MCA asks cost auditors to tap AI to better detect inefficiency

The corporate affairs ministry has directed cost auditors to focus on potential risk areas, assess cost inefficiencies' impact on financial health, and utilize AI to identify unnoticed patterns or anomalies. Cost records are essential for tax calculations, funding for government projects, and official subsidies and incentives.

New Delhi: The corporate affairs ministry has asked cost auditors to focus on potential risk areas, evaluate the impact of cost inefficiencies on companies' financial health and take advantage of artificial intelligence (AI) to plug loopholes. ET Year-end Special Reads 2024 Rewind: Elections, extreme weather, sporting glories, moments that made history, and heartfelt goodbyes Sensex & Nifty in 2025: Predictions, targets, must-have stocks for the new year From Adani bribery allegations to PayTM Bank ban: Six shocks that rocked India Inc in 2024 The use of AI would help cost auditors "identify patterns or anomalies that might otherwise go unnoticed," according to the ministry's latest communication to stakeholders, reviewed by ET. Cost records of companies are essentially books of accounts relating to expenses on materials, labour and other items used for producing goods or rendering services, in sync with Section 148 of the Companies Act.

Currently, the cost audit rules cover 39 sectors. The cost accounts are crucial for tax computation and obtaining funds for government project execution or subsidies and incentives under various official programmes. (You can now subscribe to our Economic Times WhatsApp channel ).