Uttara Finance and Investments Limited failed to maintain provisions against Tk1,499 crore in long-outstanding receivables, most linked to related parties, prompting its independent auditor to issue a qualified opinion, indicating the company’s 2021 financial statements contain material issues that prevented the auditor from giving a fully clean opinion.
The findings were disclosed in the auditor’s report for the year ended 31 December 2021.
According to the report, the receivables had remained unadjusted for years despite significant uncertainty over their recovery. Under Bangladesh Bank regulations and International Accounting Standard (IAS) 37, which governs provisions for uncertain assets and liabilities, the company should have maintained provisions against the receivables.
Instead, it recorded a Tk2,099 crore block liability under Bangladesh Bank instructions, a treatment the auditor said did not replace the provisions required under the accounting standard.
The audit also showed the non-bank financial institution remained well below regulatory capital requirements. Uttara Finance reported eligible capital of negative Tk330 crore against a required Tk576 crore, leaving a capital shortfall of Tk906 crore. Its capital adequacy ratio stood at negative 5.72 per cent, compared with the minimum regulatory requirement of 10 per cent.
The company posted a net loss of Tk309 crore in 2021, alongside a net interest loss of Tk25 crore and an operating loss of Tk13 crore, the report said.
The auditor also questioned accounting adjustments made during the company’s migration to a new core financial system, saying Tk43 crore relating to loans, advances and leases and Tk60 crore recorded under advances, deposits and prepayments lacked sufficient supporting documents and approvals.
It also raised concerns over a Tk27 crore loan to subsidiary UFIL Capital Management Ltd, saying the financing bypassed the company’s internal approval procedures and prudential guidelines. The subsidiary later received an equity injection that was used to repay the loan, leaving the auditor unable to verify the commercial substance of the transactions.
In an emphasis of matter, the auditor said the company’s newly implemented core financial software required stronger transaction processing and reconciliation controls to improve the accuracy, consistency and reliability of financial reporting.
The report further identified Tk425 crore in transactions recorded in current and short-term deposit bank accounts without corresponding entries in the company’s ledger. Of that amount, Tk418 crore involved related-party transactions.
The auditor also found that Tk13 crore in unclaimed dividends had not been presented separately or handled in accordance with Bangladesh Securities and Exchange Commission requirements, adding to a series of governance and financial reporting issues identified in the audit.
