Experts and businesses on Saturday laid emphasis on ensuring an effective financial reporting system for companies to attract foreign direct investment and to address the wilful default loan problem in the banking sector.
At a webinar on ‘Financial Reporting Act-2015: Its Implications on the Business Houses’ organised by the Dhaka Chamber of Commerce and Industry, the speakers said that in the context of increasing digitalisation, compliance to accounting standards and fair and transparent financial reporting was essential for the country.
‘Better financial reporting will help attract foreign direct investment and create business confidence. We have to enhance our credibility and in that case, we can examine the successful examples of other countries in terms of financial reporting regulations,’ said Bangladesh Bank director and former DCCI president Aftab Ul Islam.
He said that there might be a rating system for audit firms like the camel rating.
‘The Financial Reporting Council needs to play a more effective role to improve the quality of audit and corporate financial reporting systems significantly which will consequently help address the wilful default loan problem in the banking sector,’ DCCI president Shams Mahmud said.
He said that transparent financial reporting by all listed and non-listed companies was very critical to gain investors’ confidence and thereby, to attract investment to the capital market.
In order to attract foreign investment, MSME reporting also needs to meet international requirements and standards like those set by the International Accounting Standards Board, Shams said.
University of Manchester associate professor Javed Siddiqui said that for a credible audit report and local or international acceptance, corporate governance and positive will of the companies’ managements were key factors.
He said that the FRC should act to maintain transparent financial reporting by the auditors.
Former Financial Reporting Council chairman CQK Mustaq Ahmed said that the FRC’s supervisory role should be strengthened.
Regarding fixing the threshold for public interest entities in the SME sector, he said that the FRC might have a consultation with the stakeholders to fix it.
Institute of Chartered Accountants of Bangladesh president Muhammad Farooq said that the FRC should play the role of the regulator of the regulators.
‘Companies prepare the financial reports based on which the audit report is prepared by the auditors. If any anomalies are found, not only the auditors are to be blamed, but the management of the companies should also be held accountable,’ he said.
Comptroller and auditor general of Bangladesh Mohammad Muslim Chowdhury said that the financial reporting act covered the compulsion of public interest entity besides financial courses.
In the next four to five years, the FRC should play a role of persuasion rather than imposition, he said.
Regarding the adoption of the IFRS, the auditor general said that it should be based on the country’s context considering cost of compliance and that the IFRS was not applicable for SMEs in Bangladesh right at this moment.
Financial Report Monitoring Division executive director Mohammad Mohiuddin Ahmed said there were three implications of the financial reporting act on business houses which included financial statement, audit process and accountability.
Good financial reports would make businesses comparable globally and build investors’ confidence and ensure high ethical values, he said.
He also emphasised the creation of more competent professional accountants in the country.
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