The Hindu Business Line : Govt's special audits now open to ICWAI members

MEMBERS of the Institute of Cost and Works Accountants of India (ICWAI) will be eligible for special audits ordered by the Government in line with the concept paper on Companies Act.

ICWAI members, said Mr P.C. Gupta, Minister of State of Company Affairs, will now have the same status as members of the Institute of Chartered Accountants of India, at least in the matter of special audits. This will help them widen their scope of operations, he told newspersons.

The Minister also urged cost accountants to help restore people's confidence in corporates. The past two scams on the stock exchanges have eroded the common man's faith in the system - an issue that needs to be addressed by all stakeholders.

The idea is to take enough precautions, so that wrongdoers do not find it easy to manipulate the legal system in future.

The Institute has welcomed the Government's stand on the matter. According to Dr H.R. Subramanya, President of ICWAI, the inclusion of cost accountants (for special audits) will help them obtain more mandates from the authorities. "We hope to gain substantially from the proposal," he said.

The need for special audits may arise because of a number of reasons, including when the Government feels that the affairs of a company are not being managed in accordance with sound business principles or prudent commercial practices or when the company is deemed to be managed in a manner that is likely to cause serious injury to the interest of the trade, industry or business to which it pertains.

Company managements that indulge in insider trading or market manipulation may also see special audits of their books, to be conducted by professional accountants. It may be mentioned here that the concept paper has underlined that the special auditor shall have the same powers and duties in relation to the special audit as an auditor of a company has, under a relevant Section.

However, the special auditor shall (instead of making his report to the members of the company) make his report to the Union Government.

The concept paper, Dr Subramanya said, has sought to simplify the existing set of provisions. Compared to more than 650 Sections in the Companies Act 1956, the new draft has only 289 sections. This has been made possible by partially blending some of the sections.

Definitions, which are actually dispersed all over the existing Act, have been consolidated (in section two), while the arrangement of various segments has been rationalised.

ICWAI, he added, is working towards issuing various cost accounting standards. A few standards have been already issued and the Institute has drawn up a list of topics that also merit similar action.

Incidentally, there are no common globally known cost accounting standards, which can be taken up in the Indian context.

ICWAI, meanwhile, has reiterated its position on changing its name to the `Institute of Cost and Management Accountants of India' in line with the trend that is seen in other countries.

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