Powers and Duties:
Statutory provisions regarding audit of cost accounts are contained in Section 258 of the Companies Ordinance1984. These are reproduced below:
“Audit of Cost Accounts: (I) Where any company or class of companies is required under clause(e) of sub-section(1) of Section 230 to include in its books of accounts the particulars referred to therein, the Federal Government may direct that an audit of cost accounts of the company shall be conducted in such manner and with such stipulations as may be specified in the order, by an auditor who is a chartered accountant within the meaning of the Chartered Accountants Ordinance, 1961 (X of 1961), or a cost and management accountant within the meaning of the Cost and Management Accountants Act, 1966 (XIV of 1966); and such auditor shall have the same powers, duties and liabilities as an auditor of a company and such other powers, duties and liabilities as may be prescribed. ”
The cost auditor has the same powers and duties as the financial auditor may have in terms of Section 255, including the following:-
- Every auditor of a company shall have a right of access at all times to the books, papers, accounts and vouchers of the company, whether kept at the registered office of the company or elsewhere, and shall be entitled to require from the company and the directors and other officers of the company such information and explanation as he thinks necessary for the performance of the duties of the auditors.
- In the case of a company having a branch office outside Pakistan, it shall be sufficient if the auditor is allowed access to such copies of, and extracts from, the books and papers of the branch as have been transmitted to the principal office of the company in Pakistan.
- If any officer of a company refuses or fails, without lawful justification, the onus whereof shall lie on him, to allow any auditor access to any books and papers in his custody or power, or to give any such information possessed by him as and when required, or otherwise hinders, obstructs or delays an auditor in the performance of his duties or the exercise of his powers or fails to give notice of any general meeting to the auditor, he shall be liable to a fine which may extend to five thousand rupees and in the case of a continuing offence to a further fine which may extend to one hundred rupees for every day after the first during which the default, refusal or contravention continues.
Records for Cost Audit and Financial Audit:
- Section 255 and its sub-sections quoted in the foregoing paragraph defines the powers and duties of auditors, appointed under Section 252(1) of the Ordinance and auditors and duties of auditors appointed under Section 252(1) of the Ordinance and auditor appointed under Cost Audit Rules. References made in the sections to books of accounts and to balance sheet, profit and loss account or income and expenditure account for the financial auditor would mean accounting records and capacity utilization statement, statement of closing stock and cost accounting statements (schedules and annexure) would mean cost records for the cost auditor.
- Although the role of the cost auditor has been defined while discussing the objectives of cost audit, the position of the financial auditor and that of the cost auditor, are slightly different. The position of an auditor of the Company is construed as a servant of the shareholders and it is his duty to examine the affairs of the company on their behalf and report to them his findings. The position of a cost auditor, however, is different because he is appointed by the management (Board of Directors), subject to prior approval of Securities & Exchange Commission of Pakistan, and his position is to be interpreted in view of the provisions of the Companies (Audit of Cost Accounts) Rules 1998.