Eastern Insurance PLC received a qualified audit opinion for 2025 after its auditor failed to independently verify fixed deposit receipts and bank balances totaling Tk120.43 crore, equivalent to 46 per cent of the company’s total assets and 98 per cent of its cash and cash equivalents.
The auditor also included “Emphasis of Matters” and “Other Matter” paragraphs in the report for the year ended 31 December 2025.
According to the audit report, Eastern Insurance maintained Tk120.43 crore in fixed deposit receipts, commonly known as FDRs, across 563 accounts in 46 banks, but no independent confirmations were received despite requests being sent to all banks.
The auditor also identified major internal control weaknesses, saying encashment and reinvestment of FDR funds were conducted without mandatory approval from the investment committee.
The company invested Tk26.39 crore in five distressed banks — Union Bank, EXIM Bank, First Security Islami Bank, Global Islami Bank and Social Islami Bank — without recognising impairment losses despite uncertainty over recoverability.
Eastern Insurance also recognised Tk1.59 crore in interest income and receivables from the same banks although recovery of the amounts was considered highly improbable, resulting in overstated income and receivables, according to the report.
The audit further flagged major departures from International Financial Reporting Standards, commonly known as IFRS, in the company’s consolidated financial statements.
Eastern Insurance failed to comply with IFRS 10 in preparing consolidated accounts for subsidiary investments amounting to Tk21.69 crore because management did not provide detailed consolidation working papers needed to verify intra-group transactions and balances.
The report also said the company failed to recognise goodwill and properly adjust non-controlling interests as required under IFRS 3 and IFRS 10.
The auditor further stated that Eastern Insurance improperly adjusted a Tk5.39 crore loss from disposal of Chittagong Stock Exchange shares against the share premium account instead of recognising the loss in profit and loss statements under IFRS 9 and International Accounting Standard 8.
According to the audit findings, this resulted in overstated profit balances and understated share premium balances that remained uncorrected in 2025.
The report also identified discrepancies in the company’s investment portfolio.
Eastern Insurance reported investment cost values of Tk40.18 crore and market values of Tk30.29 crore, while audit calculations showed cost values of Tk32.15 crore and market values of Tk29.89 crore.
The auditor said investment costs were overstated by Tk8.03 crore and market values by Tk39.65 lakh, while unrealised investment losses of Tk9.89 crore were recognised directly in equity instead of profit and loss, overstating profit before tax.
The audit additionally cited weaknesses in claims accounting and record keeping.
Eastern Insurance recognised outstanding claim liabilities of Tk6.01 crore but failed to maintain detailed claims ledgers, ageing analyses and supporting documents needed to verify liabilities and claim payments.
The auditor also found inconsistencies between reported net claim income and underlying claim payment records, making it impossible to determine the actual impact on profits.
The company also failed to provide sufficient supporting documents for sundry creditors of Tk5.34 crore and sundry debtors of Tk20.59 crore, including advance income tax balances, rent receivables and advances.
The auditor could not physically verify fixed assets due to the absence of a fixed asset register and identification tags.
According to the report, legal ownership of seven motor vehicles costing Tk1.16 crore remained with Uttara Finance and Securities instead of the company, while documents supporting disposal of four vehicles were unavailable.
The report further identified inconsistencies in premium income reporting.
Eastern Insurance reported net premium income of Tk20.37 crore in the revenue account, while XL forms and financial statement disclosures showed direct and PSB premium income totaling Tk45.67 crore.
Due to insufficient documents and unreconciled figures, the auditor said the impact on income, expenses and net assets could not be determined.
Under the “Emphasis of Matters” section, the report said Eastern Insurance did not contribute to the Workers’ Profit Participation Fund for 2024, violating the Bangladesh Labour Act, 2006.
The company also failed to transfer declared cash dividends of Tk6.47 crore into a separate designated bank account within the deadline set by the Bangladesh Securities and Exchange Commission.
The report further stated that Eastern Insurance disclosed a gratuity scheme but did not make any gratuity provision or conduct actuarial valuation required under International Accounting Standard 19, potentially overstating profits and understating liabilities.
The auditor also could not verify deferred tax calculations and cash flow statements because management failed to provide supporting schedules and computations.
The audit report was signed by Islam Jahid & Co Chartered Accountants Managing Partner Md Jahidul Islam.
