Comptroller and Auditor General (CAG) of Bangladesh Mohammad Muslim Chowdhury on Saturday said the corporate management should be one of the areas of investigation by the Financial Reporting Council (FRC) along with the auditors.
The government formed the FRC as a regulator for the auditors as they are often blamed for cooking the financial statements, he told a webinar on "Financial Reporting Act-2015: Its Implications on the Business Houses".
The Dhaka Chamber of Commerce and Industry (DCCI) organisedthe webinar with its president Shams Mahmud in the chair.Aftab-Ul Islam, a director of Bangladesh Bank,also joined it.
Mr. Chowdhury said the corporate governance and its behaviour is important as the FRC is responsible for lack of credible financial statements.He, however,suggested the FRC to play a role of persuasion rather than imposing anything in the next four to five years.
He also stressed the need for improving the visibility of the FRC to be able to collaborate with Bangladesh Bank, BSEC, IDRA or other regulatory bodies.
The CAG said the 4th industrial revolution will change many things overnightas machine will do most of the jobs and as such the accounting practice will be mechanical products.
He said the auditors should be competent enough to take the challenges of the Industry 4.0 for their own sake.
He said: "While interviewing for the posts of executive directors for the FRC, I gave just 5.0 marks to the candidates out of 100 marks. This is the professional standard of the auditors."
He said the institutions like ICAB and ICMAB will have to collaborate with the FRC to enhance the management information systems and corporate governance in the next 10 years.
About adopting IFRS, he said that it should be based on our national context, considering the cost of compliance. Moreover, the IFRS is not applicable for the SMEs of Bangladesh right at this moment.
Speakers attending the webinar said that in the context of increasing digitisation, compliance to accounting standards as well as fair and transparent financial reporting is essential.
DCCI president Shams Mahmud said the FRC needed to play a more effective role for improvement of the quality of audit and corporate financial reporting systems significantly which will consequently help address the willful default loan problem in the banking sector.
He said that transparent financial reporting by all the listed companies as well as non-listed companies is very critical to gain investors' confidence and thereby attracting investment in the capital market.
"To attract foreign investment, MSME reporting also needs to meet international requirements and standards such as those set by the International Accounting Standards Board," the DCCI chief said.
He said that simple, user-friendly accounting and financial reporting guidelines for MSMEs needed to be in place to ensure better access to finance.
The FRC needed to have more professional resources for implantation of this Act, he added.
Aftab Ul Islam said the audit firmsmay require a rating system like camel rating.He said that better financial reporting will help attract FDI and create business confidence.
"We have to enhance our credibility and, in that case, we can examine the successful examples of other countries in terms of financial reporting regulations."
Dr. Javed Siddiqui, an associate professor at University of Manchester, UK said the FRC has been given much authority and it should act to maintain transparent financial reporting by the auditors.
He said that the auditor's fee in Bangladesh is lowerthan that of other countries and opined that low fee does not ensure quality work.
For a credible audit report with local or international acceptance, corporate governance and positive will of the company management are the key factors, he mentioned.
Barrister A M Masum said that theFRC being a regulator has to make sure the public interest entities to abide by the regulations.
He emphasised on strengthening management and board of a company that the FRC can look into it according to section 47.
Mr. Muhammad Farooq, president at the Institute of Chartered Accountants of Bangladesh (ICAB) said the FRC should play a role to regulate the regulators.
Financial reports are being prepared by the company and upon that report the audit report is prepared by the auditors, he said.
"If any anomalies found, not only the auditors are to be blamed, but the management of the company should also be accountable for that," he noted.
He said the implementation of the IFRS is also poor even in the banking sector.
Mohammad Mohiuddin Ahmed, executive director at the FRC, presented the keynote paper. He said that there are three implications of the financial reporting act on the business houses like financial statement, audit process and accountability.
"Good financial reports will make businesses comparable globally and create investors' confidence and ensure high ethical values," he added.
Without international accounting standard (IAS) or international financial reporting standard (IFRS), he said the financial report will not be accepted locally or internationally.
"Establishment of Financial Reporting Council (FRC) is a positive effort and the corporates need to change their mindset as well," he added.
He also emphasised on creating more competent professional accountants in the country. "We also should conduct a GAP analysis in order for preparation and presentation of financial statements."
M Anwarul Karim, another executive director at the FRC, said that it focused on strengthening the financial reporting of the business houses while working on enhancing the standards.
The FRC will conduct various outreach programmes and trainings for simplification of the standards, he said.
He also said that if the businesses think IFRS is complicated for them, they can hire or outsource consultant.
Md. Jasim Uddin Akond, president at the Institute of Cost and Management Accountants of Bangladesh (ICMAB) suggested including cost audit and requested the FRC to take initiative in this regard.
CQK Mustaq Ahmed, former chairman of FRC, said that the FRC's supervisory role should be strengthened. "The FRC is now at its take off situation and slowly it will be able to enhance its visibility."
N K A Mobin, DCCI senior vice president, delivered votes thanks.
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