The financial reporting of listed banks still poses a systemic risk, as regulatory waivers allow lenders to avoid compliance with accounting standards that are widely accepted globally.
Analyzing financial statements from the last few years, The Financial Express found that many banks have received Emphasis of Matter (EOM) paragraphs instead of qualified audit opinions, despite significant financial mismatches.
"The necessity of a qualified opinion cannot be bypassed by using an EOM. But the auditors have the scope to avoid accountability for not issuing qualified opinions because of regulatory waivers," said an auditor who preferred anonymity.
An auditor is required to issue a qualified opinion on a company's financial statements when there are material misstatements, departures from applicable accounting standards, or inadequate disclosures. In the opinion, the auditor explains the impact of the financial mismatches on the company's operations, profits, and losses.
An EOM, on the other hand, is issued to draw stakeholders' attention to a critical issue presented or disclosed in the financial statements. In an EOM, the auditor makes no comment on the impact of financial mismatches.
As a result, stakeholders and investors are unable to understand the possible impact of financial mismatches on the operations of the relevant company.
The central bank introduced IFRS9 in late 2024. Since then, banks have been required to receive qualified opinions from auditors for any deviation from IFRS9.
A systemic risk remains in companies' financial reporting, as auditors have used EOMs to bypass the need for qualified opinions.
Arief Hossain Khan, spokesperson for the central bank, said banks needed to follow IFRS9 if they wanted to operate in the global landscape. However, he said, the situation of the banking sector was such that "we had to provide some waivers to help some banks survive."
The provision deferral allowed by the central bank is one such example.
Many banks, including Al-Arafah Islami Bank, Standard Bank, and Premier Bank, have seen their asset quality deteriorate significantly, with severe under-provisioning and capital shortfalls.
In April, Bangladesh Bank paved the way for Al-Arafah Islami Bank to defer provisions of Tk 53.93 billion.
Since the mismatch was legally sanctioned, the bank's financial statements were technically compliant with local regulations. As a result, the auditor did not issue a qualified opinion on the underlying asset quality.
Such waivers have kept fundamentally strong companies, including BRAC Bank, from fully following IFRS9 or other global accounting standards.
BRAC Bank, however, clearly stated the reasons behind some of its deviations from IFRS9 in its 2025 financial statements.
When asked, a senior official of BRAC Bank said the bank had no problem fully maintaining IFRS9, but departed from it in some cases because of the central bank's circulars.
"But we have foreign clients. That's why we mentioned the reasons for the deviation, so that they have no confusion about our positive intention to follow IFRS9," said the official, speaking on condition of anonymity.
An expert, also speaking on condition of anonymity, said there was a systemic departure from IFRS9 and from forward-looking impairment models.
"The central bank's provisioning circulars create a baseline risk that must be adjusted for in financial models," he said.
Sk. Ashik Iqbal, a partner in the Audit & Assurance practice at Deloitte Bangladesh, explained why it is important for auditors' opinions to reflect the true financial position of a company.
Audit is the fourth line of defence in financial reporting, preceded by supervision from regulators, the audit committee, and the company's board.
The central bank's guidelines have been changed in ways that no longer align with IFRS9 accounting standards.
"If the country wants to look forward, it must follow IFRS9 accounting standards," Mr Iqbal added.
