COST ACCOUNTANTS SCOPE GETTING WIDER
New Delhi, Aug 24 Companies in the services sector and all listed
manufacturing companies may soon have to hire cost accountants under
a new formula being worked out by the government to beef up the role
of corporate cost audits.
According to sources in the ministry of corporate affairs, an
internal committee has been formed to look into reviewing the list
of industries covered under mandatory cost audit by identifying new
threshold levels.
The new determinants could be based on turnover, capital base,
ownership, level of public holding or even debt exposure in a
company or industry, sources said.
A cost audit is the process of ascertaining whether the production,
marketing and sales processes, as well as other aspects of a
business, are managed in the most cost-effective manner. This is
essentially an internal audit and is carried out as a tool to
optimise management efficiency.
A total of 44 industries are currently covered under the mandatory
cost audit order. The list includes cement, cycles, tyres & tubes,
bulk drugs, nylons, textiles, milk food, steel plants, fertilisers,
the petroleum industry and telecommunications. "It is an exercise to
examine afresh the whole issue and there will be an overall review
of policy," a source said.
The reasoning behind the review and possible redrawing or expansion
of the list is that India needs to have cost audit data on various
industries in the wake of heightened economic activity and also at a
time when it is entering into free-trade agreements (FTAs).
"The triggers for review include the increased focus on FTAs, to
help CCI check predatory pricing and anti-competitive practices, and
to verify proper segment reporting," the source added.
Institute of Cost and Works Accountants of India president Chander
Wadhwa endorses the ministry's proposed move.
However, others oppose expanding the list, arguing it would only
regulate the corporate sector further and increase the cost of
compliance.
Note:
It is wrong to say that cost audit is an internal phenomenon in the
nature of internal audit its focus is all encompassing and reviews
of the bottomlines and addresses the issues related to taxation and
corporate governance from user perspective for sustenance and
growth.It is a definitive methodology for assessment of resource
consumption and efficiency benefits in pricing decision from user
perspective plans a decision support for growth and sustenance and
helps the government in inclusive growth objectives by augmenting
revenue through taxes and optimum usage of capital.
Intenral audit have a focus on internal control and risk assessment
and supplements the work of a cost auditor by identifying the flow
and risk involved in maintaining a particular flow or allowing
deviation discretion.Cost accounting and audit scrutiny of cost
records enable identify the impact of the risk carried by the
undertaking in a particular flow it reflects the signal of shaky
wicket the business is travelling through suboptimisation.Internal
audit scheme is essential and in addition to audit scrutiny of
financial and cost records and cost accouting record rules
specifically provides on the requirement of cost auditors comments
on the existing internal audit system of cost records and suggestion
for improvement.
News posted by
CCI News Desk
Finance news reporter covering taxation, GST, income tax, business compliance, and economy updates. I simplify complex financial topics into easy-to-understand articles for professionals, taxpayers, and business owners on leading finance and tax platforms.
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