It is nothing surprising that most annual financial reports submitted by business firms to the tax offices are prepared by fake auditors. This unscrupulous practice is obviously aimed at evading the payment of tax in right amounts to the government. In fact, the state of affairs in the tax administration and the world of accounting here offer enough opportunities for indulging in this kind of mischievous act. But the extent of this particular financial offence has gone too far -- 70 per cent of the financials that the National Board of Revenue (NBR) receives from the companies are, according to a report published in this paper late last week, audited by fake accounting firms.
What is surprising is that both the Institute of Chartered Accountants of Bangladesh (ICAB) and the NBR have been aware of the malpractice for years. But none has done anything tangible to stop it. The main responsibility in this respect lies with the NBR. Except for sending a few financial statements to the ICAB being suspicious about their authenticity, NBR has not taken any effective step to stop this malpractice. Until now, the ICAB too has not demonstrated the due seriousness about the issue. If the NBR's indifference is costing the government's coffer a big volume of revenue, the lack of interest on the part of ICAB has been hurting the image of accounting professionals.
The nexus that dishonest companies -- the number of fraudulent companies is far greater than the honest ones -- and unscrupulous income tax lawyers and tax officials have formed, is quite old. It has over the years expanded and gained strength with no one trying to break it and help more revenue flow into the national exchequer. The act of certifying the financials of around 40,000 companies by fake auditors a year does amply indicate to the expansion of the nexus. Even a few ICAB members allegedly resort to the cooking of books of many listed companies to cheat shareholders and evade tax payments in right amounts. The securities regulator on a number of occasions in the past sent a few cases of unfair accounting practices by their members to the ICAB.
Given the large number of companies submitting cooked books of accounts to the NBR, the extent of tax evasion is anybody's guess. It seems rather strange that the NBR has not yet taken any serious initiative to improve in the situation. Its approach to the problem was half-hearted one. Though the large tax units hardly take the services of fake audit firms, the tax authorities cannot ignore the tax evaded by small and medium-sized companies. The NBR and the ICAB should join their hands without any further delay to address the problem of submission of financials audited by fake firms. Even a moderate improvement in the situation would help the NBR mop up a sizeable amount of additional revenue.
Auditing of businesses\\\' financials by fake firms
FE Team | Published: March 22, 2015 00:00:00 | Updated: November 30, 2026 06:01:00
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