This Article is From Jul 01, 2014

Corporate Affairs Ministry Tweaks Cost Audit Norms

New Delhi:

The government on Monday said only a certain class of companies, including those producing defence equipment, would be subject to cost audit.

Companies engaged in activities that involve public interest and those into making certain kinds of medical devices would also be covered under the new rules.

The Corporate Affairs Ministry, which is implementing the new companies law, has made changes to cost audit rules.

In a late evening press release, the ministry said the new rules would supersede those notified under the Companies Act, 1956.

"The new rules  specify four classes of companies which shall be required to maintain cost records and who will be subject to cost audit," it said.

The latest notification pertains to Companies (Cost Records and Audit) Rules, 2014 under section 148 of the Companies Act, 2013.

According to the ministry, the companies engaged in the production of goods in strategic sectors such as machinery and mechanical appliances used in defence, space and atomic energy sectors excluding any ancillary items would have to carry out cost audits.

Entities engaged in manufacturing of arms and ammunitions would also come under this ambit.

Besides, entities engaged in an industry regulated by a sectoral regulator or a ministry or department of the central government would be covered under cost audit rules. These include aeronautical services of air traffic management, roads and other infrastructure projects, drugs and pharmaceuticals, sugar and industrial alcohol, and fertilisers.

Companies operating in areas involving public interest such as railways and firms that are into production, import and supply or trading of certain medical devices would also have to maintain cost records.

" the case of a company engaged in multiple products, any product or device for which the individual turnover (from such specific product or device) is Rs 10 crore or more, or one third of the turnover, whichever is less" would be covered, as per the ministry's notification.

With regard to companies that are into one specific product or device, the cost audit rules would be applicable if the entity has net worth of Rs 150 crore or more or the turnover is Rs 25 crore or more.