B Mirror Report: The Bangladesh Securities and Exchange Commission (BSEC) has barred three audit firms and four individual auditors from auditing listed companies for specified periods due to failures in properly examining financial statements.

In separate orders issued on April 23, the regulator took action against Mahfel Huq & Co., Ata Khan & Co., and Shiraz Khan Basak & Co., all chartered accountant firms. Several current and former partner auditors of these firms have also been penalized.

According to market analysts, auditors have long faced criticism for failing to detect financial irregularities in listed companies, leaving general investors exposed to losses based on misleading financial reports.

BSEC said the three firms committed serious irregularities while auditing the financial statements of Ring Shine Textiles Ltd. over three consecutive years. The company allegedly distributed shares for free through private placements before its IPO, an act described as fraudulent.

It was also found that stock dividends were issued to shareholders who had not paid for their shares, artificially inflating the company’s paid-up capital without actual cash inflow. In 2019, the company raised Tk 1.5 billion from the capital market, but none of these irregularities were reflected in the audit reports.

Mahfel Huq & Co. has been banned for three years for its failure in auditing the financial statements for the year ended June 30, 2018. The firm was found to have issued an unqualified audit opinion without sufficient and appropriate evidence, with major discrepancies identified in assets, retained earnings, and net profit. It also received an additional one-year ban over audit lapses related to Fareast Islami Life Insurance in 2018.

Former partner Md. Abdus Sattar has been barred for five years, while Md. Abu Kaisar has been banned for two years from auditing listed companies.

Ata Khan & Co. has been removed from BSEC’s auditor panel for three years over its failure to verify asset and profit-related information of Ring Shine Textiles in 2019. Its partner Makbul Ahmed has been banned for five years.

Shiraz Khan Basak & Co. has been declared ineligible for three years due to irregularities in its 2020 audit. Its engagement partner, Romendra Nath Basak who was not listed as a BSEC-approved auditor has been banned for five years.

The regulator noted that the firms failed to comply with International Financial Reporting Standards (IFRS) and issued audit opinions without adequate evidence.