Slide 1 - ICMAP by dffhrtcv3

VIEWS: 2 PAGES: 24

									      ANTI DUMPING

COST AUDIT PERSPECTIVE




                PRESENTED AT TDAP-KARACHI.
                MUSHTAQ A MADRASWALA --
                EXECUTIVE DIRECOTR ICMAP
 INITIATION:
 The proceeding was initiated
  following a complaint lodged in
  November, 2002 by the Committee
  of Cotton and Allied Textile
  industries of the European
  Communities, called Euro cotton or
  complainants.

                     PRESENTED AT TDAP-KARACHI.
                     MUSHTAQ A MADRASWALA --
                     EXECUTIVE DIRECOTR ICMAP
   ISSUES:
        Co-operating Companies do not report
        representative domestic sales of the like
        products, for determination of normal value
        required by basic regulations

      The Commission then selected six biggest
        Pakistan Exporters, representing 32% of
        Pakistan’s volume of export of bed linen to the
        Community.The Exporters were asked to
        submit antidumping questionnaire


                                   PRESENTED AT TDAP-KARACHI.
                                   MUSHTAQ A MADRASWALA --
                                   EXECUTIVE DIRECOTR ICMAP
      Questionnaire submitted, were examined
       and verified for the purpose of a
       determination of dumping, injury,
    causality and Community interest.


      Verification visits were carried out, and
       for need of further examination of certain
       aspects of dumping, injury, causality and
       Community interest no provisional anti
       dumping measures were imposed.




                            PRESENTED AT TDAP-KARACHI.
                            MUSHTAQ A MADRASWALA --
                            EXECUTIVE DIRECOTR ICMAP
 PRODUCT CONCERNED:
      The product concerned is bed linen of cotton
       fibre, pure or mixed with man-made fibre or
       flax bleached, dyed or printed originating in
       Pakistan

 LIKE PRODUCT:
       During investigation, it was examined whether
         cotton typed bed linen produced by industry
         and sold on the Community market, as well
         as cotton type bed linen produced in Pakistan
         and sold on the Community market and on the
         domestic market were alike to the product
         concerned.


                                   PRESENTED AT TDAP-KARACHI.
                                   MUSHTAQ A MADRASWALA --
                                   EXECUTIVE DIRECOTR ICMAP
The investigation, conclude with view although there
were in some instances differences between product
types product in the Community and those sold for
Export to the Community, there were no differences
in the basic characteristics and uses of the different
types and qualities of bed linen of cotton type fibre.
Therefore, the product manufactured and sold in the
domestic market of Pakistan and were exported to
the Community from Pakistan as well as the product
manufactured and sold in the Community by the
Community producers are considered as like
products within the meaning article ‘(4) of the basic
Regulation.

                               PRESENTED AT TDAP-KARACHI.
                               MUSHTAQ A MADRASWALA --
                               EXECUTIVE DIRECOTR ICMAP
Pre-verification of Analysis submitted by the sample
Exporters.
        Export prices with the Cost of Production reported
         by each Company, reveled that profits on sales of the
         product concerned to Communities ranged from 20% to
         40% per Company, expressed as % of turnover.
       These margins were furthermore in sharp
        contract with the average negative profit
        margins around 10% on turnover reported by
        the same Companies for sales of the product
        concerned to other Countries, in contrast to
        the 1.6% profit margin on turnover on other
        similar business

       The audited Accounts witness 5% profit margin.


                                      PRESENTED AT TDAP-KARACHI.
                                      MUSHTAQ A MADRASWALA --
                                      EXECUTIVE DIRECOTR ICMAP
CONCERNS

        All information available indicated that the
         reported figures were overestimated and
         given the fact that export prices were in line with
         Euro stat, there was a reasonable presumption
         that this was a consequence of an underestimation
of the reported costs of production for the product
concerned
        Despite submission by the company that
         detailed cost accounts for the product
         concerned it was alleged on spot that no
         such accounts or supporting documents
         were available


                                   PRESENTED AT TDAP-KARACHI.
                                   MUSHTAQ A MADRASWALA --
                                   EXECUTIVE DIRECOTR ICMAP
          No substantiating evidence as normally kept in the
           companies record, for verification of reported cost of
           product concerned.

          Reasonable reflection of the cost associated with
           the production and sale of the product concerned
          Non-availability of information on costs of
           like product exported to other countries.

          Accounting record were not in compliance to
           GAAP, specially inventory valuation
Remarks:   Information regarding costs and profit of the product
           concerned could therefore, not be accepted as
           reported, due to non-verification, and information
           provided wasfalse.
                                      PRESENTED AT TDAP-KARACHI.
                                      MUSHTAQ A MADRASWALA --
                                      EXECUTIVE DIRECOTR ICMAP
         COST AUDIT PERSPECTIVE:

The history of Cost Audit traces back to the period of 1st
world war, when a large number of contracts were awarded
on cost plus basis, which compelled the contractors to
maintain cost accounting records and keep the same, open
for scrutiny or audit by the Government.

The financial audit does not evaluate the performance of the
company with regard to cost of production. It has greater
emphasis on compliance of law.
 Cost audit lays emphasis on performance evaluation and
 with analytical review of cost data, detects the reasons of
 visible and invisible losses, inefficiencies, unusual wastages
 and cost variances with the past performance, and / or
 industry averages.
                                       PRESENTED AT TDAP-KARACHI.
                                       MUSHTAQ A MADRASWALA --
                                       EXECUTIVE DIRECOTR ICMAP
   By applying various management accounting techniques,
   cost audit results in reduced cost of production, added
   competitive advantage, and profit maximization.
   At the macro level, it improves tax collection, counter
   inflation, and give a fillip to dividend, investment and
   economic development
   Vital measure for cost containment policies in hyper-
   inflationary trends

           Sector producing items of mass use
           Loss making companies need to be subject to a
            thorough Cost Audit.


Cost Audit should be taken up both in letter and spirit.

                                       PRESENTED AT TDAP-KARACHI.
                                       MUSHTAQ A MADRASWALA --
                                       EXECUTIVE DIRECOTR ICMAP
Cost audit is not punitive in nature. It is rather suggestive and
derives its force from the maxim, 'prevention is better than cure'.



It identifies areas of weaknesses, invisible losses and
unaccounted inefficiencies, which ultimately result in adverse
effects on the financial health of an organization. Cost audit
helps in getting early warning signal for remedial actions.




                                      PRESENTED AT TDAP-KARACHI.
                                      MUSHTAQ A MADRASWALA --
                                      EXECUTIVE DIRECOTR ICMAP
 It can be done under Section 258 of the Companies
 Ordinance, 1984 : and it implemented through:

S.R.O. 386 (I)/94.-14th May, 1994
CEMENT INDUSTRY (COST ACCOUNTING RECORDS) ORDER, 1994

S.R.O. 97(I)/2001.- 13th February, 2001
SUGAR INDUSTRY (COST ACCOUNTING RECODS) ORDER, 2001

S.R.O. 1131 (1)|90.1st November, 1990
VEGETABLE GHEE AND COOKING OIL COMPANIES
(COST ACCOUNTING RECORDS) ORDER, 1990

S.R.O. /I/2008.-26th September, 2008
Companies Cost Accounting Records (General Order), 2008.

Applicable on Fertilizer, Thermal Energy, Petroleum Refining, Natural
Gas and Polyester Fibre Industries.
                                           PRESENTED AT TDAP-KARACHI.
                                           MUSHTAQ A MADRASWALA --
                                           EXECUTIVE DIRECOTR ICMAP
Mandatory Cost Audit has proved a very successful experience in
development of macro economies of SAARC countries such as
India and Bangladesh.
                          India's experience
The success of economic development in India and their lower
competitive cost in the international market is mainly due to
vigilant and implementation of cost accounting records in 44
industries covered under Cost Accounting Records Rules as on 1-4-
1998.

The experience of cost audit in India has been very excellent, as it is
evident from the record of corporate governance, dividend pay outs,
modest level of price of industrial products and its competitive edge
in the export market, which speak volumes of the benefit of cost
audit which have accrued to the Indian economy.
                                         PRESENTED AT TDAP-KARACHI.
                                         MUSHTAQ A MADRASWALA --
                                         EXECUTIVE DIRECOTR ICMAP
The financial health of any company largely depends on the cost of
production, which constitutes a very substantial cash outlet of the company.
Readers of this financial statement cannot evaluate whether the company
has performed in the most efficient manner in the given or prevailing
circumstances
 The above shortcomings gave rise to the need to examine the
 accounts of manufacturing concern with a view to ascertain whether
 the company has been able to :

          achieve optimum level of production
          eliminate or minimize wastages
          control consumption ratio of materials and energy cut down
           overhead expenses
          deploy available manpower in the most efficient manner
          consider diversification of production wherever feasible and
          Perform well in the given level of competition existing   in
           the market.


                                              PRESENTED AT TDAP-KARACHI.
                                              MUSHTAQ A MADRASWALA --
                                              EXECUTIVE DIRECOTR ICMAP
These analysis are necessary not only from the point of
investors but also from the point of view of the
government particularly in developing countries to
ensure that the scarce resources of the country are
being deployed in the most efficient manner.




                                     PRESENTED AT TDAP-KARACHI.
                                     MUSHTAQ A MADRASWALA --
                                     EXECUTIVE DIRECOTR ICMAP
             TOOLS OF COST AUDIT:-


ELEGIBILITY FOR COST AUDITOR:

The companies subject of cost audit shall be required to
get its cost accounts audited by a cost auditor who is a
Chartered Accountant within the meaning of the
Chartered Accountants Ordinance 1961(X of 1961) or a
Cost and Management Accountant with the meaning of
the Cost and Management Accountants Act, 19966 (XIV
of 1966).




                                 PRESENTED AT TDAP-KARACHI.
                                 MUSHTAQ A MADRASWALA --
                                 EXECUTIVE DIRECOTR ICMAP
               Principles of Cost Audit


   Code of Ethics:-
   Independence
   Integrity
   Objectivity
   Professional competence and due care
   Confidentiality
   Professional behavior
   Technical standards.




                                  PRESENTED AT TDAP-KARACHI.
                                  MUSHTAQ A MADRASWALA --
                                  EXECUTIVE DIRECOTR ICMAP
                  COST AUDIT PROCEDURE:

Cost Auditor perform cost audit in accordance with the specified
cost audit program, guidance available in Cost Audit Handbook,
published and distributed by ICMAP

 SAMPLE FOR THE MARGIN PER UNIT OF OUTPUT.
                        AUDIT STEPS
      Verify the margin per unit of output on domestic
       sales and export with reference to cost statements.
      If sales made under group of product, check and verify
       margin per unit of output of all the major group of
       products.
      In case of significant variations in the margin
       compared to previous year, the reasons for the same
       be ascertained and recorded.


                                        PRESENTED AT TDAP-KARACHI.
                                        MUSHTAQ A MADRASWALA --
                                        EXECUTIVE DIRECOTR ICMAP
SPECIFIC COST RECORDS FOR THE REQUIRED INDUSTRIES
ARE:-

CEMENT INDUSTRY:

(1) Quarry
(2) Transportation
(3) Crusher
(4) Stock hall (where applicable)
(5) Raw mill
(6) Kiln
(7) Grinding
(8) Packing and storage




                                    PRESENTED AT TDAP-KARACHI.
                                    MUSHTAQ A MADRASWALA --
                                    EXECUTIVE DIRECOTR ICMAP
Costs of these departments are to be classified as “direct
departmental cost” and “indirect departmental cost” so as to
conform to or as near thereto as possible to such detailed
headings as described in the various annexure.

Indirect departmental cost represent cost of service
departments such as those producing compressed air (Annexure
IX), power (Annexure X) and other general expenses (Annexure
XI).

The indirect departmental cost shall be transferred to the above
production departments.




                                       PRESENTED AT TDAP-KARACHI.
                                       MUSHTAQ A MADRASWALA --
                                       EXECUTIVE DIRECOTR ICMAP
            Important items of cost

   Raw Material
   Labour
   Furnace Oil/Gas
   Electric Power
   Consumable Stores
   Repairs and maintenance:
   Compressed air
   Depreciation
   Insurance
   Other Overheads
   Administration, selling and distribution expenses
   Work-in-process and finished goods inventories
   Packing
   Statistical Statements and other records
   Reconciliation of cost and financial accounts
                                PRESENTED AT TDAP-KARACHI.
                                MUSHTAQ A MADRASWALA --
                                EXECUTIVE DIRECOTR ICMAP
         Reconciliation of Cost and Financial Accounts:

If integrated accounts are not maintained, the cost records shall
be periodically reconciled with the financial accounts to ensure
accuracy. Variations, if any, shall be clearly indicated and
explained.

The reconciliation shall be done in such a manner that the
profitability of each product produced and sold is correctly
judged and reconciled with the overall profits of the company
from all of its activities.

Adequate cost records shall be maintained in a manner so that
the cost statements may be compiled.


                                        PRESENTED AT TDAP-KARACHI.
                                        MUSHTAQ A MADRASWALA --
                                        EXECUTIVE DIRECOTR ICMAP
THE DETAILED SHEETS ARE IN ATTACHED FILE


 FOR: DETAILED REVIEW OF COST PROCEDURES AND
 DETAILED FORMS :

 KINDLY VISIT OUR WEB SITE

       www.icmap.com.pk
                           Q &A
                          welcomed




                                     PRESENTED AT TDAP-KARACHI.
                                     MUSHTAQ A MADRASWALA --
                                     EXECUTIVE DIRECOTR ICMAP

								
To top