Bangladesh

Corporate financial reporting requirements in Bangladesh are outlined in a number of laws, which include the Companies Act of 1994, the Finance Act of 2014, Bangladesh Securities and Exchange (BSEC) Rules of 1987, the Banking Act of 1991, the Insurance Act of 2010, the Bangladesh Chartered Accountants Order of 1973, and the Cost and Management Accountants Ordinance of 1977.

The Companies Act of 1994 stipulates that all companies must prepare financial statements; however, accounting standards to be applied are not specified. De facto, the Bangladesh Financial Reporting Standards (BFRS) issued by the Institute of Chartered Accountants of Bangladesh (ICAB) are applied. BFRS are developed based on the International Financial Reporting Standards (IFRS) with some modifications. ICAB has also adopted the 2009 version of IFRS for SME as BFRS for SMEs, with minor modifications. SMEs are permitted to apply BFRS or BFRS for SMEs.

Different regulators in the country also establish financial reporting requirements for the entities that they supervise either requiring partial or full compliance with BFRS. The BSEC Rules of 1987 and the Insurance Development and Regulatory Authority require listed companies and insurance companies, respectively, to apply full BFRS, while the Central Bank of Bangladesh, under the authority of the Banking Act of 1991, requires banks and other financial institutions to apply specific BFRS.

The Companies Act of 1994 stipulates mandatory financial statement audits for all companies and specifies that only Chartered Accountants (CAs), members of ICAB, are authorized to perform audits. There is no specific law that defines the auditing standards to be applied. De facto, CAs conduct audits in accordance with auditing standards adopted by ICAB. The institute has adopted the 2013 version of the International Standards on Auditing as Bangladesh Standards on Auditing for application in the country with limited modifications due to local laws. In addition to financial statement audits, certain public limited companies and state-owned enterprises are subject to mandatory cost audits under the Companies Act of 1994.

As of 2017, the accountancy profession continues to be self-regulated by two professional accountancy organizations (PAOs). In 2015, the Bangladesh Parliament passed the Financial Reporting Act of 2015, which called for the establishment of the Financial Reporting Council (FRC). It is anticipated that once the FRC is established and becomes operational, it will take over some of the regulatory functions of the two PAOs.

Under the Bangladesh Chartered Accountants Order of 1973, the Institute of Chartered Accountants of Bangladesh (ICAB) is the sole regulator of accountants and auditors. Its mandate includes: (i) determination of qualifications for membership in the institute; (ii) oversight of the initial professional development and continuing professional development of its members; (iii) conducting professional examinations; (iv) establishment and maintenance of a quality assurance review system; (v) licensing auditors; (vi) maintenance and publication of a register of persons qualified to practice as accountants and auditors; (vii) the investigation and disciplining (I&D) of its members for professional misconduct; and (viii) setting accounting and auditing standards. Members of ICAB are designated as Fellow Chartered Accountants or Associate Chartered Accountants. Membership is mandatory for all Chartered Accountants (financial accountants and auditors) in the jurisdiction.

The Cost and Management Accountants Ordinance of 1977 establishes the regulatory authority of the Institute of Cost and Management Accountants of Bangladesh (ICMAB) regarding all cost and management accounting professionals. Under the Ordinance, ICMAB is responsible for: (i) stipulating the qualifications for membership; (ii) establishing professional examinations; (iii) maintaining and publishing a register of members who hold practicing certificates; (iv) developing professional standards and rules of conduct; (v) operating an I&D system for its members; and (vi) appointing and removing members of the Institute in accordance with ICMAB’s regulations. Members of ICMAB are designated as Fellow Cost and Management Accountant or Associate Cost and Management Accountant. ICMAB is a mandatory membership body for cost and management accountants in Bangladesh.

The Bangladesh Parliament passed the Financial Reporting Act of 2015 on September 6, 2015. The new Act calls for the establishment of an independent regulatory oversight body, the FRC, to oversee the profession—the two PAOs—and the performance of auditors and audit firms that conduct audits of financial statements of listed entities and financial institutions. Its responsibilities will include:

• Establishing financial reporting requirements for all entities in the country, including the responsibility to adopt accounting and auditing standards, and ethical requirements for all professional accountants;
• Responsibility for licensing auditors, maintaining a registry of all licensed auditors and the approval of audit firms;
• Monitoring and reviewing financial reporting by public interest entities;
• Monitoring the work and conduct of all auditors including the responsibility to discipline auditors and audit firms that violate any of the provisions of the new Act; and
• Enforcing compliance with accounting and auditing standards, and ethical requirements.

All auditors and audit firms will be required to register with the FRC.

In September 2015, the Bangladesh Parliament passed the Financial Reporting Act of 2015, which calls for the establishment of an independent regulatory oversight body, the Financial Reporting Council (FRC), to oversee the profession, the performance of auditors and audit firms that conduct audits of financial statements of listed entities and financial institutions, and the two professional accountancy organizations.

The FRC’s responsibilities will 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, maintaining a registry of all licensed auditors and the approval of audit firms;
• Monitoring and reviewing financial reporting by public interest entities;
• Monitoring the work and conduct of all auditors; and
• Enforcing compliance with accounting and auditing standards, and ethical requirements.

All auditors and audit firms will be required to register with the FRC. The FRC will also have the responsibility to monitor and discipline all professional accountants who violate any of the provisions of the new act.

As of January 2017, the FRC has not been established. The auditing profession continues to be self-regulated by the Institute of Chartered Accountants of Bangladesh, with an independent audit oversight arrangement in place.

The Institute of Chartered Accountants of Bangladesh (ICAB)

Under the Bangladesh Chartered Accountants Order of 1973, ICAB is the sole regulator of accountants and auditors. ICAB’s mission is to provide leadership in the development, enhancement and coordination of the accountancy profession in Bangladesh. Its mandate includes: (i) determination of qualifications for membership in the institute; (ii) oversight of the initial professional development and continuing professional development of its members; (iii) conducting professional examinations; (iv) establishment and maintenance of a quality assurance review system; (v) licensing auditors; (vi) maintenance and publication of a register of persons qualified to practice as accountants and auditors; (vii) the investigation and disciplining (I&D) of its members for professional misconduct; and (viii) setting accounting and auditing standards. Members of ICAB are designated as Fellow Chartered Accountants or Associate Chartered Accountants. Membership is mandatory for all Chartered Accountants (financial accountants and auditors) in the jurisdiction. In addition to being an IFAC Member, ICAB is a member of the South Asian Federation of Accountants (SAFA) and the Confederation of Asian and Pacific Accountants (CAPA).

The Institute of Cost and Management Accountants of Bangladesh (ICMAB)

The Cost and Management Accountants Ordinance of 1977 establishes the regulatory authority of ICMAB regarding all cost and management accounting professionals. Under the Ordinance, ICMAB is responsible for: (i) stipulating the qualifications for membership; (ii) establishing professional examinations; (iii) maintaining and publishing a register of members who hold practicing certificates; (iv) developing professional standards and rules of conduct; (v) operating an I&D system for its members; and (vi) appointing and removing members of the Institute in accordance with ICMAB’s regulations. Members of ICMAB are designated as Fellow Cost and Management Accountant or Associate Cost and Management Accountant. ICMAB is a mandatory membership body for cost and management accountants in Bangladesh. In addition to being an IFAC Member, ICMAB is a member of SAFA and CAPA.

The Bangladesh Parliament passed the Financial Reporting Act of 2015. The new Act calls for the establishment of an independent regulatory oversight body, the Financial Reporting Council (FRC), to oversee the accountancy profession, the performance of auditors and audit firms that conduct audits of financial statements of listed entities and financial institutions, and the two professional accountancy organizations. As of January 2017, the FRC has not been established.

The Bangladesh Chartered Accountants Order of 1973 authorizes the Institute of Chartered Accountants of Bangladesh (ICAB) to establish a quality assurance (QA) review system in Bangladesh.

ICAB established a Quality Assurance Department to conduct inspections of licensed audit firms at least once every three years. ICAB adopted the International Standards on Quality Control as Bangladesh Standard on Quality Control 1 and launched an Audit Practice Manual to assist practicing members with their work. ICAB reports that its system fully incorporates the requirements of SMO 1 (revised 2012).

The Financial Reporting Act of 2015 established the Financial Reporting Council (FRC) with the mandate to monitor the performance of auditors in Bangladesh, among its other functions. ICAB reports that when the FRC becomes operational, ICAB will continue to be responsible for conducting QA reviews; however, the Institute will do so under the oversight of the FRC.

Current Status: Adopted

The Institute of Chartered Accountants of Bangladesh (ICAB), the Institute of Cost and Management Accountants of Bangladesh (ICMAB) and local universities are responsible for establishing initial professional development (IPD) and continuing professional development (CPD) requirements for professional accountants in Bangladesh.

Under the Bangladesh Chartered Accountants Order of 1973, ICAB is responsible for establishing IPD and CPD requirements for Chartered Accountants. ICAB has adopted most of the IES except for mandatory CPD requirements. The institute reports that plans are in place to introduce mandatory CPD for all members by March 2017.

The Cost and Management Accountant Ordinance of 1977 empowers ICMAB with the responsibility to determine IPD and CPD requirements for cost and management accountants in Bangladesh. While ICMAB reports that it has incorporated a majority of the IES, CPD requirements are yet to be aligned with the international standards.

Current Status: Partially Adopted

Under the Financial Reporting Act of 2015, the Financial Reporting Council, once established, will be authorized to set auditing standards in Bangladesh. Meanwhile, as of January 2017, the Institute of Chartered Accountants of Bangladesh (ICAB) remains the de facto standard-setter under the Bangladesh Chartered Accountants Order of 1973.

ICAB’s Technical and Research Committee has adopted the 2013 version of ISA as Bangladesh Standards on Auditing for application in the country with limited modifications due to local laws. The International Standards on Review Engagements, International Standards on Assurance Engagements, and International Standards on Related Services have also been adopted by ICAB.

ICAB indicates that it has established an ongoing process to incorporate new and revised IAASB pronouncements and it has plans to update its standards to the most recent version of the ISA.

Current Status: Adopted

Under the Financial Reporting Act of 2015, the Financial Reporting Council, once established, will be authorized to establish a Code of Ethics for all professional accountants in Bangladesh. At the time of this report, both the Institute of Chartered Accountants of Bangladesh (ICAB) and the Institute of Cost and Management Accountants of Bangladesh (ICMAB) are responsible for setting ethical requirements for their respective members. ICAB has adopted the 2013 IESBA Code of Ethics for application by its members and reports that it is reviewing the 2016 IESBA Code for adoption.

ICMAB reports that it has developed a Code of Ethics for its members that is based on the 2012 IESBA Code of Ethics and is no less stringent that the IESBA Code.

Current Status: Adopted

The Constitution of Bangladesh outlines the public sector accounting framework and authorizes the Comptroller and Auditor General of Bangladesh to determine applicable standards.

IPSAS have not been adopted in Bangladesh. However, the Government has declared a commitment to move from cash accounting to cash-basis IPSAS as an intermediate step prior to adopting accrual-basis IPSAS. The timeline for the implementation of cash-basis IPSAS is unknown at the time of this report.

Current Status: Not Adopted

Under the Financial Reporting Act of 2015, the Financial Reporting Council, once established, will be authorized to monitor the conduct of all professional accountants. At the time of this assessment, the Institute of Chartered Accountants of Bangladesh (ICAB) and Institute of Cost and Management Accountants of Bangladesh (ICMAB) are responsible for establishing and maintaining an investigative and disciplinary (I&D) system for their respective members.

In accordance with the Bangladesh Chartered Accountants Order of 1973, ICAB has established an I&D system. ICAB assessed its I&D system against the requirements of SMO 6 and it reports that it adopts most of the requirements, except that it’s Disciplinary Committee does not have non-accountants as members. The institute reports that it is restructuring the system to enhance compliance with the revised requirements of SMO 6.

ICMAB established a Disciplinary Committee for the investigation of members’ misconduct based on the authority granted by the Cost and Management Accountants Ordinance of 1977. The institute completed an assessment of its I&D system against the requirements of SMO 6 and reported partial compliance.

Current Status: Partially Adopted

The Bangladesh Parliament approved the Financial Reporting Act of 2015, which established the Financial Reporting Council (FRC). The FRC, once established, will be authorized to set accounting standards in Bangladesh. However, pending FRC-issued standards, standards issued by the Institute of Chartered Accountants of Bangladesh (ICAB) remain applicable.

The Finance Act of 2014, the Bangladesh Securities and Exchange Commission Rules of 1987 and the Insurance Development and Regulatory Authority require all companies to apply Bangladesh Financial Reporting Standards (BFRS) as issued by ICAB. BFRS are based on 2015 IFRS. ICAB has also adopted the 2009 version of IFRS for SME as BFRS for SMEs. SMEs are permitted to apply BFRS or BFRS for SMEs.

The Central Bank of Bangladesh, under the authority of the Banking Act of 1991, requires banks and other financial institutions to apply only some of BFRS.

Current Status: Adopted

Relevant Organizations

• Institute of Chartered Accountants of Bangladesh (ICAB)
• Institute of Cost and Management Accountants of Bangladesh (ICMAB)

Relevant Legislation

• Bangladesh Chartered Accountants Order, 1973
• Bangladesh Securities and Exchange Rules, 1987
• Banking Act, 1991
• Companies Act, 1994
• Cost and Management Accountants Ordinance, 1977

Relevant Publications

• ICAB, SMO Action Plan, October 2016.
• ICMAB, SMO Action Plan, February 2017.
• IFRS Foundation, “IFRS Application Around the World?Jurisdictional Profile: Bangladesh,” June 2016.
• OGR Legal, “Bangladesh Enacted Financial Reporting Act 2015,” September 2015.
• World Bank, Report on the Observance of Standards and Code—Accounting and Auditing: Bangladesh, April 2015.