*REVISED PROCEDURE FOR APPOINTMENT OF COST AUDITOR BY COMPANIES*
*Section 233B of the Companies Act, 1956 - Audit of cost accounts in certain
cases - Revised procedure for appointment of cost auditor by companies*
*GENERAL CIRCULAR NO. 15/2011, DATED 11-4-2011*
Ministry has reviewed the existing procedure followed by the companies for
seeking prior approval of the Central Government for appointment of cost
auditor under section 233B(2) of the Companies Act, 1956. In supersession of
any earlier order/circular issued in this regard, the revised procedure to
be followed by the companies and cost auditor shall be as under:
(*a*) The company required to get its cost records audited under section
233B(1) of the Companies Act, 1956 shall appoint a cost auditor who is a
cost accountant as defined in clause (*b*) of sub-section (1) of section 2
of the Cost and Works Accountants Act, 1959 (23 of 1959) and who holds a
valid certificate of practice under sub-section (1) of section 6 of that Act
and includes a firm of cost accountants.
(*b*) The Audit Committee of the Board shall be the first point of
reference regarding the appointment of cost auditors.
(*c*) The Audit Committee shall ensure that the cost auditor is free from
any disqualifications as specified under section 233B(5) read with section
224 and sub-section (3) or sub-section (4) of section 226 of the Companies
Act, 1956.
(*d*) While a cost auditor shall have prime responsibility to ensure that
he does not violate the limits specified under section 224(1-B) of the
Companies Act, 1956, the Audit Committee shall also be responsible for such
compliance by the cost auditor.
(*e*) The Audit Committee shall obtain a certificate from the cost
auditor certifying his/its independence and arm’s length relationship with
the company.
(*f*) The company shall e-file its application with the Central
Government on www.mca.gov.in portal, in the prescribed Form 23C within
ninety days from the date of commencement of each financial year, along with
the prescribed fee as per the Companies (Fees on Applications) Rules, 1999
as amended from time-to-time and other documents as per existing practice *
i.e.,* (*i*) certified copy of the Board Resolution proposing appointment of
the cost auditor; and (*ii*) copy of the certificate obtained from the cost
auditor regarding compliance of section 224(1B) of the Companies Act, 1956.
(*g*) On filing the application, the same shall be deemed to be approved
by the Central Government, unless contrary is heard within thirty days from
the date of filing such application.
(*h*) If within thirty days from the date of filing such application, the
Central Government directs the company to re-submit the said application
with such additional information or explanation, as may be specified in that
direction, the period of thirty days for deemed approval of the Central
Government shall be counted from the date of re-submission by the company.
(*i*) After expiry of thirty days, as the case may be, the company shall
issue formal letter of appointment to the cost auditor, as approved by the
Board.
(*j*) Within thirty days of receipt of formal letter of appointment from
the company, the cost auditor shall inform the Central Government in the
prescribed form, along with a copy of such appointment. An e-form for the
same is being developed and will be notified shortly.
(*k*) The company shall disclose full particulars of the cost auditor,
along with the due date and actual date of filing of the cost audit report
by the cost auditor, in its Annual Report for each relevant financial year.
(*l*) In those companies where constitution of an Audit Committee of the
Board is not required by law, the words "Audit Committee" shall stand
substituted by the words "Board of Directors".
*2.* If a company contravenes any provisions of this circular, the company
and every officer thereof who is in default, including the persons referred
to in sub-section (6) of section 209 of the Act, shall be punishable as
provided under sub-section (2) of section 642 read with sub-sections (5) and
(7) of section 209 and sub-section (11) of section 233B of Companies Act,
1956.
*3.* If default is made by the cost auditor in complying with the aforesaid
provisions, he shall be punishable with fine, which may extend to five
thousand rupees.
*4.* The modified procedure contained in this circular shall be effective
from the financial year commencing on or after the lst day of April, 2011.
*5.* The Institute is requested to bring this to the general information of
all Members in practice, and of the corporate sector.
Revised address of Cost Audit Branch
Revised address of Cost Audit Branch
"B-1" Wing, 2nd Floor, Paryavaran Bhawan, CGO Complex, Lodhi Road,
New Delhi- 110003. Tel: 2436-6284, 6348, 6686, 6005
Cost Audit/Record direction dated 02.05.2011.
