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The article is published in Business Standard June 02, 2008 by Ashish Bhattacharya

“Cost audit, which has not received due attention has the potential to support enterprise governance. In fact investors should insist for cost audit. In India cost audit exists for over four decades. But, it has not been used to its full potential. Till date, only 44 industries/products have been covered by Cost Accounting Record Rules, and cost audit orders have been issued in about 2,500 cases, covering about 2,000 companies.

In the era of price control and administered interventions, attested cost structure had a major role to play and hence the cost audit emphasised on this aspect. The cost audit had to play the key role of verifying and validating the cost figures in select industries before they were submitted to the government.

In the changed economic environment the emphasis should shift to efficiency review. The Ministry of Corporate Affairs has constituted an Expert Group to review the existing Cost Accounting Standards and Cost Audit Report Rules. Hopefully the cost audit in its new avatar will be effective in supporting the enterprise governance.

Some argue that cost audit has become irrelevant in a market economy. They are not correct. It is true that government control is unwarranted in a market economy. But, in a market economy, regulators are required to frame right regulations in the interest of the industry as a whole and also in the interest of the consumers.

Cost audit, supported by cost accounting standards, can provide relevant and credible cost and revenue data to regulators to support their decisions. Moreover, cost audit can provide relevant reports to the board of directors to strengthen its oversight function. Therefore, in a market economy, cost audit with changed emphasis on efficiency is as relevant as it was in a controlled economy.

In an environment where ‘stakeholder theory’ of corporate governance is still rhetoric and management focus is on capital market, cost audit will help to protect the interest of stakeholders including investors. It will also help optimal use of national resources”

Find out more on Business Today on article written by Ashish Bhattacharya

Cheers,

Santosh Puthran

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I have been stumbling lot of accountancy websites today. Then I stumbled upon the online practising members of ICWAI directory and provided a review.

The stumbleupon link is http://www.stumbleupon.com/url/www.myicwai.com/practisingmembers.asp

I would request you to provide your review on the above link. The more the reviews on the link above, the search engines will bring up the results for practising accountants in India. (Stumbleupon is very powerful tool.) In few days, practising accountants will notice increase in telephone calls or emails for new assignments.

The online directory should include following details for the benefit of practising members:

1. Contact telephone number should always be +Country code + STD + Local number: If anyone calls from abroad, he/she should have ready access to your telephone number.
2. Website: A column should be added to include website of practising members. Our institute has guidelines for maintaining the website. Website is a window for prospective clients to know about your firm. It does not cost much. Why not maintain one ?
3. Email ids: Please dump your vsnl.in, yahoo.com or hotmail.com as your email ids. It looks unprofessional. You email should represent you. Decide which email looks professional - prem.chopra22@hotmail.com or prem@chopraassociates.com ?
4. Locate on the Map: This is quite useful when prospective clients want to meet you. Locate ICWAI, HQ

Practising Cost Accountants in India, please update your information on the online directory. Opportunities will be knocking at your doors.

I stumbled on the following websites too. Please write your reviews on the links below:

ICWAI : http://www.stumbleupon.com/url/www.myicwai.com/
ICWAI on Wikipedia: http://www.stumbleupon.com/url/en.wikipedia.org/wiki/ICWAI

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Regards,

Santosh Puthran
Be my friend on Stumbleupon
http://talk2santosh.stumbleupon.com

What is StumbleUpon ?

StumbleUpon uses / ratings to form collaborative opinions on website quality. When you stumble, you will only see pages which friends and like-minded stumblers () have recommended. This helps you discover great content you probably wouldn’t find using a search engine. Read More

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Definition : An announcement made by a public company in advance of its earnings announcement indicating that profits will fall short of previously expected levels.

A recent news item

The owner of Currys and PC World, UK , DSG International, has issued a profit warning after poor Christmas trading. DSG said it had seen lower demand for laptops, and profit margins had been hit after it cut prices to drive sales of flat panel televisions and other electrical goods.

“Profit margins remain pressured via a combination of increased promotional activity and consumers’ growing addiction to sale prices.” Read more

In Christmas, when you look around in UK, you will find stores offering discount like upto 50%, buy one get one free, buy one get one half price and special prices only for two days. The online prices are comparatively cheaper than the in-store price.

Christmas Sales

The rules are changing and ever evolving:

• Sales prices drives the shoppers to buy
• Latest technology products are priced at premium
• Products become obselete faster. So cannot stay on the shelf longer
• Sourcing and manufacturing : Made in China/India/Vietnam/Thailand/Bangladesh to manufacture at cheapest possible costs.
• Focus on online sales that bring down costs of sales
• Investments in IT infrastructure
• Government investments on infrastructure conducive to the business.

The role of management accountants has changed with the change in business. Helping and advising the business by analysis in one of the objective. The best possible product mix or products giving maximum contribution etc. UK has a mature market and the retailers have a robust information system with enchanced focus on management accounting.

India is a developing market. Since the market is not competitive, the benefits are not passed on to the customers. Since the choices are limited, you buy what you get. The mindset so far has been to shops with mom and pop store who make profits themselves and cheats on taxes.

The limited competition or seller applies to white goods. Take for eg. Eureka Forbes Vacuum Cleaner is Rs 7,390 (£ 95.00) whereas a Electrolux vacuum cleaner is £ 49.99 in UK. The best ones are priced at over £ 100. Consumers can visit websites like www.pricerunner.co.uk or www.kelkoo.co.uk and find out which retailer is selling at the lowest possible price.

Current trend for organised retailing is a good indicator of growth. People have the impression that it will drive the prices high. With a healthy competition, the prices will be contained. The price of Van Heusen shirt is same at Shopper Stop and a small retail outlet. Look who is making more profit. The consumer gets a good retail experience in Shopper Stop and government gets its share of taxes.

In India, management accountants have to widen their scope from being focussed on “Cost Audit” to playing an active role in upcoming industries and helping the business. As the market becomes mature, you will find in India, companies are going to issue “profit warning”.

Any questions or comments, I am happy to answer on the blog

Regards,

Santosh Puthran

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PS: There is a remark in one of my post on “India’s Retail Policy Attacked” - Share your thoughts

“You are looking forward only for few years, less than 5 years. Here by looking up to 25 - 30 years the impact will be highly dangerous. I will point out :-

1. The selling price will be competitive at the earlier stage this is to attract the consumers to the store. they will even give 25 -30 % discounts on all products. surely they will attain their major goal. after attaining the organizational goal, the real game started, ie. by the factor of time, all other retail organisation may be packed up or may be under pressure, this time the dragon arrives and hike their prices as per the management policies!! it may be 50% may be 60% , This time consumers will be in hands of ultimate dragon, couldnt able to purchase even primary articles. For a comment some will say what Govt for?, still no fixed polices are there in India, to regulate the prices.

This time the fixed income & agricultural sector people will be under pressure. rest u can decide!! “

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“Tesco Ireland and Hibernian are the two latest companies to joint the Institute of Chartered Accountants in Ireland (ICAI) employer partnership scheme.

The employer partnership scheme’s objective is to promote best practice in learning and development by working with employers to help chartered accountants employed in their businesses fulfill their CPD requirements.” Click here to read more

I feel that ICWAI should have tie ups with the employers in India, so that students pursing Cost & Management Accountancy will be focussed in this direction. Similarly the profession will get a boost since there will be a partnership by ICWAI with the industry. The career path of management accountants will be guided to rise in the corporate ladder.

Vote on the poll and share your thoughts

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Regards,

Santosh Puthran

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Such sheer size and complexity create significant challenges to comptrollership, financial management and accountability, he adds, during the course of a recent e-mail interaction with Business Line.

CMA has ‘more than 37,000 CMAs and 10,000 CMA students,’ as www.cma-canada.org informs. And as the new chief of the body, when Mr Monk spoke of his priorities in the latest issue of www.managementmag.com, first came the aligning of ‘major governance initiatives,’ and second, the continuing ‘to cultivate relationships with international associations with similar values and services to those of CMA Canada.’

Click here to read more

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Regards,

Santosh Puthran

I received a distress email from a ICWAI student:

Question:

“Actually this June’2007. I appeared in Stage-3. But, could not cleared as i run short of the aggregate. My total was 170 Marks out of 400. I m planning and already started my preparation for both the stages. The main problem that i m facing is that i m not able to understand the portion of Valuation Management & Management Accounting Strategic Management. I m not at all getting the material for the same. I m pretty much tensioned. Pl. help me.”

My Suggestion was:

When I was appearing for ICWAI exams, I used to refer to lot of books. Got confused and then did not pass the examination.

Then I bought the institute study notes (which is around 200 pages) for each subject. It explained all the concepts about the subjects, referred previous examination question/answers and then went to the examination. I passed.

So do not get tensed. If i were you, I would study from institute study notes as my primary reference point.

Does anyone has different ideas…. how to study…. please share.

Regards,

Santosh Puthran

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Indian political think tank feels that large retailers will put small shop owners out of business. In the past as well as present these small shop owners make huge profits without a healthy competition and evade taxes by selling without invoice.

Don’t you feel that Indian consumers should be treated fairly and government get the tax revenue..

One of the reason the taxation is quite high is probably there is so much tax evasion. When the business is organised, there is a seperation of ownership and management which promotes good corporate governance and accounting. The checks and balance will make it difficult to evade taxes.

A healthy competition with both Indian and foreign players would be beneficial for Indian consumers who have been suffering and paying more because of non competitive retail sector.

With Globalisation of accountancy profession and harmonisation of practices across globe it has become imperitive to ponder upon a comprehensive set of practices addressing all the stakeholders and framing country(economy) neutral policies and practices which will render optimum reporting benefits.

While Book-keeping and financial statements have always been given prominence in the accounting sphere for the reasons best known as adequately addressing owners needs the pitfall in the system was well visualised during World-war II and the beginning of Cost Accounting practices have laid path to what is today known as management accounting.

Management accounting is Global term employed to address various issues primarily starting with determination of cost of product , process and service Business process re-engineering mechanism,triple bottomline,CSR,BSC, and the entire gamut of understanding the business in terms of resource consumption,measuring output in financial and non-financial parameters etc. It includes project accounting,investment decision,planning et al.

Thus one can see management accounting as a comprehensive set of facilities that addresses issues involving double-entry bookkeeping but not limited financial statements and all such effort to monitise or quantify a scheme of things in vogue either by enterprise or government for a profit or not-for profit motive.

Blog posted by RV

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