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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 stand in relation to the statutory financial audit conducted under section 143?

A cost audit under section 148 is in addition to the statutory audit under section 143. It does not replace it, is not optional, and is not merged with it, because the two audits serve different purposes and are performed by different appointees.

  1. AIt replaces the section 143 audit for companies covered by the cost audit order
  2. BIt is an audit in addition to the audit conducted under section 143Correct
  3. CIt is optional once the statutory auditor certifies the cost records
  4. DIt is merged with the section 143 audit and conducted 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 neither replaces nor merges with the statutory audit. The option saying it replaces the statutory audit reverses the position.

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