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

Cost Records Maintenance and Form CRA-1 Explained

Updated 11 October 2026 · Fact-checked

Cost records are the books of account that show how a company uses material, labour and other cost items for notified products or services. Section 148(1) lets the Central Government require them. The Cost Records and Audit Rules prescribe Form CRA-1 for the prescribed particulars. To answer questions, first test whether the company is covered, then name the records it must keep.

Understand Cost Records and Maintenance (Form CRA-1)

A normal company keeps financial books under the Companies Act. Section 148 adds a second layer for certain industries. The Central Government may, by order, direct a class of companies producing specified goods or providing specified services to include in their books particulars of the utilisation of material or labour and other items of cost, as prescribed.

This is the cost records requirement. It comes first and is separate from cost audit. A company can be required to keep cost records without being required to have them audited. Cost audit under section 148(2) applies only to companies already covered by section 148(1) that also cross the prescribed net worth or turnover limits.

The Companies (Cost Records and Audit) Rules, 2014 give the detail. Three rules matter here:

Rule 3 has the table of regulated and non-regulated sectors. This table fixes which products and services are covered. Use it for the product or service question.
Rule 4 sets the applicability thresholds for cost audit.
Rule 5 deals with maintenance of cost records. Form CRA-1 is the form in which cost records are maintained.

Check the current Rules for the exact entries and for the monetary thresholds. Do not quote thresholds from memory.

The cost auditor works from these records. The auditor audits the cost records, not the company's whole business. If the records are missing or weak, the auditor has to report that. The cost auditor reports to the Board of Directors, and the audit is in addition to the statutory audit under section 143.

Key rules to remember

Power to require cost records: Section 148(1): Central Government may, by order, direct a class of companies producing prescribed goods or services to include prescribed cost particulars in their books of account; The particulars cover utilisation of material, labour and other prescribed items of cost. The order applies only to the class of companies it names.
Power to order cost audit: Section 148(2): audit of cost records applies to companies covered by 148(1) that meet the prescribed net worth or turnover; Cost records come first. Cost audit needs a second test of size. The amounts are set by the Rules, so check them there.
Who may be the cost auditor: Section 148(3): a cost accountant, appointed by the Board; the company's section 139 auditor cannot be appointed; The members determine the remuneration in the prescribed manner. The cost auditor must follow the cost auditing standards.
Cost audit is additional: Section 148(4): cost audit is in addition to the section 143 audit; It never replaces the statutory audit.
Report recipient and filing: Section 148(5) proviso: report goes to the Board. Section 148(6): company furnishes it to the Central Government within 30 days of receiving a copy, with full information and explanation on every reservation or qualification; The thirty days run from the company's receipt of the report copy.
Penalty for default: Section 148(8): company and officers in default are punishable as in section 147(1); the cost auditor in default as in section 147(2) to (4); Both the company and the cost auditor are exposed.

How to solve Cost Records and Maintenance (Form CRA-1) questions

Use this order for any question on cost records and Form CRA-1. It keeps the answer tied to the law and the facts.

1Read the facts and list the company's products or services, and whether any is in a regulated sector.
2Check whether each product or service appears in the table of regulated and non-regulated sectors in Rule 3 of the Companies (Cost Records and Audit) Rules, 2014. If it does not, the records requirement does not arise for it. If it does, also check any overall turnover figure the question gives against the turnover limit in Rule 3. The records duty needs both coverage and that turnover limit.
3State the legal basis: section 148(1) lets the Central Government direct the inclusion of material, labour and other cost items in the books.
4Keep records and audit apart. Say that records are required for companies that meet the Rule 3 coverage and turnover conditions, and that audit needs a further net worth or turnover test under section 148(2) and Rule 4.
5Name the records the facts call for, such as material, labour, utilities, overheads, capacity and cost sheet details for the covered product. Say they are maintained in Form CRA-1 under Rule 5.
6Give the practical consequence, such as who appoints the cost auditor, the report to the Board, and the 30-day filing and default penalties where asked.
7Close with a one-line conclusion that answers exactly what the question asked.

Quickest way: Three-test shortcut for cost records questions

When to use it: Use it for MCQs and for short case questions where you must decide quickly whether cost records or cost audit applies.

Test 1: is the product or service covered in the Rule 3 table of regulated and non-regulated sectors? If not, stop.
Test 2: if covered, check the overall turnover given in the question against the turnover limit in Rule 3. If the limit is met, cost records must be kept, in Form CRA-1 under Rule 5. Say so. If the question gives no turnover, state that the Rule 3 turnover condition must be satisfied.
Test 3: only for a company that must keep records, check any net worth or turnover given against the Rule 4 limits for cost audit.
Watch the wording: 'maintain' points to records, 'audit' points to the cost auditor.

Common mistakes in Cost Records and Maintenance (Form CRA-1)

Treating cost records and cost audit as the same requirement.
Both come from section 148 and appear together in the Rules.
Fix: Remember the order: 148(1) is records, 148(2) is audit. Audit is a further step for covered companies that meet the size test.
Saying the statutory auditor can also do the cost audit.
Students assume one firm can do both to save cost.
Fix: The first proviso to section 148(3) bars a person appointed as auditor under section 139 from being appointed for cost audit of that company.
Saying the cost audit report goes straight to the Central Government from the auditor.
The filing step is confused with the reporting step.
Fix: The cost accountant submits the report to the Board. The company then furnishes it to the Central Government within thirty days of receiving a copy.
Quoting net worth or turnover limits from memory.
Limits have been revised and old figures stay in notes.
Fix: Say the limits are as prescribed in the Rules, and use only figures given in the question.
Writing that cost audit replaces the section 143 audit.
Both are called audits of the company.
Fix: Quote section 148(4): cost audit is in addition to the audit under section 143.

Worked examples

Example 1

Sunrise Foods Ltd makes a product that falls in the list of products covered under the Cost Records and Audit Rules. Assume the company meets the overall turnover condition in Rule 3. A director asks whether the company can skip cost records because its cost audit is not yet required. Advise.

Show the solution

Identify the law: section 148(1) allows the Central Government to direct a class of companies to include prescribed cost particulars in their books.
Note that the product is covered in the Rule 3 table, and the Rule 3 overall turnover condition is assumed to be satisfied. So the company falls within the class for cost records.
Separate the two duties: cost audit under section 148(2) and Rule 4 needs a further net worth or turnover test, but the cost records duty does not.
Conclude that the absence of a cost audit requirement does not remove the records duty.

Answer: No. The product is covered and the Rule 3 turnover condition is assumed to be met, so Sunrise Foods Ltd must keep cost records under section 148(1) and the Rules, even if the net worth or turnover test for cost audit under section 148(2) is not met.

Example 2

Himalaya Cements Ltd is covered for cost audit. Its Board wants to appoint its section 139 statutory auditor as cost auditor, and to have the report sent directly by the auditor to the Central Government. Comment.

Show the solution

Check the appointment: under section 148(3), the cost auditor must be a cost accountant appointed by the Board.
The first proviso says a person appointed as auditor under section 139 shall not be appointed for conducting the cost audit.
So the statutory auditor cannot be the cost auditor.
Check the reporting route: under section 148(5) proviso, the report is submitted to the Board of Directors.
Under section 148(6), the company furnishes the report to the Central Government within thirty days of receiving a copy, with full information and explanation on every reservation or qualification.

Answer: Both proposals are wrong. The section 139 auditor cannot be appointed for the cost audit, and the cost accountant must report to the Board. The company then files the report with the Central Government within thirty days of receiving a copy.

Exam tips

In MCQs, spot the trap words: 'maintain cost records' versus 'get cost audit done'. They are different duties.
In case questions, tie your answer to the product or service named in the facts and to the section number you are sure of, such as 148(1) to (6).
Never quote a threshold or a product list from memory. Coverage comes from the Rule 3 table of regulated and non-regulated sectors, and audit limits come from Rule 4. Use only figures the question gives.
When a question asks about default, mention both the company and officers, and the cost auditor, with section 148(8) and section 147.
Finish every answer with a clear one-line conclusion; examiners reward a decision.

Practice questions from Preparation and Filing of Cost Audit Report

Cost Records and Maintenance (Form CRA-1) in other exams

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

CMA IntermediateCost Records and Maintenance Requirements

Cost Records and Maintenance (Form CRA-1): frequently asked questions

What is Form CRA-1?

Form CRA-1 is the form in which cost records are maintained under Rule 5 of the Companies (Cost Records and Audit) Rules, 2014. It does not decide whether a product or service is covered. Coverage comes from the table of regulated and non-regulated sectors in Rule 3, and cost audit applicability is tested under Rule 4.

Who must maintain cost records under section 148?

Companies in the class that the Central Government directs by order, being those producing prescribed goods or providing prescribed services. Under Rule 3, a company must both fall in the table of regulated and non-regulated sectors and meet the overall turnover limit set there. Check any turnover figure in the question against that limit before you conclude that records are required.

Is every company that keeps cost records also subject to cost audit?

No. Cost audit under section 148(2) applies to covered companies that also have the prescribed net worth or turnover, tested under Rule 4. A company that must keep cost records but is below those limits need not have them audited.

Who appoints the cost auditor and who receives the report?

The Board appoints a cost accountant, and the members decide the remuneration in the prescribed manner. The report goes to the Board of Directors. The company then furnishes it to the Central Government within thirty days of receiving a copy.