Financial Daily from THE HINDU group of publications
Saturday, Aug 10, 2002

Port Info

Group Sites

Opinion - Editorial

At no cost

THE RECENT DEMAND by the Institute of Costs and Works Accountants of India on the Government to mandate compulsory cost audit for all companies is unjustified. For one, the concept of cost audit has outlived its utility in the light of the changed circumstances in India Inc. Its imposition earlier on select industries was a logical sequel to the government's desire to control prices in sensitive sectors. After all, for any price control to stand judicial scrutiny it must bear a reasonable connection to the costs of operations and cost audit provided an independent confirmation of such costs incurred by the enterprise. But price and distribution controls have been dismantled in most sectors and entry barriers to both domestic and overseas outfits have been either eliminated or diluted considerably. In the circumstances, the market itself has been performing a disciplining role against monopolistic behaviour rendering the need for Government price controls redundant. With the dispensing of price controls, goes the need for independent confirmation of costs.

Even had the ground reality not changed fundamentally, it is difficult to accept the merit of the ICWAI proposal. Its demand for equal treatment with the Institute of Chartered Accountants of India for purposes of income-tax law too does not stand scrutiny. The chartered accountant today quite possibly enjoys a greater share of professional opportunities than warranted by intrinsic differences in professional capabilities. Equally, a cost accountant may possibly possess the professional equipment necessary for undertaking tax audit. But the issue goes beyond that. For, by that yardstick, one could argue that even management graduates, lawyers and a whole lot of other professionals too should be allowed to undertake such assignments as they possess the capability in varying degrees. Rightly or wrongly, the profession of chartered accountancy has come to be recognised for this purpose, on the basis of its course curriculum and the professional training imparted. If the cost accounting profession wants itself to be recognised on the same footing then it must submit itself to the same process. But that, of course, cuts at the very root of its independent professional existence.

All this of course only makes the case only for a national accounting board unifying all professional accounting practice in the country. But that is in the future. For now, the ICWAI would do well to concentrate on expanding the scope of cost standards and such other professional development activities. The institution has, of late, attracted a lot of negative publicity through the misadventures of its Council members. It should focus on an image makeover so that public misconceptions about itself and its functioning are corrected. These should be the priority of the new president of the Institute.

Send this article to Friends by E-Mail

Stories in this Section
At no cost

Reality check on development
From drought to fiscal emergency
The politics of interruptus
A simple test on `current repairs'
Neither usual nor ordinary
Too late, too early

The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | Home |

Copyright 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line