RE: WRITTEN ARGUMENTS
01. The instant Show Cause Notice was issued upon Bangladesh Chemical Industries Limited (the “Company”) vide Notice No. SEC/Enforcement/203/2003-231 dated 20.11.2003 asking the Company to show cause within 15 (fifteen) days as to why the Company did not comply with the provisions of the Securities and Exchange Rules, 1987 by not paying the Commissioner’s appointed auditor’s audit fee and as to why appropriate action should not be taken against the Company and its Directors under relevant provisions of the Securities and Exchange Ordinance, 1969.
02. The Company replied to the said Notice vide its Letter No. BCIL/026/2003 dated 04.12.2003. Thereafter the Managing Director of the Company was called upon to attend the hearing and accordingly the Managing Director along with his duly authorised representative has appeared in the hearing.
03. It is submitted that the Professional Invoice along with details of working schedule of professional fee of M/S Ahmed & Ahmed, Chartered Accountants (the “Special Audit Firm”) was forwarded to the Company by the Commission vide letter No. SEC/CFD/11:15/99/902 dated 18.08.2003.
04. In is also submitted that upon receipt of the Invoice the Company drew the Commission’s notice to the following issues and vide letter No. BCIL/014/2003 dated 01.09.2003:
a) The professional fee of any of the audit firms who audited the accounts of the Company during the last several years did not exceed Tk. 25,000.00 only. It is, therefore, clear that the professional fee of the Special Audit Firm is highly exorbitant.
b) Pursuant to the appointment letter No. SEC/CFD/11:15/99/428(1) dated 14.09.2002 issued by the Commission, the Special Audit Firm was required to submit their audit report to the Commission within 45 days after commencement of the audit. The Audit Firm commenced their audit on 29.10.2002 which is evident from their Letter of Requisition dated 29.10.2002, but they failed to submit the audit report within 45 days and ultimately submitted their audit report after more than 215 days.
c) Pursuant to the appointment letter No. SEC/CFD/11:15/99/428(1) dated 14.09.2002 issued by the Commission, the time sheet of working hours maintained by the Special Audit Firm was required to be signed by the Company. But from the time sheet submitted by the Special Audit Firm it appears that some of the working hours are not signed by the Company.
05. It is further submitted that in the Company’s letter dated 01.09.2003 it was stated that while the Commission knows the poor financial status of the Company, it is most unreasonable to engage by the Commission such a costly and expensive audit firm and now saddled the Company with such huge professional bill. Obviously the question is, by saddling the Company such huge professional bill, is the Commission helping the Company or pursuing it into more financial difficulties.
06. It is submitted that pursuant to the appointment letter No. SEC/CFD/11:15/99/428(1) dated 14.09.2002 issued by the Commission, the Special Audit Firm was required to make an “Inception Report” stating that it has started audit including expected staff hours required and estimated cost within 10 (ten) days from receipt of the appointment letter. No such expected staff hours required and estimated cost was submitted. If the expected staff hours required and estimated cost was submitted, the Company would have the opportunity to make any objection to or to negotiate the audit fees prior to any audit done by the Special Audit Firm. The Special Audit Firm having failed to submit the expected staff hours required and estimated cost within 10 (ten) days from receipt of the appointment letter, the Commission cannot now compel the Company to pay any exorbitantly high and unrealistic audit fees.
07. However, since the Company in last many years paid Tk. 25,000.00 only on an average to its audit firms, the Company can only make payment so much amount to the Special Audit Firm.
In the premises it cannot be said that the Company has made any non-compliance of the provision of Rule 12(3) of the Securities and Exchange Rules, 1987 and as such no action can/should be taken against the Company and its Directors under relevant provisions of the Securities and Exchange Ordinance, 1969.