Regulator indifferent to audit dress-up by rogue listed cos
Sunday, 7 November 2010
Mohammad Mufazzal
The securities regulator is yet to take measures for re-auditing the suspected balance-sheets of listed companies though a decision to this effect was taken about three months back.
Some market experts termed it as regulatory failure and observed that the absence of such a provision had been encouraging the errant companies to resort to window dressing of their balance-sheets to cheat the investors concerned.
The Securities and Exchange Commission (SEC) itself found that unscrupulous auditors were engaged in window dressing of their balance sheets to help a section of the listed companies get away with their financial crimes.
Following such detection, the regulatory body at a meeting held on August 04 last with its chairman Ziaul Haq Khondker in the chair took a decision to re-audit the suspected balance-sheets.
An SEC official said the regulator is yet to fix the working procedure for re-auditing the doubtful balance-sheets.
Professor Abu Ahmed, an economist and a teacher at Dhaka University, said accountability and transparency of the listed companies could not be ensured due to the SEC's reluctance to introduce a mechanism for the re-auditing the suspected balance-sheets.
"It's a regulatory failure," Prof. Ahmed said.
"All kind of questionable balance-sheets and relevant financial statements, particularly of the companies that declare stock dividends at abnormally high rates, should be re-audited," he said.
"It's a one of the basic functions of the SEC to stop manipulation in balance- sheets. Otherwise, the unscrupulous companies will continue their exploitation leaving the investors in darkness," he added.
The former SEC chairman and ex-secretary Farukh Ahmed Siddiquee said at first the SEC will have to decide who will pay the fees for re-auditing the doubtful balance-sheets.
"If the companies pay fees for re-auditing, there could be manipulation of figures favouring the owners", Mr. Siddiquee said.
"Since the SEC now earns a handsome amount of revenue and it can appoint auditors to carry out quality auditing of the suspected balance-sheets and pay the fees itself," he said.
The Institute of Chartered Accountants of Bangladesh (ICAB) is the quasi- regulatory body of the country's more than 1000 audit firms. However, it is not mandated by law to regulate the auditors.
Normally, the firms appoint auditors to carry out annual assessment of their financial health, but very often the bookkeepers cover up the company woes, big debts and inflate or downplay figures to show they are in perfect conditions.
An SEC finding said, "Before 2005, most firms didn't maintain standard audit reports. Still now, many firms submit audit reports very casually."
"Between July of 2004 and December of 2009, the SEC found 443 cases of suspected audit dress-up and duly sent notices to the umbrella body of the auditors and the relevant audit firms. Unfortunately, except for two or three cases, there was no satisfactory clarification from the ICAB," it said.
The securities regulator is yet to take measures for re-auditing the suspected balance-sheets of listed companies though a decision to this effect was taken about three months back.
Some market experts termed it as regulatory failure and observed that the absence of such a provision had been encouraging the errant companies to resort to window dressing of their balance-sheets to cheat the investors concerned.
The Securities and Exchange Commission (SEC) itself found that unscrupulous auditors were engaged in window dressing of their balance sheets to help a section of the listed companies get away with their financial crimes.
Following such detection, the regulatory body at a meeting held on August 04 last with its chairman Ziaul Haq Khondker in the chair took a decision to re-audit the suspected balance-sheets.
An SEC official said the regulator is yet to fix the working procedure for re-auditing the doubtful balance-sheets.
Professor Abu Ahmed, an economist and a teacher at Dhaka University, said accountability and transparency of the listed companies could not be ensured due to the SEC's reluctance to introduce a mechanism for the re-auditing the suspected balance-sheets.
"It's a regulatory failure," Prof. Ahmed said.
"All kind of questionable balance-sheets and relevant financial statements, particularly of the companies that declare stock dividends at abnormally high rates, should be re-audited," he said.
"It's a one of the basic functions of the SEC to stop manipulation in balance- sheets. Otherwise, the unscrupulous companies will continue their exploitation leaving the investors in darkness," he added.
The former SEC chairman and ex-secretary Farukh Ahmed Siddiquee said at first the SEC will have to decide who will pay the fees for re-auditing the doubtful balance-sheets.
"If the companies pay fees for re-auditing, there could be manipulation of figures favouring the owners", Mr. Siddiquee said.
"Since the SEC now earns a handsome amount of revenue and it can appoint auditors to carry out quality auditing of the suspected balance-sheets and pay the fees itself," he said.
The Institute of Chartered Accountants of Bangladesh (ICAB) is the quasi- regulatory body of the country's more than 1000 audit firms. However, it is not mandated by law to regulate the auditors.
Normally, the firms appoint auditors to carry out annual assessment of their financial health, but very often the bookkeepers cover up the company woes, big debts and inflate or downplay figures to show they are in perfect conditions.
An SEC finding said, "Before 2005, most firms didn't maintain standard audit reports. Still now, many firms submit audit reports very casually."
"Between July of 2004 and December of 2009, the SEC found 443 cases of suspected audit dress-up and duly sent notices to the umbrella body of the auditors and the relevant audit firms. Unfortunately, except for two or three cases, there was no satisfactory clarification from the ICAB," it said.