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Financial Reporting in Private companies - Ehrar_ACMA - 07-27-2003
The introduction of code of Corporate is another good step for best corporate governance. The scope of corporate governance could expand further for over all corporate governance. By attaching it with listing regulation it is now only applicable to listed companies. I think if it is applicable to private companies as well then it will be very help for the economy as a whole.
Many areas have been covered in the Code but my concern is âFair Financial Reportingâ. The Code applies on listed companies because the governance should be strong where public money is involved. If we think in broad expect rum, the private companies also play from government & public money and there is no check & balance on their financial reporting.
Many private companies prepare accounts for income tax, sales tax purpose other then actual account either due to inefficiency of their accountants.. Even after investigation or inspection nothing is found in order because mostly companies have non-professional or unqualified accountants. If a qualified accountant is hired it is very easy to trace the books of account even after concealment. And hence there is leakage of government revenue. This is only due to fraudulent reporting.
They obtain loan from bank after submitting that accounts which were not prepared or attested /verified by any professional accountant/firm latter these loans becomes stuck up wholly or partly. Another misusage of weak financial reporting is done with their clients. Because their accounts show more than they are; which creates problem with the investors. In other words ultimately they are playing money of general public/nation.
The thing which I suggested does not only remove the above problem but also open the opportunities for r the right persons at the right place.
It is impractical for all to have a qualified (as explained in the Code) Chief Financial Officer in these small companies but at least the Manager or Accountant should be a professional qualified in these companies that is practical and bearable for these.
It is noted that this practice is not seen in large private companies but these large companies are 10% of total private companies. This article is not for large companies or exceptional cases. SECP should take any suitable action for this aspect which reduces the corruption in the country
Kh. Ehrar Hasan