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

Under section 148(2) of the Companies Act, 2013, the Central Government may direct a cost audit of cost records for a class of companies. Which condition must the companies satisfy to be covered by such a direction?

The direction applies to classes of companies already covered under section 148(1), that is, those required to include cost items in their books, and which have a prescribed net worth or a prescribed turnover. Listing status or auditor findings are not the test.

  1. AThey must have been listed on a recognised stock exchange for at least three years
  2. BThey must be covered under sub-section (1) and have a prescribed net worth or a prescribed turnoverCorrect
  3. CThey must have been found by the statutory auditor to maintain deficient books of account
  4. DThey must be companies regulated under a special Act

Explanation

Section 148(2) applies to classes of companies covered under sub-section (1) that have a net worth or turnover of the amount prescribed. Listing, auditor findings and special Act regulation are not the conditions. The special Act reference in the proviso only requires consultation with the regulator.

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