The Financial Reporting Council has recently placed a proposal before finance minister AHM Mustafa Kamal to allow it to review audit reports of upcoming initial public offerings but the minister turned down the proposal.
FRC chairman CQK Mustaq Ahmed at a meeting with Kamal as well as the capital market stakeholders on September 16 made the request to the finance minister, saying that FRC review of the audit reports of the companies seeking to issue IPOs would boost investors’ confidence.
FRC officials told New Age that although the minister turned down the proposal, they would peruse the finance minister and the government high-ups so that the proposal was accepted for the interest of the capital market.
Kamal called regulators of all financial institution, officials of the bourses, capital market experts and market intermediaries to discuss the current situation of the ailing stock market and to find a way out of the crisis.
The capital market has been experiencing a prolonged bear run.
FRC chairman Mustaq at the meeting said that investors’ confidence over the financial reports declined, which became a prime factor for the current situation in the market.
He said that the FRC could be given power through amending rules to review the financial reports of the companies.
The FRC had a powerful council with representatives of different regulatory bodies. Therefore, there was no chance of conflict of interest, he said.
The council could review the audit reports in a coordinated way, he added.
It could review the prospectus of initial public offerings before the capital market regulator, Bangladesh Securities and Exchange Commission approves it, he said.
Kamal, however, declined to accept the proposal saying that the FRC had no right to overpower other regulatory bodies.
FRC’s job is not to audit balance sheet of the companies, rather its job was to improve standard of the financial reporting by the auditors, he said.
Kamal also said that the FRC could see activities of auditing, but could not control them as it was against international practice.
The FRC came up with the proposal as the capital market has been suffering from lack of confidence over the regulators, especially BSEC.
The regulators failed to prevent anomalies and falsifications in the financial reports by the companies.
FRC officials told New Age that the FRC could watch over any financial reports of any company, but in reality there were several obstacles that could not be bypassed for various rules of other regulatory bodies.
There are allegations that the BSEC has approved many IPOs despite having irregularities and inconstancies in financial statements.
The regulator didn’t refer any audit reports to the FRC or the Institute of chartered Accountants for review.
Copperetch Industries was one of the issues which was mired in controversies with the allegation that company falsified financial documents and formatted artificial paid up capital.
ICAB has cancelled the license of the company’s auditor Ahmad and Akhtar for this reason.
But, the BSEC didn’t hesitate to allow the company, whose financial reports cost its auditor’s license, to enlist with the stock exchanges.
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