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CMA Intermediate · Corporate Accounting and Auditing · Cost Audit

Section 148 separates the requirement to include cost particulars in books from the requirement of a cost audit. Which statement correctly reflects the section?

Cost audit can be ordered only for companies already covered under section 148(1) that have the prescribed net worth or turnover, and only if the Central Government considers it necessary. Keeping cost records does not by itself require a cost audit.

  1. AEvery company that must keep cost records must also have its cost records audited
  2. BCost audit may be directed only for companies covered under sub-section (1) that meet the prescribed net worth or turnoverCorrect
  3. CCost audit applies to any company regardless of sub-section (1) coverage
  4. DCost audit replaces the audit under section 143

Explanation

Section 148(2) permits an order for audit of cost records only for companies covered under sub-section (1) which have a prescribed net worth or turnover, and where the Central Government thinks it necessary. So record-keeping does not automatically mean audit. Section 148(4) says cost audit is in addition to the section 143 audit, so it does not replace it.

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