INTERPRETATION OF COST AUDIT REPORT, 2011 Presentation by: RACTISING COST ACCOUNTANT

INTERPRETATION OF INTERPRETATION OF COST AUDIT REPORT, COST AUDIT REPORT,

20112011

Presentation by: Presentation by:

RACTISING COST ACCOUNTANTRACTISING COST ACCOUNTANT

COMPARISON BETWEEN OLD AND NEW RULES

S. S. No.No.

CRITERIONCRITERION NEW REPORT NEW REPORT RULESRULES

OLD REPORT OLD REPORT RULESRULES

1.1. NameName Cost Audit Report Cost Audit Report Rules 2011Rules 2011

Cost Audit Report Cost Audit Report Rules 2001Rules 2001

2.2. ApplicabiliApplicability ty

Report filed after Report filed after 01.04.201201.04.2012

Report filed up-to Report filed up-to 31.03.2012.31.03.2012.

3.3. Form of Form of ReportReport

Submission of PAR Submission of PAR to Board / AC.to Board / AC.

No such provisions.No such provisions.

4.4. ProductProduct Separate Definition Separate Definition given, for product given, for product group.group.

Defined as product Defined as product under referenceunder reference

……COMPARISON BETWEEN OLD AND NEW RULESCOMPARISON BETWEEN OLD AND NEW RULES

5.5. Form IForm I Only general Only general information - without information - without figuresfigures

General information General information - with figures- with figures

Form IIForm II Similar – with Similar – with additional additional declarations for PAR declarations for PAR etc.etc.

Para for Para for suggestions for suggestions for improvements improvements

Form IIIForm III New Concept - New Concept - Performance Appraisal Performance Appraisal Report (PAR)Report (PAR)

NilNil

……COMPARISON BETWEEN OLD AND NEW COMPARISON BETWEEN OLD AND NEW RULESRULES

6.6. Annexure to the Cost Audit ReportAnnexure to the Cost Audit Report

PARA 1PARA 1

NEW REPORT RULESNEW REPORT RULES OLD REPORT RULESOLD REPORT RULES

General Information, Many General Information, Many information required to be given information required to be given in old Rule has been removed in old Rule has been removed from the reporting in the new from the reporting in the new Rule, eg. Rule, eg.

1. Name of the officer in charge.1. Name of the officer in charge.

2. Details of the foreign 2. Details of the foreign collaborators.collaborators.

3. Details of the other activities 3. Details of the other activities carried out by the company.carried out by the company.

4. Details of the job worker / loan 4. Details of the job worker / loan licensee of the company.licensee of the company.

General InformationGeneral Information

Balance Sheet and Profit and Loss Balance Sheet and Profit and Loss account is not required to be account is not required to be submitted along with the Cost submitted along with the Cost Audit ReportAudit Report

Balance Sheet and Profit and Loss Balance Sheet and Profit and Loss account was required to be account was required to be submitted along with the Cost submitted along with the Cost Audit Report Audit Report


PARA2PARA2

NEW REPORT RULES OLD NEW REPORT RULES OLD REPORT RULESREPORT RULES

Cost Accounting Policy Cost Accounting Policy Cost Accounting System Cost Accounting System

Cost Auditor has to verify, the Cost Auditor has to verify, the compliance of the CAS and compliance of the CAS and GACAPGACAP

No such specific declarationNo such specific declaration

Observations on the budgetary Observations on the budgetary control systemscontrol systems

It was covered in Form II.It was covered in Form II.


PARA 3 – Para 11PARA 3 – Para 11

NEW REPORT RULESNEW REPORT RULES OLD REPORT RULESOLD REPORT RULES

Following Para’s are Following Para’s are rationalizedrationalized

in the New Rule :in the New Rule :

Para 3 – Product Group DetailsPara 3 – Product Group Details

Para 4 – Quantitative Para 4 – Quantitative InformationInformation

Para 5 – Abridged Cost Para 5 – Abridged Cost StatementStatement

Para 6 – Operating Ratio Para 6 – Operating Ratio AnalysisAnalysis

Para 7 – Profit ReconciliationPara 7 – Profit Reconciliation

Para 8 – Value Addition and Para 8 – Value Addition and Dist. Of Dist. Of

EarningsEarnings

Para 9 – Financial Position and Para 9 – Financial Position and Ratio Ratio

Analysis.Analysis.

Following Para’s have been Following Para’s have been abolished abolished

from the new Rules: from the new Rules:

Para 3 – Manufacturing Process.Para 3 – Manufacturing Process.

Para 5(A) – Major Input Materials.Para 5(A) – Major Input Materials.

Para 5(B) – Standard /Actual Para 5(B) – Standard /Actual consumption.consumption.

Para 6 – Cost of Input Material Para 6 – Cost of Input Material Imported.Imported.

Para 7(A) – Power, Fuel, utilities.Para 7(A) – Power, Fuel, utilities.

Para 7(B) – Standard / Actual Para 7(B) – Standard / Actual Consumption.Consumption.

Para 8 – Salaries & Wages.Para 8 – Salaries & Wages.

Para 9 – Repairs and Maintenance.Para 9 – Repairs and Maintenance.

Para 10 – Fixed Assets Register, and Para 10 – Fixed Assets Register, and Depreciation.Depreciation.

Para 11 – Gross Block, Depreciation, Para 11 – Gross Block, Depreciation, and Lease Rent.and Lease Rent.


NEW RULENEW RULE OLD RULEOLD RULE

Para 10 – Related Party Para 10 – Related Party

TransactionsTransactions

Para 11 – Reconciliation of Para 11 – Reconciliation of

Indirect Taxes. Indirect Taxes.

Para 13 – Research & Development.Para 13 – Research & Development.

Para 14 – Royalty and Tech. Know How Para 14 – Royalty and Tech. Know How

charges.charges.

Para 15 – Quality Control Expenses.Para 15 – Quality Control Expenses.

Para 16 – Pollution Control ExpensesPara 16 – Pollution Control Expenses

Para 17 – Abnormal Non Recurring CostPara 17 – Abnormal Non Recurring Cost

Para 18(A) – Non Moving StockPara 18(A) – Non Moving Stock

Para 18(B) – Written Off StockPara 18(B) – Written Off Stock

Para 19(A) – Inventory ValuationPara 19(A) – Inventory Valuation

Para 19(B) – Physical Verification of Para 19(B) – Physical Verification of

InventoryInventory

Para 20 – SalesPara 20 – Sales

Para 21 – MarginPara 21 – Margin

Para 22 - Competitive Margin against Para 22 - Competitive Margin against

ImportsImports

Para 25 – Capitalization of Revenue Para 25 – Capitalization of Revenue ExpExp


ConclusionConclusionNEW REPORT RULESNEW REPORT RULES OLD REPORT RULESOLD REPORT RULES

New formats are rationalized New formats are rationalized and disclosing only vital and and disclosing only vital and exceptional aspect of the exceptional aspect of the organization without organization without compromising on the secrecy compromising on the secrecy and the confidentiality.and the confidentiality.

This was more elaborate and This was more elaborate and disclosing disclosing

various information which may various information which may put the put the

organizational data in organizational data in compromising compromising

position.position.

PARA 1-11 – INTERPRETATION OF VARIOUS PARA 1-11 – INTERPRETATION OF VARIOUS PARASPARAS

Form IForm IFor e-filing on MCA WebsiteFor e-filing on MCA Website

It contains only general information; no figures are required It contains only general information; no figures are required to be filled up.to be filled up.

It should not contain Form III - PAR (That is to be submitted It should not contain Form III - PAR (That is to be submitted to the company only).to the company only).

Form II Cost Audit Report and Certificate by

Auditors

Obtain a certificate from the management on the following:Obtain a certificate from the management on the following: Compliance with the CAS and GACAP.Compliance with the CAS and GACAP. Form II cannot be modified except for PRAForm II cannot be modified except for PRA

Form II Cost Audit Report and Certificate

by Auditors

Compliance with the CAS and GACAP.Compliance with the CAS and GACAP. Internal Audit of Cost Records.Internal Audit of Cost Records. Note on Budgetary Control System.Note on Budgetary Control System. Form II cannot be modified except for the PARA 2 for the Form II cannot be modified except for the PARA 2 for the

observations and suggestions of the Cost Auditors.observations and suggestions of the Cost Auditors.

Annexure to the Cost Audit Report

Para 1Para 1

GENERAL INFORMATION:GENERAL INFORMATION: 1.1. CIN or GLN of the company:CIN or GLN of the company:

2.2. Name of the company:Name of the company:

3.3. Registered office address:Registered office address:

4.4. Corporate office address:Corporate office address:

5.5. E-mail address of the company:E-mail address of the company:

6.6. Company's financial year to which the Cost Audit Report Company's financial year to which the Cost Audit Report relates:relates:

7.7. Name, address, membership number and e-mail of the Cost Name, address, membership number and e-mail of the Cost Auditor (s):Auditor (s):

8.8. SRN Number and date of Filing of Form 23C with the Central SRN Number and date of Filing of Form 23C with the Central Government:Government:

9.9. Date of Board of Directors' meeting wherein the Annexure to Date of Board of Directors' meeting wherein the Annexure to the cost audit report were approved:the cost audit report were approved:

1010..

No. of Audit Committee meetings held by the company, and No. of Audit Committee meetings held by the company, and attended by the Cost Auditor during the _______ . attended by the Cost Auditor during the _______ .

Para 2Para 2

COST ACCOUNTING POLICYCOST ACCOUNTING POLICY

(1) Briefly describe the cost accounting policy adopted by the (1) Briefly describe the cost accounting policy adopted by the Company keeping in view the requirements of the Companies Company keeping in view the requirements of the Companies (cost Accounting Records) Rules, 2011, the Companies (Cost (cost Accounting Records) Rules, 2011, the Companies (Cost Audit Report) Rules, 2011, cost accounting standards and its Audit Report) Rules, 2011, cost accounting standards and its adequacy or otherwise to determine correctly the cost of adequacy or otherwise to determine correctly the cost of production/operationproduction/operation, , cost of sales, sales realization and cost of sales, sales realization and margin of the product/activity groups under reference margin of the product/activity groups under reference separately for each product/activity group. The policy should separately for each product/activity group. The policy should cover, inter alia, the following areas: cover, inter alia, the following areas:

a) Identification of cost centres/cost objects and cost drivers.a) Identification of cost centres/cost objects and cost drivers.

b) Accounting for material cost including packing materials, b) Accounting for material cost including packing materials, stores and spares etc., employee cost, utilities and other stores and spares etc., employee cost, utilities and other relevant cost components.relevant cost components.

c) Accounting, allocation and absorption of overheadsc) Accounting, allocation and absorption of overheads

……Para 2Para 2

d) Accounting for Depreciation/Amortizationd) Accounting for Depreciation/Amortization

e) Accounting for by-products/joint-products, scarps, wastage e) Accounting for by-products/joint-products, scarps, wastage etc.etc.

f) Basis for Inventory Valuationf) Basis for Inventory Valuation

g) Methodology for valuation of Inter-Unit/Inter Company and g) Methodology for valuation of Inter-Unit/Inter Company and Related Party transactions.Related Party transactions.

h) Treatment of abnormal and non-recurring costs including h) Treatment of abnormal and non-recurring costs including classification of other non-cost items.classification of other non-cost items.

i) In case the Company has adopted IFRS, variations (if any) in i) In case the Company has adopted IFRS, variations (if any) in treatment of cost accounting arising out of adoption of IFRS in treatment of cost accounting arising out of adoption of IFRS in Financial Accounting.Financial Accounting.

j) Other relevant cost accounting policy adopted by the j) Other relevant cost accounting policy adopted by the CompanyCompany

(2) Briefly specify the changes, if any, made in the cost (2) Briefly specify the changes, if any, made in the cost accounting policy for the product/activity group (s) under audit accounting policy for the product/activity group (s) under audit during the current financial year as compared to the previous during the current financial year as compared to the previous financial year. financial year.

(3) Observations of the Cost Auditor regarding adequacy or (3) Observations of the Cost Auditor regarding adequacy or otherwise of the Budgetary Control System, if any, followed by otherwise of the Budgetary Control System, if any, followed by the company. the company.

Para 3Para 3 PRODUCT GROUP DETAILS (for the company as a PRODUCT GROUP DETAILS (for the company as a

whole)whole) S. S.

No.No.Names of each Names of each Product Group Product Group

Name of Name of products/ products/ Activities Activities included in the included in the product group product group

Net Sales Net Sales (net of (net of taxes, taxes,

duties, etc.) duties, etc.)

(Rs. In lakh)(Rs. In lakh)

Covered Covered under Cost under Cost

Audit Audit

YesYes NoNo

AA Manufactured Manufactured Product GroupsProduct Groups

11

22

33

Sub-Total (A)Sub-Total (A)

BB Services GroupsServices Groups

11

22

33

Sub-Total (A)Sub-Total (A)

…Para 3

C.C. Trading Activities Trading Activities (Product Group-(Product Group-wise)wise)

11

22

33

Sub-Total (A) Sub-Total (A)

Other IncomesOther Incomes

Total Income as Total Income as per Audited per Audited Annual Report Annual Report (A+B+C+D)(A+B+C+D)

Note:Note:

(1) For manufactured product groups, use the nomenclature (1) For manufactured product groups, use the nomenclature as used in the Central Excise Act and Rules, as applicable.as used in the Central Excise Act and Rules, as applicable.

(2) For service groups, use the nomenclature as used in the (2) For service groups, use the nomenclature as used in the Finance Act / Central Service Tax Rules, as applicable.Finance Act / Central Service Tax Rules, as applicable.

Para 4Para 4QUANTITATIVE INFORMATION (for each product group QUANTITATIVE INFORMATION (for each product group separately)separately)

Name of the CompanyName of the Company

Name of the Product GroupName of the Product Group

Name of the Products covered in the Product GroupName of the Products covered in the Product Group

Financial YearFinancial Year From _________ To __________From _________ To __________

ParticularsParticulars UniUnitt

Current Current YearYear

Previous Previous YearYear

1. Available Capacity1. Available Capacity

(a) Installed Capacity(a) Installed Capacity

(b) Capacity enhanced (b) Capacity enhanced during during

the year, if anythe year, if any

(c) Capacity available (c) Capacity available through through

leasing arrangements, leasing arrangements, ifif

(d) Capacity available (d) Capacity available through through

loan license / third loan license / third partiesparties

(e) Total available (e) Total available CapacityCapacity

…Para 4

2. Actual Production2. Actual Production

(a) Self manufactured(a) Self manufactured

(b) Produced under leasing (b) Produced under leasing

arrangementsarrangements

(c) Produced on loan license / (c) Produced on loan license / by by

third parties on job workthird parties on job work

(d) Total Production(d) Total Production

4. Production as per Excise 4. Production as per Excise RecordsRecords

4. Capacity Utilization (in-4. Capacity Utilization (in-house)house)

5. Stock Purchased for 5. Stock Purchased for TradingTrading

(a) Domestic Purchase(a) Domestic Purchase

(b) Imports(b) Imports

(c) Total Purchases(c) Total Purchases

…Para 46. Stock & Other Adjustments6. Stock & Other Adjustments

(a) Change in Stock of Finished (a) Change in Stock of Finished GoodsGoods

(b) Self / Captive Consumption (b) Self / Captive Consumption (incl. (incl.

samples etc.)samples etc.)

(c) Other Quantitative (c) Other Quantitative Adjustments, if Adjustments, if

any (wastage etc.)any (wastage etc.)

(d) Total Adjustments(d) Total Adjustments

7. Total Available Quantity 7. Total Available Quantity for Sale [2(e) + 5(c) - 6(d)]for Sale [2(e) + 5(c) - 6(d)]

8. Actual Sales8. Actual Sales

(a) Domestic Sales (a) Domestic Sales (manufacturing)(manufacturing)

(b) Domestic Sales (trading)(b) Domestic Sales (trading)

(c) Export Sale (manufacturing)(c) Export Sale (manufacturing)

(d) Export Sale (trading)(d) Export Sale (trading)

(e) Total Quantity Sold(e) Total Quantity Sold

Para 5Para 5

ABRIDGED COST STATEMENT (for each product group ABRIDGED COST STATEMENT (for each product group separately)separately)

S. S. NNoo

ParticularsParticulars UnitUnitss

QuantitQuantityy

RatRate e

(Rs.(Rs.))

AmouAmount nt

(Rs.)(Rs.)

Rate per unit Rate per unit in Rs.in Rs.

Current Current YearYear

PrevioPrevious us

YearYear

11 Materials Consumed Materials Consumed (specify details) (specify details)

a) Indigenous a) Indigenous Purchased Purchased

b) Imported b) Imported

c) Self Manufactured c) Self Manufactured / /

Produced Produced

22 Process Materials/ Process Materials/ Chemicals (specify)Chemicals (specify)

33 Utilities (specify Utilities (specify details) details)

…Para 5S. S. NoNo


QuantiQuantityty

RatRate e

(Rs.(Rs.))

AmouAmount nt

(Rs.)(Rs.)

Rate per Rate per unit in Rs.unit in Rs.

CurreCurrent nt

YearYear

PrevioPrevious us

YearYear

44 Direct Employees CostDirect Employees Cost

55 Direct Expenses Direct Expenses

66 Consumable Stores & Consumable Stores & Spares Spares

77 Repairs & Repairs & Maintenance Maintenance

88 Quality Control Quality Control Expenses Expenses

99 Research & Research & Development Development ExpensesExpenses

1010 Technical know-how Technical know-how Fee / Royalty, if any Fee / Royalty, if any

1111 Depreciation/Depreciation/Amortization Amortization

1212 Other Production Other Production Overheads Overheads

1313 Total (1 to 12) Total (1 to 12)

…Para 5

S. S. NoNo

ParticularsParticulars UniUnitsts

QuantiQuantityty

Rate Rate (Rs.(Rs.

))

AmouAmount nt

(Rs.)(Rs.)

Rate per unit Rate per unit in Rs.in Rs.

CurreCurrent nt

YearYear

PrevioPrevious us

YearYear

1414 Add/Less: Work-in-Add/Less: Work-in-Progress Adjustments Progress Adjustments

1515 Less: Credits for Less: Credits for Recoveries, if any Recoveries, if any

1616 Primary Packing Cost Primary Packing Cost

1717 Cost of Production/ Cost of Production/ Ope-rations (12 + 13 Ope-rations (12 + 13 to 17)to 17)

1818 Increase/Decrease in Increase/Decrease in Stock of Finished Stock of Finished Goods Goods

1919 Less: Self/Captive Con- Less: Self/Captive Con- sumption (incl. Samples, sumption (incl. Samples, etc.) etc.)

2020 Other Adjustments (if Other Adjustments (if any) any)

2121 Cost of Production/ Cost of Production/ Operation of Goods/ Operation of Goods/ Services Sold (17 + 18 to Services Sold (17 + 18 to 20)20)

…Para 5

S. S. NoNo


QuantQuantityity

RatRate e

(Rs.(Rs.))

AmouAmount nt

(Rs.)(Rs.)

Rate per Rate per unit in Rs.unit in Rs.

CurrenCurrent Yeart Year

PrevioPrevious us

YearYear

2222 Administrative Administrative Overheads Overheads

2323 Secondary Packing Cost Secondary Packing Cost

2424 Selling & Distribution Selling & Distribution Overheads Overheads

2525 Interest & Financing Interest & Financing Charges Charges

2626 Cost of Sales (21 + 22 Cost of Sales (21 + 22 to 25)to 25)

2727 Net Sales Realization Net Sales Realization (Net of Taxes and (Net of Taxes and Duties) Duties)

2828 Margin [Profit/(Loss) as Margin [Profit/(Loss) as per Cost Accounts] (27-per Cost Accounts] (27-26) 26)

…Para 5

NOTES: NOTES:

Separate cost statement shall be prepared for each Separate cost statement shall be prepared for each product/activity groupproduct/activity group

The items of cost shown in the Proforma are indicative and the The items of cost shown in the Proforma are indicative and the same should be reflected keeping in mind the materiality of same should be reflected keeping in mind the materiality of the item of cost in the product/activity group. the item of cost in the product/activity group.

The Proforma may be suitably modified to meet the The Proforma may be suitably modified to meet the requirement of the industry/product/activity group.requirement of the industry/product/activity group.

In case the company follows a pre-determined or standard In case the company follows a pre-determined or standard costing system, the above cost statement should reflect costing system, the above cost statement should reflect figures at actual after adjustment of variances, if any. figures at actual after adjustment of variances, if any.

Para 6Para 6OPERATING RATIO ANALYSIS (for each product group OPERATING RATIO ANALYSIS (for each product group separately)separately)

S.S.

NoNo..

ParticularParticularss UnitUnit CurreCurrent nt

YearYear

PrevioPrevious us

Year-1Year-1

PrevioPrevious us

Year-2Year-2

Ratio of Operating Expenses to Cost of SalesRatio of Operating Expenses to Cost of Sales

11 Materials (incl. Process Materials (incl. Process Materials) CostMaterials) Cost

%%

22 Utilities CostUtilities Cost %%

33 Direct Employees CostDirect Employees Cost %%

44 Direct ExpensesDirect Expenses %%

55 Consumable Stores & Consumable Stores & SparesSpares

%%

66 Repairs & Maintenance Repairs & Maintenance CostCost

%%

77 Depreciation / Depreciation / Amortization CostAmortization Cost

%%

88 Packing CostPacking Cost %%

…Para 6

S.S.

NoNo..

ParticularsParticulars UniUnitt

CurreCurrent nt

YearYear

PrevioPrevious us

Year-1Year-1

PrevioPrevious us

Year-2Year-2

Ratio of Operating Expenses to Cost of SalesRatio of Operating Expenses to Cost of Sales

99 Other ExpensesOther Expenses %%

1010 Stock AdjustmentsStock Adjustments %%

1111 Production OverheadsProduction Overheads %%

1212 Administrative OverheadsAdministrative Overheads %%

1313 Selling & Distribution Selling & Distribution OverheadsOverheads

%%

1414 Interest & Financing Interest & Financing ChargesCharges

%%

1515 TotalTotal %%

Para 7Para 77. PROFIT RECONCILIATION (for the company as a 7. PROFIT RECONCILIATION (for the company as a whole)whole)S. S.

No.No.ParticularsParticulars Current Current

YearYearPrevious Previous Year-1Year-1

Previous Previous Year-2Year-2

11 Profit or Loss as per Cost Profit or Loss as per Cost Accounting RecordsAccounting Records

(a) For the audited (a) For the audited product product

groupsgroups

(b) For the un-audited (b) For the un-audited product product

groupsgroups

22 Add: Incomes not Add: Incomes not considered in cost considered in cost accounts:accounts:

(a) Specify(a) Specify

(b)(b)

(c)(c)

(d)(d)

…Para 7

7. PROFIT RECONCILIATION (for the company as a 7. PROFIT RECONCILIATION (for the company as a whole)whole)S. S.


YearYearPrevious Previous Year-1Year-1


33 Less: Expenses not Less: Expenses not considered in cost considered in cost accounts:accounts:

(a) Specify(a) Specify

(b)(b)

(c)(c)

44 Add: Overvaluation of Add: Overvaluation of closing stock in financial closing stock in financial accountsaccounts

55 Add: Undervaluation of Add: Undervaluation of opening stock in financial opening stock in financial accountsaccounts

…Para 7

7. PROFIT RECONCILIATION (for the company as a 7. PROFIT RECONCILIATION (for the company as a whole)whole)S. S.


YearYearPreviouPrevious Year-1s Year-1


66 Less: Undervaluation of Less: Undervaluation of closing stock in financial closing stock in financial accountsaccounts

77 Less: Overvaluation of Less: Overvaluation of opening stock in financial opening stock in financial accountsaccounts

88 Adjustments for others, if Adjustments for others, if any (specify)any (specify)

99 Profit or Loss as per Profit or Loss as per Financial AccountsFinancial Accounts

Para 8Para 8

8. VALUE ADDITION AND DISTRIBUTION OF 8. VALUE ADDITION AND DISTRIBUTION OF EARNINGS (for the company as a whole) EARNINGS (for the company as a whole) (Rs. In lacs) (Rs. In lacs)

S. S. NoNo..

ParticularsParticulars CurrenCurrent Yeart Year

PrevioPrevious us

Year-1Year-1

PrevioPrevious us

Year-2Year-2

Value Addition:Value Addition:

11 Gross Sales (excluding returns)Gross Sales (excluding returns)

22 Less: Excise duty, etc.Less: Excise duty, etc.

33 Net SalesNet Sales

44 Add: Export IncentivesAdd: Export Incentives

55 Add/Less: Adjustment in Finished Add/Less: Adjustment in Finished StocksStocks

…Para 8


S. S. NoNo..


PrevioPrevious us

Year-1Year-1

PrevioPrevious us

Year-2Year-2

66 Less: Cost of bought out inputsLess: Cost of bought out inputs

(a) Cost of Materials Consumed(a) Cost of Materials Consumed

(b) Process Materials / Chemicals(b) Process Materials / Chemicals

(c) Consumption of Stores & (c) Consumption of Stores & SparesSpares

(d) Utilities (e.g. power & fuel)(d) Utilities (e.g. power & fuel)

(e) Others, if any(e) Others, if any

Total Cost of bought out inputsTotal Cost of bought out inputs

77 Value AddedValue Added

…Para 8


S. S. NoNo..


PrevioPrevious us

Year-1Year-1

PrevioPrevious us

Year-2Year-2

88 Add: Income from any other Add: Income from any other sourcessources

99 Earnings available for distributionEarnings available for distribution

Distribution of Earnings to:Distribution of Earnings to:

11 Employees as salaries & wages, Employees as salaries & wages, retirement benefits, etc.retirement benefits, etc.

22 Shareholders as dividendShareholders as dividend

33 Company as retained fundsCompany as retained funds

44 Government as taxes (specify)Government as taxes (specify)

55 Others, if any (specify)Others, if any (specify)

Total distribution of earningsTotal distribution of earnings

Para 9Para 9FINANCIAL POSITION AND RATIO ANALYSIS (for the FINANCIAL POSITION AND RATIO ANALYSIS (for the company as a whole)company as a whole)

S. S. NoNo..



PrevioPrevious us

Year-1Year-1

PrevioPrevious us

Year-2Year-2

A.A. Financial PositionFinancial Position Rs/Rs/LakhLakh

11 Paid-up CapitalPaid-up Capital Rs/Rs/LakhLakh

22 Reserves & SurplusReserves & Surplus Rs/Rs/LakhLakh

33 Loans (secured & unsecured)Loans (secured & unsecured) Rs/Rs/LakhLakh

44 (a) Gross Fixed Assets(a) Gross Fixed Assets Rs/Rs/LLaakkhh

(b) Net Fixed Assets(b) Net Fixed Assets Rs/Rs/LakhLakh

55 (a) Total Current Assets(a) Total Current Assets Rs/Rs/LakhLakh

(b) Less: Current Liabilities & (b) Less: Current Liabilities & ProvisionsProvisions

Rs/Rs/LakhLakh

(c) Net Current Assets(c) Net Current Assets Rs/Rs/LakhLakh

……Para 9Para 9

FINANCIAL POSITION AND RATIO ANALYSIS (for the FINANCIAL POSITION AND RATIO ANALYSIS (for the company as a whole)company as a whole)

S. S. NoNo..



PrevioPrevious us

Year-1Year-1

PrevioPrevious us

Year-2Year-2

66 Capital EmployedCapital Employed Rs/Rs/LakhLakh

77 Net WorthNet Worth Rs/Rs/LakhLakh

B.B. Financial PerformanceFinancial Performance

11 Cost of ProductionCost of Production Rs/Rs/LakhLakh

22 Cost of SalesCost of Sales Rs/Rs/LLaakkhh

33 Net SalesNet Sales Rs/Rs/LakhLakh

44 Value AddedValue Added Rs/Rs/LakhLakh

55 Profit before Tax (PBT)Profit before Tax (PBT) Rs/Rs/LakhLakh

……Para 9Para 9

FINANCIAL POSITION AND RATIO ANALYSIS (for the FINANCIAL POSITION AND RATIO ANALYSIS (for the company as a whole)company as a whole)

S. S. NoNo..



PrevioPrevious us

Year-1Year-1

PrevioPrevious us

Year-2Year-2

C.C. Profitability RatiosProfitability Ratios

11 PBT to Capital Employed PBT to Capital Employed (B5/A6)(B5/A6)

%%

22 PBT to Net Worth (B5/A7)PBT to Net Worth (B5/A7) %%

33 PBT to Net Sales (B5/B3)PBT to Net Sales (B5/B3) %%

44 PBT to Value Added (B5/B4)PBT to Value Added (B5/B4) %%

D.D. Other Financial RatiosOther Financial Ratios

11 Debt-Equity RatioDebt-Equity Ratio %%

22 Current Assets to Current Current Assets to Current LiabilitiesLiabilities

%%

33 Valued Added to Net SalesValued Added to Net Sales %%

……Para 9Para 9FINANCIAL POSITION AND RATIO ANALYSIS (for the FINANCIAL POSITION AND RATIO ANALYSIS (for the company as a whole)company as a whole)

S. S. NoNo..



PrevioPrevious us

Year-1Year-1

PrevioPrevious us

Year-2Year-2

E.E. Working Capital RatiosWorking Capital Ratios

11 Net Working Capital to Cost of Net Working Capital to Cost of Sales excl. depreciationSales excl. depreciation

MontMonthshs

22 Raw Materials Stock to Raw Materials Stock to ConsumptionConsumption

MontMonthshs

33 Stores & Spares to Stores & Spares to ConsumptionConsumption

MontMonthshs

44 WIP Stock to Cost of WIP Stock to Cost of ProductionProduction

MontMonthhss

55 Finished Goods Stock to Cost Finished Goods Stock to Cost of Salesof Sales

MontMonthshs

Notes:Notes:(1)(1)Capital Employed means average of net fixed assets (excluding Capital Employed means average of net fixed assets (excluding intangible assets, effect of revaluation of fixed assets, and capital intangible assets, effect of revaluation of fixed assets, and capital work-in-progress) plus net current assets existing at the beginning work-in-progress) plus net current assets existing at the beginning and close of the financial year.and close of the financial year.(2)(2)Net Worth means share capital plus reserves and surplus Net Worth means share capital plus reserves and surplus (excluding revaluation reserves) less accumulated losses and (excluding revaluation reserves) less accumulated losses and intangible assets.intangible assets.

Para 10Para 10

S. No.

Name and Address of

Related Party

Name of the

Product/ Service group

Nature of

transaction

(Sale, Purchase, etc.)

Quan-tity

Transfer

Price

Amount

Normal

Price

Basis Adopted

to determine the normal price

1

2

3

4

5

RELATED PARTY TRANSACTIONS (for the company as a whole)

NOTES:NOTES:(1) Details should be furnished for each sale / purchase separately.(1) Details should be furnished for each sale / purchase separately.

(2) Details of Related Party transactions without indicating the (2) Details of Related Party transactions without indicating the Normal Price and the basis thereof shall be considered as incomplete Normal Price and the basis thereof shall be considered as incomplete information.information.

Para 11Para 1111. RECONCILIATION OF INDIRECT TAXES 11. RECONCILIATION OF INDIRECT TAXES

(for the company as a whole)(for the company as a whole)

ParticularParticular AssessaAssessable ble

ValueValue

Excise Excise DutyDuty

ServicService Taxe Tax

Cess & Cess & OtherOther

VATVAT

Total ClearanceTotal Clearance

DomesticDomestic

ExportExport

Stock Transfer (net)Stock Transfer (net)

Other, If anyOther, If any

TotalTotal

Duties Tax PayableDuties Tax Payable

Duties Tax PaidDuties Tax Paid

Cenvat/VAT credit Cenvat/VAT credit utilized- Inpututilized- Input

……Para 11Para 11

11. RECONCILIATION OF INDIRECT TAXES 11. RECONCILIATION OF INDIRECT TAXES

(for the company as a whole)(for the company as a whole)

ParticularParticular AssessabAssessable Valuele Value

Excise Excise DutyDuty

ServicService Taxe Tax

Cess Cess & &

OtherOther

VAVATT

Cenvat/VAT Credit Utilised Cenvat/VAT Credit Utilised - Capital Goods- Capital Goods

Cenvat/VAT Credit Utilised Cenvat/VAT Credit Utilised - Input Services- Input Services

Cenvat/VAT Credit Utilised Cenvat/VAT Credit Utilised – Others– Others

TotalTotal

Paid through PLA/CashPaid through PLA/Cash

Total Duties/Taxes PaidTotal Duties/Taxes Paid

Duties/Taxes RecoveredDuties/Taxes Recovered

Difference between Difference between Duties/ Taxes Paid and Duties/ Taxes Paid and RecoveredRecovered

Interest/Penalty/Fines PaidInterest/Penalty/Fines Paid

…Para 11

SINGNATURE SINGNATURE SINGNATURE SINGNATURE SINGNATURESINGNATURE

NAMENAME NAME NAME NAME COST AUDITOR (S) COMPANY SECRETARY/DIRECTORNAME COST AUDITOR (S) COMPANY SECRETARY/DIRECTOR DIRECTORDIRECTOR

MEMBERSHIP NO.MEMBERSHIP NO. MEMBERSHIP/DIN NUMBER MEMBERSHIP/DIN NUMBER DIN NUMBERDIN NUMBER

SEAL SEAL STAMP STAMPSTAMPSTAMP

DATEDATE DATE DATEDATEDATE

Notes:Notes:

(1) Wherever, there is any significant variation in the current year's (1) Wherever, there is any significant variation in the current year's figure over the previous year's figure for any item shown under each figure over the previous year's figure for any item shown under each para of the Annexure to the Cost Audit Report, reasons thereof shall para of the Annexure to the Cost Audit Report, reasons thereof shall be given by the Cost Auditor. be given by the Cost Auditor.

(2) Wherever, duration of the current year or the previous year is not (2) Wherever, duration of the current year or the previous year is not 12(twelve) months, same shall be clearly indicated in the Report. 12(twelve) months, same shall be clearly indicated in the Report.

Form III- PARForm III- PAR

Name of Company:Name of Company: _______________________ _______________________

Period of Report:Period of Report: ______________ ______________

(indicative list of areas to be covered in the report) (indicative list of areas to be covered in the report)

1. Capacity Utilization Analysis 1. Capacity Utilization Analysis

2. Productivity/Efficiency Analysis 2. Productivity/Efficiency Analysis

3. Utilities/Energy Efficiency Analysis 3. Utilities/Energy Efficiency Analysis

4. Key-Costs & Contribution Analysis 4. Key-Costs & Contribution Analysis

5. Product/Service Profitability Analysis 5. Product/Service Profitability Analysis

6. Market/Customer Profitability Analysis 6. Market/Customer Profitability Analysis

7. Working Capital & Inventory Management Analysis 7. Working Capital & Inventory Management Analysis

8. Manpower Analysis 8. Manpower Analysis

…Form III- PAR

9. Impact of IFRS on the Cost Structure, Cash-Flows and Profitability 9. Impact of IFRS on the Cost Structure, Cash-Flows and Profitability

10. Application of Management Accounting Tools 10. Application of Management Accounting Tools

Date: ____________ Signature of the Cost Date: ____________ Signature of the Cost Auditor(s) Auditor(s)

Place: ____________ Membership Number(s) Place: ____________ Membership Number(s)

Notes: Notes:

1. Areas included in this form are indicative; these are to be 1. Areas included in this form are indicative; these are to be included/excluded depending upon the size/scale and type of included/excluded depending upon the size/scale and type of operations, nature of the industry, management requirements, operations, nature of the industry, management requirements, etc. etc.

2. Frequency of this report viz. half yearly/annual to be decided by 2. Frequency of this report viz. half yearly/annual to be decided by the Company Management. the Company Management.

How to conduct Cost Audit How to conduct Cost Audit effectively ?effectively ?

The effective way of conducting the cost audit is by way of dividing this The effective way of conducting the cost audit is by way of dividing this

activity in following 4 stages or phases. activity in following 4 stages or phases.

Stage:1 Stage:1

Pre-Cost audit preparation Pre-Cost audit preparation Study Annual Report copy of the previous year. This will also give a Study Annual Report copy of the previous year. This will also give a

bird’s eye view about management, line of business, and other bird’s eye view about management, line of business, and other activities.activities.

Get a profile of the company, with number of factories, offices, Get a profile of the company, with number of factories, offices, branches, depots etc.branches, depots etc.

To study system & procedure visit various factories & their To study system & procedure visit various factories & their production department and collect a note on process of manufacture production department and collect a note on process of manufacture & flow chart.& flow chart.

In new industry, involve as an associate/ staff who has experience in In new industry, involve as an associate/ staff who has experience in that industry. This will help to pick up special features of that that industry. This will help to pick up special features of that industry. industry.

To discuss schedule of annual closing of accounts & try to get To discuss schedule of annual closing of accounts & try to get prepared on similar line, schedule for completion of cost records & prepared on similar line, schedule for completion of cost records & cost audit.cost audit.

Stage: 2Stage: 2Conducting Cost Audit – Areas to be Conducting Cost Audit – Areas to be covered before the close of the year.covered before the close of the year.

Visit to various departments to understand, review & test Visit to various departments to understand, review & test check the basic records of the departments such as stores, check the basic records of the departments such as stores, production, Finance, Costing etc. production, Finance, Costing etc.

To understand:To understand: Existing internal costing system and MIS system, defining Existing internal costing system and MIS system, defining

cost centres, cost centres, System and basis for allocation, and apportionment of System and basis for allocation, and apportionment of

various cost elements, various cost centres.various cost elements, various cost centres. To carry out trend analysis of various cost & technical To carry out trend analysis of various cost & technical

parameters – monthly to yearly to understand cause for parameters – monthly to yearly to understand cause for variations in various parameters.variations in various parameters.

Stage 3Stage 3Conducting Cost Audit – Areas to be Conducting Cost Audit – Areas to be covered after the close of the yearcovered after the close of the year

When cost records are getting finalized, to carry out simultaneous audit of When cost records are getting finalized, to carry out simultaneous audit of

following aspects, as & when these records are ready.following aspects, as & when these records are ready. Reconciliation statement in terms of quantity & value.Reconciliation statement in terms of quantity & value. Apportionment of cost of various service cost centers to production Apportionment of cost of various service cost centers to production

cost centers.cost centers. Application/ absorption of factory overheads, administration Application/ absorption of factory overheads, administration

overheads, Selling & Distribution overheads & Interest to various overheads, Selling & Distribution overheads & Interest to various products.products.

Product-wise sales & margin analysis – quantity & value (net of Product-wise sales & margin analysis – quantity & value (net of Government levies).Government levies).

While finalizing the Cost Audit for the current year, we should check While finalizing the Cost Audit for the current year, we should check plus/minus 10% variation in cost versus previous year in following plus/minus 10% variation in cost versus previous year in following areas –areas –

Item-wise unit cost of Raw Material & Packing Material for major items.Item-wise unit cost of Raw Material & Packing Material for major items. Cost centre wise conversion cost per unitCost centre wise conversion cost per unit Product wise per unit cost, sales & marginProduct wise per unit cost, sales & margin To draw a conclusion about compliance with CAS and GACAP by the To draw a conclusion about compliance with CAS and GACAP by the

company.company.

Stage 4Stage 4Preparation for Audit Committee Preparation for Audit Committee

Meeting Meeting

The Audit Committee meeting is very critical as The Audit Committee meeting is very critical as the interaction with the Stake holders is during this the interaction with the Stake holders is during this meeting.meeting.

Drafting of conclusion for Form III – Performance Drafting of conclusion for Form III – Performance Appraisal Report, based on the information Appraisal Report, based on the information received from the company.received from the company.

Discussion on Form II – Cost Audit Report & Form Discussion on Form II – Cost Audit Report & Form III – Performance Appraisal Report with III – Performance Appraisal Report with management.management.

To assist the management in preparation of the To assist the management in preparation of the Executive SummaryExecutive Summary of Cost Audit Report for of Cost Audit Report for presenting to the Audit Committee.presenting to the Audit Committee.

THANK YOUTHANK YOU

Documents

INTERPRETATION OF COST AUDIT REPORT, 2011 Presentation by: RACTISING COST ACCOUNTANT