A balanced FRA for transparency in financial reporting

The enactment of the Financial Reporting Act (FRA) and subsequent formation of the Financial Reporting Council (FRC) are faced with hurdles mainly due to strong opposition by the country's chartered accountants (CAs).
From the very beginning the Institute of Chartered Accountants of Bangladesh (ICAB) took its strong position against formation of FRC and so opposed the FRA. The government was, however, determined to move ahead with the much needed act and the council to oversee the professional accountants and auditors. Finding it difficult to stop enactment of the act, ICAB later devised different strategies to undermine the role of the proposed council. With hectic lobbying, the institute has succeeded to some extent to revise the initial draft of the act and consequently composition of the proposed FRC in its favour.
For instance, the initial draft proposed the central bank governor as the chairman of the board of the FRC. But due to strong opposition of the ICAB, it was changed in the first revised draft proposing a person having long working experience as a CA to head the board.  Moreover, composition of the board was designed in such a way that ICAB representatives could dominate the decision making.   
The latest draft, however, accommodates some changes to bring a reasonable balance.  The draft was endorsed by the parliamentary standing committee which was again rejected by the ICAB. Due to such opposition, the finance minister in proposed in Parliament to send back the bill to the standing committee on the finance ministry asking the committee to resubmit it after one month.
ICAB's opposition to the inclusion of the representatives of the ICMAB (Institute of Cost Management Accountants of Bangladesh) is also against the spirit of transparency and accountability. True, the position of chartered accountants is the highest in the accounting profession and their supremacy is well recognised. It doesn't, however, mean that other accountants and related professionals are inferiors and should not have any say. Inclusion of the representatives of the ICMAB in the FRC is very important to ensure transparency of the council and counterbalance the load of ICAB. The argument that cost or management accountants are not fit to review the work of financial accountants is also flawed.  In the FRC, ICMAB is not given responsibility to do such works, rather the council itself is to review all kinds of activities by accountants, be it financial or cost-related.        
The most pronounced argument on behalf of ICAB is that the institute is virtually the regulatory body of the professional accountants and auditors of the country and so it has to be considered at par with other regulators like Bangladesh Securities and Exchange Commission (BSEC). This is a distorted argument. True that ICAB is the highest body of the professional accountants and empowered legally to oversee of the functions of the CA firms besides developing accountants and auditors in line with international standard. But this must not undermine the role of an important entity, to be precise ICAB, for the greater interest of the country's financial sector and businesses in the long run.    
In fact, the so called 'self-regulation mechanism' is very weak and not effective in this fast moving time of globalisation. CAs  regulating CAs - is not a credible and trustworthy proposition and should not be accepted. Moreover, ICAB cannot be considered as a regulator like BSEC or Bangladesh Bank. Recognising ICAB as a similar kind of regulator is not only misguiding, but also risky and it will handicap the financial sector and capital market regulators.  
In many cases, ICAB has conflict of interests and so its so-called regulatory role does not appear affective enough. For instance, in three years between FY'10 and FY'12, National Board of Revenue has received some 55,000 audited financial statements on average annually. On the other hand, ICAB listed CA firms that on an average audited some 14,000 financial statements annually. Thus, a large number of audited financial statements appeared fake or cooked up although many of those statements had the endorsement of ICAB listed CA firms.  Besides the tax authority, it is the responsibility of the ICAB to detect such fake auditing and take action against those involved in such misdeeds. But, very little has been done so far.
ICAB has introduced award for best financial reporting in the country. It is dubious to see that while members of the ICAB are preparing and auditing financial reports, the institute is virtually awarding its own members. This is an unethical practice and unfortunately poses question as regards the integrity of the CAs. Following the practice of ICAB, ICMAB has also introduced best corporate award which is also questionable.  
The orchestrated campaign by the ICAB that formation of FRC would create dual regulatory body for accounting professions is also not valid. By launching the FRC, the overall regulatory and supervisory responsibility will be bestowed on the council and ICAB has to play the role of primary regulator. In the stock market, stock exchanges are the primary regulator while Securities and Exchange Commission (SEC) is the overall regulator.  Again, banks and financial institutions in Bangladesh have two regulators. Bangladesh Bank is the ultimate regulator while BSEC is the additional regulator.  Thus, there should not be any problem if ICAB plays its role properly and extend cooperation. It is unfortunate that ICAB, being a well equipped and highly professional body, is giving wrong message by opposing the formation of FRC.    
Bangladesh economy is moving forward and its financial sector is also growing despite multifaceted complexity. From small to big, all businesses are in need of transparent and compliant financial accounting reports. In this connection, a well balanced FRA and FRC is a must. The government should move ahead with its move to ensure transparency and accountability of accountants as well as financial reports.  
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