The finance ministry, in the face of widespread allegation about a section of auditors' deliberate indulgence in the acts of preparing fabricated or cooked-up financial reports by companies, framed the Financial Reporting Act (FRA) and got it approved by the cabinet a couple of months back.
However, the ministry did not push the proposed act through the parliament, apparently, in view of strong opposition from the Institution of Chartered Accountants, Bangladesh (ICAB), the professional body of the auditors.
The ICAB has claimed that the Financial Reporting Council (FRC), to be instituted under the proposed act, would only ruin the accounting profession. It has rather pleaded for continuation of the ICAB's role as self-regulatory body for the accounting professionals.
It seems an opportunity has arrived lately for the ICAB to prove its worth as a regulator. A demi-official (DO) letter sent by the National Board of Revenue (NBR) to the ICAB recently has offered that opportunity.
In the letter, according to a report published in the Financial Express early this week, the NBR has informed the ICAB that an instant survey by its officials has revealed gross anomalies in financial statements submitted separately to it and a commercial bank.
In the letter, signed by its chairman, the NBR requested the ICAB president to take necessary measures for preventing the audit firms from submitting window-dressed audit reports.
The ICAB president in reply to the NBR letter without refuting the allegation brought about by the latter admitted that a few firms, as happened in the case of other professions, might have been involved in wrongdoing.
The ICAB president sought from the NBR the names of the audit firms that were allegedly involved in the preparation of audit reports incorporating false information and, reportedly, told the Board that it would show 'zero' tolerance towards corrupt audit firms.
It is, however, difficult to make predictions about the ICAB actions against the 'corrupt' audit firms, if there is any, since the track record of the institution on this particular issue has not been that encouraging.
The government made the recent move to enact the FRA that paves the way for formation of FRC because of the alleged failure on the part of the ICAB to take punitive actions against errant audit firms. A number of government agencies, including the securities regulator, have time and again expressed their dissatisfaction over lack of punitive actions against audit firms that do not follow international as well as national auditing standards and indulge in corrupt practices.
The audit firms undeniably play a very important role in the economy. On their honesty and integrity depend, among others, the tax revenue income of the government and return on investments by shareholders of companies, listed or otherwise.
It is widely believed that many companies maintain 'two accounts' mainly to cheat the taxation authority. This evil practice is not possible without the help of audit firms. The issue that has been brought forward by the NBR for consideration by the ICAB is about two varying financial statements of a bank with an intention of evading tax.
The ICAB has opposed tooth and nail the FRA and the FRC, mainly on the plea of giving an undue upper-hand to non-professionals in the proposed FRC in deciding the fate of professional audit firms.
But the problem remains that professionals manning any watchdog body in many cases are found to be reluctant to initiate appropriate actions against fellow professionals.
The Bangladesh Medical and Dental Council (BMDC) is a glaring example. The government has not empowered the Bangladesh Medical Association (BMA) to act as a watchdog for medical professionals. Rather it has created the BMDC, manned mainly by physicians, to do the job. But allegations are galore that the Council hardly takes any action against doctors involved in acts of gross professional negligence.
The ICAB might have successfully stalled the move to create the FRC for now. But the accounting professionals will be under intense watch from different quarters and with the change time the issue of enacting the relevant law might come up again in the future.
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