APPENDIX V Auditing Help


1. Materials

(i) Direct Materials:

(a) Adequate records shall be maintained showing separately the quantity and cost of sugar-cane procured at the factory gate or other collection centres. Where sugar came is grown in farms owned or taken on lease by the company, detailed records shall be maintained in a mill suitable proforma so as to enable computation of the cost of such sugar came. The rate fixed by the Government from year to year adopted for pricing the sugar cane supplied by the sugar came grower (growers) to the sugar shall be indicated in the cost records.

(b) Where beet is used as raw material for the production of sugar, separate records shall be maintained on the lines similar to sugarcane.

(c) A separate proforma must be maintained to record sugar-cane and beet procurement expenses along with other related expenses. These expenses shall be separately determined.

(d) All issues of materials shall be reconciled with figures shown in  Annexure to Schedule III, or in any other form as near there to as possible. Any losses or surpluses arising as a result of physical verification of inventories and adjustments thereof shall be clearly indicated in the cost records.

(e) Record of purchase/supply through Indent by suppliers shall be maintained showing the rates at which the various quantities of materials are to be required. The records shall indicate principal features of each Indent particularly conditions relating to quantity, price, period of delivery and discounts.

(f) If the quantity and value of materials consumed in a company are determined on any basis other than actuals for example.

(g) At standards, the method adopted shall be mentioned in cost records and followed consistently. The overall reconciliation of such quantities and values of materials with the actuals shall be made at the end of the financial year explaining the reasons for variances. The treatment of such variances in determining the cost of items referred to in Para 2 shall be indicated in the cost records.

(h) The records shall be maintained in -such detail as m-ay.enable the company to readily provided data required in the various Annexures to Schedule III to this order in a verifiable state.

(ii) Process materials:

Adequate records shall be maintained to show the receipts, issues and balances, both in quantities and costs of each item of the process material such as line, sulphur super phosphate, caustic soda. filter cloth and other chemicals. The cost shall include all direct charges up to works, wherever specifically incurred. The issues of material shall properly be identified with the departments or cost centers.

(iii) Consumable stores, small tools, machinery spares etc.

(a) Adequate records shall be maintained to show the receipts, issues and balances, both in quantities and cost, of each item of consumable stores, small tools and machinery squares. The costs shown shall include the direct charges up to works, wherejer specifically incurred.

(b) In case of small tools, the costs of which are insignificant, the company may maintain such records for the main groups of such items.

(c) The cost of issues of consumable stores, small tools and machinery spares, shall be charged to the relevant heads of accounts such as repairs to plant and machinery, or repairs to building. Material consumed on capital woks such as addition to buildings, plant and machinery and other assets shall be shown under the relevant capital heads.

(iv) Wastages, spoilages, rejections or losses etc.:

Adequate records shall be maintained showing the quantity and cost of wastages, spoilages, rejections and losses of sugar-cane and other raw materials, process materials, consumable stores, small tools and machinery spares, whether in transit, storage, or for any other reason. The method followed for adjusting the above losses as well as the income derived from the disposal of scrap, if any, in determining the cost of the product shall be disclosed in such details as may enable the company to arrive at the net cost of white sugar produced.

II. Excise Duty and Sales Tax

Adequate record of excise duty and Sales Tax paid and the rebate claimed or earned in case of allowance for excess production or export of sugar shall be maintained along with the record of white sugar manufactured. Calculation for rebate shall be worked our through formula prescribed by the government. The working of the adjustment or claim, if any, shall also be shown.

III. Salaries and Wages

(a) Adequate record shall be maintained to show the attendance of workers employed by the company whether on regular, seasonal, temporary, or on contract basis, as the case may be. Proper record shall also be maintained in respect of payment made for overtime work and production incentives whether in the shape of production bonus or incentives based on output given to the workers. Payment of any retirement benefits including pension, provident fund,gratuity, old age benefits, contribution and any  welfare expenses shall also be included in the labour or factory overhead cost of beneficiary cost center/department. This will be done in a manner that labour cost is available for each cost center or department and for each product whether by-product or main product so that different Annexures of Schedule III to this order, are filled properly and easily.

(b) FaiTand reasonable allocation shall be made for wages paid to such direct labour as has been utilized in more than one departments, between the various departments or cost centers and the basis of such allocation shall be consistently followed. Idle time or lay-off payments shall be recorded separately indicating the reasons and the method of treatment in the calculation of the cost of the items referred to in Paragraph 2. Any wages paid for additions to plant a machinery or other capitalized assets, shall be capitalized and excluded from the cost statements of while sugar produced.

(c) Benefits paid to the employees other than covered in (a) above shall be worked out separately and shown in the cost statement department wise.

IV. Service / Departments

Adequate records shall be maintained to indicate the expenses incurred for each services department or cost center. In the case of multi-product companies these expenses shall be apportioned to other service and production departments on an equitable basis. Where these service and production departments on an equitable basis. Where these service departments serve products other than white bagged sugar suitable bases shall be worked out so that the share apportioned to white bagged sugar is worked out and applied consistently.

V. Utilities

(i) Steam.

Adequate records showing the quantity and cost of steam raised and consumed shall be maintained in such detail as may enable the company to fill up the necessary particulars in Annexure 7 to schedule II to this Order. The cost of steam consumed by the Sugar mill and other units of the company shall be calculated on a reasonable basis and applied consistently. The cost of steam should be allocated to electric power house, white bagged sugar and other users including staff colony and office building etc. Basis adopted for valuation of steam at different pressures shall also be  indicated in the records.

(ii) Electric Power. – Adequate record of cost of electric power generated by the company and purchased shall be kept in such details as may enable the company to furnish the necessary cost data as in Annexure 8 to Schedule III to this Order. The records shall be so maintained as to enable assessment of consumption of power by different departments or production units or cost centers. Allocation of cost of electric power shall be on the basis of actual consumption, if separate meters are installed, or on the basis of technical estimates in the absence of separate meters. In the case of fixed charges or fuel adjustment surcharge claimed by the utility company, irrespective of the actual power consumed and if the amount payable as per actual consumptions fall below the contractual minimum, the difference between the contractual minimum and the actual amount shall be treated as fixed or period cost and transferred to other factory expenses statement [Annexure 9 of Schedule Ill]. Cost of power consumed in and chargeable to non-production departments, if significant, shall be shown separately. Record shall also be kept for any electric power sold to out-side agencies.


In case of self-generation quantity and reasons for under utilization shall be specified and the relevant cost shall be treated as fixed or period cost.

VI. Repairs and Maintenance

Adequate record showing the expenditure incurred on workshop facilities for repairs and maintenance of buildings, civil works, office and plant and machinery in different departments and cost centers shall be maintained on regular basis. Details of costs incurred and the basis of allocation of repairs and maintenance expenditure to different departments or production units shall be indicated. Cost of work of capital nature, heavy repairs, and overhaul cost, benefit of which is likely to be spread over a period longer than the financial year, shall be shown separately.

If the maintenance services are utilized for other produces, the portion utilized for them shall be segregated and charged thereto.

VII. Depreciation

(a) Adequate records shall be maintained showing values and other particulars of fixed assets in respect of which depreciation is to be provided. The records shall, inter alia, indicate the cost of each item of asset, the date of its acquisition, accumulated depreciation, the rate of depreciation and the depreciation charge, for the relevant period.

(b) Basis of which depreciation is calculated and allocated to the  various departments and products shall be clearly indicated in the records.

(c) Amount of depreciation .chargeable to different departments, production units or cost centers, for the financial year shall be in accordance with the provisions of clause (F) of Part II of the Fourth Schedule to the Companies Ordinance, 1984, and shall relate to the plant and machinery and other fixed assets utilized in such departments or units or cost centers. The method once  adopted shall be consistently.

VIII. Insurance

(a) The record shall be maintained showing the insurance premia paid for the various risks covered on the assets and other interests of the company.

(b) Method of allocating insurance cost to the various departments shall be indicated in the cost records and followed consistently.

IX. Other Overheads

Adequate records showing the amounts comprising the manufacturing overhead expenses other than those already mentioned and details of apportionment thereof to the various departments or process shall be maintained. .

If products other than white bagged sugar are also being produced in factory, adequate bases should be developed to apportion the over the cost equitably.

x. By-Products

Detailed records shall be maintained for each item of by-product showing the production, disposal and balance both in quantity and value The basis adopted for valuation of the by-products shall be equitable and consistent. Records indicating the actual sales realization of by-products shall also be maintained.

XI. White Sugar Transferred for Self Use

Adequate records shall be maintained showing the quantity and cost of white sugar transferred to other units of the company for sell consumption. The rate at which such transfers are affected shall be disclosed in the end records.

XII. Work-In-Process and Finished Goods Stock

The method of valuation of work-in-process and finished goods stock shall be indicated in the cost records so as to reveal the cost elements that have been taken into account in such computation.  The cost element shall be related to the items referred to in the relevant Annexures to Schedule III to this Order. The costing method adopted shall be consistently followed. Treatment of differences, if any, on physical verification of stocks with book balances, shall also be indicated in the cost records.

XIII. Adjustment of Cost Variance

Where the company maintains cost records on any basis other than actuals, such as standard costing, the records shall indicate the procedures followed by the company in working out the actual cost of the product under such systems. The method followed for adjusting the cost variances in determining the actual cost of the product shall be indicated clearly in the cost records. The reasons for the variances shall be indicated in details in the cost records.

XIV. Inter-Company Transactions

In respect of supplies made or services rendered by the company to its holding company or a subsidiary of a company in the same group or company in which a Director of the Company is also a Director in such companies and vice versa, records shall be maintained showing contracts entered into, agreements or understanding reached, in respect of:

(a) Purchase and sale of raw materials and process materials;
(b) Utilization of plant facilities
(c) Supply of utilities; and
(d) Administrative, technical, managerial and other consultancy  services

These records shall indicate the basis followed to arrive at the rates charged between them so as to enable determination of the reasonableness of the rate charged or paid for such services.

XV. Reconciliation of Cost and Financial Accounts

(a) If integrated accounts are not maintained, the cost records shall be periodically reconciled with the financial accounts to ensure accuracy. Variations, if any, shall be clearly indicated and explained.

(b) The reconciliation shall be done in such a manner that the profitability of each product produced and sold is correctly judged and reconciled with the overall profits of the company from all of its activities.

(c) Adequate cost record shall be maintained in a manner so that the cost statements may be properly compiled.

XVI. Statistical Records

(a) Data such as the duration of crushing period, the quantity of each grade of white sugar produced, mill stoppages during the season indicating the reasons, quantity of by products obtained, percentage of sugar balance, bagasse, press-mud, molasses and sugars shall be kept in detail.

(b) The data maintained in the cost records shall be reconciled with the periodical returns submitted by the company to excise and other

(c) Companies may develop an appropriate standard for use as a basis to evaluate performance properly.


1. Name of the Company
2. Date of Incorporation
3. Location of Registered Office
4. Location of Factory/Factories
5. Products other than sugar being manufactured
6. Installed Cane Crushing Capacity in tones.




Annexure 1


I. Raw Materials:

a) Sugar Can (Annex 3)
b) Best (Annex 4)
c) Gur
d) Raw Sugar
e) Process Material (Annex 5)

2. SalarieslWages and benefits (Annex 6)
3. Consumable Stores
4. Repairs and maintenance
5. Utilities Steam (Annex 7)
6. Electric Power (Annex 8)
7. Water & Gas
8. Insurance
9. Depreciation
10. Other Factory Overheads (Annex 9)
11. Total Cost
12. Add: Opening Stock ofW.I.P.
13. Less: Closing Stock ofW.I.P.
14. Total Cost of goods Manufacturing
15. Less: Realizable value of By-Products Molasses Baggase Others
16. Net Cost of goods Manufacturing:
17. Add: Packing Material & Handling
18. Net Cost of Bagged Sugar
19. Add: Excise Duty I Sales tax
20. Total Cost of Bagged Sugar:
21. Add: Opening Stock of Sugar
22. Less: Closing Stock of Sugar
23. Cost of Sales
24. Administrative Expenses (Annex 10)
25. Selling & Distrib. Expenses (Ann ex II)
26. Financial Expenses Other Charges Total Cost to Make and Sell

Annexure 2


1. Seeds and Other inputs Seed Fertilizers, herbicides etc. Insecticides Abiana/Water Charges Total Cost of inputs
2. Labour Cost Land preparation Plantation Maintenance of cane crap/rations Operation of Tractors Harvesting Total Labour Cost
3. Other Cost Fuel for Tractors operation Maintenance and over haul of Tractors Insurance Interest expenses Depreciation of equipments Rent of agriculture equipments (if any) Total Other Costs Total· Cost of own production (1+2+3) Sales value at controlled price Profit/Loss on own production

Annexure 3


I. Total sugarcane purchase at Government fixed rate Sugarcane produced from own farm (Annex 2) Less: Loss to transit Sugarcane received at factory gate
2. Commission
3. Quality premium
4. Leading/unloading charges
5. Cane development expenses:

a) Salaries and Wages of Supply and Development Staff
b) Sugarcane Development Research
c) Supply staff and transportation expenses
d) Other expenditure

6. Taxes and levies:

a) Cane cess/purchase tax
b) Market committee fee
c) Road cess
d) Octroi
e) Other levies

7. Transportation Charges:

a) Delivery expenses
b) Transport expenses
c) Others

8. Other Expenditures at Cane Collection Centers:

a) Salaries and Wages
b) Stores
c) Repairs and Maintenance
d) Others

9. Total cost of “SUGARCANE” Transferred to production processes (Annex 1).

Annexure 4


I. Total beet purchased at Government fixed rate Less: Loss in transit Beet received at factory gate
2. Commission paid
3. Loading unloading
4. Beet development expenses:

a) Salaries and Wages of supply and Development Staff
b) Sugar Development Research
c) Supply staff and transportation
d) Other expenditure

5. Taxes and Levies (if any):

a) Purchase tax
b) Market Committee fee
c) Road cess
d) Octroi
e) Other levies

6. Transportation Charges:”

a) Delivery expenses/traveling from purchases centre to mill gate
b) Other Expenditures at Beet Collection Centers
c) Other

7. Other Expenditures at Beet Collection Centers:

a) Salaries and Wages
b) Stores
c) Repairs and Maintenance
d) Others

8. Total cost of “BEET” Transferred to production process (Annex I)

Annexure 5


Total Sugar Produced (M.Tons)

1. Unslaked Lime
2. Phosphoric Acid
3. Filter Acid
4. Sulphur
5. Caustic Soda
6. Soda Ash
7. Tri sodium Phosphate
8. Bleaching Powder
9. Anti Foam
10. Formaline
11. Labour story Chemicals
12. Filter Cloth
13. Sewing Thread
14. Cleaning Brushes
15. Lubricant and Grease
16. Other (Specify)


Less allocated to:

(a) Electricity Generation
(b) Stem Generation
(c) Raw Material
(d) Admin Expenses
(e) Selling and Distribution Expenditure
(f) Any Other Specify Balance transferred to production process Annexure 1.

Annexure 6


1. Salaries/Wages

i) Officers and Permanent Staff
ii) Seasonal Staff
iv) Daily rated and Contract Labour
v) Bonuses

2. Benefits:

i) Medical Expenses
ii) Canteen Expenses
iii) Welfare, Recreation
iv) Transport and Traveling
v) Education CesslExpenses
vi) Group Insurance/W orkmen
vii) Compo Insurance
Provo Fund (Employer’s Contribution)
viii) GratuitylPension
ix) Other Benefits (if any)
x) Total
xi) Less allocated to:

a) Electricity Generation
b) Steam Generation
c) Raw Material
d) Admin Expenses
e) Selling & Distribution Expenses
f) Any Other Specify Balance transferred to production process (Annexure)

Annexure 7


Types of steam boilers used:
I. No. of days worked
2. Installed Capacity (steam in tones)
3. Utilized capacity (steam in tones)
4. Production:
a) High pressure steam
b) Medium pressure steam
c) Low pressure steam
d) Less: transit losses
e) Total
5. Percentage of capacity utilization (312 * 100)


I. Water
2. Fuels:

a) Bagasse

(i) Own
(ii) Purchased

b) Pith
c) Coal Purchased
d) Fumace Oil
e) Fire Oil
f) Gas
g) Other fuels. if any (to be specified)

3. Quantity of waste heat from the plant, if any
4. Consumable stores
5. Direct salaries, Wages and benefits
6. Repairs and Maintenance
7. • Other direct expenses (e.g. Boiler inspection fee etc.)
8. Insurance
9 Depreciation
10 Less: Outside sale Total Cost of Steam for Self Consumption Add: Cost of steam purchased II. Total Cost of Steam Consumed

Total of item 12 allocated to

i) White bagged sugar
ii) Electric power house

Annexure 8

I. Installed Capacity (KWH)
2. No. of units generated (KWH)
3. No. of units purchased (KWH)
4. Total (2+3)
5. Consumption in Power House including other losses
6. Net units consumed (4-5)
7. Percentage of Consumption and losses to total units Available = 5/4* 100
8. Percentage of power generated to installed capacity 2/1 * 100


I. Steam (Annex 7)
2. Consumable Stores
3. Salaries and Wages
4. Other direct expenses
5. Repairs on electricity
6. Duty on electricity
7. Depreciation


8. Less:

 a) Credit for exhaust steam used in process etc.
b) Other credit, if any

9. Cost of power generated
10. Less: Cost of power sold
II. Add: Cost of power purchased
12. Total net cost of power consumed
13. Cost per unit average


Total at item 12 allocated to:

i) White bagged sugar
ii) Self consumption .
iii) Others:

a) Staff colony
b) Office building
c) Other (specify)

14. Total

Annexure 9


. 1_ Rent, Rate and Taxes
2. Printing & Stationery
3_ Postage & Telegram
4. Telephone Fax & Telex
5. Traveling & Conveyance
6. Subscriptions, Books & Periodicals
7. Entertainment
8. Vehicle Running Expenses
9. Security
10. Fire Fighting
II. Other Expenses
12. Total

Allocated to:

i) White bagged sugar
ii) Electric Power House
iii) Steam Generation
iv) Others:

a) Staff colony
b) Office building etc.

Total as per item 12 above

Annexure 10


1. Total Sold (M-Tons)
2. Cost

– Salaries, Wages & Benefits (Annex 6)
– Rent, Rate and Taxes
– Insurance
– Water, Gas & Electricity
– Printing & Telegram
– Telephone Fax & Telex
– Repair & Maintenance
– Traveling & Conveyance
– Subscription, Books & Periodicals
– Entertainment
– Advertising
– Legal & Professional Exp
– Auditors remuneration
– Vehicle Running Expense
– Charity & Donation
– Others


Annexure 11


1. Total Sugar Sold (M-Tons)
2. Cost

– 920 Javid H.Zuberi
– Traveling & Conveyance
– Commission
– Freight Outwards
– Sucking Restacking
– Loading / Unloading
– Export Expenses
– Vehicle Remaining Expenses
– Advertising for Sales Promotion
– Other Expenses



I/We………………………………….. . having been appointed to conduct an audit of cost accounts of Messrs , have examined the books of account and the statements prescribed under clause (e) of sub – section (1) of section 230 of the Companies Ordinance, 1984 and other relevant record for the year ended on and report that-

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 purposes of this audit.

2. in my/our opinion Proper cost accounting records as required by clause

(a) of subsection (1) of section 230 of the Companies Ordinance,  984 (XL VII of 1984), and as required by these rules, have been / have not been kept by the company;
b) Proper returns, statements and schedules for the purpose of audit of cost accounts have / have not been received from branches not visited by me/us;
c) The said books and records give / do not give the information required by the rules in the manner so required; and

In my / our opinion and subject to best of my / our information.

a)The annexed statement of capacity utilization and stock-in-trade are/are not in agreement with the books of account of the company and they exhibit true and fair view of the company’s affairs: and
b) Cost accounting records have/have not been properly kept so as to give a true and fair view of the cost of production, processing, manufacturing and marketing of the under mentioned products of the company.

Namely: –

The matters contained in the ANNEX forms part of this report.

This…………day of…………….Signature:

(Name of the cost auditor or firm of cost auditors).

Posted on November 4, 2015 in Cost Audit

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