Creating unified regulatory authority for auditors

The function of any regulator is to ensure that the stakeholders concerned follow the set of rules that guides their activities and does not fall afoul of it. Also, it holds those breaking the rules to account and, at the same time, ensures the overall quality of the professional output. But if the regulator becomes too bureaucratic about its job, then it turns into a barrier to, not a facilitator of, the profession in question.

According to reports, that is exactly what happened in the case of the Financial Reporting Council (FRC) established under the Financial Reporting Act (FRA), 2015 and responsible for overseeing and regulating financial reporting. But of late, the FRC is learnt to have become a veritable hurdle to the auditing profession as it has been sitting on the completion and renewal process for enlistment of practitioners in the auditing profession. The delays in enlistment/ renewal of auditing firms and auditors have not only been disrupting professional careers of the practitioners, it is also affecting the entire professional ecosystem of auditing negatively. But it should not have been the case given that there are clear-cut provisions under the FRA as well as the Auditors Enlistment Rules (AER) 2022 to conduct the job. On the contrary, as alleged, enlistment of a number of chartered accountant (CA) firms as well as individual auditors has been held back as they, according to the regulator have compliance issues vis-à-vis FRC rules or that all partners of the CA firms in question are not individually enlisted. But the argument is a matter of interpretation of the rules under FRA, 2015. However, such delay in enlisting the firms embroiled in regulatory interpretations runs the risk of disrupting the continuity of the CA firms and individual operators of the profession as they have to enlist/get renewal 10 days before the end of the financial year. In the present case, they were to finish their enlistments and/or renewals before June 2025.

But it is already more than three months into the new financial year FY26, yet the auditing firms or individual professionals in question are still unsure about their fate. In consequence, these firms/individual practitioners are not able to conduct their work that includes appointment of auditors by the firms under scrutiny. This has a negative impact on the economy in general that it obstructs the incomes of the auditors and the auditing firms and, in consequence, the state is deprived of its revenues that it earns by imposing taxes on those firms' incomes. That's simply not done. In fact, the regulator in the present case is acting more like a traditional bureaucrat than a facilitator of the auditing profession. True, there are instances where allegations that anomalies and violations of securities rules were detected in the financial statements of business entities audited by certain CA firms with the result that the Bangladesh Securities and Exchange Commission (BSEC), which is also a regulator of auditing companies and individual auditors held them to account. In fact, according to the Securities and Commission Rules, 2020, any firm and its auditors are separately and jointly liable for anomalies identified in financial statements audited by them.

Understandably, allegations of such professional misconduct by certain operators in the trade have created an atmosphere of mistrust in the profession that might have negatively impacted the outlook of the regulators including FRC. In this connection, some experts have expressed their reservation about the existence of multiple authorities to oversee the business of auditing that include, for instance, FRC, the Institute of Chartered Accountants of Bangladesh (ICAB) and BSEC, each of which has its own set of enlistment procedure. Now the government should play the role of creating a unified authority to streamline as well as speed up the enlisting and renewal process of the auditing firms and individual practitioners.