Audit Procedure: A Case Study on ACNABIN- Chartered Accountants

Audit Procedure: A Case Study on ACNABIN- Chartered Accountants

ACNABIN Chartered Accountants – an independent a member of Baker Tilly International, which is the world’s 8th largest network – as my first experience to professional world. ACNABIN has established a close working relationship with many international and national consulting firms for providing services to clients in Bangladesh. In this way ACNABIN has enriched its professional base for serving the clients interest in best manner.

Objective of the Project:

Internships are required to enrich the practical working knowledge by relating it to the theoretical education provided. There is vast dissimilarity between this theoretical based and reality based operation of an organization. Hence, to minimize this gap and complete our wisdom in our line of study, it is essential to work in an organization. Also, it creates a base for our career. Thus to complete our graduation, the internship is a pre-requisition.

The purpose of this internship placements are:

• Internship provides an intern with first time working experience.
• Internship enables us to relate our theoretical knowledge with practical knowledge.
• Internship helps to adjust an intern with the organization’s environment.
• Internship helps building up confidence with in an intern to become a successful employee.
• Internship enables to have an overall idea on the audit procedure of ACNABIN Chartered Accountants.
• Internship helps to gain practical knowledge on how audit is performed in corporations, companies and non-profit making organizations.
• Internship helps in to identify about how to accumulate and process evidences to make an audit report.

Methodology of the Project:

The preparation of internship report which gives the understandings on “Audit procedure in Bangladesh: A case study on ACNABIN Chartered Accountants”, the information is collected from two type of sources

• Primary sources
• Secondary sources

Primary sources are:-

• Information collected by working with audit teams.
• Information collected by conversing with engagement partners, audit managers, audit staffs and articled students.
• Information collected by interviewing clients.
• Information collected by observing during working period.

Secondary sources are:-

• Information collected from Annual audit report, management audit report, accounting system and audit working papers audited by ACNABIN.
• Information collected from the different publications of the Institute of Chartered Accountants of Bangladesh (ICAB).
• Information collected from various files and books like Bangladesh Standards of Auditing (BSA).
• Information collected from Internet.

Introduction

At present, ACNABIN is ranked as No. 1 Chartered Accountants Firm by Bangladesh Bank. The global affiliations of ACNABIN have enabled the firm and its people to obtain training overseas and up-to-date information and knowledge in the profession. Currently, ACNABIN is an independent member firm of Baker Tilly International, an international accounting network of 149 firms in 125 countries. ACNABIN was associated with Arthur Andersen, LLP the then global leader in the profession till the closure of the accounting conglomerate in 2002.

Since the firm’s inception, ACNABIN has been providing market survey, management review and consultancy services to clients actively involved in industry, trade, finance, microfinance, education, health, social services, and agriculture in the private, public and NGO sectors throughout Bangladesh, as well as to various UN agencies and other development partners. ACNABIN has been appointed by various governmental and non-governmental organizations to carry out consultancy services for donor aided development projects. Many of those engagements involved projects funded by international agencies such as the World Bank, ADB, UNDP, UNICEF, UNFPA, WFP, CIDA, DFID, FAO, ILO, IFAD, NORAD, SIDA, USAID, UNCDF, ODA, European Commission (EC), LWF/DWS, KfW-Germany, BftW, GTZ, Stromme Foundation, CARE International, DANIDA and Save the Children. ACNABIN has sufficient depth in conducting market survey with expert resources as well as it has adequate logistics facilities backhand and personnel to be able to carrying out research and its plan implementation. It is undoubted that the organization possesses demonstrable knowledge of commodities and services procured by UN Agencies. ACNABIN is also an enlisted auditor of USAID and European Commission.

History

ACNABIN was formed in February 1985, with a mission to continually add value by helping clients succeed. The firm is in public practice for more than 29 years. Seven chartered accountants founded this partnership with a vision to build an institution which would foster an environment for leadership, continuous growth, learning, and collaborations. Over the past twenty-nine years, the firm has become one of the leading and most reputable chartered accountancy firms in Bangladesh with global affiliations. At present, ACNABIN has ten partners whose expertise in audit, review, consulting, and taxation has established the firm as a multidisciplinary professional organization.

All the partners have many years of experience of working in Bangladesh and with international consultants and organizations operating both locally and overseas.

Audit procedures followed by ACNABIN

The primary goal of ACNABIN at the time of involving in any audit engagement is to provide the opinion on Financial Statements in accordance with Bangladesh Standards on Auditing (BSA) as well as International Standards on Auditing (ISA). ACNABIN also seek to provide auditing and management consultancy services that are innovative, efficient and most importantly responsive to the client’s needs.

It is another fact that before starting the audit procedure there presents a series of more procedures.

For example audit engagement letter, audit clearance letter, team meeting etc.

Engagement Procedures

Before discussing the Audit Procedures followed by ACNABIN, I will try to focus on the engagement procedures through which ACNABIN is engaged/ recruited by the client to perform the audit. Before starting the audit work, some letters are exchanged between ACNABIN and clients. ACNABIN faces three kinds of situations in engagement process:

• Engagement with new client.
• Engagement with existing client
• Directly appointed by the client.

NEW CLIENTS

In case of new clients, four letters are exchanged between ACNABIN and client including acceptance letter of appointment at the time of involving with the new client. Following stages are followed by both ACNABIN and client:

STAGE – 1: Client requires for technical and financial proposal from the ACNABIN

Client generally gives circular with the newspaper or directly wants proposal for audit from the audit firm. In case of direct offer they request to the audit firm to submit a quotation for the cost of conducting audit of the client. They also mention the specific date to confirm the decision taken by the audit firm and completion date for audits. The client firm mentions here the key areas of the audit in the form of attachment. It assures that if ACNABIN audits client’s firm, they will supply the formal terms of reference/audit mandates to govern the conduct of audit.

STAGE – 2: The technical and financial proposal is sent by ACNABIN to the client

After reviewing the client letter or paper’s circular, audit firm drafts a proposal letter to the client. The proposal letter contains technical and financial proposal for carrying out the subject of audit. ACNABIN estimates its personnel costs after considering the mandates to be utilized and using the minimum hourly rate of fees as prescribed by The Instituted of Chartered Accountants of Bangladesh (ICAB). The firm also mentions that as it is an estimate, the cost may vary with variation in number of mandates estimated to be utilized for the job.

STAGE – 3: Acceptance by the client on the basis of proposal of ACNABIN – A letter of contract

After receiving proposal letters from various audit firms, client then selects the one which is favorable to them, and it appoints the audit firm for audit purpose. From the technical and financial proposal of the ACNABIN the client company understands the nature of the audit (such as independent, external) to assess the organization’s internal control system in administering the matter of audit.

STAGE – 4: A letter is sent by ACNABIN to the client confirming to work with the client – Confirmation Letter

After receiving the acceptance letter from the client, ACNABIN provides confirmation letter describing the firm’s willingness to work with the client.

EX-CLIENTS OR CLIENTS FROM LAST YEAR

Three letters are exchanged between the ACNABIN and client:

• Willingness letter for reappointment: In this letter ACNABIN wants to audit this year. It can request to increase audit fee or change some other conditions.
• Client sends appointment letter.
• ACNABIN accepts this appointment.
• CLIENTS WILLING TO APPOINT ACNABIN

If the client is interested to work with ACNABIN, then it directly sends an appointment letter to the firm which includes all terms and conditions. If all terms and conditions are favorable to the ACNABIN then it accepts the appointment and sends a letter to the client as an auditor.

Audit Procedures

There are seven steps involved in the procedures that come one after another. The procedures followed by the ACNABIN are basically inspired by the approaches suggested by ICAB in Audit Practice Manual. Steps are as follows:

1. Identity Overall Goals
2. Gather & Evaluate Initial Information
3. Assess General Risks
4. Assess Account Specific Risk
5. Develop Efficient And Effective Audit Plan Program
6. Conduct Audit Testing
7. Evaluate And Communicate Audit Results

1. Identify Firm’s Overall Goals

The purpose of ACNABIN in conducting an audit is to express an opinion as to whether the financial statements are prepared and presented fairly in accordance with Generally Accepted Accounting Principles (GAAP). The Firm’s policies on Generally Accepted Accounting Principles are contained in Accounting Standards. The audit team considers these standards in formulating an opinion. In forming an opinion, the audit team also addresses responsibilities for:

• Errors
• Irregularities and other matters
• Efficiency
• Errors

Errors are unintentional misstatements or omissions of accounts of disclosures in financial statements. The audit team is required to design the audit to provide reasonable assurance of detection of material errors. The In-charge of an audit team is responsible to ensure existence or occurrence of asset or liabilities which are rightfully owned by the clients at given date and recorded completely with accurate balance or value and disclosed properly. Errors may arise for

• Mistakes in gathering or processing accounting data from which financial statements.
• incorrect accounting estimates arising from oversight or misinterpretation of facts and;
• Mistakes in the application of accounting principles relating to amount, classification, and manner of presentation or disclosure.

Irregularities and other matters

This is basically deals with the risk and materiality. Irregularities are basically intentional misstatements or omission of amounts or disclosures in financial statements, including fraudulent financial reporting and misappropriation of assets. So there is always a risk that material irregularities may occur and not be detected. This risk is increased by the possibility of management’s override of internal controls, collusion, forgery, or unrecorded transactions.

But this can be reduced by taking some steps regarding detection of irregularities, misstatement etc.

Efficiency

The auditing procedure should be efficient in manner but that should not exceed the budget of the project or audit engagement. Performing an efficient audit involves:

• Performing front-end risk assessment and planning with adequate partner and manager involvement.
• If it is a recurring audit then the same team of previous year can be appointed.
• Designing the combination of audit procedures based on the risk assessment that will efficiently reduce the risk of undetected material misstatements to an appropriately low level.
• Assigning work to adequately trained and supervised persons with appropriate experience and skill levels.

Gather & Evaluate Initial Information

To conduct the efficient audit, it is important to have clear idea about the client. For this reason ACNABIN, when get engaged in an audit project, it at first request for some basic information of the client, like what is the basic business of the client, what is the foundation of the establishment of the business or how the business is being operated, who are the major buyer or seller etc. These information help to understand the following subjects:

• Understanding the client’s activities and operation
• Considering the internal control structure
• Identifying client’s expectation
• Considering materiality.
• Understand the operation of clients

The auditor understands of the entity and its environment should include information about each of the following categories:

• Industry, regulatory, and other external factors, including the applicable financial reporting framework.
• Nature of the entity.
• Selection and application of accounting policies.
• Objectives, strategies and related business risks.
• Measurement and review of financial performance.
• Entity’s internal control.
• Consider internal control structure

As per BSA-610, audit team can ask for help from internal auditors. Again internal control structure provides an overall idea about the risk that must be considered. If the client has a strong internal control then the audit risk can be minimized. And this will have an effect on sample size also. But if the client does not have an internal control system there may exists high possibility of material misstatement and audit risk, thus increase in sample size. To check internal control an internal control questionnaire is prepared.

ACNABIN consider the activities of internal auditing and their effect, if any, on external audit procedures. So they try to:

Understand and Assess Internal Auditing

As external auditors, we should obtain a sufficient understanding of internal audit activities of the client that assists us in planning the audit and developing an effective audit approach.

During the course of planning the audit, we should perform a preliminary assessment of the internal audit function when it appears that internal auditing is relevant to the external audit of the financial statements in specific audit areas.

Evaluate and Test the Work of Internal Auditing

To use specific work of internal auditing, we evaluate and test the work of internal auditing to confirm its adequacy for the external auditing purposes. The evaluation of specific work of internal auditing involves consideration of the adequacy of the scope of work and related programs and whether the preliminary assessment of the internal auditing remains appropriate. This evaluation may include consideration of whether:

• The work is performed by persons having adequate technical training and proficiency as internal auditors and the work of assistants is properly supervised, reviewed and documented;
• Sufficient appropriate audit evidence is obtained to afford a reasonable basis for the conclusions reached;
• Conclusions reached are appropriate in the circumstances and any reports prepared are consistent with the results of the work performed; and
• Any exceptions or unusual matters disclosed by internal auditing are properly resolved.
• The external auditor would record conclusions regarding the specific internal auditing work that has been evaluated and tested.

Identify client’s expectation

As external auditor, we should identify the client’s expectation and design and perform the audit to meet the client expectation.

Consider materiality

Information is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements. Materiality depends on the size of the item or error judged in the particular circumstances of its omission or misstatement. Materiality should be considered by the auditor when:

• Determining the nature, timing and extent of audit procedures; and
• Evaluating the effect of misstatements.

Assess General Risks

The assessment of risk is accomplished using a “top-down” approach. The audit team focuses initially on high level information. The nature and extent of documentation will vary significantly based on an entity’s size, complexity, ownership characteristics, and level of risk. The ability to identify, assess, and manage risk is often indicative of an organization’s ability to respond and adapt to change. Risk assessment therefore helps organizations to quickly recognize potential adverse events, be more proactive and forward-looking, and establish appropriate risk responses, thereby reducing surprises and the costs or losses associated with business disruptions. This is where risk assessment’s real value lies: in preventing or minimizing negative surprises and unearthing new opportunities. The more real-time and forward-looking the analysis of potential risks, the more controllable the achievement of objectives becomes. During audit planning and risk assessment, we obtain initial audit evidence in order to:

• Effectively assess the inherent risk of potential financial statement misstatements,
• Identify indicators of possible going concern problems, and
• Identify account specific risk and design an overall audit approach to provide reasonable assurance of detecting material misstatements.

Assess Account Specific Risk

In this step, audit team has to determine the risk related to specific account like sales, account receivables, payroll and personal file, acquisition and payment cycle, inventory and cash balances. Audit team also can take guideline from the APM questionnaire for the assessment. By having the answers in the questionnaire, audit team can assess how much risk is related to that specific account.

For example, sales cycle, the normal cycle may be the transaction should be recorded when the product is delivered to customer. But the audit team observed that client’s sales are recorded when products are shifted in the carriage.

That implies that there exists risk for material misstatement in revenue, account receivable etc. accounts. To assess those risks audit team can perform

• Test of control and
• Substantive test of transaction.

Develop Efficient And Effective Audit Plan Program

In this step, Job In charge makes an overall plan about how audit can be performed. The purpose of the overall audit strategy is to develop an effective response to the risk of material misstatement. The auditor considers what they found in preliminary planning activities such as client acceptance, ethical position of the audit firm and their understanding of the entity and its environment, including its internal control, to develop an effective and efficient overall audit strategy that will appropriately respond to assessed risks.

The overall audit strategy includes consideration of planned audit responses to specific risks through the development of the audit plan. The overall audit strategy also helps the auditor determine the resources required for the engagement, including engagement staffing.

Therefore, at a minimum the following matters should be included in the overall audit strategy:

• Relevant characteristics of the audit engagement, such as the reporting framework used in order to set the scope of the engagement.
• Key dates for reporting and other communications
• Setting of materiality
• Preliminary risk assessment and whether internal controls are to be tested
• Consideration of resources available and how they are to be used.

Conduct Audit Testing:

In this stage the field work starts. During the fieldwork phase, audit evidence is gathered by the auditor/s working methodically through the work plan or checklist, for example interviewing staff, managers and other stakeholders associated with the client’s, reviewing client’s documents, printouts and data (including records of client’s activities such as security log reviews), observing client’s processes in action and checking system security configurations etc. Audit tests are performed to validate the evidence as it is gathered. Audit work papers are prepared, documenting the tests performed.

The first part of the fieldwork typically involves a documentation review. The auditor reads and makes notes about documentation relating to and arising from the client’s (such as the Statement of Applicability, Risk Treatment Plan, client’s policy etc.). The documentation comprises audit evidence, with the audit notes being audit working papers.

Technical compliance tests may be necessary to verify that IT systems are configured in accordance with the organization’s information security policies, standards and guidelines. Automated configuration checking and vulnerability assessment tools may speed up the rate at which technical compliance checks are performed but potentially introduce their own security issues that need to be taken into account.

The output of this phase is an accumulation of audit working papers and evidence in the audit files.

Evaluate And Communicate Audit Results:

Once the auditor has completed gathering evidence relating to the financial statement assertions the audit enters the completion phase. First the sufficiency and appropriateness of the evidence gathered is evaluated. The preliminary assessments of the risk of material misstatement (as identified during the planning phase) are used to evaluate the sufficiency and appropriateness of the evidence collected. The auditor shall obtain sufficient appropriate evidence in order to reach and justify a conclusion on the fairness of the financial statements.

Should the auditor determine that sufficient appropriate evidence was not obtained; additional substantive procedures need to be performed. Once the auditor is content with the sufficiency and appropriateness of the evidence, the completion phase can continue.

The next stage of this phase is to determine the final materiality figure and to evaluate all misstatements identified. The auditor can either accept the planning materiality figure as the final materiality figure or lower it. However, the auditor should never increase the planning materiality figure during the completion phase. The auditor then aggregates the total identified misstatements and determines if it causes the financial statements to be materially misstated.

The list of identified misstatements is discussed with the client, and the client is given the opportunity to correct some or all of the identified misstatements should they wish to do so.

If the uncorrected misstatements are judged to be material, the auditor issues an opinion that explains that the financial statements are materially misstated. If the uncorrected misstatements do not cause the financial statements to be materially misstated, ACNABIN may issue a report with an unqualified opinion. But if misstatements cause financial statements to be materially misstated, ACNABIN may issue a report with other than unqualified opinion.

CLIENT’S AUDIT PROCEDURE

In the course of my Internship period I was assigned as an audit staff for performing the audit of Rangs Group. ACNABIN was being engaged to audit the company RANGS Ltd, RANGS WORKSHOP Ltd and RANCON MOTORS Ltd for a period of 3months. There they send an audit team where I was one of them. I am giving a small overview on the audit of Rangs Workshop Ltd.

RANGS WORKSHOP LTD. Company Overview

Rangs Workshop Limited was set up with the intention of providing world class services for the car owners who really care. To repair the vehicle by the people who actually built it in Japan with the identical component ‘Genuine Parts’ made in Japan and to set up a standard for vehicle workshop in Bangladesh. Over the years Rangs Workshop has remained true to providing customers with the very best in product and services. The engineers are dedicated to quality and their ‘Attention to detail’ can be the source for inspiration for other professionals. Rangs possesses two of the most well equipped and modern automobile workshop. Rangs regularly send the engineers and mechanics to Mitsubishi Japan to gain the latest technical updates. A well-stocked inventory guarantees efficient and cost effective supply of genuine Mitsubishi spare parts.

• A new and modern service-engineering workshop has been opened in the Industrial area of Dhaka City. RWL has two service centers. One of them is in Dhaka and the other in Chittagong.
• RWL serves approximately 15,000 vehicles annually.
• RWL not only caters to Mitsubishi owners, but also well equipped to provide services to other branded automobiles.

Financial Ratios of Rangs Workshop Ltd.

Profitability ratios

Gross profit margin: the gross margin reveals the amount that an entity earns from the sale of its products and services, before the deduction of any selling and administrative expenses.

Net profit margin: Net profit margin is the percentage of revenue left after all expenses have been deducted from sales. The measurement reveals the amount of profit that a business can extract from its total sales.

Return on equity: Return on equity compares the annual net income of a business to its shareholders’ equity. The measure is used by investors to determine the general level of return that an organization is generating in proportion to the investment they have made in it.

Return on shareholder’s equity: This ratio measures the rate of return that shareholders receive on their investment in your business. In other words, it tells the shareholders how much the company is earning for each of their invested money.

Return on assets: The return on assets compares the net earnings of a business to its total assets. It provides an estimate of the efficiency of management in using assets to create a profit.

Liquidity Ratios

Current ratio: The current ratio measures the ability of an organization to pay its bills in the near-term. The ratio is used by analysts to determine whether they should invest in or lend money to an entity.

Quick ratio: The quick ratio focuses on the liquid assets, and gives a better view of how well a business can pay off its immediate obligations.

Efficiency Ratios

Receivables Turnover Ratio: Accounts receivable turnover is the number of times per year that a business collects its average accounts receivable. The ratio is intended to evaluate the ability of a company to efficiently issue credit to its customers and collect funds from them in a timely manner.

Inventory Turnover Ratio: The inventory turnover formula measures the rate at which inventory is used over a measurement period. One can use the formula to see if a business has an excessive inventory investment in comparison to its sales level, which can indicate either unexpectedly low sales or poor inventory planning.

Payable Turnover Ratio: Accounts payable turnover is a ratio that measures the speed with which a company pays its suppliers.

Assets Turnover: The total asset turnover ratio compares the sales of a company to its asset base. The ratio measures the ability of an organization to efficiently produce sales, and is typically used by third parties to evaluate the operations of a business.

Debt Ratios

Debt Ratio: The debt ratio measures the proportion of assets paid for with debt. One can use the ratio to reach conclusions about the solvency of a business. A high ratio implies that the bulk of company financing is coming from debt; this is a risky financial structure.

Times Interest Earned Ratio: It measures the ability of an organization to pay its debt obligations. The ratio is commonly used by lenders to ascertain whether a prospective borrower can afford to take on any additional debt.

Audit procedures of RWL

Identify Firm’s Overall Goal

Rangs engaged ACNABIN in conducting an audit and to expressing an opinion as to whether the financial statements are prepared and presented fairly in accordance with Generally Accepted Accounting Principles (GAAP). Our audit team considered these standards in formulating an opinion taking into accounts the errors, irregularities and efficiency of Rangs Group.

Gather & Evaluate Initial Information

After our audit team got engaged in Rangs’ audit project, we have collected some basic information of the Rangs Workshop Ltd, Rangs Ltd and Rancon Motors ltd. We went through what their basic business are, to understand their operations, considered their internal control structure and also identified their expectations.

Assess General risks of clients

In this step, our audit team determined the risk related to specific account like sales, account receivables, payroll and personal file, acquisition and payment cycle, inventory and cash balances. There is also a guideline from the APM questionnaire for the assessment. By having the answers in the questionnaire, audit team can assess how much risk is related to that specific account.

Develop Efficient and Effective Audit Plan Program

Job In charge made an overall plan about how audit can be performed. Audit strategy is to develop an effective response to the risk of material misstatement, considering what we found in preliminary planning activities such as client acceptance, ethical position of the audit firm and their understanding of the entity and its environment, including its internal control, to develop an effective and efficient overall audit strategy that will appropriately respond to assessed risks.

Conduct Audit Testing

In this stage the field work started. During the fieldwork phase, audit evidence is gathered by working methodically through the work plan or checklist, for example interviewing staff, managers and other stakeholders associated with the client’s, reviewing client’s documents, printouts and data (including records of client’s activities such as security log reviews), observing client’s processes in action and checking system security configurations etc. Audit tests are performed to validate the evidence as it is gathered. Audit work papers are prepared, documenting the tests performed.

Client procedure

1. Nature of Salary Expense

Salary Expense is one of the Administrative Expense of RWL. It is provided on the basis of regular requirement. There is no amount range of salary expense in the policy. Salaries are paid through cheques.

2. Procedures

Salary expense is recorded by the HR Department. End of every month HR submits a report consists of deduction; addition and penalty on salary of the employees to the Accounts. Accounts department prepare the salary sheet according to the instruction of HR and sent it to the Audit department. After checking the entire documents audit department passes it to the head of the accounts. Then Accounts department prepare a payment voucher. Employee collects the net pay from the bank.

3. Segments: RWL records different types of salary expenses under administrative expense.
4. Provident fund: Provident fund is applicable for permanent employees. Both employer and employees contribute 10% of basic salary to the fund and 5% of gross salary is also kept as providend fund.
5. Others

• Increment basis depend on directors
• Bonus – 75% of gross salary, two festive bonus and rarely performance bonus
• Worker gets salary. If overtime, in that case hourly rate is applied this was not applicable previously.
• Reconciliation if required is done face to face. Though no problem of such type has taken place yet, as it is checked by the internal auditor.
• In case of switching of job salary is given at the time of settlement.
• Possibility of giving loan against salary is very low because of less authority approval.
• All documents are available to the HR regarding salary expenses.

Evaluate And Communicate Audit Results:

After gathering evidence relating to the financial statement assertions the audit enters the completion phase. First the sufficiency and appropriateness of the evidence gathered is evaluated by using the risk of material misstatement. The auditor then justifies a conclusion on the fairness of the financial statements. The auditor then aggregates the total identified misstatements and determines if it causes the financial statements to be materially misstated. This step is not yet done and the work is in progress at ACNABIN.

The list of identified misstatements will be discussed with the Rangs Group, and they will be given the opportunity to correct some or all of the identified misstatement. Based on this, the auditor will issue an opinion that explains that the financial statements are materially misstated or not. ACNABIN thus issue a report with an unqualified opinion or report with other than unqualified opinion.

Outcome of Our Audit at Rangs Workshhop Ltd.

After conducting our audit we have found weakness in internal control system and accounting system. However, due to confidentiality issue, I am not in a position to share all the observations. A few observations along with fact, effect and recommendation is given below:

No advanced register

Fact: the advance register is not maintained. The advanced is paid against I Owe You slip.

The only document for the advanced is the I.O.U slip.

Ref: Meeting minutes

Effect:

• There is a chance that the advance amount may not adjust duly.
• The reason of advance may not identify due to non-existence of the register

Recommendation:

• It is better to use separate advanced register for the fair and clear information on advanced payment.
• Lack of internal control

Fact: the advanced internal control is not proper because the advanced adjustment time is fifteen (15) days but when someone fails to make adjustment within 15 days the advanced receivers are reminded through the mail correspondence. No other measure is taken against the responsible person.

Ref: Meeting minutes

Effect:

• Malpractice may occur due to lack of internal control system

Recommendations:

The management should immediately establish an internal control mechanism to establish an adjustment process for advance and take necessary actions against the employees who fail to adjust the advance with the prescribed time.

No advanced limit

Fact: the RWL does not have any advanced limit. The advanced is paid from the petty cash maximum limit BDT 500000. When the petty cash limit exceed then the rest amount is paid from the bank.

Ref: Meeting minutes

Effect:

• Advance amount may take for personal purpose
• It indicates that the company has a weak working capital management system.

Recommendations:

• The organization should establish a limit for advance receipt based on the delegation of power of the employees.
• Collection from trade debtor is not proper

Fact: the credit customer whether listed or non-listed when they fail to pay the credit amount at the due time the collection process is not proper. These credit customer are only communicated but does not take any further measure to collect the credit due amount.

Ref: Meeting minutes

Effect:

• It indicates that the company has a weak working capital management system.
• There is a chance that the company may lose money.

Recommendation:

• The company should immediately set up a recovery unit to collect the due amount from the customer.

FINDINGS & RECOMMENDATIONS

Audit procedures are designed to detect material misstatements in the financial statements and focus on the financial aspects of transactions and events. Despite of this there are numerous loopholes in the system that undermines the prospects of this glorious profession.

In this report, on my behalf, I would like to share some of the complications that I observed during my working as an audit staff and would like to recommend some solutions according to my point of view. The findings and recommendations are discussed below.

Use of Professional Judgment

Findings: An auditor may at times misjudge a situation which may cause the auditor to overlook a misstatement in the financial statement and provide their opinion based on that.

Recommendations: All the situations should be discussed properly with the client as well as with the staffs before giving or publishing the final opinions in forming sound professional judgments.

Use of Sampling

Findings: Auditors apply sampling techniques to limit the number of transactions and balances selected for audit testing in order to perform the audit efficiently and cost effectively. The results may not however be representative of the entire population and may fail to detect a material misstatement in the financial statements due to the inability of auditors.

Recommendations: Auditors need to perform as detailed testing as possible, from the samples they choose out of the entire population of transactions and balances. So the result is more accurate and fair.

Management Representations

Findings: Although auditors collect audit evidence from a range of sources, they focus more on external evidence. Too often they have to rely on the representations of management in order to assess the reasonableness of the matters concerning financial statements. This is usually difficult to corroborate management representation of appropriateness.

Recommendations: Internal evidence should also be considered by the management to get more reliable form of audit evidence and for the representations about the appropriateness of their judgments with external evidence.

Risk of Fraud

Findings: By their very nature, frauds are intended to be concealed by the guilty party and therefore pose a very high risk of remaining undetected by the auditors.

Recommendations: Though this is an inherent risk, auditors can reduce it by applying sounder audit methodology and procedures.

Time Constraints

Findings: Auditors face strict time constraints, above that firm’s involve audit staffs in an audit engagement without having prior knowledge of client’s business. Members’ lacking in knowledge about the client’s business, take much of their time to understand and start dealing with the client.

Recommendations: Before going to the client, supervisor or in charge should give some brief idea about the client’s business to all the members of the audit team so that they can finish their job in time to provide their opinion on the financial statements.

Work programs are not followed properly

Findings: Work programs contain step by step instructions to carry out the audit work. But in most of the cases, work programs are not followed properly, just touch each account head to save time. As a result, auditor’s miss some important issues to be discussed.

Recommendations: Work programs must be properly introduced to the juniors/ new students and must be followed as much as possible in each audit engagement.

CONCLUSIONS

In the report, Audit Procedure in Bangladesh: A case study on ACNABIN CHARTERED ACCONTANT, I have tried my level best to deliver the shadow of audit procedure that ACNABIN follows in offering service to its client’s. Chartered Accountancy is one of the most respectable professions in Bangladesh. It is mainly a step by step process. From engagement to report submission the step is followed with reasonable and professional care and maintaining all rules and regulations and standards set by the ICAB. ACNABIN is doing a great job with their seamless internal control, disciplinary policies and strong chain of command. Their inflexible ethical moral has earned them a brand status in the market.

Although there are many gaping holes in the policies set by ICAB that undermine the prospects of this glorious profession. In some cases, the auditors of ACNABIN violate some audit standards and not carry out their audit tasks properly. As a result, the quality of audit work cannot be ensured all the time. But if these loopholes are removed, ACNABIN can maintain its current status and will remain No. 1 Chartered Accountants Firm according to the rating of Bangladesh Bank.

The auditing profession has contributed and will be contributing a greater extent, ensuring transparency and efficiency of internal control system of various sectors of Bangladesh. The achievement of the auditors will be after having the maximum people of the country be aware of their rights and then proper transparency will be set conquering all obstacles.