Financial Daily from THE HINDU group of publications
Thursday, Dec 12, 2002
Financial Daily from THE HINDU group of publications Thursday, Dec 12, 2002 |
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Corporate
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Auditing Cost auditors gear for shield against law suits Nilanjan Dey
KOLKATA, Dec. 11 AFTER chartered accountants, it could well be the turn of cost accounting professionals to contemplate securing safeguards against third-party action on cost audit reports. A general consensus on the issue seems to be forming in cost accounting circles, with the matter being taken up by a few leading names associated with the Institute of Cost and Works Accountants of India (ICWAI). It is not known at this stage whether ICWAI itself has taken a formal view on the issue. Cost auditors have not been subjected to any litigation so far. However, as a note that is currently being circulated among the constituents of an e-group formed by a section of ICWAI members points out, the possibility of being sued for damages by a lending agency (when a client turns sick) cannot be ruled out altogether. It may be mentioned here that a leading audit firm, PricewaterhouseCoopers, has already sought to bring in certain key phrases in its reports. These are expected to limit the confidence that banks (and other lenders) often have in these reports. The broad idea is to reduce the firm's liabilities that may arise in a situation marked by non-performing assets. The situation, according to sources close to the e-group, actually boils down to improving the `Form of Cost Audit Report'. It has been suggested that the format of the report, as prescribed in the Cost Audit Report Rules 2001, would need some modifications, depending on the circumstances of each company that has been audited. The format underlines auditors' responsibility, which is "to express an opinion and to give our observations and suggestions on these cost records and pro forma to the cost audit report based on our examination on test check basis." An auditor, it is felt, should state that he or she has not received any confirmation from external sources about defaults in payments due to government, FIs and banks, or about penal interest that may have been charged by them.
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