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A Cost Accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works
Accountants Act, 1959 (23 of 1959) and who holds a valid certificate of practice under sub-section (1) of section 6 of that Act and including Firm of Cost Accountants can be appointed by a Company as cost auditor.
However, the cost accountant or partners of a firm of cost accountant should be in whole-time practice and not holding any other employment. The audit committee of the board is the first point of reference regarding the appointment of cost auditors.
The audit committee should ensure that the cost auditor is free from any disqualifications as specified under section 233B (5) read with section 224 and Section 226 (3) or 226(4). The audit committee needs to take a certificate from the cost auditor that he is not violating the limits specified under section 224(1-B) of the Companies Act, 1956 in accepting the appointment. The audit committee will also obtain a certificate from the cost auditor certifying his/her/its independence and arm’s length relationship with the company.
The Company would be required to File Form 23C with the Central Government within 90 days from the commencement of each financial year, along with the prescribed fee and other documents i.e. certified copy of board resolution proposing appointment of cost auditor and Copy of certificate from the auditor regarding compliance of section 224(1-B). The approval would be deemed to have been granted if the Central Government does not raise any query within 30 days of filing of Form 23C.
In case the Central Government raises any query within the said period of 30 days, the company would be required to clarify the issues and re-submit the Form 23C. The period of 30 days, in this case, would run from the date of resubmission of Form 23C. After expiry of 30 days, as the case may be the company shall issue a formal letter of appointment to the cost auditor, as approved by the board. Within 30 days of receipt of formal letter from the company, the cost auditor shall inform the central government in form 23D, along with a copy of such appointment letter.
