ICMAI seek permission from the government of India to do cost audit for MSME companies. As per global standards, there is a necessity for conducting a financial audit for MSMEs. ICMAI conducts research programmes. It has 5 lakh students and 90,000 members. According to the previous year’s law, MSMEs with 5 crores of turnover will not require auditing. Professor Raju Iyer also welcomed the proposal. The state minister for the MSME ministry declared that the Institute of cost accountants has not asked for an audit of the MSME industry. There is a need for finance and credit for the MSME industry. ICMAI coach around five lakh students per year. It has more than 90,000 members. The Institute has an interest in financial audits for private companies and MSME Companies.
Why does ICMAI want to audit MSME companies?
The institute submitted a memorandum to the government to get approval for conducting the financial audit. NFRA, reporting authority, has commented on the auditing process of MSME. The regulatory body said that as per the criteria of the threshold, there is no need for auditing for the companies in the MSME sector. In 2020, Government said in the budget that companies with more than five crores of turnover need to do an audit. Below five crore there is no necessity to do auditing as the flow of money is comparatively less. Previously, the rule was up to one crore. The value of money is changing and accordingly, the limits are changing.
By auditing MSME the following improvements will occur:
• The auditors reduce the risk element and take better decisions.
• Understand the need for manpower and management of costs in the organisation.
• Increase the reliability of reports.
• Safeguard assets.
• Increase operational efficiency.
• Follow the rules and regulations.
• Help in implementing best practices.
• Bring improvements in the areas of commerce, economy and legislation.
Accounting standards for MSME:
In 2021, MCA announced amendments to the accounting standards. Disclosures and some amendments do not apply to the MSME sector. The following points elucidate the details of the accounting standards not applicable to the MSME Company.
• Accounting standards 15, 19, 20, 28, and 29 deal with MSME.
• In AS 15, there is no necessity to comply with paragraphs 11 to 16.
• If the contribution falls due after 12 months, the amount does not discount in the balance sheet.
• Paragraphs 50 to 116 do not apply to small and medium-sized companies.
• The method used for the valuation of benefit plans should be in the projected unit credit method.
• Paragraph 78 insists on mentioning the discount rate for the government bonds as per the market yields.
• Paragraphs 117 to 118 regarding benefit plans are not applied to the presentation.
• The long-term employee benefits are calculated using the projected unit credit method.
• Paragraph 22 and subparagraphs C, e, and f explains disclosures of financial leases. This disclosure does not apply to the MSME sector.
• Paragraph 25 of AS 19 contains the disclosures for operating leases. The subparagraphs a, b, and e also say the same. This compliance is not for small and medium-sized companies.
• Paragraph 37 is also not applicable to the MSME Company.
• Paragraph 46 deals with the disclosure of operating leases. This section is also not applicable to MSME companies.
• AS 2o deals with the disclosure of diluted earnings per share. This does not apply to MSME companies.
• AS 28 explains the value in use. Paragraph 121 (g) requires the information. This rule does not apply to the MSME sector.
• AS 29 is about disclosures. The information mentioned in 66 and 67 does not apply to the MSME companies.
Benefits of MSMEs in India:
MSMEs get access to international trade shows. MSMEs get exposure to international cooperation schemes from the Indian government. The international seminars in India cost go up to 12 lakhs, and international events held in foreign countries are arranged with financial assistance for a maximum cost of 25 lakhs. To get financial assistance, the organisation should have the following qualities: registered under the companies act, have a positive track record for the past three years, and have international participation.
• The small Industries development bank of India and the Ministry of MSME together created a trust operating in the name of a credit guarantee trust fund scheme. This scheme help for getting a collateral-free bank loan.
• Start-up companies get a 50 per cent discount on the registration of the patent. This discount is to encourage novel ideas in the finance, production and service industries.
• By maintaining proper books of accounts and procedures, MSMEs get tax exemption.
• The Government of India has introduced multiple schemes for MSME. They are as follows: SFURTI, CVY, MPDA, DMP, EMP, and TIRFSS.
• The arbitration from delayed payments is mediated within a reasonable time. The rate of interest is thrice for the buyer, in case of late payment.
• During starting stage, ISO certification explains the standard maintained in the company.
• Government assist MSME companies in marketing, promotion and technology upgradation.
Final words:
In May 2022, the ICMAI institute wanted to conduct a financial audit of MSMEs. In December 2022, the MSME ministry declares that they have not received a request from the ICMAI institute for the financial audit of MSMEs. As per the cost accountancy guidelines, a financial audit is to provide advice on the financial status. The financial audit is not to check the standards. Cost accountancy subject deal with pricing strategies, budgeting and strategic management. Cost accountants understand the available schemes and suitable strategies for lifting the MSME units. MSME units are the reason for the employment of a poor section of people. The primary and secondary sectors of the economy employ educated and uneducated hard-working people. By lifting the MSME sector, employment opportunities will increase.
