One can guess well the state of accountability and transparency in the operations of most registered companies and firms in Bangladesh from a report that was placed at a seminar in Dhaka.
The World Bank country office in Dhaka and the Institute of Chartered Accountants of Bangladesh (ICAB) organised the seminar last Sunday.
The report said nearly 90 per cent of the companies registered with the Registrar of Joint Stock Companies and Firms (RJSC&F) do not bother to submit their audited financials to the RJSC&F, despite the fact that the act concerned has made the submission of the same mandatory.
Besides, the office of the Registrar is not equipped adequately to go through the audited financials. In most cases, the financial reports submitted by the companies and firms are not even touched by the officials there.
The fact remains that the RJSC&F has also never been interested in detecting the companies defaulting on report submission or punishing anyone for non-compliance.
It would be, however, unfair to blame the entity concerned for lack of initiatives on its part. Rather the logistics and manpower required to monitor the default on submission of audited financials are not available with the RJSC&F. The monitoring of such a massive number of registered companies and firms every year is a daunting task.
Thousands of companies after getting registration do not enter the office of RJSC&F even for once or send reports, financials or otherwise, to the latter. The failure to take actions as required under the act concerned has, in fact, emboldened the registered companies to be so defiant.
The number of companies and firms that have taken registration from the RJSC&F until June 2013 was over 181,000.
Of them, more than 128,000 were companies. However, the RJSC&F does not know how many of those actually are in operation.
The RJSC&F is, in fact, a regulatory body. But it hardly carries out any regulatory function. Despite some recent improvements, the state of affairs with most other regulators continues to be disappointing.
However, among all regulatory functions, ensuring the fairness and transparency of the financials, particularly those of listed companies, is considered to be the most important one. The relevant regulatory bodies' performance to this effect has not been that satisfactory until now.
Yet some positive developments have taken place in recent years. After a long delay, the government has adopted the Financial Reporting Act (FRA). Steps have been taken, in cooperation with the World Bank and some other international organisations, to encourage the listed companies to adhere to the International Financial Reporting Standards (IFRS) and the International Standards on Auditing (ISA).
The securities regulator, following the collapse of the stock market in 2010, has strengthened its oversight functions. It is now trying to ensure transparency in the audited financial statements of the listed companies.
There is no denying that non-submission of audited financials to the RJSC&F by the lawfully registered companies does highlight the lack of accountability on the part of the latter.
The regulator concerned does not mind such non-compliance or defiance, possibly, because the submission of the financial reports by all registered entities would entail more problems for it. The RJSC&F, apparently, feels itself relieved by the present state of affairs.
Under the circumstances, the policymakers concerned should think of deleting from the relevant act the clause that makes submission of audited financials mandatory for all the registered companies. Moreover, when the RJSC&F does not have the manpower and logistics to examine the audited financials, why should it unnecessarily impose additional cost on the companies on account of preparation of audited financial reports?
However, the Bangladesh Securities and Exchange Commission (BSEC) should have no reason to be lenient as far as the financials of the listed companies are concerned. The FRA that provides for the formation of the Financial Reporting Council (FRC), has created an opportunity to get quality audit reports.
The financial statements of companies, duly audited by the qualified chartered accountants, are supposed to be transparent and fair. Those should not, in any form, try to cheat either the shareholders or the state revenue authority. However, questions on occasions have been raised about the quality of auditing by the ICAB-recognised firms. The ICAB too has taken disciplinary actions against a few of its members.
Now law, rules, institutions, international standards are in place. It is expected that all concerned would try to raise the quality of financial statements of companies, listed or otherwise, to an acceptable level.
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