After reading this article you will learn about the rights, powers and duties of the Cost Auditor.
Rights and Powers of a Cost Auditor:
According to Section 233B (4) of the Companies Act, 1956, the cost auditor ‘shall have the same powers and duties in relation to an audit conducted by him under this section as an auditor of a company has under Section 227(1) and such auditor shall make his report to the Central Government in such form and within such time as may be prescribed and shall also at the same time forward a copy of the report to the company’.
Thus, the cost auditor has the same rights and powers as that of a financial auditor.
The rights and powers of a cost auditor may be summarised as follows:
1. A right of access at all times to the books of accounts and vouchers of the company, whether kept at the head office of the company or elsewhere.
2. A right to require and receive from the officers of the company such information and explanations as he may think necessary for the successful performance of his duties as a cost auditor of a company.
3. A right to visit branch offices and factories of a company, and to receive proper returns therefrom as may be necessary for the conduct of his cost audit.
4. A right to receive such cost accounting records, cost statements and other books and papers as would be necessary for cost audit within 90 days of the financial year of the company.
5. A right to seek and enjoy assistance and facilities from the company so that he can successfully complete his audit.
6. A right to receive remuneration from the company for his function as a cost auditor.
7. A right to receive notice and to attend the general meeting of the company.
8. A right to have technical and legal advice whenever necessary in connection with his work of cost audit.
9. A right to sign on the cost audit report and a right to send his report to the Central Government as well as to the company.
Duties of a Cost Auditor:
The provisions of the Companies Act, the Cost Audit (Report) Rules, the Cost and Works Accountants Act and Regulations, and the different laws that are applicable on a particular company or companies govern the duties of a Cost Auditor.
The duties may be described as follows:
1. He should submit his Cost Audit Report to the Central Government within one hundred and eighty days from the end of the company’s financial year to which such report relates, and a copy of the said report to the company.
2. He should clearly state, in his report, that:
(a) He has obtained all the information and explanations relating to the cost accounts which to the best of his knowledge and belief were necessary for the purposes of the cost audit.
(b) Proper cost accounting records as required under the relevant Cost Accounting (Records) Rules have been kept by the company.
(c) Proper returns adequate for the purpose of his cost audit have been received from the branches not visited by him.
(d) The books and records kept by the company give the information in the manner required by the Companies Act, and
(e) In his opinion the company’s cost accounting records have been properly kept so as to give a true and fair view of the cost of production, processing, manufacturing or mining activities, and marketing of the product.
3. He should also qualify his report to the extent it differs, where he is not satisfied with any of the provisions stated above.
4. He should, if he considers it necessary after submission of his report, submit a supplementary report, to the Central Government before the date fixed for folding the annual general meeting of the company, limited to the extent of reconciliation of the cost statements with the company’s financial accounts.
5. He should assist the Government in the latter’s investigation process being launched for the purpose of examining the affairs of the company.
6. He should keep records of various errors or omissions and commissions done by the client staff.
7. He should give necessary advice to the company about the irregularities in the maintenance and recording of cost accounts books and statements.
8. He should understand and appraise the company’s policies and procedures and systems adopted for the purpose of controlling wastages and inefficiencies.
9. He should see and ensure what other exceptional duties are cast upon him by the Articles of the company.
10. He should owe his duty of care primarily to the company, act honestly and sincerely and maintain the secrecy and confidentiality of his client, and
11. Lastly, he has a continuing duty to maintain his professional knowledge and skill at a level conducive to act as a cost auditor competently.