Introduction Chapter

Auditing and Accounting Profession

Meaning of Audit: The term ‘audit’ has been derived from the Latin word “audire” which
means “to hear”. Hence, literally, an auditor is a person who hears or listens. For centuries,
audits were “oral hearing” in which people entrusted with fiscal responsibilities justified with
their stewardship. Now audit is one of the assurance services provided by the competent and
qualified professional accountants.
Audit is the examination or inspection of various books of accounts by an auditor followed
by physical checking of inventory/register to make sure that all departments are following
documented system of recording transactions. It is done to ascertain the accuracy of financial
statements provided by the organisation.
Difference of the word audit and auditing- "Audit" is either the verb "to audit" or a noun.
"Auditing" is the present participle of the verb. "John is carrying out an audit of the accounts
this week"/"John is auditing the accounts this week".
Audit can be done internally by employees or heads of a particular department and externally
by an outside firm or an independent auditor. The idea is to check and verify the accounts by
an independent authority to ensure that all books of accounts are done in a fair manner and
there is no misrepresentation or fraud that is being conducted.
All the public listed firms have to get their accounts audited by an independent auditor before
they declare their results for any quarter.
Who can perform an audit? In Bangladesh, chartered accountants from ICAB or The Institute
of Chartered Accountants of Bangladesh can do independent audits of any organisation. CPA
or Certified Public Accountant conducts audits in Bangladesh.

Auditing: Auditing is concerned with the verification of accounting data by determining

the accuracy and reliability of accounting statements and reports.

Companies prepare financial statements of their activities, which represent their overall

performance. These financial statements are examined and evaluated by independent persons,
who assess them according to the industry’s generally accepted standards.

This examination and evaluation are an audit.

6 Essential Features of an Audit

The audit is structured into activities that follow a logical sequence.

1. Systematic process.
2. Three-party relationship.
3. Subject matter.
4. Evidence.
5. Established criteria.
6. Opinion.

1. Systematic process: Auditing is a systematic and scientific process that follows a

sequence of activities, which are logical, structured, and organized.

2. Three-party relationship: The audit process involves three parties, that is, shareholders,
managers, and auditors.

3. Subject matter: Auditors give assurance on a specific subject matter. However, the
subject matter may differ considerably, such as – data, systems or processes and behaviour.

4. Evidence: The auditing process requires collecting the evidence, that is, financial and
non-financial data, and examining thereof.
5. Established criteria: The evidence must be evaluated regarding established criteria,
which include International Accounting Standards, International Financial Reporting
Standards, Generally Accepted Accounting Principles, industry practices, etc.
6. Opinion: The auditor has to express an opinion as to the reasonable assurance on the
financial statements of the entity.

Objectives of an Audit – 2 Main Audit Objectives:

The objective of an audit is to express an opinion on financial statements, to give the opinion
about the financial statements, the auditor examines the financial statements to satisfy himself
about the truth and fairness of the financial position and operating results of the enterprise.

The objectives of the audit can be categorized into:

1. Primary objectives, and
2. Subsidiary objectives.
1. Primary Objectives of Audit: The main objectives of the audit are known as the
primary objectives of the audit. They are as follows:

1. Examining the system of internal check.

2. Checking arithmetical accuracy of books of accounts, verifying posting, casting,
balancing, etc.
3. Verifying the authenticity and validity of transactions.
4. Checking the proper distinction between capital and revenue nature of transactions.
5. Confirming the existence and value of assets and liabilities.

Internal Check: Internal Check is an integral function of the internal control system. It is
an arrangement of duties of the staff members in such a way that the work performed by one
person is automatically and independently checked by the other.

Following are the main objectives of Internal Check −

 To protect business from carelessness, inefficiency and fraud.

 To ensure and produce adequate and reliable accounting information.
 To keep moral pressure over staff.
 To minimize the chances of errors and frauds and to detect them easily on early stage
if it is committed.
 To divide the work in such a way that no business transaction should be left
unrecorded.
 To fix the responsibility of every clerk according to the division of work.

Verifying whether all the statutory requirements are fulfilled or not.

Proving true and fairness of operating results presented by income statement and financial
position presented by the balance sheet.

2. Subsidiary Objectives of Audit: These are such objectives that are set up to help in
attaining primary objectives. They are as follows:

Detection and prevention of errors

Errors are those mistakes that are committed due to carelessness or negligence or lack of
knowledge or without having vested interest.

So, they are to be checked carefully. Errors are of various types. Some of them are:

 Errors of principle.
 Errors of omission.
 Errors of commission.
 Compensating errors.
Detection and prevention of frauds

Frauds are those mistakes that are committed knowingly with some vested interest in the
direction of top-level management.

Management commits frauds to deceive tax, to show the effectiveness of management, to get
more commission, to sell a share in the market or to maintain the market price of share, etc.

Detection of fraud is the main job of an auditor.

Such frauds are as follows:
 Misappropriation/fraud of cash.
 Misappropriation of goods.
 Manipulation of accounts

Under-or over-valuation of stock

Normally such frauds are committed by the top-level executives of the business. So, the
explanation is given to the auditor also remains false.
So, an auditor should detect such frauds using skill, knowledge, and facts.
Other objectives
 To provide information to the income-tax authority.
 To satisfies the provisions of the Companies Act.
 To have a moral effect.

Types of Audits:

3 primary types of audits performed by CPAs are; (1) financial audit, (2) operational audit,
and (3) compliance audit.

Let’s try to understand the 3 types of audits are;

1. Financial Audit.
2. Operational Audit.
3. Compliance Audit.

1. Financial Audit: Financial audit, also known as external audit and the 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 presented fairly in conformity with
established criteria usually- GAAP.
Financial audit for public limited companies is indispensable to the functioning of our
national securities markets.
2. Operational Audit: The operational audit also referred to as internal audit, is a
voluntary appraisal activity undertaken by an organization to assure the effectiveness of
internal controls, risk management, and governance to facilitate the achievement of
organizational objectives.

3. Compliance Audit: In many countries, companies are required to conduct specific audit
engagements other than the statutory audit to comply with the requirements of particular laws
and regulations of the company’s operations.

Who is an Auditor?
An auditor is a person authorized to review and verify the accuracy of financial records and
ensure that companies comply with tax laws. They protect businesses from fraud, point out
discrepancies in accounting methods and, on occasion, work on a consultancy basis, helping
organizations to spot ways to boost operational efficiency. Auditors work in various
capacities within different industries.

Types of Auditors

Different Types of Auditors: 

Internal Auditors
Internal auditors are employed by the organizations they audit. These auditors can review the
performance of employees, compliance with company standards and financial and accounting
systems. Internal auditors allow company leaders to be informed of what is happening within
the company and to deal with problems or concerns in advance. The internal auditor then
writes a report highlighting the issues and recommending remedies. Hence these are
employees of the company’s management and are thus not considered independent auditors.

External Auditors

The traditional statutory audit, also known as financial audit or statutory audit, is carried out
by external auditors. The role of an external auditor is to determine whether the books of
accounts have been adequately managed. Whether the annual financial statements provide an
accurate and realistic picture of the entity’s financial situation. An external auditor’s report is
crucial because it includes the auditor’s assessment of the company’s integrity. Both
stakeholders, including the general public, are given access to the annual financial statements
and the auditor’s report. An external auditor’s opinion is unbiased and pure. Specifically, for
the purpose of determining whether or not a corporation is being truthful to its shareholders.

Government Auditors

Government auditors are employed by various local and state governmental agencies. The
activities of these auditors include both compliance and operational audit. Their assignment
includes audit of governmental agencies to determine that spending programs follow the
instruction of the government and operational audit evaluates the effectiveness and efficiency
of the selected government programs.

Independent Auditors

Independent auditors do not work for the government or the organization that is being
audited. These auditors review the financial statements of a company, municipality, agency
or district. In fact, to determine if the statements and reports are accurate and fair.
Independent auditors help prevent organizations from issuing misleading financial
information.

Professional Accounting Body

ICAB

The Institute of Chartered Accountants of Bangladesh (ICAB) is the National Professional

Accountancy Body in Bangladesh, established under the Bangladesh Chartered Accountants
Order, 1973 for the purpose of regulating the profession of accountants and related matters.
ICAB is a leading professional membership organization that promotes and develops the
accountancy profession in Bangladesh.

ICAB members hold a widely respected professional accounting qualification which supports
enterprise, corporate governance and sustainable growth in the business environment. ICAB
is working to promote and regulate high quality financial reporting and auditing in
Bangladesh, to develop and maintain the competence of professional accountants and to
enhance the reputation of the accounting profession in all sectors of the economy. It has 2,086
members. ICAB has Regional Offices in Dhaka, the capital of Bangladesh and in Chittagong.
There are also Chapter/sub divisional Management Committee Offices both in London, UK,
and Ontario, Canada.

This organisation is a member of the following institutions:

 The International Federation of Accountants (IFAC)

 The International Accounting Standards Board (IASB)
 The Confederation of Asian and Pacific Accountants (CAPA)
 The South Asian Federation of Accountants (SAFA)
 The Asia Oceania Tax Consultants' Association (AOTCA)

Abbreviation ICAB

Formation 1973

Type National Professional Accounting

 Body

Professional title ACA, FCA

Headquarters 100 Kazi Nazrul Islam Avenue

Dhaka-1215, Bangladesh

Region served Bangladesh

Membership 2,086

Objectives of ICAB:

ICAB pursue the following objectives-

1. Regulate the Accountancy Profession and matters connected therewith in the country
2. Administer its member and students
3. Ensure sound professional ethics and code of conduct by its member
4. Provide specialized training professional expertise in Accounting, Auditing, Taxation,
Corporate Laws, Management Consultancy, Information Technology and related subjects.
5. Impart/inform Continuing Professional Education (CPE) to its member
6. Foster acceptance and observance of International Accounting Standards (IAS) and
International Standards on Auditing (ISA) and adopt the same as Bangladesh Accounting
Standards (BAS) and Bangladesh Standards on Auditing (BSA) respectively.

Functions of Chartered Accountants Engaged in Public Practices

After qualifying, a Chartered Accountant may not necessarily go for public practice either on
his/her own or in partnership with other Chartered Accountants but may go for employment
in trade, commerce, industry, finance etc. Many positions of trust and responsibility are open
to a Chartered Accountant such as Chief Executive, Member Finance, Finance Director,
Financial Manager/ Company Secretary, Chief Accountant, Finance Controller, Systems
Analyst, Internal Auditor,
Chief Auditor in listed Companies/Autonomous bodies or in industrial, financial, commercial
or educational enterprises. A Chartered Accountant can also serve on the Board of Directors
of various organizations, particularly financial institutions. Such positions of responsibility,
trust, honour and dignity are offered to Chartered Accountants because of excellent
educational & training background, professional know how and technical & expertise and
sound financial knowledge & experience, thus enabling them to contribute towards solving
accounting, financial, educational and business problems at top levels.

Career Prospects in Comparison with other Professions

CA is an internationally relevant and accessible qualification-a go-anywhere passport/permit
to a successful career. In an age of growing globalization and intensified competition, modern
business demands timely and accurate financial information. That is why, CA’ S are sought
after by companies across the world. They are commercial business managers with wide-
ranging skills. With this globalisation, the world economic scenario is rapidly evolving,
Innovative financial instruments are being constantly introduced in the twenty first century,
and the Chartered Accountancy (CA) Profession world-wide is in the forefront/lead in
launching the financial products. Chartered Accountancy (CA) has emerged as a unique
profession of paramount/dominant importance. Anybody will find Chartered Accountancy
(CA) as a satisfying and rewarding profession. Apart from exciting opportunities and
attractive pay packages, Chartered Accountancy qualification is recognized internationally,
and its reputation and value are maintained through high standards of assessment and
regulation. It is the professional qualification of choice/prime for businesses world-wide.

The Profession of Chartered Accountancy is looked upon with great honour and dignity.
Chartered Accountants have developed this over the years through sincerity, devotion and
integrity. Business owner or promotors cannot deal with every detail of their business. That’s
why they employ to conduct the financial activities of the organizations for smooth
functioning of the financial affairs and they can be informed about true picture or result about
the whole financial affairs of the organizations.

Due to the increasing demand for their services, the average earnings/remuneration packages
of Chartered Accountants have also steadily increased in recent past. Hence a student, on
successful completion of examinations and training, could look forward to a comfortable and
rewarding compensation package.

In today’s world is governed by commerce and trade. Only the successful Qualified
Chartered Accountants can control the matters related to business and trade. So, there is an
increasing demand of Chartered Accountants worldwide. That is why the Charactered
Accountancy Profession is best among all other profession.

Professional Accounting Body

ICMAB

The Institute of Cost and Management Accountants of Bangladesh (ICMAB) is the national
body of the professional Cost and Management Accountants of Bangladesh. Established with
the prime objective of promoting and regulating the Cost and Management Accounting
profession in the country, the Institute offers education and training to the students interested
to pursue career in this field and provides highly recognized CMA degree on fulfilment of
requisite qualification. The Institute undertakes research in relevant fields and is the sole
authority to issue practicing license to its members.

Legacy of the Institute

The Institute has a long heritage of rendering professional services to the nation. The journey
of the glorious Profession of Cost and Management Accounting began in the pre-independent
Bangladesh with the founding of a branch of The Pakistan Institute of Industrial Accountants
(PIIA) in 1958. As we started a fresh journey towards success and prosperity in independent
Bangladesh, the profession entered into a new era. In 1972, the Institute was re-established in
the name of Bangladesh Institute of Industrial Accountants (BIIA). Thereafter, the members
of the Institute through their excellence in various fields proved their credibility in the
national and international outfit which started building the credentials for the Institute for
gaining acceptability from all concerned and to attain confidence of the government and
business community of the country. With the changing need of time the Government of
Bangladesh renamed it as The Institute of Cost and Management Accountants of Bangladesh
(ICMAB) through promulgation of The Cost and Management Accountants Ordinance 1977
(Ordinance No. LIII of 1977), which was published in the official Gazette on 14 November
1977. Considering the active role of Cost and Management Accountants for accelerated
growth of Bangladesh economy, a new Act of Parliament “Cost and Management
Accountants Act 2018” (Act No. LXX of 2018) has been passed by the Parliament on 29th
October 2018 and published in the official Gazette on 14 November 2018, after a 48-year
arduous journey, the chronicle of success earned by our predecessors has brought us to the
place where we stand today.

Legal Status
ICMAB is a statutory organization constituted by the Government under The Cost and
Management Accountants Ordinance 1977 (Ordinance No Llll of 1977) and regulated under
the Cost and Management Accountants Regulations 1980 (as amended up to date). Thereafter
the Cost and Management Accountants Ordinance 1977 has been replaced by the Cost and
Management Accountants Act 2018 (Act No. LXX of 2018), published in the official Gazette
on 14 November 2018. It is a member of leading regional and global accounting bodies
including International Federation of Accountants (IFAC).

Administrative Ministry
The Institute of Cost and Management Accountants of Bangladesh (ICMAB) is an
institution dedicated to Cost and Management Accounting education and research in
Bangladesh. It is managed as an autonomous professional body under the Ministry of
Commerce. As well as education, it is also engaged in regulating and promoting the
profession of cost and management accountant in Bangladesh.

CMAB members are known as CMAs with their designatory title ACMA and FCMA. They play
leading roles in the accountancy and finance profession in Bangladesh. 30% of members live
and work outside of Bangladesh.

Vision & Mission

Vision:
Institute’s vision is to help Bangladesh become an industrialized nation by promoting and
regulating Cost and Management Accounting profession to enhance economic
competitiveness and quality of life.

Mission:
Institute’s mission is to develop, equip and promote Cost and Management Accounting
profession by maintaining highest professional standard of its members in order to enable
them to provide better services to the society.

The Institute is entrusted with the formulation and implementation of National Accounting as
well as Cost Accounting Standards and take other necessary steps with a view to regulating
the Cost and Management Accounting profession commensurate with global standard with
the ultimate objective of developing Bangladesh’s human and natural resources to ensure
common welfare and to enrich our shared future.

International association
CMAB is a member of the following international accounting bodies:

 International Federation of Accountants  (IFAC)

 Confederation of Asia Pacific Accountants (CAPA)
 South Asian Federation of Accountants  (SAFA)
 International Accounting Standard Board (IASB)

National and international recognition

The ICMAB qualification is recognised by many professional bodies nationally and
internationally. The bodies that have granted exemption to ICMAB members or qualified students
are:

 Chartered Institute of Management Accountants (CIMA), UK

 Association of Chartered Certified Accountants (ACCA), UK
 Institute of Management Accountants (IMA), US
 Society of Management Accountants of Canada (CMA Canada)
 Certified General Accountants Association of Canada (CGA-Canada)
 Institute of Certified Financial Consultants (IFC), the United States and Canada
 Institute of Certified Public Accountants (ACPA), US
 Institute of Public Accountants (IPA), Australia
  Institute of Chartered Accountants of Bangladesh (ICAB)

ICMAB offers you more career options

With its emphasis on strategic business skills, the CMA Professional Qualification is a
springboard/facilitator to success both within and outside the accounting and finance arena.
ICMAB members are successful business analysts, management consultants and project
managers. Others hold senior roles in areas such as operations, IT, business planning and
change management. And many are in top positions, becoming managing directors, chief
executives and chairmen. You will be surely joining a powerful network of business leaders.

The Focus is clearly on business

CMA Professional Qualification provides more strategy, more management accounting and
more relevance across a broad business perspective than any other professional accountancy
qualifications. Its holistic approach will ensure a balanced expertise in accounting and
finance. You will be equipped with the necessary skills to make key decisions in business and
advice others of the financial implications.

Our work touches every area of business

ICMAB students and members work in small, medium and large sized companies, large
multinationals and some are in practice. The CMAs are playing very important role for the
economic development of the country through establishing discipline and transparency in the
financial sector. Their active role makes a very competitive industrial sector and in the
process of ensuring good governance the role of CMAs cannot be denied.

ICMAB would take you around the world

The CMA Professional Qualification is a passport to a global career because it is valued by
every employer and is internationally portable. CMAs are held in high esteem in various
countries and are in great demand due to their strategic and managerial focus. More than 200
of ICMAB members are holding various international assignments across the world which
really make this profession unparalleled. The CMA is unique among professional and
academic credentials, designed specifically for serving as accounting and financial
management professionals in business. High recognition of CMA designation in a global set
up is due to the acceptability of ICMAB credentials by world class professional bodies like
CIMA (UK), CGA (CANADA), CIPFA (UK).

CMAs (Cost and Management Accountants) are forward looking, unlike

traditional accountants who focus on reporting past performance.
A CMA’s role is geared towards assessing business possibilities, grasping opportunities and
shaping the future of organizations. They will have the strategic insight to assess risk and
make vital business decisions based on a robust understanding of the business environment.
Cost and Management Accountants are typically qualified to engage in a wide variety of
business CMAs (Cost and Management Accountants) are forward looking, unlike traditional
accountants who focus on reporting past performance.
Cost and Management Accountants are typically qualified to engage in a wide variety of
business – related activities such as: 

 Working across the business interpreting financial data for non-financial manager
 Explaining the financial consequences of management decisions and suggesting
possible courses of action
 Advising managers on the financial and economic implications of project
management
 Making strategic decisions and formulating business strategies to create wealth and
shareholder value
 Monitoring spending and the effectiveness of financial control
 Managing risk and business assurance
 Cost determination and financial control
 Evaluating existing financial information systems and suggesting improvements
thereof
 Conducting internal business audits and preparing periodic financial statements for
managers
 Explaining the impact of the competitive landscape/scenery.
 CMAs can also be self-employed as practising Cost and Management Accountants,
Management Consultant, Cost Auditor, Tax Adviser, etc.

CMAs combine a high level of financial and management expertise with excellent
business acumen and decision-making skills. This makes them essential to every business
in all sectors covering Industry, Commerce, Government, Semi Government,
Autonomous Bodies, Public Sector and not-for-profit Organizations.