Audit firms asked to report NBFI anomalies instantly

The Bangladesh Bank has instructed chartered accounting firms to immediately inform it about any major financial anomalies they unearth while carrying out audits into non-bank financial institutions (NBFIs).

On February 28, the central bank issued a letter to NBFIs where it gave the instruction to 43 chartered accountant firms in tandem.

The firms are listed with the BB to audit into 34 NBFIs operating in the country. A copy of the letter was also sent to the firms.

The move comes as a good number of NBFIs are struggling to survive due to large-scale scams committed in recent years. But the inspection teams of the central bank could not detect the scandals in time.

Had there been sufficient time, the central bank could have moved to protect the non-banks from the ongoing bad state of affairs, said a BB official.

So, the audit firms can't avoid their responsibility as they had not informed the central bank about the scams, he said.

As per rules, the audit firms have to submit the annual audit report to the central bank after the completion of the exercise. But, the reports have failed to highlight financial forgeries. As a result, unscrupulous directors, senior executives and borrowers embezzled thousands of crores of taka from a number of NBFIs.

Prashanta Kumar Halder, also known as PK Halder, who is believed to be living in Canada after fleeing from Bangladesh, is one of the people responsible for the ongoing vulnerable situation of the NBFI sector.

Halder, a former managing director of NRB Global Bank and Reliance Finance, and his associates swindled around Tk 4,000 crore to Tk 5,000 crore from four NBFIs: International Leasing & Financial Services Ltd, FAS Finance & Investment, People's Leasing & Financial Services Ltd, and Reliance Finance.

The chartered accountancy firms chiefly flopped in carrying out their duties as the money was siphoned off from the NBFIs.

Currently, more NBFIs are unable to repay depositors despite maturity.

Md Shahadat Hossain, chairman of the Institute of Chartered Accountants of Bangladesh, says that the central bank's letter is logical and audit firms should inform the BB soon after they find any gross violations.

"As per global best practices, an audit firm should inform the top management immediately after they spot any anomalies. If required, they should notify the financial regulator."

The audit firms have been asked to examine at least 80 per cent of the outstanding loans disbursed by NBFIs.

In addition, they have to verify whether NBFIs have transferred the interest on the rescheduled loans to the income segment of the financial statement accurately.