SECP revises cost audit rules for firms

The Securities and Exchange Commission of Pakistan (SECP) has issued a consultation paper to evaluate the effectiveness of the Companies (Maintenance and Audit of Cost Accounts) Regulations, 2020, and explore potential improvements based on industry practices and needs.

At present, cost audit requirements apply to only five industries. The SECP is seeking feedback on whether this scope should be expanded or restricted to specific sectors. Stakeholders are encouraged to share their challenges, suggest solutions, and offer their views on whether cost audit reports should be publicly disclosed or remain confidential.

The consultation paper underscores the role of cost audits in promoting transparency, operational efficiency, and corporate accountability. It also reviews the existing regulatory framework, international practices, and the usage of cost audit reports in Pakistan.

The SECP stresses the importance of integrating financial and cost accounting systems to ensure seamless reconciliation between financial statements and cost audit reports. This integration will enhance consistency, accuracy, and transparency in reporting, helping stakeholders better understand an organization’s financial and cost efficiency. Standardized digital tools and systems can streamline compliance, reduce discrepancies, and aid decision-making.

Although the Institute of Cost and Management Accountants of Pakistan (ICMAP) has drafted cost accounting standards, the SECP emphasized the need for a unified framework. Collaboration between ICMAP and the Institute of Chartered Accountants of Pakistan (ICAP) is vital. A joint committee formed by both institutions previously failed to produce significant results, but the SECP is urging renewed efforts to establish a comprehensive cost accounting framework.

The SECP has invited feedback from stakeholders, industry experts, and other relevant parties by January 31, 2025, to refine the cost audit regulations and ensure they meet industry needs and regulatory standards.