Ministry of Corporate Affairs plans expert panel to formulate cost audit
April, 14th 2009
The government may set up an expert panel to advise it on how to prepare norms for companies to record and submit sensitive operational details on cost of production.
The government, which is reviewing the scope of cost audit for enterprises, aims to have a separate body that will give crucial inputs on such standards before making them applicable. The panel is expected to have experts from various fields.
The idea is to set up the panel on the lines of National Advisory Committee on Accounting Standards (Nacas), which acts as the apex body to clear accounting standards in the country, an official in the ministry of corporate affairs (MCA) said on conditions of anonymity.
Nacas, which comprises officials from industry chambers, professionals institutes, the government and regulators, acts as the last clearance authority for accounting standards that are primarily prepared by the Institute of Chartered Accountants of India (ICAI).
MCA, which is the administrative ministry on matters of accounting, feels that the setting up of an expert body will ensure that the proposed norms are thrown open to a wider discussion forum.
Cost audit allows the government to access sensitive operational details such as cost of production, raw material consumption, capacity utilisation, quality control, research expenses and royalty payments.
Cost data is becoming relevant in new areas like adjudicating on allegations of anti-competitive practices such as predatory pricing.
It is also useful in detecting tax evasion and making policy decisions related to pricing. Under the competition law, cost data of a company is vital in determining whether it is guilty of predatory pricing.