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New Delhi , Nov 19

DO Indian companies need cost audit reports as detailed as they are today? This may seem like a routine question asked by a section of India Inc.

However, it evoked strong reaction from the cost accountant professionals at a workshop on `Why do we need cost accounting and new cost audit report rules?' organised here by the Confederation of Indian Industry (CII).

The cost audit professionals voiced their concern over the fact that they represent a weak pressure group compared to other professional bodies like the chartered accountants', it was easy to brush them aside.

The professionals argued that "today entire business activity revolves around cost, quality and delivery - be it manufactured goods or services. India Inc is already on its mission of restructuring on the above parameters for being world class and they need partners in this mission."

India Inc was of the opinion that audit of cost accounting records should not be made mandatory, as competition will ensure that every effort is made to strengthen the area of cost management.

The professionals, however, held the view that with the economy moving away from being a centrally controlled model to a competitive relatively free market model, the role of efficiency review from angles of quality, cost and delivery has assumed utmost importance today.

The chamber said cost audit, which is more like a post-mortem in nature and usually a year-end exercise with filling up some schedules and reconciliation work, does not serve any purpose to the industry.

In fact, CII felt that it did not add any value to the cost analysis usually undertaken by companies on ongoing basis. "There is a need for a continuous and dedicated effort to upgrade the system of cost management so that the industry could be benefited from such an exercise," they argue.

"Also, another major issue, which can be detrimental for the industry is the cost audit report in its present form. It carries strategic data and information about the cost of production under different cost categories, cost of sales under different categories, sales realisation and margin in respect of the products. These are of vital importance for the survival of the companies. It can be subject to misuse leading to decline in the competitive edge of companies," the chamber pointed out.

Countering the views of the corporate India, the Institute of Cost & Works Accountants Of India (ICWAI) members said, "the question before us now is how the objectives of cost audit can be revisited to suit corporate governance and evolve related practices with or without the required legal support."

Mr Rajiv Mehrishi, Joint Secretary, Department of Company Affairs (DCA), said "The issue is not whether do we need cost accounting, but whether we need to mandate it under law. In fact, the question stands for other services also provided by a company secretary or an auditors."

Some of the key speakers at the workshop were Mr Subodh Bhargava, Past President, CII, Mr Arun Bharat Ram, Vice-Chairman of SRF Ltd, Mr A K Kapoor, Advisor (Cost), DCA, and Mr Chandra Wadhwa, Central Council Member, ICWAI.

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