Cost audit presentation – Cement Industry

COST AUDIT – CEMENT COST AUDIT – CEMENT INDUSTRYINDUSTRY

INTERNAL PRESENTATIONINTERNAL PRESENTATION

TARIQ ABDUL GHANI & Co.TARIQ ABDUL GHANI & Co.CHARTERED ACCOUNTANTS, ISLAMABADCHARTERED ACCOUNTANTS, ISLAMABAD

SPEAKER:SPEAKER: SARFRAZ KHANSARFRAZ KHAN

Cost audit – Cement Cost audit – Cement IndustryIndustry

Applicable LawsApplicable Laws Cement Industry (Cost Accounting Records) Cement Industry (Cost Accounting Records)

Order, 1994Order, 1994 Companies (audit of cost accounts ) rules, 1998Companies (audit of cost accounts ) rules, 1998 Companies ordinance 1984 (section 230 & 258)Companies ordinance 1984 (section 230 & 258)

SECTION 230(1)(e) – CO 1984BOOKS OF ACCOUNT TO BE KEPT BY COMPANY

In the case of a company engaged in production, processing, manufacturing or mining activities, such particulars relating to utilization of material or labour or the other inputs or items of cost as may be prescribed, if such class of companies is required by the Commission by a general or special order to include such particulars in the books of accounts

SECTION 258 DEALS WITH AUDIT OF COST SECTION 258 DEALS WITH AUDIT OF COST ACCOUNTSACCOUNTS

Where any company or class of companies is required under Where any company or class of companies is required under clause (e) of sub-section (1) of section 230 to include in its clause (e) of sub-section (1) of section 230 to include in its books of account the particulars referred to therein, the Federal books of account the particulars referred to therein, the Federal Government may direct that an audit of cost accounts of the Government may direct that an audit of cost accounts of the company shall be conducted in such manner and with such company shall be conducted in such manner and with such stipulations as may be specified in the order by an auditor who stipulations as may be specified in the order by an auditor who is a chartered accountant within the meaning of the Chartered is a chartered accountant within the meaning of the Chartered Accountant Ordinance, 1961, or a cost and management Accountant Ordinance, 1961, or a cost and management accountant within the meaning of the Cost and Management accountant within the meaning of the Cost and Management Accountants Act, 1966; and such auditor shall have the same Accountants Act, 1966; and such auditor shall have the same powers, duties and liabilities as an auditor of a company and powers, duties and liabilities as an auditor of a company and such other powers, duties and liabilities as may be prescribed.such other powers, duties and liabilities as may be prescribed.

COMPANIES (AUDIT OF COST ACCOUNTS ) RULES, 1998

These rules shall apply to companies or class of companies, which are required by the Commission through a general or special order issued under clause (e) of sub-section (1) of section 230 of the Companies Ordinance, 1984, to include in their books of account, such particulars relating to utilisation of material or labour or to other inputs or items of cost, as specified in that order.

Cement Industry (Cost Cement Industry (Cost Accounting Records) Accounting Records) Order, Order,

19941994Maintenance of recordsMaintenance of records

Records shall be kept in such a way as to make it Records shall be kept in such a way as to make it possible to calculate from the particulars entered possible to calculate from the particulars entered therein the cost of production and cost of sales of therein the cost of production and cost of sales of each of the products each of the products

Where a company is manufacturing any other Where a company is manufacturing any other product in addition to clinker or cement or both, product in addition to clinker or cement or both, Cost of materials, labour and other items which Cost of materials, labour and other items which are applicable to such other product shall not be are applicable to such other product shall not be included in the cost of clinker or cement or both included in the cost of clinker or cement or both

Cost records on quantitative and money Cost records on quantitative and money value basis shall be maintained in respect of value basis shall be maintained in respect of each of the following :-each of the following :-

Quarry (Site for Lime Stone, Clay etc.)Quarry (Site for Lime Stone, Clay etc.) TransportationTransportation Crusher (Lime stone & Clay is crushed)Crusher (Lime stone & Clay is crushed) Stock hall (Crushed lime stone, Clay, Stock hall (Crushed lime stone, Clay,

Laterite etc) Laterite etc) Raw mill (Mixing of lime stone, clay & Raw mill (Mixing of lime stone, clay &

other) other) Kiln (Heating from 1000°C to 1450°C )Kiln (Heating from 1000°C to 1450°C ) Grinding (Clinkers & Gypsum are grinded) Grinding (Clinkers & Gypsum are grinded) Storage and Packing Storage and Packing

Cost classificationCost classificationCosts are to be classified as “direct departmental Costs are to be classified as “direct departmental

cost” and “indirect departmental cost”. cost” and “indirect departmental cost”. Indirect departmental cost represent cost of Indirect departmental cost represent cost of

service departments such as those producing service departments such as those producing compressed air, power and other general compressed air, power and other general expenses. expenses.

The indirect departmental cost shall be The indirect departmental cost shall be transferred to the production departments transferred to the production departments

Cost of each production department i.e. total of Cost of each production department i.e. total of direct and indirect departmental cost, shall be direct and indirect departmental cost, shall be transferred to the next production department transferred to the next production department on the basis of quantity of output transferred out on the basis of quantity of output transferred out to next department.to next department.

Cost componentsCost components Raw materialsRaw materials Labour Labour Furnace Oil/Gas Furnace Oil/Gas Electric Power Electric Power Consumable Stores Consumable Stores Repairs and maintenance Repairs and maintenance Compressed air Compressed air Depreciation Depreciation Insurance Insurance Other Overheads Other Overheads Administration, selling and distribution expenses Administration, selling and distribution expenses Work-in-process and finished goods inventories Work-in-process and finished goods inventories Packing Packing

DEPARTMENTAL COST STATEMENTDEPARTMENTAL COST STATEMENT Annexure - IAnnexure - I

LIMESTONE, CLAY GYPSUM, QUARRY FOR THE YEAR ENDED LIMESTONE, CLAY GYPSUM, QUARRY FOR THE YEAR ENDED ________A. Quantitative Data A. Quantitative Data

(Tonnes)(Tonnes)

(Current year, Last year & (Current year, Last year & increase/decrease)increase/decrease)

Opening stock at quarry,Opening stock at quarry, Quantity quarriedQuantity quarried Total:Total: Quantity transported to Quantity transported to

crusher crusher Stock adjustment (if any)Stock adjustment (if any) Closing stock at quarryClosing stock at quarry

C. Cost DistributionC. Cost Distribution

Cost transferred to crusherCost transferred to crusher Cost of closing stockCost of closing stock Total cost accounted forTotal cost accounted for

B. Cost StatementB. Cost Statement

• ((Direct Departmental Cost):Direct Departmental Cost): Explosives (if any)Explosives (if any) Royalty and duties Royalty and duties Labour cost.Labour cost. SalariesSalaries Employee’s other benefitsEmployee’s other benefits Indirect materialsIndirect materials Insurance Insurance Repair & maintenanceRepair & maintenance Fuel oil Fuel oil Gas Gas Depreciation Depreciation Other overheadsOther overheads • Indirect Departmental Cost:Indirect Departmental Cost: Compressed Air (Annexure IX)Compressed Air (Annexure IX) Power (Annexure X).Power (Annexure X). Other Factory Expenses Other Factory Expenses

(Annexure XI).(Annexure XI).

DEPARTMENTAL COST STATEMENT DEPARTMENTAL COST STATEMENT Annexure - Annexure - II II TRANSPORTATION FOR THE YEAR ENDED________TRANSPORTATION FOR THE YEAR ENDED________

A.A. Quantitative Quantitative datadata

Quantity transported from quarry:Quantity transported from quarry:

Clay/shale Clay/shale Lime StoneLime Stone GypsumGypsum

(Current year, Last year & (Current year, Last year & increase/decrease)increase/decrease)

C. Cost C. Cost DistributionDistribution

Apportioned to:Apportioned to: Clay/ShaleClay/Shale Lime StoneLime Stone Gypsum Gypsum

B. Cost StatementB. Cost Statement Direct Departmental Cost:Direct Departmental Cost:Outside contract costs of Outside contract costs of

transportation:transportation: Clay/ShaleClay/Shale Lime StoneLime Stone GypsumGypsum

Own Transportation CostsOwn Transportation Costs:: Duties (if any)Duties (if any) Labour costsLabour costs SalariesSalaries Employee’s other benefitsEmployee’s other benefits InsuranceInsurance Fuel oilFuel oil GreasesGreases GasGas Tyres and tubesTyres and tubes Indirect materialIndirect material Repair and maintenanceRepair and maintenance Depreciation (Annex…………)Depreciation (Annex…………) Other Overheads Other Overheads

Indirect Departmental Cost:Indirect Departmental Cost: Compressed Air (Annexure IX) Compressed Air (Annexure IX) Power (Annexure X) Power (Annexure X) Other Factory Expenses (Annexure Other Factory Expenses (Annexure

XI)XI)

DEPARTMENTAL COST STATEMENT DEPARTMENTAL COST STATEMENT Annexure - IIIAnnexure - III

CRUSHING FOR THE YEAR ENDED ________CRUSHING FOR THE YEAR ENDED ________

A. Quantitative dataA. Quantitative data Opening Stock (uncrushed material)Opening Stock (uncrushed material) Add:Add: Received from quarry/purchase Received from quarry/purchase Less: Closing stock (uncrushed Less: Closing stock (uncrushed

material)material) Crushed during the period.Crushed during the period.

B. Cost StatementB. Cost StatementDirect Departmental Cost:Direct Departmental Cost: Direct material (if any) Direct material (if any) Labour Cost Labour Cost SalariesSalaries Employee’s other benefitsEmployee’s other benefits Indirect materialsIndirect materials Repair and maintenanceRepair and maintenance InsuranceInsurance Fuel oilFuel oil GreasesGreases Gas Gas Depreciation (Annex…………)Depreciation (Annex…………) Other OverheadsOther Overheads

Indirect Departmental Cost:Indirect Departmental Cost: Compressed Air (Annexure IX) Compressed Air (Annexure IX) Power (Annexure X) Power (Annexure X) Other Factory Expenses (Annexure XI)Other Factory Expenses (Annexure XI)

D- Cost Transferred and Cost D- Cost Transferred and Cost of Closingof Closing

Opening Stock (Uncrushed).Opening Stock (Uncrushed). Cost received (during the year)Cost received (during the year) Total cost for uncrushed material (a+b)Total cost for uncrushed material (a+b) Cost applicable to closing stock Cost applicable to closing stock

(uncrushed)(uncrushed) Cost applicable to crushed material (c-d).Cost applicable to crushed material (c-d). Cost of crushing process (from above).Cost of crushing process (from above). Opening stock (crushed material).Opening stock (crushed material). Total cost applicable to crushed material Total cost applicable to crushed material

(e+f+g)(e+f+g) Closing stock (crushed material)Closing stock (crushed material) Cost transferred to stock hall (Raw Cost transferred to stock hall (Raw

material storage) (h-i)material storage) (h-i)

C- Cost DistributionC- Cost Distribution Clay/ShaleClay/Shale Lime StoneLime Stone Gypsum.Gypsum.

DEPARTMENTAL COST STATEMENT DEPARTMENTAL COST STATEMENT Annexure - IVAnnexure - IV STOCK HALL STORAGE/ISSUAGE OF R.M THE YEAR ENDED STOCK HALL STORAGE/ISSUAGE OF R.M THE YEAR ENDED

________________ A. Quantitative dataA. Quantitative data

Opening Stock Opening Stock (Clay, Lime Stone & (Clay, Lime Stone & Gypsum)Gypsum)

Received from crusherReceived from crusher Purchased.Purchased. Total Total Issued to mix/slurryIssued to mix/slurry Stock adjustmentStock adjustment Closing stockClosing stock

B. Cost StatementB. Cost StatementDirect Departmental Cost:Direct Departmental Cost: Labour Cost Labour Cost SalariesSalaries Employee’s other benefitsEmployee’s other benefits Indirect materialsIndirect materials Repair and maintenanceRepair and maintenance InsuranceInsurance Fuel oilFuel oil Gas Gas Depreciation (Annex…………)Depreciation (Annex…………) Other OverheadsOther Overheads


D- Cost Transferred and Cost of D- Cost Transferred and Cost of ClosingClosing

Quantity Received (Tonnes) Quantity Received (Tonnes) Quantity Issued (Tonnes) Quantity Issued (Tonnes) Opening StockOpening Stock Add: Received from Add: Received from

Crusher/purchases.Crusher/purchases. Stock Hall Cost Stock Hall Cost Less: Cost of closing stock Less: Cost of closing stock

applicable to Qty. issued to Raw applicable to Qty. issued to Raw MillMill

C- Cost DistributionC- Cost Distribution Clay/ShaleClay/Shale Quality issued to Raw Quality issued to Raw

MillMill

Lime StoneLime Stone Cost of Stock Hall Applicable Cost of Stock Hall Applicable to issuesto issues

GypsumGypsum Cost Applicable to closing Cost Applicable to closing stock stock

DEPARTMENTAL COST STATEMENT DEPARTMENTAL COST STATEMENT Annexure - VAnnexure - V

RAW MILL (FOR MIX/SLURRY) THE YEAR ENDED ________RAW MILL (FOR MIX/SLURRY) THE YEAR ENDED ________

A. Quantitative dataA. Quantitative data Opening Stock Opening Stock (Clay/Shale (Clay/Shale

, Lime Stone & Mix/Slurry), Lime Stone & Mix/Slurry) Received from stock hallReceived from stock hall Issued for mix/slurryIssued for mix/slurry Total mix/slurry madeTotal mix/slurry made Mix/slurry transferred to Mix/slurry transferred to

ClinkeringClinkering Stock adjustmentStock adjustment Closing stock Closing stock

B. Cost StatementB. Cost StatementDirect Materials:Direct Materials: Opening StockOpening Stock Received from stock hallReceived from stock hall Closing stock Closing stock Cost of raw materials processed Cost of raw materials processed Cost of opening stockCost of opening stock

Direct Departmental Costs:Direct Departmental Costs: Materials added e.g. LateriteMaterials added e.g. Laterite Labour Cost Labour Cost SalariesSalaries Employee’s other benefitsEmployee’s other benefits Grinding materialGrinding material Lining platesLining plates Indirect materialsIndirect materials Repair and maintenanceRepair and maintenance InsuranceInsurance Fuel oilFuel oil Gas Gas Depreciation (Annex…………)Depreciation (Annex…………) Other OverheadsOther Overheads


C- Cost DistributionC- Cost Distribution Transferred to KilnTransferred to Kiln Closing stock of Closing stock of

mix/slurry mix/slurry TotlaTotla

DEPARTMENTAL COST STATEMENT DEPARTMENTAL COST STATEMENT Annexure - VIAnnexure - VI

KILN FOR THE YEAR ENDED ________KILN FOR THE YEAR ENDED ________ A. Quantitative dataA. Quantitative data

Opening StockOpening Stock Received from Raw MillReceived from Raw Mill Quantity fed into the KilnQuantity fed into the Kiln Stock adjustmentStock adjustment Closing stock Closing stock Clinker producedClinker produced Opening stock of ClinkerOpening stock of Clinker Clinker transferred to Clinker transferred to

GrindingGrinding Clinker soldClinker sold Stock AdjustmentStock Adjustment Closing Stock of Clinker.Closing Stock of Clinker.

B. Cost StatementB. Cost StatementCost received from Raw Mill:Cost received from Raw Mill: Opening StockOpening Stock Received during the yearReceived during the year (Closing stock )(Closing stock ) Cost to be charged to the Cost to be charged to the

processprocess

Direct Departmental Costs:Direct Departmental Costs: Materials added , if anyMaterials added , if any Labour Cost Labour Cost SalariesSalaries Employee’s other benefitsEmployee’s other benefits Indirect materialsIndirect materials Repair and maintenanceRepair and maintenance Fuel oilFuel oil Gas Gas Depreciation (Annex…………)Depreciation (Annex…………) Other OverheadsOther Overheads

Total Cost:Total Cost: Value of Clinker sold, if any Value of Clinker sold, if any

Net CostNet Cost

C- Cost DistributionC- Cost Distribution Cost Transferred to grindingCost Transferred to grinding Cost of Closing stock of Cost of Closing stock of

clinkerclinker

DEPARTMENTAL COST STATEMENT DEPARTMENTAL COST STATEMENT Annexure - VIIAnnexure - VII

GRINDING (CEMENT) FOR THE YEAR ENDED ________GRINDING (CEMENT) FOR THE YEAR ENDED ________ A. Quantitative dataA. Quantitative data

Opening StockOpening Stock Clinker received from KilnClinker received from Kiln Clinker fed into the GrindingClinker fed into the Grinding Stock adjustmentStock adjustment Closing stock of ClinkerClosing stock of Clinker Cement producedCement produced Cement produced as % of Cement produced as % of

inputinput Opening stock of CementOpening stock of Cement Cement transferred to SilosCement transferred to Silos Stock AdjustmentStock Adjustment Closing Stock of CementClosing Stock of Cement

B. Cost StatementB. Cost StatementCost received from Kiln:Cost received from Kiln: Opening StockOpening Stock Received during the year for ClinkerReceived during the year for Clinker (Cost of Closing stock of Clinker)(Cost of Closing stock of Clinker) Cost of Clinker fed to Grinding processCost of Clinker fed to Grinding process

Direct Departmental Costs:Direct Departmental Costs: Materials added , if anyMaterials added , if any Gypsum, Slag, OthersGypsum, Slag, Others Royalties/detiesRoyalties/deties Labour Cost , SalariesLabour Cost , Salaries Employee’s other benefitsEmployee’s other benefits Indirect materialsIndirect materials Grinding Materials, Lining PlatesGrinding Materials, Lining Plates Repair and maintenanceRepair and maintenance Fuel oil, Gas Fuel oil, Gas Depreciation (Annex…………)Depreciation (Annex…………) Other OverheadsOther Overheads


C- Cost DistributionC- Cost Distribution Cost Transferred to SilosCost Transferred to Silos Cost of Closing stock of Cost of Closing stock of

CementCement

DEPARTMENTAL COST STATEMENT DEPARTMENTAL COST STATEMENT Annexure - VIIAnnexure - VIII I

PACKING & STORAGE FOR THE YEAR ENDED ________PACKING & STORAGE FOR THE YEAR ENDED ________ A. Quantitative dataA. Quantitative data

Opening Stock of Cement Opening Stock of Cement (Unpacked)(Unpacked)

Cement received from Cement received from GrindingGrinding

Closing stock of Cement Closing stock of Cement (Unpacked)(Unpacked)

Cement packed (No. of Bags)Cement packed (No. of Bags) Cement sold (No. of Bags)Cement sold (No. of Bags) Stock Adjustment, if any (No. Stock Adjustment, if any (No.

of bags)of bags) Closing Stock of CementClosing Stock of Cement

packed (No. of bags)packed (No. of bags)

B. Cost StatementB. Cost StatementCost of opening Cement (Unpacked):Cost of opening Cement (Unpacked):

Cost transferred in from cement grinding Cost transferred in from cement grinding department. department.

Direct Departmental Costs:Direct Departmental Costs: Packing MaterialsPacking Materials Other materialsOther materials Labour Cost Labour Cost SalariesSalaries Employee’s other benefitsEmployee’s other benefits Indirect materialsIndirect materials Repair and maintenanceRepair and maintenance Fuel oil, Gas Fuel oil, Gas Depreciation (Annex…………)Depreciation (Annex…………) Other OverheadsOther Overheads


Total CostTotal Cost

Less: Cost applicable to un-packed closing Less: Cost applicable to un-packed closing stockstock

Cost applicable to packed closing stockCost applicable to packed closing stock

Balance: Cost of packed cement sold:_______Balance: Cost of packed cement sold:_______

Cost of loose cement sold, if anyCost of loose cement sold, if any

C- Cost DistributionC- Cost Distribution Cost Transferred to SilosCost Transferred to Silos Cost of total Cement soldCost of total Cement sold

DEPARTMENTAL COST STATEMENT DEPARTMENTAL COST STATEMENT Annexure - IXAnnexure - IX

AIR COMPRESSED FOR THE YEAR ENDED ________AIR COMPRESSED FOR THE YEAR ENDED ________ A. Quantitative A. Quantitative datadata

Compress air Compress air ProducedProduced

B. Cost StatementB. Cost StatementDirect Departmental Costs:Direct Departmental Costs: Labour Cost Labour Cost SalariesSalaries Employee’s other benefitsEmployee’s other benefits InsuranceInsurance Indirect materialsIndirect materials Repair and maintenanceRepair and maintenance Fuel oilFuel oil Gas Gas Depreciation (Annex…………)Depreciation (Annex…………) Other OverheadsOther Overheads

Indirect Departmental Cost:Indirect Departmental Cost: Power (Annexure X) Power (Annexure X) Other Factory Expenses Other Factory Expenses

(Annexure XI)(Annexure XI)

Total CostTotal Cost

C- Cost DistributionC- Cost Distribution Departments using Departments using

compressed aircompressed air

DEPARTMENTAL COST STATEMENT DEPARTMENTAL COST STATEMENT Annexure - XAnnexure - X

COST OF POWER GENERATED/PURCHASED/CONSUMED FOR THE YEAR ENDED ________COST OF POWER GENERATED/PURCHASED/CONSUMED FOR THE YEAR ENDED ________ A. Quantitative dataA. Quantitative data

Installed capacity KWH.Installed capacity KWH. No. of Units GeneratedNo. of Units Generated No. of Units PurchasedNo. of Units Purchased Total:Total: Self-consumption in power houseSelf-consumption in power house Losses:Losses: Net units consumed by various other Net units consumed by various other

department:department: Percentage of loss to total power Percentage of loss to total power

generated and purchased.generated and purchased. % of power generated to installed % of power generated to installed

capacity. capacity.

B. Cost StatementB. Cost StatementDirect Departmental Costs:Direct Departmental Costs: Fuel oil/steam consumedFuel oil/steam consumed Other material Other material Consumable storesConsumable stores Other direct chargesOther direct charges Salaries and wagesSalaries and wages Repairs and maintenanceRepairs and maintenance Other overheadsOther overheads DepreciationDepreciation Indirect Indirect

Less: (1) Supplies to other units Less: (1) Supplies to other units of the companyof the company

Net cost of Power generated.Net cost of Power generated.

Purchased power (on actual Purchased power (on actual consumption basis)consumption basis)

Total Cost of PowerTotal Cost of Power

Cost per unit (average).Cost per unit (average).

C- Cost DistributionC- Cost DistributionConsumed in:-Consumed in:- Lime stone,clay, gypsum QuarryLime stone,clay, gypsum Quarry Transportation, CrushingTransportation, Crushing Stock hall, Raw millsStock hall, Raw mills Kilns, Cement grindingKilns, Cement grinding Storage and packingStorage and packing Air compressing, Others. Air compressing, Others.

Total Cost distributedTotal Cost distributed

DEPARTMENTAL COST STATEMENT DEPARTMENTAL COST STATEMENT Annexure - Annexure - XIXI

OTHER FACTORY EXPENSES FOR THE YEAR ENDED ________OTHER FACTORY EXPENSES FOR THE YEAR ENDED ________

A.A. COST STATEMENTCOST STATEMENTDirect Departmental Cost:Direct Departmental Cost: Labour cost Labour cost Salaries Salaries Employee’s other benefitEmployee’s other benefit Contractor’s labourContractor’s labour DepreciationDepreciation Stores and sparesStores and spares Repair and maintenanceRepair and maintenance ElectricityElectricity Compressed Air (Annexure Compressed Air (Annexure

IX)IX) Power (Annexure X).Power (Annexure X). Miscellaneous Expenses.Miscellaneous Expenses.

B- Cost Distribution:B- Cost Distribution: Lime stone, Clay, Gypsum, Lime stone, Clay, Gypsum,

QuarryQuarry Transpiration Transpiration CrushingCrushing Stock hallStock hall Raw MillRaw Mill Kilns Cement GrindingKilns Cement Grinding Packing and StoragePacking and Storage Air-Compressing (if any)Air-Compressing (if any) Power generation (if any)Power generation (if any) Total cost Total cost

The Companies (Audit of Cost Accounts) The Companies (Audit of Cost Accounts) Rules, 1998Rules, 1998

Applicable to companies or class of companies, which are Applicable to companies or class of companies, which are required by the Commission through a general or special required by the Commission through a general or special order issued under clause (e) of sub-section (1) of section 230 order issued under clause (e) of sub-section (1) of section 230 of the Companies Ordinance, 1984, to include in their books of the Companies Ordinance, 1984, to include in their books of account, such particulars relating to utilization of material of account, such particulars relating to utilization of material or labor or to other inputs or items of cost, as specified in that or labor or to other inputs or items of cost, as specified in that orderorder

Cost auditor Cost auditor to be appointed within sixty daysto be appointed within sixty days of the of the close of financial year of the company with the prior approval close of financial year of the company with the prior approval of the Commission.of the Commission.

Cost auditor required to submit his report within Cost auditor required to submit his report within sixty days of his appointment to the directors with sixty days of his appointment to the directors with

copies to the Commission and the registrar copies to the Commission and the registrar concerned. concerned.

The Cost AuditorThe Cost Auditor

Qualification:Qualification:

Only qualified cost and management accountant or Only qualified cost and management accountant or chartered accountant can be appointed as a cost auditor.chartered accountant can be appointed as a cost auditor.

Disqualification:Disqualification:Following persons are ineligible to be appointed as cost Following persons are ineligible to be appointed as cost

auditor of a company:auditor of a company:

Statutory auditor (U/S 252); Statutory auditor (U/S 252); a person who is, or at any time during the preceding three a person who is, or at any time during the preceding three

years was, a director, officer or employee of the company ; years was, a director, officer or employee of the company ; a person who is a partner of, or in the employment of, a a person who is a partner of, or in the employment of, a

director, officer or employee of the company ; director, officer or employee of the company ; a spouse of a director of the company ; a spouse of a director of the company ; a person who is indebted to the company ; and a person who is indebted to the company ; and a body corporate.a body corporate.

The Cost AuditorThe Cost Auditor

Appointment:Appointment:

Within sixty days of the close of financial year of the Within sixty days of the close of financial year of the companycompany

Directors appoint the cost auditor.Directors appoint the cost auditor.

Prior approval of the Commission is required.Prior approval of the Commission is required.

Application Form set out in Appendix –I of the Rules. Application Form set out in Appendix –I of the Rules.

Application shall be furnished to Commission thirty Application shall be furnished to Commission thirty days before the date on which cost auditor to be days before the date on which cost auditor to be appointed.appointed.

The remuneration of the proposed cost auditor is The remuneration of the proposed cost auditor is fixed by the directors of the company.fixed by the directors of the company.

COST AUDITORS' REPORT

Statutory Affirmations:Statutory Affirmations: In the main report, a cost auditor In the main report, a cost auditor categorically states whether or not his requirements relating categorically states whether or not his requirements relating to five specified points have been metto five specified points have been met

proper cost accounting records as required by clause (e) of sub-section (1) of section 230 of the Companies Ordinance, 1984 (XLVII of 1984), and as required by these rules, have been / have not been kept by the company;

proper returns, statements and schedules for the purpose of audit of cost accounts have / have not been received from branches not visited by me/us;

the said books and records give/do not give the information required by the rules in the manner so required;

the annexed statement of capacity utilisation and stock-in-trade are/are not in agreement with the books of account of the company and exhibit true and fair view of the company's affairs; and

cost accounting records have/have not been properly kept so as to give a true and fair view of the cost of production, processing, manufacturing and marketing of the under mentioned products of the company, namely:-

Appendix III [ See rule 4(3) ]

PARTICULARS TO BE INCLUDED IN COST AUDITORS'REPORT TO THE DIRECTORS OF THE COMPANY

Capacity:

Cost accounting system:

Production:

Raw material:

Wages and salaries:

Stores and spare parts:

Depreciation:

Licensed, installed and utilised capacities of the factory

Brief comments on the cost accounting system and its adequacy or otherwise

quantities of each type of product, %age of production of the product

major raw material consumed both in terms of quantity and value

paid for all categories of employees, man-days, Direct labour cost per unit of output

expenditure per unit of output on stores, Comments on the system of stores accounting

method of depreciation, basis of charging depreciation to the cost of products



Overheads:

Royalty payments:

Abnormal non-recurring features:

Cost of production:

Sales:

Profitability:

Observations & conclusions:

Break-up of overheads, Reasons for any significant variances, basis of allocation of overheads to cost centers

Total amount of royalty/ technical aid fees, amount chargeable per unit of the product

Strikes, lock-outs, major breakdowns, substantial power cuts, serious accidents

Cost per unit of different categories

Sales in quantities and net realization

Cost per unit of each catogory

Major observations, suggestion for improvements



Reconciliation with Financial accounts:

Cost statements:

Cost auditor shall submit supplementary report on reconciliation with financial accounts

Cost statements verified by the cost auditor shall be appended to the report

Types of CementTypes of Cement

Ordinary Ordinary Portland cement Portland cement (OPC):(OPC):

Portland Blast Portland Blast furnace Cement furnace Cement

Portland Fly ash Portland Fly ash Cement Cement

Portland Portland Pozzolan Pozzolan Cement Cement

Portland Silica Portland Silica Fume cement Fume cement

Made by heating limestone with small quantities of Made by heating limestone with small quantities of other materials (such as clay) and small amount of other materials (such as clay) and small amount of Gypsum to 1450°C in a kiln. Gypsum to 1450°C in a kiln.

Contains up to 70% ground granulated blast furnace Contains up to 70% ground granulated blast furnace slag, with the rest Portland clinker and a little slag, with the rest Portland clinker and a little gypsum gypsum

Contains up to 30% fly ash Contains up to 30% fly ash

Includes fly ash cement. In countries where volcanic Includes fly ash cement. In countries where volcanic ashes are available (e.g. Italy, Chile, Mexico, the ashes are available (e.g. Italy, Chile, Mexico, the Philippines) these cements are often the most Philippines) these cements are often the most common form in use. common form in use.

Exceptionally high strengths, and cements containing Exceptionally high strengths, and cements containing 5-20% silica fume. Also called Sulphate Resistant 5-20% silica fume. Also called Sulphate Resistant Cement (SRC)Cement (SRC)

Types of CementTypes of Cement

Masonry Masonry Cements:Cements:

White blended White blended cements cements

Colored Colored cements cements

Super sulfated Super sulfated cementscements

Are used for preparing bricklaying and must Are used for preparing bricklaying and must not be used in concrete not be used in concrete

May be made using white clinker and white May be made using white clinker and white supplementary materials such as high-purity supplementary materials such as high-purity metakaolinmetakaolin

Are used for decorative purposesAre used for decorative purposes

These contain about 80% ground These contain about 80% ground granulated blast furnace slag, 15% granulated blast furnace slag, 15% gypsum or anhydrite and a little gypsum or anhydrite and a little Portland clinker or lime as an activatorPortland clinker or lime as an activator

Documents

Cost audit presentation – Cement Industry