Understanding Form CRA-2: Appointment of a Cost Auditor under the Companies Act, 2013
CS Rantu Das
CS Rantu Das is the Founder and Managing Partner of M/s. Rantu Das & Associates, a firm established in 2010. As a Fellow Member of ICSI and a law graduate (LL.B., LL.M.), with an M.Com from Calcutta University, he has over 13 years of expertise in corporate laws, SEBI matters, FEMA, RBI regulations, and compliance audits. He regularly represents cases before NCLT and NCLAT under the Companies Act, 2013, and IBC, 2016.
In India, cost auditing plays a vital role in promoting transparency and cost efficiency within companies, particularly those operating in regulated or cost-sensitive industries. To ensure compliance with the provisions of cost audit, the Companies Act, 2013 mandates certain classes of companies to appoint a cost auditor and intimate the government through Form CRA-2.
This article explains the applicability, purpose, procedure, timeline, and consequences related to Form CRA-2, ensuring a comprehensive overview for corporates, professionals, and stakeholders.
What is Form CRA-2?
Form CRA-2 is an electronic form prescribed under Rule 6(2) of the Companies (Cost Records and Audit) Rules, 2014. It is used by companies to intimate the appointment of a cost auditor to the Ministry of Corporate Affairs (MCA).
The form must be filed within the stipulated time frame, either from the date of the Board resolution or from the beginning of the financial year, whichever is applicable. The cost auditor so appointed is responsible for conducting a detailed audit of the cost records maintained by the company as per statutory provisions.
Legal Background
The provisions relating to cost audit are primarily governed by:
- Section 148 of the Companies Act, 2013
- Companies (Cost Records and Audit) Rules, 2014
- Notification issued by MCA from time to time
Only companies that meet certain turnover thresholds or operate in specific industries are required to maintain cost records and have them audited.
Applicability of Cost Audit and Filing of CRA-2
1. Companies Required to Maintain Cost Records
According to the Companies (Cost Records and Audit) Rules, 2014, the following categories of companies are required to maintain cost records:
Companies engaged in regulated sectors such as:
a. Telecommunication
b. Power generation, transmission, and distribution
c. Petroleum products
d. Drugs and pharmaceuticals
e. Fertilizers
f. Sugar
g. Other specified sectors
2. Companies operating in non-regulated sectors, if:
a. Overall turnover from all products and services is ₹100 crore or more, and
b. Aggregate turnover from individual products or services for which cost records are required is ₹35 crore or more.
Companies Required to Appoint a Cost Auditor and File CRA-2
Once cost record maintenance is triggered, cost audit becomes applicable if:
- Overall turnover from all products/services is ₹100 crore or more, and
- Aggregate turnover from individual regulated/non-regulated products/services is ₹50 crore or more.
Such companies are mandatorily required to appoint a Cost Auditor and file Form CRA-2 with the Registrar of Companies (ROC).
Contents of Form CRA-2
Form CRA-2 contains the following major components:
1. Corporate Identification Number (CIN) of the company
2. Details of the company (name, registered office, etc.)
3. Details of the cost auditor appointed:
a. Membership number
b. Firm registration number
c. PAN and address
4. Date of Board Resolution approving the appointment
5. Effective date of appointment
6. Sectors/products covered under cost audit
7. Declaration and digital signature by a Director and the cost auditor
Timeline for Filing CRA-2
Form CRA-2 must be filed:
- Within 30 days of the Board resolution passed for the appointment of a cost auditor, or
- Within 180 days from the start of the financial year, whichever is earlier.
This strict timeline ensures timely appointment and regulatory oversight of cost audit processes.
Example:
For the financial year starting on 1st April 2025:
- CRA-2 must be filed on or before 28th September 2025 if the Board resolution was passed within that period.
- If the resolution is passed earlier, say on 30th May 2025, then CRA-2 must be filed by 29th June 2025 (within 30 days).
Penalty for Non-Filing of CRA-2
Failing to file Form CRA-2 within the prescribed period attracts penalties under Section 147 of the Companies Act, 2013. The consequences can include:
On Company:
1. A fine of ₹25,000 to ₹5 lakh may be levied.
On Officers in Default:
1. A fine between ₹10,000 and ₹1 lakh, or
2. Imprisonment for up to one year, or
3. Both, depending on the seriousness of the default.
Appointment of Cost Auditor: Key Points
1. The cost auditor must be a Cost Accountant within the meaning of the Cost and Works Accountants Act, 1959.
2. The appointment is subject to ratification by shareholders in the Annual General Meeting (AGM).
3. The cost auditor must not be associated with any other audit or consultancy assignment with the company to avoid a conflict of interest.
Revocation or Modification of Appointment
If the company decides to revoke or modify the appointment of the cost auditor, or appoint another cost auditor due to resignation, disqualification, or death, then a new CRA-2 must be filed indicating the updated details. In such cases, reasons must be clearly stated in the form.
Post-CRA-2 Compliance: CRA-3 and CRA-4
Once the cost auditor is appointed via CRA-2 and completes the cost audit, further compliance measures include:
1. Form CRA-3 – Cost Audit Report in prescribed format.
2. Form CRA-4 – Filing of Cost Audit Report to MCA within 30 days from the date of receipt of the report by the company.
Practical Considerations for Companies
- Ensure an early appointment to avoid missing the 180-day deadline.
- Validate the eligibility and independence of the cost auditor.
- Keep adequate documentation of Board meetings and resolutions.
- Verify professional membership credentials of the cost auditor.
- Maintain updated cost records to facilitate a smoother audit.
Conclusion
Form CRA-2 is a statutory obligation and an important compliance milestone for companies falling under the ambit of cost audit regulations. By appointing a cost auditor promptly and filing CRA-2, companies fulfill their legal duties while also promoting cost transparency, strengthening internal controls, and enabling informed decision-making.
Given the structured compliance regime under the Companies Act, businesses and professionals must stay alert to filing timelines and procedural nuances associated with forms like CRA-2 to avoid penalties and regulatory scrutiny.
For any clarifications or queries, please feel free to reach out to us at admin@fintracadvisors.com
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