The Karnataka State Chartered Accountant Society (KSCAS) has lost its case against inclusion of Cost Accountants as auditor of State Cooperative Societies by Karanataka State Government.
Writ Petition No. : 2026-2031 of 2015
Karnataka State Chartered Accountant Society and Ors vs. State of Karnataka, Department of Co-operation and Ors
Date of Judgment: 29/03/2016
Brief Facts of the Case:
97th Constitutional amendment introduced Article 243ZH to 243ZT requiring every State to make Law making audit of every cooperative society mandatory. Consequently, section 63 of KCS Act was amended making audit of the accounts of the co-operative society compulsory. Initially, the audit was to be assigned to departmental auditors or to chartered accountants.
KSCAS had filed a WP challenging the amendments made in section 63 of the Karnataka Co-operative Socieites Act, 1959 (KCS Act) which allowed auditing of the accounts of state cooperative accounts of by cost accountants/firm of cost accountants. It was prayed to declare such amendment as null and void and ultra-virus the Constitution.
KSCAS had alleged that due to political pressure and lobbying by the members of the Cost Accountant fraternity, the State Legislature sought to bring a further amendment in said Section 63 to enlarge the scope of auditor to include a Cost Accountant within the meaning of Cost and Works Accountants Act, 1959.
KSCAS had contended that the State had overlooked the distinction between the two professional classes and depicted the distinction as under:
Through knowledge of every aspect of accounting, auditing and taxation.
Knowledge of cost and financial management to ensure a fine balance between expenditures and available recourses
CAs are involved in core accounting work of an organization
Cost accountants are involved in the costing part of financial transactions
CAs analyse risk and design efficient financial system
Cost accountants assess the feasibility of projects vis-à-vis available funds
Taxation and auditing are main duties of a Chartered Accountants
Cost management and designing cost controls methods are main duties of a Chartered Accountants
However the Court held as under:
“On a careful consideration of the rival contentions, it is not evident that by virtue of impugned amendment, a Cost Accountant has been enabled to carry out functions which can only be performed by a Chartered Accountant. This statutorily governed and there can be no entrenchment on such functions. It is not the case of the petitioners that auditing the accounts of a cooperative society is the exclusive domain of Chartered Accountants , If that be so, there is no ground for challenge made out.”