05 February 2024

Mr. Musfiqur Rahman

Chief Executive Officer
CBC Capital & Equity Management Ltd.
Office: Level-6, Unit-6L, N, Tower-A
Police Plaza Concord Tower
Plot # 2, Road #144, Gulshan-1
Dhaka, Bangladesh

Subject: Report on Special Audit of Modern Securities Limited for the Financial Years from 2018-
2019 to 2022-2023 (5 years) & for the period from 01 July 2023 to 30 November 2023

Dear Sir,

This has reference to your appointment letter Ref: CSL/2023/1 dated 11 September 2023 and
subsequent discussion with the authority of different level.

We have conducted and completed Special Audit of Modern Securities Limited for the Financial Years
from 2018-2019 to 2022-2023 (5 years) & for the period from 01 July 2023 to 30 November 2023 in
compliance with terms of reference (ToR) of appointment letter, relevant laws and regulations of the
country and international standards on auditing (ISAs).

Our report has been prepared with a view to disclose all relevant information. As such, we have detailed
out in the report the scope of the special audit, our limitations when carrying out the assignment,
procedures that we have carried out for the purpose of the special audit and results that we have
obtained from such procedures along with relevant findings. The findings that we have identified are
presented mentioning finding, fact, category of risk, effect and recommendation thereof.

During the course of our special audit we communicated with the concerned officials of the company
through requisition letters and verbal reminders continuously for the required documents and
information.

We thank you for giving us the opportunity to carry out this assignment. We believe, this report would
meet the requirements as set out in the appointment letter. If there are any queries regarding any part of
the report, please feel free to contact us. We look forward to our continued professional relationship
with you.

Yours respectfully,

Aziz Halim Khair Choudhury

Chartered Accountants
 REPORT ON SPECIAL AUDIT OF MODERN SECURITIES LIMITED FOR THE FINANCIAL YEARS FROM 2018-
2019 TO 2022-2023 (5 YEARS) & FOR THE PERIOD FROM 01 JULY 2023 TO 30 NOVEMBER 2023

1. BACKGROUND OF THE COMPANY

1.01 LEGAL STATUS AND NATURE OF THE COMPANY:

Modern Securities Ltd. was incorporated in Bangladesh as a private limited company by share, on 22 nd
august, 2005 with the register of Joint Stock Companies & Firms, Bangladesh having registration no C-
58702(708)/05 dated August 22, 2005 of the register of Joint Stock Companies, Bangladesh. The Principal
Object of the Company is to carry on the business as stock broker.

The authorized share capital of the company is Tk. 100,000,000.00 dividend into 1,000,000 ordinary
shares of Tk. 100.00 each. The initial Paid up Capital of the company with which the company was
incorporated was Tk. 27,500,000.00 dividend into 275,000 Shares of Tk. 100.00 each Subscribed and paid
up by the Sponsor Shareholders and Directors.
Amount in Taka
Sl. No. Name of Shareholder 2022-2023 2021-2022
1 Ms. Shabana Saheen Bina 2,750,000 2,750,000
2 Ms. Shahana Rahman 2,750,000 2,750,000
3 A.K.M. Mahfujul Haque 2,750,000 2,750,000
4 A K M Mahabubul Haque 12,375,000 12,375,000
5 Khondokar Bozlul Hoque 6,875,000 6,875,000
Total 27,500,000 27,500,000

1.02 Registered office of the Company:

The Corporate Office of the Company is situated at Room # 209, DSE Building (1 st floor), 9F, Motijheel
C/A, Dhaka- 1000.

2. SCOPE OF THE ASSIGNMENT

In order to carry out the assignment in an expedient and complete manner, we analyzed the
appointment letter in details. The purpose of our analysis was to identify the appointing authority’s
requirements regarding the special audit and evaluate the overall scope of the work. The scope of the
assignment as set out in the appointment letter is provided below for the readers’ understanding:

1. To assess and evaluate the assets & liabilities of the Company as on 10 September 2023 and
subsequently on 30 November 2023.
2. To review the audited financial statements for the last 5 years.
3. To assess assets & liabilities (margin loan including interest) of ail clients' portfolios including negative
equity clients.
4. To assess assets & liabilities of dealer accounts (own portfolios).
5. To assess liabilities owed to Government (VAT. Tax etc.), regulators (BSEC, CASE, CSE), employees,
other parties, if any.
6. To evaluate value of business of the Company including Net Asset Value.
7. Any other areas to be examined and/or evaluated by the auditor for assisting the decision of
acquisition.

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3. SCOPE LIMITATION

Limitations that we have encountered during special audit are as follows:

 Books of accounts were not maintained for any year for the reporting period;
 Financial Statements could not be cross checked and reviewed as books of accounts were not
maintained for any year for the reporting period which were mandatory as per Companies Act 1994;
 Necessary documents for our Audit purpose were not provided to us in a timely manner.
 Due to the CBC Equity & Capital Ltd. Management urgency we did not get enough time to review the
documents so provided to us by the MSL management.

4. AUDIT APPROACH

AUDIT TEAM AND WORK ALLOCATION

To conduct the assignment, we formed an audit team comprising sufficient members having relevant
experience and skills and each of them was assigned with defined duties and responsibilities in the
assignment. An engagement partner administered the whole audit process including monitoring
fieldwork. A Job in Charge (Director- Audit & Admin) and an audit supervisor (Additional Director-Audit &
Assurance) assisted the engagement partner in the assignment. An audit team comprising an audit in-
charge (senior staff) and three audit staff were engaged to complete the audit. Besides, a review partner
independent to the assignment reviewed the audit work and reports.

AUDIT APPROACH FLOW CHART:

Entrance Engagement Partner

Meeting
with client Exit Meeting with client/
Review and
Draft Submission
finalization

Planning and Audit Supervisor/ Review Partner

Manager
execution
(Bottom down
approach)
Review and drafting Final Report
Audit/Job in Charge Submission
of the report

Communication of audit
findings and reporting
Audit Team (Bottom Up approach)

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 PLANNING, PROGRAMMING AND PERFORMANCE OF THE AUDIT

We applied following methodologies/steps for performance of the audit. These are not considered as all-
inclusive or restrictive in nature and do not constitute relief from exercising due professional care and
judgment. Our audit steps are first delineated through a flow chart, which is given below:
Audit Planning
Internal Control
System of
appraisal of the
functions and
Stage management
ng Review of
Planni
SurveyFindings
Audit
Preliminaryof
Evaluation
Review and
Testing
Substantive
Sampling for Test
Stage Schedules
Statements and
Testing
financial
Audit Obtaining
Reports
Programming
Finalization
Audit of
Draft Reports and
Post Conference
Report
draft Audit
Results Discussion of
Audit
Review
ication
conference
Commun
Report and Pre-
Drafting the

5. METHODOLOGY FOLLOWED

The Special Audit was carried out in accordance terms of reference as set out in the appointment letter.
We selected and assembled a team of suitably qualified personnel to conduct the field level work and
oversee the special audit. An appropriate audit program was duly prepared and followed consistently by
our team when carrying out the assignment. The methodology adopted by us in meeting each
requirement of the special Audit as set out by the appointment letter is summarized below:

 Held an entry meeting with the Senior Management of the Company with a view to having an
understanding of the assignment. Before going to the next step i.e., developing the work plan and
program we conducted a point project to have a complete idea and identify the work limitation.
Based on the experience and communication we carried out our assignment further through the
extended approach;
 Developed work plan and program;
 Collected relevant papers, documents, information etc. from appropriate authority in the company;
 Examined the collected data, verify that it is authentic, complete, and accurate;
 Conducted interview of relevant company personnel;

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  Determined if further information or scrutiny is necessary and if such necessity is identified, carry out
relevant procedures;
 Identified any irregularities or deficiencies if there are any and draw a conclusion on the matter;
 Reviewed the issues identified, the conclusions reached and decide if there is any need to conduct
further work;
 Performed further procedures if deemed necessary;
 Prepared and submitted a draft report containing any and all relevant data and information as
required by the Appointment Letter;
 Held exit meeting with the Management of the company to discuss the draft report;
 Finalized the report upon receipt of comments and responses from the client.

6. SUMMARY OF MAJOR FINDINGS

ToR # Finding # Finding Title

ToR-1 7.1 It could not be confirmed whether the Balance sheets and other parts of
financial statements represent a true and fair view of assets, liabilities because
of not keeping books of account as per section 181 of the companies Act, 1994
(sizes of the Assets and Liabilities as at 30 November 2023 were taka
190,292,428).
7.2 As at 30 November 2023, the entity recognized Property, Plant and Equipment
(PPE) of Taka 24,710,051 which could not be confirmed due to not
maintenance of books of account and fixed assets register as well as year end
physical verification report by the management.
7.6 The entity recognized Account Receivable of Taka 22,252,855 as at 30
November 2023 but there was no aging since when such receivables are carried
forward.
7.7 Advance & Deposit of Taka 200,000 not confirmed.
7.8 Cash and Cash Equivalent of Taka 62,653,534 as at 30/11/2023 out of which
Taka 20,865,416 is still in deficit.
7.14 The company had ‘Liability for Others Expenses’ of Taka 61,845,860 as at
30/11/2023 and Taka 827,079 (Taka 2,737,995 – Taka 1,910,916 ) shown in
less which should be reduced from net worth of the company as at
30/11/2023.
ToR-4 7.15 The company had earned net revenue of Taka 30,614,602 through own
portfolio account (vide account no. 00000001, BO ID: 1203570028973202)
maintained with Modern Securities Limited but only Taka 3,614,602 was
recognized resulting in tax liability of taka 8,100,000.
ToR-5 7.16 Tax assessment was not done for several years which has created government
liabilities and Net Assets Value will be reduced.
ToR-6 7.17 Net Asset Value of the Company as at 30/11/2023 stood at Taka 73,889,868
considering other elements after date of 30 November 2023.
ToR-7 7.18 The Managing Director appeared to have failed to establish robust internal
control system within the organization and established autocratic management
system.
7.19 Taka 2,000,000 has been withdrawn from Strategic Investment Account (A/c.
no. 1121063831001) with The City Bank.

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7. DETAILS OF OBSERVATIONS

During the course of our special audit, we have complied with Terms of Reference (ToRs) and applied
relevant audit procedures in accordance with International Standards on Auditing (ISA). Only a very few
documents we could obtain against our requisition letters and based on such documents and information
available to us, we present hereunder detailed findings as per ToRs:

ToR-1: To assess and evaluate the assets & liabilities of the Company as on 10 September 2023 and
subsequently on 30 November 2023.

As the audit was carried after 30 November 2023 and subsequently upon discussion with the
authority it was decided to assess and evaluate the assets & liabilities of the Company as on 30
November 2023 instead of 10 September 2023. Accordingly we have assessed and evaluated the
assets & liabilities of the Company as on 30 November 2023 and our findings out of our review has
been presented below.

7.1 Finding:
It could not be confirmed whether the Balance sheets and other parts of financial statements
represent a true and fair view of assets, liabilities because of not keeping books of account as per
section 181 of the companies Act, 1994 (sizes of the Assets and Liabilities as at 30 November
2023 were taka 190,292,428).

Criteria
As per section 181 of the companies Act, 1994, books to be kept by company and penalty for not
keeping them:

(1) Every company shall keep proper books of account with respect to-

(a) all sums of money received and expended by the company and the matters in respect of
which the receipt and expenditure take place;
(b) all sales and purchases of goods by the company;
(c) the assets and liabilities of the company; and
(d) in the case of a company engaged in production, distribution, marketing, transportation,
processing, manufacturing, milling extraction and mining activities, such particulars
relating to utilisation of material, labour and other items of overhead cost.

(2) For the purpose of sub-section (1), proper books of account shall not be deemed to be kept
with respect to the matters specified therein if there are not kept such books as are necessary
to give a true and fair view of the state of the affairs of the company and to explain its
transactions.

Fact
During the course of our audit, to review the audited financial statements for the last five years
(2018-2019 to 2022-2023) and for the period ended 30 November 2023 to ascertain the fair
presentation of the financial statements we required books of accounts along with relevant
vouchers which were mandatorily required to be maintained by the management of the entity as
per section 181 of the companies Act, 1994. But the management failed to provide books of
accounts to us for our review and verification thereof. In this regard, the management informed us
that no books of account were kept or preserved. It is the MSL management who was fully
responsible for maintaining proper books of accounts and relevant vouchers to support fair
presentation of the financial statements.

Most important documents like books of accounts (cash book, bank book, ledgers, subsidiary
ledgers, etc.) and vouchers (debit, credit, journal and etc.) along with supporting documents were

PAGE \* MERGEFORMAT 17
necessary for checking accounting balances presenting in the financial statements and
appropriateness and authenticity of individual transactions appeared in the books of account.

Without such documents, we could not cross check the financial statements with the books of
accounts whether the financial statements are in agreement with the books of accounts or not and
we also could not confirm the account balances being presented in the financial statements as well
as individual transactions.

Assets and Liability Position (Unaudited) of the Company as at 30 November 2023 is as follows:

Particulars In Tk.
PROPERTY & ASSETS:
Non Current Assets: 24,810,051
Property, Plant & Equipment 24,710,051
Security Deposits 100,000
Investment: 68,319,883
Investment in DSE Shares 54,113,290
Investment in Securities under Strategic Account (Annexure-2) 14,206,593
Current Assets: 105,261,422
Accounts Receivable 22,252,855
Advance & Deposit 200,000
Marketable Securities under Dealer Account (Annexure-3) 19,880,878
Advance Income Tax 274,155
Cash & Cash Equivalent 62,653,534
TOTAL 198,391,355
OWNERS EQUITY AND LIABILITIES:
Share Holders Equity: 130,360,424
Share Capital 27,500,000
Revaluation Reserve 47,963,290
Retained Earning 59,732,388
Capital Reserve 2,136,517
OCI Reserve (Unrealized Gain/Loss) (6,971,771)
Current Liabilities: 68,030,931
Accounts Payable 61,845,860
Provision for Income Tax 4,274,155
Liability for Others Expenses 1,910,916
TOTAL 198,391,355

Net Asset Value:

Total Assets Value 198,391,355

Less: Liabilities (68,030,931)
Net Worth/Net assets value 130,360,424

Effect/Comment
1. As the proper books of account were not maintained or kept, the financial statements might
not present fairly.
2. The management might present the financial statements as they wish of not maintaining
required books of account and relevant vouchers for their intended operating results and asset
base. The stakeholders and the users of the financial statements might be deprived of getting
true financial information for taking investment and economic decisions.
3. The users of the financial statements might not also get proper financial information and
through these types of creative financial statements the general shareholders are at severe
risk.

PAGE \* MERGEFORMAT 17
7.2 Finding:
As at 30 November 2023, the entity recognized Property, Plant and Equipment (PPE) of Taka
24,710,051 which could not be confirmed due to not maintenance of books of account and fixed
assets register as well as yearend physical verification report by the management.

Fact
During the course of our audit we observed that as at 30 November 2023, the entity recognized
Property, Plant and Equipment of Taka 24,710,051 which could not be confirmed due to not
maintenance of books of account, fixed assets register. However, the entity could provide us only
the list of the assets mentioning only the quantities without condition of the assets and the
management did not conduct the physical verification of the assets. Through this simple paper, the
value and existence of the material amounts of assets could not be confirmed. Details of PPE as per
unaudited financial statements as on 30 November 2023 are as under:

Property, Plant and Equipment (PPE) Figures in Taka

A. COST: 69,646,077
Balance as on July 01, 2021 69,646,077
Addition during the year -
B. ACCUMULATED DEPRECIATION: 44,936,026
Balance as on July 01, 2021 43,394,904
Charged during the year 1,541,122
WRITTEN DOWN VALUE AS ON JUNE 30.2022 (A-B) 24,710,051

Effect/Comment
As we were not provided with proper records and documents in support of PPE, we cannot
quantify, determine the exact value and the conditions of the assets. Further, the financial
statements might not present fairly.

7.3 Finding:
Security Deposit of Taka 100,000 has been confirmed.

Fact:
We observed that the company made Security Deposit of Taka 100,000 to Central Depository
Bangladesh Limited (CDBL). We confirmed this payment through Money Receipt of CDBL dated 21
March 2006.

7.4 Finding:
Investment in DSE Shares of Taka 54,113,290 has been confirmed.

Fact:
We observed that the company made Investment in DSE Shares of Taka 54,113,290. We confirmed
this investment through DSE documents.

7.5 Finding:
Investment in Securities under Strategic Account of Taka 14,206,593 has been confirmed.

Fact:
We observed that the company made Investment in Securities under Strategic Account of Taka
14,206,593. We confirmed this investment through Clients Stock Balance Report of CDBL dated
30/11/2023.

7.6 Finding:

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 The entity recognized Account Receivable of Taka 22,252,855 as at 30 November 2023 out of
which Taka 20,364,589 would not be realized. And there was no aging since when such
receivables are carried forward.

Fact
During the course of audit we observed that the entity recognized Account Receivable of Taka
22,252,855 as at 30 November 2023. We were informed that an amount of Taka 20,364,589 was
receivable from the clients since long. Details are as follows:

Account Receivable: Figures in Taka

Account Receivables arisen from trading commission 20,364,589
Account Receivables from DSE Clearing House (Broker) 1,888,266
Account Receivables from Client for CDBL Yearly charges -
Total 22,252,855

 The Management provided us the outstanding balance list of clients as at 30/11/2023 as well
as list of closed accounts which shows close account of debit balance of Taka 16,673,829.
However, we were informed that the an amount of Taka 20,364,589 would not be realized.

 Account Receivables from DSE Clearing House (Broker) of Taka 1,888,266 has been confirmed
through Balance Confirmation Letter of Dhaka Stock Exchange Ltd. Dated 03/12/2023.

Effect/Comment
As such accounts were closed, Taka 20,364,589 may not be recovered which should be written off
and net worth of the company as at 30 November 2023 should be reduced to that extent.

7.7 Finding:
Advance & Deposit of Taka 200,000 has not been confirmed.

Fact
The entity showed Taka 200,000 as Advance for office & others under ‘Advance & Deposit’ but no
documents are available.

Effect/Comment
Taka 200,000 as Advance for office & others under ‘Advance & Deposit’ should be written off and
net worth of the company as at 30 November 2023 should be reduced to that extent.

7.8 Finding:
Cash and Cash Equivalent of Taka 62,653,534 as at 30/11/2023.

Fact
We could confirm the bank balances with the bank statements of the company but cash deficit of
Taka 62,653,534 could not be confirmed because of not providing appropriate and sufficient
documents. Cash & Cash Equivalent of the company as at 30/11/2023 as per unaudited financial
statements and bank statements are as follows:

Name of Bank & Cash in Hand As per unaudited As per bank Diff.
Financial statements statements as
as at 30/11/2023 at 30/11/2023
1. Exim Bank Ltd. CD # 00111100008803 375,855 375,855
(Consolidated Customer)
2. The City Bank, CD # 1101063831001 11,358,853 11,358,853 0
(Consolidated Customer)
3. First Security Islami Bank, CD # 26,469 26469 0
13100000406 (Consolidated Custom)
PAGE \* MERGEFORMAT 17
 Name of Bank & Cash in Hand As per unaudited As per bank Diff.
Financial statements statements as
as at 30/11/2023 at 30/11/2023
4. The City Bank, STD #3101084087001 559,667 559,667 0
(Dealer Account)
5. The City Bank, CD#1101063831002 1,352 1,352 0
6. The City Bank, CD # 2951063831001(PIAA) 1,119 1,119
0
8. The City Bank, CD # 2,120,902 2,120,902
0
1121063831001(Strategic Investment
9. Cash Deficit 48,196,416
Cash in Hand 12,901
Total 62,653,534

However, the company management provided us a reconciliation statement for cash deficit as
under:
Client’s Payable Reconciliation Statement
As on 30-11-2023
SL. No. Particular Amount (Tk) Amount (Tk) Remarks
(Add) (Less)
A Payable to Client: - 61,562,091 As per client
B Source of Fund
1 The city bank Ltd 1 11,358,8532 As per Bank Statement
2 Exim bank 375,855
3 FSIBL 26,469
4 Add: Receivable From DSE 1,888,266 As per CNS
5 Less: Payable to DSE 283,768 As per CNS
C Net Source of Fund 13,649,443
Net Payable 61,845,859
D Client’s Payable Status - 48,196,416 Deficit

Against the above mentioned deficit balance, the following amounts are held as assets as per MSL
management statement dated:

Sl.no. Particulars Taka

1 Deposit with DSE (As per deposit documents) 2,500,000
2 DSE Dividend (DSE declared dividend @ 4% for the year 2022-2023 1,731,000
which is not shown in income statement of the company)
3 Investment in SPCL Share in Dealer Account dt. 30.11.2023 16,100,000
4 Investment in SPCL Share in Strategic Account 7,000,000
Total: 0

No documents against above assets balances were provided to us except DSE Deposit. Here it is
worth to be mentioned that transactions of Taka 2,500,000 were not recognized in the financial
statements for the period ended 30 November 2023 though the payments were made from the
company’s bank account resulting in understatement of income.

Effect/Comment:
Particulars Taka
Deficit 48,196,416
Less: Amounts are held as assets as per MSL statement (27,331,000)
Amounts still in deficit (which should be reduced from Net Assets Value) 20,865,416
7.9 Finding:

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 Share Capital of Taka 27,500,000

Fact
The subscribed & Paid up Share capital with which the company has been registered is Tk.
27,500,000.00 (Two Core Seventy five lac) divided into 275,000 ordinary shares of Tk. 100.00 each
as at 30/11/2023 . We were not provided with the RJSC return documents like schedule –X of
31/12/2022 and 31/12/2023. Only submission status dated January 11/2024 was provided.

Share Capital 27,500,000

7.10 Finding:
The company had ‘Revaluation Reserve’ of Taka 47,963,290 as at 30/11/2023.

Fact
We observed that the company had ‘Revaluation Reserve’ of Taka 47,963,290 as at 30/11/2023.
The revelation reserve as per financial statements for the period ended 30/11/2023 is as follows:

Taka
Capital Reserve (72,151,060-8,200,000)-15,987,770 47,963,290
Less Capital Reserve Reduced due to sale of Share -
Total

We were informed by the management that they had original investment in DSE was taka
8,200,000 and while allotting DSE to the company the total allotment was 7,215,106 number of
shares @Taka 10 per share being total Taka 72,151,060 and subsequently shares of Taka
15,987,770 (25%) were sold to a Chinse Company but no selling documents were available.

7.11 Finding:
The company had ‘Retained Earnings’ of Taka 55,870,795 as at 30/11/2023 which could not be
confirmed because of non-preserving books of account as per section 181 of the company act
1994.

Fact:
We observed that the company had ‘Retained Earnings of Taka 55,870,795 as at 30/11/2023 which
could not be confirmed because of non-preserving books of account as per section 181 of the
company act 1994. We were informed that the company did not keep books of account since its
inception.

Retained Earnings:
Last Year Balance 66,885,126
During This Year (11,014,330)
Less: Transferred to Capital Reserve -
Total 55,870,795

Effect/Comment
The financial statements might not present fairly and be manipulated for avoiding tax or gaining by
the then existing management.

7.12 Finding:

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 The company had ‘Capital Reserve’ of Taka 2,136,517 as at 30/11/2023 of which there were no
basis of calculation financial statements.

Fact:
We observed that the company had ‘Capital Reserve’ of Taka 2,136,517 as at 30/11/2023 of which
there were no basis of calculation financial statements.

Taka
Opening Balance 2,136,517
During This Year -
Total 2,136,517

Effect/Comment
The financial statements might not present fairly if there is no basis of calculation.

7.13 Finding:
The company had ‘Account Payables’ of Taka 61,845,860 as at 30/11/2023.

Fact:
We observed that the company had ‘Account Payables’ of Taka 61,845,860 as at 30/11/2023.

Account Payables:
1. Accounts Payables of Trading Client 61,562,092
2. Accounts Payables of DSE Clearing House (Broker) 283,768
Total 61,845,860

 Accounts Payables of Trading Client of Taka 134,483 was closed as at 30/11/2023 which would
be added while calculating net worth of the company.
 Accounts Payables of DSE Clearing House (Broker) of Taka 283,768 was confirmed through DSE
documents.

7.14 Finding:
The company had ‘Liability for Others Expenses’ of Taka 61,845,860 as at 30/11/2023.

Fact:
As per the financial statements the company had ‘Liability for Others Expenses’ of Taka
61,845,860 as at 30/11/2023. Details are as follows:

Taka
Office Rent 123,000
Director Remuneration 211,000
Salary & Allowance 326,484
Telephone Bill 2,726
CDS Bill 70,706
DSE Rent, Elc. Bill & Others 435,000
Utilities & Others 742,000
Total 1,910,916

However, apart from the ‘Liability for Others Expenses’ shown in the financial statements for the
period ended 30/11/2023 the management provided a list of ‘Liability for Others Expenses’ upto
30/11/2023 which are as follows:

SL.No. Head Month Approximate

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 Amount
1 Salary Of Staff November 1 392,284
2 CDBL Monthly Charge November 1 10,274
3 Swantex Ltd Office Rent November, December/23 3 264,000
4 Swantex Ltd Electric Bill December 1 14,881
5 Swantex Ltd Water & Sewerage Bill November 1 10,400
6 Swantex Ltd Generator Bill November 1 1,875
7 Swantex Ltd Service Charge 2020-2023(2500*48) 50 125,000
May 2023 To November
8 Nikunjo Office Rent 771,120
23(7*85680) 9
9 House Rent DSE Room 209 November 1 6,865
10 Water bill November 1 1,610
October –November,
11 Telephone Bill 10,000
December, January 4
12 Cable TV. Connection fee November 1 600
13 Newspaper bill November 1 310
14 Ait Vat November 1 22,850
15 Amber It November 1 3,150
16 B.D Com online ltd November 1 4,025
17 Solution(Network) November 1 4,700
18 5 Months Accounts bill 100,000
19 Storage charge November 20,000
20 CDBL Suspend code withdrawal (2783*350) 974,050
Broker Dealer and Dp registration
21 6000/day -
delay fine
Total 2,737,995

Effect/Comment
‘Liability for Others Expenses’ was Taka 827,079 (Taka 2,737,995 – Taka 1,910,916) shown in less
which should be reduced from net worth of the company as at 30/11/2023.

ToR-2: To review the audited financial statements for the last 5 years.

We were provided with the audited financial statements for the last 5 years but we were
unable to review and comment on whether such financial statements present fairly because
of not providing books of account and relevant documents.

However, Mr. Mohammad Khaled Hossain, Tax and Company Law Consultant proprietor of
‘Swapan & Associates, 122/F North Mugdapara, 1 st Floor, room 06, Mugda, Dhaka-1214)
informed us that he prepared the financial statements in excel sheet based on the monthly
Profit & Loss Account and being audited by the Chartered Accountancy Firm.

We were provided audit reports for the following years:

Sl. No. Years Auditors

1 2022-23 Mollah Quadir Yusuf & Co.
2 2021-22 Mollah Quadir Yusuf & Co.
3 2020-21 Huda Hossain & Co.
4 2019-20 Huda Hossain & Co.
5 2018-19 Huda Hossain & Co.

ToR-3: To assess assets & liabilities (margin loan including interest) of all clients' portfolios

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 including negative equity clients.

The company did not have any margin loan, so we could not assess assets & liabilities (margin
loan including interest) of all clients' portfolios including negative equity clients.

ToR-4: To assess assets & liabilities of dealer accounts (own portfolios).

7.15 Finding:
The company had earned net revenue of Taka 30,614,602 through own portfolio account (vide
account no. 00000001, BO ID: 1203570028973202) maintained with Modern Securities Limited
but only Taka 3,614,602 was recognized resulting in tax liability of taka 8,100,000.

Fact:
1. We wanted to assess assets & liabilities of dealer accounts (own portfolios) of the company.
On our query Mr. Mohammad Khaled Hossain, Tax and Company Law Consultant proprietor of
‘Swapan & Associates, 122/F North Mugdapara, 1 st Floor, room 06, Mugda, Dhaka-1214)
provided us with the a statement showing ‘Accounts of Realized Gain/(Loss) of Dealer
Accounts’ which is as under:

Realized Gain/(Loss) as per annual Realized Gain/(Loss) as per annual

Income Year Transaction Summary Report Transaction Summary Report ( Tax
(Actual) File)
2022-2023 (2,443,528) (2,443,528)
2021-2022 7,913,937 913,937
2020-2021 24,415,315 4,415,315
2019-2020 728,878 728,878
Total 30,614,602 3,614,602

2. We came to know from the concerned personnel that Ms. Khugesta Nur-E-Naharin, Managing
Director, Modern Securities Limited operated the account solely including deposit, withdrawal,
transfer or any other transactions (fully under her control) and the company’s official has no
access to this account and also no transactions occurred under the portfolio account were
accounted for in the company books. The tax consultant showed lump-sum amount as income
for tax purpose.

Effect/Comment

Monetary impact
Particulars Taka
Realized Gain/(Loss) as per annual Transaction Summary Report (Actual) 30,614,602
Realized Gain/(Loss) as per annual Transaction Summary Report ( Tax File) (3,614,602)
Earnings were not fully recognized 27,000,000
Corporate Tax @ 30% which may be paid with penalty and interest and reduced 8,100,000
while determining Net Assets Value

The fact indicates that the Managing Director enjoyed the whole earning which may be termed as
manipulation of company’s fund and the earnings of the other shareholders were reduced and
government was also deprived of revenue earnings.

ToR-5: To assess liabilities owed to Government (VAT. Tax etc.), regulators (BSEC, CASE, CSE),
employees, other parties, if any.

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 7.16 Finding:
Tax assessment was not done for several years which has created government liabilities and Net
Assets Value will be reduced.
Fact:
We observed that Tax assessment was not done for several years which has created government
liabilities and Net Assets Value will be reduced. Income Tax Status of the company since inception
to FY 2022-2023 is shown in the following format:

Tax paid in advance &

at 30 November 2023
payable/(Receivable)

Present Tax Status as

Tax Assessed by DCT

Final Tax Assessed if

Tax Provision as per
Financial Statement

Deducted at source
Assessment Year
Income Year

Tax
2022-2023 2023-2024 1,683,395 - - 1,683,395 - Done
2021-2022 2022-2023 3,586,390 - - 3,170,949 - Done
Assessment
Pending
2020-2021 2021-2022 3,808,892 - - 3,084,635 -
(Tax
Liability)
2019-2020 2020-2021 - - - 983,046 - Done
2018-2019 2019-2020 - - - 4,597,260 - Done
Including
Interest &
Fine Tk.
2,548,203
2017-2018 2018-2019 3,435,081 14,064,250 - 3,383,352 13,041,950
Revision on
Possess.
(Tax
Liability)
2016-2017 2017-2018 4,195,405 - - 3,881,165 - Done
2015-2016 2016-2017 3,811,380 - - 3,415,880 - Done
Including
Interest &
Fine Tk.
189,752
2014-2015 2015-2016 2,287,484 - - 2,002,147 506,005
(Tax
Liability)
Revision on
Possess

Appeal was not field to the authority till date of our reporting resulting no tax benefit will get from
the tax authority.

Effect/Comment
Future tax may be paid which is reduced from Net assets value:

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 Tax paid in advance &

at 30 November 2023
payable/(Receivable)

Present Tax Status as

Tax Assessed by DCT

Final Tax Assessed if

Tax Provision as per
Financial Statement

Deducted at source
Assessment Year
Income Year

any

Tax
Assessment
Pending
2020-2021 2021-2022 3,808,892 - - 3,084,635 - (Tax
Liability)**
Including
Interest &
Fine Tk.
2,548,203
2017-2018 2018-2019 3,435,081 14,064,250 - 3,383,352 13,041,950
Revision on
Possess.
(Tax
Liability)
Including
Interest &
Fine Tk.
189,752
2014-2015 2015-2016 2,287,484 - - 2,002,147 506,005
(Tax
Liability)
Revision on
Possess
Future tax may be paid 13,547,955

*** Other than the above mentioned tax liability future tax obligation may arise on the
pending tax assessment for the year 2020-2021.

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 ToR-6: To evaluate value of business of the Company including Net Asset Value..

7.17 Finding:
Net Asset Value of the Company as at 30/11/2023 stood at Taka 73,889,868 considering other
elements after date of 30 November 2023.

Fact:
Considering the assets and liability position as per unaudited financial statements for the period
ended 30 November 2023 and elements after date of 30 November 2023, we have determined the
Net Asset Value as under:

Particulars Finding Ref. Taka

Net Assets Value as per unaudited Financial Statements for 7.1 130,360,424
the period ended 30/11/2023
Account Receivables arisen from trading commission would 7.6 (20,364,589)
not be realized
Cash Deficit amounts still in deficit 7.8 (20,865,416)
Accounts Payables of Trading Client was closed as at 7.13 134,483
30/11/2023
‘Liability for Others Expenses’ shown in less in the unaudited 7.14 (827,079)
Financial Statements for the period ended 30/11/2023
Future tax may be paid 7.16 (13,547,955)
Expenditure for the company made from Strategic 7.19 (1,000,000)
Investment Account (A/c. no. 1121063831001) with The City
Bank.
Adjusted Net Assets Value by considering effect of 73,889,868
transactions as at 30/11/2023 and after date events

ToR-7: Any other areas to be examined and/or evaluated by the auditor for assisting the decision
of acquisition.

7.18 Finding:
The Managing Director appeared to have failed to establish robust internal control system within
the organization and established autocratic management system.

Fact:
Our review revealed that the Managing Director appeared to have failed to establish robust
internal control system within the organization and established autocratic management system
due to the following reasons:

1. Sole signatory of all documents like bank, voucher passing;

2. Sole authority to conduct any kind of transactions;
3. Sole operator of company’s own portfolio accounts;
4. Non-maintenance of books of account (neither manually nor electronically);
5. Non-creation of delegation of financial authority;
6. Non-respondent to government rules and regulations;
7. Non-set up of accounts and finance department;
8. Non-ensuring segregation of duties;
9. Preparation of monthly profit and loss account without appropriate papers and documents;
10. Non-compliance in many cases in tax and Vat deduction at source;
11. Yearly increment of salary of the Managing Director by herself without approval of the Board
of Directors;
12. Non-preservation of relevant vouchers and documents and so on.

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 Effect/Comment
By establishing autocratic management system the Managing Director ensured her own financial
benefits rather than ensuring the safeguarding the wealth of the other shareholders and interest of
the employees of the company resulting in which the total operating chain was broken down.

7.19 Finding:
Taka 2,000,000 has been withdrawn from Strategic Investment Account (A/c. no.
1121063831001) with The City Bank.

Fact:
We observed that Taka 2,000,000 has been withdrawn from Strategic Investment Account (A/c. no.
1121063831001) with The City Bank for the following purposes:

Date as per Bank Statement Taka Purpose and comment

03/01/2024 1,000,000 Expenditure for the company. Net Asset
Value will be reduced.
04/02/2024 1,000,000 Deposit to DSE which will be recovered.

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