The government has taken an initiative to make cost audits mandatory, in addition to financial audits, in order to increase transparency and efficiency in the financial management of state-owned companies. Despite the existence of gazette notifications, cost audits have not been implemented for a long time. The absence of cost audits is one of the main reasons behind the continued losses of most state-owned enterprises.
Sources at the Ministry of Commerce said that financial audits mainly focus on whether the accounts are correct. In this process, little attention is paid to whether expenditures are reasonable. However, it is essential to conduct an in-depth review of how reasonable the production and operating costs of state-owned companies are, where wastage is occurring, and which sectors have abnormally high expenditures. If cost audits are introduced, these weaknesses can be identified.
Recently, an inter-ministerial meeting was held under the chairmanship of Commerce Secretary Mahbubur Rahman to revise and update the gazette related to the implementation of cost audits in state-owned companies listed in the capital market. Under the Companies Act, the Ministry of Commerce issued a gazette in December 2001 directing all listed state-owned sugar mills to conduct cost audits by cost and management accountants. In addition, in January 2003, similar gazettes were issued for five companies in the fuel and power sector and six companies in the jute sector. Later, in December 2009, gazettes were issued mandating cost audits for all state-owned chemical fertilizer factories, 12 companies in the pharmaceutical sector, and 42 companies in the textile sector.
Although these gazettes were issued about 16 to 24 years ago, they have not been implemented to date. This time, however, an initiative has been taken to enforce cost audits in order to overcome the structural weaknesses of state-owned enterprises by evaluating production costs and operational efficiency. As a result, accountability in management will increase through the reform of cost structures of state-owned companies. If losses are reduced, the financial burden on the government will also decrease to some extent.
Commerce Secretary Mahbubur Rahman told Media that opinions will be sought from the Finance Division, the Financial Institutions Division, the Ministry of Industries, the Dhaka Stock Exchange, and the Bangladesh Securities and Exchange Commission. Based on these opinions, initiatives will be taken to amend the gazette by issuing uniform instructions for cost audits for all public limited companies, instead of specifying company names.
It is learned that the number of currently listed companies in the sectors mentioned in the previous gazettes has increased. In some cases, several companies are no longer listed. Therefore, emphasis has been placed on revising the gazette comprehensively. According to the earlier gazettes, the number of companies in the fuel and power sector subject to cost audits has increased to 52. The number of pharmaceutical companies has increased to 34. The number of sugar mills has risen to 16, and textile sector companies have increased to 58.
At the meeting, a representative of the Institute of Cost and Management Accountants of Bangladesh (ICMAB) said that cost audits ensure cost transparency, accountability, operational efficiency, proper utilization of government subsidies, fair tariff determination, and cost analysis. They play an effective role in preventing wastage, inefficiency, and corruption, and help companies operate profitably and sustainably.
