Financial statements, creative accounting, and roles of auditors : the case of Bangladesh

Based mainly on archival sources and interviews with accounting academics and professionals, this paper examines financial statements, creative accounting, and roles and responsibilities of auditors in Bangladesh. As in other countries, financial statements in Bangladesh are intended to provide divergent users with a true and fair view of the business result of a company during a stipulated period of time and the state of affairs at a particular date. The professional auditor’s functions in connection with these statements include examination of the books of accounts on the basis of which these are prepared; verification that financial statements conform to legal requirements and conventional accounting practices; certification that these statements exhibit accurate, authentic, and undistorted business results and financial positions; and attestation that such statements do not conceal any irregularities in connection with their preparation, presentation, and certification. The users rely on such audited reports and use them to achieve their respective objectives. If those reports misrepresent or conceal a company’s performance and financial position, and the users suffer any loss from actions based on such reports, they can sue the auditors in the Courts and lodge complaints with the relevant professional accounting institution. Financial and audit integrity is also essential in order to promote a strong and reliable capital market and attract foreign investment. This paper critically examines the existing provisions of the Companies Act 1994, legal, professional and ethical codes of conduct, and the role of the court in resolving audit related cases in Bangladesh. It is suggested that a strong coordinated role of the government and professional bodies is required to ensure proper user protection.