The long-lingering concern over cooking of financial statements by a section of unscrupulous companies with the help of some dishonest chartered accountancy (CA) firms has not yet been properly addressed. That these companies, individually, prepare multiple financial statements to submit to the tax authorities and relevant other agencies with an ulterior motive to make undue pecuniary gains, has widely been in suspect. But the malpractice is still in place despite the fact the government, after a lot of foot-dragging, has put in place a relevant law and a regulatory entity under it to look into the issues involving financial reporting by companies.
In this context, the statement delivered by the chief of the Anti-corruption Commission (ACC) at a function late last week that the problem has gone too far is quite candid. The ACC chief made it amply clear that the allegation regarding preparation of cooked financial statements deserves proper investigation. It is, however, no secret that the books are cooked by businesses to evade tax and, in the case of listed companies, to deprive the shareholders of their due dividends.
It is an open secret that some dishonest companies prepare multiple financial statements to suit their different needs. And some CA firms deviate from their professional code of conduct to offer their services to such companies. Without the latter's help and assistance it is not possible on the part of the former to hoodwink the relevant regulatory bodies and government agencies and cheat investors and shareholders. For instance, a company seeking to be listed on the bourses is required to submit its audited financial statements for a number of past years along with other documents. Some unscrupulous companies manufacture financials containing false information about the company's fundamentals. What happens after the company is listed, is anybody's guess - the cheated investors suffer.
Prior to the formation of the Financial Reporting Council (FRC), the Institute of Chartered Accountants, Bangladesh (ICAB), the professional body of the CAs, used to oversee the activities of their members. But allegations of lax monitoring and failure to take appropriate actions against errant audit firms were there. The government also made long delays in passing the Financial Reporting Act and subsequent formation of the FRA. But, unfortunately, the FRA is not yet visible enough in the field of monitoring. Had it been so, the ACC chief would not have raised the issue concerning anomalies in the financials of a section of companies.
There is no doubt that the act of doctoring financials is an act of corruption. If the relevant agencies, including the FRC, fail to take cognizance of the crime and mete out punishment to the errant companies and CA firms, any action coming from the ACC to this effect would be welcome by the taxmen and shareholders of the listed companies, nay the people in general. But what is desired most is action coming from the FRC which has been constituted for the particular purpose of regulating the activities of CA firms and punishing the companies and auditors involved in the cooking of financial statements. Hopefully, the Council would meet the aspirations of people who want to see neat and transparent financial statements from all companies, listed or unlisted.