ISLAMABAD: Every company engaged in production, processing or manufacturing activities within the sectors of sugar, cement, vegetable ghee/cooking oil, fertilizers and wheat is required to maintain data of utilization of material/labour, etc, for calculating cost of production and sales of each product for audit of accounting records by the cost auditors.
The Securities and Exchange Commission of Pakistan (SECP) has issued the draft of the Companies (Audit of Cost Accounts) Regulations, 2020 here on Wednesday.
The new rules would be mainly applicable on every company engaged in the production, processing and manufacturing of sugar; clinker or cement or both; vegetable ghee, cooking oil, margarine, bakery shortening and allied products and chemical fertilizers and every company engaged in milling of wheat and production of flour and other extracts in any form.
The public interest, large and medium sized companies falling within the criteria as laid down under the Third Schedule of the Companies Act, in the above mentioned class of companies, shall be required to maintain particulars of cost accounting records and prepare cost statements as per relevant Schedule.
The SECP will also repeal Companies (Audit of Cost Accounts) Rules, 1998; Vegetable Ghee and Cooking Oil Companies (Cost Accounting Records) Order, 1990; Cement Industry (Cost Accounting Records) Order,1994; Sugar Industry (Cost Accounting Records) Order,2001; Chemical Fertilizer Industry (Cost Records) Order, 2012; Synthetic and Rayon Companies (Cost Records) Order, 2012 and Electric Power Generation Industry (Cost Records) Order 2015.
Every company shall also, in addition to the records and statements specified in the Schedule to these regulations, prepare a statement of production capacity of the plant, in terms of machine hours and production units, the actual utilization of the capacity and the reasons of difference between the two and a statement of stock-in-trade of the company as at the end of financial year in terms of quantity and cost thereof distinguishing between stock of raw material and components; stock of work in process; stock of finished products and other stocks.
According to the SECP, every company shall be required to get its cost accounts audited by a cost auditor who is a Chartered Accountant or a Cost and Management Accountant having a valid certificate of practice from the respective institute.
Every company to which these regulations applies shall, in respect of each financial year commencing on or after the commencement of these regulations, keep cost accounting records, containing, inter alia, the particulars specified in Schedules to these regulations.
The cost accounting records shall be kept in such a way as to make it possible to calculate from the particulars entered therein, the cost of production and cost of sales of each of the products separately, during a financial year. Where a company is engaged in any other businesses in addition to those referred to in Schedules to these regulations, the particulars relating to the utilization of materials, labour and other items of cost in so far as they are applicable to such other product shall not be included in the cost of product referred to in Schedules to these regulations.
It shall be the duty of every person to comply with the provisions of these regulations in the same manner as they are liable to maintain financial accounts required, SECP said.
The first cost auditor shall be appointed by the board within 90 days from the date of this notification of these regulations or amendment thereof and thereafter cost auditor for subsequent financial year shall be appointed within one hundred and eighty days of the commencement of every financial year of the company, the SECP added.
Copyright Business Recorder, 2020
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