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CMA Final · Cost and Management Audit · Basics of Cost Audit

Under section 148 of the Companies Act, 2013, how does a cost audit conducted under that section relate to the statutory financial audit under section 143?

A cost audit under section 148 is conducted in addition to the statutory audit under section 143. It does not replace the financial audit, because the two audits serve different purposes and are both required for companies covered by the cost audit order.

  1. AIt replaces the section 143 audit for companies covered by cost audit orders
  2. BIt is conducted in addition to the audit under section 143Correct
  3. CIt is conducted only if the section 143 auditor gives a qualified opinion
  4. DIt is merged with the section 143 audit and performed by the same auditor

Explanation

Section 148(4) states that an audit conducted under that section is in addition to the audit under section 143. It therefore does not replace or merge with the statutory audit. The option saying it replaces the financial audit is wrong because both audits are required.

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