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Auditor casts doubts on Tk11cr Federal Insurance agent advances

Shakhawat Hossain Sumon
23 May 2024 23:27:08 | Update: 23 May 2024 23:27:08
Auditor casts doubts on Tk11cr Federal Insurance agent advances

An auditor has raised doubts about the whereabouts of Tk 11.77 crore, paid by Federal Insurance Company Ltd – a listed company – to its agents as advance.

After reviewing the company’s latest financial statement until December 31 last year, the auditor had recently said, “This advance to the agents has remained uncollectable for several years, so this asset is materially overstated and should be written off.”

A qualified opinion, typical after a professional audit, indicates that the information provided may be limited in scope, or that the company's adherence to generally accepted accounting principles may be questionable.

According to the auditor, the company has the long outstanding and uncollectable agent balance worth Tk 11.77 crore under Advance against Others (under note 20.02 of the financial statement).

Speaking to The Business Post, Federal Insurance Company Ltd Secretary Sheikh Mohammad Anwar Uddin said, “The money given to the agents is old. This account for 2010 is ongoing. As a result, they are now almost impossible to collect.

“We are trying to collect some money but the amount is very little.”

According to the company’s latest financial statement, “Only Tk 4 lakh have been collected from this sector in the last one year. Until December 31, 2022, the company owed Tk 11.81 crore to agents.

The auditor reviewed the company's financial statement for 31 December last year, and said the company has not yet established the Gratuity Fund and recognised the fund to the National Board of Revenue (NBR).

Currently the company is paying the gratuity benefit to employees on a cash basis.

For the absence of establishment of fund, liability and the employee benefit expense for gratuity for the year may be understated materially and this is also a violation of labor Act 2006, the auditor added.

The auditor said, the company was unable to provide any assessment copy for any year, so we were unable to verify whether any additional income tax demanded by the tax authority, and or whether any additional income tax provision should be kept by the company.

Additionally, we were also unable to verify whether the disclosed advance income tax amount is adjustable or recoverable from the tax authority, or whether any adjustment should be made by the company.

As a result, the financial statement may be misstated materially by these amounts, the auditor added.


Financial health

The Federal Insurance Company board of directors has recommended a 10 per cent cash dividend for the year ending on December 31, 2023.

This final approval of the dividend will come during the annual general meeting (AGM), scheduled to be held on August 14 at 11am using a digital platform. The record date is set for June 10, the company said in a filing with the Dhaka Stock Exchange (DSE) on April 29 this year.

The general insurer has also reported earnings per share (EPS) of Tk 0.96, net asset value (NAV) per share of Tk 12.93, and net operating cash flow per share (NOCFPS) of Tk 0.93 for the year ending on December 31, 2023 as against Tk 1.03, Tk 12.97 and Tk 1.65 respectively for the same period previous year.

Each share of the insurer, which was listed on the DSE in 1995, closed at Tk 22.90 on Thursday. Its shares traded between Tk 22 and Tk 32.20 in the last one year. The company had disbursed 10 per cent cash dividend for the year ended on December 31, 2022.

The company’s paid-up capital is Tk 71.04 crore, authorised capital is Tk 100 crore, and the total number of securities is Tk 7.10 crore.

The sponsor-directors own 38.26 per cent stake in the company, while the institutional investors own 1.01 per cent, and the general public holds 60.73 per cent until April 2024, show DSE data.