M KAMESW

ARA RAO

B.COM.,F

CMA

CO

ST

AC

CO

UN

T AN

T

M K RA O & C O . , C O S T A C C O U N TA N T S

THE COMPANIES (COST AUDIT REPORT) RULES, 2011

Notification No.G.S.R.No.430(E) dated 3.6.2011

Superceded earlier rules of 2001

2

M K RA O & C O . , C O S T A C C O U N TA N T S

FOMS PRESCRIBED

Form I – for filing cost audit report and other documents with Central Government in electronic mode

Form II – Form of Cost auditors report and includes auditor’s observations and suggestions, and annexure to the cost audit report.

Form III – Performance appraisal report

3

M K RA O & C O . , C O S T A C C O U N TA N T S

APPLICATION

Every Company in which an audit of cost records has been ordered by the Central Govt.under section 233 B of the Act.

4

M K RA O & C O . , C O S T A C C O U N TA N T S

APPOINTMENT OF AUDITOR

Within 90 days from the commencement of every FY seek approval from Central Govt. by filing application in form 23 C electronically.

Cost Auditor to inform CG of his appointment within 30 days of receipt of appointment letter by electronically filing form 23 D.

5

M K RA O & C O . , C O S T A C C O U N TA N T S

FORM OF REPORT

As per form prescribed under these rules along with his observations and suggestions, and Annexure

To Central Government and forward copy to the Company

Cost details, statements, schedules, etc. for each unit and each product or activity duly authenticated by at least two directors of the Company and the cost auditor.

6

M K RA O & C O . , C O S T A C C O U N TA N T S

PERIOD FOR WHICH RECORDS TO BE KEPTEight years preceding the current financial year.

Newly established companies not in existing for 8 years for all the years.

7

M K RA O & C O . , C O S T A C C O U N TA N T S

PERFORMANCE APPRAISALEvery Cost Auditor who submits a report under

these rules shall also submit a Performance Appraisal Report duly authenticated to the Board/ Audit Committee of the Company in prescribed form

The Auditor to clarify on any issue to CG within 30 days of receipt of communication.

8

M K RA O & C O . , C O S T A C C O U N TA N T S

TIME LIMIT FOR REPORT

Within 180 days from the close of the financial year to which the report relates.

9

M K RA O & C O . , C O S T A C C O U N TA N T S

AUTHENTICATION OF ANNEXURE

Board to approve the Annexure before submitting to CG by cost auditor

The Annexure duly audited by the cost auditor, shall be signed by he Company Secretary and at least one Director on behalf of the Company.

If no Company Secretary in the Company, then at least two directors shall sign.

10

M K RA O & C O . , C O S T A C C O U N TA N T S

FORM III – PERFORMANCE APPRAISAL REPORT

Capacity Utilization Analysis

Productivity / Efficiency Analysis

Utilities/Energy Efficiency Analysis

Key-Costs & Contribution Analysis

Product/Service Profitability analysis

Market/Customer profitability analysis

Manpower analysis

Impact of IFRS on the cost structure, cash flows and profitability

Application of Management Accounting Tools

11

M K RA O & C O . , C O S T A C C O U N TA N T S

ANNEXURE TO THE COST AUDIT REPORT

1. General Information

2. Cost Accounting Policy

3. Product Group details(for the company as whole )

4. Quantitative information (for each product group separately)- capacity – prodn.- sales-

5. Abridged cost statement(for each product group separately)

6. Operating Ratio Analysis

7. Profit Reconciliation

8. Value addition and distribution of earnings

12

M K RA O & C O . , C O S T A C C O U N TA N T S

ANNEXURE TO THE COST AUDIT REPORT

9. Financial Position and Ratio Analysis

10. Related Party Transacvtions

11. Reconciliation of Indrect Taxes

13

M K RA O & C O . , C O S T A C C O U N TA N T S

COST ACCOUNTING POLICY

Briefly describe the cost accounting policy adopted by the Compay keeping in view the requirements of Cost Accounting Record Rules, 2011 and Cost Audit Report Rules, 2011 Cost Accounting Standards and its adequacy or otherwise to determine cost of production, cost of sale ,sales realisation and margin of the product./activity groups separately for each of the product/activity group.

The policy should cover:

1.Identification of cost Centre, objects and cost drivers

2.Accounting for material costs including packing materials, stores and spares etc.,employee costs, utilities and other relevant cost components

3.Accounting Allocation and absorption of overheads.

4.Accounting for depreciation and ammortisation

14

M K RA O & C O . , C O S T A C C O U N TA N T S

COST ACCOUNTING POLICY

5. Accounting for by product, joint product, scraps and wastages.

6.Basis of Inventory valuation

7.Methodology for valuation of inter-unit/company and related party transactions.

8.Treatment of abnormal and non recurring costs including classification of other non-cost items.

9. Observation of Cost Auditor regarding adequacy or otherwise of Budgetary Control System.

10. Indicate if any change is made to Cost Accounting Policy during the current year for the products under Audit as compared to previous year.

15

M K RA O & C O . , C O S T A C C O U N TA N T S

ANNEXURE TO THE COST AUDIT REPORT

6.Operating Ratio Analysis (for each product group separately)

Ratio of operating expenses to Cost of Sales

7. Profit reconciliation

8. Value Addition and Distribution(for the Company as whole)

9. Financial Position and Ratio Analysis (for the Co.as a whole)

16

M K RA O & C O . , C O S T A C C O U N TA N T S

ANNEXURE TO THE COST AUDIT REPORT

10 Related party transactions (for the company as a whole)

Under this the auditor shall give Purchase, Sale transactions

Transfer price applied

Normal price and basis adopted to determine normal price.

17

M K RA O & C O . , C O S T A C C O U N TA N T S

ANNEXURE TO THE COST AUDIT REPORT

11 Indirect Taxes reconciliation (for the company as a whole)

18