Corporate Accounting and Auditing · Cost Audit

Section 148 and Cost Audit Rules 2014: Applicability

Updated 10 October 2026 · Fact-checked

Section 148 of the Companies Act, 2013 lets the Central Government require certain companies to keep cost records and have them audited by a cost accountant in practice. The Cost Records and Audit Rules, 2014 decide who is covered, using the industry tables and turnover limits. Check the sector first, then the turnover.

Understand Statutory Provisions: Section 148 and Cost Audit Rules

Ordinary books of account show profit and financial position. They do not show what each product costs. Section 148 of the Companies Act, 2013 fills this gap. It lets the Central Government prescribe which companies, in which industries, must keep cost records, and which of them must also get those records audited.

The section only gives the power. The detail sits in the Companies (Cost Records and Audit) Rules, 2014. The Rules list industries in two tables. Table A covers regulated sectors, such as telecommunication, electricity, petroleum, pharmaceuticals, fertilizers and sugar. Table B covers non-regulated sectors, such as engineering, textiles, chemicals and cement. A company's products or services must fall under one of these tables before any test applies.

There are two separate obligations, and students often merge them. First, maintaining cost records. This applies to companies in the tables when overall turnover crosses a lower limit. Second, cost audit. This applies only to a company already required to keep cost records, and it has higher limits that differ for regulated and non-regulated sectors. Every company that needs a cost audit needs cost records. The reverse is not true.

The audit itself is done by a cost accountant in practice, appointed by the Board. The company's statutory auditor under the Act cannot be appointed for the cost audit. The cost auditor reports to the Board, and the company then files the report with the Central Government in the prescribed form. Remember the broad flow: applicability, appointment, audit, report, filing.

The Rules, and the thresholds in them, have been amended over time. In the exam, use the limits taught in your ICMAI study material for the paper. Work in the order sector, then records test, then audit test.

Key rules to remember

Step 1: Sector test: Company must produce goods or services listed in Table A (regulated) or Table B (non-regulated) of the Rules; If the product or service is in neither table, the Rules do not make it subject to cost records or cost audit.
Cost records test: Overall turnover in the immediately preceding financial year ≥ ₹35 crore → maintain cost records; Turnover means that of all products and services of the company, not only the listed ones. Check the latest amendments for exemptions.
Cost audit: regulated sectors (Table A): Overall turnover ≥ ₹50 crore, or turnover of the individual product or service covered by cost records ≥ ₹25 crore; Either limit is enough, as the rule is worded. The company must already be covered for cost records.
Cost audit: non-regulated sectors (Table B): Overall turnover ≥ ₹100 crore, or turnover of the individual product or service covered by cost records ≥ ₹35 crore; Either limit is enough, as the rule is worded. The company must already be covered for cost records.
Timeline for the audit: Board appoints the cost auditor within 180 days of the start of the financial year; auditor reports within 180 days of the year-end; The company informs the Central Government of the appointment in Form CRA-2 within 30 days of the Board meeting at which the auditor is appointed, and in any case within 180 days of the start of the financial year. The report goes in Form CRA-3. The company files it in CRA-4 within 30 days of receiving it.
Who audits: Cost accountant in practice, appointed by the Board on the audit committee's recommendation; members ratify the remuneration; The company's statutory auditor cannot be appointed as cost auditor. Cost records are preserved for at least 8 years.

How to solve Statutory Provisions: Section 148 and Cost Audit Rules questions

Use the same order for every applicability question. It stops you from jumping to the cost audit limits when only the records test applies.

1Note the company's products or services and decide whether they fall in Table A (regulated) or Table B (non-regulated).
2If they are in neither table, state that Section 148 and the Rules do not make the company liable, and stop.
3Check overall turnover of the immediately preceding financial year against ₹35 crore for cost records.
4If cost records apply, check the cost audit limits for the correct table: ₹50 crore overall or ₹25 crore for a product (Table A); ₹100 crore overall or ₹35 crore for a product (Table B).
5Check for any exemption given in the question, such as an SEZ unit or export revenue facts, and apply it only as stated.
6State the conclusion in two parts: cost records required or not, cost audit required or not.
7If the question asks for the procedure, add: appointment by the Board, a cost accountant in practice, not the statutory auditor, and the CRA forms with their time limits.

Quickest way: Two-gate shortcut for applicability MCQs

When to use it: Use this for Question 1 style MCQs that give a sector and a turnover and ask what is required.

Gate 1: Is the sector in Table A or B? If not, the answer is none.
Gate 2: Is overall turnover below ₹35 crore? If yes, no records and no audit.
Gate 3: Pick the limit by table. Table A: ₹50 crore overall or ₹25 crore product. Table B: ₹100 crore overall or ₹35 crore product.
Read whether the question gives turnover for the whole company or for one product. Test it against the matching limit.
Eliminate any option that says audit without records, or that appoints the statutory auditor as cost auditor.

Common mistakes in Statutory Provisions: Section 148 and Cost Audit Rules

Saying every company with turnover above ₹35 crore needs a cost audit.
The ₹35 crore figure is the most remembered limit, and the records test gets mixed up with the audit test.
Fix: Treat ₹35 crore as the threshold for cost records only. Cost audit has higher limits that depend on the table.
Applying the Table A and Table B audit limits the wrong way round.
Students memorise numbers without linking them to regulated and non-regulated sectors.
Fix: Regulated sectors have the lower limits (₹50 crore and ₹25 crore). Non-regulated sectors have the higher limits (₹100 crore and ₹35 crore).
Using the product turnover limit as an extra condition that must also be met.
Students read the two limits as 'and' rather than 'or'.
Fix: As the rule is worded, meeting either the overall turnover limit or the individual product limit is enough. Write both tests in your answer.
Using the current year's turnover instead of the immediately preceding financial year.
The word 'preceding' is skipped when reading the question.
Fix: Always use the turnover of the immediately preceding financial year, and say so in your answer.
Appointing the company's statutory auditor as cost auditor.
Both are called auditors, so students assume one person can do both.
Fix: The cost auditor must be a cost accountant in practice. The statutory auditor appointed under Section 139 cannot be appointed for the cost audit.
Mixing up who appoints and who fixes remuneration.
Company law has many appointment rules, and they blur together.
Fix: The Board appoints the cost auditor on the audit committee's recommendation. The members ratify the remuneration in the prescribed manner.

Worked examples

Example 1

Shree Engineering Ltd makes auto components, a Table B (non-regulated) sector. Its turnover in the immediately preceding financial year was ₹120 crore. The turnover of the product covered by cost records was ₹30 crore. Is cost audit applicable?

Show the solution

Sector: auto components fall under the non-regulated list (Table B), so the Rules can apply.
Cost records test: overall turnover ₹120 crore is at least ₹35 crore, so cost records must be maintained.
Cost audit test for Table B: overall turnover limit is ₹100 crore. ₹120 crore is above ₹100 crore.
The product limit (₹35 crore) is not met, as ₹30 crore is below it, but meeting one limit is enough.
Cost audit therefore applies. The Board must appoint a cost accountant in practice, who is not the statutory auditor.

Answer: Shree Engineering Ltd must maintain cost records and get them audited, because overall turnover of ₹120 crore is at least ₹100 crore.

Example 2

Bharat Drugs Ltd is in a regulated sector (Table A). Overall turnover in the preceding financial year was ₹40 crore. The turnover of the product covered by cost records was ₹26 crore. State whether cost records and cost audit are required.

Show the solution

Sector: pharmaceuticals is a regulated sector (Table A).
Cost records test: overall turnover ₹40 crore is at least ₹35 crore, so cost records must be maintained.
Cost audit test for Table A: overall limit is ₹50 crore. ₹40 crore is below it.
Product limit for Table A is ₹25 crore. The product turnover of ₹26 crore is above it.
As the rule is worded, either limit is enough, so the product limit triggers cost audit.

Answer: Cost records are required (₹40 crore is at least ₹35 crore). Cost audit is also required, because the product turnover of ₹26 crore is at least ₹25 crore, even though overall turnover is below ₹50 crore.

Exam tips

For MCQs, the trap is nearly always a mismatch between the table and the limit. Read the sector first, then pick the limit.
In written answers, state the law first: Section 148 gives the power, the 2014 Rules give the thresholds. Then apply the facts in two parts, records and audit.
Learn the forms and time limits together: CRA-2 within 30 days of the Board meeting at which the auditor is appointed (and in any case within 180 days of the start of the financial year), CRA-3 report within 180 days of year-end, CRA-4 filing within 30 days of receipt.
Show your comparison in numbers (for example, ₹120 crore ≥ ₹100 crore). Examiners give step marks for the test, not only the conclusion.
If the question mentions an exemption such as an SEZ unit, apply it only to the extent the question states, and say you are following the Rules.

Practice questions from Cost Audit

Statutory Provisions: Section 148 and Cost Audit Rules in other exams

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

Statutory Provisions: Section 148 and Cost Audit Rules: frequently asked questions

Which companies must maintain cost records under the Cost Records and Audit Rules, 2014?

Companies engaged in production of goods or providing services listed in Table A or Table B of the Rules, with overall turnover of at least ₹35 crore in the immediately preceding financial year. Some exemptions exist, so check the conditions given in the question.

What is the turnover limit for cost audit?

There are two sets of limits. For regulated sectors (Table A) it is ₹50 crore overall or ₹25 crore for the individual product or service. For non-regulated sectors (Table B) it is ₹100 crore overall or ₹35 crore for the product or service. The company must also be covered for cost records.

Can the statutory auditor also do the cost audit?

No. Section 148 requires a cost accountant in practice to be appointed by the Board, and a person appointed as the company's auditor under Section 139 cannot be appointed to audit cost records.

Does a company needing cost records always need a cost audit?

No. Cost records apply at a lower turnover limit. Cost audit applies only when the higher limits for the relevant table are also met.