Professional Documents
Culture Documents
INTRODUCTION
In todays society the exercise of an auditors to the economic and ethical
leadership sets the bounding standard or in other words equips an auditor
in such a way that recognizes him as a reliable body. With the growing
conscious recognition of the importance of financial data in the ordering of
everyday business and economic life, the need of basic economic facts is
providing
constantly
enlarging
opportunity
for
the
accounting
HISTORY OF AUDITING
The complicated evolution of auditing has been changing throughout the
historical changes. Thus the practice of auditing have always had a
dramatic shift of change to cope with the needs of everyday business
environment. Auditing has been around since the beginning of human
civilization, focusing mainly, at first, on finding fraud. As the United States
grew, the business world grew, and auditing began to play more important
roles. In the late 1800s and early 1900s, people began to invest money
into large corporations. The Stock Market crash of 1929 and various
scandals made auditors realize that their roles in society were very
important. Scandals and stock market crashes made auditors aware of
deficiencies in auditing, and the auditing community was always quick to
fix those deficiencies. The auditors job became more difficult as the
accounting principles changed, and became easier with the use of internal
controls. These controls introduced the need for testing; not an in-depth
detailed audit. Auditing jobs would have to change to meet the changing
business world. The invention of computers impacted the auditors world
by making their job at times easier and at times making their job more
difficult.
The practice of auditing has been in the human society since its
beginning. Auditing was used mostly for the detection of fraud and was
INTRODUCTION TO AUDITING | ACT 341
PAGE |
This Act of 1862 showed that there was a great demand for
that
was
viewed
by
professional.
INTRODUCTION TO AUDITING | ACT 341
PAGE |
outsiders
as
more
clerical
than
THE AUDITOR
INTRODUCTION TO AUDITING | ACT 341
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company's
financial
statements
are
presented
by
its
system
and
procedure,
operations
and
activities
of
an
and
important
guidelines
to
measure
concerns
10
on
financial
statements.
The
pronouncements
issued
by
11
successful
organization,
which
established
individual
to
checking
for
distributed
compliance
with
laid
down
procedures and has no role in connecting upon which procedures are the
right ones: sterile mode of internal auditing if fortunately seldom seen
now a days. So it appears that internal audit is concerned to review all the
INTRODUCTION TO AUDITING | ACT 341
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12
13
14
audit
or examination
Federal
funds received
assurance
to the
US federal government
and
non-profit organizations,
15
as to the
recipients,
such as
compliance
(CPA) and
along with a
that
seeks
systematic
1993
to
improve
review
of
patient
care
care
against
into the
United Kingdom's
process
quality improvement
and
outcomes
explicit
criteria
through
and
the
implementation of change".
The key component of clinical audit is that performance is reviewed
(or
audited)
not it provides a
framework
assessment
assessments
include
of
system
interviewing
or
staff,
application.
Manual
performing
security
standards
Testing
Surveillance
Inspection
16
Auditing
Certification
Registration
Accreditation
5) Environmental Audit
sustain
and position.
Environmental Auditors can get certified through written exam and
acceptance of the Environmental Auditor Association code of ethics.
Depending on the nature of the audit, there are several different
designations to choose from. CECAB administers these designations.
6) Financial Audit
company
or any other
legal entity
(including
accounting
and
auditing
17
internal auditors,
who do
External auditors
auditing
involves
the
utilization
of
systematic
activity.
The
scope
of
internal
auditing
internal control
within
an
and
regulations.
Internal
auditing
frequently
involves
of the
Board of Directors,
8) Performance Audit
18
non-profit
using
structured
and
professionally
adopted
methodologies.
In most countries, performance audits of governmental activities are
carried out by the external audit bodies at federal or state level.
Many of these audit bodies have established guides for conducting
performance
audits
independence,
supervision,
continuing
professional
19
Performance
auditing
differs
from
performance
financial
statements
are
discovered,
the
auditors
will
direct
20
environmental audits.
In
financial
Auditing Rules
Its important to understand the guidance given to auditors on the topic of
fraud. Accountants performing audits in the United States follow Generally
INTRODUCTION TO AUDITING | ACT 341
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21
22
Professional
bodies
in
various
countries
have
issued
23
corresponding
international
Auditing
Guidelines.
However,
in
developing the SAPs, the institute also takes into consideration the
existing laws, customs, uses and business environments of Bangladesh.
The international accounting standards committee (IASC) developed by
professional bodies all over the world has been engaged in formulating
and publishing standard of financial accounting. Auditing and accounting
professions are therefore correlated, coordinated and interdependent
subjects.
The institute of chartered accountant of Bangladesh (ICAB) can be briefly
classified asa) statements on accounting and auditing, including statements of
auditing practices(SAPs)
b) Accounting standards
c) Guidance notes on matters relating to accounting, auditing,
taxation, company law, ethics and other related matters.
d) Opinion on specific queries
e) Research studies and other miscellaneous publications
The council of the institute of chartered Accountant of Bangladesh
regularly issues statements on basic principles governing an audit. A
member of the professional body is to generally follow these guidelines
while conducting an audit. The auditor should be straightforward, honest
and sincere in his approach to his professional work.
24
There
is
no
meaningful
relationship
without
proper
25
adapted
from
behavioral
research
approaches.
The
26
record,
systems
and
procedures
and
operations
of
an
27
safeguarded
and
properly
accounted
for,
whether
the
28
The need to conduct special requested projects from the Audit &
Governance Committee and senior management may also
require
the
deferral
of
planned
audits.
Note
that
procedures
special
involving
requested
little
or
projects
no
require
notification
different
to
involved
management.
29
anticipated
Obtain
cooperation
department
staff
from
as
the
line
management
necessary to
identify,
and
obtain
for
information
from
example,
central
whenever
sources
possible,
rather
obtain
than
from
6. Wrap-up Audit
30
8. Disseminate Report
the
President, the
CFO
and the
department
of
agreed-upon
management
actions
and
31
out
assigned
responsibilities.
Examinations
and
Safeguarding of Assets
32
1. Safeguarding of Assets:
Internal auditors should review the means of safeguarding assets
and, as appropriate, verify the existence of such assets. Internal
auditors should review the means used to safeguard assets from
various types of losses such as those resulting from theft, fire,
improper or illegal activities, and exposure to elements. Internal
auditors, when verifying the existence of assets, should use
appropriate audit procedures.
setting
operating
standards
to
measure
an
activity's
33
Under-utilized facilities.
Nonproductive work.
Overstaffing or understaffing.
is
responsible
for
establishing
operating
or
refers
to
special
purpose
activities
of
an
government
34
grants. Special
purpose
auditors
appropriate
auditors
levels
may
depending
should
of
report
management.
recommend
on
the
such
Additionally,
appropriate
circumstances.
conditions
courses
Internal
to
the
internal
of
action
auditors
may
goals.
The
internal
auditors'
evaluation
of
the
35
Controls
for
measuring
and
reporting
the
accomplishment of objectives and goals are established
and are adequate.
whether
the
underlying
assumptions
are
36
37
Confidentiality:
An
accountant
should
respect
the
38
Control environment:
Sometimes referred to as the tone at the top of the organization,
meaning the integrity, ethical values, and competence of the
entity's people; management's philosophy and operating style; the
way management assigns authority and responsibility and organizes
and develops its people; and the attention and direction provided by
the board of directors. It is the foundation for all other components
of internal control, providing discipline and structure.
39
Control activities:
Policies
and
procedures
that
help
ensure
that
management
of
operating
performance,
security
of
assets,
and
segregation of duties.
Monitoring:
The internal control system must be monitored by management and
others in the organization. This is the framework element that is
associated with the internal audit function in the organization, as
well as other means of monitoring such as general management
activities and supervisory activities. It is important that internal
control
deficiencies
be
reported
40
upstream,
and
that
serious
41
An
effective internal control structure will keep the right people informed
about the organization's progress (or lack of progress) in achieving its
objectives, but it cannot turn a poor manager into a good one.
Internal control is not a solution to management and the board about the
organization's accomplishment of its objectives. Due to limitations
inherent in all internal control systems, it can only provide reasonable
assurance. For instance, due to simple error or mistake; breakdowns in the
internal control structure can occur, faulty judgments that could be made
at any level of management as well. Controls can be inserted by collusion
or by management override. Lastly, there must be a cost-benefit analysis
in the design of the system, meaning that the design of the internal
control system is a function of the resources available.
42
43
for
the
system
by
their
colleagues
throughout
the
Compensating Controls:
The audit committee should be tuned-in to the tone-at-the-top of the
organization as a first indicator of the functioning of the internal control
system. It is important to realize that both the design and compliance with
the internal control system is important.
In addition, audit committees should realize that the system of internal
control should be scaled to the organization. Some organizations will be so
small, for example, that they will not be able to have appropriate
segregation of duties. The message here is that the lack of segregation of
duties is not automatically a material weakness, or even a reportable
condition, depending on the compensating controls that are in place.
INTRODUCTION TO AUDITING | ACT 341
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44
All checks are hand signed by an officer of the company, rather than
using a signature plate that is in the control of the person that
prepared the checks.
A periodic report of all checks that are cleared at the bank could be
prepared by the bank and forwarded to an officer of the company
for review.
45
about
management
override,
and
the
controls
over
46
Project title
Project lead/s (and name of the person who wrote the report, if
different)
Date of report
2. Table of contents:
Recommended if report runs to more than eight pages
3. Executive summary:
It is good practice to begin a report with an executive summary (or
abstract). This should be a short paragraph (certainly no more than
10% of the total length of the report) that encapsulates the main
thrust of the report. Identify the issue, state the key findings,
conclusions and what course of action is recommended. This will
help people identify whether they need to read the full report, and
will be a Useful prcis for busy managers. You may (instead of or in
addition to an executive summary) want to produce a one A4 page
summary of the report for this purpose, especially if the report is
very long.
4. Background:
This is essentially narration, clarifying why the audit was done. For
example, was the project prompted by an identified local problem or
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47
48
49
initials of all authors followed by the title of the article, the title of
the journal, the year of publication, the volume number and the first
and last page numbers. References to books should give the names
of any editors, place of publication, publisher and year.
13. Appendices:
Include a copy of the pro-forma/questionnaire that auditor used for
data collection.
50
companys
act
1994 is compulsory in
NON-GOVERNMENT
accountant as defined in the same Order. The accounts of every cooperative 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 INTRODUCTION TO AUDITING | ACT 341
PAGE |
51
jatiya
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
52
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
53
the
accounts
of
Bangladesh
WAPDA.
Following
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.
INTRODUCTION TO AUDITING | ACT 341
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54
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
55
56
57
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
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.
58
BIBLIOGRAPHY
Lee, T. A., The Evolution of Audit Thought and Practice(New York: Garland
Staub,
Walter
A.,
Auditing
Developments
During
the
Present
Century(Massachusetts:
Harvard University Press, 1942), p.15, 17, 26, 29
o
59
1983), p.3, 7
60