SECTION 233B
AUDIT OF COST ACCOUNT
Appointment of
cost auditors in firm's name - Whether cost audit report could be signed by
merely affixing firm's name
Attention is invited to this Department's letter of
even number dated 19.11.1983 (reproduced below) intimating the decision of the
Department regarding the approval for appointment of cost auditors in firm's
name under sub-section (2) of section 233B.
In case where a firm of cost auditors is approved
for appointment under sub-section (2) of section 233B, the cost auditor report
shall be signed by any one of the partners of the firm responsible for the
conduct of cost audit in his own hand, for and on behalf of the firm, which has
been approved for appointment as cost auditors of the company. In any case, the
report should not be signed by merely affixing the firm's name.
*
LETTER NO.52/409/60-CAB, DATED 24.8.1984.
Copy of letter
dated 19.11.1983 referred to in clarification
I am directed to state that the question of
appointment of cost auditors in firm's name for conducting cost audit has been
under examination in the Department and it has been decided to approve the
appointment of cost auditors in firm's name under sub-section (2) of section
233B, if such a proposal is received from the board of directors of any company
subject to the following conditions:
i) all the partners of the firm are
practising cost accountants within the meaning of
sections 6 and 7 of the Cost and Works Accountants Act, 1959; and
ii) the firm itself has been
constituted with the previous approval of the Central Government as required
under regulation 113 of the Cost and Works Accountants Act, 1959.
Whether appointment of cost
auditor as internal auditor permissible
As
you are aware, the Department of Company Affairs issued a Circular
No.1/1/1976-CL-V, dated 27.8.1976, clarifying therein that a statutory auditor
of a company cannot also be its internal auditor (printed on p. 3.136 ante)
Similarly, a question has now been raised whether a cost
auditor of a company can also be its internal auditor, which has been carefully
examined in this Department. Since the
cost auditor is required to comment on the scope and performance of internal
audit as per the provisions of the Cost Audit (Reports) Rules, 1968, it would
tend to militate against proper and dispassionate discharge of the duties of
the cost auditor if he was also the internal auditor of the company for the
same period for which he is conducting the cost audit. The Department is, therefore, of the view
that the cost auditor should not also be the internal auditor of a company for the period for which he is conducting
the cost audit.
*
CIRCULAR NO.1/83, DATED 20.1.1983
Whether cost auditor is
under legal obligation to make disclosure of full details in his cost audit
report
The attention of the Institute is drawn to the
provisions of section 233B and the Cost Audit (Report) Rules, 1968, as amended
from time to time. The duties of the
cost accountants appointed to conduct an audit of cost accounts of the company
flow directly from the above provisions and as such they should in strict
compliance therewith ensure that full and complete details in respect of the
cost accounts of the company are furnished in their reports. Any request that certain details may not be
disclosed in the report (on any ground whatsoever) should be inconsistent with
the object and purpose of the Cost Audit Report Rules and the requirements
thereunder. The cost auditors should,
if necessary, bring such instances to the notices of government by a specific
note in their reports.
*
CIRCULAR NO.3/83, DATED 18.3.1983.