Institute of Cost Accountants of India (ICAI) has said that the proposed rules to relax the cost audit mechanism for companies would adversely impact the economy, the corporate sector as well as cost accountants.
In November, last year, the Corporate Affairs Ministry had issued draft rules on cost audits under the new companies law wherein the threshold limits for companies required to carry out cost audit has been increased.
The threshold limit for net worth of companies has been increased to Rs 500 crore from existing Rs 5 crore, while that for turnover has been raised to Rs 100 crore from Rs 20 crore.
As per the Northern India Regional Council (NIRC) of ICAI, while the Companies Act, 2013 increases the scope of cost audit by including the service sector it erodes the existing scope of cost audit for manufacturing sector.
"New Draft (Cost Audit and Cost Record) Rules, fail to reflect vision, fix responsibility and accountability and if implemented will be a huge setback for collection of revenue and will encourage manipulations and growth of economy," NIRC said today.
The council has raised concerns that if "statutory maintenance" of cost records for companies is relaxed vital information will not be available to various stakeholders like Competition Commission of India, Central Excise and Customs, Income Tax Department, Directorate of Anti Dumping, among others.
"Cost Audit mechanism is a tool which helps the government in reducing the prices of essential commodities," NIRC said.
Further, it said cost audit helps in, tariff determination, free trade agreement, consumer protection, corporate governance as well as keep check on predatory pricing.
