The Institute of Cost Accountants of India
(Statutory body under an Act of Parliament)
This Preface to the Standards on Cost Auditing has been issued to facilitate understanding of the scope and authority of the pronouncements of the Cost Auditing & Assurance Standards Board (CAASB) on Cost Auditing issued under the authority of the Council of the Institute of Cost Accountants of India.
The Institute of Cost Accountants of India is committed to the goal of developing the cost and management accountancy profession in India. In furtherance of this goal, the Institute develops and promulgates technical standards and other professional literature.
The Institute of Cost Accountants of India is a founder member of the International Federation of Accountants (IFAC). The International Auditing and Assurance Standards Board (IAASB) established by the IFAC have issued series of International Standards on Auditing, which primarily focus on the financial audit. There are fundamental differences between the scope and methodology of financial and cost audit. Therefore, it shall not be appropriate to adopt in full or with modifications the International Standards on Auditing issued by the IAASB. However in formulating the standards, the CAASB will ensure that the framework and other aspects of the International Standards are considered, to the extent relevant and applicable to cost audit.
Standards issued by the Cost Auditing & Assurance Standards Board under the authority of the Council of the Institute of Cost Accountants of India
The CAASB plans to issue the following Standards under the authority of the Council of the Institute of Cost Accountants of India:
While formulating the Standards, the CAASB takes into consideration the applicable laws, usage and business environment prevailing in India. CAASB also takes into account the relevant provisions of Cost and Works Accountants Act, Rules and Regulations, Code of Professional Ethics, Cost Accounting Standards and other Statements issued by the Institute. The Standards issued by the CAASB are aligned, to the extent possible, with other recognised Standards issued in India and prevailing International Practices. If a particular standard or any part thereof is inconsistent with a law, the provisions of the said law shall prevail.
Standards formulated by the CAASB include paragraphs in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. Each Standard should be read in the context of the objective stated in that Standard and this Preface. Any limitation of the applicability of a specific Standard is made clear in the Standard itself.
Pending development of the Standards on Quality Control, the Guidance Manual for Audit Quality issued by the Institute prevails in respect of all services rendered by the Cost Accountants.
The CAASB considers issues requiring interpretation of any Standard. Interpretations or General Clarifications are issued under the authority of the Council. The authority of interpretation is the same as that of the Standard to which it relates.
Standards on Cost Auditing
“Standards on Cost Auditing meansthe Standards of Auditing issued by the Institute of Cost Accountants of India to be applied by its Members in practice for compliance while conducting audit of cost statements or any other financial or non –financial statement, data, or information of an entity. The term Cost Auditing Standards and Standards on Cost Auditing denotes the same meaning and is used interchangeably”
Compliance with the Standards
The Standards on Quality Control, Standards on Cost Auditing, Assignment Standards, and Standards on Related Services, issued by and under the authority of the Council of the Institute, are required to be complied with by the members of the Institute, wherever applicable.
Guidance Notes are issued to assist the professional cost accountants in implementing the Standards on Quality Control, Standards on Cost Auditing, Assignment Standards, and Standards on Related Services issued by the CAASB under the authority of the Council of the Institute. Guidance Notes are also issued to provide guidance on other generic or industry specific issues, not necessarily arising out of a Standard. CMAs should be aware of and consider Guidance Notes applicable to the assignment. A professional cost accountant who does not consider and apply the guidance included in the relevant Guidance Note should justify the appropriateness and completeness of the alternate procedures adopted by him to deal with the objectives and basic principles set out in the Guidance Note.
Technical Guides, Practice Manuals and other Pronouncements The CAASB may also publish Technical Guides, Practice Manuals and other pronouncements. Technical Guides are generally aimed at imparting broad knowledge to the CMAs about a particular aspect of an industry. Practice Manuals are aimed at providing additional guidance to the CMAs in performing cost audit and other assignments. Other pronouncements are aimed at promoting discussion or debate or creating awareness on issues relating to quality control, cost auditing, and assurance and related services affecting the profession. Such publications of the CAASB do not establish any basic principles or essential procedures to be followed in cost audit, review, assurance or related services assignments and accordingly Standards on Cost Auditing shall prevail over such pronouncements.
Constitution of the Cost Auditing & Assurance Standards Board The Council of the Institute of Cost Accountants of India constituted the Cost Auditing and Assurance Standards Board (CAASB) in 2007 entrusting the responsibility to formulate Standards and develop Guidance Notes in the areas of quality control, cost auditing, review, assurance and related services.
Composition of the CAASB The composition of the CAASB is broad based to ensure participation of all interest groups in the standard setting process. Apart from six members of the Council of the Institute nominated in the CAASB, the following are also represented on the CAASB:
In addition, the President is authorised to include a maximum of two eminent persons having relevant knowledge and expertise not falling under the categories mentioned above.
The Chairman of the CAASB is nominated by the Council of the Institute.
The quorum of the CAASB is five members.
The terms and period of appointment of the chairman and other members, excluding the nominee members, is decided by the Council of the Institute. This is, however, restricted to the term of the Council.
Objectives and Functions of CAASB The following are the objectives and functions of the Cost Auditing and Assurance Standards Board:
Procedure for issuing the Standards
Procedure for issuing Guidance Notes The procedure to be followed in this regard will be as follows:
Authority attached to the Guidance Note The Guidance Note will be explanatory to the corresponding Standardand will not override the same.
Procedure for issuing Technical Guides, Practice Manuals and other Pronouncements
For issuance of a Technical Guide, Practice Manual etc., the procedure followed by the CAASB is generally the same as in case of a Guidance Note except that the draft Technical Guide, Practice Manual etc., is never exposed for public comments. Also since Technical Guide, Practice Manual etc., do not have any authority attached to them, those are not required to be placed for consideration and approval by the Council of the Institute; rather they are issued by the CAASB under its own authority.
Procedure for Revision of the Standards, Guidance Notes, Technical Guides, Practice Manuals and other Pronouncements The CAASB undertakes revision of the Standards, Guidance Notes, Technical Guides, and Practice Manuals etc., based on the subsequent legal or professional requirements or any other national or international developments in the field of auditing. The procedure followed for revision is the same as that followed for formulation of a new Standard, Guidance Note, Technical Guide, or Practice Manual etc., as the case may be, as detailed above.
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