, Business and Finance, ICAB

1. Structure and regulation of the Accountancy profession
The structure of the Accountancy profession
 Bangladesh Accountancy bodies: ICAB & ICMAB – both are autonomous
professional bodies under the Ministry of Commerce
 Regional Accountancy bodies:
Confederation of Asian & Pacific
Accountants
The South Asian Federation of Accountants
CAPA was established in 1976
Having a Membership of 34 accountancy
organizations
Largest regional accountancy organization
Geographical area spans half of the globe
ICAB and ICMAB both are member of
CAPA
SAFA formed in 1984
Objective: to serve the accountancy
profession in SA region and uphold its
importance in the world
Regional grouping of IFAC
SAFA has eight members institutes with over
170,000 accountants
 International Global Organisation for Accountants: International Federation of
Accountants
-Have 163 member organization, including ICAB
-2.5 million accountants worldwide
-Objective- to protect the public interest by encouraging high quality practice by
world’s accountants
Who can themselves call an accountant?
Accountants enjoy no special position in laws. Anyone is free to advertise as an accountant
and offer full range of accounting services. But in case of statutory audit as per statute’s
demands, member of ICAB can compete only
Regulation of accounting profession:
Why regulation of profession is needed?
It is needed to provide the public interest with protection and assurance in situation where the
issues are too complex for the public to be reasonably expected to look after their own
interest.
Types /methods of the regulations:
 Regulation by government via legislation
 Regulation by separate agencies established by the Government (Delegated
legislation): Government delegates its certain of its statutory power to the SEC, RJSC
and Bangladesh bank. But the government remains responsible via the power and so
has a continuing responsibility for the system’s effectiveness.
 Regulation by the profession or industry itself (Self regulation): ICAB has primary
regulatory responsibility for supervision of its members acting in their professional
capacity. ICAB act as a recognized professional regulator in relation to statutory audit
(reserved area).
The role of ICAB: In relation for Membership, ICAB has direct responsibility for
1. Entry & Education requirements
2. Eligibility to engage in public practice
3. Eligibility for the performance of reserve activity under statutory power
4. Professional conduct requirement
5. Dealing with professional misconduct by its members
 By a combination of the above methods

2. Oversight mechanism: Self regulation work best when there is an oversight mechanism.
Oversight mechanism of a regulation ensures that the regulation is achieving what it set out to
achieve. In case of self regulation, it is primarily important that oversight mechanism be
independent, to counter allegation of self interest. The requires features of the oversight
mechanism are as follows:
 Sufficient independence from profession being regulated
 Knowledge of profession being regulated
 Significant, but non-controlling, inputs from the professional to ensure that the
decisions are workable, do not impose cost on society in excess of benefit and will not
achieve the opposite
 Balance the various stakeholders interests
 Authority to have decision acted on across of the whole profession
 Good communication
 Sufficient resources to carry out effective examination of the regulatory arrangements
ICAB’s Complaints and disciplinary procedures:
 Complaints: Breach of regulation or departure from Guidance by student, member or
firm
 Who can make a complaint? : Client, other member, SEC, BB, RJSC, other regulator,
public or ICAB itself
 To whom complaint can be given? – to ICAB
For serious complaint – to IDC (Investigation & Disciplinary committee)
 Committee involved in dealing with complaints- IDC and ICAB’s Quality assurance
Directorate as asked by IDC and the Council
 Procedures :
1. Conciliation- Trying to find out a practical solution (e.g., explanation or
providing information to resolve the problem)
2. Investigation by IDC: ICAB asks complainant and the member to give full
details of the complain. If members initially do not reply, IDC require them to
reply again. If the member fails to response IDC’s request, they will be in
breach of bye-law and can be disciplined for this. IDC may take no further
action, if the complaint can not be sustained. Or IDC can make a formal report
to the council
3. Disciplinary proceedings by IDC and Council. The decision of the council may
be
 Warning the member or student with a penalty not exceeding Tk. 10,000
 Suspend the membership of the member for a period not exceeding 5 years
 Exclude the member from membership, or
 Direct the cancellation of, or extend the period of articleship
 Require the complainant to pay monetary penalty not exceeding Tk.
10,000, if the complain is proved to be baseless or unfounded.
An opportunity of heard will be given to the member or student before passing order.
 The finding and decision will be published in the Gazette of Bangladesh & in
desirable journal.

3. ICAB Complaints and disciplinary procedures:
IDC receive complaints
Step 1: IDC consider the complaints and ask two
questions
Does it appear that Accountant may not have
complied with institute guidance or regulation?
Yes 
Can Accountant resolve the problem without the
Institute help?
No.  Mediation or free
arbitration
Yes  A conciliator reached an
agreement resolving the
complaint. If successful, the
institute will not disciplined the
accountant
Step 2: IDC gather evidence from
complaining person & accountant
No Evidence of departure from
guidance or breach of regulation
Evidence found 
Insufficient evidence to allow
Institute to discipline the accountant
IDC Prepare a report for the council
Step 3: Council
Decision
If conduct is not a
departure from
guidance or breach
of the regulations,
the complaint is
dismissed
Although
accountant has
departed from
guidance or broken
regulation, it is not
sufficient enough
for further action
Accountants
accept a
disciplinary
order or a
caution
Step 4: The Council hears evidence from IDC & the accountant. If misconduct
is proved, the Council disciplines the accountant/student if appropriates

4. Governance & Ethics
Agency theory or stewardship theory:
In a company, ownership and control is different. Here, managers act as an agent of the shareholders
when managing the company. The separation of ownership and control and misalignment resulting in
conflicts between the interest of owners and managers is known as agency or stewardship theory.
Managers were able to pursue their own interests because they have better information than
shareholders and were not accountable to them. According to the theory, in the absence of the
protection, asymmetries of information and difficulties of monitoring, the owner will find it risky and
costly to protect themselves from the opportunistic behavior of managers and controlling shareholders.
Corporate governance: Governance means the overall control and direction of the business that the
business objectives are achieved in an acceptable manner.
Corporate governance is the set of relationships between a company’s management, board,
shareholders and other stakeholders that provide the structure through which the company’s
objectives are set, attained and monitored. – OECD, Principle of corporate governance
Corporate governance is a structured system for the direction and control of a company that
 Specifies the distribution of right and responsibilities between stakeholders like, shareholders
and BOD and management
 Has established ruled and procedures for making decision about the company’s affairs
This concept has emerged after financial scandals of Enron, Worldcom, Parmalat etc.
Objective of corporate governance: Four board perspective
1. The corporate perspective of corporate governance: The manager should balance the interest
of shareholders with those of other stakeholders to achieve long term sustained value for
shareholders
2. The public policy perspective of corporate governance: The aim of corporate governance is to
endure that the company meets
 The objective of the shareholders PLUS
 The interest of other stakeholders PLUS
 The interest of public at large
3. The Stakeholders perspective of corporate governance: Corporate governance balance
between economic and social goal and between individual & communal goal. So it should
 Encourage the efficient use of resources
 Require accountability from the Company’s management
 Ail to align the interest of shareholders and company with those of other stakeholders
4. The stewardship perspective of corporate governance: The most narrow view of corporate
governance which requires directors to act in the best interest of the company
Conflict between stakeholders’ interest:
Stakeholders’ interests can often be in conflict. For example managers may not always perform their
activities on the shareholders’ or company’s interest. The conflict of interest evident from
 Financial collapse without warning (US energy corporation Enron in 2002)
 Directors trying to disguise the true financial performance of the company from shareholders
by dressing up the published financial statement
 Directors’ remuneration do not vary according to the company performance/shareholders
benefit
 Decision of BOD to satisfy their own wish for power and rewards rather than to boost the
interest of the shareholders
Stakeholders’ governance needs:
 For their interests and expectations to be reflected in the company’s objectives
 For the scope for conflicts to be reduced
 For the company to adhere to good practice in corporate governance
 For the company to adhere to good business ethics