Professional Documents
Culture Documents
Cost audit is the independent audit of cost records maintained by companies. The
concept of cost audit was introduced in 1965 when Companies Act, 1956 was
amended to incorporate the provisions relating to the maintenance of cost accounting
records and cost audit. Cost audit got an impetus in 2011 when its scope was
expanded and the rules and reporting formats were simplified to address industry
concern of confidentiality.
India is the first country in the world to introduce the provisions of compulsory
maintenance of the cost accounting records and audit thereof. Cost audit can offer
valuable assistance to the management in its decision making process, since it
ensures reliable cost accounting data and information.
Concept of Cost Audit
According to the Institute of Cost and Management Accountants of England, cost
audit represents the verification of cost accounts and a check on the adherence to
cost accounting plan. Cost audit, therefore, comprises:
(a) Verification of the cost accounting records such as the accuracy of the cost
accounts, cost reports, cost statements, cost data and costing techniques, and
(b) Examination of these records to ensure that they adhere to the cost accounting
principles, plans, procedures and objectives.
Smith and Day in their book Advanced Cost Accountancy define it By the term
cost audit is meant the detailed checking of the costing system, technique and
accounts to verify their correctness and to ensure adherence to the objective of cost
accountancy
It, therefore, means that the cost auditors attention and approach should be to see that
the cost accounting plan is in consonance with the objectives set by the organisation
and the system of accounting is geared towards the attainment of the objectives. The
management will be in a position to know what price is to be fixed for a product,
whether the wastages are avoidable, whether to re-organise purchase or sales or
inventory systems to make the work more efficient and so on.
Cost Audit
Not compulsory except in special
cases provided u/s 233B
Covers only cost records and
accounts
Aims to verify cost accounts
Apart from the aforesaid functions of cost audit, the additional functions of cost audit
include:
Price fixation: The need for fixation of retention prices in the case of materials of
national importance, like steel, cement etc. may be useful in knowing the true cost of
production.
Cost variation within the industry: Where the cost of production varies significantly
from unit to unit in the same industry, cost audit may be necessary to find the reasons
for such differences.
Inefficient management: Where a factory is run inefficiently and uneconomically,
institution of cost audit may be necessary. It may be particularly useful for the
Government before it takes over any unit.
Tax-assessment: Where a duty or tax is levied on products based on cost of
production, the levying authorities may ask for cost audit to determine the correct
cost of production.
Trade disputes: Cost audit may be useful in settling trade disputes about claim for
higher wages, bonus, etc.
Types of Cost Audit
The different types of cost audit that we come across may be the following:
(a) Cost audit on behalf of the management: The principal object of this audit is to
see that the cost data placed before the management are verified and reliable and
they are prepared in such detail as will serve the purpose of the management in
taking appropriate decisions. The detailed objectives include:
Establishing the accuracy of the costing data, as for example, cost of material
used allocation of wages into direct and indirect and on different products,
functions and cost centres.
Ensuring that the objectives of cost accounting are being achieved through
appropriate collection, segregation, analysis and compilation of data.
Ascertaining abnormal losses and gains along with the relevant causes,
expressed in financial terms in a manner that the person responsible for such
loss or gain is identified.
Determination of the unit cost of production in a precise but practicable
manner.
5
Cost audit will prove to be useful to the management, consumers, shareholders and
the government. The advantages are as under:
(a) To management:
Management will get reliable data for its day-to-day operations like price
fixing, control, decision-making, etc.
A close and continuous check on all wastages will be kept through a proper
system of reporting to management.
Inefficiencies in the working of the company will be brought to light to
facilitate corrective action.
Management by exception becomes possible through allocation of
responsibilities to individual managers.
The system of budgetary control and standard costing will be greatly
facilitated.
A reliable check on the valuation of closing stock and work-in-progress can be
established.
It helps in the detection of errors and fraud.
(b) To consumers:
Cost audit is often introduced for the purpose of fixation of prices. The prices
so fixed are based on the correct costing data and so the consumers are saved
from exploitation.
Since price increase by some industries is not allowed without proper
justification as to increase in cost of production, inflation through price hikes
can be controlled and consumers can maintain their standard of living.
(c) To shareholders:
Cost audit ensures that proper records are kept as to purchases and utilisation
of materials and expenses incurred on wages, etc. It also makes sure that the
valuation of closing stocks and work- in-progress is on a fair basis. Thus the
shareholders are assured of a fair return on their investment.
(d) To government:
Where the Government enters into a cost-plus contract, cost audit helps
government to fix the price of the contract at a reasonable level.
Cost audit helps in the fixation of ceiling prices of essential commodities and
thus undue profiteering is checked.
Cost audit enables the government to focus its attention on inefficient units.
Cost audit enables the government to decide in favour of giving protection to
certain industries.
Cost audit facilitates settlement of trade disputes brought to the government.
Cost audit and consequent management action can create a healthy
competition among the various units in an industry. This imposes an automatic
check on inflation.
Disadvantages of Cost Audit
There are a few disadvantages of cost audit mentioned below:
(a) For small concerns, it would be unnecessary to carry out cost audit.
(b) Audit associates have no interest as they carry out the work mechanically.
(c) As each business has its own problems and procedures, a rigid programme
cannot be laid down for all types of business.
Inventory
8
(a) Is the size of the inventory adequate or excess compared with the
production programme?
(b) Is the provision most economical?
(c) Does it ensure optimum order size?
(d) Does it take into account the storage cost on the one hand, and carrying
cost on the other?
(e) Does it take note of lead time of the various items or groups of items?
(f) Does the receipt and issue system cause any bottle-neck in production?
(g) Does it involve too many forms and too much paper work?
(h) Is there any room for reduction of inventory cost consistent with
production needs?
(i) Is the inventory as per the priced store ledger and as certified by the
management physically correct?
(j) Is the same amount of attention and care given to monies translated into
material things like raw materials, stores and supplies of all kinds as given to
liquid cash?
(k) Does the issue of raw materials make the production in accordance with
the standard or schedule or otherwise or covered by authorised schedule?
(i) Is the expenditure of consumable stores within the standard? If not, why
not?
Labour
(a) Proper utilisation of labour and increase in productivity are now receiving
attention, several productivity teams have emphasised importance of higher
productivity. It is, therefore, essential to assess the performance efficiency of
labour and compare it with standard performance, so that labour utilisation
10
auditor to make a report on the cost accounts and cost records maintained by the
company.
It may be noted that the requirement of the statutory cost audit in our Companies Act
is something special, because statutes in most of the other countries do not contain a
similar requirement. In most of the countries the concept of cost audit as such is also
non-existent and the objectives, whatever they may be, are achieved by properly
designing the scope and depth of internal audit.
The object with which the statutory requirement of cost audit has been included in
the Companies Act can only be ascertained by a study of the cost audit report
requirements. They include control over cost, wastage and losses, efficiency in the
utilisation of human, material, and other resources, determination of appropriate
selling price, proper maintenance of cost records appropriate use of the costing
system, etc.
For determining the scope and extent of cost audit, the cost auditor will necessarily
have regard to the relevant costing records required to be maintained pursuant to
Section 209(l) (d) of the Companies Act, in respect of products manufactured by
certain types of industries and the cost sheets prescribed. The records are broadly
based on the elements of cost and, therefore, there is a great deal of similarity
between the various records prescribed for various products. The cost sheets,
however, vary from product to product, having regard to the nature of the product
and the production process involved. The cost auditor will also have to pay special
attention to the reporting requirements laid down under the Cost Audit (Report)
Rules.
Cost audit programme
The audit programme should include all the usual broad steps that a financial auditor
includes in his audit programme. However, the significant things that should not be
missed are: proper vouching of expenses, capital and revenue character
determination, allocation of expenses, apportionment of overheads, arithmetical
accuracy, the statutory requirements, examination of contracts and agreements,
review of the Boards and shareholders minute books to trace important decisions
having bearing on costs, verification of title deeds and documents relating to
properties and assets, etc. Cost audit, in order to be effective, should be completed at
one time as far as practicable. The exact content of cost audit largely depends on the
size of the organisation, range of products, production process, the existence of a
12
well organised costing department and of a well designed costing system, and the
existence of a capable internal auditing system. Other relevant considerations may
be:
System of cost accounting in vogue and the organisation of the cost
department, forms, schedules, etc.
System of internal check used in the organisation.
Frequency of audits, areas to be covered, volume of transactions, efficiency of
the internal check, needs of management, purpose of cost audit, its benefits,
etc.
After considering the aforesaid factors a set of procedures and instructions are
evolved which may be termed the cost audit programme. Like every other audit, a
systematic planning of cost audit routine is necessary. Broadly speaking cost audit
programme may be divided into the following stages:
(a) Review of Cost Accounting Records
This will include:
Method of costing in use - batch, process or unit
Method of accounting for raw materials; stores and spares, wastages, spoilage
defectives, etc
System of recording wages, salaries, overtime and spares, wastages, etc
Basis of allocation of overheads to cost centres and of absorption by products
and apportionment of service departments expenses
Treatment of interest, recording of royalties, research and development
expenses, etc
Method of accounting of depreciation
Method of stock-taking and its valuation including inventory policies
System of budgetary control
System of internal auditing
(b) Verification of cost statements and other data
This will include the verification of:
Licensed, installed and utilised capacities
Financial ratios
Production data
Cost of raw material consumed, wages and salaries, stores, power and fuel,
overheads provision for depreciation etc
13
Sales realisation
Abnormal non-recurring and special costs
Cost statements
Reconciliation with financial books
(c) General Features of Cost Records
The following are the general features of cost records Materials
Manufactured components and intermediates
Stores and spare parts
Wages and salaries
Service department expenses including expenses on utilities
Packing
By-products
Production and Sales
Inventories
Variances
Cost Statements
Reconciliation of Cost and Financial Accounts
Statistical records
Incorporation of Provision Relating to Inter-Company Transfer in the Cost
Accounting Records Rules
Cost audit procedure
The main points in cost audit procedure are summarized below:
(a) Vouching: Inspecting the documentary evidence which substantiates the
transaction
(b) Checking & Ticking: Checking of calculations and postings. The cost auditor
should mark and put his initial on the records seen in different colour pencils.
(c) Test checking: Procedural tests to decide the extent to which he can rely on
internal check in the company.
(d) Questionnaire: Issuing questionnaires to appropriate authorities to seek
clarifications. It should be framed in such a manner that the answers are
generally expected in the yes or no form. It is in sequential order which can
be in a standard form to help the cost auditor get acquainted with the company.
14
500
1000
C ` 5 crore or more
2000
Appropriate fee for each year for which approval for exemption is sought may be
remitted through demand draft drawn in favour of Pay and Accounts Officer,
Department of Company Affairs, payable at New Delhi.
Documents required:
Following documents are required to be furnished along with application for
exemption:
Printed or attested true copy of complete Annual Report containing balance
sheet and profit and loss account for the year for which exemption is being
sought along with copies of the same pertaining to preceding two years.
An affidavit containing full facts of capacity utilization, turnover and financial
status of the company such as sick or not, duly signed by two Directors of the
company and authenticated by a Notary Public.
16
A brief note/status report on steps taken by the management for revival of the
said unit.
True and fair cost of production etc.: The true and fair concept is known to us in the
context of financial accounts. Based on that knowledge, it may be assumed that the
following are the relevant considerations in determining whether the cost of
production determined is true and fair:
Determination of cost following the generally accepted cost accounting
principles.
Application of the costing system appropriate to the product.
Materiality.
Consistency in the application of costing system and cost accounting
principles.
Maintenance of cost records and preparation of cost statements in the
prescribed form and having the prescribed contents.
Elimination of material prior-period adjustments.
Abnormal wastes and losses and other unusual transactions being ignored in
determination of cost.
The report of the cost auditor will be subject to the cost auditors observations and
conclusions, if any, made pursuant to clause 16 of the Annexure to the Cost Audit
Report Rules. Also the report is subject to observations of the cost auditor on the
various matters contained in the Annexure.
General Rules
The CARR issued for formulation on 4/6/1988 contain some general matter rules as
well:
Cost records should be written upon regular basis and not after the end of the
financial year.
Rule 3(4) requires that a company has to maintain information required for
cost audit report, although it might not be necessary under the CARR.
Penalty: Breach of the provisions of the CARR by way of the following:
Non maintenance of cost records or
Improper maintenance of cost records or
Delay in the completion of cost records attracts penalty. The penalty and
prosecution is prescribed as under:
17
By introducing the concept of 'public interest', the government has made the 2014
Rules unnecessarily complicated
The Companies Act, 2013 has retained the provisions relating to maintenance of
cost records and cost audit. The government has notified the Companies (cost records
and audit) Rules 2014 on June 30, 2014. The 2014 Rules have severely curtailed the
scope of cost audit. This U-turn in policy has dismayed the cost accounting
profession
and
experts.
The new Rules mandate the maintenance of cost records in companies engaged in the
production of specified goods in strategic sectors, companies engaged in an industry
regulated by a sectoral regulator or a ministry or department of central government,
companies operating in specified areas of public interest and companies engaged in
18
the production, import and supply or trading of specified medical devices. The Rules
also provide for a threshold in terms of net worth or turnover of companies, thus,
restricting
its
applicability
to
large
companies.
It appears that the government has mandated maintenance of cost records and cost
audit only in those sectors, which might require policy intervention. For the first
time, it has brought construction companies, companies engaged in health services
and companies engaged in education services within the ambit of cost audit. The
government has categorised those as companies operating in the area of public
interest.
The government has excluded the industries in which the competition among
companies is significant. Presumably, the government has taken the view that cost
audit is not relevant in companies that operate in a competitive environment. It is
argued that those companies maintain cost records voluntarily, as they are required to
continuously analyse cost and revenue data for managing costs, in order to retain and
enhance competitiveness on the face of competition from competing firms or
competing substitutes. In those companies, the management information system
draws data from cost records. Therefore, there is no need to mandate maintenance of
cost records and cost audit. But there is a flaw in this argument. Cost audit is no less
relevant
for
companies
operating
in
a
competitive
environment.
Any audit provides reasonable assurance about the integrity of audited information.
For example, financial audit provides assurance to shareholders and other
stakeholders about the integrity of information provided through financial statements.
Financial audit is mandated to protect the interest of minority shareholders from the
opportunistic behaviour of managers. The underlying assumption in mandating
financial audit is that managers are human beings and, therefore, are inherently
opportunistic.
Managers show opportunistic behaviour even in presenting information before the
board of directors. This is the reason why Sebi had to mandate the minimum
information to be presented before the board of directors. It is not unknown that
managers manoeuvre board process to get favourable board decisions.
Companies Act, 2013 aims to strengthen corporate governance by empowering the
board of directors. It requires independent directors to get involved in critical
decisions. They have been made responsible for strategy review, risk management,
performance evaluation and key appointments. All these require analyses of cost and
revenue data. If, we agree that managers are inherently opportunistic, the board of
directors needs an assurance from an independent agency about the integrity of cost
19
and revenue information that is placed before it. Only cost audit by an independent
cost
auditor
can
provide
that
assurance.
Cost audit has not lost relevance, even for companies operating in a competitive
environment. Benefits from cost audit outweigh its cost. If a company is already
maintaining cost records, the incremental cost is the audit fee. The cost of regular
staff, which supports the audit, is fixed in nature. Therefore, while the cost is
immaterial, benefits in terms of improved corporate governance are immense, may
not be from the management's perspective. By introducing the concept of 'public
interest', which is difficult to define, the government has made the 2014 Rules
unnecessarily complicated and difficult to implement. Rules should be transparent
and simple. The current Rules provide the scope for jockeying for inclusion and
exclusion of companies from the ambit of cost audit. The government should bring
all companies, except small companies, within the ambit of cost audit. It is also
important that the cost accounting profession quickly upgrades skills in developing
costing systems for emerging businesses, including those in the service sector.
- Business Standard
20
control equipment and devices. ACC has won several prizes and accolades for
environment friendly measures taken at its plants and mines.
ACC plants, mines and townships visibly demonstrate successful endeavours in
quarry rehabilitation, water management techniques and greening activities. The
company actively promotes the use of alternative fuels and raw materials and offers
total solutions for waste management including testing, suggestions for reuse,
recycling and co-processing. . The company has also been felicitated for its acts of
good corporate citizenship.
ACC has taken purposeful steps in knowledge building. We run two institutes that
offer professional technical courses for engineering graduates and diploma holders
which are relevant to manufacturing sectors such as cement. The main beneficiaries
are youth from remote and backward areas of the country.
ACC has made significant contributions to the nation building process by way of
quality products, services and sharing expertise. Its commitment to sustainable
development, its high ethical standards in business dealings and its on-going efforts
in community welfare programmes have won it acclaim as a responsible corporate
citizen. ACCs brand name is synonymous with cement and enjoys a high level of
equity in the Indian market. It was the first cement company to figure in the list of
Consumer Super Brands of India.
Vision
To be one of the most respected companies in India; recognised for challenging
conventions and delivering on our promises
ACC Limited
Cost Auditors Report of ACC Limited for the year ending 31st December 2013
I/We, N I Mehta & co. having been appointed as Cost Auditor(s) under Section 233B Companies
Act of M/S ACC Limited (hereinafter referred to as the company, having its registered office at
Cement House, 121 Maharshi Karve Road, Mumbai-400 020, have audited the books of account
prescribed under the said Act, and other relevant records in respect of the cement business for the
period/year 31st December 2013 maintained by the company and report, in addition to my/our
observations and suggestions in Para 2.
1. I/We have/have not obtained all the information and explanations, which to the best of
my/our knowledge and belief were necessary for the purpose of this audit.
2. In my/our opinion, proper cost records, as per companies rule, 2011 prescribed under clause
(d) of sub section (1) of section 209 of the companies act 1956, have/have not been
maintained by the company so as to give a true and fair view of the cost of
production/operation, cost of sales and margin of the product/activity groups under
reference.
3. In my/our opinion, proper returns adequate for the purpose of the Cost Audit have/have not
been received from the branches not visited by me/us.
23
4. In my/our opinion and to the best of my/our information, the said books and records give/do
not give the information required by the Companies Act, in the manner so required.
5. In my/our opinion, the said books and records are/are not in conformity with the Cost
Accounting Standards issued by The Institute of Cost and Works Accountants of India; to
the extent these are found to be relevant and applicable.
6. In my/our opinion, company has/has not adequate system of internal audit of cost records
which to my/our opinion is commensurate to its nature and size of its business.
7. Detailed unit-wise and product/activity-wise cost statements and schedules thereto in
respect of the product groups/activities under reference of the company duly audited and
certified by me/us are/are not kept in the company.
8. As required under the provisions of companies (cost audit report) rules, 2011, I/we have
furnished Performance Appraisal Report, to the company, on the prescribed form.
The matters contained in the ANNEXED Forms are part of this report.
Date: 06/02/2014
Place: Mumbai
N I MEHTA & CO
Cost & Management Accountants
24
ACC Limited
1.
CAPACITY (Tonne)
(a) Clinker:
Licensed / Installed
705,000
Utilized
% of Rated
493,426
70%
1,145,094
57%
Line-I clinker capacity is based on 300 working days with capacity of 2,350 tonne per day.
Line-II clinker capacity is based on 300 working days with capacity of 4,300 tonne per day.
The company has not utilized its full production capacity due to certain plant modifications and
use of local coal during the year.
2.
Manufacturing of cement is a continuous process; therefore, the company uses process cost
accounting system as prescribed by Cost Accounting Record Rules (CARR)
The company has classified whole manufacturing process into six major stages / departments
for the purpose of maintaining cost accounting records.
The company is operating EXCEL based in house software, which generates cost statements
relating to six stages / departments and allocates cost thereon.
25
ACC Limited
2014
3.
PRODUCTION (a)
Qty in Tonne
Production
Year
s
2012
2013
Line-I
Ordinary Portland
Sulphate Resistance
Line-II
Increase / Decrease
Tonne
493,426
493,426
622,012
3,834
625,846
(128,586)
(3,834)
(132,420)
(21%)
(100%)
(21%)
651,668
1,145,094
1,014,246
1,640,092
(362,578)
(494,998)
(36%)
(30%)
Ordinary Portland
Cement
Ordinary Portland
Sulphate Resistance
(b)
The plant design facilitates production of the various types of cement as per production
requirements within the installed capacity limits.
(c) There was addition in production capacity in the shape of Line-II in the year 2005-06.
26
ACC Limited
RAW MATERIAL
(a) Major Raw Materials Consumed
Limestone
Clay
209,902
Laterite
64,657
Bauxite
32,755
Gypsum
73,034
12,162
34,628
17,240
28,777
Quantity
2013
Value
Rate per
1,498,106
140,507
94
Quantity
2012
Value
2,122,977
188,396
Rate per
89
Quantity
2011
Value
Rate per
91
1,572,270 142,326
192,121
11,133
58
291,022
16,401
56
66,207
35,879
542
121,933
62,485
512
11,472
6,670
581
23,068
10,422
452
42,657
15,573
58
536
526
365
89,032
35,747
402
394
27
Fly Ash
-
809
307
380
ACC Limited
210,070
313,451
235,133
11,669
24,329
21,579
(1,530)
(1,050)
10,182
336,730
266,894
Add / (less):
220,209
28
(b) Major Raw Materials consumption per unit of production compared with standard requirements.
Description
Standard
2013
Tonne
ACTUA
L
2012
Tonne
2011
Tonne
% Increase /
(Decrease)
2013
2012
2011
Limestone
Clinker
1.32
1.31
1.29
1.27
(1.11)
(2.49)
(4.01)
Clay / Shale
Clinker
0.16
0.17
0.18
0.17
5.52
13.21
6.92
0.04
0.06
0.07
0.05
52.15
84.21
31.58
Bauxite
Clinker
0.01
0.01
0.01
0.03
0.18
200.00
Clinker
1.53
Cement
0.05
TOTAL
Gypsum
1.54
0.04
1.52
0.06
1.53
0.06
0.91
(17.46)
(0.78)
16.00
0.20
20.00
The variances from standards are attributed to chemical contents of raw materials.
29
5.
(a) Total wages and salaries paid for all categories of employees
2013
Rs. in '000
2012
Rs. in '000
Increase /
Rs. in '000
137,841
117,291
20,550
57,219
59,006
(1,787)
195,060
176,297
18,763
69,126
57,529
31,425
31,895
295,611
265,721
11,597
(470)
29,890
Salaries & wages increased mainly due to inflationary trend and annual increments.
30
Rs. in
'000
31
Chief
2013
Total number
17
Executives
2013
2012
1
1
2012
15
(Rupees in '000')
Basic salary
19,764
4,784
1,660
46,369
4,200
17,188
928
5,774
3,108
12,218
46,981
In addition, the chief executive and all the executives of the company have been provided with
free use of company owned and maintained cars with other benefits in accordance with their
entitlements as per rules of the company. Payments to CEO include arrears on account of previous two
years increments paid during the year.
71,314
71,314 days
% of Increase
342
32
(e) Per tonne direct labour cost increased mainly due to decrease in volume of production as compared to last
year.
33
These are valued at lower of moving average cost and net realizable value, except for furnace oil and
coal, which are valued at average cost. Items in transit are valued at cost comprising invoice value plus
other charges incurred thereon.
All items of stores are properly coded and entered by designated staff members of the stores department,
on daily basis.
(b) Proportion of closing inventory of stores representing items which have not
moved for over twenty four months.
No provision has been made for slow moving items in the accounts during the year under review.
7.
DEPRECIATION
Depreciation is calculated on straight line method except plant and machinery and coal firing system on
which depreciation is charged on the basis of units of production method. Depreciation on additions is
charged from the month in which the asset is available for use and on disposals up to the month of
disposal.
Maintenance and normal repairs are charged to profit and loss account as and when incurred. Major
renewals and improvements are capitalized. Gains and losses on disposals of assets, if any, are included
in the profit and loss account.
2013
Rs. in '000
% age
373,493
3,106
3,719
380,318
98
1
1
100
2012
Rs. in '000
% age
427,440
4,434
3,432
435,306
98
1
1
100
8.
OVERHEADS
2013
Rs. in '000
2012
Rs. in '000
2011
Rs. in '000
(i)
Factory
449,846
507,475
446,767
97,654
89,978
86,876
359,975
466,047
108,405
451,465
413,203
365,848
1,358,940
1,476,703
1,007,896
(ii) Administration
(i)
Factory Overheads
2013
2012
2011
Rs. in '000
Rs. in '000
Rs. in '000
% Increase / (Decrease)
Based on
Based on
27,318
23,284
16,122
17
69
Insurance
10,236
10,423
10,072
(2)
37,935
2,324
362,299
44,131
2,695
416,238
46,517
2,894
357,681
(14)
(14)
(13)
(18)
(20)
1
9,734
10,704
13,481
(9)
449,846
507,475
446,767
(11)
Factory overheads decreased mainly due to decrease in repairs & maintenance and depreciation cost.
(28)
% Increase / (Decrease)
Based on
Based on
Rs. in '000
Rs. in '000
Rs. in '000
69,126
2,095
4,150
2,232
1,528
3,809
1,667
1,846
1,835
799
3,381
548
707
3,106
825
57,529
4,177
3,319
2,262
1,786
2,583
1,544
1,995
3,108
892
3,033
2,402
693
4,434
221
52,268
5,155
3,256
2,943
1,628
2,660
1,792
4,142
1,791
837
1,289
3,180
828
4,436
671
20
(50)
25
(1)
(14)
47
8
(7)
(41)
(10)
11
(77)
2
(30)
273
32
(59
27
(24
(6)
43
(7)
(55
2
(5)
162
(83
(15
(30
) 23
97,654
89,978
86,876
12
The admin overheads increased mainly due to increase in salaries, wages & benefits, vehicle running exp.
utilities and others.
Rs. in '000
31,425
722
3,474
2,335
1,454
1,789
1,457
1,597
5,038
830
1,661
2,137
301,599
738
3,719
359,975
Rs. in '000
31,895
1,011
3,128
3,005
1,490
2,676
1,331
1,269
3,447
847
1,036
1,236
409,457
787
3,432
466,047
29,077
1,169
3,407
2,452
1,308
1,768
1,627
1,854
1,342
688
1,193
5,406
53,931
771
2,409
3
108,405
(1)
(29)
11
(22)
(2)
(33)
9
26
46
(2)
60
73
(26)
(6)
8
(23)
8
(38
2
(5)
11
1
(10
(14
275
21
39
(60
459
(4)
54
232
Selling and distribution overheads decreased mainly due to decrease in freight and handling
charges which relates directly to exports.
% Increase / (Decrease)
Based on
Based on
Rs. in '000
Rs. in '000
Rs. in '000
361,790
74,974
14,701
354,226
34,314
22,897
298,405
32,458
16,033
413,203
23
2
118
(36)
1,766
365,848
21
131
(8)
18,952
9.
Limestone / Clay
Production
2 0 13
Rupees
in Tonne
in '000
Tonne
in Tonne
in '000
1,706,702
29,610
17.35
2,414,659
39,964
Rupees / Production
2 0 1 2
Rupees
Rupees /
Tonne
16.55
Royalty and excise duty is paid to the Provincial Govt. on the quantity of lime stone / clay extracted and
transported to mill from land at statutory rates.
NONE
NONE
Qty. in
Tonne
1,033,587
Cement
3,330,921
3,223
1,486,656
2 0 1 3
Rs.
in
3,733,802
Rs.
Qty. in
Per
Ton
Tonne
2,512
2 0 1 2
Rs.
in
28
12. SALES
(As per Schedule-2 attached)
Rs.
Per
Ton
Increase
Qty. in
2 0 1 3
Rs. in
Local
922,510
3,973,092
OPC
922,510
SRC
Export
OPC
Clinker
Total
Qty. in
2 0 1 2
Rs. in
4,307
1,329,926
3,383,537
3,973,092
4,307
1,337,224
3,401,864
104,235
456,064
4,375
154,358
555,253
3,597
22
243,585
1,027,143
4,217
447,790
1,451,900
3,242
30
1,166,095
5,000,235
2,719
58
Rs.
4,288
1,785,014 4,853,764
Increase /
Rs.
2,544
2,544
69
69
13. PROFITABILITY
(As per Schedule-3 attached)
Qty. in
2 0 1 3
Rs. in
Rs.
Qty. in
2 0 1 2
Rs. in
Rs.
Increase /
(Decrease)
OPC
SRC
Export
OPC
Clinker
Total
922,510
342,165
371
1,329,926
(455,858)
(343)
(208)
922,510
342,165
371
1,337,224
(458,261)
(343)
(208)
104,235 (104,760)
(1,005)
154,358
(38,176)
(247)
306
243,585 (167,859)
(689)
447,790
(115,753)
(258)
167
1,166,095
174,306
149
1,785,014
(574,014)
(322)
(146)
In spite of the adverse effect of cost inputs and exchange fluctuation loss the improved selling
price has provided relief in achieving profitability.
(a) Matters which appear to him to be clearly wrong in principle or apparently unjustifiable.
No such matters have so far come to our notice except that current liabilities Rs. 3,489,131
million against current assets Rs. 1,020,577 million shows that current liabilities increased by 242%
over the current assets. The current ratio is negative which speaks of weak liquidity position of the
company.
(b) Cases where the company funds have been used in a negligent or inefficient
manner.
NONE
=
(c) Factors which could have been controlled but have not been done resulting in increase in the
cost of production.
Plant capacity has not been fully utilized which is the main cause of low
profitability.
(d) (i)
The Adequacy or otherwise of Budgetary Control System, if any, in vogue in the company.
The company prepares its budget on annual basis. A monthly report comparing actual results with
budget is generated along with the reasons for major variances. On the basis of such variances,
corrective measures are initiated, implemented and followed up.
A full fledged internal audit department has been established by the company. The audit findings are
reported to the top management through the audit committee and corrective measures are
immediately adopted wherever necessary.
(i)
Cement grinding capacity of 1,620,000 M.Tonne is not in harmony with clinker capacity of 1,995,000
M.Tonne.
Management may consider rectifying the imbalance in the plant.
(ii) fuller utilization of installed capacity
Optimum plant capacity has not been fully utilized in the year under review. Efforts should be made
to utilize the company at the maximum level.
The management shall have to fully utilize the plant capacity to reduce per tonne cost on larger
volume of production.
(b) Increased productivity
Same comments as above.
(c) Key limiting factors causing production bottle necks
Owing to technical reasons modification had been carried out in the plant to remove the bottle
necks.
(d) Improved inventory policies
P r e s e n t inventory policies appear to be satisfactory except dead / unusable stores and
spares which are lying in inventory.
The company uses 'Dry Process' which is the latest technology in cement production.
(v) Plant
Initially the plant was new when installed. However during the year 2005-2006, a second line
(Kiln-II) was installed and commissioned which includes new and used equipments.
Copies of all cost statements on the formats prescribed, duly authenticated by the
Chief Executive and Chief Financial Officer of the company, and verified by us are
appended to the report.
17. MISCELLANEOUS
Previous year's figures have been re-arranged and regrouped where necessary to facilitate
comparison.
N I MEHTA & CO
Mumbai: 06 Feb 2014
Conclusion
Cost audit has always played an important role to facilitate the management in
making important decisions. Although weightage is generally given to statutory
audit, questioning the significance of cost audit; it is an integral part which is
gradually gaining popularity. Unlike statutory audit, it lays emphasis on
performance evaluation through cost records.
In case of ACC limited, cost audit has helped with analytical review of cost data,
detection of reasons of visible and invisible losses, inefficiencies, unusual wastages
and cost variances with the past performance and industry average.
By applying various management accounting techniques, it has helped ACC
Limited in reduction of cost of production, added competitive advantage and profit
maximization.
Bibliography
Websites
www.acclimited.com
www.caclubindia.com
www.icmai.in
Books
Cost Accounting Manual by ICAI
Advanced Cost Accounting M.com-I by Sheth Publishers
Newspapers
Business Standard, August 2014
Economic Times, July 2014