Maintenance of Cost records and periodical Audit-Relevance in Globalised environment.

Management Accountant-an accountant of the future for Governance-Both Corporate world and the Government.

There has been a strong debate around as to whether Cost records and Audit of the same has relevance in India in the liberalised economy.This has stemed from the fact that Cost Audit has already been seen in isolation.

The GOI feels that it has the exclusive right on Cost Audit,The Industry feels that the exercise is unnecessary and subserve its interest,Though industry agrees to have a proper Cost Management system in place they are averse of Auditing for obvious reasons.However Cost records and scrutiny of the same have evolved over the years and its utility has got stabilised.

The vision of the government has been that Cost Audit is relevant for Administrative controls on the industry functioning and that is the reason still Cost audit is ordered for products not for business.Industry is apprehensive that its production and process secrets will be leaked in the name of Cost Audit.

Industry however recognises the importance of a well established cost management system .

Basically any economy can be classified as Planned(Plan Driven) economy and an Free economy(where the market force drives the economic growth).They are loosely categorised as communist and capitalist economy.India has adopted middle path and accepted Mixed economy where private enterprise had a controlled growth.

While financial accounting records the transaction as Revenue,expenditure,Deferred/Capital spending, it is Cost accounting that identifies the importance analysing Cost and driving its efficiency to the last mile.It is cost accounting that recovers and studies the efficiency aspect of value addition.

The focus is shifted from cash profits ,to how such cash profits are earned and whether there is scope for improvement(Cost Engineering).

Globalisation of the economy means removing controls(Tarriff barriers) on movement of goods and services.Now this in essence means the most efficient producer across the world will rule over the product or services whether by operating from a single location(where transportation logistics come into play)or multi locational(Strategic placement of production and service facility).Efficiency is triggered by Cost control and reduction(Cost engineering),for this, records have to be generated and system put in place to identify, classify,and analyse costs to trigger efficiency of produce and service.In this sense no Government in the globalised economic activity can afford to neglect Cost Data ,so also no Industrialist will like to be left in the lurch ,with only financial data which do not talk about efficiency parameters.The policies and decisions of the global corporates are impacted with many issues, but the focus had been only on foriegn currency differentials while Cost of production and services took to the back burner, with protectionism, but with liberalisation of the economy and the concept of patronising all as against some, will compel the industry to rethink on Cost issues.

Liberalisation also means government is trying to drag itself out of business and business controls this being the case a question may arise why should the government still hang on to controlling Cost Auditors and their report.Answer is partly government should relook the entire issue and allow appointment of Cost auditor directly by the AGM and the auditor shall furnish the report of cost audit to the management of the Company .The government may instead call for classified reports or sections of such report from the management instead of the current practice of cost auditor furnishing the report to the government.This will allow lot of innovation in the functioning of Cost auditor,build confidence in the management and improve corporate governance.

Practically Liberalisation has brought us to an earlier situation where every industry is now being monitored ny the government through pricing authority.So in essence Mixed economy is retained and globalised while pure capitalist economy have witnessed change as a shift to mixed economic status and communist have breathed fresh air of capitalism it is India that has been stable for 50 years and its vision is not defeated.

The concept of stake holder,Corporate social responsibilty and triple bottomline all points to the narrowness in approach of financial statements.While Monopolies commision had been re-named as competition commision to suit the global needs and consumers awareness have resulted in many enactments,Cost as a prime value driver(Use,Esteem,Exchange,Cost) cannot be ignored.

Since any economic activity in a democratic setup is for and on behalf of all the citizens the myopic vision of restricting the performance indicators to owners will hardly sell for long.Every citizen have been defined as equal sharing unit in the geographical boundaries of a democratic set up reposed by adult franchise and they have all the right to know the value drivers of the entire economic activity.It is the responsibility of the representatives of the people in the legislature to ensure this happens.