Firms asked to eliminate anomalies found in accounting of forfeited provident funds
The Financial Reporting Council (FRC) has unearthed gross irregularities in the accounting of the forfeited amount of provident funds of public interest entities.
A worker may leave a enterprise before being entitled to the part of the provident fund from the company. If the fund isn't returned to the business after they depart, it really is regarded as a forfeited fund.
"This money is normally distributed among the present employees but it is not legal," the FRC explained.
The situation prompted the independent government regulatory body beneath the finance ministry to issue a circular on Tuesday for each public interest entity.
It directed the firms either to give the amount of money to the outgoing employees or go back it to the earnings and damage accounts of the firms and pay tax onto it.
Any federal government or non-authorities entity is considered a open public interest entity when its total annual revenue crosses Tk 5 crore, assets reach Tk 3 crore, or liability rises to Tk 1 crore.
The entities treat their contribution to the provident funds as expenses and so get tax benefit against the expenditure.
The forfeited amount should either be paid to the employee who eventually left or reverted back again to the accounts of the business and the company must pay tax onto it, said Sayeed Ahmed, an executive director of the FRC.
"Giving one's funds to others is a forgery," he explained, adding that the auditors were as well not addressing the problems in their reports.
If an audit organization fails to address and inform such issues, it'll be accountable for allowing the irregularities to take place, he added.
Firms with forfeited fund have to revert it to the employer's accounts found in the same financial time, the circular said.
The organisation must recognise the fund as income from other sources and subsequently will be charged corporate tax against the total amount.
Employees of public fascination entities who enjoyed additional benefit as a result of the forfeited funds needs to deduct the excess sum by December 31, 2020.
Every entity must make an effort to recover the additional benefits that have already been realised by other employees, the notice said.
If an employee receives any excess amount from a provident fund, it should be discussed in the meetings of trustee plank or committee of the provident fund, in the audit and risk management committees of the organisation. The trustee plank or committee should be accountable for that.
An audited financial article in the employee provident cash must be submitted to the FRC and different regulatory bodies within 120 days following the end of an accounting year, in line with the circular.
If anyone breaches the circular, they might confront Tk 5 lakh in fines, or five years in imprisonment, or both, said the FRC.
