‘Auditors should not be blamed for low-standard reports’
Showkat Hossain, president of the Institute of Chartered Accountants of Bangladesh, in a recent interview with New Age, has said the quality or standard of an audited financial statement does not only depend on the auditors. Interviewed by Ahmed Shawki.
New Age: What do you think about the standard of the country’s audit reports?
Showkat Hossain: I believe the standard of the audit reports in our country is good as we always maintain the international standard. We have formulated an audit standard in line with the best international practice and it is mandatory for the audit firms to maintain that. There could be some incidents where an individual audit firm fails to maintain the standard fully but that does not necessarily mean the entire industry lacks the standard.
On the other hand, the quality or standard of an audited financial statement does not only depend on the auditors. There are other issues like the efficiency of the business entity and the government policies about different financial issues.
NA: How the audit reports can be affected by the business entities and government policies?
Showkat: The government brought many small firms under audit requirement because of its tax policy. Now the small firms often cannot afford high quality account managers. As a result, their financial reports fail to match the standard. As you may know the duty of the auditors is not to prepare the accounts, rather they just check if the accounts of the report are correct or not. So basically, for low-standard financial reports you can hardly blame the auditors. Sometimes the small firms also try to pass through the audit requirement by taking unfair means. Maybe some audit firms also help them doing so. But if the business entities prepare their accounts is a standard manner then no auditor can change it or manipulate it.
NA: What measures are taken against the audit firms which help businesses in unfair means?
Showkat: The ICAB has a disciplinary committee which takes action against the audit firms if any complaint is found. We can suspend or even cancel the licence of the audit firms. But we have faced problems when we did so in the past. The suspended firms often get stay order form the court and carry out their operation. As we all abide by the law there is noting much to do on this ground. But we often impose fine for the professional misconducts.
NA: Why has ICAB opposed the government move to formulate the Financial Reporting Act?
Showkat: It will be better if you say we raised some points which we believe need consideration. The FRA is prepared in a manner which has some contradictions. If the government wants to strengthen the monitoring for audit reports there are already regulators to look after it. For the public limited companies we have the Bangladesh Securities and Exchange Commission and for private companies we have Registrar of Joint Stock Companies and Firms. The ICAB itself is also doing a lot of work to ensure better audit reports. We have a 1973 act under which we operate and updating that act will do enough to ensure better accounting and audit standard.
NA: There is allegation that low-quality audit reports were major reasons behind the stock market crash during 2010-11. What is your stand?
Showkat: There is no base of such allegation. The stock market was burst because of the bubble which was created because of a demand-supply mismatch. People were rushing to invest in the stock market and I wonder if anyone looked at the audit report of the companies to make investment decisions. The picture would have been different if the investors paid attention to the audit reports of the companies.
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