Cost Accounting Record Rules (CARR) and Cost Audit Report Rules (CAR):
Within six years of statutory recognition in the year 1959, the Institute achieved the first milestone when the Government amended the Companies Act 1956 to incorporate Section 209 (1) (d) and Section 233B. Section 209 (1) (d) prescribes for the maintenance of cost accounting records and Section 233B provides for the audit of the cost records. The justification for the mandatory maintenance of cost accounting records and cost audit as applicable has been well explained and documented in the Note on clauses report of the Joint Select Committee and Parliamentary debate that led to adoption of Companies Amendment Bill 1965 incorporating the above mentioned sections.
By introducing statutory requirement of maintenance of cost accounting records and audit thereof as applicable by a qualified cost accountant, the Government has fulfilled the objective of protecting the interests of investors, consumers, tax payers and society at large. The objectives and reasons for ensuring that the companies keep proper records was to inculcate a culture of cost consciousness among industries for better resource management, to make the efficiency audit possible, and to make cost data available to the Government. The executive organ of Government of India for the purpose of implementation of the said sections is the Cost Audit Branch which was also created in tandem.
To give a Regulatory push to the Indian companies to attain highest level of cost management, cost competitiveness, strengthen the corporate governance mechanism and to fulfill demands of industry with regard to (a) simplification of rules, procedures, structure, and formats (b) removal of discrimination, addressing the confidentiality of cost data and (c) reducing cost of compliance; and also to recognize cost accounting standards issued by the ICWAI to bring uniformity and standardization in cost statements, the Cost Audit Branch, Ministry of Corporate Affairs during 2011-12 issued series of Orders/ Notifications/ General Circulars/ Master Circular regarding simplified procedure for appointment of cost auditors, cost audit, uniform Cost Accounting Records Rules, 2011 (CARR), Cost Accounting Records Rules for six (6) regulated industries viz. Cost Accounting Records (Telecommunication Industry) Rules, 2011; Cost Accounting Records (Petroleum Industry) Rules; 2011Cost Accounting Records (Electricity Industry) Rules, 2011; Cost Accounting Records (Sugar Industry) Rules; 2011, Cost Accounting Records (Fertilizers Industry) Rules, 2011, Cost Accounting Records (Pharmaceutical Industry) Rules, 2011, The Companies (Cost Audit Report) Rules, 2011 (CAR), clarifications on Cost Accounting Records Rules and Cost Audit Report Rules and applicability of these rules and compliance requirements.
The reforms in the form of simplified procedure for appointment of cost auditor, uniform rules on maintenance of cost accounting records, cost accounting records rules for regulated industries and new rules on cost audit were the result of recognition of the utility and efficacy of the recommendations of the Expert Group. The rules notified by the Government on Cost Accounting Records Rules and Cost Audit Report Rules are principle based and provide flexibility to the corporates in complying with the statutory requirements.
In the era of price control and administered interventions, attested cost structure had a major role to play and hence the cost audit emphasized on this aspect. In the changed economic environment the emphasis has to shift to efficiency review. Further, in a market economy, regulators are required to frame right regulations in the interest of the industry as a whole and also in the interest of the consumers and other stakeholders. The restructured Cost audit report, supported by cost accounting standards, would provide relevant and credible cost and revenue data to regulators to support their decisions. Moreover, cost audit report along with the performance appraisal report would provide relevant reports to the Board of Directors to strengthen its oversight function.
With the notifications issued by MCA during 2011 in April, May, June, November and December, 2011, the profession of practice as a Cost Accountant has become a sought after option and large number of aspirants are joining the profession.
Section I: Cost Accounting Records Rules
Section II: Cost Audit Report Rules & Appointment Procedure
Section III: Cost Audit Orders
Section IV: Clarification regarding Cost Accounting Records and Cost Audit