The Companies Act, 2017, after much fanfare, has now been enforced in Pakistan. The finance minister acknowledged and appreciated the good efforts of Securities and Exchange Commission of Pakistan (SECP) and its entire team of senior bureaucrats for bringing out such a valuable enactment which is a catalyst for progress and growth in trade, commerce and industry more particularly under the corporate sector. The Companies Ordinance, 1984 has now been repealed and replaced by the Companies Act, 2017. It was claimed that the new law will reduce the cost of doing business and will be highly instrumental in profit maximization of the companies engaged in production, manufacturing, processing and mining. However, the authors of the Companies Act, 2017 lost sight of the effective use of cost audit by ignoring to give it proper importance in the new enactment.
Under the repealed Companies Ordinance, 1984, the role of cost audit was not only fully recognized but given due importance because cost audit is a good tool to identify areas of cost inefficiency including, invisible losses which do exist but are not reflected in the books of account, hence such losses escape the attention of statutory financial auditors as well as management of the company. Although the Companies Act, 2017, contains the provision of cost audit under its sub section 1 of section 250, but its enforcement has been restricted and made difficult by the insertion of sub section 2 of section 250 of the same Act.
(The writers are Wasful Hassan Siddiqi and Mustafa Hussain Siddiqi from Karachi)
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