Disclosure of Cost Audit Report

After reading this article you will learn about the Disclosure of Cost Audit Report.

The prime object of statutory cost audit is “to make the industries alert and efficient and to make them know their rational costs with a view to reducing it to the extent possible…………….. it is a definite step towards removal of social injustice,” observed H.R. Gokhale, Ex-Minister of Law, Justice and Company Affairs.


Experience with the industries and their performance does not indicate that they have become really alert and sensitive to reducing the costs and prices and towards removal of ‘social injustice’.

The shareholders with the knowledge of cost audit information can make the industries alert in true spirit. Non-disclosure of cost audit report constitutes ‘social injustice’ to the shareholders who have the greatest role in the capital funds of a company.

A person or an authority having the right to appoint another person or agency should have a genuine right to know the results of the activities undertaken by such other person or agency. The shareholders, being the appointing authority of a cost auditor in an Annual General Meeting of a company, must have the right of access to the Cost Auditor’s Report also.

The present practice of non-disclosure of the report denies this genuine claim and obligation.

The shareholders, at the tail-end of this century, are not laymen, rather knowledgeable and sensitive to understand the financial and cost audit reports. If it is thought that they understand only published financial accounts and not anything else, then it would be a gross underestimation of their potentialities.

‘Education for all’ is the catchword now-a-days and the contents of the cost audit report should be disclosed to the shareholders without prejudice.


The ‘means of information’ alone does not convey information and creates suspicion and distrust. It should be the policy of the Government to ensure conveying of audit information through adequate disclosures to the shareholders.

The directors on the board of a company are insider participants and similarly, the shareholders are the outsider-participants of a company. Ethics of fairness and equity call for sharing of knowledge on cost and allied matters between them.

In India, we are brought up in an environment to assume a Corporate Board as a repository of the highest interests in the company and a willing and able steering function through the troubled waters of the business oceans. In practice, this is rarely so. Such corporate level boards exist for statutory purposes at their statutory regular meetings and give statutory seals to policy decisions already made.

Those decisions more often are made for away from the real scene of a company by the group representing the dominant shareholding in a capitalist’s chamber of a national or multi-national headquarters or in the offices of a bureaucrat or a minister. This state of affairs is mainly because the vast majority of Indian companies are owned to the point of total control for all practical purposes by a single shareholding interest.


The statutory cost audit is going to complete its existence for thirty years soon; yet, the situation has not changed. Neither the corporate entities nor the dominant shareholding groups nor even the Government have come up critically on the patterns of disclosure of cost audit information.

A new orientation in the attitude of all concerned is a necessity. The current trend of liberalisation and globalisation of economy have already set in a state of international competition in all markets.

In this background, the Government should consider repositioning of the law relating to cost audit so as to make it obligatory to submit the cost audit report to the shareholders of a company as has been the practice in case of a statutory audit (financial) report of a company.

This step will foster a discipline of accountability and help expose the members of the corporate board to certain liabilities, and will go a long way to the fulfilment of social justice for all concerned.

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