Auditing (FAC-603)

Assignment Topic: Auditing as a profession in Bangladesh

Assignment No: 1

Prepared For
Md. Hossen Miazee
Lecturer, Head of Internship & Placement, School of Business (UITS)

Prepared By
Sujan Bhowmik
ID: 16102538
MBA, Summer 2016

Date of Submission: 20th July, 2016

Auditing
The word 'Audit' is originated from the Latin word 'audire' which means 'to hear'.

Auditing Definition: A systematic process of objectively obtaining and evaluating

evidence regarding assertions about economic actions and events to ascertain the degree
of correspondence between those assertions and established criteria and communicating
the results to interested users.

According to Lawrence R. Dicksee, "an audit is an examination of accounting records

undertaken with a view to establishing whether they correctly and completely reflect the
transactions to which they relate. In some instances, it may be necessary to ascertain
whether the transactions themselves are supported by authority."

R. K. Mautz defines auditing as being "concerned with the verification of accounting

data, with determining the accuracy and reliability accounting statement and reports."

Internal audit
Internal audit, also referred as operational audit, is a voluntary appraisal activity undertaken by
an organization to provide assurance over the effectiveness of internal controls, risk management
and governance to facilitate the achievement of organizational objectives. Internal audit is
performed by employees of the organization who report to the audit committee of the board of
directors as opposed to external audit which is carried out by professionals independent of the

organization and who report to the shareholders via audit report.

External audit
External audit, also known as financial audit and statutory audit, involves the examination of the
truth and fairness of the financial statements of an entity by an external auditor who is
independent of the organization in accordance with a reporting framework such as the IFRS.

Accounting
It is a systematic process of identifying, recording, measuring, classifying, verifying,
summarizing, interpreting and communicating financial information. It reveals profit or loss for a
given period, and the value and nature of a firms assets liabilities and owners equity.

Auditor
a person who conducts an audit, a person appointed and authorized to examine accounts and
accounting records, compare the charges with the vouchers, verify balance sheet and income
items, and state the result.

Regulations of professionalism and ethics of an auditor

The professionalism of an auditor is of utmost significance in the light of the powers he exercises
case he deems fit. But at the same time, none would like that he would be arrogant, unscrupulous
and unreasonable while conducting an audit. So has been there provided regulatory restrictions
as to what he should do and what not.
In 1973 the institute of chartered account order aims at regulating the profession of financial
auditors of Bangladesh. Similarly, chartered accountants act, 1949 regulates the Indian
professional accountants. Similar, regulatory laws exist in all the industrially developed nations.
All persons passing certain specified qualifications or those having passed the examinations and
completed the training prescribed by the institute of chartered Accountants, can become its
members. There are two categories of members of Bangladesh institute of chartered accountants
(ICAB) associates and fellows. A person becomes an associate member of the institute as soon as

his name is entered in the membership register. These entities he /she to write ACA after his/her
name. An associate in continuous practice in Bangladesh for at least five years and any other
associate who has been a member of the institute, can be enrolled as a fellow of the institute and
is entitles to use the words FCA after his/her name.
According to the ICAB order, 1973 clearly defines the ethical standard of a member of the institutes.
Any contravention of the prescribed ethical standard will invoke the penal measures for such a
breach as laid down in the statue. There have been provided different penal measures for different
types of professional misconduct. Membership of the institute is not mandatory but for doing practice
as a professional accountant, membership is obligatory. Someone getting into a

substantive cadre job may not be forced to become a member of the institute. All these are about
the institutional methods.
The IFAC considers the following to the fundamental principles by which an accountant should
be governed in the conduct of his professional relation with others.
Integrity: An accountant should be straightforward, honest and sincere in his approach to his

professional work.
Objectivity: An accountant should be fair and should not allow prejudice or bias to override

his objectivity. While on financial statements which come under his review, he should maintain
an impartial attitude.
Independence: When in public practice, an accountant should behold and appear to be free

of any interest which might be regarded, whatever be it actual effects, as being incompatible with
integrity and objectivity.

Confidentiality: An accountant should respect the confidentiality of informations

required in
the course of his work and should not disclose any such information to a third party without a
specific authority or unless there is a legal or professional compulsion to disclose. The breach
would charge him for guilty of misfeasance.

Technical standard: An accountant should carry out his professional work in accordance
with the technical and professional standard relevant to that work.

Professional competence: He should have duty to maintain his level of competence

through his professional career. He should only undertake works which he or his firm can expect to
compete with professional competence and within reasonable time. Last but not the least, an
accountant should conduct himself and refrain from any conduct which might bring discredit to the
profession.

In fine the practice of professional ethics is largely a matter of conscience and the determination
of the members to distinguish between what is wrong and what is right. It thus involves a high
civic sense.

Present Scenario & Auditing as a profession in Bangladesh

Auditing a systematic process of objectively, obtaining and evaluating evidence, regarding
assertions about economic actions and events to ascertain the degree of correspondence between
these assertions and established criteria. It is an independent examination of financial statements
or related financial information of an entity. The results of the examination are finally expressed
in the form of a specific opinion communicated to the relevant parties. Auditing of financial
statements of companies registered under the companys act 1994 is compulsory in Bangladesh.
According to Sec 213(3), the auditor is to make a report to be presented in the annual general
meeting of the company on accounts examined by him. Before acceptance of the International
Standards of Auditing (ISA) by the Institute of Chartered Accountants of Bangladesh (ICAB),
detection of errors and frauds, and prevention of errors and frauds were the two important
objectives of auditing in Bangladesh. At present, Bangladesh follows ISA guidelines in auditing.
Auditing practices are regulated by the Companies Act 1994, the Banking Companies Act 1991,
the Insurance Act 1938, the Securities and Exchange Commission Act 1993, the Securities and
Exchange Rules 1987, the Foreign Donations Regulation Rules 1978, and the Co-operative
Societies Ordinance 1984.
According to the Companies Act 1994, accounts of companies registered under this act must be
audited by chartered accountants within the regulations of the Bangladesh Chartered Accountants
Order 1973. Similarly, all books of accounts maintained by a NON-GOVERNMENT
ORGANIZATION receiving foreign donations shall be audited by a chartered accountant as defined
in the same Order. The accounts of every co-operative society are to be audited at least once in every
co-operative year. The audit is to be conducted by the Registrar, or by an audit officer authorized by

him, and by such date as may be prescribed. Accounts of enterprises under sector corporations are
audited at three levels - corporations' internal audit departments, independent professional audit
firms, and the Comptroller and Auditor General (C&AG) of Bangladesh. Internal audit, sometimes
similar to an investigation, and often termed as management audit, is conducted by the employees of
a corporation on special issues. The purpose of this audit is to check whether the corporation's rules
and regulations are being properly followed at the time of execution of any policy. Independent
professional audit is conducted by chartered accountants to pass opinion about the financial
statements annually. The C&AG has the obligation to conduct a

government commercial audit where there is any government interest in the form of ownership,
or investments, or where the government provides help in the form of subsidies.
The Constitution of Bangladesh empowers the C&AG of Bangladesh to conduct an audit of the
accounts of the Republic and report to the jatiya sangsad (parliament) on the findings. The public
accounts of the Republic and of all courts of law, authorities and officers of the government are
audited and reported on by the Auditor General. For that purpose he or any person authorized by
him has access to all records, books, vouchers, documents, cash, stamps, securities, stores or
other government property in the possession of any person in the service of the Republic. In the
exercise of his functions, the C&AG are not subject to the direction or control of any other
person or authority. Having derived his authority from the Constitution, he with the assistance of
nine Directors General placed under him, conducts audit of all government departments,
agencies, public sector corporations and public companies having fifty percent or more
government owned shares.
The purpose of government audit is to ensure transparency and accountability in the use of
resources in all types of government management. The objectives of audit work includes
verification of the statements of accounts and statement of income and expenditure to determine
whether these are prepared truly and correctly; examination of the adequacy of the audited body's
financial management systems and internal control framework; making sure that sufficient
arrangements have been made to achieve economy, efficiency and effectiveness in the utilization
of the entity's resources; examination of the trading, manufacturing, profit and loss accounts and
balance sheets and other subsidiary books of accounts with regard to state-owned commercial
organizations; and undertaking special studies where necessary to determine if environmental
legislation and procedures are being strictly followed.

The audit directorates and training academy placed under C&AG are Commercial Audit; Local
Audit; Works Audit; Foreign Aided Project Audit; Civil Audit; railway Audit; Post, Telephone
and Telegraph Audit; Defense Audit; Mission Audit; and Financial Management Academy
(FIMA). Each of the Directorates mentioned above has its own functional set up headed by a
Director General.

Commercial Audit Directorate

The Commercial Audit Directorate was set-up in 1956 by the government of Pakistan to
undertake audit in state-owned commercial organizations. Following the independence of
Bangladesh, the role of the department of commercial audit expanded because of the
nationalization of industries, banks etc. At present, all autonomous and semi-autonomous public
enterprises, government-owned commercial bodies, including nationalized banks and public
enterprises, having minimum 50% government share are audited by the directorate.
Local and Revenue Audit Directorate
The Director General, Local and Revenue Audit (DG, L&RA), conducts audit in two important
fields covering about 12,000 government units/individual offices in a wide range of areas. These
are the government offices (other than Post, T&T, Works, Roads & Highways, Railways, Public
Health Engineering and Defense directorates; hospitals; educational institutions; sports and
cultural bodies) and autonomous and local bodies (city corporations, municipalities, universities,
port authorities and other autonomous bodies).
Directorate of Works Audit
The present office of the Directorate of Works Audit was established with effect from 18 May
1964 under the name Director of Audit and Accounts Works and WAPDA, East Pakistan, Dacca.
After liberation, it was renamed as Accountant General Works & WAPDA, Bangladesh, DHAKA
and entrusted with the accounting and auditing function of the works expenditure and auditing
the accounts of Bangladesh WAPDA. Following departmentalization of government accounts,
the present office of the Directorate of Works was established in 1985.
Foreign Aided Projects Audit Directorate
Different foreign countries and donor agencies provide grants and loans for different development
projects in the form of investment or technical assistance. The Director General, Foreign Aided
Projects Audit, is responsible for auditing all projects implemented with funding by foreign aid. The
main responsibilities of this Audit Directorate are to carry out audits in all donor funded development
projects to prevent error and fraud, to ensure accuracy and completeness of

accounting records and examine the adequacy of rules and regulation; to prepare the annual audit
report and submit the same to C&AG for placement before the parliament; to conduct audits of
all Accounts and Financial Statements of donor fund in accordance with the agreement between
the government and donors; to express an opinion as to whether the financial statements of the
donor funded projects presented are consistent with international standards on auditing, whether
the accounts prepared are in accordance with accepted principles and whether they present fairly
the results of the operation of the project. In terms of IDA and ADB loans, a separate opinion
needs to be furnished for the statement of expenditure.
Civil Audit
Following the departmentalization of government accounts, the Civil Audit Directorate was
established in 1985 to strengthen the capability of the C&AG in discharging his duties. This
directorate carries out audits in the following accounts offices: office of the Controller General of
Accounts, Chief Accounts offices, Regional Accounts offices, District Accounts offices and
Upazila Accounts offices.
Railway Audit Directorate
The present office of the DG Railway Audit, headed by a Chief Auditor, and located at the
Central Railway Building (CRB) CHITTAGONG, was established in 1950. This office was
entrusted with the audit responsibility of the Eastern Bengal Railway and Pakistan Eastern
Railway from 1950 to 1961 and from 1961 to 1971 respectively. Following the liberation of
Bangladesh in 1971, all audit functions of Bangladesh Railway were conducted by this office
which was renamed as the office of the DG Railway Audit in 1995. The office has 208 personnel
including one director, two deputy directors, and 14 audit and accounts officers working in the
regional and divisional offices throughout Bangladesh.

Conclusion
In todays world; auditing has become an incorporated segment of the association. All association
wants auditing not only for avoidance and recognition of fake but in addition for organizational
effectiveness. Auditing plays an essential part to appropriately finish the accounting records and

timely preparation of the consistent financial information. Internal audit moreover helps organization
to defend the property and maintaining the arranged and effectively accomplish of the business
including adherences to the management policies. The manner of auditing is becoming easier day by
day because of using computer aided audit. The computer aided audit tools and technique software is
simplifying and automating the audit process. The auditor is now able to find any kind of fraud or
material misstatement through the use of CAATTs software. Government audit also helps the
government to find whether the resources are used effectively and efficiently. They evaluate the data
and directly report to the Comptroller and Audit general of Bangladesh. Also to guard the
shareholder, creditor and supplier from any kind of fraud, every corporation must verify their
financial report by an external auditor. The external auditor must be an independent man also has to
be a member of the ICAB in Bangladesh.

In modern business advancement audit is one of the core factor to be considered. Because
auditing provides support to the whole organization in such a way that it serves both the external
and internal users. For internal users it provides information to manager to make judgment and
for external user it provides guarantee that the financial report is all right and out of any kind of
material misstatement.

Reference
1. http://print.thefinancialexpress-bd.com/old/more.php?
news_id=145121&date=2011-08-05
2. http://www.icab.org.bd/index.php?
option=com_content&view=article&id=51&Itemid=5
3. http://www.assignmentpoint.com/search/?cx=partner-pub8449447137375313%3A2092802913&cof=FORID%3A10&ie=UTF8&q=+auditing+as+a+profession+in+bangladesh&sa=Search&siteurl=www.assi
gnmentpoint.com%2F&ref=www.google.com.bd%2F&ss=3401j4215681j6
4. https://en.wikipedia.org/wiki/Audit

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