2. THE COMPANIES (COST AUDIT REPORT) RULES, 2011
Notification No.G.S.R.No.430(E) dated 3.6.2011
Superceded earlier rules of 2001
M K R A O & C O . , C O S T A C C O U N T A N T S 2

3. FOMS PRESCRIBED
Form I – for filing cost audit report and other documents
with Central Government in electronic mode
Form II – Form of Cost auditors report and includes
auditor’s observations and suggestions, and annexure to
the cost audit report.
Form III – Performance appraisal report
M K R A O & C O . , C O S T A C C O U N T A N T S 3

4. APPLICATION
Every Company in which an audit of cost records has been
ordered by the Central Govt.under section 233 B of the
Act.
M K R A O & C O . , C O S T A C C O U N T A N T S 4

5. APPOINTMENT OF AUDITOR
Within 90 days from the commencement of every FY seek
approval from Central Govt. by filing application in form
23 C electronically.
Cost Auditor to inform CG of his appointment within 30
days of receipt of appointment letter by electronically
filing form 23 D.
M K R A O & C O . , C O S T A C C O U N T A N T S 5

6. FORM OF REPORT
As per form prescribed under these rules along with his
observations and suggestions, and Annexure
To Central Government and forward copy to the Company
Cost details, statements, schedules, etc. for each unit and
each product or activity duly authenticated by at least two
directors of the Company and the cost auditor.
M K R A O & C O . , C O S T A C C O U N T A N T S 6

7. PERIOD FOR WHICH RECORDS TO BE KEPT
Eight years preceding the current financial year.
Newly established companies not in existing for 8 years for
all the years.
M K R A O & C O . , C O S T A C C O U N T A N T S 7

8. PERFORMANCE APPRAISAL
Every Cost Auditor who submits a report under these rules
shall also submit a Performance Appraisal Report duly
authenticated to the Board/ Audit Committee of the
Company in prescribed form
The Auditor to clarify on any issue to CG within 30 days of
receipt of communication.
M K R A O & C O . , C O S T A C C O U N T A N T S 8

9. TIME LIMIT FOR REPORT
Within 180 days from the close of the financial year to which
the report relates.
M K R A O & C O . , C O S T A C C O U N T A N T S 9

10. AUTHENTICATION OF ANNEXURE
Board to approve the Annexure before submitting to CG by
cost auditor
The Annexure duly audited by the cost auditor, shall be
signed by he Company Secretary and at least one
Director on behalf of the Company.
If no Company Secretary in the Company, then at least two
directors shall sign.
M K R A O & C O . , C O S T A C C O U N T A N T S 10

11. FORM III – PERFORMANCE APPRAISAL REPORT
Capacity Utilization Analysis
Productivity / Efficiency Analysis
Utilities/Energy Efficiency Analysis
Key-Costs & Contribution Analysis
Product/Service Profitability analysis
Market/Customer profitability analysis
Manpower analysis
Impact of IFRS on the cost structure, cash flows and profitability
Application of Management Accounting Tools
M K R A O & C O . , C O S T A C C O U N T A N T S 11

12. ANNEXURE TO THE COST AUDIT REPORT
1. General Information
2. Cost Accounting Policy
3. Product Group details(for the company as whole )
4. Quantitative information (for each product group
separately)- capacity – prodn.- sales-
5. Abridged cost statement(for each product group
separately)
6. Operating Ratio Analysis
7. Profit Reconciliation
8. Value addition and distribution of earnings
M K R A O & C O . , C O S T A C C O U N T A N T S 12

13. ANNEXURE TO THE COST AUDIT REPORT
9. Financial Position and Ratio Analysis
10. Related Party Transacvtions
11. Reconciliation of Indrect Taxes
M K R A O & C O . , C O S T A C C O U N T A N T S 13

14. COST ACCOUNTING POLICY
Briefly describe the cost accounting policy adopted by the Compay keeping
in view the requirements of Cost Accounting Record Rules, 2011 and
Cost Audit Report Rules, 2011 Cost Accounting Standards and its
adequacy or otherwise to determine cost of production, cost of sale
,sales realisation and margin of the product./activity groups separately
for each of the product/activity group.
The policy should cover:
1.Identification of cost Centre, objects and cost drivers
2.Accounting for material costs including packing materials, stores and
spares etc.,employee costs, utilities and other relevant cost
components
3.Accounting Allocation and absorption of overheads.
4.Accounting for depreciation and ammortisation
M K R A O & C O . , C O S T A C C O U N T A N T S 14

15. COST ACCOUNTING POLICY
5. Accounting for by product, joint product, scraps and wastages.
6.Basis of Inventory valuation
7.Methodology for valuation of inter-unit/company and related party
transactions.
8.Treatment of abnormal and non recurring costs including classification of
other non-cost items.
9. Observation of Cost Auditor regarding adequacy or otherwise of
Budgetary Control System.
10. Indicate if any change is made to Cost Accounting Policy during the
current year for the products under Audit as compared to previous year.
M K R A O & C O . , C O S T A C C O U N T A N T S 15

16. ANNEXURE TO THE COST AUDIT REPORT
6.Operating Ratio Analysis (for each product group
separately)
Ratio of operating expenses to Cost of Sales
7. Profit reconciliation
8. Value Addition and Distribution(for the Company as
whole)
9. Financial Position and Ratio Analysis (for the Co.as a
whole)
M K R A O & C O . , C O S T A C C O U N T A N T S 16

17. ANNEXURE TO THE COST AUDIT REPORT
10 Related party transactions (for the company as a whole)
Under this the auditor shall give Purchase, Sale transactions
Transfer price applied
Normal price and basis adopted to determine normal price.
M K R A O & C O . , C O S T A C C O U N T A N T S 17

18. ANNEXURE TO THE COST AUDIT REPORT
11 Indirect Taxes reconciliation (for the company as a whole)
M K R A O & C O . , C O S T A C C O U N T A N T S 18