Balance sheets of several banks found ‘fictitious’

The balance sheets of several banks have been found to be "fictitious", failing to reflect their true financial state, according to Bangladesh Bank (BB) Governor Ahsan H Mansur.

Non-performing loans (NPLs), which many banks had reported at just 3 percent up to last year, shot up to 36 percent in the first quarter of this year, he said.

"Why? Was there a good reason for it? No. It is completely for misrepresenting the facts and the reality," the governor said while speaking at the Accounting & Auditing (A&A) Summit 2025 in Dhaka yesterday.

The event was jointly organised by the World Bank and the Financial Reporting Council (FRC).

Senior policymakers at the summit echoed similar concerns, saying auditors had failed to give a true picture of corporate accounts.

This, they said, had contributed to the deterioration of business balance sheets, enabled money laundering, shaken investor confidence, and led to tax losses.

They called for a concerted effort from Bangladesh Bank, the FRC, the Institute of Chartered Accountants of Bangladesh (ICAB), and the Institute of Cost and Management Accountants of Bangladesh (ICMAB) to strengthen the financial reporting ecosystem.

Mansur said the quality of audits at financial institutions requires a lot of attention and that he has been engaging with the FRC chairman to collaboratively look into the issue.

"We need to support the FRC with a proper budget, proper staffing, and ensure that the salaries of the staff who will be engaged there are commensurate with their skills," he said.

"If I today judge the performance of audit firms based on the audit reports, I can tell you there will be no auditors left qualified for the job," he said.

The way they misreported facts disqualifies them from serving in the profession in the future. If this is taken critically, there will be no one left to do the job, so everyone is having to make do with whatever is available, he said.

"Most of the financial reports are unqualified, very good reports, clean, in Bangladesh," said Finance Adviser Salehuddin Ahmed.

"But when you look at the track record of what they are doing, you don't say these are unqualified. Most of them were qualified," he said.

An unqualified report, also known as a clean report or unmodified opinion, is an auditor's opinion stating that a company's financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

On the other hand, a qualified report in auditing is a report that indicates the auditor has identified some issues with the financial statements, but these issues are not pervasive enough to warrant a disclaimer or adverse opinion.

Ahmed laid emphasis on three things—rules, process, and person. People who are implementing the rules and standards have not done a good job, said Ahmed.

There is a kind of understanding between the auditors and the management of companies, with the former delivering unqualified reports in exchange for repeatedly getting hired, he said.

On the other hand, directors are sometimes kept in the dark. Many independent directors are not independent or are mostly "sleeping directors," he said.

From time to time, they just avail themselves of comfortable transportation or air fares and hotel stays to attend board meetings and then go back to their lives again, said Ahmed.

For auditors and accountants, audit reports are definitely important. In fact, this is the third eye of the management. Unless those are really efficient and transparent, they will not be of any use to the management or board directors, he said.

It would be better if there were improved coordination among the ICAB, ICMAB, and FRC, he added.

"Window dressing" is commonplace not only in financial reports but also throughout the country, said Anti-Corruption Commission (ACC) Chairman Mohammad Abdul Momen.

Regarding allegations of fraudulence against a prominent businessperson involving a bond, he said one person cannot perpetrate such malpractice unless he was assisted by professionals who are now "happily loitering around."

Bangladesh Bank identified a few credit scandals, which is welcome, but questions remain over its role during the past regime, when it appeared to be an accomplice to the repeated plundering of state funds, which devastated the economy, he said.

The central bank could not even protect its own money, said Momen.

The Bangladesh Securities and Exchange Commission (BSEC) did a good job in identifying officers involved in a mutual fund scandal, but by then it had already led to the plundering of the whole market, he said.

The Anti-Corruption Commission has a wider scope to work with the FRC, BSEC, Bangladesh Bank, and other regulatory agencies, he added.

FRC Chairman Md Sajjad Hossain Bhuiyan, Md Khairuzzaman Mozumder, secretary to the Finance Division, ICAB President NKA Mobin, and ICMAB President Mahtab Uddin Ahmed also spoke at the event.