Elevating accounting standards
Saturday, 8 December 2007
Enamul Haque
ACCOUNTING in many areas of business in the country continues to be pursued in the traditional fashion with accounting looked upon as nothing more than book-keeping or taking a stock of routine expenditures and sales returns. But modern accounting is much more dynamic than such traditional practices. It involves regular and meticulous preparation of balance sheets that give a very thorough view of the business organisations including their assets and liabilities.
Even the smallest depreciation of standing assets such as capital equipment in the organisation is noted in such a balance sheet as well as the slightest gain in the form of an acquisition by the business firm. Thus, accounting under the up-to-date system reflects the true state of the business in the sense of its good health or otherwise.
Top managers of a business firm that employs good accounting practices should be able to get the latest and comprehensive picture of the health of their company from accounting exercises on a daily basis so that they can detect any undesirable development the moment it occurs and contemplate the taking of action against it. Thus, today's accounting procedures aids the organisation by constantly presenting company profiles as they stand and enable the company operators to take corrective decisions. Such profiles are also of immense value to investors in company shares and other decision makers in relation to the companies.
Accounting standards of international level are no doubt practised in many business establishments in Bangladesh. But there is also the other side of many business organisations not having accounting systems in place consistent with the international standard. The challenge, therefore, is to achieve uniform accounting standards in all or nearly all business organisations in the country or the elevation of accounting standards where the same is clearly lacking.
This is also the recommendation of the Institute of Chartered Accountants of Bangladesh (ICAB). Notably, the ICAB produced a manual, the Bangladesh Accounting Standards (BAS), long ago. But it is not being followed as a matter of some compulsion in all of the country's business organisations. But business organisations should generally adhere to the BAS. Specially, compliance with the BAS should be made mandatory for all listed companies.
The profession of accounting has a long history in this country and there are of course accountants to be found here whose competence and professionalism are as good as any in any part of the world. But there is also the other face to the profession where auditors do their job poorly or do so deliberately out of "other" considerations.
Meanwhile, it is extremely important to take utmost caution about company prospectuses aiming at raising resources from the capital market. The profiles that are projected for the purpose must be fair and objective, reflecting the actual state of financial situation of the related companies. The accounting firms have a great deal of responsibility here. The financial statements of the companies which go for public floatation of their shares are carefully read and examined by the investors before they put in their funds for investing in initial public offering thereof. The accountants who authenticate such statements should, therefore, do their job in accordance with their best professional norms.
ACCOUNTING in many areas of business in the country continues to be pursued in the traditional fashion with accounting looked upon as nothing more than book-keeping or taking a stock of routine expenditures and sales returns. But modern accounting is much more dynamic than such traditional practices. It involves regular and meticulous preparation of balance sheets that give a very thorough view of the business organisations including their assets and liabilities.
Even the smallest depreciation of standing assets such as capital equipment in the organisation is noted in such a balance sheet as well as the slightest gain in the form of an acquisition by the business firm. Thus, accounting under the up-to-date system reflects the true state of the business in the sense of its good health or otherwise.
Top managers of a business firm that employs good accounting practices should be able to get the latest and comprehensive picture of the health of their company from accounting exercises on a daily basis so that they can detect any undesirable development the moment it occurs and contemplate the taking of action against it. Thus, today's accounting procedures aids the organisation by constantly presenting company profiles as they stand and enable the company operators to take corrective decisions. Such profiles are also of immense value to investors in company shares and other decision makers in relation to the companies.
Accounting standards of international level are no doubt practised in many business establishments in Bangladesh. But there is also the other side of many business organisations not having accounting systems in place consistent with the international standard. The challenge, therefore, is to achieve uniform accounting standards in all or nearly all business organisations in the country or the elevation of accounting standards where the same is clearly lacking.
This is also the recommendation of the Institute of Chartered Accountants of Bangladesh (ICAB). Notably, the ICAB produced a manual, the Bangladesh Accounting Standards (BAS), long ago. But it is not being followed as a matter of some compulsion in all of the country's business organisations. But business organisations should generally adhere to the BAS. Specially, compliance with the BAS should be made mandatory for all listed companies.
The profession of accounting has a long history in this country and there are of course accountants to be found here whose competence and professionalism are as good as any in any part of the world. But there is also the other face to the profession where auditors do their job poorly or do so deliberately out of "other" considerations.
Meanwhile, it is extremely important to take utmost caution about company prospectuses aiming at raising resources from the capital market. The profiles that are projected for the purpose must be fair and objective, reflecting the actual state of financial situation of the related companies. The accounting firms have a great deal of responsibility here. The financial statements of the companies which go for public floatation of their shares are carefully read and examined by the investors before they put in their funds for investing in initial public offering thereof. The accountants who authenticate such statements should, therefore, do their job in accordance with their best professional norms.