This article throws light upon the top three responsibilities of a cost auditor. The responsibilities are: 1. Professional Responsibilities 2. Ethical Responsibilities 3. Legal Responsibilities.
Responsibility # 1. Professional Responsibilities:
The Council of the Institute of Cost and Works Accountants of India has cast upon the cost auditors the following nature of responsibilities.
(i) Responsibility to clients and confidentiality:
He should observe the principle that information about a client’s affairs acquired in the course of his professional work must not be disclosed unless he obtains the client’s consent except to the extent that he has a legally established duty or right to disclose or that he is given specific authority to disclose.
He should observe the principle of confidentiality i.e. he shall neither use nor appear to use confidential information, acquired in the course of his professional work, for his personal advantage or for the advantage of a third party. He should ensure that the principle of confidentiality is faithfully observed by his employees or assistants.
(ii) Responsibility to colleagues:
He should not solicit business directly or indirectly.
He must, when approached by a client of another cost auditor to render services or advice of a special character, communicate to the other cost auditor of the circumstances.
He, when engaged for services under a reference from another practising member, shall not go beyond the extent of that engagement without consulting the member who initially referred the matter to him.
He should, in all cases, make a communication to the other member or cost auditor before accepting the appointment.
(iii) Professional competence and technical standards:
He should, when accepting a professional engagement or occupation, ensure that he has the necessary professional knowledge, skill and competence to carry out the work with reasonable care and diligence, and in conformity with the professional and technical standards, promulgated by the professional body or state legislation or the instructions of the client in so far as they are not incompatible with the requirements of integrity, objectivity and independence.
He has also a continuing duty to maintain his professional knowledge and skill at a level required to ensure that his client receives the advantage of competent professional advice based on the up-to-date developments in practice, legislation and techniques.
(iv) Responsibilities to practice and profession:
In case a cost auditor, either as an individual or in his firm name, maintains a branch office or offices in India, each branch office shall be under a separate change of a member of the ICWAI.
He is guilty of professional misconduct if:
a. He allows any person to practice in the former’s name or allows such person to sign any financial or cost statement or certificate on his behalf unless the latter is a member in practice and is in partnership with or employed by the former.
b. He pays, allows, agrees to pay, directly or indirectly any share or commission or brokerage in the fees or profits of his professional business to any person other than a member or a partner or a retired partner or legal representative of a deceased partner.
c. He engages in any other business and occupation excluding those allowed by General or Specific Resolution of the Council of the Institute.
d. He certifies or submits in his name or in a firm name a report of an examination on the financial or cost statements, unless examination of such statements and related records are done by him or by a partner or employee of his firm or by another practising member.
He should restrict himself to the use of trade or firm name to proper name and should not adopt any other name.
He must ensure that his firm name is not fictitious, indicative of specialisation or misleading as to the type of organisation.
Responsibility # 2. Ethical Responsibilities:
When a practising member (including a cost auditor) performs or renders services in a country other than his home country (i.e. across international borders), it becomes a necessity and a responsibility for him to know which ethic requirements he should follow. In any case, he should carry out his professional work in accordance with the technical standards and ethic requirements relevant to that work.
He is strictly prohibited in soliciting of clients and professional work, personal communication and interview, responding to tenders or advertisements inviting quotations for professional work, sub-contract agency work and canvassing.
He should not offer or render professional services on a fee as a percentage of profit or under an arrangement whereby no fee will be charged unless a specific finding or result is obtained or where the fee is otherwise contingent upon the findings or results such services.
He should not obtain professional work by quoting a fee lower than that charged by the cost auditor previously carrying out that work.
He should not accept gifts and services from a client, or hospitality incommensurate with the normal courtesies of social life.
He is prohibited in advertising his own professional attainments and services, using any designation or description other than the university degrees or membership of recognised professional Institutes or other titles as may be permitted, and in making publicity to appointment as an auditor.
Responsibility # 3. Legal Responsibilities:
The Companies Act cast upon the cost auditor the following nature of responsibilities:
(i) Qualification and appointment:
He must ensure that he is qualified to function as a cost auditor, by holding a certificate of practice, within the meaning of the Cost and Works Accountants Act, 1959. A firm whereof all the partners practising in India are qualified as aforesaid and eligible to be appointed by the firm name as the auditor of a company, any partner so practising must act in the firm name.
He must ensure that he is not attracted by any of the disqualifications under Section 226(3) of the Act which specifies that the persons, such as a body corporate, an officer or employee of the company, a person who is a partner or who is in the employment of an officer’ or employee of the company, shall not be qualified for appointment as auditor of a company.
He must not be indebted to the company for an amount exceeding one thousand rupees or he must not have given any guarantee or provided any security in connection with the indebtedness of a third party to the company for an amount exceeding one thousand rupees.
He must not be a director or member of a private company.
He must ensure that his appointment as a cost auditor of a company is within the limits as to the ‘specified number of companies’ as explained under Section 224 (1-B) of the- Companies Act, 1956.
(ii) Other Obligations:
The measure of an auditor’s responsibility depends upon the terms of his engagement, either by special contract or as contained in the Articles.
The cost auditor must make himself acquainted with his duties under the Companies Act, and the responsibilities under the Cost Audit Report Rules, 1996, and also with the nature, scope and extent of application of the cost accounting records rules relevant to the products for which he has accepted the audit assignment:
His responsibility is not to confine himself merely to the task of verifying the arithmetical accuracy of the Annexures and Proforma of cost statements, but to inquire into their substantial accuracy and to ascertain that the statements were properly drawn up so as to depict reasonability in arriving at the costs of individual products.
He is duty bound to see what exceptional duties, if any, are cast upon him by the Articles of the company.
He owes his duty of care primarily to the company, with whom alone he is in any contractual relationship.
He must send his cost audit report to the Central Government and forward a copy of the same to the company, in accordance with Section 233B (4) of the Act.
He is liable to pay damages if on account of his breach of the statutory duties or wrongful acts, the company suffers loss. He is also held responsible to the Central Government who are misled by a false information or statement which has been certified by him as correct.