Title

Cost Audit

Version

1.0

Author

Mayank

Reviewed By

Saurabh Misra

Date

30.11.2012

Table of Contents

1.

DEFINITION OF COST AUDIT................................................................................................... 3

2.

COST ACCOUNTING STANDARDS.........................................................................................3

3.

COST ACCOUNTING RECORD RULES...................................................................................4

4.
DIFFERENCE BETWEEN COST ACCOUNTING RECORD RULES AND COST
ACCOUNTING STANDARD................................................................................................................. 4

5.

COST ACCOUNTING RECORD RULES FOR CEMENT INDUSTRY.......................................5

1. Definition of Cost Audit

Cost audit is the verification of the cost of production of any product, service or activity on the basis of
accounts maintained by an enterprise in accordance with the accepted principles of cost accounting.
In India Cost Audit is not mandatory however Section 209 deals with the books of accounts required
to be maintained by the company
Under Section 209 (1) (d) states the maintenance of cost records and provides that in the case of a
company (pertaining to any class of companies), which is engaged in either production or processing
or manufacturing or mining activities, the company will also be required to maintain such particulars in
its books of accounts relating to utilization of material or labor or to other items of cost as may be
prescribed by the Central Government.
Cost Audit of a company is done only when there is a direction made by the Central government.
Cost audit is to be conducted only when the Central Government directs such an audit.[Sec233B (1)]
The auditor for this purpose is to be appointed by the Board of Directors, with the previous approval of
the Central Government. [Sec. 233B (2)]
2. Cost Accounting Standards
Cost Accounting Standards (CAS) are a set of standards that are designed to achieve uniformity and
consistency in cost accounting practices.
Cost Accounting Standard Board have established 14

Cost Accounting Standard till date

They are mentioned below

CAS1.
CAS2.
CAS3.
CAS4.
CAS5.
CAS6.
CAS7.
CAS8.
CAS9.
CAS10.
CAS11.
CAS12.
CAS13.
CAS14.

Classification of Cost
Capacity Determination
Overheads
Captive Consumption
Average (equalized) cost of transportation
Material Cost
Employee Cost
Cost of Utilities
Packing Material Cost
Direct Expenses
Administrative Overheads
Repairs & Maintenance Cost
Cost of Service Cost Centre
Pollution Control Cost

Please find the link below with regards to the above mentioned Cost Accounting Standard issued by
the Cost Accounting Standard Board (ICWAI).

cost accounting
standards.pdf

Copyright 2011 JKT

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3. Cost Accounting Record Rules

Cost Accounting Record Rules are the prescribed details by the Central Government with. Respect to.
Utilization of material, labor or other items of cost in respect of a class of companies notified under the
provisions of Companies Act, 1956. The Cost Accounting Record Rules are aimed at inducing the
companies to have control over their operations and costs with a view to achieve Optimum utilization
of resources in the economy.
The Central Government selects the products (class of company manufacturing a particular product)
for which the cost accounting record rules are proposed to be notified.
Total 44 products have so far been covered under the respective cost accounting record rules.
4.

Difference between Cost Accounting Record Rules and Cost Accounting Standard

Presently, separate Cost Accounting Records Rules have been prescribed with respect to each class
of industry or product covered under section 209(1) (d). Total 44 products have so far been covered
under the respective cost accounting record rules. Even though the rules broadly the similar, there
are definitely differences amongst various rules, especially formats and treatment of certain items
of expenditure.
However there coverage is limited to the selected companies only falling in 44 industries. On the
other hand Cost Accounting Standards shall be uniformly applicable to all the units including
companies and are easier to understand besides being flexible and uniform. Therefore these will have
much wider coverage.
Today, when most of the companies are multi-product organizations manufacturing or producing
number of products, only one or two products only are generally covered under Cost Accounting
Records Rules. Both of them are covered under different rules and it becomes difficult for the
companies to comply with the requirements. On the other hand Cost Accounting Standards shall
be equally applicable to the companies and all products manufacturers. Therefore, many experts
are of the view that prescription of Cost Accounting through Cost Accounting Standards with
appropriate compliance audit or disclosure norms may be much more effective and useful than
through complicated Cost Accounting Records Rule.
5. Cost Accounting Record Rules for Cement Industry
The list of Annexure and Performa on the different Cost Accounting Records Rules are mentioned
below
Performa A - Cost statement of lime stone raised
Performa B - Cost statement of limestone crushing
Performa C - Cost statement of clinker
Performa D - Cost statement of cement produced
Performa E - Cost statement of cement sold
Please find below a link with regards COST ACCOUNTING RECORDS (CEMENT) RULES, 1997
issued by Ministry of Finance (Department of Company Affairs) on how to maintain
Cost Accounting Records for Cement Industry.

cost audit record

rules cement industry.pdf

Copyright 2011 JKT

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Copyright 2011 JKT

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