Mohammad Mufazzal

The securities regulator has sought public opinion to introduce the provision of ‘special audit’ by appointing auditors with its own fees, if any listed company fails to prepare its audited financial statement according to the specific manner set by the regulator.

The ‘special audit’ provision will also be applicable to a company, if it fails to submit balance sheet within stipulated timeframe.

The Securities and Exchange Commission (SEC) has moved to amend the Securities and Exchange Rules 1987 by incorporating the provision of ‘special audit’ in a move to ensure better governance in the activities of the listed companies.

As per the existing sub-rule (3) of the rule (12) of the Rules, the securities regulator may appoint an auditor for the sake of public interest, if a listed company fails to maintain the international standards on auditing, applicable in Bangladesh.

In that case, the concerned company has to bear the expenses of the SEC-appointed auditor.

The regulator has published draft of the proposed amendment in newspapers, seeking opinions from the stakeholders.

However, the proposed ‘special audit’ will not be applicable in case of the banks, NBFIs and insurance companies. If necessary, the commission may take appropriate measures for conducting audit for them in consultation with their respective primary regulators.

A top SEC official told the FE that the regulator has moved to bring a change to the existing sub-rule (3) to eliminate the conflict of interests between the auditor and the company to be audited.

“An auditor may show weakness towards a company in preparing its financial statement, as the company itself will pay the auditor. That’s why the regulator itself will pay the auditor to ensure the required quality of the audited financial statement,” the official said.

He said the regulator hopes that following the latest move better governance will be ensured in the activities of the listed companies.

Former SEC chairman A B Mirza Azizul Islam welcomed the regulatory initiative, as it would make the listed companies conscious, and they would refrain from submitting ‘window-dressed’ balance sheets.

“Earlier, the listed companies refused to pay for re-auditing their financial statements, although there was a provision of payment by the companies concerned. However, following the latest amendment, the payment problem will be solved, and the required standard in the financial statements of the companies can be achieved,” Mr Islam told the FE.

He hope that after finalising the ‘special audit’ provision, the listed companies will give up the tendency of submitting ‘window-dressed’ balance sheets, as the regulator may re-audit those balance sheets, if any confusion arises.

Another former SEC chairman Faruq Ahmad Siddiqi echoed with Mr Islam, saying that the regulatory move will eliminate some complications in re-auditing the financial statements.

“I also faced some problems regarding re-auditing of balance sheets, as the companies concerned were reluctant to pay the auditors’ fees,” Mr Siddiqi told the FE.

“I think the SEC’s move will create a positive impact on the stock market,” Mr Siddiqi added.

As per the SEC’s proposed draft, the auditor appointed by the regulator will maintain a timesheet of working hours, as an evidence of staff hours, spent for carrying out the audit.

The auditor will have to maintain records and documents in support of their findings for submitting reference to the SEC in future.