On May 30, 2025, the Ministry of Corporate Affairs (MCA) issued the Companies (Cost Records and Audit) Amendment Rules, 2025, introducing significant changes to the regulatory framework governing cost records and audits for companies in India. These amendments aim to streamline compliance requirements, enhance transparency, and reduce the regulatory burden on small and medium enterprises (SMEs).
Key Highlights of the Amendment Rules
Revision of Turnover Thresholds
One of the most notable changes is the revision of the turnover thresholds that determine the applicability of cost record maintenance and cost audit requirements. Previously, companies in regulated sectors with a turnover exceeding ₹25 crore and those in unregulated sectors with a turnover exceeding ₹35 crore were mandated to maintain cost records and undergo cost audits. Under the new rules, these thresholds have been increased to ₹75 crore, thereby exempting many SMEs from these obligations.
Introduction of ‘Audit Trail’ Requirement
The amendment introduces a requirement for companies to maintain an ‘audit trail’ in their accounting software. This means that all transactions recorded in the books of accounts must have a clear, chronological record of edits, including the date and time of changes, and the identity of the person making the changes. The audit trail feature must be enabled throughout the financial year and cannot be disabled. This measure aims to enhance the integrity and transparency of financial records.
Mandatory Use of Accounting Software with Audit Trail Feature
Companies are now required to use accounting software that has the capability to record an audit trail for each transaction. The software must create an edit log of each change made in the books of account, along with the date when such changes were made, and ensure that the audit trail cannot be disabled. This requirement applies to all companies, irrespective of their size or turnover.
Enhanced Disclosure in Board’s Report
The amendment mandates that the Board’s Report must include additional disclosures, such as the details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016, and the details of difference between the amount of the valuation done at the time of one-time settlement and the valuation done while taking a loan from banks or financial institutions, along with the reasons thereof.
Implications for Companies
Compliance Burden Reduction for SMEs: The increase in turnover thresholds for maintaining cost records and undergoing cost audits will significantly reduce the compliance burden on SMEs, allowing them to allocate resources more efficiently.
Enhanced Financial Transparency: The introduction of the audit trail requirement will enhance the transparency and integrity of financial records, making it easier to detect and prevent fraudulent activities.
Need for Software Upgradation: Companies that currently use accounting software without audit trail features will need to upgrade their systems to comply with the new requirements.
Increased Accountability: The enhanced disclosure requirements will increase accountability and provide stakeholders with more detailed information about the company’s financial activities.
Revised Form CRA-2 – Enhanced Disclosure Requirements
Form CRA-2, which deals with the intimation of appointment of cost auditors, has been revised to include the following additional disclosures:
- Nature of Appointment – Companies are now required to specify whether the appointment is a fresh appointment, re-appointment, or any other applicable category.
- Confirmation of Auditor’s Consent – A declaration confirming that the cost auditor has given their consent to act as such must now be provided explicitly.
These changes aim to improve transparency and compliance in auditor appointments, ensuring that stakeholders are fully informed of the terms and acceptance of the appointment.
Revised Form CRA-4 – New Reporting and AGM Extension Details
Form CRA-4, which pertains to the filing of the cost audit report, has also been updated with the following new fields:
- Lead Auditor Status – The revised form requires disclosure of whether the reporting cost auditor is acting as the lead auditor, in case of multiple auditors.
- AGM Extension Reporting – Companies availing extension of their Annual General Meeting (AGM) must now furnish:
These additions are intended to streamline regulatory tracking and ensure alignment between audit timelines and AGM proceedings.
Conclusion
The Companies (Cost Records and Audit) Amendment Rules, 2025, represent a significant step towards modernizing India’s corporate regulatory framework. By reducing compliance burdens for SMEs, enhancing financial transparency, and promoting accountability, these amendments align with the government’s broader strategy to foster a more conducive environment for business growth and economic development.
