While financial audit serves the interest of the shareholders, we need cost audit for catering to the needs of the Government, the regulatory bodies, and the society at large, argues ‘Social Utility of Cost Audit’ from the Institute of Cost and Works Accountants of India (www.eircoficwai.com).
Describing ‘statutory cost audit’ as a unique legislative innovation of India, the foreword by K. K. Sarkar emphasises that cost audit is not just for fulfilling the requirements of a ‘control and command economy of the past.’ It is essential for cost effectiveness and economic efficiency of organisations that is key for survival and prosperity in a globalised and liberalised competitive world, he reasons.
The publication traces the debut of statutory cost audit to 1965, when the Companies Act was amended to introduce Section 209(1)(d) for statutory maintenance of cost records in selected industries and their audit under Section 233B. “In the mid 1960s and 70s, in line with the prevailing industrial policies, statutory cost audit served the cause of the public sector, for administered pricing as well as optimum utilisation of resources initially financed by the state exchequer.”
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The authors aver that the debate on the utility of cost audit reflects the conflict between the owners and other stakeholders, between the short-term and long-term interests. Cost audit can play a useful role by converging the society’s goals with those of the management, in the interest of better resource utilisation, the publication notes.
Forceful presentation.