Module: | SEBI LODR & Corporate Governance Frameworks
Q21: Consider the following statements regarding the applicability of Cost Audit for manufacturing companies in non-regulated sectors for the 2025-2026 cycle:
1. A company in a non-regulated sector is subject to cost audit if its overall annual turnover exceeds Rupees 100 Crore and revenue from covered products exceeds Rupees 35 Crore.
2. A company is completely exempt from the cost audit requirement if its revenue from exports in foreign exchange constitutes 75 percent or more of its total turnover.
3. Once cost audit becomes applicable, the company must appoint a Cost Auditor within 180 days of the commencement of the financial year.
Which of the above statements is/are correct?
2. A company is completely exempt from the cost audit requirement if its revenue from exports in foreign exchange constitutes 75 percent or more of its total turnover.
3. Once cost audit becomes applicable, the company must appoint a Cost Auditor within 180 days of the commencement of the financial year.
Which of the above statements is/are correct?
✅ Correct Answer: D
🎯 Quick Answer:
D. All statements 1, 2, and 3 are correct.Structural Breakdown: Statement 1 is correct; the thresholds for non-regulated sectors (like textiles or FMCG) are Rs 100 Crore overall turnover and Rs 35 Crore product turnover.
Statement 2 is correct; the law provides an explicit exemption for companies generating 75% or more of their revenue from foreign exchange exports.
Statement 3 is correct; the Board must appoint the Cost Auditor (via Form CRA-2) within 180 days from the start of the financial year.
Historical/Related Context: The Central Government mandates cost records and audits to monitor pricing anomalies, prevent cartelization in crucial sectors, and ensure companies are not suppressing profits to evade taxes.
Causal Reasoning: The export exemption exists to reduce the compliance burden on companies that primarily compete in global markets and bring foreign exchange into the country, prioritizing export competitiveness over domestic cost scrutiny.