Iftekhar Rahman
Verdant Global
Purpose of This Article
This article examines whether Bangladesh’s auditor-independence framework is sufficiently robust to support credible financial reporting, banking-sector confidence and capital-market trust. It benchmarks Bangladesh’s existing arrangements against global independence principles, with India used only as a practical regional comparator. The focus is on whether audit independence is visible in practice through effective rotation, restrictions on conflicting non-audit services, transparent fee disclosure, audit-committee oversight, quality-management systems and credible regulatory inspection. This article builds on the author’s earlier Oniket Bulletin article, When Financial Statements Lose Credibility, which argued that Bangladesh’s financial-reporting challenge is less about the absence of formal standards and more about implementation, enforcement and consequence management. ¹
The main finding is that Bangladesh’s weakness lies less in formal rulemaking and more in visible implementation. Mandatory auditor rotation exists, but rotation alone cannot protect independence if non-audit-service conflicts, fee dependency, weak audit-committee challenge and limited public inspection outcomes remain insufficiently visible. Bangladesh should therefore prioritise five reforms. Rotation rules should address substance, not only tenure. Restrictions on conflicting non-audit services should be clearer. Audit and non-audit fees should be disclosed more transparently. Audit committees should have a stronger mandate to challenge appointments and findings. The Financial Reporting Council should publish regular anonymised inspection findings to demonstrate that audit quality is being reviewed in practice.
The Missing Link in Audit Reform
Auditor independence is not a technical formality. It is one of the foundations of market confidence. If investors, lenders and regulators cannot rely on an auditor’s judgement, financial statements become documents of compliance rather than instruments of trust. For Bangladesh, this issue is no longer confined to the accountancy profession. It affects banking stability, capital-market credibility, foreign investment and the country’s ability to build a modern assurance industry.
Bangladesh has already developed much of the formal architecture required for credible financial reporting. The Financial Reporting Act 2015 established the Financial Reporting Council as the national authority responsible for setting, adopting, monitoring and enforcing accounting and auditing standards.² The Bangladesh Securities and Exchange Commission also restricts listed companies from appointing the same chartered-accountancy firm as statutory auditor for more than three consecutive years and requires compliance with applicable auditing, quality-control and ethical standards.³ On paper, these provisions are meaningful. In practice, their effectiveness depends on enforcement, transparency and consequence management.
Rotation Must Address Substance, Not Only Tenure
Mandatory auditor rotation can reduce familiarity risk, but it cannot by itself create independence. A three-year rule may prevent excessively long relationships, yet it does not address all threats. Independence may still be weakened where audit partners move between firms, firms operate through shared networks, or the same client remains commercially significant through related advisory work.
India is useful as a regional comparator, but it should not become the centre of Bangladesh’s reform debate. Under section 139 of the Companies Act 2013, listed companies and prescribed classes of companies are subject to mandatory auditor rotation, including a five-year cooling-off period before reappointment. ⁴ The more important lesson is not that Bangladesh should copy India mechanically. It is that rotation rules should address economic substance, network continuity and familiarity risk rather than focusing only on the formal number of years.
Global Principles Should Guide Reform
The wider global direction of audit regulation is clear. Auditor independence must be supported by restrictions on conflicting non-audit services, transparent fee disclosure, communication with those charged with governance, effective quality-management systems and visible inspection outcomes. These principles matter because independence cannot be assumed from an appointment letter. It must be demonstrated through systems, evidence and oversight.
The International Ethics Standards Board for Accountants has strengthened fee-related independence provisions, including restrictions on audit fees being influenced by non-audit services, enhanced communication with those charged with governance and greater transparency for public-interest entities.⁵ The International Auditing and Assurance Standards Board’s ISQM 1 also expects firms performing audit, review, assurance and related-services engagements to operate quality-management systems suited to the nature and circumstances of the firm and its engagements.⁶ These international expectations show that independence is no longer only a matter of professional declaration. It requires governance infrastructure.
Why Domestic Capacity Matters
Bangladesh’s reliance on internationally connected assurance networks for sensitive assignments shows both the value and the weakness of the current market. The Financial Times reported that Bangladesh Bank engaged EY, Deloitte and KPMG to conduct asset-quality reviews of banks alleged to have suffered significant losses. ⁷ In one sense, this was understandable. When confidence in local financial statements is under pressure, regulators may prefer firms with international systems, cross-border reputational exposure and deeper technical capacity.
At the same time, this should not become a permanent dependency. A domestic assurance profession cannot become credible if it is never tested, inspected and publicly benchmarked. More recently, The Financial Express reported that KPMG was set to separate from its Bangladesh affiliate, Rahman Rahman Huq, as part of a broader restructuring also affecting Egypt and Pakistan. ⁸ That reported decision should not be interpreted as proof of a Bangladesh-specific governance failure. It does, however, underline a strategic question for Bangladesh. How can the country retain internationally connected assurance capacity while building domestic firms that can command confidence on their own merits?
What Reform Should Prioritise
Bangladesh should focus on practical reforms that make independence observable. Rotation rules should be reviewed to address partner movement, common-brand networks and successor firms where the same economic relationship continues in substance. Restrictions on conflicting non-audit services should be clearer and more visible, especially for public-interest entities. Listed companies should disclose audit and non-audit fees in a way that allows investors to assess fee dependency and independence risk.
Audit committees should also have a clearer mandate to recommend appointments, review independence assessments and challenge material audit findings. The Financial Reporting Council should publish regular anonymised inspection findings so that audit-quality trends are visible without unfairly targeting individual firms before due process is complete. These reforms would not weaken domestic firms. They would strengthen them. Public inspection, transparent fee disclosure and credible sanctions create the conditions under which good firms can differentiate themselves.
Confidence Must Be Earned Publicly
Bangladesh’s audit challenge is not the absence of rules. It is the gap between formal compliance and visible enforcement. Auditor independence must be demonstrated through evidence, not assumed through appointment letters. If Bangladesh wants deeper capital markets, stronger banks and greater foreign-investor confidence, audit reform must move beyond rotation on paper towards independence in practice.
The objective should not be to outsource trust indefinitely to foreign-linked networks. It should be to build a domestic assurance ecosystem that is technically capable, independently regulated, internationally connected and publicly credible. That is how Bangladesh can turn audit from a compliance requirement into a governance asset.
References
¹ Iftekhar Rahman, When Financial Statements Lose Credibility. Why Audit Reform Must Become a Governance Priority in Bangladesh, The Oniket Bulletin, 2026.
² International Federation of Accountants, Bangladesh Member Profile.
³ Bangladesh Securities and Exchange Commission, Notification on Financial Reporting and Disclosure, Notification No. BSEC/CMRRCD/2006-158/208/Admin/81, dated 20 June 2018, published in the Bangladesh Gazette, Extraordinary Issue, 8 August 2018, conditions 2(2), 2(4) and 2(5), pp. 1-2.
⁴ Government of India, Ministry of Law and Justice, Companies Act 2013, section 139(2).
⁵ International Ethics Standards Board for Accountants, Final Pronouncement, Revisions to the Fee-related Provisions of the Code, April 2021.
⁶ International Auditing and Assurance Standards Board, International Standard on Quality Management (ISQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements, 17 December 2020.
⁷ John Reed and Redwan Ahmed, Bangladesh Hires Big Four Audit Firms to Review “Robbed” Banks, Financial Times, 26 January 2025.
⁸ Doulot Akter Mala, Big Four Accounting Firm KPMG Set to Exit Bangladesh, The Financial Express, 24 May 2026.
