it as the report duly audited and signed by the cost auditor on an independent examination of the cost statements, cost records and other related information, expressing his opinion. It also includes any statement, annexure, qualification or observation attached to it, or required by law or regulation.

So the report is not just a one-page opinion. It is the opinion plus its supporting annexures. In practice, this is what Form CRA-3 carries under the Companies (Cost Records and Audit) Rules.

Think of the format in two parts. The first part is the cost auditor's report: it states the basis of the audit, whether proper cost records were kept, and the auditor's observations and qualifications. The second part is the set of annexures, which hold the proforma statements. These show cost and profitability figures for the product or service under audit, and reconcile them with the financial books.

The legal flow comes from Section 148 of the Companies Act, 2013. The cost auditor submits the report to the Board of Directors (proviso to Section 148(5)). Within thirty days of receiving a copy, the company must furnish it to the Central Government with full information and explanation on every reservation or qualification (Section 148(6)). The Government may call for more information, which the company must furnish within the time specified (Section 148(7)).

The cost auditor must comply with the cost auditing standards (second proviso to Section 148(3)). This is why the report must reflect standards-based work and must not be a mere formality. The exact layout of the form and the annexure line items are prescribed by the Rules, so learn them from the current form and rely on the structure here as your memory frame.

Key rules to remember

Meaning of cost audit report (SCA 109, para 4.5): Cost audit report = auditor's signed report + statements, annexures, qualifications, observations attached or required by law; Use this to answer 'what does the report include'. Annexures are part of the report.
Who receives the report (Section 148(5) proviso): Cost accountant → Board of Directors; The report goes first to the Board, not directly to the Government.
Filing with the Central Government (Section 148(6)): Company furnishes report within 30 days of receiving a copy, with full information and explanation on every reservation or qualification; The 30 days run from the company's receipt of the copy. The company files, not the auditor.
Further information (Section 148(7)): Central Government may call for further information; company furnishes within the time specified; No fixed number of days is stated in the Act for this step.
Standards compliance (Section 148(3), second proviso): Cost auditor must comply with cost auditing standards issued by the Institute of Cost Accountants of India with Central Government approval; Link your report content to SCA compliance in answers.
Default consequences (Section 148(8)): Company and officers in default: as per Section 147(1). Cost auditor in default: as per Section 147(2) to (4); Quote the sub-sections only if the question asks about penalties.

How to solve Contents and Format of Cost Audit Report (CRA-3) questions

Questions on this topic ask you to describe the report, draft observations, or explain filing. Use one structure for all of them.

1Identify what is asked: contents, format, qualification wording, or filing flow.
2Define the cost audit report using SCA 109 para 4.5: signed report plus annexures, qualifications and observations.
3Split the answer into two parts: the auditor's report and the annexures with proforma statements.
4For the auditor's report, cover the basis of audit, the standards followed, whether cost records were properly kept, and the observations and qualifications.
5For the annexures, cover the proforma statements of cost and profitability and the reconciliation with the financial accounts.
6State the flow: report to the Board under Section 148(5) proviso, then the company files with the Central Government within 30 days of receipt under Section 148(6).
7If the case mentions a qualification, state that the company must give full information and explanation on it when filing.
8Close with a clear conclusion tied to the case facts, such as who must act and by when.

Quickest way: Two-part, three-step recall

When to use it: Use for MCQs and for short written answers when time is under five minutes.

Say 'report plus annexures' to cover the definition.
Say 'auditor to Board, company to Government in 30 days' to cover the flow.
Say 'every qualification needs an explanation from the company' to cover the reservation rule.

Common mistakes in Contents and Format of Cost Audit Report (CRA-3)

Saying the cost auditor files the report with the Central Government.
Students merge the submission step with the filing step.
Fix: The auditor submits to the Board. The company furnishes the report to the Central Government within thirty days of receiving a copy.
Treating annexures as separate from the cost audit report.
The opinion looks like the whole report.
Fix: SCA 109 para 4.5 includes statements, annexures, qualifications and observations in the report.
Counting the 30 days from the balance sheet date or the auditor's signing date.
Students remember '30 days' but not the trigger.
Fix: The Act counts from the date the company receives a copy of the cost audit report.
Writing observations and qualifications as the same thing.
Both appear in the report and sound alike.
Fix: A qualification is a reservation on the work or records that affects the opinion. Observations are other matters the auditor reports. The company must explain every reservation or qualification.
Quoting exact annexure line numbers or form layouts from memory.
Students try to reproduce the form word for word.
Fix: Describe the structure and purpose of each part. Give line-level detail only if you are sure of it.
Forgetting that the cost auditor must follow cost auditing standards.
Students focus only on the format.
Fix: Mention the second proviso to Section 148(3) and link the report to compliance with SCAs.

Worked examples

Example 1

Lakshmi Textiles Ltd is covered by cost audit. The cost auditor, CMA Rao, signs the cost audit report on 10 July and submits it to the Board. The company receives it on 12 July. Explain the next steps the company must take and the deadline, assuming the report contains a qualification.

Show the solution

Under the proviso to Section 148(5), the report is submitted by the cost accountant to the Board of Directors. This has been done.
Under Section 148(6), the company must furnish the report to the Central Government within thirty days from the date it receives a copy.
Receipt is on 12 July. Thirty days from 12 July ends on 11 August.
Because the report has a qualification, the company must furnish full information and explanation on that reservation or qualification along with the report.
The Central Government may then call for further information under Section 148(7). The company must furnish it within the time specified.

Answer: The company must furnish the report, with full information and explanation on the qualification, to the Central Government by 11 August (thirty days from receipt on 12 July). It must also answer any further request within the time the Government specifies.

Example 2

Explain what a cost audit report in Form CRA-3 contains and why annexures matter for the report.

Show the solution

Define the report using SCA 109 para 4.5: the signed report on the independent examination of cost statements, cost records and related information, expressing an opinion.
Add that it includes statements, annexures, qualifications, observations attached to it or required by law.
Describe the first part: the cost auditor's report, covering the basis of audit, the cost auditing standards followed, the auditor's view on the cost records, and the observations and qualifications.
Describe the second part: the annexures with proforma statements of cost and profitability, which give the figures supporting the opinion.
Explain why annexures matter: they are part of the report by definition, and they let the Board and the Central Government see the figures behind the auditor's opinion.
Add that the company must explain every qualification when it furnishes the report to the Government.

Answer: The CRA-3 report has the cost auditor's signed report with observations and qualifications, plus annexures with proforma cost and profitability statements. Annexures are part of the report under SCA 109 para 4.5 and support the opinion with figures.

Exam tips

Learn the definition in SCA 109 para 4.5 almost word for word. It is easy to quote in a short answer.
In case-based MCQs, check who acts: auditor to Board, company to Government. Wrong options often swap these.
Always compute the 30-day deadline from the date of receipt of the copy by the company, not any other date.
If a case mentions a qualification, state that the company must provide full information and explanation on it.
For descriptive answers, use two headings in your writing: auditor's report and annexures. This gives clear structure and easy marks.

Practice questions from Preparation and Filing of Cost Audit Report

Contents and Format of Cost Audit Report (CRA-3): frequently asked questions

What is Form CRA-3?

It is the form in which the cost auditor gives the cost audit report under the Companies (Cost Records and Audit) Rules. It contains the auditor's report with observations and qualifications, and annexures with proforma statements. Learn its structure rather than line-by-line wording.

Who submits the cost audit report and to whom?

The cost accountant submits the report to the Board of Directors of the company, as the proviso to Section 148(5) says. The company then furnishes it to the Central Government.

What is the time limit for filing the cost audit report with the Government?

Section 148(6) gives the company thirty days from the date of receipt of a copy of the report. The company must also give full information and explanation on every reservation or qualification.

Are annexures a part of the cost audit report?

Yes. SCA 109 para 4.5 says the cost audit report includes any statement, annexure, qualification or observation attached to it or required by law.