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INSIDE

Cost accounting cannot be underestimated: Justice Lahoti

theManagement

accountant
THE JOURNAL FOR CMAs

AUGUST 2013 Vol 48 NO. 8 `60

COST AUDIT
& COMPLIANCE
l Usefulness of Cost Audit Report in excise audit
l New Mechanism of Cost Audit and Compliance A Sanjeevani
l Costing Care while Caring Cost

The Institute of Cost Accountants of India

(Statutory body under an Act of Parliament)

www.icmai.in

ICAI-CMA SNAPSHOTS

1
1. Mr Sachin Pilot, Honble Minister of State for
Corporate Affairs (I/C), Dr. Rana Kapoor, President,
ASSOCHAM, CMA Rakesh Singh, the former President
of the Institute at the National Conference on
Companies Bill 2012, on 18 July, 2013 in New Delhi
2. Sitting on the dais from left CMA Sanjay Gupta,
Chairman, WTO and International Affairs, Mr N
Venkatram, Partner and National Leader for Audit and
Enterprise Risk Services, Deloitte Haskins and Sells,
Mr G P Madan, Co-Chairperson, ASSOCHAM, CMA Dr
PVS Jagan Mohan Rao, Council Member, and Mr Pavan
Kumar Vijay, Chairman, ASSOCHAM

3. Release of publication on Management by

Consciousness by SAFIM. From left to right, CMA
Sanjay Gupta, Council Member, CMA S C Mohanty, now
President of the Institute, Mr R Bandyopadhyay, member
of Central Administrative Tribunal and member SAFIM
Advisory Board and former Secretary MCA, Justice
Ramesh Chandra Lahoti, Chairman of SAFIM Advisory
Board and Former Chief Justice of India, Mr O P Dani,
Vice Chairman of SAFIM, CMA Dr P V S Jagan Mohan
Rao, Council Member, and CMA Nisha Dewan, Joint
Secretary of the Institute.

4. Inauguration of the Seminar on Governance by Inner

Consciousness held on 13th July, 2013 in New Delhi.
From left to right CMA S C Mohanty, the then Vice
President of the Institute, Mr R Bandyopadhyay, member
of Central Administrative Tribunal and former Secretary
MCA, Justice Ramesh Chandra Lahoti, Chairman, SAFIM
Advisory Board, CMA G B Rao, former President of the
Institute, Mr O P Dani, Vice Chairman of SAFIM with
other Council Members of the Institute

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taxation
FOCUS

Cost accounting cannot be

underestimated: Justice
Lahoti

Justice R C Lahoti
Former Chief Justice of India and
Member, SAFIM Advisory Board

This is a speech by Justice R C Lahoti at the National Seminar

on Governance by Inner Consciousness organised by the Institute
on 13 July 2013 in New Delhi

t gives me immense pleasure to find myself associated

with the inauguration of this national seminar on Governance by Inner Consciousness co-organized by ICAI,
the Institute of Cost Accounts of India and SAFIM, Sri Aurobindo Foundation for Integral Management.
Ever since the dawn of human civilization, the Mind of
Men has been dreaming of a perfect society. In its search
the humanity has reached the day where we are living in
an industrial and commercial globalism led by multinational corporations and propelled by an increasingly efficient
and sophisticated management and technology, especially
information technology. Experience tells us that these are
means of temporary success not an assurance of perfect society.
What is the cause of this failure? According to Shri Aurobindo ... to hope for a true change in human life without
a change of human nature is an irrational and unspiritual
proposition; it is to ask for something unnatural and unreal, an impossible miracle . The futuristic vision of Shri Aurobindo has been the creation of a New Social Order. And,
there enters the role of consciousness or inner conscience.
Let us be clear on the inter-relationship of conscience and
consciousness. Conscience is an inner sense which tells us
what is right and what is wrong. Consciousness is awareness
of such sense. It is that awareness which enables exercise of
discrimination by senses. Hence, the sane advice of the sages
is: Be a master of your mind and a slave to your conscience.
SAFIM, a discreet unit of Sri Aurobindo Society, Puducherry is founded on the commitment to disseminating a
new paradigm of management which proposes to transform values by applying in practice the teachings of Sri Aurobindo and the Mother. Sri Aurobindo has said we do
not want to exclude any of the worlds activities. Politics,
trade, social organization, poetry, art, literature all will remain; but all will be given a new life, a new form. If we are
spread out everywhere as individuals, something no doubt

will be done; if we are spread out everywhere in the form

of a Sangh (i.e. a collective body, a divine fellowship), a hundred times more will be accomplished. SAFIM is, therefore,
stretching its arms to collaborate wherever it can with any
group of individuals, preferably, the professionals, who have
potential to advent a new world a new order, and a willingness to dedicate themselves to accomplishing this solemn
objective. SAFIM has drawn upon the Western Management
skills and technology and set down to restructure them with
the touch of deeper spiritual philosophy of Sri Aurobindo
acting as a catalyst. The core of this philosophy is: unless an
individual learns to manage himself he cannot manage others. To do so the managers (professionals included) have to
develop their inner potential and express themselves fully.
The switch over from the present materialistic society
to a spiritualised society i.e. a new social order will not be
ushered in either by a Royal Charter or by an Administrative Arbitor or by a Parliamentary Proclamation or even by
sermons, preaching or slogans. The new social order of the
Aurobindonian thought will be ushered in only in MEN
the individual. A society that lives not by its man but by
its institutions, is not a collective soul, but a machine, its
life becomes a mechanical product and cease to be living
growth.Therefore, the coming of a New Social Order must
be preceded by appearance of increasing number of individuals who are no more satisfied with normal intellectual, vital
and physical existence of men but perceive that a greater
evolution is the goal of humanity.
For the New Social Order to descend, where the society
would be full of peace, prosperity and pleasure, we need
people with conscience. Conscience is that faculty of intellect, an intuition which enables distinguishing right from
wrong. An inner conscience is the voice within. It is a debatable issue whether such voice is ruled by reason or the
voice over over-rules the reason. But one thing is certain
that conscience is that voice which originates from within
and warns us that somebody may be looking though you
are all by yourself. How beautifully the great poet Krishna
Behari Noor has put it in a couplet, which says:
Main andhere main rahoon, ya ki ujale main rahoon,

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Aisa lagta hai ki koi dekh raha hai yaro!

I am delighted to see SAFIM and ICA having joined
hands to discuss certain aspects of Governance and creating
right environment by realising the role of inner conscience
as the tool of transformation. The importance of cost accounting as being central to the formation of Governmental
and Corporate policies cannot be underestimated. Effective
cost accounting assures efficiency and optimum utilization of scarce resources. Ever since cost accounting earned
recognition it has been continuously contributing to the
growth of the industrial and economic climate of the country. No wonder the prime object of the Institute of Cost
and Management Accountancy is to function as a powerful
tool of management control in all the spheres of economic activities. It seeks to promote and develop the adoption
of scientific methods in cost and management accountancy.
Often the Cost Accountant works in solitude dictated by
none except by his own inner conscience, while formulating opinions and dictating his notes. Looking at the significance of the profession and far reaching implications which
it has on shaping the economic growth it would be apposite

to say that the conscience of a Cost and Management Accountant should be a sacred sanctuary where the supreme
divine alone may be seated as a decision maker.
During the course of the day, the delegates will be deliberating over the Conscious Governance - need of the hour,
role of values in Governance and creating the right environment. I would like to close by quoting the assurance of Sri
Aurobindo in Savitri even if the struggling world is left
outside, one mans perfection still can save the world. I hope
that at the end of the day you find an answer to what the
Mother had asked in one of her New Year Messages The
world is preparing for a big change.Will you help?
i)
Dr. G.P. Gupta, Designing a New Social Order an Insight into
Aurobindonian thought, published by Shri Aurobindo Society,
Pondicherry, pg-11.
ii) Towards Tomorrow an introductory booklet, Sri Aurobindo Society,
Puducherry, p.14
iii) Dr. G.P. Gupta, Supra, pg-11.
iv) If you have liked the couplet then yet another two lines for a change:
Jiska koi bhi nahin , uska khuda hai yaro,
Main nahin kahta, kitabon main likha hai yaro! - Noor

Need of the hour to be dead

honest: Bandyopadhyay
R Bandyopadhyay

Former Secretary, MCA and

Member, SAFIM Advisory Board

This is a speech by R Bandopadhyay at the National Seminar on

Governance by Inner Consciousness organised by the Institute on
13 July 2013 in New Delhi

Salutations

Why Unethical Behaviour

We see that scandals and scams in present-time are on the
rise.What has really changed? Individual ethics, organization
ethics or societal ethics? We may observe many similarities
in India and in the Western Countries individuals involved
in recent scandals/scams.
1. Every major actor was a highly skilled professional in his
or her respective field.
2. All of them also were very well off.
3.They were highly professional people with very sharp intellect, and
4.They were highly motivated people.
With these combinations of high virtues that the people
at the helm of affair possessed, yet the result was scams and

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scandals.
Therefore, it is true that effective implementation of an
ethical ideal or concept requires two factors: creating an
ethical consciousness and promoting ethical conduct and
behaviour. But for the outer conduct and behaviour to be
authentic, sincere and effective, it has to be a spontaneous
expression of a corresponding inner state of consciousness.
In the Corporate Boardroom
The principal role of the board of directors as representatives of the shareholders, is to oversee the function of
the organization and ensure that it continues to operate in
the best interests of all stakeholders. Given the complexity
of todays organizations, that is no simple or straightforward
task.Today, board effectiveness is a key performance driver of
the Indian companies.
With expectations of them continuing to increase, boards
can take several actions to govern more effectively. Indian
boards must move away from being a rubber stamp to being

a strategic asset for the company. They need to set the tone
from top in promoting a transparent culture that promotes
effective dialogues among the directors, senior management,
and various function and risk managers. Boards should look
beyond the old boy network and select directors with individual areas of expertise, and invest on an ongoing basis on
their formal and informal education. Independent directors
should significantly contribute to the functioning of the
board through requisite understanding of the company and
the business. Boards must take a hard look at its own performance evaluation and enable continuous feedback and
communication cycle.
Effective boards build capabilities within themselves and
their organizations that allow them to do both, protect existing assets (compliance role), as well as, manage threats to
future growth (strategy oversight role).
Inner Consciousness
This level of Consciousness enables the human mind
to make sense of the stimuli that it is capable of receiving
from its environment with the help of mental consciousness. It includes three mental activities of feeling, willing and
knowing. In the mental consciousness, thoughts propelled
by external stimuli have not taken a specific shape; they are
vague, amorphous and hence ineffective. But at the level of
inner- consciousness, which develops in individuals as they
physiologically grow, the mind is capable of interpreting the
external stimuli and converting them into firm ideas, concepts, and knowledge and is ready for connecting the same
with action.
This level of consciousness consists of ones intelligence,
i.e., thinking abilities which include logical, rational, analytical comprehension, arithmetical and rational abilities and
emotions i.e. feeling abilities which include: anger greed,
fear, attachment, pride, hatred and jealousy etc.
Aristotle posited an ethical system that may be termed
self-realizationism. When a person acts in accordance
with their nature and realizes their full potential, they will
do well and be content. At birth, a baby is not a person, but
a potential person. In order to become a real person, the
childs inherent potential must be realized. Unhappiness and
frustration are caused by the unrealized potential of person,
leading to failed goals and poor life. Aristotle said Nature
does nothing in vain
Therefore, it is imperative for persons to act in accordance
with their nature and develop their latent talents, in order
to be content and complete. Happiness was held to be the
ultimate goal. All other things, such as civic life or wealth,
are merely means to the end. Self-realization, the awareness
of ones nature and the developments of ones talents is the
surest path to happiness.
Aristotle asserted that man had three natures: Vegeta-

ble (Physical), Animal (Emotional) and Rational (Mental).

Physical nature can be assuaged through exercise and care,
emotional nature through indulgence of instinct and urges
and mental through human reason and developed potential.
Rational development was considered the most important, as essential to philosophical self awareness and as
uniquely human. Moderation was encouraged with the extremes seen as degraded and immoral. For, example, courage
is the moderate virtue between the extremes of cowardice
and recklessness. Man should not simply live, but live well
with conduct governed by moderate virtue.This is regarded
as difficult, as virtue denotes doing the right thing, to the
right person, at the right time, to the proper extent, in the
correct fashion for the right reason. Important Aristotelian
virtues are: Courage, Self-control, Generosity, Magnificence,
High-mindedness, Gentleness, Friendliness, Truthfulness,
Wittiness, and Modesty.
The scams and scandals in corporations and the deteriorating standards of officers occupying key positions and are
responsible for controlling the growth and regulating the
working of corporations have given rise to the need of a
transparency practices for the formulations and reporting of
financial policies of corporations. In India, in the wake of
globalization perspectives, the practice of sound Corporate
Governance has been gaining acceptance among Indian
Corporations.
The domain of Corporate Governance must take the
view pertaining to its impact of economic activity at firm
level on socio-economic development of the Country
which, in India, has received a low priority.
There are two important aspect of Corporate Governance namely, Structural and Cultural. The Structural aspects
of Corporate Governance deal with systems and processes,
norms and regulatory mechanisms, policies and guidelines.
It is observed that companies in India have started giving
increasing emphasis on these areas.
The cultural aspects require that the Indian Corporate
Sector must put in efforts for creating a vision and mindset among the top management to enable them to address
towards integrated development involving the community
and the environment at large. Which means the scope of
Corporate Governance must be extended to include the
assimilation of values in the members of the organization.
Sensitization to ethical issues and sustenance of high ethical standards by individuals and organizations assume paramount importance.
The attitudes, values, sentiments, rituals etc. bind people
and societies together, and identity is necessary to generate
the feeling of belongingness to particular society. In India,
two things are important in the context of culture and traditions:
1. The individuals acquire in the process of growing (pri-

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mary socialization) a strong need of family ties and affiliate

relationship and have tendencies for dependencies and the
like, and
2. The individuals are deeply influenced by values, attitudes and sentiments in the ancient writings, i. e. Our thinking and feelings have been shaped by our readings about
Buddha, Mahavir, Mahatma Gandhi, Vivekanand, Rajaram
Mohan Roy, Shri Aurobindo, etc.
It brings us to the question whether business ethics can be
taught? I do believe that value formation starts much earlier
than at the B-school level, though there is certainly a need
for training, I would like to maintain that business ethics is a
reflective discipline, and hence the need for innovative teaching methods, where students are actively engaged instead of
being mere recipients of information. It cannot be stated
better than in the words of Albert Einstein I believe, indeed,
that overemphasis on the purely intellectual attitude, often

directed solely to the practical and factual, in our education,

has led directly to the impairment of ethical values. To this
extent, I think, there needs to be extensive compilation of
thought-provoking case studies that encourage students to
look at instances from wider stakeholders points of view, issues and conflicts; live cases on companies; case writing by
students themselves and listening to peers; simulation games
that put students into situations to require tough ethical decisions. I am of the view that good training can embed these
values in daily decision-making by business managers. And,
business schools are rightly the vehicles to ensure this.
Finally, it is the need of the hour to be dead honest in our
duties and it is the responsibility of each and every individual concerned to obtain the desired growth and development
of our self as a whole otherwise our Future will not forgive
us for our intentional misdeeds.
Thank you.

Need to awake professional ethics: CMA S C Mohanty,

President, ICAI-CMA
This is a speech by CMA SC Mohanty at
the National Seminar on Governance by
Inner Consciousness held by the Institute on
13 July 2013 in New Delhi
From the Institutes side I am thankful
to Mr Dani to associate us in this great
venture to bring values to the human
society which is the need of the hour
and we look forward to associate with the body to play our
role which is mandate to create leaders with values, ethics
so that those leaders can serve the society with sovereignty
and ensuring happiness and peace.
I could realise it is not only the need of the society or the
human to our external peace or the prosperity but at the
end of the day you should have to bring inner consciousness.
I would like to share few of my teachings and learnings
what I have acquire in the process as a human being. What
I realise, we are now belonging to the last stage, KALYUG,
where there is a fight not with man and non-man and animals, there is a fight with man with himself.The inner consciousness is external comfort. This is the Kalyug. We have
seen in 19th century we are the dependent, 20th century
we became independent and this is the 21st century. We
have to realise we cant survive without interdependence
or collaboration.

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We three Institutes met last month, President and Vice

President and colleagues and we have taken decisions that
there is a need to awake professional ethics and there is a
need to awake quality service to awake specialise service
to the society to ensure the inclusive society a society with
prosperity.
We are blessed with a situation with Gandhiji but today
we are moving towards what I should not mention we all
know.
There is a need to correct the society to correct each and
everyone of us. We the people, the blessed souls having a
good education, good position.We are mandate to serve the
society in different positions, but we should not forget there
is a need and we are the only a trustee or agent of the society and we have to discharge our obligation and it have taken
10% from the society and I could always in state of mind
to give back 90% to the society. So that the society will
prosper and being the blessed souls and the best creature of
the God. We can give a better days, a better opportunity to
the next generation.
I assure from the Institutes point of view, we are determine to work for the society, for the economy and whatever the policy initiatives of the government bodies like
Aurobindo Integral Management we will be associated
with that and because we are mandate to create a society
of leaders with human values and ethics who can serve the
society and look after the economy for a better tomorrow.