Black Law for Economy Draft Companies (Cost Record and Cost Audit) Rules, 2013 issued by the Ministry of Corporate Affairs would hurt the economy, the corporate sector and the profession. The Draft Rules fails to reflect the necessity and importance of mandatory requirement for maintaining cost accounting records and cost audit in a market economy, most players in which are yet to make the best use of cost accounting information to achieve competitive advantage and to survive on the face of increasing competition. In formulating the Rules the government has totally ignored the recommendations of the Expert Group constituted by the Ministry of Corporate Affairs, Government of India, which emphasised the need for companies, irrespective of scale and industry, to have an adequate cost accounting system to support decision-making. On the basis of recommendations of the Group the scope of the law relating to the maintenance of cost accounting records and cost audit was extended. The whole process will be reversed if the Draft Rules is not modified. This reversal will hurt shareholders and other stakeholders, who do not participate in day-to-day management. It is well established that managers act opportunistically and they take short-term view and benefit themselves even when the going is bad. In absence of reliable cost accounting information, independent directors will not be able to assess whether the company is moving towards achieving the optimal productivity of resources. An effective cost accounting system in itself is a risk management mechanism - risk that the company will find itself vulnerable from sudden onslaught of competition or increase in the cost of inputs. Cost Accounting system also throws data that are used for detecting frauds. An effective cost accounting system supports the corporate governance mechanism. It appears that the Draft Rules is formulated on the assumption that the government should ensure integrity of cost data only for products that are of strategic importance or which are subject to regulations or which are purchased by government department (Railways) or purchase of which are funded by the government, and natural resources (mining and oil exploration). The Rules does not answer the question why integrity of cost information is not important for independent directors and the Board, which oversees the executive management. As soon as the news flashed and members heard of it, they rushed to the NIRC office. By 3 pm the same day some 200 plus members had gathered outside the gate. CMA Vijender Sharma, RCM has been on dharna since the morning of 21st Nov outside the gate of the institute. He was perched on the ground sitting on a cushioned white sheet along with other members. Its true, friends. Injustice has been done to us by the government. The new draft rules if passed by the parliament will not only endanger the future scope of the CMA profession, it will create a commotion in the entire nation. It will mess up the whole economy. Our nation is moving backward instead of forward, due to this inhuman act and our economy will surely collapse. We all know that corruption has been on limelight due to the fodder scam and MBBS admission scam. We CMAs play an important role in checking corruption cheating and forgery and in saving crores of rupees to the national exchequer. The government is aware of our role. When the govt has realised our importance in the last few years and has increased our scope and responsibility then why this sudden change? It is a question that comes to everyone’s mind. The apex body of our profession and NIRC called urgently a Disaster management meeting today, inviting members to the main auditorium, scope complex, lodhi road at 3 pm. The meeting lasted till 6.15 pm. CMA Chander Wadhwa, past president presided over the meeting and started the meeting with the background of the situation through a presentation. The meeting was attended by me, Saurabh Srivastava, Vice chairman, Sandeep Bhatt, RCM, Vijender Sharma, RCM and Ravi Sahni, RCM. Mr Wadhwa stressed the fact that a minimum of 20,000 comments on the new draft rules along with valid justifications must go from NIRC alone to the MCA. Other chapters and regions across the nation are also planning to send a good no. of comments. A sufficient no. Of RTIs are also proposed to be submitted so that the MCA realises the pain and effort in replying to the RTIs. In the meeting a number of members started showing their anger at the council members. They were told that the Govt negative mark was started 10 months back but the RCMs were not allowed to interact directly with the MCA. Shree Wadhwa chalked out the line of action. 6th dec is the last day for comments on the new draft rules. The following committees were formed with 5-7 members under a leader: Political committee (under chairmanship of CMA Sandip Bhatt) Media and communication Committee (under my chairmanship) RTI Committee (under chairmanship of CMA Vijender Sharma) Draft rule committee (under chairmanship of CMA Ravi Sahni) Technical Committee (under chairmanship of CMA Navneet Jain) CMA Saurabh Srivastava will be incharge of co-ordination of all the committees. All the committees are well defined in their roles. The media and communication committee will concentrate on social media like facebook, twitter by sharing daily updates and articles. Press release in newspapers in northern region will come under its purview as well. The technical committee comprises of senior practitioners who will share their expert knowledge and give their valuable inputs on the profession along with doing R & D work. The draft rules committee will assist members in sending their suggestion to MCA in an intelligent manner. After 10 days of vigorous activity, a second meeting of this kind is expected. Will keep updating you friends! Till next time. JAI HIND CMA Rakesh Bhalla 09779010685
Posted on: Sun, 24 Nov 2013 14:30:15 +0000
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