Why are ICMAB and ICAB locked in dispute over FRA and FRC?

It is very shocking and painful to see that ICMAB, a professional institute, is criticising the other professional institute, ICAB for initiating exclusion of the members of ICMAB from the proposed FRC (financial reporting council) under Financial Reporting Act (FRA). They should know well that the sole authority of considering membership of the proposed FRC lies with the government. The status of both the institutes is considered more or less with the same objectives except for qualifications: a chartered accountant assigned to act as an auditor of the financial statement of accounts while a member of the ICMAB to perform cost auditing of certain matters relating to cost. But ignoring their own position in the field of accounting, they adopted some techniques targeted to vilify the status of chartered accountants before the civil society. They failed to understand their position as referred to in the Companies Act and are trying to convince vested quarters to raise their status as auditor with malafide intentions.  Auditors are recognized under the Royal Charter since 1954 with the task of auditing.
It is indeed a great irritant for the two august institutions, ICAB and ICMAB, which are locked in a cold war and mud-slinging. The issue is stirred by the officials of the ICMAB who are in favour of legitimising the role of the members of the ICMAB as auditors in auditing financial statement. Let the legal position of chartered accountants and cost & management accountants be analysed from the viewpoint of the Companies Act, 1994.
 (2) A chartered accountant is recognised as an auditor in the Companies Act under section 212 and that a cost management acountant as a cost auditor under section 220. The qualification for auditors of a company shall be a chartered accountant degree within the meaning as assigned to the Bangladesh Chartered Accountants order 1973 (PO No. 2 of 1973) where all the partners of a practising firm under the provision of the section 212 of the Act are qualified in Bangladesh as aforesaid may be appointed by its firm name to be auditor of a company and auditors so practising may act in the name of the firm.
 (3)Under the sub-section-3 of the section 212 restrictions have also been imposed under which a person shall not be qualified for appointment as an auditor of a company if he according to sub-section 2 is disqualified for appointment as auditor of any other body corporate which is subsidiary or holding company of that company.
From the above, it is understood that to be an auditor of a company a person shall hold the qualification of a chartered accountant.
(4) On the other hand, the section 220 states that if the government  feels it necessary to audit certain matters by cost and management acountants on the basis of section 181(1) of the Companies Act, it may engage a practising member of ICMAB to perform services involving costing or pricing of goods or services etc. The main objectives of cost accounting are ascertainment of cost, determination of sale price. Cost control and cost reduction, verification of cost elements in ascertaining profits of a company. The audit of such particulars relating to utilisation of materials, labour and other items of overhead cost. Thus, it is clear that a member of the ICMAB is recognised as cost auditor to audit elements of cost only. They are not eligible in any way to be an auditor for financial statement.
This is the basic difference between chartered accountants and members of the ICMAB with regard to their working field.
 (5) It is also stated in the Companies Act that none shall be qualified for appointment as auditor of the company except a chartered accountant in the following situations:
i) an officer or employees of the company;
II) a partner who is partner or who is in the employment of an officer or employee of the company;
III) a person who is indebted to the company;
IV) a director, a member of a private company, or a partner of a firm which is the managing agent of the company.
(6) The claim by cost and management accountants for qualifying to be auditor to audit the financial statements of listed companies are inspired probably by the definition of the words "Auditor" as given in the proposed FRA. In the proposed Act, auditors have been considered in a manner as if they do not require any qualification. Anyone could be an auditor if s/he got registered under FRA. The introduction of the said Act along with definition of auditors have been kept in abeyance by the government. Still promulgation of the FRA subject to certain amendments including definition of auditors and the justification of time set for promulgation of FRC under the same may be considered.
 (7) The two institutions, the Institution of Chartered Accountant of Bangladesh and Institute of Cost and Management Accountants of Bangladesh are engaged to train students in their respective fields of financial accounting, audit and allied subjects. The prime responsibility of the ICMAB is to train the students who desire to be Cost Accountant. As regards Management Accountancy course, there is no formation of Institute of Management Accountants in Bangladesh as yet. The objectives of the two institutions are quite different from each other as mentioned in the Bangladesh Chartered Accountants order 1973 (Presidential order No. 2 of 1973) and ICMAB was constituted for the purpose of regulating the profession of cost and management accountants in Bangladesh. The two institutions therefore by birth are different in their approach. But the members of the two institutes are eligible to pursue any courses according to their desire. There is no bar for a person to achieve such qualifications. A large number of chartered accountants have acquired the qualifications from ICMAB side by side.
(8) Similarly, the ICAB has extended its option to the members of ICMAB to pursue the course of ICAB. In this case, the ICAB made some provisions to exempt a few papers for members of ICMAB. These are Accounting, Taxation, Business and Commercial Law and I. T. knowledge. Even period of Article-ship has been reduced to 2 years in place of 3 years. There is ample opportunity for a member of ICMAB to become an auditor/chartered accountant. In that case they will not require any recommendation from any vested quarter to make the members of ICMAB to be an auditor. The very qualification from ICAB shall make them chartered accountants to enter into the business of professional of accountants. The members of ICMAB in this case shall not be required to enter through the back door to become an auditor.
 (9) The high officials of different ministries and vested quarters under this situation cannot be a tool to make room for a member of ICMAB in auditing the accounting of companies and other organizations including government sector Institutions.
 (10) One glaring example is that the Ministry of Finance proposed to ICMAB's members to act as auditors in the finance bill 2014. But good sense prevailed and while passing the finance bill into finance Act, 2014-2015, parliament dropped the idea of appointing the members of ICMAB as auditors to audit enterprises other than companies and not to act beyond the established traditions in respect of appointment of auditors.
(11) Moreover, the non-practising members of the ICAB cannot accept the appointment of members of the ICMAB to act as auditors of a company without qualification of C.A. Members of the ICAB had to achieve the qualification of C. A. after long persuasion of the course over a long period. To become an auditor, the qualification of C. A. is not enough. The members of ICAB are required to be a professional practising member in the field of audit, accounts, and finance etc. Chartered accountants employed in different services are not entitled to practice as auditors.
 (12) Therefore, there is no scope for any person like members of ACCA, CIMA, Management Accountant, ICS, CAT etc. to act as auditors of a company unless they are qualified as chartered accountants within the meaning of the Bangladesh Chartered Accountants Order. At the same time there is no bar to pursue C. A. course having some exemptions on some papers for the professional of other disciplines.
 (13) There are some allegations put forward by ICMAB that auditing by cartered accountants has become a monopoly business. Such monopoly situation can be enjoyed by any other professionals of any discipline provided that they become a chartered accountant. Practicising chartered accountants shall welcome other professionals but oppose the entry of other professionals as auditors without qualification of chartered accountancy.
 (14) If any one tries to break the long tradition of chartered accountancy profession, it will bring the end of such internationally recognized studies in Bangladesh. ICAB, after long persuasions, entered into an agreement with the Institute of chartered accountants of England and Wales for acceptance of their counterparts from Bangladesh as practitioners in England with some conditions. It is enough recognition for the Bangladeshi chartered accountants in international arena. So the need is to uphold the image of the ICAB and defend the prsent government stand on this issue.
 (15) The government has decided to enact the Financial Reporting Act in the interest of the accounting professions in Bangladesh. The ICAB supports the move. Initially the ICAB opposed the formation of FRA because of inclusion of some arbitrary clauses in the Act. But now, the ICAB agrees to accept the FRA subject to some changes in the Act aimed at making the proposed Act effective in ensuring transparency and accountability in the practice of audit.
(16) The ICAB has proposed five points which are very much relevant to audit profession in Bangladesh.
a) The definition of the word "auditors" included in the proposed FRA requires to be revised in line with the Companies Act. The words, professional accountant should include only the practising chartered accountants. No other members of ICMAB, ACCA, CIMA, ICS, CIPFA etc. should be considered since they do not possess the chartered accountancy qualification as defined in the Chartered Accountants Order of Bangladesh.
b) The present system of registration followed by practising chartered accountants is to continue to avoid double registrations by professional firms as proposed in the FRA.
c) The provision of jail sentences of a chartered accountant appears to be disgraceful and harsh and hence it should be dropped in the interest of the profession. It would be better to keep the other penalty provisions in the proposed Act.
d) Exclusion of the members of the ICMAB and other institutions from the definition of auditors in compliance with the principle set in the Companies Act regarding auditor which has existed since long.
e) To consider representatives from the Ministry of Law, Commerce Ministry along with Finance Ministry but exclusion of ICMAB representatives as their function appears to be irrelevant to the subject. Inclusion of three (3) -member representatives from ICAB in a thirteen (13)-member committee.
 (17) It is reported that the FRA under which a financial reporting council (FRC) will be formed will oversee the functions of the auditors. This would be realistic, logical and fair to improve the auditing profession and the ICAB welcomes such a move.
 (18) The logic for exclusion of members of the ICMAB strong, because members of the ICMAB are not acquainted with the practical experience of auditing of private and publicly listed companies. The present auditing procedures are being regulated through IAS and IFRS techniques. These techniques appear to be very critical for application in a country like Bangladesh. The environment prevailing in the country does not match those in countries like U. K., Europe, and America.
 (19) The accounting profession in Bangladesh is striving hard to match and maintain world class standards. Since ICAB is a member of the different standard setting bodies including SAFA, CAPA, IFAC and IASB, it is expected that ICAB will be in a position to reach the dynamism in accounting profession in a short time, which the ICMAB cannot foresee in the near future due to its non-involvement in practical affairs.
 (20) Against this backdrop, there should not be any hurry to implement the FRA and FRC to control the chartered accountants in consideration of the environment prevailing in the country. The standards and regulations as contained in BAS, BFRS and BSA are enough to discipline errant chartered accountants. A neighboring country has introduced such an accounting standard (of course it framed its own standard in line with international standard) in the year 2000 but still struggling to achieve the target. It is trying its best to achieve the target trough trial and error.
There are some accountants in our country who are very much enthusiastic to adopt the FRA and FRC because they had experienced the situation during their study in foreign countries. "They are in a hurry to catch fish in muddy water". But they do not like to understand that the accounting environment of Bangladesh differ with those of the foreign countries. They have/had the long tradition and experience of accounting profession over a period of 500 years.
Therefore, we cannot rush for adoption of a new concept.
 (21) It is true that there were some criticism by ICMAB members in the media. This is most unethical for a professional body like the ICMAB to question the performance of auditors. Their criticism is mostly unfounded and their concept of audit is far from reality. An auditor has no responsibility in preparation of accounts; he examines the financial statements only on the basis of information and records as maintained by the management. If the management does not record any transaction in the book at all, the auditors would not be in a position to unearth the same and its effect on the profit. Maintaining continuity of the same profit every year by a company is an absurd proposition. It depends on demand and supply of goods and its increase/decrease of prices. There is also a rumor in the market that investors could not keep their confidence in the financial statements audited by auditors here. This is not a correct appraisal by investors. They are to determine their own decision with regards to purchase and sale of its investment in shares. There are a lot of yardsticks to judge the performance of a company, profit cannot remain constant and is unlikely to  be a constant factor. It changes from year to year based on rise and fall of prices of purchase and sale of goods. Monopoly of audit assignment for auditors of ICAB is a baseless demand. It is within the power of the management of the company to decide the appointment of auditors as per relevant sections of the Companies Act. Auditors have no link to get appointment unless a management agrees to appoint them.
(22) There is also some criticism that audit report can be available on spending money. If the investor knows that such audit reports are based on wrong information, why do they depend on the said report? These are all unnecessary assumptions and not based on facts and figures. To make the issue disputed such commonly used issues are made controversial by the illiterate. The involvement of auditors in the matter of rise and fall of share prices is nothing but wrong and an outlandish concept. The authority of Stock Exchange is responsible for such a situation. The report of Mr. Khaled Ibrahim, Chairman of the Enquiry Committee for share debacle nowhere did mention the name of an auditor. There is a High Court ruling that "Auditor is a watchdog but not blood hound". So you cannot expect that auditor should be looking for each and every transactions and pursue beyond his capacity. There are wilful disparaging comments just to malign the noble profession of audit.
 (23) Finally, it is least expected that the authority of ICMAB would indulge in mud-slinging particularly when its members have access to ICAB for pursing the course of C.A. which will qualify them as auditors for auditing financial statements. They do not require entering in the profession through the back door with the help of vested quarters.
The writer is ex-senior partner, HYC