SECP Set to Revise Cost Audit Regime 

The Securities and Exchange Commission of Pakistan (SECP) has published a consultation paper on the Cost Audit Regime in Pakistan.   This paper aims to assess the effectiveness of the Companies (Maintenance and Audit of Cost Accounts) Regulations, 2020, and explore potential improvements in light of prevailing practices and industry needs.  The SECP has asked the stakeholders to specify whether there any particular industries or sectors where the cost audit framework should be expanded or restricted?  Currently, Cost Audit requirement is limited to only 5 industries, the stakeholder consultation seeks feedback on expansion or restriction to specific industries, challenges and potential solutions, implementation of cost accounting standards and audit framework, as well as public disclosure or confidentiality of cost audit reports.  The consultation paper highlights the role of cost audits in enhancing transparency, operational efficiency, and accountability within the corporate sector. It reviews the existing regulatory framework, international practices, and the current use of cost audit reports in Pakistan. The paper also outlines several key considerations and poses targeted questions to stakeholders for feedback.  The integration of financial and cost accounting systems is crucial for ensuring that the notes to the financial statements can be seamlessly compared and reconciled with those of the cost audit report.   Such integration fosters consistency, transparency, and accuracy across financial and cost reporting, enabling stakeholders to gain a comprehensive understanding of an organization’s financial health and cost efficiency. By aligning definitions, classifications, and reporting frameworks, discrepancies can be minimized, and the reliability of both financial and cost data is enhanced. Implementing standardized systems and digital tools for this integration not only simplifies reconciliation but also facilitates compliance with regulatory requirements and supports informed decision-making for management and external stakeholders.   Although the Institute of Cost and Management Accountants of Pakistan (ICMAP) has drafted cost accounting standards, there remains a pressing need to standardize and notify the cost accounting framework to enhance its effectiveness.   This standardization may be achieved through collaborative efforts between the Institute of Chartered Accountants of Pakistan (ICAP) and ICMAP. Previously, a joint committee was formed by ICAP and ICMAP to address this issue, but no definitive conclusion was reached.   A renewed and focused partnership between these bodies, with clear objectives and actionable outcomes, is essential to establish a cohesive and comprehensive cost accounting framework that, SECP said.  The SECP has invited all stakeholders, industry experts, and relevant parties to share their valuable feedback and recommendations by 31st January 2025.