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CMA Intermediate · Corporate Accounting and Auditing · Cost Audit

A company is covered by a cost records order under section 148. Its statutory auditor appointed under section 139, CA Mehta, offers to also audit its cost records at a nominal fee to save time. Which view is correct under section 148?

It is not permitted. Under the first proviso to section 148(3), a person appointed under section 139 as the company's auditor cannot be appointed to audit its cost records, and the cost audit must be done by a cost accountant.

  1. APermitted, since a chartered accountant can do cost audit if the Board approves
  2. BPermitted, if the members approve the fee
  3. CNot permitted, because a person appointed under section 139 as auditor shall not be appointed to audit cost recordsCorrect
  4. DPermitted, provided the cost audit report goes to the Central Government directly

Explanation

The first proviso to section 148(3) says no person appointed under section 139 as an auditor of the company shall be appointed for conducting the audit of cost records. Also, the cost audit is conducted by a cost accountant, and the report is submitted to the Board, so approval by Board or members cannot override the bar.

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