Rethinking FRC’s Backdated Audit Report Prevention Policy – Practical Challenges and a Better Path Forward

The Financial Reporting Council of Bangladesh (FRC BD) has recently issued the Backdated Audit Report Signature Prevention Policy, 2026. Signing an audit report with a backdated signature is a clear violation of ethical standards for auditors. Although auditors are expected to follow auditing and ethical standards when signing audit reports, there was previously no specific policy or guidance on this matter in law or in ICAB directives. From this perspective, FRC’s initiative to introduce such a policy is a very positive step. However, some clauses of the policy present several significant practical challenges which make it difficult to comply with.

The policy requires directors to sign financial statements on the same day the board approves them. It then requires auditors to sign the financial statements on that same day. While this may be possible in a few situations, in most cases it is physically impractical.

Let me give an example. Suppose a company has head office in Chittagong and its auditor’s office is in Dhaka. The board meeting to approve the financial statements was held on 01 March 2026. Since all directors were present, they signed the financial statements on the same day. However, the auditor in Dhaka may not receive the signed financial statements on that same day. It could take a couple of days before the documents reach the auditor for signature. So how can the auditor sign on 01 March 2026?

If the auditor receives the signed financial statements on 03 March 2026, signing the audit report with the date 01 March would clearly be backdating. Ethically, auditors should use the actual date they sign. But if the auditor signs on 03 March, the date will not match the policy requirement and will be considered non‑compliant with the FRC policy.

Now consider a multinational company where several directors live in different countries and hold board meetings digitally. Since the directors are abroad, hard copies of the financial statements may need to be sent to them for signatures. Even if all directors sign on the same day as the board meeting, the signed documents will then need to be sent to the auditor, which may take weeks or even months. In this situation, the auditor cannot sign the audit report on the same date as the board meeting or the date the directors signed, making it impossible to comply with the policy.

Now lets focus on guidance provided in International Standards on Auditing related to audit report signing. According to para 49 of IAS 700 (Revised), the auditor’s report shall be dated no earlier than the date on which the auditor has obtained sufficient appropriate audit evidence on which to base the auditor’s opinion on the financial statements, including evidence that all the statements and disclosures that comprise the financial statements have been prepared; and those with the recognized authority have asserted that they have taken responsibility for those financial statements.

This indicates audit report date should not be before the date directors approves the financial statements in board meeting. But there is no restriction on signing the report audit the board meeting date. If International Auditing standards permits signing audit report after board meeting day, why should FRC put restrictions on it leading to a compliance challenge?

The FRC policy allows auditors to delay generating the Document Verification Code (DVC) by up to 20 days, provided they notify FRC. However, the DVC generation date may not be same as the audit report signing date. The purpose of the DVC is simply to confirm that the audit report is genuine and was issued by the signing auditor. Ideally, the DVC should be generated on the same day the auditor signs the report, but technical issues may cause delays. While the DVC should be created within a reasonable time after the audit report is signed, it should not be considered as evidence of the audit report’s actual signing date.

The 20‑day delay limit set by FRC seems reasonable, but the policy requires auditors to notify FRC with the reason for the delay. However, FRC has not provided any specific procedure for submitting this notification. Monitoring and reviewing these notifications would also require additional resources for FRC. A simpler approach could be to allow a 20‑day limit without requiring any notification.

The policy is an appreciated step toward more transparent and decision‑useful financial reporting. However, the FRC should remove the requirement for directors and auditors to sign on the same day the board approves the financial statements, as this creates practical challenges to comply. Instead, FRC should provide following directives:

• Directors should be required to sign within a reasonable period (maybe a month) after the board meeting and make the signed financial statements promptly available to the auditor.
• Prohibit auditors from dating the auditor’s report before the board’s approval date keeping in line with international auditing standards.
• Auditor will be required to generate DVC within 20 days from the audit report date.

These requirements will effectively prevent back‑dated audit reports. For example, if the audit work is actually done in 2026 but the auditor tries to date the FY2024 report June 2025, the DVC must be generated within 20 days of the report date, which would expose the back‑dating. By contrast, if the FY2024 audit and the board approval both occur in 2026, the auditor can date the report after the board meeting and generate the DVC within 20 days. It will prevent backdating and make the audit report on current dated. It will also allows directors and auditors to sign the financial statements on the same day as the board meeting if possible.