Implementing Authorities of Cost Audit

As per provisions of section 233B (2), the Board of Directors of a Company can appoint a cost auditor after obtaining prior approval of the Central Government. Under the revised procedure, the first point of reference will be the Audit Committee to ensure that the cost auditor is free from any disqualification as specified under section 233B (5) read with section 224 and sub-section (3) or sub-section (4) of section 226 of the Companies Act, 1956. The Audit Committee should also ensure that the cost auditor is independent and is at arm’s length relationship with the company. After ascertaining the eligibility, the Audit Committee will recommend to the Board of Directors for appointment. In those companies where constitution of an Audit Committee is not required by law, the functions of the “Audit Committee” as per the procedure will be discharged by the “Board of Directors”.