Is Financial Audit Applicable to Cost Accounting Companies?
The question arises whether statutory audit is applicable to a company that is required to undergo cost audit as per the Companies Act 2013. This article delves into the applicability of these audits within the context of cost accounting companies.
Applicability of Audit as per the Companies Act 2013
The Companies Act 2013 mandates that every company must appoint an auditor to conduct a financial audit. Section 139 of the act stipulates that this is a legal requirement for all companies, ensuring their financial statements are accurately represented.
Applicability of Cost Audit
Cost audit, on the other hand, is governed by Section 148 and Rules 3 and 4 of the Companies Cost Records and Audit Rules 2014. These sections outline conditions under which a company is required to maintain cost records and, if necessary, undergo a cost audit by a designated cost auditor.
For a company to be subject to cost audit, it must meet specific thresholds defined in these rules. These thresholds ensure that the company has sufficient transactions or assets to necessitate a cost audit. If the company meets these requirements, it is mandated to maintain detailed cost records and have them audited by a cost auditor.
Primary vs. Additional Requirements
In summary, every company is required to undergo a statutory financial audit as a primary requirement. Additionally, if a company meets the specified thresholds for cost records, it must maintain these records and have them audited by a cost auditor.
It is important to note that cost accounting under the Companies Act 2013 is an additional requirement for companies seeking to validate their cost-related financial statements. This requirement is separate and distinct from the primary statutory audit requirement.
Conclusion
In conclusion, yes, financial audit is applicable to cost accounting companies. These companies must first satisfy the primary requirement of statutory financial audit. Subsequently, if they meet the thresholds specified in the Companies Cost Records and Audit Rules 2014, they must maintain cost records and ensure a cost audit is conducted.
To ensure compliance and to address any uncertainties, it is recommended to seek a second opinion from an experienced auditor or a legal expert.
For further reading and detailed information, visit: Articles on Companies Act 2013 and Cost Records Audit Rules 2014