Auditor of listed insurer Federal Insurance PLC has issued a qualified opinion and included an Emphasis of Matter paragraph in the company’s audited financial statements for the year ended December 31, 2025, citing concerns over long-outstanding receivables and other financial reporting issues.
According to the audit report signed by Md. Kamal Uddin, FCA, Senior Partner of Toha Khan Zaman & Co., Chartered Accountants, the qualified opinion stems from a long-overdue and potentially unrecoverable agent balance of Tk 117.06 million recorded under “Advance Against Others” in Note 21.02 of the financial statements.
The auditor noted that the balance has remained unpaid for several years, creating significant uncertainty regarding its recoverability. As a result, the asset may be overstated compared with its actual realizable value.
As per Note 21.02, Federal Insurance reported Tk 145.19 million under “Advance Against Others,” of which agent balances accounted for Tk 117.06 million. The remaining amount included Tk 14.24 million in a collection control account and Tk 3.45 million as advances against miscellaneous claim payments.
The company stated that it has made a provision of Tk 2.5 million against expected credit losses on these long-outstanding balances. It plans to gradually build provisions for the remaining potential losses over the next five years starting from 2025. However, management said that prevailing political conditions and a slowdown in business activities during 2025 prevented it from making the full provision in the reporting year.
In the Emphasis of Matter section, the auditor highlighted outstanding insurance premiums totaling Tk 24.44 million, disclosed in Note 19.00, which remain unadjusted and uncollected. The auditor warned that future adjustments may be required and that reported premium income could be overstated. However, this matter did not affect the audit opinion.
The outstanding premiums comprise Tk 4.73 million from fire insurance, Tk 2.30 million from marine cargo insurance, and Tk 17.40 million from motor insurance.
The audit report also pointed out that Federal Insurance has yet to establish an NBR-approved gratuity fund. Instead, employee gratuity payments are being made on a cash basis. The auditor said this practice may understate gratuity liabilities and employee benefit expenses and is not fully aligned with the provisions of the Bangladesh Labour Act, 2006. The company was advised to create a statutory gratuity fund to ensure compliance and avoid unnecessary tax liabilities.
The auditor further noted that management disclosed the status of an unclaimed dividend account worth Tk 5.09 million under Note 12.00. No modification to the audit opinion was made regarding this matter.
Additional disclosures in Notes 21.02 and 21.03 showed Tk 14.24 million in the collection control account, Tk 3.45 million in miscellaneous claim payment advances, and Tk 71.01 million in prepaid expenses. Management provided explanations regarding the nature and current status of these balances, and the auditor did not modify the opinion on these items.
According to Note 21.03, total deposits and prepayments stood at Tk 68.99 million, while a provision of Tk 2.5 million was also recognized against expected credit losses relating to prepaid expenses.
The auditor additionally referred to management’s explanation for the company’s continued non-implementation of IFRS 17 (Insurance Contracts). No change was made to the audit opinion in relation to the accounting standard’s adoption status.
