Asim Saha
Cost audit is basically & purely audit of resource utilization and an effort to assess value addition. Through cost audit India will be low cost HUB of manufacturing activities. This will help Indian Government to attract huge investment from outside. Every Goods and services manufactured in our country have some input output ratio relationship. The science and technology wing of govt. of India has set some input out ratio in any product so that quality of the goods manufactured comply the prescribed standard in international market. In low wastage economy huge investment is possible both from inside and outside the country because of compliance of standard input / output ratio and proper checking through cost audit mechanism.
The industries should start thinking that all expenses are not cost to include in the cost of production. The govt. should have huge data base of cost of every product & services so that root cause of inflation can be tackled. The valuation of every product / services is the only measure in Indian economy from cost data to check inflation. Correct assessment of valuation is possible through cost audit / maintenance of cost records.
It is commonly said that the corporate are maintained cost data. But that records are for internal use and based on internal assessment. The audit of cost records will reflect the proper use of inputs and will also reflect the abnormal usage of inputs. This will help the investor to decide further investment based on cost competitiveness of the industries. Investment in any sector depends on sustain ability & growth opportunities. However, ability to sustain depends on cost saving / cost competitiveness of the management. Avoidance of non productive expenses by deleting from the cost of production will help the management to assess its position in the market.
Every company engaged in manufacturing excisable products are required to submit ER5 stating the input / output ratio. Cost audit is the only means to check the maintenance of standard input / out put norms of every goods / services produced in India and thereby avoidance of abnormal wastage of inputs which will help the industry to save and can maintain low price of its manufactured products. Consumption accounting of all resources are necessary and its audit is also justified in maintaining standard quality and price of that commodity. Some of the schools are of the opinion that cost audit will not serve any purpose to the govt. But take the example of medical treatment / education / consumer construction / consumer item including food sector in which govt. does not have authenticate data to ask the producers to check on the price for the common people. Earning of targeted revenue may fall behind if the valuation of the goods are not assessed through cost audit. Any govt. may go for drive to collect revenue from the nations / industries but it is also a burning issue to the govt. that how to control the inflation for the common people.
Valuation of all the goods and services is possible only when known ingredients of inputs and its cost of each are available to the regulator. In free market economy some observer are needed to feel the price movement of the goods and services available in the market. The observation of the price movement is possible only when the cost data are available to the govt. So the Govt. must know the fact “ COST”. In recently taken policy on manufacturing where huge employment is possible cost audit is necessary to check the performance of company.
If the Ministry of corporate affairs is of the opinion that cost data will not render any usefulness then we should target Ministry of Finance , Department of Expenditure , Department of revenue to convince them that valuation based revenue can only possible if proper cost data can make available to them . Another organization may be targeted that Centre for monitoring Indian Economy with proper cost data to predict correct future of the economy.
So Indian economy needs to have continuous cost audit to attain its maturity level of sustainability and inflation controlled status for future growth and then only India will get huge Foreign Investment.
Sir,
Rally a good article on the importance of cost accounting and cost audit
Good article published. Thank you Mr saha.The sooner the industry people realises , better for their own survival and growth through which our country will be benefitted. For the welfare of the people of the country Govt should mandate cost audit and maintenance of cost records for every industry to control inflation, wastages of resource utilisation and sickness of the industries, NPA of Bank etc.
The compliance burden is increasing day by day. In the midst of Statutory audit, tax audit, compliance audit, SOX audit, Secretarial audit……. etc and the list goes on forever. The business needs a congenial atmosphere and easy compliance laws. In view of these, we dont require anything called Cost audit. Businessmen know what their costs are. We dont need an auditor to go through the costs and certify. This is wastage of productive man hours.
I trully agreed with the article, the cost accountant can give big boost to the economy from its much prooven detailed reports and also can help country where Inflation is a big challenge to face by the government.
great article.. Govt sud understand it..