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Subject: Cost Audit

Total Number of Question: 40

Time: 41 Minutes

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CMA Madhuri Kashyap

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Which of the following is the primary objective of Cost Audit?

Financial reporting compliance

Detection of fraud

Verification of cost records for efficiency

Tax compliance

Cost audit is governed under which section of the Companies Act, 2013?

Section 143

Section 139

Section 148

Section 133

Who is responsible for appointing a cost auditor?

Board of Directors

Shareholders

Government

Chief Financial Officer

Cost Audit is mandatory for which type of companies?

All private companies

Companies meeting specified turnover & net worth criteria

All partnership firms

Small companies

Which institute regulates the cost audit profession in India?

ICAI

ICMAI

ICSI

RBI

What is the first step in conducting a cost audit?

Issuance of cost audit report

Submission of cost audit report to MCA

Appointment of cost auditor

Conducting audit procedures

The cost audit report must be submitted in which form?

CRA-1

CRA-2

CRA-3

CRA-4

Which document contains the cost accounting records to be maintained by companies?

CRA-1

CRA-2

CRA-3

Form AOC-4

What is the due date for submitting CRA-4 to MCA?

Within 180 days from the financial year-end

Within 90 days from the cost audit report date

Within 30 days from the cost audit completion

Within 120 days from the financial year-end

10.

Which of the following is NOT a part of cost audit scope?

Verification of production efficiency

Checking compliance with cost accounting standards

Ensuring financial statement accuracy

Identifying areas for cost reduction

11.

Which form is used for the appointment of a cost auditor?

CRA-1

CRA-2

CRA-3

CRA-4

12.

How long should cost audit records be maintained by a company?

3 years

5 years

8 years

10 years

13.

Which standard governs cost audit and assurance?

Cost Accounting Standard - 101

Cost Auditing Standard - 101

Cost Audit Rule - 2021

Accounting Standard - 20

14.

Cost audit primarily ensures compliance with which standards?

Ind AS

Cost Accounting Standards (CAS)

GAAP

IFRS

15.

What does CRA-4 deal with?

Cost Audit Report Format

Submission of Cost Audit Report to MCA

Cost Auditor Appointment

Cost Records Maintenance

16.

Which industry is generally exempt from cost audit requirements?

Power generation

Banking & Insurance

Pharmaceutical

Cement

17.

What is the minimum turnover for cost audit applicability in regulated sectors?

₹10 Crore

₹20 Crore

₹30 Crore

₹25 Crore

18.

Which companies must comply with cost accounting record rules?

Only listed companies

Companies meeting turnover thresholds

Sole proprietorships

LLPs

19.

Which of the following does NOT come under regulated sectors for cost audit?

Electricity

Sugar

Real estate

Telecommunication

20.

Cost audit is NOT applicable to which type of company?

Manufacturing company with ₹35 crore turnover

Service company with ₹50 crore turnover

Banking company

Pharmaceutical company

21.

One of the key benefits of cost audit is:

Reducing tax liability

Enhancing cost efficiency

Ensuring compliance with IFRS

Avoiding statutory audit

22.

Cost audit is helpful for which of the following?

Detecting financial fraud

Ensuring cost control

Filing tax returns

Managing foreign exchange transactions

23.

Which of the following is NOT a responsibility of a cost auditor?

Checking compliance with cost accounting standards

Advising on tax matters

Evaluating efficiency in cost control

Reporting irregularities in cost records

24.

Who approves the cost audit report?

CFO

Company’s shareholders

Board of Directors

Statutory Auditor

25.

What happens if a company fails to comply with cost audit requirements?

No penalty

Penalty under the Companies Act, 2013

Imprisonment for directors

Audit exemption in the next year

26.

Which of the following is NOT a method used by cost auditors during their audit process?

Analytical review

Reconciliation of cost data

Verification of internal controls

Financial statement analysis

27.

Which document is generally used by cost auditors to check the accuracy of cost records?

Financial statements

Cost sheets

Bank statements

Shareholder reports

28.

What is the main purpose of variance analysis in cost auditing?

To analyze operational profits

To determine deviations from expected costs

To calculate the net profit

To calculate taxes payable

29.

What is the key focus area during the verification of cost records?

Accuracy of revenue recognition

Efficiency in cost management

Compliance with legal tax obligations

Shareholder dividend payouts

30.

Which of the following tools is used to ensure cost allocation is done properly in cost audit?

Cost allocation statements

Profitability analysis

Bank reconciliation statements

Income tax returns

31.

In a cost audit report, which statement should the auditor make regarding compliance?

Whether cost accounting records are maintained as per prescribed rules

Whether financial statements are accurate

Whether taxation is managed properly

Whether operational risks are minimized

32.

Which statement is usually included in a cost audit report?

Auditor’s recommendation for future cost reduction

Auditor’s opinion on financial profitability

Auditor’s opinion on internal controls effectiveness

Auditor’s view on management’s strategy

33.

What should a cost auditor do if they identify discrepancies in cost records?

Ignore the discrepancies

Report the discrepancies to the Board of Directors

Inform the statutory auditor only

Modify the cost records

34.

What happens if a cost auditor fails to submit the cost audit report on time?

The company gets a waiver from compliance

A fine is imposed on the company

A penalty is imposed on the auditor

The auditor’s appointment is automatically revoked

35.

In case of discrepancies in the cost audit report, what is the auditor required to do?

File a complaint with the registrar

Modify the audit report

Make a note of discrepancies in the report

Provide a clear justification for discrepancies in the report

36.

Which cost element is examined in detail during a cost audit?

Income tax expense

Direct and indirect costs

Capital gains

Shareholder equity

37.

Which of the following is a key component of the cost audit process in manufacturing companies?

Production cost verification

Review of financial position

Checking tax liabilities

Assessing management’s strategic vision

38.

What is the focus of cost audit when applied to service-oriented companies?

Inventory management

Efficiency in resource utilization

Verification of profit margins

Financial risk management

39.

What should a cost auditor do when they detect inefficient cost management practices?

Alert management to take corrective actions

Ignore the inefficiency and move forward with the audit

Report to the external auditor

Suggest improvements directly to the Board of Directors

40.

In which scenario is a cost audit report NOT required to be submitted?

For companies with exempted industries

For companies meeting cost audit thresholds

For companies with no manufacturing operations

For public sector undertakings

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