Chartered accounts win!

 

 

The Institute of Cost & Works Accountants of India (ICWAI), one of the last three All India Institutes still remaining at Kolkata, is all set to shift to Delhi. The shift, interestingly, is motivated by a strange logic: to be in closer proximity with the power lobby at the Centre! However, many of the members fear a hidden agenda behind amalgamating the ICWAI with The Institute of Chartered Accountants (ICAI) at Delhi, where now cost accountants will be swallowed by their bigger counterparts, the chartered accountants.

Since it is being felt increasingly difficult to feed the growing number of practicing chartered accountants, it is now necessary to substantially take away the market of practicing cost accountants, disclosed sources close to ICAI, speaking on condition of anonymity. The CAs will do all the work, including those earmarked for cost accountants, while the latter can be junior partners or employees of chartered accountants in multidisciplinary firms now being envisaged in the Limited Liability Partnership Bill 2008 tabled recently in the Parliament.

The Bill seeks to dilute, or eliminate, the provision of cost audit by cost accountants. For instance, in Clause 131(2) of the Bill on Statutory Cost Audit, the very ‘qualification’ of cost auditor has been omitted. Clause 131(5) of the Bill specifies that ‘qualification’ of general auditor (financial auditor) will also apply to cost auditors and such ‘qualification’ of auditor is specified in Clause 124(1). And what is that qualification? “A person shall be eligible for appointment as an auditor of a company only if he is a chartered accountant in practice”. It means chartered accountants will now do cost audit, replacing cost accountants!

The provision of statutory cost audit by Cost & Management Accountants (CMAs) in the present Companies Act, now covering 44 industries, provides an independent review of costs and cost management efficacies of corporates.

This issue was discussed during a meeting of the general members of Eastern India Regional Council (EIRC) on November 1 at Kolkata where a strongly worded resolution was adopted in support of retaining the exclusive right of CMAs to do cost audit. Interestingly, soon after this resolution was highlighted by the media, Kunal Banerjee, ICWAI president who is also an ICAI member (a former practicing CA), slapped show case notices on EIRC vice president and treasurer asking why disciplinary action should not be taken against them for airing their views – which he found to be in “bad taste” and which had “damaged the cause of the Institute to a great extent” – to the media. This show cause notice has come as a surprise to many members who wonder if the ‘cause of the institution’ could be helped by abolishing CMAs’ right to do cost audit, and if the ICWAI president was more inclined to serve the interests of chartered accountants, even if it is at the cost of CMAs. In the ICWAI Council, four out of five government nominees are chartered accountants.