This has been reflected through the display of inadequate footnote disclosure of material inter-company and related party transactions, the absence of reporting and the lack of consolidation of financial performance of companies. The observations were made in a final draft report of the Asian Development Bank (ADB), which was prepared under an ongoing ADB technical assistance project.

It said there are marked weaknesses in financial statement disclosure and the standards under which accounting professionals perform external audits of public companies.

"While Bangladesh's accounting conventions appear to generally conform to international accounting standards (IAS), rule to cover certain significant accounting issues such as treatment of asset impairment and derivatives investment, have not as yet been adopted," the report says.

It said there is a shortfall of qualified accounting personnel within public companies who are sufficiently knowledgeable of accounting standards and are capable of preparing financial statements in accordance with IAS.

The report said there is also problem of professional independence and the level of competency of outside auditors. Although auditors of public companies have to obtain license from the Institute of Chartered Accountants of Bangladesh (ICAB), the institute only recently has acted once to impose sanction on an audit firm for failure to conduct proper audit.

But the suspension was challenged in the court, which issued a stay order on the ICAB order. "But the ICAB did not contest the stay order," the report said.

"The auditing firms do not generally have quality assurance programmes nor has a peer review process been established by professional organisation."

In the light of perceived shortcomings of the ICAB in the areas of responsibility, the ADB report suggested creating an accounting board under the jurisdiction of the Securities and Exchange Commission.

The report observed the board is not a panacea, the problem of organising, recruiting and training qualified individuals, rulemaking, properly compensating them and insulating them from liability will occupy such a board.

"However, in view of the intense need to improve the quality of Bangladeshi financial reports and audits, there seems to be little alternatives," the report said.