5 firms asked to explain financial anomalies

The stock market regulator has asked five companies to explain anomalies in their financial statements for the year ending on 30 June 2020.

The companies are Bangladesh Building Systems, Eastern Cables, Bangladesh Autocars, National Tubes, and Aziz Pipes.

The Bangladesh Securities and Exchange Commission (BSEC) last week issued letters asking the firms to submit their explanations to the regulator within seven working days.

Bangladesh Building Systems

The BSEC has observed that the company took full contract price as the revenue which is non-compliance as per international financial reporting standards. As a result, the company did not keep any deferred income in the financial statements.

It did not consider obsolete and damaged items during valuation. The receivables Tk26.39 crore was doubtful out of a total of Tk93.56 crore in the financial statement, which is not in line with laws. No provision has been made against the aforesaid doubtful amount.

The commission deems that the company has overstated its revenue and inventories.

Eastern Cables Ltd

The regulator noticed that the company has made a provision of Tk34.74 lakh for tax, but the actual provision will be Tk3.43 crore for the year that ended on 30 June 2020.

As a result, the company's net loss has been understated, as well as earnings per share, was the extent.

The calculation and recognition of deferred tax have not been properly done by the company as per laws.

Bangladesh Autocars

The company said it has refunded the claim of Tk12.64 lakh to the National Board of Authority of 2007-2008, but the taxation authority said it has not responded to the claim. This long outstanding should be written off from the face of the statement of the profit or loss, observed the commission.

National Tubes

The commission has observed that the company, in its financial statements for the last fiscal year, mentioned Tk30.54 crore as advance tax. But, finally, its income tax stood at Tk6.10 crore.

The commission has now raised questions about the rest of the advance tax as there was no mention of the amount in the financial statements. 

The BSEC observed that the company conducted a revaluation of its property, plant, and equipment (PPE) on 17 April 2012 and recognised deferred tax during this year on revaluation gain on land.

However, it did not recognise deferred tax on the revaluation gain of other PPE, which is not in line with the international accounting standard.

Aziz Pipes Limited

The regulator has noticed that the company has not made payment of Workers' Profit Participation Fund (WPPF) as per labour laws. Moreover, interest was not charged against such an unpaid amount of Tk6.13 lakh.

The auditor could not verify the value of inventory amounting to Tk11.43 crore as the stock register was not available.

The company did not reevaluate its non-current assets for the last ten years, which is non-compliance.

Besides, the company's balance of payments for expenses has increased by 1,507.19% for this year, which involves a significant audit risk, believes the regulator.