ICMAB requests toughening cost audit for public companies

Highlights:

• Cost audits for public companies mandatory since 2001
• 2-3% public companies follow this: ICMAB President
• Cost audits identify operational inefficiencies, irregularities
• BSEC requested they be implemented across listed companies
• Cost audit report submission to be required
• Such reports can help regulatory investigations

Two decades ago, the Bangladesh government made it a requirement that all public limited companies go through a cost audit process.

However, less than two to three percent of public limited companies are complying with that order, according to Md Jasim Uddin Akond, president of the Institute of Cost and Management Accountants of Bangladesh (ICMAB).

Cost auditing is a management appointed internal auditing task where professional ICMAB members work to identify operational irregularities and inefficiencies.

But, companies avoid professional cost auditing as cost audit reports, unlike financial audit ones, need not be made publicly available or submitted to regulators.

For the sake of performance and governance improvement in public companies, regulators should strengthen the implementation of cost audits within companies, cost and management accountants of the country believe.

An ICMAB delegation, led by its President Md Jasim Uddin Akond, discussed the importance of cost audits while meeting Professor Shibli Rubayat-Ul-Islam, the chairman of Bangladesh Securities and Exchange Commission (BSEC), on Monday.

The BSEC chairman, following a passionate discussion, ensured the accountants that his office would take necessary steps so that each listed company embraces a professional cost audit.

ICMAB President Jashim Uddin Akond told The Business Standard, "A financial audit is happy to see two and two make four while a cost and management audit focuses on adding more by addressing areas a company needs to improve in."

"We requested the BSEC chairman make the submission of a cost audit accomplishment report mandatory for all the listed companies. He noted the points and assured us about it."

On demand, the submission of such reports can help any regulatory investigation, the ICMAB president believed.

Cost audits play a vital role in economic development through increasing transparency and efficiency within companies, he said, adding that the government is very serious about increasing financial transparency across sectors; which is impossible without strengthening cost audits.

ICMAB leaders also discussed ways to utilise more of the professional knowledge and skills of cost and management accountants.

Akond said his community is ready to serve the government's plan to revamp ailing factories as BSEC's plan to restructure poorly performing listed companies stuck in Z categories is creating pains for shareholders.

Understanding the points on what makes a company sick, and where the problems lie and matter, experts of ICMAB, as engineers of financial management, have a very important role to play.

Managements of committed companies look for a strict cost audit, even if they are not bound to do one.

In contrast, myopic management avoids the process to save some fees, or they have a fear of loopholes being identified.

Among others, ICMAB Vice Presidents, Abu Bakar Siddique and Md Mamunur Rashid, Secretary Md Munirul Islam, former president Abdul Aziz, and Executive Director of the institute Md Mahbub Ul Alam were present in the meeting.

The delegation also met BSEC commissioners Khondoker Kamaluzzaman, Dr Shaikh Shamsuddin Ahmed, Professor Dr Md Mizanur Rahman, and Md Abdul Halim at their offices, individually.