John Samuel Raja D & Sapna Dogra Singh / New Delhi Mar 23, 2009, 00:04 IST
All manufacturing companies with a paid-up capital of Rs 50 crore or more will be required to conduct a statutory cost audit if the recommendations of an expert committee appointed by the Ministry of Corporate Affairs are accepted.
This would bring between 20,000 and 25,000 firms under the ambit of cost audit. At present, only 44 industries and specific products within an industry come under cost audit. This covers around 6,000 firms but cost audits are conducted in only about 2,200 of these.
The proposed change will have a major positive impact on the profession because more firms will have to mandatorily appoint a cost auditor and have cost accounting records audited on an annual basis.
At present, about 1,700 cost accounting professionals practise in India against 42,000 qualified people.
“We hope the recommendations are accepted. We don’t see any opposition because all the stakeholders were represented, including from industry bodies, in the expert committee,” said Kunal Banerjee, president of the Institute of Cost and Works Accounts of India (ICWAI), which regulates the cost accounting profession in India.
The ministry will soon put up the expert group report on its website to seek comments from all stakeholders.
ICWAI has been demanding an expansion of the scope of cost audits in India, on grounds that the term “class of companies” in Section 209 (1) (d) of the Companies Act means the entire set of products produced by manufacturing firms, not just a few sectors or products specified by the central government.
At present, the central government selects companies within the 44 industries and orders cost audits on an annual basis. If the new proposals come through, all firms will have to maintain cost records and undergo cost audits.
Anurag Goel, secretary in the Ministry of Corporate Affairs, said the expert committee has made valuable recommendations with “the objective of making Indian industry more competitive while appreciating the need to position cost audit in the enterprise governance structure”.
Banerjee said the change would only mean interpreting a particular section of the Companies Act, so there is no need for parliamentary approval. “An executive order is enough to bring about the change,” he said.
With the model code of conduct in place because of impending general elections, however, a final decision on the recommendations will have to wait till the new government takes charge.
cma can play better comand on manufacturing concern as well as financial concern in the field of audit,by virtue of it's cost control strategy.it would be beneficial for public.
1.Cost audit should be compulsory for all company as to know the actual cost of expenditure in first to last of the company.
2. It helps to calculate the profit of the company and to know is the cost used in right purpose or not.
3. Tax and other govt dues are paid or not.
yes me too agreeing with the recommendation of the expert committee appointed by ministry of corporate affairs.if the recommendation is accepted it will add to the scope of cost accountant in India.
yes, i m agree with the ministry of corporate affairs. it is a great move from their side. Also cost accountant is permitted to do certified financial accounts as well because he is more and equal in all respects from chartered accountant.
At last something happening . In India maximum corporates are non-conforming and always think how to escape/dis-obey and always interested in maximising their own interests .No concern for the stake holder (known satyam and unknown countless )Economy should not be exploited by few segments ( cos, professionals etc) by virtue of their strong positions (animalistic approach )Let us have checks for every one whether industries (cos )or professions (CAs ) or govt services deprtmnts etc for healthy growth of economy & nation in order to suvive in the globalised atmosphere by widening & strenghtning COST AUDIT - a great useful meaningful tool suitable for the present liberalised economy
Before implimentation need to study current practices adopted by various companies such as Inventory valuations using FIFO or Weighted Avg. Cost.
Some of the companies are complying with above 2 (fifo & Weighted Avg.) by determining the inventory costs at Standard & adjusting either to wEIGHTED aVG. OR FIFO by adjustiment of allocation of variance on Inventory on basis of reasonable logic. Whether Cost Audit will also accept standard costing with adjustment of variances. This needs to be dealt suitably.
It is very good all industries will cover under Cost Audit.
I am agree with ministry of corporate affaire. it is good step for safe stekholder fund which also verified by doul proffecinal person, firt by CA second by CWA. I also request to verify statury account by CWA person.
Our Company welcome this bill For Kris Flexipacks Pvt. Ltd ( Naresh Sharma)
Thanks to our President,Secretory,Members,CLB,MCA,Minister,Govt.,Expert Group,whose approching for Applying regulation of Cost Audit systematic ways in the interest of Nation,Industry,Share holder,ICWAI Professional etc.
It is great achievement of I.C.W.A. profession.Cost Accountant is more competent,knowledgable and labourious than other similar profession.Government of India should soon bring appropriate order of Cost Audit to ptotect interest of Consumer,shareholder,natural scared resources.Cost Audit should be applicable every company having paid up capital 50 Crore.
Cost Audit means better corporate governance through maximisation of profit by optimum utilisation of resources. Wastages reduced gets translated into profit which is ensured through a robust cost accounting system. Proper utilisation of resources mean proper accounting of resources which automatically takes care of fraudulent activities. Welcome move, kudos to the President and other central committee members.
in my openion every company which is registered under company Act must be covered under cost audit.Also every business organisation (whether a company ,partnership firm or a soke enterprise) must be subjected to cost audit on the basis of turnover under the law regulating them.
It is a very welcome move by government. Till now the CWA profession was in isolation and they could not show their talent. Also the CWA should allowed to certify the financial accounts.
Some people and Industralist/professional oppose the Cost Audit they think extra expenses or extra regulation to be incuured .but as per my oppinion they are in Traditional management system and only interested in own benefit not interested in benefit to Economy/Goverment/people of India. Cost Audit provide benefit to each stakeholder with Maximum profit, modern managment policy,Paramatric cost control technique,SWOT analysis,etc.hence COST AUDIT means DEVELOPED ECONOMY link with DEVELOPED LIVING OF STANDARDS for Each level.
Mandotory Cost Audit will provide to our Economy/Industry effective or optimum utilisation of Resourcess (MEN,MONEY,MATERIAL,MACHINE,METHODS,MARKET etc)with Cost effectiveness,Quality of Services & Product. Cost Audit is not only verify the report it give Internal Managenment support and better Tax Planning system , better decision making in Economic recession condition.
Financial audit certifies what is profit/loss, but it will not verify where the company is earning profit, where the company is loosing the profit, why company is getting good profit, why company is getting the less profit, financial audut will not minimise the cost,
Cost audit will verify all the above activity and cost audit looks to minimise the cost & maximise the profit, cost audit keeps control the cost of all the activities of the company
Cost audit will make mandatary for all Manufacturing and service industries
Cost accountants of India are very strang in Costing, finance, Direct/Indirect tax and accounting also
It should be regared as welcome step of Ministries of Corporate affairs.It also show the intension of the minitries.Seeing the critical situation of the economy it becomes very essensial that the cost accountant also come farwad and provide the service in the area of cost effecincy and cost management for effective and effecient utilisation of the all resources in industries for better satisfaction to the end user.
This was long awaited but 'Der aaye durust aaye'-better late than never.Infact there should be a combined audit carried out by ICWAI as well to minimise fraud like in Satyam.
Yes, it should be implemented at the earliest. Due to iposition of Cost-Audit all the sections of the society will be benefitte including consumers. This will help the indian industry to be more competitive. Till now the approach of industrial unit was that Cost-Audit is useless and it increases the cost of compliance.So the approach was always to avoid cost-audit. It can only be implemented only making it mandatory by CLB & MCA. Not only that, this will also make popular the carrier of ICWAI.
Cost Audit was intended to quote in the words of Smt Tara Ramachandra sathe(MP) in a
parliamentary debate way back in 1965 "Cost audit is quite different from financial audit . it is to see whether
the labour is efficient or not ,whether material and every part of it used is to the optimum extent?"She had
demanded then that cost audit should not be discretionary and to quote her again "?it is essential, no doubt,
and in factories and industries, everywhere this cost audit should be emphasized".
And to quote the Hon.Minister of finance shri.T.T.Krishnamachari " while we have made it obligatory or
semi-obligatory our intention is to ask the industries to have a cost accountants report".And
"when we have sufficient number of cost accountants to make it obligatory for every company and every
producing and manufacturing concern( unquote: not being a company) to have a cost accountants report.
Members of ICWAI now should be allowed to certify the financial statements of the company,since after satyam scam it is noticed that the trumpeting ICAI had produced members who cannot certify Cash and Bank Balances and had continually relied on false documentation of the company.
This shows there is an urgent need for expanding the certification authority to multi-disciplinary professionals and induce competition.
After all the financial reporting of 1500000 companies and millions of enterprises and NGO and Government enterprise are left at the mercy of 70000 practitioners a dismal reflection of the way the country is progressing.
While often the argument for restricting the scope of cost audit is lack of practitioners , can the law makers look at the above statistics and be satisfied with the ICAI performance.
Or the stakeholders will continually be left at the lurch.
Posted by: Naveenvenkat
March 23 , 2009, 16:10 IST
yes The cost Auditor's also should be allowed to certify the financial statement of companies irrespective of the type of industry, this will ensure the quality of the work and secure the interest of the share holders,gereral public etc.why only the ICAI should have the autority to certify the financial account's of the companies eventhough ICWAI professional having more & equal knowledge to ICAI, the Ministrey of Company Affairs should think about it. in the way of sequre the ICWAI profession and build a nation with good economy control.
Posted by: S.K.Garg
March 23 , 2009, 15:42 IST
Actually Cost accounting is a technical subject which defines the input/ output ratio for every segment of cost. In a way Costing defines the efficiency of the management that how better the resourses has been utilised. I strongly feel that if Cost Audit becomes compulsary, no satyam will be repeated. Further I also feel that cost accountant should also be allowed to do financial audit as in today's open economies no one should be protected ( CAs) from the competition.
Posted by: VINAY
March 23 , 2009, 13:27 IST
yes, cost accountant are highly expert in financial accounting, taxation, banking, internal audit etc. They should be allowed to certify all financial statements under various acts in oder to ensure accuracy, restore shareholders trust. The undue monopoly of ICAI is causing harms to accounting and economic development of our nation
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