Audit reports of most banks contain cooked up data: BB governor

Bangladesh Bank Governor Ahsan H Mansur has revealed that the audit reports of most banks contain fictional data.

"We found that at the end of 2024, the non-performing loan (NPL) ratio was 4%. But after the following quarter, we found the ratio to be 36%," he said.

"The massive mismatch did not happen due to any regulatory issue. It happened only because of misreporting [by the banks], which misled the facts and reality," he said.

The governor made the remarks while speaking at the "Audit and Accounting Summit" held at the Pan Pacific Sonargaon hotel in Dhaka today (9 July), organised by the Financial Reporting Council (FRC) in collaboration with the World Bank.

"Quality financial statements are very important to gain investors' trust. Unfortunately, we have found that the quality of financial statements was much neglected when they were provided officially or unofficially to the regulatory authority over the years," he said.

"However, ensuring the quality of financial reporting is not easy, as there is significant resistance," he added.

Giving an example, Mansur said, "We organised training sessions to help four state-owned enterprises -- including Bangladesh Petroleum Corporation, Petrobangla, and Bangladesh Shipping Corporation -- transition to financial reporting under International Accounting Standards. But they offered no support in this regard."

He warned that if current audit reports were used to make judgments, it would be difficult to find any honest auditors.

"To earn investors' trust, there can be no compromise in financial reporting," he said.

The governor further said that ensuring corporate good governance practice is the key point to prepare quality financial statements.

Addressing the event, Anti-Corruption Commission Chairman Abdul Momen cited major scandals at IFIC Bank, where, with the help of auditors, inflated financials were used to secure funds for a paper company allegedly linked to Salman F Rahman, former private industry adviser to ousted prime minister Sheikh Hasina.

"There have been repeated financial irregularities in the banking sector during the previous administration," he said, adding that Bangladesh Bank had identified several top audit firms involved in covering up such corruption.

While this identification is commendable, Momen lamented that no visible punitive action has been taken against them yet.

Finance Adviser Salehuddin Ahmed stressed the importance of audit and accounting in ensuring transparency and accountability in the financial system. However, he noted that the integrity and transparency of those involved in auditing and accounting are even more critical.

"Many organisations submit papers that lack quality," he said.

He added, "Auditors must be transparent themselves. It's not just about arithmetic, auditors must observe with insight and identify risks."

Regarding the National Board of Revenue (NBR), Salehuddin said proper auditing is crucial, especially when 70 out of every 100 taxpayers reportedly declare zero income tax. "This is unbelievable and deserves thorough scrutiny."

According to him, many believe that these reforms are being undertaken on the initiative of international financial institutions such as the International Monetary Fund (IMF) and the World Bank, but in reality, the government is taking its own initiatives as well. "They are just giving us technical assistance."

During the event, FRC Chairman Sazzad Hossain Bhuiyan presented a keynote paper.