Corporate Accounting and Auditing · Cost Audit

Cost Audit Programme and Cost Audit Report

Updated 10 October 2026 · Fact-checked

A cost audit programme is the cost auditor's written plan of work: strategy, procedures, timing and resources. The cost audit report is the cost accountant's findings on the cost records, submitted to the Board of Directors. The company then sends a copy to the Central Government within thirty days, with explanations for every reservation.

Understand Cost Audit Programme and Cost Audit Report

A cost audit checks whether a company's cost records are properly kept and whether cost statements are fairly drawn from them. Section 148 of the Companies Act, 2013 allows the Central Government to order such an audit for notified classes of companies. The audit is done by a cost accountant appointed by the Board. It is in addition to the audit under section 143.

The cost audit programme is the plan. SCA 101 (Planning an Audit of Cost Statements) says the auditor shall prepare and document the overall audit strategy and audit plan. Think of it as a roadmap. It tells your team what to test, in what order, who does it and by when.

The application guidance in SCA 101 (para 6.5) lists what to consider while planning. These include the cost reporting framework and the need for reconciliation with the financial reporting framework, industry regulators' requirements, unique features of the industry, reliance on financial auditors, other cost auditors and internal auditors, the state of IT and ERP systems, statutory timelines, Board or audit committee meeting timelines, and manpower and equipment.

The cost audit report is the output. Under section 148(5) proviso, the cost accountant submits it to the Board of Directors, not directly to the Government. Under section 148(6), the company must furnish the Central Government with the report within thirty days from the date of receipt of a copy of it, along with full information and explanation on every reservation or qualification in it.

The form numbers (CRA-3 for the report, CRA-4 for filing) and the detailed report format come from the Cost Records and Audit Rules, which are not in the text supplied here. Learn them as exam facts from your study material, but anchor your answer on the section 148 rules above.

Key rules to remember

Who appoints the cost auditor: Appointed by the Board; remuneration determined by the members; Section 148(3). The company's section 139 statutory auditor cannot be appointed for the cost audit.
To whom the report goes: Cost accountant → Board of Directors; Section 148(5) proviso. The report is submitted to the Board, not to the Central Government.
Filing timeline: Company → Central Government within 30 days of receiving a copy of the report; Section 148(6). Send it with full information and explanation on every reservation or qualification.
Further information: Central Government may call for more information; company furnishes within the time specified; Section 148(7).
Relationship with statutory audit: Cost audit is in addition to the section 143 audit; Section 148(4).
Planning duty: Auditor shall prepare and document the overall audit strategy and audit plan; SCA 101, Scope (para 3).
Standards compliance: Cost auditor shall comply with the cost auditing standards; Second proviso to section 148(3).
Use of 'true and fair' wording: Only if the law or regulation prescribes it in the cost audit report format; SCA 105, para 6.33.
Penalty for default: Company and officers: section 147(1). Cost auditor: section 147(2) to (4); Section 148(8).

How to solve Cost Audit Programme and Cost Audit Report questions

Use this method for any question on the cost audit programme or report. It keeps your answer structured and tied to the law.

1Identify what is asked: the planning (programme), the report contents, or the timeline and filing.
2For planning questions, begin with the SCA 101 duty to prepare and document the overall audit strategy and audit plan.
3List the planning factors that fit the case: reporting framework and reconciliation with financial accounts, regulators, industry features, reliance on others, IT or ERP, timelines, resources.
4For report questions, state who prepares it (cost accountant), to whom it goes (Board of Directors), and the duty to comply with cost auditing standards.
5For filing questions, give the 30-day rule from receipt of the copy, the Central Government as recipient, and the need to explain every reservation or qualification.
6Mention follow-up powers under section 148(7) and penalties under section 148(8) where the question hints at default.
7Apply the facts given: count days from receipt of the report copy, not from the year end or the Board meeting.
8Close with a one-line conclusion that answers the exact question.

Quickest way: Three-line recall: Plan, Report, File

When to use it: Use for short notes, 2-mark MCQs and quick date-based questions when time is short.

Plan: SCA 101 requires a documented strategy and plan; think framework, regulators, reliance, IT, timelines, resources.
Report: Cost accountant to Board of Directors, following cost auditing standards.
File: Company to Central Government within 30 days of receiving the copy, with explanations for every qualification.
For date questions, add 30 days to the date of receipt and check the answer against that.

Common mistakes in Cost Audit Programme and Cost Audit Report

Saying the cost auditor files the report with the Central Government.
Students mix up the report submission with the company's filing duty.
Fix: The cost accountant submits to the Board of Directors. The company furnishes it to the Central Government under section 148(6).
Counting the 30 days from the balance sheet date or the Board meeting.
Students assume all deadlines run from the year end.
Fix: The text says thirty days from the date of receipt of a copy of the cost audit report.
Appointing the statutory auditor as cost auditor.
Both are audits of the same company, so students think one person can do both.
Fix: Section 148(3) first proviso bars a person appointed under section 139 as auditor from the cost audit.
Forgetting to explain reservations and qualifications when filing.
Students remember only the 30-day limit.
Fix: Add that full information and explanation on every reservation or qualification must go with the report.
Treating the cost audit as a replacement for the section 143 audit.
Both examine accounting records.
Fix: Section 148(4) says it is in addition to the section 143 audit.
Writing a generic audit programme with no cost-audit factors.
Students copy the financial audit programme.
Fix: Include reconciliation with financial accounts, industry features and reliance on other auditors from SCA 101 para 6.5.

Worked examples

Example 1

A company received a copy of the cost audit report from its cost auditor on 10 June. By which date must it furnish the report to the Central Government? What must accompany it?

Show the solution

Identify the rule: section 148(6) gives thirty days from the date of receipt of a copy of the report.
Start counting from 10 June, the date of receipt.
June has 30 days, so 20 days remain in June after 10 June (11 to 30 June).
Ten more days are needed, so the last date is 10 July.
State what accompanies the report: full information and explanation on every reservation or qualification.

Answer: The company must furnish the report to the Central Government by 10 July, with full information and explanation on every reservation or qualification in it.

Example 2

Explain the factors a cost auditor should consider while planning the cost audit programme for a manufacturing company.

Show the solution

State the duty: under SCA 101 the auditor shall prepare and document the overall audit strategy and audit plan.
Cost reporting framework: the framework under the Companies Act and Rules on which cost information is prepared, including reconciliation with the financial reporting framework.
Regulators and industry: any industry regulator's requirement on handling costs, and unique industry features that affect audit needs.
Reliance on others: how far the work of financial auditors, other cost auditors and internal auditors, such as attendance at stocktaking, can be relied on.
IT environment: whether an ERP or an internally developed system is used and how much reliance it allows.
Timelines: statutory reporting timelines, and Board or audit committee meeting dates that set limits for completing work.
Resources: manpower, equipment and others, and assigning them to specific parts of the work.

Answer: The programme should be a documented strategy and plan built on the reporting framework and reconciliation needs, regulator and industry features, reliance on other auditors, IT systems, timelines and available resources, as listed in SCA 101 para 6.5.

Exam tips

Memorise the three recipients: cost accountant to Board, then company to Central Government. Examiners test this swap.
In date problems, always count from the date of receipt of the report copy and show the working.
For programme questions, quote SCA 101 factors in a bulleted list; each point earns a step mark.
Learn CRA-3 and CRA-4 form numbers from your ICMAI material, but do not invent contents of the form beyond what you have studied.
For MCQs, watch for options that name the statutory auditor, the Board, or the wrong day count.

Practice questions from Cost Audit

Cost Audit Programme and Cost Audit Report in other exams

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

Cost Audit Programme and Cost Audit Report: frequently asked questions

What is a cost audit programme?

It is the cost auditor's documented plan of work. SCA 101 requires the auditor to prepare and document the overall audit strategy and audit plan. It covers what to test, timing and resources.

Who receives the cost audit report first?

The Board of Directors. Under section 148(5) proviso, the cost accountant submits the report to the Board. The company later furnishes it to the Central Government.

What is the time limit for sending the cost audit report to the Central Government?

Thirty days from the date the company receives a copy of the report. Section 148(6) also requires full information and explanation on every reservation or qualification.

Are CRA-3 and CRA-4 mentioned in section 148?

No. Section 148 states the duties and timeline, while form numbers and the detailed format come from the Cost Records and Audit Rules. Study those forms from your ICMAI material.