Cost Audit is a statutory compliance requirement under the Companies Act, 2013 for certain classes of companies engaged in regulated sectors such as manufacturing, production, or specified services. It involves the verification of cost records and accounts by a qualified Cost Accountant in practice to ensure accuracy in cost determination and efficiency in operations.

Companies meeting the prescribed turnover thresholds in specific industries must maintain detailed cost records and get them audited annually. The Board of Directors is required to appoint a cost auditor within 180 days of the financial year, and the appointment must be filed with the Registrar of Companies (ROC) through Form CRA-2. After the audit, the cost auditor submits the Cost Audit Report in Form CRA-3, which the company must file with the ROC in Form CRA-4 within 30 days of receipt.

Non-compliance with cost audit provisions can result in penalties for both the company and officers in default. Cost audit not only fulfills statutory requirements but also helps businesses control costs, improve efficiency, and ensure pricing transparency.