# Introduction n 1998, the then Prime Minister of Bangladesh has announced that the government of Bangladesh will think about the formation of an independent oversight body to ensure transparency and accountability of financial reporting in the inaugural session of the 13th SAFA conference held in Dhaka. With this announcement, The Institute of Cost and Management Accountants of Bangladesh (ICMAB) felt it as a prerogative to support the Government and prepared and submitted a draft act with respective ministry when the western world could not even think about such an issue even before the enactment of Sarbanes-Oxley Act (SOX) in USA in 2002 (Salim, 2015). The Sarbanes-Oxley (SOX) Act of 2002 is legislation passed by the U.S. Congress to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise, as well as improve the accuracy of corporate disclosures. The U.S. Securities and Exchange Commission (SEC) administers the act, which sets deadlines for compliance and publishes rules on requirements. The Sarbanes-Oxley Act was enacted in response to a series of high-profile financial scandals that occurred in the early 2000s at companies including Enron, World Com and Tyco that rattled investor's confidence (searchcio.techtarget.com). As a result of SOX, top management must individually certify the accuracy of financial information. In addition, penalties for fraudulent financial activity are much more severe. Also, SOX increased the oversight role of boards of directors and the independence of the outside auditors who review the accuracy of corporate financial statements (Kimmel, Paul, Weygandt, Jerry, Kieso and Donald, 2011). It created a new, quasi-public agency, the Public Company Accounting Oversight Board, or PCAOB, charged with overseeing, regulating, inspecting, and disciplining accounting firms in their roles as auditors of public companies. The act also covers issues such as auditor independence, corporate governance, internal control assessment, and enhanced financial disclosure. The nonprofit arm of Financial Executives International (FEI), Financial Executives Research Foundation (FERF), completed extensive research studies to help support the foundations of the act. In response to the perception that stricter financial governance laws are needed, SOX-type regulations were subsequently enacted in Canada (2002), Germany (2002), South Africa (2002), France (2003), Australia (2004), India (2005), Japan (2006), Italy (2006), Israel, and Turkey. Debate continued as of 2007 over the perceived benefits and costs of SOX. Opponents of the bill have claimed it has reduced America's international competitive edge against foreign financial service providers because it has introduced an overly complex regulatory environment into US financial markets. Proponents of the measure said that SOX has been a "godsend" for improving the confidence of fund managers and other investors with regard to the veracity of corporate financial statements. Financial Reporting Act (FRA), 2015: A Revolutionary Era for Ensuring Effective Capital Market and Economic Development in Bangladesh ICMAB throughout the long process of the development of the Financial Reporting Act (FRA) extended active support to the Government and significantly contributed in the draft of the Act giving important inputs from the year 2006 in line with laws of the other countries. Many of the suggestions and modifications were adopted when the draft of the Financial Reporting Ordinance was prepared and ultimately promulgated on December 30, 2008. This was however not ratified in the Parliament by the newly formed democratic government. Subsequently the present benevolent took the initiative to introduce it as an Act. But for different reasons the act haven't been passed, however, the bud is growing over the year which is a complete tree now. The act finally passed in the Parliament on 6th September 2015 and Bangladesh entered into a new era in the history of disciplined financial reporting. Due to stakeholders' pressure for last couple of years, the Government of Bangladesh is trying to enact such an act, though it failed in multiple instances due to the prescription of a vested quarter (Salim, 2015). # II. # Literature Review Introduction of Financial Reporting Act in 2015 is an In-Time-Initiative of the Government to maximize the Opportunities of the Capital Market in Up-coming Decades. There is rumor of China, India and beyond theories; if we prepare ourselves we have a strong possibility to be one of the players in the global capital market. Let's work and keep hope alive! (Alam FCMA, 2015). Ahmad FCMA (2015) has quoted from Honorable President of ICMAB "the Government of Bangladesh has taken a welcome step, now as professional accountants it's our turn to learn more, know more and do more to uphold our professional image". The World Bank Report on the Observance of Standards and Codes (ROSC), published on May 16, 2003, reflects a true picture of accounting and auditing environment in Bangladesh. The World Bank team suggested a recommendation to establish an independent oversight body --Financial Reporting undertaken by the Government of Bangladesh during different times is a continuation of this recommendation. However, for ensuring more accountability, the need for a financial reporting law was proposed by the concerned community in the year 2012. ICMAB has taken pragmatic role to facilitate the Government in the process of such formation at different capacities as required by the government. Because, the ICMAB, one of the two established accounting institutes exist in the country, believes that it has enough scope of contribution for such initiatives where it is also an active stakeholder. The institute has organized workshops, contributes in drafting the Act, represented in different forums as an expert to the Act and its due process. However, from the very beginning of its inception, the ICAB, the only national institute of the country certifying public accountants, has been opposing strongly against the Act for some reasons which are not properly founded. Even some veteran chartered accountants have written some articles criticizing the Act (Shil FCMA, 2015). Since the beginning of accounting profession in Bangladesh, The Institute of Chartered Accountants of Bangladesh (ICAB) was the one and only governing body for the country's chartered accountants (Hossain FCMA, 2015). Kibria (2015) has given more importance on formation of FRC and said that in many cases, ICAB has conflict of interest and so it's so called regulatory role does not appear affective enough. For instance, in three years between FY'10 and FY'12, National Board of Revenue has reviewed some 55,000 audited financial statements on average annually. On the other hand, ICAB listed CA firms that on an average audited some 14,000 financial statements annually. Thus a large number of audited financial statements appeared fake or cooked up although many of those statements of ICAB listed CA forms. Besides the tax authority, it is the responsibility of the ICAB to detect such fake auditing and take action against those involved in such misdeeds. But, very little has been done so far. Ahmed (2015) says that the proposed Financial Regulatory Council (FRC) will replace any other regulator if there is any for the purpose. But the constitution of the FRC needs to be carried out carefully so that this body truly becomes independent, capable and willing to regulate the rogue auditors. Nowhere in the world, the auditors enjoyed so much of freedom as they enjoy here in Bangladesh. Too much of freedom led them to remain above questioning. They signed many window-dressed financial reports which not only deceived stakeholders like crediting banks and stock investors but also deceived the tax authorities. Actually, auditors in Bangladesh enjoyed too much of freedom in the absence of an independent watchdog. From now on, the FRC under the Act will ensure accountability and performance of the professional accountants of Bangladesh. Moreover, the council will be a statutory body with members from various government bodies, institutions and professional groups. Now, the investors hope the FRC will ensure that the financial reporting presented before the investors will be trustworthy. Another good thing of the FRA is that for the first time, through this Act, it has recognized the needs for cost and management audit of the public entities. The quality of the financial reports the auditors are supposed to produce depends on how good the regulation is done by the FRC (Ahmed, 2015). The FRA ensures authenticity of the published accounts of public and private companies. The Act will regulate the auditors and their activities more effectively. Once the auditors are working properly, we expect the accounts to be more trustworthy. Hence the whole country will be benefitted through much more transparency in what the companies share with the general stakeholders. It is important that the rules have no ambiguity and clearly explains how things will work. In case of ambiguity, various parties will take advantage and the FRA will lose acceptability in the bigger society. It is important that the formulation of rules take into account inputs from all concerned bodies and is respectful to a transition stage to enable companies to be more compliant (Nawaz FCMA, 2015). Chowdhury (2015) states that the main objective of formation of the FRA is to make suitable structure in favor of the people's interest and make it accountable and transparent and maintaining professional standard. The FRC will oversee the effectiveness of the financial reporting framework in Bangladesh. It will regularly be consider issue related to financial reporting including audit quality and setting of standards, with a view to developing strategic advice to the authorities and stakeholders on these issues. So, the stakeholders' expectations are that the FRC would be the key external advisor to the Bangladesh Government on the financial reporting system (Hossain FCMA, 2015). Globally it is believed and proved that a high level independent oversight body will work as an effective intervention to reduce the expectations gap that exists between the expectations of the society from auditors and auditors' actual performance. The effective implementation of FRA can be a strong intervention to narrow the expectations gap. The council should be formed in a balanced way which can reduce the monopolistic behavior of public accountants and every interested stakeholder must have a proper representation on the council (Shil FCMA, 2015). # III. # Objectives of the Study a. To analyze the major elements of Financial Reporting Act (FRA), 2015; b. To reveal the strengths, weaknesses, opportunities and threats of FRA, 2015; c. To find out the credible roles of FRA, 2015 in audit industry; d. To find out the tremendous duties and responsibilities of Financial Reporting Council (FRC); e. To find out the deliberate responsibilities of management of public interest entities; f. To find out the relevant responsibilities of ICAB and ICMAB under FRA, 2015; and g. To find out the significant approaches of FRC to ensure effective capital market and economic development in Bangladesh. IV. # Major Elements of fra 2015 Section 2 ( 18 (ii) Recommending to take possible punishable action for that failure or non-compliance; and (iii) Informing it to the related parties. # Section 28-Professional Behavior and Code of Ethics: Council may set Professional behavior and code of ethics for its members and employees with a view to establishing professional behavior for their individual duties and responsibilities. Section 31-Registration with Financial Reporting Council: After the establishment of the FRC, all auditors and audit firms must register in the FRC. Without registration, no auditor and audit firm will be able to provide auditing service to any entity related with public interest. Section 32-Application for Registration: For registration, the auditor or audit firm needs to apply to the FRC. The FRC will review the application and will provide the registration to pursue the rules and guidelines. Section 33-Cancellation and Fine of Registration: If any auditor or any audit firm violates any provisions of the act or any of its rules and guidelines, FRC may cancel or suspend the registration and may fine as well. Section 40-43-Setting, Monitoring, Publishing of Standards: Its key functions include the oversight of the accounting and auditing standards setting processes for the public and private sectors, providing strategic advice in relation to the quality of auditing and advising the authorities on these and related matters to the extent that they affect the financial reporting framework in Bangladesh. Section 45-Monitoring of Financial Statements and Annual Report: The FRC will be the sole watchdog to monitor the functions of auditors and ensure clearness and responsibility in accounting and auditing of financial organizations, including various governments, autonomous and non-government institutions. It will also monitor activities of the country's chartered accountants and cost and management accountants. It will responsible for promoting high quality corporate governance and reporting to foster investment. Section 46-Review of Audit Practice of the Auditors of Public-Interest Oversight: Council, or any officer authorized by it, in writing may review the audit practice of a listed auditor and may investigate, examine and call all records, documents, balance sheet, cash and bank balance, mortgage, other assets etc. and may make query or call for any information or explanation to any partner, employee or agent. standards or by fraudulent way or by providing false information or breaks any rule of this act, then it will be treated as an offence and s/he will be punishable for imprisonment not exceeding 5 years or not exceeding taka 5, 00,000 (five lac) or both. Section 54-Appeal Authority: Government may form an appeal authority, published by gazette, for hearing appeal under FRA 2015 and it will be called book keeping and audit appeal authority. V. activities of relevant professional and regulatory bodies as relating to Corporate Governance and Financial Reporting; (vi) increasing confidence of investor and all other stakeholders in corporate financial reporting, that is, reporting on financial and non-financial matters and compliance with standards; (vii) facilitating comparability of financial statements. Financial reports of companies will give regulators, policy makers, shareholders and other stakeholders access to greater disclosure, hence the availability of perfect information flows for taking decisions at the top level as well as investor level; (viii) monitoring the quality of published accounts by the FRC will contribute in establishing Bangladesh as a leading regional financial center with a modern and wellregulated infrastructure; (ix) providing assistance to the regulators -Bangladesh Bank (BB), Bangladesh # Findings of SWOT Analysis # Conclusion The Bangladesh parliament passed finally the much awaited Financial Reporting Act (FRA) in September 6, 2015. This was one piece of legislation which took an extraordinarily long time to get it through the lawmaking body -the National Parliament in the face of opposition from the very auditors whose work and functions were supposed to be regulated by this act. In the last few years, more regulatory orders were issued but that did not help the capital market grow in the way investors expected. Still the market is dominated by the poor quality stocks, some of which have frequently been picked up by the day traders as gambling instruments. With the passage of the FRA, the full circle of reforms in the financial sector, especially issues relating to capital market, is almost complete and now investors will not have much to complain about as to what has been going wrong with the more important aspect of the financial industry such as auditing standards. But passage of the act is one thing, putting it in practice to attain the desired objectives is another thing. Fortunately, this Act has also paved the way for setting up an independent watchdog for the auditing industry which hitherto remained almost free to be overseen. By implementation of FRA the trust of the investors in the capital market will get back because the investors rely on the financial statements to take investment decisions and they believe transparency, accountability and corporate governance will be ensured by this act. It is the high time to the Government to form the FRC as soon as possible to ensure transparency and accountability of professional accountants as well as financial reports and to implement the FRA-2015 for the greater interest of the country. The economy of Bangladesh is moving forward and its financial sector is also growing despite multifaceted complexity. From small to big, all businesses are in need to transparent and compliant financial accounting reports. In this connection, fully implementation of FRA and establishment of FRC is a must. The largest proportion of stakeholders, and in particular many investors, call for more change including more transparency in financial reporting and a more open and comparative reporting framework process to help improve their confidence in the independence of auditors and the transparency of their audit reports. The country's economy depends on the drive and efficiency of its companies. Thus the effectiveness with which their boards discharge their responsibilities determines competitive position of Bangladesh. They must be free to drive their companies forward, but exercise that freedom within a framework of effective transparency and accountability with a view to showing the true and fair view of financial reporting of the firm for ensuring effective capital market and economic development of Bangladesh. ![Section 47-Enforcement of Compliance of Financial Reporting and Auditing Standards: Council shall give order to change or correct the financial statements under financial reporting and auditing standards to the public-interest oversight if it fails to comply with the financial reporting and auditing standards, code or guideline. Section 48-Offence and Punishment: If anyone has got registration as a auditor by breaking any condition of Global Journal of Management and Business Research Volume XVI Issue I Version I](image-2.png "") Division a. Standards Setting Division) -Professional Accountant: Professional Duties of the Division Accountant means the member of The Institute of (i) Preparing effective proposal of setting, renewal and developing of financial reporting, Chartered Accountants of Bangladesh (ICAB) and The value determination, actuarial standards, auditing standards in accordance with the rules Institute of Cost and Management Accountants of Bangladesh (ICMAB). and regulations of this act; and (ii) Presenting this proposal in the council for approval.b. FinancialSection 2 (19) -Professional Accountancy Institution: i. Monitoring, analyzing and identifying whether or not any financial reporting standards,ReportingProfessional Accountancy institution means The Institute auditing standards, code or guidelines of this act or any other act are complied effectivelyMonitoring Divisionby the public-interest oversight.of Chartered Accountants of Bangladesh (ICAB) and The Institute of Cost and Management Accountants ofc. Audit Practice(i)Bangladesh (ICMAB).Review DivisionSection 3-Establishment of Council: The Act aims at inspiring the auditing and accounting system of thecountry's financial institutions to international standards,and under the Act, FRC comprising of 12 members willbe established, led by a Chairman appointed by theGovernment. Moreover, the council will be a statutorybody with members from various government bodies,institutions and professional groups.Section 16-The duties and Responsibilities of Chairmanof the Council: The duties and responsibilities ofChairman of the council will be the following:(a) Conducting administration of the council; (b)Conducting and organizing effectively the activities andmatters determined by the council; (c) Preparing annualbudget and program; and (d) Performing other dutiesgiven time to time by the council.Section 21-Annual Report of the Council: Council shallsubmit an annual report on its immediate precedingyear's functions to the Government within 3 months fromthe completion its fiscal year. The following matters shallbe included in annual report:Section 7-The General Objectives of the Council: The objectives of the FRC would be: (a) To determine the code of ethics, standards of accounting and auditing profession; (b) To improve the quality of accountancy and audit services ; (c) To improve the accounting and auditing profession; (d) To ensure the highest quality of accounting and auditing of listed auditors of the council; (e) To enhance the credibility of financial reporting; (f) To ensure the transparency and accountability of functions of accounting and auditing profession; and (g) To motivate for preparing the high quality reporting of financial and nonfinancial information by public interest entities. (a) Accounts of annual revenues and expenses and related information; (b) Details analysis of the functions of the council; (c) Statement of the achieved goals of the council; (d) Statement of the non-achieved goals with reasons; (e) Statement of brief description of the members of the council and their honorees and other facilities; and (f) © 2016 Global Journals Inc. (US) Financial Reporting Act (FRA), 2015: A Revolutionary Era for Ensuring Effective Capital Market and Economic Development in Bangladesh © 2016 Global Journals Inc. (US) Financial Reporting Act (FRA), 2015: A Revolutionary Era for Ensuring Effective Capital Market and Economic Development in Bangladesh * Implementing Financial Reporting Act. The Cost and Management AAhmed Journal of the ICMAB 43 2015 * Financial Reporting Act 2015 and the Cost & Management Accountants. The Cost and Management RAhmad Journal of the ICMAB 43 6 2015 * Writings on the Capital Market in up-coming decades. 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