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Corporate social responsibility and Role of Cost accounting record rules and cost audit report rules.


• Control Risk Management.
• Improve stakeholder relations & operational impacts.
• Comply Integrated EMS, Social and Productivity Management system.
• Compliance through supply-chain .
• Work out the relationships between business drivers and CSR dimensions.
• Improve strengths and weaknesses of organizational expertise.
• Estimate costs of improving CSR.
• Priorities your initiatives in the light of these factors.
• Publicize your intentions in mission and/or value statements.
• Adopt a Ethical Code.

AIMS of COST Audit:(rule 2 c rule 4 G.S.R. 924(E).-sub-section (4) of section 233B,read with subsection
(1) of section 227 and clause (b) of sub-section (1) of section 642, of the Companies Act, 1956 (1 of 1956),

Based on my/our examination of the records of the company subject to aforesaid qualifications, if any,
I/We give my/our observations and suggestions on the following

(a) the adequacy or otherwise of the cost accounting system including inventory valuation in vogue in the company and suggestions for the improvement thereof. The Cost auditor shall also indicate the persistent deficiencies in the system, pointed out in earlier reports but not rectified;

(b) the adequacy or otherwise of the budgetary control system, if any, in vogue in the company;

(c) matters which appear to him to be clearly wrong in principle or apparently unjustifiable;

(d) cases, where price charged for related party transactions as defined in the respective Cost Accounting
Records Rules is different from normal price, impact of such lower/higher price on margin of the product under reference shall be specified;

(e) areas where the company is incurring losses or where there is considerable decline in profitability, the cost auditor should comment on the reasons thereof including indicative break-even point. The cost auditor shall also comment on the default, if any on the payments due to the Government, financial institutions and
banks, penal interest levied thereon and its impact on the cost of sales and profitability;

(f) steps required to strengthen the company under the competitive environment especially with regard to need for protection from cheaper imports, if any;

(g) export commitments of the company vis-à-vis actual exports for the year under review.

Also comment on
comparative profitability and pricing policy of the company for domestic and export sales. Give impact of exports benefits/ incentives offered by the Government on export profitability;

(h) the scope and performance of internal audit of cost records, if any, and comment on its adequacy or otherwise.

4. The Cost Auditor shall suggest measures for making further improvements in the performance in respect of cost control and cost reduction.

Blog Contributed by RV


The objectives of CSR are very clear Value creation by continuous improvements establisment of EMS/SMS/PMS.Now what the cost audit aims at though currently it has embedded governmental views only is that to monitor entire resource consumption from the bottomline.This arose from the fact that there is inherent deficiency in the Financial accounting and it exihibits more than that it reveals as a common dictum it dresses the window and hides the room.
Infact Cost audit report can encompass testing adequacy of books of account kept as enshrined in para(annexed to cost audit report)2,3,4,5,6,15,16,23,24,26 etc.
santoshputhran said…
Hello RV,

Pt. d price charged to related party charged whether different from normal price. I think this is subjective or no one can ascertain that it has been done in arms length. What can be done is disclosure about total value of related party transaction with costs. (How do justify non related party transactions when the pricing for each customer is different - IT software sales for e.g)

Pt.e. I feel that declined in profitability should be explained in the director's report. If they not explained, then it should be commented in cost auditor's report.

Pt.f This depends on terms of reference of the audit assignment. Whether he acting as cost auditor or management consultant. Point f should be more elaborate to comment

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