Expert group to review costing standards and cost audit
February, 11th 2008
Breathing fresh hopes into cost accounting and cost audit is a new order from the Government. Cost accounting, through the determination and allocation of costs to various products, provides a valuable service to the managements of companies in cost analysis and control, reads a recent communication from the Ministry of Corporate Affairs constituting an Expert Group to review the existing Cost Accounting Standards and Cost Audit Report Rules.
The group, with eight members headed by Mr B.B. Goyal, Advisor (Cost) in the Ministry, will advise the Government on suitable measures to enable development of relevant cost accounting methodologies and standards to increase the competitiveness of the Indian manufacturing sector.
The order opens by acknowledging an imperative that in the context of an economic environment, determined by increasing competition both domestically and internationally, efficiency and economy be brought about in the operations of the manufacturing sector to catalyse and facilitate the cost competitiveness of the manufacturing sector in India. It is equally necessary to enable the industry to address issues arising from unfair trade practices such as dumping, subsidies and cartels in international trade, adds the communiqu.
Recognising the advantages of costing be they about improving efficiency in the use of materials, labour and plant, maximising production and realising greater profits it says that cost analysis furnishes useful information in respect of such important matters as gross margin, differential costs, and replacement costs. Cost analysis can be useful to the Regulators of public utilities and provide a basis for comparing claims and assessing the validity of issues arising out of international trade.
The Groups members are Mr P. Murugesan, General Manager, Maruti Udyog Ltd, representing CII; Mr Lalit Bhasin, Bhasin & Co, Advocates, for PHDCCI and FICCI; Mr S.C. Aggrawal, Chairman and Managing Director, SMC Global Securities Ltd, for the Assocham; Mr Amarjit Chopra, GSA Associates, for the ICAI; Mr Chandra Wadhwa and Mr M. Gopalakrishnan for the ICWAI; and Mr Ravindra Mathur, Director (Cost), Cost Audit Branch, MCA. The Group may invite any other expert or representative of any trade or industry association as special invitee, and take up such other consultations as may be considered necessary.
The expert group has been given time till September 30, 2008 to work on the following tasks:
Review the Cost Accounting Record Rules and their continued relevance in the contemporary competitive business environment and make recommendations for requisite modifications and/or alternative structures.
Review the existing Cost Audit Report Rules and formats prescribed therein, and recommend appropriate modifications to make them more relevant to the needs of different stakeholders including company management, shareholders, and regulators.
Review the existing system with a view to make suggestions for addressing the concerns of the industry with regard to confidentiality of company cost data and cost of compliance.
Review and, if required, give suggestions for redrafting the existing Cost Accounting Standards in the Indian context in light of international best practices, and to align them with the international cost accounting standards issued by the International Federation of Accountants (IFAC).