The suspicion that companies listed with the country's bourses do not deliberately include all the information in their financial disclosures, published from time to time, has become rather strong among investors. None of the listed companies has ever stated that it faithfully includes all the information in its financial disclosures as are required under the relevant laws and rules. In fact, investors' suspicion would rather be strengthened by the findings of a recent research study carried out on listed companies under a jointly sponsored project by the University Grants Commission (UGC) of Bangladesh and the World Bank.
The study has detected some particular areas where the listed companies hide some mandatory information from their general shareholders. These areas include unsecured short-term borrowings, deferred taxation, deferred tax liabilities, break-up of intangible assets, value of land and buildings and accumulated impairment losses at the start and completion of projects. Many companies even do not furnish the names of their top management people and their compensation packages in financial statements. The statements published quarterly, half-yearly and annually by the companies have so many grey areas. But those are rarely questioned by the regulatory bodies and even by general or institutional investors.
Two basic reasons have been identified by the study -- family control and involvement of controlling shareholders with the management -- for hiding information from general investors by the listed companies. The act of concealing information is aimed at keeping the control of a chosen few over the company management and accrual of financial benefit for them. But an obvious question that one feels tempted to ask here is, what are the audit firms doing? True, audit firms are not meant for policing. But while preparing the financial statements of companies, listed or otherwise, they are required to comply with rules and provisions of the relevant laws, namely, the Company Act, the Securities and Exchange Commission Ordinance, International Accounting Standards and Bangladesh Accounting Standards (that have been put in place by their own professional organisation).
In fact, it is hard to conceal financial information from the shareholders by the listed companies without the help of the audit firms. This particular fact has prompted the government to put in place a financial reporting act. But the move has met opposition from the accounting professionals who are opposed to any kind of bureaucratic control over, or interference in, the professional activities of the chartered accountants. The opposition has delayed the adoption of the act in question. But the finance minister has recently disclosed that a bill in this connection would be tabled in parliament soon.
The role of the securities' regulator in ensuring lawful disclosures by the listed companies should also come under scrutiny. It cannot wash off its hand just by holding others responsible for incomplete and faulty financial disclosures by the listed companies. The primary responsibility for examining all the reports, financial or otherwise, of the listed companies lies with it. The Bangladesh Securities and Exchange Commission (BSEC), which has been the focal point of criticism following two major market collapses, has reportedly gone through some reforms, of late. So, it is expected that the regulator, with the support of adequate and skilled personnel of its own, would be made to see to it that the listed companies do not cheat the general investors as far as financial disclosures are concerned.
