B Mirror Report: The Bangladesh Securities and Exchange Commission (BSEC) is expanding auditors’ responsibilities to accelerate the approval process for initial public offerings (IPOs), with a new “extended audit” system set to verify companies’ capital build-up history alongside their financial statements and other documents.
BSEC Chairman Masud Khan said the new system could significantly reduce the time required to approve an IPO, adding that there should be no reason for an IPO process to take more than three months.
He made the remarks on Monday (October 5) at a seminar titled “Building Investor Confidence: The Role of Professional Bodies in Audit Reporting, Governance and Risk Management,” organised jointly by the Institute of Chartered Accountants of Bangladesh (ICAB), ICMA Bangladesh, the Institute of Chartered Secretaries of Bangladesh (ICSB), the Institute of Internal Auditors Bangladesh (IIAB) and ACCA Bangladesh to mark World Investor Week 2026.
According to Masud Khan, the Dhaka Stock Exchange (DSE) and BSEC currently verify various documents after an IPO application is submitted. If discrepancies are found, the company is asked to provide explanations, often resulting in lengthy correspondence and delays.
Under the proposed system, auditors will take over much of this document-verification process through extended audits. They will also examine how a company’s paid-up capital was built up before its IPO.
The BSEC chairman said reducing duplicate verification would help shorten the approval process. Once the extended audit system is introduced, he said, an IPO should not take more than three months to complete, and even three months could be excessive if all required work is completed efficiently.
He also said changes have been introduced in the valuation and price-discovery mechanisms under the new IPO rules. While institutional investors play a major role in IPO price discovery in many countries, Bangladesh needs a system suited to its market, where retail investors have a significant presence.
Under the new system, IPO valuation will be determined through coordination among the issue manager, BSEC and DSE. The commission will scrutinise the assumptions used by issue managers, while the Dutch auction method will also be introduced, he said.
Masud Khan also stressed the need to ensure audit quality as auditors’ responsibilities increase. He warned that accepting audit assignments at excessively low fees could compromise audit quality.
He said scientifically determined audit fees based on factors such as turnover and total assets should be considered for different categories of companies. Auditors charging below the prescribed fees could face strict action, including removal from the approved list and referral to the Financial Reporting Council (FRC).
The BSEC chairman also indicated that the eligibility criteria for auditors of listed companies may be revised. He said merely having five years of experience should not automatically qualify an auditor to audit a listed company.
Instead, the nature and size of organisations audited by an auditor during the most recent one to three years should receive greater consideration, he said. The BSEC is considering separate qualification standards for auditors of listed companies and has sought proposals from ICAB.
Masud Khan further said auditors should assess whether figures in financial statements are consistent with the underlying business reality, rather than merely checking compliance with accounting standards.
For example, a sharp rise in profit accompanied by a decline in cash could be a warning sign requiring closer examination of changes in working capital. Ratios related to inventory, receivables, payables and the cash conversion cycle can also help determine whether reported figures are reasonable, he said.
He noted that a make-to-order export-oriented company would normally not be expected to maintain large inventories for extended periods. If such a company reports six to eight months of inventory, auditors should investigate whether there are issues in the financial reporting.
Explaining the purpose of statutory audits, Masud Khan said their primary objective is to present a “true and fair view” of a company’s financial position, rather than conduct a complete forensic investigation of every document.
However, under the extended audit system for IPOs, auditors will have the additional responsibility of verifying documents and reviewing the history of capital formation. BSEC expects the additional audit work to ultimately reduce the time required for IPO approvals.
