Focus on cost management
PROF. DR. KHAWAJA AMJAD SAEED
August 16 - 22, 1999
At the time of its independence on August 14, 1947, Pakistan inherited
an agrarian economy with more than 80% of its population living in rural areas and earning
its livelihood from agricultural sector. The industrial base was very narrow and basic
industries were almost non-existent. The backwardness of economy also meant that
accountancy was a relatively young profession in the country. It was only with economic
development and expansion in industrial sector that the profession of accountancy acquired
greater importance and ultimately its present status.
In South Asia, accountancy as a profession had its origin and early
development during the British colonial era. For quite sometime after independence
Pakistan continued with the same accounting practices, rules and regulations that were in
vogue when the British authorities departed. Like most other laws, rules and regulations,
the Government of Pakistan adopted the Auditors' Certificate Rules, 1932 for regulating
the profession of accountancy in the country. These rules laid down the conditions
concerning education and training that made a person eligible for registration as a
professional accountant with the Ministry of Commerce, Government of Pakistan. Under these
Rules, the accountancy profession in Pakistan included practising and non-practising
Registered Accountants. The latter were employed on full-time basis in accounting,
managerial or other positions in private organisations.
During the early years, the Registered Accountants were mainly involved
in the work of auditing in compliance with various legislations such as Companies Act,
1913, different Civil and Criminal Codes and Auditors' Certificate Rules, 1932
(subsequently 1950) Section 144(1) of the Companies Act, 1913, as applicable then
"No person shall be appointed or act as an auditor of any company
other than a private company (not being the subsidiary company of a public company) unless
he holds a certificate from the Central Government entitling him to act as an auditor of
Providing that a firm whereof all the partners practising in Pakistan
hold such certificates may be appointed by its firm name to be auditor of a company, and
may act in its firm name."
Section 144(2) and (2A) of the Companies Act, 1913, empowered the
Government to make rules relating to issuance of certificates to accountants who wanted to
join the profession as Registered Accountants.
In the year 1950, the Government of Pakistan reframed the Auditors'
Certificate Rules with necessary modifications to suit the prevalent needs of the
profession. The Auditors' Certificate Rules, 1950 consisted of three parts:
Part I : Maintenance of and Enrolment on the Register.
Part II : Theoretical Training, Examination and Practical Training.
Part III : The Pakistan Council of Accountancy.
During the initial stages, there were serious problems concerning
education and training of the professional accountants. The Pakistan Council of
Accountancy that was set up under the Auditors' Certificate Rules, 1950 also failed to
properly shoulder its responsibilities.
Soon after the independence, the Government of Pakistan placed much
emphasis on industrialization to promote self-reliance in manufactured items and consumer
goods. At the same time it concentrated its efforts on producing value-added products
based on jute and cotton. This led to the importance of cost determination and cost
control in industrial sector with a view to making Pakistani products more competitive in
international markets. In 1951, Pakistan Institute of Industrial Accountants was
established and incorporated under the Companies Act, 1913. In a brief issued by the
Institute, the reasons for its establishment were stated:
"With the inception of Pakistan in1947 there followed a very rapid
industrialization of the country. The paucity of properly qualified persons in the many
specialized fields, including Cost Accountancy was, however, a serious block in the way of
this expansion. In the field of Cost Accounting, there were only 4 fully qualified persons
in the country at the time of partition.
In this background and in order to meet the country's requirement of
properly trained Cost Accountants, the Pakistan Institute of Industrial Accountants was
established in 1951 on the lines of the Institute of Cost and Works Accountants, London.
It will be observed that the Institute is a non-profit-making body established solely for
Another important step was taken in 1952 when Pakistan Institute of
Accountants was formed as an independent body to safeguard and promote the interests of
the Cost Accountants and to apprise the Government of their views. Its membership was
voluntary and restricted to Registered Accountants only. Pakistan Industrial Accountants
and Pakistan Institute of Accountants filled the vacuum to some extent, yet much more was
required to be done. In June 1959, the Government established a Department of Accountancy
with Controller of Accountancy as its Chief Executive. Greater involvement of the
Government was the need of the hour and, therefore, on the recommendation of the Council
of Accountancy, the Government promulgated the Chartered Accountants Ordinance 1961. On
July 1, 1961 the Institute of Chartered Accountant of Pakistan (ICAP) was established with
the prime objective of regulating the profession of accounting in Pakistan. The Government
was oblivious of the importance of cost accounting and in 1966 the Cost and Management
Accountants Act, 1966, was passed which led to the establishment of the Institute of Cost
and Management Accountants of Pakistan (ICMAP), as a successors to the former Pakistan
Institute of Industrial Accountants. In view of the specific needs of the country, the two
streams of accounting profession had taken shape. Subsequently amendments were made in the
Acts establishing these Institutes whenever necessary.
INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN
The mission statement of the ICAP is as follow:
"To continue to promote high professional and ethical standards
and to equip the members with the distinguished knowledge and training required to face
the challenges of the 21st Century."
There are more than 2,300 members of the ICAP. The Institute is managed
by a Council of Sixteen members who elect the office bearers including the President.
There is Secretariat with a Secretary, Executive Director and Directors for Technical
Services, Education and Training, Examinations and Professional Standards Compliance.
INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN
The mission statement of ICMAP is as follow:
"To promote efficiency and effectiveness by providing competent
and high calibre professionals in the area of Management Accountancy."
Pertinent aspects about ICMAP are as under:
1. NATIONAL COUNCIL
The Institute is administered by the National Council. It consists of
twelve (12) members, eight (8) of whom are elected by the members and four (4) are
nominated by the Government. The governing body is assisted by various statutory and
non-statutory committees in discharging its responsibilities efficiently and effectively.
2. STUDENTS' DEVELOPMENT
The main object of the Institute is to regulate the profession of Cost
and Management Accounting. In this context, students who ultimately become members of the
Institute are considered as the prime asset of the profession. It is a pre-occupation of
the Institute to devote all its efforts and energies to develop the students as good
In this connection it is a policy of the Institute to continuously
improve and upgrade the curricula keeping in view international trends and national
requirements. The syllabus is usually revised after every 3 to 5 years. All kinds of
innovations in course development that are taking place over the globe especially under
IFAC are given due weight in developing the course outlines at the
To develop communication skills and leadership qualities in the
students, the Institute has recently prescribed presentations in each subject as an
integral part of the educational programme. Case study has also been introduced to make
the students better prepared for their career. To give the student orientation to the
professions in practice two years compulsory internship has been imposed.
To provide thorough and comprehensive education to the students the
course has been divided into six parts. The first two parts constitute foundation stage
and in the four higher parts the students are trained for professional skills and
The main objectives of the syllabus are:
a. To provide students with a structured frame-work of the course of
study for preparing to qualify the examinations of the Institute.
b. To provide the Institute with an adequate basis upon which to train
the students and to examine their bases, detailed and in-depth knowledge in the prescribed
subjects of the course.
c. To provide the prospective members with a basis of professional
applicable knowledge and skills for enabling them to practice as management accountants,
financial advisors, auditors and management consultants under various business
d. To enable the prospective members to have appropriate applicable
knowledge and skills to effectively function as a member of top management team in
business, trade and industry and ultimately rise to position of Chief Operating Executive.
3. ROLE OF COST AND MANAGEMENT
The Cost and Management Accountants are engaged by all kinds of
organizations in government, multinational, public and private sectors. While employing
them, their qualification is considered equal to Chartered Accountancy. The Government of
Pakistan has recognized the equivalence of CMAs and CAs vide its memo No. F.
5(4)-Estt.1/74, dated May 2, 1974. The members of the Institute are authorised to carry
out the Cost Audit, Sales Tax Audit and also carrying out their jobs under various laws of
the country. They are also authorised to sign the balance sheet and other financial
statements under the prudential regulations passed by the State Bank of Pakistan.
4. PROFESSIONAL JOURNAL
The Institute brings out its official magazine entitled
"Management Accountant" after every two months. It contains articles written by
eminent scholars of national and international stature for the benefits of its members,
students, business executives etc. A special section for students has also been created in
the journal. It carries articles written by the students. News items of students' interest
are also published in it.
The research department of the Institute publishes a newsletter under
the name of Research Line. As a research oriented periodical it is quite popular among the
members and students of the Institute.
5. CONTINUING PROFESSIONAL
To keep the members abreast with the emerging developments in the
profession, the Institute regularly organises functions like Seminars, Symposia,
Workshops, Conferences etc. Eminent scholars of national and international repute are
invited to make presentations in these events. Usually latest topics like Balanced
Score-Card, Target Costing, Life Cycle Costing, Activity Based Costing, Activity Based
Management etc. are subjected to discussions and deliberations in them. The Institute
normally organises two to three conferences in a year.
Minimum C.P.E. Credit Hours to completed by the members during a
calendar year are as under:
a. Practising Members 15
b. Non-Practising Members 10
c. Members residing abroad 05
It is mandatory requirement for admission of a newly qualified student
to be a member that he must have at least ten credit hours to his credit.
The Institute has its head office located at Karachi. It has four more
campuses at Karachi, Lahore, Islamabad and Multan. It performs its various functions
through its secretariat comprising the following officers.
Director Admin. & Finance
Deputy Director Co-ordination
Director Northern Zone (Lahore)
Regional Director (Islamabad)
Students who qualify all the examinations of the Institute, complete
requisite experience and earn at least 10 C.P.E. hours etc. are admitted as members of the
Institute. There are at present two types of membership i.e. Associate and Fellow Members.
A person is admitted as an Associate Member on completion of final examination of the
Institute and on having three years experience in a reputable organisation in business and
industry sectors. Fellowship of the Institute is granted to Associate members when they
have five years experience in managerial capacity to their credit.
The membership of the Institute has more than doubled during the last
ten years. The members are engaged in professional practice and are employed in various
organisations. About 100 members are in practice while others are employed as directors,
managers and accountants in public, private, multinational and Government sectors. A few
of the members reached the higher echelons of the organisation they were in. Mr. Riyaz H.
Bokhari, FCMA retired as Auditor General at Pakistan, Mian Mumtaz Abdullah had been the
Chairman Corporate Law Authority (CLA), Prof. Dr. Khawaja Amjad Saeed rose to the position
Pro Vice-Chancellor in the University of the Punjab, Lahore. A good number of ICMAP
members are working as CEOs in various local and multinational
The Institute is a founder member of following International Accounting
International Federation of Accountants
International Accountancy Standard Committee
Confederation of Asian and Pacific Accountants
South Asian Federation of Accountants
Two of institute's Presidents had been elected President SAFA in the
past. The Director Northern Zone of the Institute served as the Executive Secretary of the
SAFA during 1997. The sitting President of the Institute is at present a member of
Governing Body of IFAC as a representative of both the Institute of Cost and Management
Accountants of Pakistan (ICMAP) and the Institute of Chartered Accountants of Pakistan
8. COST RECORDS ORDERS
The Institute extends assistance, through providing inputs, for framing
of various laws, rules and regulations to the Securities Exchange Commission of Pakistan
as and when required. In the context of Cost Audit, it has been playing pivotal role in
the development of Cost Records Orders of various industries. These records will
ultimately form the basis of Cost Audit. Uptill now Cost Records Orders have been prepared
for Vegetable Ghee, Cement, Sugar, Chemical and Fertilizer Industries. Those for thermal
power and other industries are in the pipeline. ICMAP is the major contributor in this
As a living organisation ICMAP is alert and alive to the changes taking
place in the professional environment over the globe. It is quick to make adjustments in
its outlook and curriculum development and thus keeping the profession relevant in the
emerging scenarios. Now when Cost Audit has been imposed in Pakistan and CMAs are
authorised to carry it out when desired, ICMAP has employed a Cost Audit Advisor to help
the practising members in resolving their problems and to satisfy their queries. ICMAP
firmly believes in professional ethics. Its Ethics Committee is ever vigilant and keeps
the members' behaviour under active surveillance so that ethical rules and regulation are
complied with letter and spirit.
The objective is to provide high quality services to the employers and
clients of management accountants. Under the continuos improvement programme which is the
policy of Institute, upgradation of the profession is always on the anvil to keep it
relevant in the changing business and economic scenarios.
President, Institute of Cost and Management Accountants of Pakistan.
The author is grateful to Mr. Tariq Saeed, ACMA for his logistical
support in developing this paper.