The corporate world was enjoying, not so long ago, unfettered freedom in running the affairs of its organisations. Government interference was inconceivable. Rather the government was to some extent considered impediment to smooth functioning of the free-market economy. US president Reagan and UK Prime Minister Thatcher were strong protagonists of this view. The situation changed after the deluge in the corporate world in the USA in 2001 when Enron, the seventh biggest company of the world, collapsed. Anderson, one of the largest five audit firms of the globe, was the villain in this mega crime. George W. Bush, the then US President, immediately went into action. So long the elite chartered accountants' organisation had the final say in certifying the audit reports of a publicly traded company. After this disaster necessary laws were enacted in the USA and a separate accounts board under the title "Public Company Accounting Oversight Board" was set up for overseeing the audit and accounts of the publicly traded companies. The Board of a company usually used to consist of members from the sponsors and general shareholders elected in the annual general meeting (AGM). This time the concept of independent director was introduced. The independent director will have no pecuniary interest i.e. he will hold not a single share or any other financial interest in the concerned company.
Countries around the world started to follow the steps taken by the USA, the principal guru of the corporate world. In Bangladesh, the independent directors have been included in the Boards of publicly traded companies. However, there has been unusual delay in setting up the Financial Reporting Council (FRC) for overseeing the proper preparation of the accounts of the companies. When the draft of the proposed FRC Act was made public, the Institute of Chartered Accountants of Bangladesh (ICAB) vehemently opposed the entry of ICMAB (Institute of Cost and Management Accountants). It took unusually long time in settling this acrimony. ICAB apparently suffered from professional vanity. But it should have remembered that the unprecedented deluge in the corporate world occurred in connivance with a global audit giant firm, Anderson.
The Jatiya Sangsad passed FRC Act in 2015. Almost two years have since passed but it is still in the embryonic stage. Only the Chairman has been appointed. The council consists of 13 members, including the Chairman. All council members will be nominated by the concerned authorities. There will, however, be executive directors to be appointed by the government who will run the administrative affairs and provide logistics under the guidance of the Chairman.
FRC is different from other organizations, such as Bangladesh Securities and Exchange Commission (BSEC). FRC chairman will have to fully depend on the nominated members for decision-making whereas BSEC will always act of its own. It appears from a public statement he recently made that he is concerned about, how he would build consensus among the members coming from such divergent bodies. In such a situation FRC will have to formulate rules and regulations which should be comprehensive and transparent.
Ensuring preparation of audit report of international standard by the listed auditor will be the core issue for the FRC. Earlier, the finance minister publicly expressed his indignation over the audits report of the companies for containing inadequate information. However, there is a good flow of information from around the world. So there will not be any dearth of material for framing rules, regulations, accounts standard, etc. The main function is to collect all and scrutinise and adopt in commensurate with our requirement.
Finally, FRC should go into operation without wasting any more time.
Syed Mahbubur Rashid