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APPOINTMENT PROCEDURE

Timeline for Appointment – Rule 6(1)

Companies specified in Rule 3 and exceeding threshold limits in Rule 4 shall, within 180 days of the commencement of every financial year, appoint a cost auditor.

For companies with financial year ending March 31, the cost auditor must be appointed by September 29 (i.e., within 180 days from April 1).

Pre-Appointment Requirements

Before appointment, the company must obtain from the proposed cost auditor:

Written Consent

The proposed cost auditor must provide written consent confirming willingness to accept the appointment.

Certificate of Eligibility – Rule 6(1A)

The cost auditor must submit a certificate certifying that:

• • The individual or firm is eligible and not disqualified under the Companies Act, 2013, or the Cost and Works Accountants Act, 1959;

  • The individual or firm satisfies the criteria under Section 141 of the Act (independence requirements);

  • The proposed appointment is within the limits prescribed by the Act; and

  • The list of pending proceedings against the cost auditor or firm regarding professional conduct is true and correct.

Board Resolution and Filing – Rule 6(2)

Post-Appointment Obligations:

1. 1. Inform the Cost Auditor: The company must formally inform the cost auditor of the appointment.

   2. File Form CRA-2: File notice of appointment with the Central Government through electronic mode in Form CRA-2.

   3. Timeline: Within 30 days of the Board meeting approving appointment OR within 180 days from commencement of financial year, whichever is earlier.

   4. Fee Payment: Pay prescribed fee as per Companies (Registration Offices and Fees) Rules, 2014.

Tenure of Cost Auditor – Rule 6(3)

The cost auditor continues in office until the earlier of:

• • • Expiry of 180 days from closure of the financial year; OR

    • Submission of the cost audit report for the financial year

Removal of Cost Auditor – Rule 6(3) Proviso

The cost auditor may be removed before expiry of term, subject to the following conditions:

1. 5. Reasonable Opportunity: The cost auditor must be given reasonable opportunity to be heard before removal.

   6. Board Resolution: Removal must be effected through a Board resolution.

   7. Recording of Reasons: The reasons for removal must be recorded in writing.

   8. Filing Requirement: When appointing a replacement, Form CRA-2 must enclose the Board resolution regarding removal and new appointment.

Note: The cost auditor retains the unqualified right to resign from office at any time.

CRA – 4 – Filing Cost Audit Report with Central Government (Section 148(3), Rule 6(6) of the Companies (cost records and audit) Rules, 2014

Cost Audit Report is required to be submitted to Central Government with 30 days from the date of receipt of cost audit report

FILLING OF CASUAL VACANCY

Statutory Provision – Rule 6(3A)

Any casual vacancy in the office of a cost auditor, whether due to resignation, death or removal, shall be filled by the Board of Directors within thirty days of occurrence of such vacancy and the company shall inform the Central Government in Form CRA-2 within thirty days of such appointment of cost auditor.

Circumstances Creating Casual Vacancy

A casual vacancy arises in the following situations:

• • Resignation: The cost auditor exercises the right to resign from office.

  • Death: In case of individual cost auditor, death creates an immediate vacancy. In case of a firm, death of a partner may create vacancy if it affects the eligibility of the firm.

  • Removal: The Board removes the cost auditor in accordance with the procedure prescribed in Rule 6(3).

  • Disqualification: The cost auditor becomes subject to disqualification under the Act or professional regulations during the tenure.

  • Incapacity: The cost auditor becomes incapable of performing duties due to physical or mental incapacity.

Procedure for Filling Casual Vacancy

Step 1: Identification of Vacancy

The Board must promptly identify and acknowledge the occurrence of a casual vacancy in the office of cost auditor. The date of occurrence of vacancy is:

• • Date of receipt of resignation letter (for resignation)

  • Date of death (for death)

  • Date of Board resolution (for removal)

Step 2: Board Meeting

The Board must convene a meeting within 30 days of occurrence of vacancy to:

• • Record the casual vacancy in the minutes

  • Identify and evaluate suitable replacement cost auditors

  • Obtain written consent and certificate from proposed cost auditor (as per Rule 6(1A))

  • Pass a Board resolution appointing the new cost auditor

Step 3: Intimation to Cost Auditor

The company must immediately inform the newly appointed cost auditor in writing about the appointment, specifying:

• • Date of appointment

  • Financial year for which appointment is made

  • Remuneration (as determined by members)

  • Scope and timeline for audit completion

Step 4: Filing with Central Government

Timeline: Within 30 days of the Board resolution appointing the replacement cost auditor.

Form: Form CRA-2 must be filed electronically through the MCA portal.

Attachments: The following documents must be enclosed:

• • Board resolution appointing the new cost auditor

  • Written consent of the cost auditor

  • Certificate of eligibility as per Rule 6(1A)

  • If applicable, Board resolution recording reasons for removal of previous cost auditor

Fee: Prescribed fee as per Companies (Registration Offices and Fees) Rules, 2014 must be paid.