The cost auditor reports in Form CRA-3, and the company files that report with the Central Government in Form CRA-4. Both forms are prescribed under the Companies (Cost Records and Audit) Rules, 2014.
Structure of Form CRA-3
The report has three parts:
- The report itself — the auditor’s statement on whether proper cost records have been kept, whether the cost statements give a true and fair view of the cost of production, sales and margin, and whether Cost Accounting Standards have been followed. It includes the auditor’s qualifications and observations.
- Annexure to the report — general information about the company and the audit, and a list of qualifications, observations and suggestions.
- Abridged cost statements and performance indicators — product-wise quantitative information, cost and profit statements, reconciliation of cost and financial profit, value addition and related party transactions.
Timeline
| Step | Time limit |
|---|---|
| Cost auditor submits CRA-3 to the Board | Within 180 days from the close of the financial year |
| Board considers the report | At the Board meeting following receipt |
| Company files CRA-4 with the report and its comments on qualifications | Within 30 days of receipt of the report |
CRA-4 is filed in XBRL. The taxonomy follows the CRA-3 structure, so the report must be prepared with the XBRL tagging in mind.
Board’s response to qualifications
The company must explain every reservation or qualification in the cost audit report. The explanation forms part of the CRA-4 filing.
Common reasons for qualification
- Cost records not maintained on a regular basis.
- Capacity not determined, or idle capacity cost loaded onto products.
- Reconciliation with financial accounts incomplete.
- Related-party transactions not disclosed at arm’s length values.
Points for the company
- Share production and cost data early; the 180-day limit runs from the year-end, not from the end of the statutory audit.
- Align the financial statements and cost statements on turnover, consumption and inventory before the auditor’s review.
- Keep the Board’s explanations factual and specific.
Official sources
Disclaimer. This article explains the law as understood on the review date shown above. It is general information, not advice on any particular case. Provisions may have changed since; refer to the official sources and obtain professional advice before acting. Full disclaimer.