All manufacturing companies with a paid-up capital of Rs 50 crore (Rs 500 million) or more will be required to conduct a statutory cost audit if the recommendations of an expert committee appointed by the ministry of corporate affairs are accepted.
This would bring between 20,000 and 25,000 firms under the ambit of cost audit. At present, only 44 industries and specific products within an industry come under cost audit. This covers around 6,000 firms but cost audits are conducted in only about 2,200 of these.
The proposed change will have a major positive impact on the profession because more firms will have to mandatorily appoint a cost auditor and have cost accounting records audited on an annual basis.
At present, about 1,700 cost accounting professionals practise in India against 42,000 qualified people.
"We hope the recommendations are accepted. We don't see any opposition because all the stakeholders were represented, including from industry bodies, in the expert committee," said Kunal Banerjee, president of the Institute of Cost and Works Accounts of India, which regulates the cost accounting profession in India.
The ministry will soon put up the expert group report on its website to seek comments from all stakeholders.
ICWAI has been demanding an expansion of the scope of cost audits in India, on grounds that the term 'class of companies' in Section 209 (1) (d) of the Companies Act means the entire set of products produced by manufacturing firms, not just a few sectors or products specified by the central government.
At present, the central government selects companies within the 44 industries and orders cost audits on an annual basis. If the new proposals come through, all firms will have to maintain cost records and undergo cost audits.
Anurag Goel, secretary in the ministry of corporate affairs, said the expert committee has made valuable recommendations with "the objective of making Indian industry more competitive while appreciating the need to position cost audit in the enterprise governance structure."
Banerjee said the change would only mean interpreting a particular section of the Companies Act, so there is no need for parliamentary approval. "An executive order is enough to bring about the change," he said.
With the model code of conduct in place because of impending general elections, however, a final decision on the recommendations will have to wait till the new government takes charge.
