High quality financial reporting supports well-informed investment decisions, thereby facilitating the efficient formation and deployment of capital, said Muhammad Farooq, president of the Institute of Chartered Accountants of Bangladesh (ICAB).
"So, independent and consistently high quality audits are an essential tool for trustworthy financial reporting, which brings stakeholders' confidence when pursuing market opportunities," he said yesterday.
He made the comments at a time when financial experts have been blaming the volatility of the stock market as well as the economy on the publication of fabricated financial statements.
The members of ICAB took part in the conference on 'Bringing improvement in the financial reporting and quality of auditing' through virtual conferencing platform Zoom.
The purpose of the conference was to discuss the challenges and way forward to improve the financial reporting and quality of auditing.
Most companies around the world provide factual information on their financial statements to help interested parties decide whether to invest or not. They depend on quality audit reports. But, the case is opposite in Bangladesh.
At the event, Mahbub Ahmed Siddique, director (technical) of ICAB, shed light on the challenges for quality audit in Bangladesh.
A lack of corporate governance, conflict of interest, corruption, minority shareholders, a lack of technical skill, low audit fee and a lack of collaboration among regulators and stakeholders are some of the challenges, the keynote paper presenter said.
Reporting and compliance of corporate governance should be meaningful and effective collaboration among relevant stakeholders is vital to improve the quality of financial reporting and audit in the country, he said.
As part of ICAB's mandatory inspection programme, it evaluates quality control system of each firm maintaining requirements of the International Federation of Accountants, Farooq said.
ICAB takes necessary actions, if it identifies quality control deficiencies, he said. "Even, proactively take actions against the firm for any professional misconduct."
Auditors cannot compromise audit quality for audit fee, said Farooq about the role of the auditors. They should prepare high quality audits regardless of the level of audit fee.
Considering the high level of cost to engage audit personnel with sufficient skill, expertise, and the use of information technology like computer assisted audit techniques, the existing audit fees are not sufficient, he said.
Regulators involvement in selection of audit firm and fixing of audit fee may be an option to think about, he said.
In this connection, the Financial Reporting Council (FRC) and Bangladesh Securities and Exchange Commission (BSEC) could jointly work in formation of a joint committee or task force to develop a strategic plan to improve the quality of financial reporting and auditing, he suggested.
Independence of preparers, auditors and regulators could improve the quality of audit, Siddique said.
The regulators should protect chief financial officers from any threat, including job security, he said.
CQK Mustaq Ahmed, chairman of FRC; Shaikh Shamsuddin Ahmed, commissioner of BSEC, and Muhammed Farhad Hussain, past president of ICAB, also spoke.