Mar. 15 – New cost accounting standards will be applicable starting April 1 with six of the 10 new standards to be made compulsory.

The move is part of government efforts to improve cost auditing and more standards expected to be released in the next two years. Better cost audit mechanisms in place will lead to better corporate performance and efficiency.

Cost auditing is defined as a method of determining if corporate processes like production, marketing and sales are effective in terms of price moreover to ascertain if their are unnecessary expenses that need to addressed or other resources that need to be utilized.

“The importance of a cost audit cannot be overemphasized and in most countries there is a strict cost audit even for government expenditure. The government is the biggest spender and, therefore, cost audit is absolutely essential,” K. Narasimha Murthy, Director of IDBI and LIC Housing Finance was quoted by The Hindu Business Line during a seminar organized by the Institute of Cost and Works Accountants. He said that of the new standards to be implemented in April, three more are likely to be added.

For advice on India’s new cost accounting standards email Dezan Shira & Associates at mumbai@dezshira.com.