|Posted : 21 Jul, 2014 00:00:00||AA-A+|
The Institute of Chartered Accountants of Bangladesh (ICAB) has finally agreed to accept the proposed Financial Reporting Act (FRA), under which Financial Reporting Council (FRC) will be formed to oversee functions of the auditors, according to its chief.
The institute, however, placed a five-point demand before the government for its consideration in finalising the FRA draft as it, ICAB said, will help shun various impediments in ensuring quality audit and achieve purposes of the law.
"We have recently submitted five-point proposal before the Finance Minister for incorporation in the proposed FRA for the greater interest of the standard audit practice and the country," ICAB president Showkat Hossain FCA told the FE in an interview recently.
In a query, Mr Hossain said that ICAB still thinks that strengthening its existing Investigation and Disciplinary Committee (IDC) as like as the proposed FRC in terms of composition, power and function is a better alternative to the formation of FRC as a separate body.
By strengthening the IDC, it is veritably possible to achieve purposes of the proposed FRC. "To do so, it will be needed just to bring some necessary changes in the Presidential Order No 2 of 1973, under which the ICAB was established," he said.
However, against the government's resolution to pass the FRA and form FRC, the ICAB finally placed the five-point proposal to make the FRC effective in ensuring transparency and accountability in the audit practice instead of binding its functions with bureaucratic red tape, Mr Hossain said.
Explaining the first of the five proposals, he said that the definition of 'auditor' was mentioned as 'professional accountant' that was further defined as 'member of ICAB and ICMAB (Institute of Cost and Management Accountants of Bangladesh)' in the drafted FRA.
Strongly opposing the definition, he said that the Cost and Management Accountants (CMAs) are not 'auditors of the financial statement'; rather they are empowered to audit only cost accounts according to Section 220 of the Companies Act 1994.
So, "We requested him (finance minister) to exclude the members of ICMAB from the definition of auditor."
Secondly, the ICAB requested to raise its representatives from one to three, include representative from the law and commerce ministries along with the finance ministry and exclude ICMAB representative at the proposed 13-member FRC.
Substantiating its demand to exclude ICMAB, he said that as the FRC is for overseeing functions of CAs, then why CMAs will be included here. He rather floated to make another FRC, if necessary, for the CMAs and not to include CAs there.
Disagreeing with the drafted provisions that empowered FRC to give licence to CAs, ICAB further proposed to include provisions, under which the institute will continue giving licence under a set of rules and regulations and FRC will give final clearance to the CAs to start their audit practice.
Because, if the FRC was empowered to give licence, there will be bureaucratic red tape on the issue, causing lack of CAs for audit in the country.
Fourthly, Mr Hossain said that ICAB is member of different standard setting bodies including SAFA, CAPA, IFAC and IASB. Accordingly, ICAB receives any new standard immediately after they are set, and "we then incorporate it in the Bangladesh perspectives after necessary examination."
Because of not having such connection with international standard setting bodies, FRC will not be able to do the task; rather it will take 5-7 years for FRC to be acquainted to all of these. In the meantime, Bangladesh will lag behind than others. So, ICAB proposed to continue its function of setting audit standard and simultaneously empower the FRC to finally approve that standard.
Lastly, the ICAB pleaded to drop the provision of jail sentence proposed in the FRA for the CAs keeping other penalty provisions as it is drafted.
Regarding the ICMAB's request for its inclusion in the FRC, he said that they (CAMs) might want their inclusion in the FRC in an intention to place demand later to allow them to audit.
"CMAs do not audit anywhere in the world. If they are allowed to audit financial statements, there is no necessity of having two organisations -- ICAB and ICMAB; then, it is better to merge them. Otherwise, it will create chaos," he said.
About ICAB's objection on composition of FRC, Mr Hossain said that in the drafted FRA, the Bangladesh Bank governor was made chairman of FRC, securities regulator and insurance regulators' chairmen and some others were made its members; but all of them are stakeholders and beneficiaries of the CAs' reports;
"On the one hand, they will get their reports certified by us (CAs) and on the other hand will oversee functions of the CAs. That's why we protest it," he said.
He further said that the ROSC Report made 20 recommendations; ICAB already complied with 19 of them; only FRA was left.
In another query, the ICAB president said that "transparency and accountability at the accountancy profession will definitely be enhanced" if the proposed FRC is constituted prudently and function efficiently instead of being like many other ineffective bodies.
Saying that base of the unscrupulous CAs would be enervated with formation of the FRC, he hoped the FRA to truly facilitate to bring the errant CAs into book and develop the economy in the country.
The ICAB already started creating awareness among the CAs about provisions of the proposed FRA so that they increase their efficiency and ensure quality of audit.