President's Message - ICWAI President’s Page April 2009, The current global downturn spawned by excessive greed and recklessness driven by short-term ‘profit only’ motive has led to widespread questioning on whether this crisis will sound the death knell of capitalism in the world. Cheerleaders for capitalism will argue that it has seen far worse times in the past and that it is resilient, capable of weathering such occasional storms. Skeptics doubt the inherent ability of the capitalist market for automatic correction and self-equilibrium. Whatever be the argument, there is one ground on which a broad consensus is emerging and that is the need to reshape capitalism in its present avatar to a more value based, more fundamental based one with clearly defined governance structure and transparency. Market forces do not eliminate the need to regulate prices and profits to bring about economic balance. ‘Free market’ does not mean throwing away the control system of society. It does not lead to automatic, self-regulation. Regulatory apparatus needs to foster efficiency and investment by eliminating outdated restrictions. This is where India steals a march over the Anglo Saxon economies - with its passive state control, its measured pace of financial innovation and expansion and its business based on ‘basics’. The management accounting profession is directly involved with the issue of functional potentials of different types of resources of the society and to examine whether the resources are put into optimal usage in conformity with their innate functionalities. These issues need to be considered for appropriate strategic perception. Strategic cost management for sustaining competitive advantage is loaded with many socio-economic issues and value judgement. In the changed economic environment the emphasis should shift to efficiency review. Some argue with a misconceived notion that cost audit has become irrelevant in a market economy. It is true that government control is unwarranted in a market economy. But, in a market economy, regulators are required to frame right regulations in the interest of the industry as a whole and also in the interest of the consumers and other stakeholders. Cost audit, supported by cost accounting standards, can provide relevant and credible cost and revenue data to regulators to support their decisions. Moreover, cost audit can provide relevant reports to the board of directors to strengthen its oversight function. In a market economy, cost audit with changed emphasis on efficiency is as relevant as it was in a controlled economy. The Council is aware of its responsibilities in this regard and is taking all necessary steps to position cost audit in the enterprise governance structure. The 6th ICWAI National Award for Excellence in Cost Management was held at Vigyan Bhavan, New Delhi on March 13, 2009. Shri Anurag Goel, IAS, Secretary, Ministry of Corporate Affairs graced the occasion as Chief Guest and gave away the prizes to the award winners. As you are aware, this is a flagship event of the Institute and this year a record number of companies participated in the award contest. Hon’ble Justice J. S. Verma, Retired Chief Justice of Supreme Court of India was the Chairman of the Jury. The list of award winners is published elsewhere in this issue of the Journal. Shri Goel, put on record his appreciation of the excellent work done by ICWAI in recent times and said “Audits like Financial Audit, Cost Audit, corporate social responsibility are elements of a corporate governance system. Enterprise governance strengthens corporate governance in the context of contemporary competitive scenario and increased consciousness to align the company to the global practices and standards. Corporate reporting systems also need to be strengthened through appropriate efficiency audit practices. In this connection it is significant to appreciate the need to position Cost Audit in the enterprise governance structure”. A number of seminars and conferences were organized by different Chapters during March 2009. The Eastern India Regional Council and Durgapur Chapter of Cost Accountants organized the Eastern India Regional Conference at Durgapur on March 7-8, 2009 on “Innovation for Accelerated Growth” which was very well organized and attended by a large number of delegates. The Asansol Chapter of Cost Accountants organized their Annual Seminar on “Enterprise Governance – the need of the hour” on March 15, 2009 at Asansol. The interaction of the members on the concept of Enterprise Governance was extremely lively. The Dhanbad Chapter of Cost Accountants organized their Annual Seminar on “Global Financial Crisis – a SWOT Analysis of Indian Economy” on March 22, 2009 at Dhanbad. A meeting was held with the officials of SEBI to discuss the modalities of conducting the Internal Audit of Stock Brokers which was also attended by the representatives of ICSI, NSE, BSE and MCX’SX. The meeting was extremely fruitful and number of issues in connection with structure of the report and requirements of SEBI were sorted out in the meeting. A meeting was also held with officials of the Reserve Bank of India to discuss different areas where our profession can play a positive role. The ICWAI took active part in the 1st Edition of “IFRS Summit 2009” on March 18, 2009 organized by the CII at Mumbai. The current issue of Management Accountant focuses on the Small and Medium Enterprises (SMEs) in India, their pivotal role in Indian economy and the challenges they confront in the wake of the current crisis.