The Institute of Chartered Accountants of Bangladesh

Business and Finance

Chapter-10
Structure and regulation of the accountancy profession

Presented By: Muhammad Mahbub Alam FCA

03rd October,2022
 Regulation of the accountancy profession
How is the accountancy profession regulated?

Following lengthy debate, the regulatory regime that now exists for the accountancy profession involves:

The government
The profession (self-regulation)
An oversight mechanism

The role of the government

The government is responsible for the legislative elements of the regulatory framework. Once
the regulatory framework was in place the government delegated certain of these statutory
powers to the SEC, RJSC and Bangladesh Bank, but the government remains responsible via
these powers and so has a continuing responsibility for the system's effectiveness.

The role of ICAB

In relation to its membership ICAB has direct responsibility for:

 Entry and education requirements
 Eligibility to engage in public practice
 Eligibility for the performance of reserved activity under statutory powers delegated by the
government
 Professional conduct requirements
 Dealing with professional misconduct by its members
 Disciplinary procedures against accountants

The Investigation and Disciplinary Committee (IDC) of ICAB is responsible for

implementing the ICAB's disciplinary procedures, including the handling of
complaints against students and members (both individuals and firms).

What is the ICAB complaints and disciplinary procedure?

The procedure for most complaints is as follows:

 Conciliation: When a client identifies a problem with a member, a firm or a student,

the first step is conciliation. This means trying to find a practical solution, such as
giving an explanation or providing information to resolve the problem
 Investigation (if it has not been resolved through conciliation) by the Investigation
and Disciplinary Committee (IDC) Disciplinary proceedings by the Investigation and
Disciplinary Committee (IDC)
How are complaints investigated?
The ICAB first writes to the person who has made the complaint (the complainant),
then to the member, firm or student setting out full details of the complaint and
inviting their comments. It is one of the ICAB's rules that members must:
 Answer questions
 Provide any information the ICAB asks for

If members do not reply to letters initially, the IDC can require them to answer
questions and produce books or papers. If members fail to respond to the IDC's
request, they will be in breach of a bye-law and can be disciplined for this.
 Following the initial investigation, if it appears there is a case to answer (or if the
complainant insists that the IDC considers the case) it is reported to the IDC. At
present the IDC consists of 27 members, who are all chartered accountants.
 If the IDC decides there is no case to answer, the matter is closed.

 If the Council decides that a penalty should be imposed on the member it has the
power to:
Issue a reprimand
Fine the member or their firm
Suspend a member's practicing certificate
Council Decision
 reprimand the member or the articled student with or without
monetary penalty as the Council in its discretion may decide.
The monetary penalty, if any, as may be decided by the Council
may not exceed ten thousand taka; or
 suspend the member from membership for such period, not
exceeding five years, as the Council thinks fit; or
 exclude the member from membership; or
 Direct the cancellation of, or extend the period of articles or that
any period already served under such articles shall not be
reckoned as such service for the purpose of relevant clause of
Bye-law 80
 require the complainant to pay monetary penalty which may not
exceed ten thousand taka as may be decided by the Council
in its discretion if the complaint is proved to be baseless or
unfounded or malicious.
The Institute of Chartered Accountants of Bangladesh

Business and Finance

Chapter-12
Corporate Governance

Presented By: Muhammad Mahbub Alam FCA

05th October,2021
 What is the Code of Corporate Governance?

The Code of Corporate Governance is a code of best practice (it has no statutory force)
embodying a shareholder-led approach to corporate governance. It includes requirements of
institutional shareholders as well as of companies themselves.

The content of the Code of Corporate Governance

The conditions imposed by SEC, vide notification dated 20th February, 2006 to enhance the
corporate governance for the listed companies of Bangladesh are as follows:

Board of directors:
Board’s Size
The number of the board members of the company should not be less than 5 (five) and more
than 20 (twenty):
Independent Directors
(i) At least one fifth (1/5) of the total number of the company’s board of directors, subject to a
minimum of one, should be independent directors.
(ii) The independent director(s) should be appointed by the elected directors.
Chief financial officer (CFO), head of internal audit and company secretary:
The company should appoint a Chief Financial Officer (CFO), a Head of Internal Audit and a
Company Secretary. The Board of Directors should clearly define respective roles,
responsibilities and duties of the CFO, the Head of Internal Audit and the Company Secretary.
Duality of Chairperson of the Board of Directors and Managing Director or Chief
Executive Officer.-
(a) The positions of the Chairperson of the Board and the Managing Director (MD)
and/or Chief Executive Officer (CEO) of the company shall be filled by different
individuals;
(b) The Managing Director (MD) and/or Chief Executive Officer (CEO) of a listed
company shall not hold the same position in another listed company;
(c) The Chairperson of the Board shall be elected from among the non-executive
directors of the company;
(d) The Board shall clearly define respective roles and responsibilities of the
Chairperson and the Managing Director and/or Chief Executive Officer;
(e) In the absence of the Chairperson of the Board, the remaining members may elect
one of themselves from non-executive directors as Chairperson for that particular
Board’s meeting; the reason of absence of the regular Chairperson shall be duly
recorded in the minutes.

Chief financial officer (CFO), head of internal audit and company secretary:
The company should appoint a Chief Financial Officer (CFO), a Head of Internal Audit and a
Company Secretary. The Board of Directors should clearly define respective roles,
responsibilities and duties of the CFO, the Head of Internal Audit and the Company Secretary.
The Directors’ Report to Shareholders
The Board of the company shall include the following additional statements or
disclosures in the Directors’ Report prepared under section 184 of the
Companies Act,1994 (Act No. XVIII of 1994):-

(i) An industry outlook and possible future developments in the industry;

(ii) The segment-wise or product-wise performance;

(iii) Risks and concerns including internal and external risk factors, threat to sustainability
and negative impact on environment, if any;

(iv) A discussion on Cost of Goods sold, Gross Profit Margin and Net Profit Margin,where
applicable;

(v) A discussion on continuity of any extraordinary activities and their implications(gain or

loss);

(vi) A detailed discussion on related party transactions along with a statement showing
amount, nature of related party, nature of transactions and basis of transactions of all
related party transactions;
The Directors’ Report to Shareholders

(vii) A statement of utilization of proceeds raised through public issues, rights

issues and/or any other instruments;

(viii) An explanation if the financial results deteriorate after the company goes for
Initial Public Offering (IPO), Repeat Public Offering (RPO), Rights Share
Offer,Direct Listing, etc.;

(ix) An explanation on any significant variance that occurs between Quarterly

Financial performances

(x) A statement of remuneration paid to the directors including independent

directors;

(xi) A statement that the financial statements prepared by the management of the
issuer company present fairly its state of affairs, the result of its operations,
cash flows and changes in equity;
The Directors’ Report to Shareholders

(xii) A statement that proper books of account of the issuer company have been maintained;

(xiii) A statement that appropriate accounting policies have been consistently applied
preparation of the financial statements and that the accounting estimates are based on
reasonable and prudent judgment;

(xiv) A statement that International Accounting Standards (IAS) or International

Financial Reporting Standards (IFRS), as applicable in Bangladesh, have been
followed in preparation of the financial statements and any departure there from has been
adequately disclosed;

(xv) A statement that the system of internal control is sound in design and has been
effectively implemented and monitored;

(xvi) A statement that minority shareholders have been protected from abusive actions by,
or in the interest of, controlling shareholders acting either directly or indirectly and have
effective means of redress;
The Directors’ Report to Shareholders
(xvii) A statement that there is no significant doubt upon the issuer company’s
ability to continue as a going concern, if the issuer company is not considered
to be a going concern, the fact along with reasons there of shall be disclosed;

(xviii) An explanation that significant deviations from the last year’s operating
results of the issuer company shall be highlighted and the reasons thereof
shall be explained;

(xix) A statement where key operating and financial data of at least preceding 5
(five) years shall be summarized;

(xx) An explanation on the reasons if the issuer company has not declared
dividend (cash or stock) for the year;

(xxi) Board’s statement to the effect that no bonus share or stock dividend has
been or

(xxii) The total number of Board meetings held during the year and attendance by
each director;
The Directors’ Report to Shareholders

(xxiii) A report on the pattern of shareholding disclosing the aggregate number

of shares (along with name-wise details where stated below) held by:-

(a) Parent or Subsidiary or Associated Companies and other related parties

(name-wise details);
(b) Directors, Chief Executive Officer, Company Secretary, Chief Financial
Officer, Head of Internal Audit and Compliance and their spouses and minor
children (name-wise details);
(c) Executives; and
(d) Shareholders holding ten percent (10%) or more voting interest in the
company (name-wise details);
Managing Director (MD) or Chief Executive Officer (CEO), Chief Financial Officer
(CFO), Head of Internal Audit and Compliance (HIAC) and Company Secretary (CS).-
(1) Appointment
(a) The Board shall appoint a Managing Director (MD) or Chief Executive Officer
(CEO), a Company Secretary (CS), a Chief Financial Officer (CFO) and a Head of
Internal Audit and Compliance (HIAC);

(b) The positions of the Managing Director (MD) or Chief Executive Officer (CEO),
Company Secretary (CS), Chief Financial Officer (CFO) and Head of Internal Audit
and Compliance (HIAC) shall be filled by different individuals;

(c) The MD or CEO, CS, CFO and HIAC of a listed company shall not hold any
executive position in any other company at the same time;

(d) The Board shall clearly define respective roles, responsibilities and duties of the CFO,
the HIAC and the CS;

(e) The MD or CEO, CS, CFO and HIAC shall not be removed from their position
without approval of the Board as well as immediate dissemination to the Commission
and stock exchange(s).
Duties of Managing Director (MD) or Chief Executive Officer (CEO) and Chief
Financial Officer (CFO)

(a) The MD or CEO and CFO shall certify to the Board that they have reviewed financial
statements for the year and that to the best of their knowledge and belief:

(i) these statements do not contain any materially untrue statement or omit any
material fact or contain statements that might be misleading; and

(ii) these statements together present a true and fair view of the company’s affairs and
are in compliance with existing accounting standards and applicable laws;

(b) The MD or CEO and CFO shall also certify that there are, to the best of knowledge
and belief, no transactions entered into by the company during the year which are
fraudulent, illegal or in violation of the code of conduct for the company’s Board or
its members;
(c) The certification of the MD or CEO and CFO shall be disclosed in the Annual Report.
Board of Directors’ Committee.-
For ensuring good governance in the company, the Board shall have at least following
subcommittees:
(i) Audit Committee; and
(ii) Nomination and Remuneration Committee.

Audit Committee.-
(1) Responsibility to the Board of Directors.
(a) The company shall have an Audit Committee as a sub-committee of the Board;
(b) The Audit Committee shall assist the Board in ensuring that the financial statements
reflect true and fair view of the state of affairs of the company and in ensuring a good
monitoring system within the business;
(c) The Audit Committee shall be responsible to the Board; the duties of the Audit
Committee shall be clearly set forth in writing.
(2) Constitution of the Audit Committee
(a) The Audit Committee shall be composed of at least 3 (three) members;

(b) The Board shall appoint members of the Audit Committee who shall be nonexecutive
directors of the company excepting Chairperson of the Board and shall include at least 1
(one) independent director

(c) All members of the audit committee should be “financially literate” and at least 1
(one) member shall have accounting or related financial management background
and 10 (ten) years of such experience;

(d) When the term of service of any Committee member expires or there is any
circumstance causing any Committee member to be unable to hold office before
expiration of the term of service,

(e) The company secretary shall act as the secretary of the Committee;

(f) The quorum of the Audit Committee meeting shall not constitute without at least 1
(one) independent director.
.(5) Role of Audit Committee

The Audit Committee shall:-

(a) Oversee the financial reporting process;

(b) monitor choice of accounting policies and principles;

(c) monitor Internal Audit and Compliance process to ensure that it is

adequately resourced, including approval of the Internal Audit and
Compliance Plan and review of the Internal Audit and Compliance Report;

(d) oversee hiring and performance of external auditors;

(e) hold meeting with the external or statutory auditors for review of the annual
financial statements before submission to the Board for approval or adoption;

(f) review along with the management, the annual financial statements before
submission to the Board for approval;
.(5) Role of Audit Committee (Count…..)
(g) review along with the management, the quarterly and half yearly financial
statements before submission to the Board for approval;

(h) review the adequacy of internal audit function;

(i) review the Management’s Discussion and Analysis before disclosing in the
Annual Report;

(j) review statement of all related party transactions submitted by the management;

(k) review Management Letters or Letter of Internal Control weakness issued by

statutory auditors;

(l) oversee the determination of audit fees based on scope and magnitude, level of
expertise deployed and time required for effective audit and evaluate the
performance of external auditors; and

(m) oversee whether the proceeds raised through Initial Public Offering (IPO) or
Repeat Public Offering (RPO) or Rights Share Offer have been utilized as per the
purposes stated in relevant offer document or prospectus approved by the
Commission:
(6) Reporting of the Audit Committee

(a) Reporting to the Board of Directors

(i) The Audit Committee shall report on its activities to the Board.

(ii) The Audit Committee shall immediately report to the Board on the following
findings, if any:-
(a) report on conflicts of interests;
(b) suspected or presumed fraud or irregularity or material defect identified
in the internal audit and compliance process or in the financial
statements;
(c) suspected infringement of laws, regulatory compliances including
securities related laws, rules and regulations; and
(d) any other matter which the Audit Committee deems necessary shall be
disclosed to the Board immediately;
Maintaining a website by the Company.-
(1) The company shall have an official website linked with the website of the stock
exchange.
(2) The company shall keep the website functional from the date of listing.
(3) The company shall make available the detailed disclosures on its website as required
under the listing regulations of the concerned stock exchange(s).

Reporting and Compliance of Corporate Governance.-

(1) The company shall obtain a certificate from a practicing Professional Accountant or
Secretary (Chartered Accountant or Cost and Management Accountant or Chartered
Secretary) other than its statutory auditors or audit firm on yearly basis regarding
compliance of conditions of Corporate Governance Code of the Commission and
shall such certificate shall be disclosed in the Annual Report.

(2) The professional who will provide the certificate on compliance of this Corporate
Governance Code shall be appointed by the shareholders in the annual general
meeting.

(3) The directors of the company shall state, in accordance with the Annexure-C
attached, in the directors’ report whether the company has complied with these
External or Statutory Auditors.-

(1) The issuer company shall not engage its external or statutory auditors to
perform the following services of the company, namely:-

(i) appraisal or valuation services or fairness opinions;

(ii) financial information systems design and implementation;
(iii) book-keeping or other services related to the accounting records or
financial statements;
(iv) broker-dealer services;
(v) actuarial services;
(vi) internal audit services or special audit services;
(vii) any service that the Audit Committee determines;
(viii) audit or certification services on compliance of corporate
governance
(ix) any other service that creates conflict of interest.
The Institute of Chartered Accountants of Bangladesh

Business and Finance

Chapter-14
External regulation of business

Presented By: Muhammad Mahbub Alam FCA

03rd October ,2022
Regulation: Any form of state interference with the operation of the free market. This
could involve regulating demand, supply, price, profit, quantity, quality, entry, exit,
information, technology, or any other aspect of production and consumption in the
market.

Protecting the public interest

 Just as regulation of the accountancy profession is needed to provide the public
interest with protection and assurance, so too with businesses, which are the source
of most wealth creation and economic power, but which are focused as we have
seen on meeting the interests of:

Shareholders
Directors and managers

 External regulations on businesses of many different forms are designed to ensure

that the needs of the other stakeholders can be met.
What is compliance?

Regulatory compliance: Systems or departments in businesses which ensure that

people are aware of and take steps to comply with relevant laws and regulations.

The US Sarbanes-Oxley Act 2002

Corporate scandals such as Enron and WorldCom in the US prompted very

significant concerns about corporate responsibility, internal controls, financial
reporting, external audit and the prevention of fraud.

It was the Enron scandal in particular that prompted the biggest financial reporting
provision in Sarbox, namely that companies affected by the Act must establish and
maintain accounting procedures that control creative accounting, in particular that
material off-balance sheet transactions and other relationships should be
appropriately disclosed. This requirement, and the complexity of off-balance sheet
transactions, has pushed international accounting standards further towards a
principles-based approach to financial reporting.
 Corporate responsibility for financial reports (s302)

The Chief Executive Officer (CEO) and the Chief Financial Officer (CFO):
Must review all financial reports and sign a personal certificate that:

– They do not contain any misrepresentations

– Information in the financial report is 'fairly presented'

Are responsible for the internal financial controls

Must report any deficiencies in internal accounting controls, or any fraud involving
management, to the board, audit committee and external auditors
Must indicate any material changes in internal accounting controls

Submission of an inaccurate certification may lead to a fine on the CEO or CFO of up

to $5 million plus a prison term of up to 20 years.
The World Trade Organisation (WTO)

The WTO was formed in 1995 as successor to the General Agreement on Tariffs
and Trade (GATT),which was itself set up in 1947. The WTO is an organisation that
devotes itself to international trade in goods, services, traded inventions, creations
and intellectual property. It is also involved in dispute settlement issues.

The WTO represents nearly 97% of international trade. It seeks to promote the free
flow of trade by removing obstacles to trade. It does this by:

Administering the WTO Agreements

Being a forum for trade agreements
Settling trade disputes via the Dispute Settlement Body
Reviewing national trade policies
Assisting developing countries in trade policy issues
Co-operating with other international organisations
Regional trading organisations

 Countries in various regions have entered into closer economic arrangements such
as:

The EU: (the world's largest single market, but it is unusual in that it features a
common political decision-making process (Council of Ministers, Commission,
Parliament) and a single currency)

NAFTA (USA, Canada, Mexico)

SAARC (Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka)

Mercosur (Brazil, Argentina, Uruguay, Paraguay and now Chile)

ECOWAS (the Economic Community of West African States)