A positive approach towards ensuring transparency in accounting, auditing and reporting systems, and amending the Companies Act are crucial factors to improve corporate governance, chief of Bangladesh's accounting and auditing professionals’ institution observed.
“The existing Companies Act is outdated and is neither progressive nor user-friendly. It is necessary to make things more relevant to match with today's needs,” Akhtar Sohel Kasem, president of the Institute of Chartered Accountants of Bangladesh (ICAB), said in an interview with The Daily Star.
Bangladesh's corporate practices went backwards instead of moving forward to meet the needs of time as the disclosure requirements under the Companies Act 1994 were based on the Companies Act 1956 of India, where corporate culture was very conservative at that time, Kasem said.
The ICAB president underscored the need for an independent monitoring body with broad based participation that would play an important oversight role in ensuring enforcement of rules and regulations of corporate affairs, accounting and auditing standards and practices in particular.
“We have to have a mixture of necessary laws, their proper enforcement and above all a will power to move forward,” said Kasem, a professional chartered accountant who took over as the chief of ICAB in January 2004 for a one-year term.
He said the Registrar of Joint Stock Companies is supposed to perform a regulatory function for the limited companies but it is not doing so. “It is necessary to make the body well-equipped and more accountable.”
Kasem said a company should comply with all relevant rules and regulations regarding submission of audit reports, annual returns and change of directors. If a company does not comply, the Registrar of Joint Stock Companies can fine it, he said.
“Some people, who are at the helm of affairs of the companies, lack commitment to improve disclosure and transparency within the corporate houses. Besides, those who are in the regulatory agencies also lack professionalism and will,” the ICAB chief observed.
He said excepting a few, corporate houses in the country are essentially corporatised family partnerships. “They often do not consider that a business should be a separate entity and they are only the shareholders.”
“Excepting filing tax returns they don't often seem to fulfill their other corporate responsibilities.”
Kasem said the ICAB members have some limitations in performing their duties. Because existing rules and regulations are not enough to bring transparency in the accounting and auditing systems. “In many cases these are outdated and not relevant to today's needs.”
Chartered Accountants are probably the “best professional community” to assist in improvement of corporate governance, but in that case the chartered accountants must have representation in the decision making process, he said.
“Most of our neighbouring countries have already introduced a Code of Corporate Governance for listed companies, banks and corporate entities, but we are still lagging behind in this respect.”
About disclosure requirements for companies, he said the disclosure requirements currently under the Companies Act contain many unnecessary and irrelevant points.
For example, he said, it should not be in the list of disclosures what raw materials and in what proportion have been used in producing a certain product. “Will a company disclose it if it is a trade secret? We are required to disclose things that are totally irrelevant.”
“On the other hand, there are many important items in the Bangladesh or International Accounting Standards which should be disclosed but there is no legal requirement to do so,” the ICAB president said.
Terming chartered accountancy profession a potential one he said, “There is tremendous scope for our CAs both at home and abroad, but our numbers are still very low. The Institute is working very hard to attract the right students and is offering a modern education course and professional examinations which are at par with regional and in some cases international standards.”