Many of the publicly listed companies are found to be flouting the much-touted financial reporting law of the country. A report published recently in the FE shows that such companies do not employ skilled professionals, as required under the Financial Reporting Act (FRA), to prepare their reports. Many renowned listed companies are run by family members. The Financial Reporting Council (FRC), the regulatory body constituted in accordance of the FRA, have the authority and responsibility to make the companies compliant in this regard. FRC chairman himself told a conference on conceptual framework of financial reporting: "Things are even worse for non-listed companies. The Financial Reporting Act covers the issue but we are not following this." Such public statements by the FRC chairman have apparently raised many an eyebrow.
Transparency in financial reporting is a delicate issue and deemed necessary for creating as well as boosting investor confidence. Lack of transparency, accountability and corporate governance affects growth and functioning of companies, especially those in the capital market. It was to bring financial reporting of the country to global standard that the FRA was enacted following the conceptual framework for financial reporting as issued by the International Accounting Standards Board (IASB).
The FRC is there to ensure compliance of the FRA. FRC is an independent regulatory oversight body to oversee the accounting profession and the performance of auditors and audit firms that conduct audits of financial statements of listed entities and financial institutions. Its responsibilities include establishing financial reporting requirements for all entities in the country, including adoption of accounting and auditing standards as well as ethical requirements for all professional accountants; licensing auditors and approving audit firms; enforcing compliance with set standards as well as monitoring and disciplining all professional accountants who violate any of the provisions in the new act.
However, the FRC seems to be passing through the teething phase. To recall, professional bodies like the Institute of Chartered Accountants of Bangladesh (ICAB) initially questioned the very rationale of establishing FRC as the regulatory body. Secondly, the FRA requires the FRC to be comprised mostly of government nominees who may not be accountant by profession. Experts are of the opinion that the existing structure of the FRC is not conducive enough to achieve desired objectives. The majority of the FRC's functions involve setting standards in the specialised field of accounting and auditing and also monitoring activities of the professional accountants. Last but not the least, though the chairman has been appointed about a year ago, the formation of FRC is yet to be completed.
The FRC needs to be fully activated before it can be expected to deliver. While the FRA, which created the FRC, follows global standard in financial reporting, the same can hardly be claimed for the FRC. Experts doubt whether the present structure of the regulatory body, dominated as it is by nominated non-professionals, can be as effective as such bodies are in other countries. One hopes FRC chairman will be pragmatic enough and the authorities concerned will be equally wise to devise ways and means to strengthen the regulatory body. This will help bring discipline, transparency and accountability in corporate governance.
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