The Institute of Chartered Accountants of Bangladesh (ICAB), a Professional Accountancy Body in Bangladesh, developed the Document Verification System (DVS) in 2020.
ICAB has been functioning as an autonomous body to regulate the accounting profession since 1973 under the Bangladesh Chartered Accountants Order, 1973. One might question why ICAB developed DVS four decades later and why it is now becoming a vital tool. And, what exactly is DVS? Okay, let’s unveil the answers.
A very brief introduction to DVS
Document Verification System (DVS) is a tool to verify the audit reports issued by registered chartered accounting firms. One of the most significant purposes of this tool is aligned with its name. A verification System! It was developed to verify the authenticity of the audit reports.
Highlights
- After signing the audit report, the chartered accountant, as an engagement partner of the report, enters the DVS portal. Here, the auditor inputs the necessary information into the database from the audited financial statements.
- Hence, upon submission of the required information, an 18-digit Document Verification Code (DVC) will be generated.
- DVC is a unique code. The code is like the identity of the audit report and the financial statements. The audited reports and financial statements must incorporate the designated code. Later, the code can be applied to verify the authenticity of the audit reports.
- In the case of a limited company, the key financial information previewed on the DVC typically includes total liabilities, profit before taxes, retained earnings, revenue, and total assets.
- The DVS is utilized by many, including regulators such as the National Board of Revenue (NBR), Registrar of Joint Stock Companies and Firms (RJSC), Bangladesh Securities and Exchange Commission (BSEC), NGOs Affairs Bureau, and Financial Reporting Council (FRC).
As we have learned the snapshots of the Document Verification System (DVS), we need to understand why DVS is so vital in our economy. To understand the context, we need to look back to the time before 2020.
Why DVS is vital in our economy
Before the implementation of DVS, there was a trend among tax-evading companies to submit different reports. These companies submitted different audit reports based on their respective purposes in the same fiscal period.
It was not like the tailored financial statements to which you normally customize your statements into different formats to present different stakeholders while preserving the same financial information. They changed the financial picture in those reports to gain illicit benefits.
When they submitted the reports to the banks, they showed higher profits. However, in the same fiscal year, when the reports were submitted to the NBR, higher profits were not evident.
There was an insurgence of fake audit reports. In the fiscal year 2019-20, approximately 17,000 audit reports were signed, despite the number of tax returns exceeding 35,000 during the same period.
Now, it is feasible to track the number of audit reports signed by the auditor. Thanks to DVS! If a tax evader went to the NBR with a fake audit report, the tax officials would verify it through DVS.
One of the finest things DVS facilitates is providing a hub for different financial regulators to collaborate and fight against corruption.
The DVS is definitely effective since the irregularities become more obvious than ever.
“A total of 41,082 financial reports were verified by 400 professional chartered accountants. Of them, 17,041 financial reports were verified by 50 professional accountants, which is practically abnormal.“
The Financial Reporting Council, in a notice on September’ 22
The effectiveness of DVS shades the light in a way that is both promising and distressing at the same.
It’s distressing because it depicts the irregularities that have occurred in the audit profession in the past in Bangladesh. Nevertheless, there is hope as regulatory bodies can now place companies involved in misconduct under legal examination through the help of DVS.
Quality audit report always adds a significant value to the economy. It guides the stakeholders. An audit report plays a crucial role, extending from the NBR’s tax collection to an individual’s investments in the stock market.
The reports influence their decisions as the purpose of the report is to provide reasonable assurance of whether the financial statements provide a true and fair view.
If auditors adhere to the ethical standards of the accounting profession during the audit process, it can contribute to establishing a balanced and stable financial environment. DVS can play a part in ensuring that the auditor’s adherence to the code of conduct has been complied with.
DVS is, in fact, a revolutionary tool in bringing all regulators together to fight against corruption.
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