MCA Notification

MCA extends the deadline for submitting the Cost Audit Report to the Board of Directors

MCA has extended the deadline for filing Cost Audit Report with General Circular No. 15/2021, dated September 27th, 2021.

What is Cost Audit Report

Cost auditing is the practise of verifying a company’s cost accounts to assess the authenticity of cost accounting data. The cost audit report would confirm if the cost accounting records are in accordance with the costing principles, goals, objectives, and processes.

The following processes are often included in an audit:-

• Checking the correctness of costing records
• Error detection in cost records
• Examining cost books, accounts, and records

The Ministry of Corporate Affairs has extended the deadline for submitting a Cost Audit Report (CAR) to the Board of Directors as per Rule 6(5) of the Companies (Cost Records and Audit) Rules, 2014, in its General Circular dated September 27, 2021.

As a result, the cost auditor may submit the CAR for the financial year 2020-21 to the company’s Board of Directors by October 31, 2021, and it will not be deemed a breach of rule 6. (5). According to regulation 6(5), the report must be filed by a cost auditor within 180 days of the end of the fiscal year, which is September 27th each year.

As a result, firms must file the CAR in e-form CRA-4 within 30 days after receiving a copy of the CAR from the cost auditor. Yet, because businesses have been granted a general extension to hold AGMs under Section 96(1), e-form CRA-4 may be filed during the consequent longer time of submitting financial statements under Section 137 of the Companies Act, 2013.

Given the extraordinary disruption caused by the COVID-19 outbreak, it has been decided that if a cost audit report for the fiscal year 2020-21 is submitted to the Board of Directors of the companies by October 31, 2021, it will not be considered a violation of Rule 6(5) of the Companies (cost records and audit) Rules, 2014. Nevertheless, if a business entity has been granted an extension of time to convene its Annual General Meeting as per Sec. 96(1) of the Act, e-form CRA-4 may be filed within the time frame mentioned in the proviso to Rule 6(6) of the Companies (Cost Records and Audit) Rules, 2014.

As per Rule 6(5), (6) of the Companies (Cost Records and Audit) Rules, 2014 –

(5) Each cost auditor must submit his duly signed report to the company’s Board of Directors within 180 days at the end of the fiscal year to which the report pertains, such report shall be considered and examined the Board of Directors , especially any reservation or qualification contained therein.

(6) Within 30 days of receiving a copy of the cost audit report, every company covered by these rules will furnish the Central Government with such report, alongwith full information and explanation on every reservation or qualification enclosed therein, in Form CRA-4 in Extensible Business Reporting Language format, in the manner specified in the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2015 in addition to the charges outlined in the Companies (Registration Offices and Fees) Rules, 2014.

However, Companies that have received an extension of time to convene their Annual General Meeting as per Sec. 96 (1) of the Companies Act, 2013, may file form CRA-4 during the consequent extended timeframe of reporting financial statements as per Section 137 of the Companies Act, 2013.

Illustration –

Date of AGM	Date of Receipt of CAR	Due date of filing
		AOC – 4	CRA – 4
25/09/ 2021	17/ 10/ 2021	25/10/2021	16/11/2021
01/ 10/ 2021	27/ 09/ 2021	31/10/2021	31.10.2021
31/ 10/ 2021	15/ 10/ 2021	30/11/2021	30/11/2021

Law pertaining Cost Record Audit

Section 148 of the Companies Act of 2013 specifies the laws and requirements for Cost Records and Cost Audit applicability. Rule 3 of the Companies (Cost Records and Audit) Rules, 2014 lists the companies that must retain Cost Records, undertake a Cost Audit, and submit a Cost Audit Report.

Companies that are required to conduct a Cost Record Audit

The following companies must file the Cost Audit Report on Form CRA-4 with the government:-

• Regulated sectors operating with specific goods or services having annual total revenue of Rs.50 crore or more from all products and services
• Regulated sectors relating to specific goods or services having aggregate revenue of Rs.25 crore or more from the particular product and service
• Non-regulated sectors that deal with specific goods or services and have annual total revenue of Rs.100 crore or more from all products and services
• Non-regulated industries that deal with specific goods or services The total revenue from the specific produce or service is Rs. 35 crore or higher.

Companies exempted to conduct a Cost Record Audit

The below mentioned companies are excluded from performing a cost record audit:-

• The foreign exchange export income of the company surpasses 75% of overall revenue.
• The organization is based in a Special Economic Zone (SEZ)
• The organization generates power using a captive generating plant.

Circular attached

The extended deadline for filing Cost Audit Reports circular could also be viewed on the official MCA website: https://mca.gov.in/

GeneralCircularNo15_cost-audit-extension

Read our article:Company Law Regulations/Provisions applicable from 1st April 2021