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Cost Audit under the Companies (Cost Records and Audit) Rules, 2014

Reviewed by CA and CS Team, Patron Accounting LLP ICAI & ICSI Registered| 15+ Years Experience| Last Updated: Verify Credentials →

Service: End-to-end cost audit support under Section 148, from applicability to the CRA-4 filing.

Fees: Cost audit support starting from INR 49,999 per year (Exl GST and Govt. Charges).

Applies to: Specified regulated and non-regulated sectors crossing the turnover thresholds.

Forms: CRA-1 records, CRA-2 appointment, CRA-3 report and CRA-4 filing.

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Cost Audit: Overview and Quick Summary

📌 TL;DR - Cost Audit Services at a Glance

Cost audit under Section 148 and the Cost Records and Audit Rules, 2014 applies to companies in specified sectors that cross the turnover thresholds, 50 crore overall and 25 crore product in a regulated sector, or 100 crore overall and 35 crore product in a non-regulated sector. Such companies maintain cost records in CRA-1, appoint a cost auditor via CRA-2, and file the cost audit report through CRA-3 and CRA-4.

Parameter	Detail
Governing Provision	Section 148 with the Cost Records and Audit Rules, 2014
Cost records	CRA-1, where overall turnover is 35 crore or more
Regulated audit	Turnover 50 cr and product 25 cr or more
Non-regulated audit	Turnover 100 cr and product 35 cr or more
Cost	Patron fee from INR 49,999 per year (Exl GST and Govt. Charges)
Auditor	Cost Accountant, appointed within 180 days, intimated in CRA-2
Report	CRA-3 to the Board, then CRA-4 to the Central Government

Cost audit services from Patron Accounting cover the applicability assessment, the cost records in CRA-1, the cost auditor appointment in CRA-2, and the cost audit report in CRA-3 and CRA-4, with the work led by qualified professionals and coordinated with your cost accountant. It is an annual statutory audit for the specified sectors. Our team has supported 10,000+ businesses since 2009.

Cost audit sits alongside the other statutory audits a company faces. For the financial audit, see our statutory audit service, and for the audit under the Income-tax Act, our tax audit service.

What Is a Cost Audit?

A cost audit is the independent verification of a company’s cost records by a Cost Accountant in practice, under Section 148. It checks that the cost of production, operations and sales is recorded accurately and in line with the cost accounting standards.

It applies to companies in specified manufacturing and service sectors that cross the turnover thresholds. It is separate from the financial statutory audit and the tax audit, and it gives the government and stakeholders visibility of cost and pricing in key sectors.

Key Terms for Cost Audit:

Cost records: The books of cost data a company maintains in the CRA-1 format.
Cost auditor: A Cost Accountant in practice appointed to audit the cost records.
Regulated sector: Sectors in Table A of Rule 3, such as telecom, petroleum, drugs and fertilisers.
Non-regulated sector: Sectors in Table B of Rule 3, such as chemicals, metals, machinery and textiles.
CRA forms: CRA-1 records, CRA-2 appointment, CRA-3 report and CRA-4 filing.

Section 148 CRA Forms

Who Must Have a Cost Audit?

Cost audit applies to a company in a specified sector that crosses the turnover thresholds for its category, having first crossed the cost-records threshold.

Cost records first: A company in a specified sector maintains cost records in CRA-1 where overall turnover is 35 crore or more.
Regulated sector audit: Cost audit applies where overall turnover is 50 crore or more and the product or service turnover is 25 crore or more.
Non-regulated sector audit: Cost audit applies where overall turnover is 100 crore or more and the product or service turnover is 35 crore or more.
Preceding-year test: The thresholds are tested on the turnover of the immediately preceding financial year.
Exemptions: Export revenue in foreign exchange over 75 percent, an SEZ unit, and electricity solely for captive consumption.

Which Sectors Are Covered?

Rule 3 lists the sectors in two tables. Cost audit enforcement focuses on these specified sectors.

Regulated sectors (Table A): Telecommunication, petroleum products, drugs and pharmaceuticals, fertilisers, sugar and industrial alcohol, and electricity, among others.
Non-regulated sectors (Table B): Chemicals, metals and steel, machinery, cement, textiles, automotive and many other manufacturing lines, among others.

Where a company makes both regulated and non-regulated products, the thresholds and the audit are applied product-wise, so only the covered product lines may trigger the cost audit. Cost audit is one of several audits a company may face; see our statutory audit service for the financial audit alongside it.

Our Cost Audit Services

Service	What We Do
Applicability Assessment	We test your sector and turnover against the cost-records and cost-audit thresholds, product-wise, and confirm whether a cost audit applies.
Cost Records in CRA-1	We help set up and maintain the cost records in the CRA-1 format, aligned to the cost accounting standards.
Cost Auditor Appointment and CRA-2	We coordinate the appointment of a Cost Accountant within 180 days and file the intimation in CRA-2.
Cost Audit Report, CRA-3	We support the cost audit and the cost audit report in CRA-3, including the reconciliation between the cost records and the financial accounts.
CRA-4 Filing	We file the cost audit report with the Central Government in CRA-4 within the due date, in XBRL.
Exemption and Position Review	We assess whether an exemption applies and document the company’s cost audit position each year.

Our Process

Cost Audit Process: Step by Step

How Patron runs the cost audit, from the product-wise applicability assessment to the CRA-4 filing.

Step 1

Assess Applicability

Test the sector and the overall and product turnover against the thresholds, product-wise.

Product-wise Threshold test

Assess 01

Step 2

Maintain Cost Records

Set up and keep the cost records in the CRA-1 format through the year.

CRA-1 format Cost standards

Records 02

Step 3

Appoint the Cost Auditor

Appoint a Cost Accountant within 180 days of the start of the financial year and obtain consent.

180 days Consent

Appoint 03

Step 4

File CRA-2

Intimate the appointment to the Central Government in Form CRA-2.

CRA-2 To Govt

Intimate 04

Step 5

Conduct the Audit

Support the cost auditor through the audit and the reconciliation with the financial accounts.

Audit Reconciliation

Conduct 05

Step 6

Receive CRA-3

Obtain the cost audit report from the auditor in Form CRA-3 within 180 days of the year end.

CRA-3 180 days

Report 06

Step 7

File CRA-4

File the cost audit report with the Central Government in Form CRA-4 within 30 days of receipt.

CRA-4 XBRL 30 days

File 07

Information Required for a Cost Audit

Sector classification and product or service list.
Overall turnover and product-wise turnover of the preceding year.
Cost records and cost accounting data in the CRA-1 format.
Audited financial statements for reconciliation.
Board resolution for the cost auditor appointment.
Valid DSC of the signatory for the CRA filings.

Need the full checklist? We share a tailored cost audit checklist after reviewing your sector and numbers.

Common Cost Audit Challenges and Solutions

Challenge	Impact	How Patron Accounting Solves It
Unsure whether cost audit applies	Applicability turns on the sector and the product-wise turnover, which is easy to misread. We assess it precisely and document the position.
Cost records not maintained	Companies often lack proper CRA-1 records. We help set them up and align them to the cost accounting standards.
Late appointment or CRA-2	Missing the 180-day appointment or the CRA-2 intimation is a common slip. We manage the timeline.
CRA-4 delays	A late CRA-4 draws additional fees. We file within the 30-day window after the report.

Cost Audit Service Fees

Fee Component	Amount
Patron Accounting Professional Fees (annual)	Starting from INR 49,999 per year (Exl GST and Govt. Charges)
Scope	Applicability assessment, CRA-1 records support, CRA-2 appointment, CRA-3 report support and the CRA-4 filing for the year
Cost auditor’s own remuneration	Scoped and charged separately
MCA filing fees and large remediation of past records	Scoped and charged separately

All fees and charges listed are indicative only and do not constitute a binding offer. Final amounts may vary depending on the volume of work and the complexity involved.

The cost auditor’s own remuneration, MCA filing fees and any large remediation of past cost records are scoped and charged separately, since the workload depends on your sector, product lines and the state of your existing cost records. Contact us for a detailed quote.

Get a free Cost Audit consultation - Call +91 945 945 6700 or WhatsApp us. No-obligation assessment.

Cost Audit Timeline at a Glance

Stage	Estimated Timeline
Cost auditor appointment	Within 180 days of the start of the financial year
CRA-2 intimation	After appointment, to the Central Government
Cost records (CRA-1)	Maintained through the year
CRA-3 report	From the cost auditor within 180 days of the year end
CRA-4 filing	With the Central Government within 30 days of receiving CRA-3

Cost audit follows the financial year. The cost auditor is appointed within 180 days of the start of the year and the appointment is intimated in CRA-2. Cost records are kept in CRA-1 through the year. After the year end, the cost auditor submits the report in CRA-3 within 180 days, and the company files it with the Central Government in CRA-4 within 30 days of receiving it. We run the calendar so each step is on time.

Key Benefits

Why Choose Professional Cost Audit Support

Applicability Assessed Precisely

The sector and the product-wise turnover are tested precisely against the thresholds, and the position is documented.

CRA-1 Cost Records Set Up

The cost records are set up and maintained in the CRA-1 format, aligned to the cost accounting standards.

CRA-2 and CRA-4 Managed

The 180-day cost auditor appointment, the CRA-2 intimation and the CRA-4 filing are managed within their windows.

Reconciliation Supported

The reconciliation between the cost records and the financial accounts is supported for a clean CRA-3.

Penalty Risk Removed

Timely, accurate filings avoid the penalties on the company, the officers and the cost auditor under Section 147.

Coordinated by Qualified Professionals

The engagement is coordinated by qualified professionals and the cost auditor, end to end.

Trusted by Businesses Across India

10,000+ Businesses Served | 4.9 Google Rating | 50,000+ Documents Filed | 15+ Years

"We crossed the cost audit thresholds in our pharma line. Patron assessed applicability, set up CRA-1 and managed the CRA-2 to CRA-4 chain." - Director, pharmaceuticals company, Mumbai.

"Patron coordinated our cost auditor and filed CRA-4 on time, with a clean reconciliation to our accounts." - Finance Head, manufacturing company, Pune.

Trusted by leading brands including Hyundai, Asian Paints and Bridgestone for accounting and compliance support.

With offices in Pune, Mumbai, Delhi, and Gurugram, Patron Accounting serves businesses across India - both in-person and remotely.

Cost Audit Compared with Statutory and Tax Audit

Factor	Cost Audit (this service)	Statutory Audit	Tax Audit
Governing law	Section 148, Cost Rules 2014	Section 139 to 143	Income-tax Act, Section 44AB
Auditor	Cost Accountant	Chartered Accountant	Chartered Accountant
Focus	Cost records and costing	Financial statements	Tax compliance
Report	CRA-3 and CRA-4	Audit report to members	Form 3CA or 3CB and 3CD

Related Audit and Compliance Services

Cost audit is one of several audits a company may need, and it sits within its wider compliance. Patron handles the full audit family.

Statutory Audit for the financial audit of the company.
Tax Audit for the audit under the Income-tax Act.
Internal Audit for process and control reviews.
Appointment of Auditor for the statutory auditor appointment process.
Private Limited Company Compliance for the full annual compliance cycle.

Legal and Compliance Framework

Power and rules: Section 148 of the Companies Act, 2013 empowers the Central Government to mandate the maintenance of cost records and a cost audit for specified companies, and the Companies (Cost Records and Audit) Rules, 2014 set out the sectors, thresholds and forms.

Records and applicability: Under Rule 3, specified companies maintain cost records in Form CRA-1 where overall turnover is 35 crore or more, and under Rule 4 a cost audit applies in a regulated sector at 50 crore overall and 25 crore product turnover, and in a non-regulated sector at 100 crore overall and 35 crore product turnover, tested on the preceding year.

Auditor and forms: Under Rule 6, the Board appoints a Cost Accountant in practice as cost auditor within 180 days of the start of the year and intimates it in Form CRA-2, the cost auditor submits the report in Form CRA-3 within 180 days of the year end, and the company files it with the Central Government in Form CRA-4 within 30 days of receipt.

Exemptions and penalty: Rule 4(3) exempts a company with export revenue in foreign exchange over 75 percent, an SEZ unit, and electricity generated solely for captive consumption, while non-compliance attracts a penalty under Section 148 read with Section 147 on the company, the officers in default and the cost auditor, with CRA-4 late filing drawing additional fees. This is the Section 148 cost audit under the Companies Act, not the income-tax reassessment notice under Section 148 of the Income-tax Act, which is unrelated.

Refer to the MCA portal for the forms and to Section 148 on IndiaCode for the bare provision.

What is a cost audit?

A cost audit is the independent examination of a company’s cost records by a Cost Accountant in practice, under Section 148 of the Companies Act, 2013 and the Cost Records and Audit Rules, 2014. It verifies that the cost of production, operations and sales is recorded accurately and in line with the cost accounting standards, and it applies to companies in specified sectors that cross the turnover thresholds.

When does a cost audit become applicable?

A cost audit applies to a company in a specified sector that has first crossed the cost-records threshold and then the audit threshold. In a regulated sector, it applies where overall turnover is 50 crore or more and the product or service turnover is 25 crore or more. In a non-regulated sector, it applies where overall turnover is 100 crore or more and the product turnover is 35 crore or more, tested on the preceding financial year.

What are the CRA forms in a cost audit?

There are four CRA forms. CRA-1 is the format in which cost records are maintained. CRA-2 is the intimation of the appointment of the cost auditor to the Central Government. CRA-3 is the cost audit report the cost auditor submits to the Board. CRA-4 is the form in which the company files the cost audit report with the Central Government, in XBRL, within the due date.

Who can be a cost auditor?

A cost audit can be conducted only by a Cost Accountant in practice, or a firm of Cost Accountants, who is appointed by the Board of Directors of the company. The cost auditor is appointed within 180 days of the start of the financial year, after obtaining written consent, and the appointment is then intimated to the Central Government in Form CRA-2.

Which sectors are covered by cost audit?

The Rules list the sectors in two tables. Regulated sectors include telecommunication, petroleum products, drugs and pharmaceuticals, fertilisers, sugar and electricity. Non-regulated sectors include chemicals, metals and steel, machinery, cement, textiles and automotive, among many others. Where a company makes both regulated and non-regulated products, the thresholds are applied product-wise.

What is the difference between cost records and cost audit?

Cost records are the ongoing books of cost data a company maintains in the CRA-1 format, required once it is in a specified sector and crosses the records threshold. Cost audit is the independent verification of those records by a cost auditor, required only when the higher audit thresholds are crossed. So a company can be required to maintain cost records without necessarily being required to have a cost audit.

Are any companies exempt from cost audit?

Yes. Under the Rules, a company is exempt from cost audit where its revenue from exports in foreign exchange exceeds 75 percent of its total revenue, where it operates from a special economic zone, or where it generates electricity solely for captive consumption. Even so, the applicability and the exemption should be assessed each year, as the position can change with the numbers.

What is the penalty for cost audit non-compliance?

Non-compliance with the cost record and cost audit provisions attracts a penalty under Section 148 read with Section 147 of the Companies Act, on the company, its officers in default and the cost auditor, and a late filing of CRA-4 draws additional fees. Beyond the monetary cost, non-compliance can invite regulatory scrutiny and affect approvals, so the filings are best kept on time.

Cost audit kab lagu hota hai?

Cost audit specified sector ki company par lagu hota hai jab regulated me turnover 50 crore aur product 25 crore, ya non-regulated me 100 crore aur product 35 crore ho.

Cost audit kaun karta hai?

Cost audit ek practising Cost Accountant karta hai, jise Board 180 din ke andar appoint karta hai aur CRA-2 me intimate karta hai.

Quick Answers

Regulated audit? Turnover 50 cr and product 25 cr.

Non-regulated? Turnover 100 cr and product 35 cr.

Auditor? A practising Cost Accountant.

Forms? CRA-1, CRA-2, CRA-3, CRA-4.

Why Get It Right

Cost audit applicability is easy to misjudge and the filings are time-bound. Misreading the product-wise thresholds, missing the 180-day cost auditor appointment or the CRA-2, or filing CRA-4 late all draw fees and penalties on the company, the officers and the cost auditor, and can affect approvals and tenders. A clear annual assessment and a managed CRA chain keep the company compliant and audit-ready.

Check your cost audit position - Call +91 945 945 6700 or WhatsApp us. We respond within 2 hours.

Manage Your Cost Audit with Patron Accounting

Cost audit under Section 148 and the Cost Records and Audit Rules, 2014 is a sector-specific, threshold-based statutory audit: maintain CRA-1 records, appoint a cost auditor and file CRA-2, and complete the cost audit through CRA-3 and CRA-4.

With distinct regulated and non-regulated thresholds and time-bound forms, a precise yearly assessment matters. Patron Accounting, with qualified professionals and offices in Pune, Mumbai, Delhi and Gurugram, manages your cost audit compliance end to end.

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Content Created: 3 June 2026 | Last Updated: | Next Review: 4 September 2026 | Reviewed By: CA & CS Team, Patron Accounting LLP

This page is reviewed at least yearly and updated whenever Section 148, the Companies (Cost Records and Audit) Rules, 2014, the regulated and non-regulated turnover thresholds, the CRA-1 to CRA-4 forms, the exemptions, or the penalty provisions change. Freshness Tier 1.

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