Corporate Governance & Role of Cost and Management Accountants in the backdrop of Companies Bill, 2012 CS. Bilu Balakrishnan 6 th April, ICAI Cochin Chapter Corporate Intelligence Education & Research Coaching – Career Guidance – Knowledge Portals

Corporate Governance The way how a corporate entity is managed The culture of managing a corporate entity The direction of governance The true spirit of compliance The respect for shareholders The accountable board room

Corporate Governance - Elements Compliance Disclosure Transparency Responsibility Accountability

Corporate Governance - Defined Cadbury Committee, UK “It is a system by which companies are directed & controlled” World Bank President “Is all about promoting fairness, transparency & accountability”

Role of CMAs in Corporate Governance Premier Professional Acclaimed with Status Code of Ethics Part of Top Management Cost Audit Costing Standards Increased role in Companies Bill 2012

Cost and Management Accountants & Companies Bill 2012

Companies Bill, 2012 Corporate Affairs Minister, Mr Veerappa Moily introduced the Companies Bill, 2011 on Wednesday the 14 th December, 2011 in Parliament Lok Sabha. The Bill was cleared by the Cabinet on November 24, On 18 th Dec 2012 the Bill Amendments was presented by Mr. Sachin Pilot, the current Minster of Corporate Affairs, at the Lok Sabha around by PM, and got it approved. The New Companies Bill, 2012 have 29 Chapters, 470 Clauses (Sections) & 7 Schedules

Provisions detailed Definition: 2(28) “cost accountant” means a cost accountant as defined in clause (b) of subsection (1) of section 2 of the Cost and Works Accountants Act, (38) “expert” includes an engineer, a valuer, a chartered accountant, a company secretary, a cost accountant and any other person who has the power or authority to issue a certificate in pursuance of any law for the time being in force.

Provisions detailed (Cont.) Incorporation of Companies: 7(1)(b) a declaration in the prescribed form by an advocate, a chartered accountant, cost accountant or company secretary in practice, who is engaged in the formation of the company, and by a person named in the articles as a director, manager or secretary of the company, that all the requirements of this Act and the rules made there under in respect of registration and matters precedent or incidental thereto have been complied with. (New Opportunity – Ref. Sec.33(2) of Companies Act 1956)

Provisions detailed (Cont.) Internal Audit: 138. (1) Such class or classes of companies as may be prescribed shall be required to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company. (New Opportunity – Ref. CARO)

Cost Audit Provisions in Companies Bill 2012

Cost Records (Sec.148(1)) 148. (1) Central Government may, by order, in respect of such class of companies engaged in the production of such goods or providing such services as may be prescribed, direct that particulars relating to the utilisation of material or labour or to other items of cost as may be prescribed shall also be included in the books of account kept by that class of companies. (Ref. Sec.209(1)(d) of Companies Act 1956)

Cost Audit (Sec.148(2)) 148 (2) If the Central Government is of the opinion, that it is necessary to do so, it may, by order, direct that the audit of cost records of class of companies, which are covered under sub-section (1) and which have a net worth of such amount as may be prescribed or a turnover of such amount as may be prescribed, shall be conducted in the manner specified in the order. (Ref. Sec.233B of Companies Act 1956)

Cost Audit (Cont.) 148 (3) The audit under sub-section (2) shall be conducted by a Cost Accountant in practice who shall be appointed by the Board on such remuneration as may be determined by the members in such manner as may be prescribed: Provided that no person appointed under section 139 as an auditor of the company shall be appointed for conducting the audit of cost records: Provided further that the auditor conducting the cost audit shall comply with the cost auditing standards.

Cost Audit (Cont.) (4) An audit conducted under this section shall be in addition to the audit conducted under section 143. (5) …It shall be the duty of the company to give all assistance and facilities to the cost auditor appointed under this section for auditing the cost records of the company. Provided that the report on the audit of cost records shall be submitted by the cost accountant in practice to the Board of Directors of the company.

Cost Audit (Cont.) (6) A company shall within thirty days from the date of receipt of a copy of the cost audit report prepared in pursuance of a direction under sub-section (2) furnish the Central Government with such report along with full information and explanation on every reservation or qualification contained therein. (7) ….If, after considering the cost audit report ……the Central Government is of the opinion that any further information or explanation is necessary, it may call for such further information and explanation.

CMAs Role in Other Areas in Companies Bill 2012

CMAs Role in Mergers & Amalgamation (Sec.232) 232 (7) Every company in relation to which the order is made shall, until the completion of the scheme, file a statement in such form and within such time as may be prescribed with the Registrar every year duly certified by a chartered accountant or a cost accountant or a company secretary in practice indicating whether the scheme is being complied with in accordance with the orders of the Tribunal or not.

CMAs Role in Liquidation (Sec.291) 291. (1) The Company Liquidator may, with the sanction of the Tribunal, appoint one or more chartered accountants or company secretaries or cost accountants or legal practitioners or such other professionals on such terms and conditions, as may be necessary, to assist him in the performance of his duties and functions under this Act.

CMAs Role in NCLT 409 (3) A practicing CMA having 15 years of experience are eligible to be appointed as a Technical Member of NCLT; 432 CMAs can appear before NCLT / NCALT.

Section 143 – a Real Twist in the Role of Trio Practising CA / CMA / CS Sub-section 12…..if an auditor of a company, in the course of the performance of his duties as auditor, has reason to believe that an offence involving fraud is being or has been committed against the company by officers or employees of the company, he shall immediately report the matter to the Central Government within such time and in such manner as may be prescribed. Sub-section 15…. If any auditor, cost accountant or company secretary in practice do not comply with the provisions of sub-section (12), he shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees.

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