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

Duties, Powers and Penalties under Section 148

Updated 11 October 2026 · Fact-checked

Section 148 of the Companies Act, 2013 makes a cost auditor subject to the rights, duties and obligations of auditors under the Chapter, so far as applicable. The cost auditor reports to the Board. The company must give full facilities, send the report to the Central Government within thirty days, and explain every qualification. Default is punishable under Section 147.

Understand Duties, Powers and Penalties under Section 148

Section 148 lets the Central Government prescribe cost records for certain classes of companies and, where it thinks fit, order an audit of those records. The audit is done by a cost accountant. That person is appointed by the Board, and the members decide the remuneration in the manner prescribed.

The cost auditor is not a lesser auditor. Sub-section (5) applies to the cost auditor the qualifications, disqualifications, rights, duties and obligations of auditors under the Chapter, so far as they can apply. This is how you answer a question on powers: the cost auditor borrows the statutory auditor's position, and the company must give all assistance and facilities.

Three features keep the cost audit separate. First, a person appointed as statutory auditor under Section 139 cannot be appointed for the cost audit. Second, the cost audit is in addition to the audit under Section 143. Third, the cost auditor must comply with the cost auditing standards, which are issued by the Institute of Cost Accountants of India with the approval of the Central Government.

Reporting runs in a chain. The cost auditor submits the report to the Board of Directors. The company then has thirty days from receiving a copy to furnish it to the Central Government, with full information and explanation on every reservation or qualification. If the Government wants more, it can call for further information and the company must supply it within the time specified.

The penalty provisions split the blame. 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). Read the question to see who defaulted before you pick the limb.

Key rules to remember

Who audits and who appoints: Cost accountant appointed by the Board; remuneration determined by members in the prescribed manner; Section 148(3). The statutory auditor appointed under Section 139 cannot be appointed for the cost audit.
Applicability of auditors' provisions: Qualifications, disqualifications, rights, duties and obligations of auditors under the Chapter apply to the cost auditor, so far as applicable; Section 148(5). This is the source of the cost auditor's powers. The company must give all assistance and facilities.
Report recipient: Cost audit report goes to the Board of Directors; Proviso to Section 148(5). The report is not submitted directly to the Central Government by the auditor.
Filing by company: Within 30 days of receiving the copy of the report, furnish it to the Central Government with full information and explanation on every reservation or qualification; Section 148(6). The duty is on the company.
Further information: Central Government may call for further information; company must furnish it within the time specified; Section 148(7).
Penalty for default: Company and officer in default: Section 147(1). Cost auditor in default: Section 147(2) to (4); Section 148(8). Do not quote amounts unless the question supplies them.
Relationship with Section 143 audit: Cost audit is in addition to the audit under Section 143; Section 148(4). It does not replace the financial audit.

How to solve Duties, Powers and Penalties under Section 148 questions

Use this method for any question on duties, powers or penalties under Section 148. It keeps you tied to the sub-section and to the person who defaulted.

1Identify the party in the question: the cost auditor, the Board, the company or its officers.
2Name the duty or power and tie it to a sub-section: (3) appointment, (4) in addition to Section 143, (5) auditor provisions and report to Board, (6) filing in thirty days, (7) further information, (8) penalty.
3State the rule in plain words, with the exact time limit or condition from the Act.
4Apply it to the facts. Check dates, who received the report, and whether a qualification was explained.
5Decide who is in default. Company and officers go to Section 147(1). The cost auditor goes to Section 147(2) to (4).
6Conclude with a clear position: compliant or not, and the consequence. Add any related duty, such as complying with cost auditing standards.

Quickest way: Four-line Section 148 check

When to use it: Use it for MCQs and short case scenarios where you have under two minutes.

Who: cost accountant, appointed by Board, not the Section 139 auditor.
What: audit is additional to Section 143 and must follow cost auditing standards.
Flow: auditor to Board; company to Central Government within 30 days with explanations.
Default: company and officers under Section 147(1); cost auditor under Section 147(2) to (4).

Common mistakes in Duties, Powers and Penalties under Section 148

Saying the cost auditor files the report with the Central Government.
Students mix up the report submission with the filing step.
Fix: Remember the chain: the auditor submits to the Board, and the company furnishes it to the Government within thirty days under Section 148(6).
Saying the thirty days run from the date of the audit report.
Loose reading of the sub-section.
Fix: The days run from the date the company receives a copy of the cost audit report.
Treating the statutory auditor as eligible for the cost audit.
Both are auditors, so students assume one person can do both.
Fix: The first proviso to Section 148(3) bars a person appointed under Section 139 from the cost audit.
Applying one penalty to both company and cost auditor.
Students remember Section 147 but not its split.
Fix: Company and officers in default fall under Section 147(1). The cost auditor falls under Section 147(2) to (4).
Writing that the cost audit replaces the Section 143 audit.
Both examine the company's accounts.
Fix: Section 148(4) says the cost audit is in addition to the Section 143 audit.
Listing powers of the cost auditor with no link to the Act.
Students learn the rights as a list without the source.
Fix: Open with Section 148(5): auditor rights and duties under the Chapter apply so far as applicable. Then list the rights, such as access to records and the company's duty to give assistance and facilities.

Worked examples

Example 1

Gamma Chemicals Ltd received a copy of its cost audit report on 4 July. The report has a qualification on the allocation of utilities. The CFO says the company will file the report with the Central Government on 10 August, with no explanation of the qualification. Advise the company.

Show the solution

The cost auditor submitted the report to the Board, which is the correct recipient under the proviso to Section 148(5).
The company must furnish the report to the Central Government within thirty days of receiving the copy. Thirty days from 4 July ends on 3 August.
Filing on 10 August is late, so the company is in default of Section 148(6).
The company must also provide full information and explanation on every reservation or qualification. The plan to file with no explanation breaches this.
Under Section 148(8)(a), the company and every officer in default are punishable as provided in Section 147(1).

Answer: The plan is non-compliant. The company must file by 3 August with an explanation of the utilities qualification. Late filing or no explanation exposes the company and its officers in default to Section 147(1) punishment.

Example 2

Delta Steels Ltd appointed its statutory auditor, appointed under Section 139, to also conduct its cost audit to save fees. The company says the cost audit replaces the Section 143 audit for the year. Comment.

Show the solution

The first proviso to Section 148(3) says a person appointed under Section 139 as auditor cannot be appointed for the audit of cost records. The appointment is invalid.
Section 148(3) requires a cost accountant appointed by the Board. A fresh appointment is needed.
Section 148(4) says the cost audit is in addition to the Section 143 audit, so it cannot replace it.
The cost auditor, once properly appointed, must comply with the cost auditing standards and report to the Board.

Answer: Both claims are wrong. The statutory auditor cannot be appointed for the cost audit, and the cost audit is in addition to, not instead of, the Section 143 audit. The Board must appoint a separate cost accountant.

Exam tips

Quote the sub-section with every rule. Marks go to the link between the fact and the provision.
Use the number thirty days only for the company's filing under sub-section (6). Do not apply it elsewhere.
In case scenarios, check who defaulted first, then pick the Section 147 limb.
For powers, start with Section 148(5) and then name the rights, so the answer has a legal base.
Do not quote penalty amounts or other section details unless the question gives them.

Practice questions from Preparation and Filing of Cost Audit Report

Duties, Powers and Penalties 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.

Duties, Powers and Penalties under Section 148: frequently asked questions

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

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

What is the penalty for default in cost audit under Section 148?

Under Section 148(8), 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). Your answer should say who defaulted.

To whom does the cost auditor submit the report?

The cost auditor submits the report to the Board of Directors of the company. The company then furnishes it to the Central Government within thirty days of receiving the copy. The explanation of every qualification goes with it.

Can the statutory auditor also do the cost audit?

No. The first proviso to Section 148(3) bars a person appointed as auditor under Section 139 from being appointed for the cost audit. The cost audit is also separate from, and in addition to, the Section 143 audit.