SPECIAL FOCUS INSIDE COST ACCOUNTING CANNOT BE UNDERESTIMATED: JUSTICE LAHOTI theMANAGEMENT ACCOUNTANTTHE JOURNAL FOR CMAs AUGUST 2013 VOL 48 NO. 8 `60 COST AUDIT & COMPLIANCE l USEFULNESS OF COST AUDIT REPORT IN EXCISE AUDIT l NEW MECHANISM OF COST AUDIT AND COMPLIANCe – A SANJEEVANI l Costing ‘CARe’ while CARING COST The Institute of Cost Accountants of India (Statutory body under an Act of Parliament) www.icmai.in SPECIAL FOCUS INSIDE COST ACCOUNTING CANNOT BE UNDERESTIMATED: JUSTICE LAHOTI theMANAGEMENT ACCOUNTANTTHE JOURNAL FOR CMAs AUGUST 2013 VOL 48 NO. 8 `60 CONTENTS Cover Story: Cost Audit & Compliance COST AUDIT 898 906 916 & COMPLIANCE l USEFULNESS OF COST AUDIT REPORT IN EXCISE AUDIT Usefulness of Cost Costing ‘Care’ while The need for Cost l NEW MECHANISM OF COST AUDIT AND COMPLIANCe – A SANJEEVANI l Costing ‘CARe’ while CARING COST Audit Report in Caring Cost Audit in the present (Statutory body under an Act of Parliament) www.icmai.in excise audit scenario 910 AUGUST 2013 VOL 48 NO. 8 `60 904 Statutory 918 The Management Accountant, New mechanism maintenance of cost Rule 1-2-3 of costing official organ of The Institute of Cost Audit and records & Cost Audit of Cost Accountants of India, compliance – A established in 1944 (founder Sanjeevani member of IFAC, SAFA and CAPA) EDITOR CMA Dr. Debaprosanna Nandy 881 From the Editor’s desk 933 Tax Titbits [email protected] 882 President’s communique BANKING PRINTER & PUBLISHER 884 The Institute’s Action Plan 935 The global financial crisis: An aftermath CMA S C Mohanty 2013-14 President, The Institute of Cost 885 Our new President of shadow banking Accountants of India 12 Sudder Street 886 Our new Vice President CASE STUDY Kolkata 700 016 887 Chairman’s communique 941 Liquidity management in PSUs in and printed at 890 ICAI-CMA snapshots Hooghly Printing Co Ltd post-reform era: A case study of BHEL (a Government of India Enterprise) 894 Council committees 973 Institute News FINANCIAL MANAGEMENT EDITORIAL OFFICE 979 Admission to membership 947 An empirical study on the volatility of CMA Bhawan, 4th Floor, 84, Harish GREENEX Index (an Initiative of BSE) Mukherjee Road, Kolkata-700 025 SPECIAL FOCUS Tel: +91 33 2454-0086/0087/0184 923 National seminar on Inner 952 Intangible assets: Valuation and Fax: +91 33 2454-0063 Consciousness characterization The Institute of Cost Accountants of India is the owner of all the written 962 Relevance of forex products for mineral- TAXation and visual contents in this journal. rich states: A case study of Jharkhand Permission is neccessary to re-use 927 The Service Tax amnesty scheme any content and graphics for any 929 Two far-reaching case laws from God’s 967 Guide for cost conscious investors in purpose. Own Country Bhutan The Management Accountant technical data Advertisement rates Periodicity: Monthly Rs. US $ Language: English Back Cover 50,000 2,500 Overall Size: - 26.5cm x 19.5cm Inside Cover 35,000 2,000 Screens: up to 130 Ordy. Full Page 20,000 1,500 Subscription Ordy. Half Page 12,000 1,250 Inland: `600 p.a. or `60 for a single copy Ordy. Qrtr. Page 7,500 750 Overseas: US$150 for airmail or US$100 for surface mail The Institute reserves the right to refuse any matter of Concessional subscription rates for registered students of the advertisement detrimental to the interests of the Institute. The Institute: `300 p.a. or `30 for a single copy decision of the Editor in this regard will be final. AUGUST 2013 THE MANAGEMENT ACCOUNtaNT 879 PRESIDENT CMA Suresh Chandra Mohanty [email protected] The Institute of Cost VICE PRESIDENT CMA Dr A S Durga Prasad [email protected] COUNCIL MEMBERS Accountants of India CMA Amit Anand Apte, CMA Aruna Vilas Soman, CMA D L S Sreshti, CMA Hari Krishan The Institute of Cost Accountants of India (erstwhile The Institute of Cost and Goel, CMA M Gopalakrishnan, CMA Manas Kumar Thakur, CMA Dr P V S Jagan Mohan Rao, Works Accountants of India) was first established in 1944 as a registered company CMA Pramodkumar Vithaldasji Bhattad, CMA under the Companies Act with the objects of promoting, regulating and develop- Rakesh Singh, CMA Sanjay Gupta, CMA Dr Sanjiban Bandyopadhyaya, CMA S R Bhargave, ing the profession of Cost Accountancy. CMA T C A Srinivasa Prasad GOVERNMENT NOMINEES Suresh Pal, Nandana Munshi, Ashish Kumar, On 28 May 1959, the Institute was established by a special Act of Parliament, name- G. Sreekumar, K. Govindaraj ly, the Cost and Works Accountants Act 1959 as a statutory professional body for Secretary (Acting) CMA Kaushik Banerjee the regulation of the profession of cost and management accountancy. [email protected] Senior Director (Studies) It has since been continuously contributing to the growth of the industrial and CMA R N Pal [email protected] economic climate of the country. Director (Internal Control & Systems) CMA Arnab Chakraborty The Institute of Cost Accountants of India is the only recognised statutory profes- [email protected] Director (Professional Development) sional organisation and licensing body in India specialising exclusively in Cost and CMA J K Budhiraja [email protected] Management Accountancy. Director (Examinations) CMA Amitava Das [email protected] Director (CAT), (Training & Placement) MISSION STATEMENT CMA L Gurumurthy [email protected] The CMA Professionals would ethically drive Director (Continuing Education Programme) CMA D Chandru [email protected] enterprises globally by creating value to stakeholders Director (Finance) CMA S R Saha in the socio-economic context through competencies [email protected] Director (Administration–Delhi Office drawn from the integration of strategy, management & Public Relations) CMA S C Gupta and accounting. [email protected] Director (Research & Journal) CMA Dr Debaprosanna Nandy VISION STATEMENT [email protected] Director (Advanced Studies) The Institute of Cost Accountants of India would be the CMA Dr P S S Murthy [email protected] preferred source of resources and professionals for the Director (Technical) CMA A S Bagchi financial leadership of enterprises globally. [email protected] Director (Technical) CMA Dr S K Gupta [email protected] Director (Discipline) and IDEALS THE INSTITUTE stands FOR Joint Director (Membership) CMA Rajendra Bose • to develop the Cost and Management Accountancy profession [email protected] • to develop the body of members and properly equip them for functions Editorial Office CMA Bhawan, 4th Floor, 84, Harish Mukherjee • to ensure sound professional ethics Road, Kolkata-700 025 Tel: +91 33 2454-0086/0087/0184 • to keep abreast of new developments Fax: +91 33 2454-0063 Headquarters CMA Bhawan, 12, Sudder Street Kolkata 700 016 DISCLAIMER Tel: +91 33 2252-1031/34/35 The views expressed by the authors are personal and do not necessarily represent Fax: +91 33 2252-1602/149 Delhi Office the views of the Institute and therefore should not be attributed to it. CMA Bhawan, 3, Institutional Area Lodi Road, New Delhi-110003 Tel: +91 11 24622156, 24618645 Behind every successful business decision, there is always a CMA Fax: +91 11 24622156, 24631532, 24618645 WEBSITE www.icmai.in 880 FROM THE EDITOR’S DESK Greetings! Cover stories invited In the recent past, we have witnessed several accounting frauds throughout the for the September and world in big corporate houses. These corporate giants had reputed leaders and October 2013 issues experienced professionals, robust corporate governance and auditors who were of The Management renowned for quality deliverables. Despite this, the frauds committed by manage- Accountant ments through manipulation, distortion or misapplication of accounting practices had escaped the auditor’s eye. The cover story of the Sep- In view of this, the Ministry of Corporate Affairs has announced a number tember 2013 issue of The of circulars and notifications relating to Cost Audit, which have bought about a Management Accountant will be sea-change in the applicability of Cost Audit Rules. The maintenance of cost ac- on ‘Health sector: Imperatives counting records and cost audit have been prescribed for companies engaged in for CMAs’. The cover story manufacturing, production, processing, and mining activities vide the Various Cost for the October 2013 issue will Accounting Records Rules 2011 and Cost Audit Report Rules 2011. The concept be ‘Enterprise Risk Manage- of ‘Product group’ has been introduced for Compliance Reports and for reporting ment’. Articles on the topic are in various paragraphs under cost audit. invited from readers and authors The Performance Appraisal Report from a Cost Auditor contains useful infor- along with their passport-size mation and suggestions on capacity utilization, efficiency analysis, Utilities analysis, photos. Please send your articles Key-costs and Contribution analysis, etc. Companies can benefit hugely from this by e-mail to editor@icmai. report, which is based on the experience and expertise of the cost auditor. in followed by a hard copy to In such a competitive scenario, Cost Audit Reports can play a pivotal role because CMA Bhawan, Fourth floor, 84 it provides reliable and authentic feedback to the government and its various depart- Harish Mukherjee Road, Kolka- ments and agencies. The Cost Audit Report is an effective tool of information in the ta 700 025. Hard copies for the hands of directors on the board because it gives a clear-cut analysis of cost structure September issue must reach by and pricing policy, thus ensuring good corporate governance. It also provides per- 8 August 2013 and those for formance appraisal reports which help directors, the government, and investors to October by 8 September. understand the performance of the company. They also help the company get the cost and revenue information necessary to formulate and implement strategies. With increasing foreign trade coming under the WTO regime, the dumping of Attention products has become a serious issue in international trade.