Benefit to the government
i) Exercise price control on the essential consumable products of general consumption
ii) Determine correct rate of levy and taxes compatible with purchasing power of the general public
iii) Provide subsidy on the items of export to match with the international prices
Benefit to the companies
i) To know the correct cost of production
ii) To avoid visible and invisible losses suffered by the industry
iii) To increase productivity and profitability of the company
India has cost audit in most of the companies engaged in production, processing and mining. Therefore it has the competitive edge in almost all of the export items as compared to our country.
Because of the advantages, the repealed Companies Ordinance, 1984 had incorporated the provisions of compulsory cost audit under its section 258 read with section 230.
Subsequently, the Companies Ordinance, 1984 was repealed and replaced by Companies Act, 2017. Presumably, because of the vested interests of some of the industrial groups, the authors of the new Company Act, 2017 ignored the importance of the cost audit; and in spite of its recognition under clause (1) of section 250 of Companies Act, 2017, they tactfully impaired its enforcement under the same section by incorporating clause (2) of Section 250 of Companies Act, 2017. By this way, they killed two birds with one stone.
In view of the importance of the cost audit, we would request the Securities and Exchange Commission of Pakistan to kindly review the position of Cost Audit and restore its compulsory enforcement to the industry by deleting clause 2 of section 250 of Companies Act, 2017.
(The writers are Wasful Hassan Siddiqi, FCMA & Mustafa Hussain Siddiqui, FCMA KARACHI)