The Bangladesh Securities and Exchange Commission has tightened the rules empowering itself to conduct special audit of the banks, non-banking financial institutions and insurance companies in a bid to prevent manipulative audit-reporting of the listed companies.
As per the latest amendment to the Securities and Exchange Commission Rules 1987 published recently, the BSEC will appoint an auditor to re-audit financial statements at its own cost.
‘The commission made the move in a bid to verify suspicious audit reports of the listed companies by re-auditing the companies,’ BSEC executive director Saifur Rahman told New Age.
‘Strengthening the rules will allow the commission to prevent manipulative reporting and to protect investors’ interest more effectively,’ Saifur, also the BSEC spokesperson, said.
DSE officials, however, said that it is hard to find out a single company which complies with all the BSEC rules along with other accounting standard in preparing financial statement.
Under the amendment, the commission inserted a sub-rules (3c) under the rules 12 which said, ‘The commission may take appropriate measures for conducting the special audit for banks, non-banking financial institutions and insurance companies in consultation with their respective primary regulators, as the case may be, if felt necessary.’
The BSEC also formulated a guideline under the guideline for the auditor, whom the commission will appoint, to conduct special audit of the banks, NBFIs and insurance companies.
As per the guideline, the auditor have to emphasise on twenty-two issues, if the issuer company has kept the proper books of accounts, register of members, minutes of the meeting of board of directors.
The BSEC guideline also asked the auditor to check if the company adhered to the Securities and Exchange Rules 1987, Bangladesh Financial Reporting Standards, Bangladesh Accounting Standards and to mention deviations from these rules, if any.
Under the guideline the auditor are asked to verify accuracy of turnover and business, major components of costs of sales.
The position of current assets of the companies with particular emphasis on the realisation, collection, adjustment status and debtors, advance, loan or investment to sister and other concerns, if any, will be checked during the audit.
If adequate provision for income tax was made along with accuracy of deferred tax calculation would be verified during the audit, the guideline said.
As regards debtors and receivables, it said the auditor should obtain direct confirmations for such balances which constitutes for more than 5 per cent of the total outstanding, if not realised subsequently.
During the audit, the investment amount made by the company with the books of account and supporting documents will be checked and confirmation for the relevant organisation will be obtained along with income from such investment.
The guideline also asked the auditor to check all the sales and see if its corresponding collection have been recorded and properly deposited to bank and to identify fake sales, if any.
Item-wise reconciliation of cash and cash equivalent as shown in the cash flows statement including profit or loss shown with the financial statements should be checked, it said.
-With New Age input
