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CMA Intermediate · Corporate Accounting and Auditing · Cost Audit

Which combination correctly describes the position of a cost audit under section 148 of the Companies Act, 2013?

A cost audit is conducted in addition to, not in place of, the section 143 audit. The cost auditor must comply with cost auditing standards issued by the Institute of Cost Accountants of India with the approval of the Central Government.

  1. AIt replaces the section 143 audit for covered companies, and the cost auditor must follow cost auditing standards issued by the Institute of Cost Accountants of India
  2. BIt is in addition to the section 143 audit, and the cost auditor must follow cost auditing standards issued by the Institute of Cost Accountants of India with Central Government approvalCorrect
  3. CIt is in addition to the section 143 audit, and the cost auditor may follow any standards the Board chooses
  4. DIt replaces the section 143 audit if the company's net worth exceeds the prescribed limit, and standards are set by the Board

Explanation

Section 148(4) says cost audit is in addition to the section 143 audit. The second proviso to 148(3) requires compliance with cost auditing standards, which the Explanation defines as those issued by the Institute with the approval of the Central Government. Options saying it replaces the statutory audit are wrong.

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