ICMAB for \\\'global standards\\\' in forming FRC

Institute of Cost and Management Accountants of Bangladesh (ICMAB) has strongly stressed on maintaining 'global standards' in forming the proposed Financial Reporting Council (FRC) in order to materialise the purposes of its establishment.
"Otherwise, achievement of main purposes of the long-expected FRC will remain elusive, eventually deterring the government move to salvage country's audit standard and causing sufferings to the stock market investors," Mohammed Salim FCMA, President of the ICMAB, told the FE in an interview recently.
The FRC will the supreme body under the proposed Financial Reporting Act (FRA) as the regulator of the country's audit firms.
A row over the FRC's composition, especially about representation of ICMAB in it, surfaced recently between the Institute of Chartered Accountants of Bangladesh (ICAB) and the ICMAB.
ICAB earlier demanded of the government to exclude ICMAB's representation from the FRC under the proposed FRA, which was approved by the cabinet last year.
However, elaborating the 'global standards', Mr Salim said, "Composition of FRC should comprises different independent and professional experts such as representatives from bar association, apex trade body, central bank, securities' regulator, prominent economists, university teachers and non-practicing accountants etc."
 "FRC should comprise who are independent and do not have conflict of interest," he said. "Otherwise, they cannot serve the greater interests of the nation."
He quoted one of the core principles of International Forum of Independent Audit Regulators (IFIAR), an organisation of about 50 countries' audit regulators, as having cited, "Audit regulators should ensure that their staff is independent from the profession…."
 "Audit regulators should make appropriate arrangements for cooperation with other audit regulators and, where relevant, other third parties," Mr Salim quoted another core principle of IFIAR, buttressing the necessity of presence of ICMAB's representation in the FRC.
"As we don't audit financial statements, requirement of having independent person in the FRC will be contented by ensuring ICMAB's representation there," he said, adding that "Thanks to expertise and knowledge in 'finance and audit', its representation in the FRC will also significantly facilitate in ensuring efficient oversight functions of the regulator."
"Though we do not audit financial statements, we have studied relevant subjects and are dealing with it in practice," he continued.
The FRC's functions will also affect the Cost and Management Accountants (CMAs) too; because, the body, aside from overseeing the auditors' (CAs) functions, will set auditing and accounting standards, Mr Salim added to further substantiate his position.
He, however, opposed the drafted FRA provision that included the ICMAB and the ICAB 'Presidents' as representatives in the proposed regulatory body. "To avoid the conflict of interest, other non-practicing experienced members", nominated by the institutes, should be there," he said.
Telling off the ICAB's demand for exclusion of ICMAB's representation, Mr Salim claimed that the demand was raised to make difficult the identification of the auditors' faults in their reports, which is one of the main purposes of forming FRC.
About another claim of ICAB that after inclusion in the FRC, ICMAB later might seek authority to audit financial statements, Mr Salim said, "It is a remark (of ICAB) to create confusion. And actually, the government is the authority to decide through law on who will do what."
 "And, we ourselves didn't want to be included in the FRC," he said, adding that rather, the government prudently kept the ICMAB representation at the 2008 FRA Ordinance, the 2010 draft FRA and also the final draft, which was approved by the cabinet last year.
The ICMAB president also disagreed with all of the five demands, earlier placed by the ICAB before the government to consider for, what it said, the greater interest of the auditing profession and the nation.
Responding to such an ICAB demand to "exclude CMAs from the definition of auditor," Mr Salim termed the demand 'irrelevant'. "Because, as per the drafted FRC, the auditors to be responsible to audit financial statements of the public interest entities under the law are none but the CAs," he said.
He, however, said that the definition was initially stated in a broader sense; later, the auditors can be elaborately defined as responsible to audit activities of different sector organisations.
Mr Salim also termed 'illogical' the ICAB's another opposition to inclusion of representatives from the central bank and securities regulator in the FRC.
Apart from the FRC's composition, the ICMAB president supported the FRA provisions about keeping the CA license and standard setting authorities under the control of proposed regulatory body.
Naming the potential crimes under the FRA as 'criminal offence', Mr Salim also favoured the jail sentence provision in the law saying that it is needed to protect the public interest in line with the global standard.
The FRA and FRC, in the long run, will be beneficial for the auditors because "they then will do quality audit and also get better remuneration," Mr Salim added.