Practising accounting standards of international level
Friday, 2 November 2007
Kamal Ahmed
Despite some welcome changes in recent years, accounting procedures in many areas of business in the country still continue 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. 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 organisation including their assets and liabilities. Even the smallest depreciation of standing assets such as capital equipment in the organisation are 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. This will enable them to detect any undesirable development the moment it occurs and contemplate the taking of action against it. Thus, today's accounting procedures not only aids the organisation by constantly presenting company profiles as they stand and enable the company operators to take corrective decisions, the 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 of Bangladesh. Such standards have been updated and are noteworthy for their being at par with global ones in a wide array of areas. Professional accounts with probity and accountability have been making endeavours to put such standards into practice. Greater efforts are still need for enforcement of such standards and accounting procedures across the board. This is largely because of the fact that many business organisations do not yet have 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 has 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 in all business centrepieces, particularly banks and other financial organisations at this stage.
It is not difficult to appreciate the reasons why accounting standards in some areas in Bangladesh are still not developed to the desired degree. This is not to deny that 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 pecuniary considerations . Company prospectuses that venture to raise resources from the capital market are produced to project exaggerated company profiles through the collaboration of pliant accounting firms; dividends are squeezed due to the preparation of purposefully skewed profit and loss accounts. Besides, many otherwise prospective companies fail to take timely steps for expansion or other business adjustments as they have not cared to maintain competent accounting departments to aid them in these tasks. Furthermore, it has to be noted that accounting fees and charges have to be raised in many cases because quality involves costs. All business enterprises should spend a reasonable part of their operating expenditures for ensuring the quality of accounting procedures relating to their business activities.
Despite some welcome changes in recent years, accounting procedures in many areas of business in the country still continue 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. 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 organisation including their assets and liabilities. Even the smallest depreciation of standing assets such as capital equipment in the organisation are 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. This will enable them to detect any undesirable development the moment it occurs and contemplate the taking of action against it. Thus, today's accounting procedures not only aids the organisation by constantly presenting company profiles as they stand and enable the company operators to take corrective decisions, the 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 of Bangladesh. Such standards have been updated and are noteworthy for their being at par with global ones in a wide array of areas. Professional accounts with probity and accountability have been making endeavours to put such standards into practice. Greater efforts are still need for enforcement of such standards and accounting procedures across the board. This is largely because of the fact that many business organisations do not yet have 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 has 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 in all business centrepieces, particularly banks and other financial organisations at this stage.
It is not difficult to appreciate the reasons why accounting standards in some areas in Bangladesh are still not developed to the desired degree. This is not to deny that 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 pecuniary considerations . Company prospectuses that venture to raise resources from the capital market are produced to project exaggerated company profiles through the collaboration of pliant accounting firms; dividends are squeezed due to the preparation of purposefully skewed profit and loss accounts. Besides, many otherwise prospective companies fail to take timely steps for expansion or other business adjustments as they have not cared to maintain competent accounting departments to aid them in these tasks. Furthermore, it has to be noted that accounting fees and charges have to be raised in many cases because quality involves costs. All business enterprises should spend a reasonable part of their operating expenditures for ensuring the quality of accounting procedures relating to their business activities.