Advent Pharma warned for breaching rules
The Financial Reporting Council (FRC) has discovered that Advent Pharma breached regulations while appointing its external auditor for fiscal 2018-19.
The company's board of directors appointed Ahmed Zaker & Co as the external auditor without a recommendation from its audit committee.
The FRC issued a warning to Advent Pharma and instructed the pet healthcare product maker to avoid repeating its mistake, which was a breach of the corporate governance code.
The FRC was formed to create the type of financial reporting in Bangladesh.
Previously, through the company's annual general meeting on December 6, 2018, Advent Pharma had appointed KM Hasan & Co as its chartered accountants for 2018-19.
The business was listed with the country's bourses that year as well.
"But we discovered that Ahmed Zaker & Co signed in the financial report therefore, the business has been asked to describe," the FRC said in a notice issued to Advent Pharma on October 20.
In its response, the drug maker informed that KM Hasan & Co was appointed however the firm was unwilling to carry out the audit, citing 'unavoidable circumstances', before quitting.
"So, the board of directors chosen March 24, 2019, to appoint Ahmed Zaker & Co as the external auditor," Advent Pharma said.
However, there is no recommendation from the audit committee in this regard on the minutes or agenda of the board meeting.
"Nonetheless it was in the minutes of the audit committee meeting held on March 27 of 2019," the FRC said in its letter.
That is a clear breach of the Corporate Governance Code-2018 as it appointed an auditor before getting a recommendation from the audit committee, it added.
The audit committee is intended to scrutinise an auditors' expertise before making a recommendation. The board of directors will appoint an auditor predicated on the recommendation, based on the corporate governance code.
Because the appointment of Ahmed Zaker & Co had not been approved in an over-all meeting, the move was illegal, the FRC said, adding it had been not mentioned in the minutes of the next general meeting either.
The FRC also sent issued a warning to Ahmed Zaker & Co because of its insufficient transparency and unprofessional activities in obtaining the appointment.
Abdullah Hujaifah, a stock investor, said listed companies normally change auditors if they neglect to entertain any illegal request from the company's authority.
"So, the FRC should find out the real reason for the resignation of the Advent Pharma's previous auditor," he added.
"We have already replied to the commission and the FRC on the problem," said Md. Ikramul Islam, company secretary of Advent Pharma.
Asked why KM Hasan & Co had resigned, he said it had been the auditor that wished to quit.
The stock of Advent Pharma closed at Tk 22.9 on the Dhaka STOCK MARKET yesterday.