QUALITY ASSURANCE OF ANNUAL CORPORATE REPORTS OF DSE LISTED COMPANIES

Abstract

This study looks into four aspects of the financial reporting system of Bangladesh: (1) the perception of the various elements of the annual reports by users and auditors, (2) corporate report users' informational needs, (3) current reporting practice, and (4) determinants of the voluntary and mandatory disclosure level of financial information in the annual reports of the companies. The first part of the study concentrated on the first two features investigated by a questionnaire to three different groups of users: individual investors, institutional investors, and auditors. Furthermore, during this phase, the resemblances and dissimilarities in the perceptions of the three groups of auditors were examined. The second stage of this research looked at the other two components, assessed by looking at the annual reports of 275 Dhaka Stock Exchange-listed companies. Interviews with 25 professional users were also conducted as part of the study to understand further and substantiate the results of the first and second phases. When comparing and contrasting user groups, considerable disparities in the importance of company annual reports were discovered between individual investors and other user groups. According to the findings, many user groups rely considerably on financial analyses of annual corporate reports, particularly financial statements. In Bangladesh, institutional shareholders have more long-term and short-term investments than government officials, who prefer long-term investments. Institutional shareholders get data through a variety of sources to fit their long-term and short-term objectives. Individual investors, in contrast, are more apprehensive with short-term investment and return. Individual report sections were used and valued similarly in industrialized countries. User groups saw the separate sections of the Management Discussion and Analysis report and the Corporate Governance report differently. The study discovered that auditors' perspectives from the Big four audit firms did not differ considerably from those from globally affiliated and local audit businesses. Manufacturing companies disclosed the most mandatory items, and service companies disclosed the least mandatory items. Due to the nature of the finance industry, finance companies revealed more voluntary information in their annual reports than service and manufacturing organizations. The low marginal correlation between unweighted, mean-weighted, and median-weighted voluntary and mandatory disclosure of DSE service xviii companies suggests that voluntary disclosure is influenced by external variables such as competition and pressure from non-listed companies. Using multiple regression analysis, the study categorized leading sources of fluctuations in disclosure level. The company size and the industrial sector were the main determinants of disclosure in Bangladeshi annual reports. According to the study, regulators in Bangladesh should promote awareness of the value of the CG report for investment decisions. Furthermore, people should be educated about the transparency of corporate governance and its significance to a company's long-term viability. According to the interviewees in this study, a firm will not share certain information, for instance, segment information, if it is not in the company's best interest. This is due to the unfair competition between publicly traded and privately held enterprises in the same industry. The essential annual report components for making an investment choice in Bangladesh, according to this survey, were the company's financial statements and auditor's report. The corporate governance report and the chairman's report were the least essential components. The study managed to understand and explain the questionnaire results and regression analysis through interviews. Report users felt that companies meet the disclosure requirements, one of the critical points. The number and quality of voluntary disclosure, instead, displeased interviewees. Another significant conclusion was that auditors influence disclosure since they may create annual reports, as some interviewees said. Finally, the study found that improving the quality of the financial reporting system requires collaboration across all professional groups.