Letter of Transmittal

11th March 2012 To

Mr. Islam Biswas

Lecturer Department of Accounting, Bangladesh University of Business & Technology (BUBT) Subject: Submission of Internship Report. Dear Sir,
I have the honor to draw your attention that I am submitting my internship report entitled Evaluation of audit report in the listed companies of Bangladesh. I have completed three months internship program at A.K Azad & Co. Chartered Accountants Firm. I have included all the relevant information that I have gathered from both primary & secondary sources and hope that it would be up to your complete satisfaction.

It would be great pleasure to me, if the paper can serve the purpose assigned to me. Finally I am grateful to you for your kind guidance and support.

Yours truly,

Mohammad Jaber Chowdhury ID No-07083101107 BBA Program Department of Accounting, Bangladesh University of Business & technology

Letter of Approval

This is to certify that Mohammad Jaber Chowdhury, ID No. 07083101107, Student of BBA Program of Bangladesh University of Business & Technology, has completed the Internship report under my supervision. He has done this report on Evaluation of Audit Report in the listed companies in Bangladesh on A.K Azad & Co. as a part of requirement for obtaining BBA Degree. I have gone through the report and found it be a well written report. He has completed the report by himself. He has been permitted to submit the report.

I wish him, every success in life.

Signature of the Supervisor

Mr. Islam Biswas

Lecturer Department of Accounting, Bangladesh University of Business & Technology (BUBT)

Acknowledgement

Praise is to Almighty, the Lord of the Universe for giving me the opportunity to be a student of a prestigious program like BBA. Then I express my gratitude and indebtedness to my respected supervisor Lecturer Mr. Islam Biswas for helping me to create this report with such a tremendously nice topic. I have prepared this report an integral part of BBA program under the program of BBA. I am highly indebted to a number of persons for their kind advice, suggestions, directions and cooperation that have enabled me to prepare the report. This is a great pleasure for me to be assigned under the supervision of Lecturer Mr. Islam Biswas. I am very grateful to him for all his kind cooperation and guidance in furnishing the report. At this stage I would like to place my gratitude to those Officials of A.K Azad & Co. Who helped me in presenting valuable information for my report. I also give my best thanks to Mohammad Moniruzzaman, ACA, Head of Audit & Advisory Services, who has given me advice regarding information gathering. My final affection and respect go to those officials with whom I was working with. Really their cooperation was much in detailing the report. Finally I say that this report is also subject to error or mistakes that are inherent in every human effort. I therefore request every reader of this paper to forgive me for any kind of mistakes

Table of Content
Description Chapter-01 : Introduction Executive Summary Scope Objective Methodology Limitation Chapter-02 : Theoretical Aspects Audit Types of auditor Objectives and Advantage of audit The auditors report on financial statement Types of audit Opinion Standard Unqualified Audit Report Qualified Opinion Disclaimer of Opinion Adverse Opinion Chapter-03 : Auditing In Bangladesh Perspective Audit in Bangladesh Auditing Standard Auditing Statements General Principal of an audit Reasonable Assurance Chapter-04 : Findings & Analysis Findings Regarding Structure of the Audit Report Issued Findings Regarding the Audit Report Issued Findings the nature of the Audit Report Chapter-5 : Recommendation Chapter -6 : Conclusion Chapter-7 : Bibliography Chapter-8 Appendix Page No.

Chapter-1 EXECUTIVE SUMMARY

In todays world academic education is not adequate to enable a student to compete with confidence and reach his/her goal without having experience with the outside world. In order to have an idea and gain experiences, we, the students of Faculty of Business Administration, BBA program, Bangladesh University of Business & Technology (BUBT) have to undertake an internship program at any organization. As a part of my BBA Program, the internship program gave me the opportunity to have a practical knowledge on auditing. The assignment was nature of what is the audit report work on audit performance. To face much more complex and challenging business world in the challenging business areas, practical knowledge is essential to expand our theoretical base. To gather this practical knowledge, we were forwarded different organization after completing BBA Program. As I have an intention to become a chartered accountant, I was forwarded to A.K. Azad & Co., a prominent chartered accountants firm in Bangladesh.

Chapter One contain introduction, objective of the study, scope of the study, methodology of the study,
which includes secondary source of information and limitation of the study.

Chapter Two I have organized and discussed all my theoretical knowledge about auditing that I have
gathered from my auditing class and some from internet. This part includes definition of auditing, Types of auditor both Internal & External auditor, Objective & Advantage of audit, Auditors report on financial statement, & also types of audit report on financial statement, all of this are explained in this section.

Chapter Three will provide information about a scenario of auditing in Bangladesh. This part includes
background of audit in Bangladesh; Standard applies in Bangladesh, Auditing statement, Brief Discussion about ICAB their significant auditing policy.

Chapter Four contains the Findings that I have identified after analyzing structure of audit report on
financial statement of listed companies. These findings were mostly related to their published financial statement of 2009-2010.

Chapter Five I have drawn some Recommendation to the listed companies based on my overall
findings.

Chapter Six I have drawn an overall conclusion on my report. Chapter Seven I have drawn the Bibliography of the overall my study. Chapter Eight I have shown appendix of the study.
ORIGIN OF THE REPORT

Internship is the part of BBA course and it is an opportunity to any fresh graduate gain practical experience in corporate world. I had opportunity to work with Auditors of CA Firm. With this company I tried to implement educational experience in this company. Auditing section of CA firm support me to do audit in different type of organization and share with me their experiences. This research report is the reflection of my working experience at this company and summary of my Responsibilities that had been bestowed on me. The report topic is Evaluation of Audit Report in the Listed Companies of Bangladesh
SCOPE

I audited different types of company through this CA firm. I had scope to learn about the groups activities while I came into contact with different departments. I had opportunity to inform about the Audited Companys performance and financial condition.
OBJECTIVE Broad Objective In our study period primarily we gain theoretical knowledge. But now a day, in the job market there is no substitute for work experience. The broad objective of the study is Evaluation of Audit Report in the listed companies of Bangladesh. Specific Objective: The broader objective may be broken down into further specific objectives enlisted as follows:. Understanding audit report writing procedure. How to collect and process evidences to make an audit report. Developing skill to make an audit report. Analyzing the nature of audit reports in the listed companies of Bangladesh.

METHODOLOGY The study is basically of content analysis. It is empirical in nature. As the study works on the audit reports of the companies doing operations in Bangladesh, researchers used sample size of the study is 90 audit reports selected on random basis. From the table below it is seen that out of 282 companies are listed on the DSE, as on March, 2012. Out of the 282 companies, 90 companies were selected for study on their audit report audited by various audit firms in Bangladesh and a framework of requirement categories in an audit report. The annual reports of the 90 companies for the year 2009-10 are studied. The study has been based mainly on secondary data of the samples. The main sources of data are the Annual Reports of the selected samples. Table-1: Sector wise distribution of listed companies in DSE SL No. Sector Population Sample Companies

1 2 3 4 5 6 7 8 SL No.

Bank Investment Engineering Food and Allied Products Fuel and Power Jute Textile Pharmaceuticals and Chemicals Sector

30
21

23

22 16
13

14 11 5 0 2 13 Sample Companies

3
25 20 Population

9 10 11 12 13 14 15 16 17 18 19 20 21

Paper and Printings Service and Real estate Cement IT Sectors Tannery Ceramic Insurance Miscellaneous Telecommunication Travel & Leisure Debenture Mutual Funds Corporate Bond

1 4

1 1 4 1 4 1 2 8 0 0 0 0 0 90

6
5 5 5 44 09 01 02 08 39 03 Total 282

Source: monthly Review of DSE, March, 2012

LIMITATIONS

The study is conducted with an objective to make a thorough study of audit report issued by independent auditor of the listed companies. I faced some challenges during my study. Though I have overcome the faced challenges I had some limitations also. These limitations are number of sample, time and cost.

Number of Sample: For the difficulty of collecting all the audit reports of listed companies in DSE, I have taken 90 listed companies and out of 282 listed companies and all the multinational companies operating in Bangladesh.

Time: Time was limited as I had completed my internship on February 27, 2012 and engaged in studying chartered accountancy in full swing resulting in time constraint for study. So, time span was not sufficient to cover all information.

Cost: Huge cost was involved for completion of the study as I had to purchase the published annual report from the premise of DSE or from download from internet for getting the sample audit report which also restricted me to limit the number of sample.

Chapter-2 Theoretical Aspects

Audit: Audits are performed to ascertain the validity and reliability of information; also to provide an assessment of a system's internal control. The goal of an audit is to express an opinion on the person / organization / system (etc.) in question, under evaluation based on work done on a test basis. Due to practical constraints, an audit seeks to provide only reasonable assurance that the statements are free from material error. Hence, statistical sampling is often adopted in audits. In the case of financial audits, a set of financial statements are said to be true and fair when they are free of material misstatements - a concept influenced by both quantitative (numerical) and qualitative factors. Auditing is a vital part of accounting. Traditionally, audits were mainly associated with gaining information about financial systems and the financial records of a company or a business (see financial audit). However, recent auditing has begun to include non-financial subject areas, such as safety, security, information systems performance, and environmental concerns. With nonprofit organizations and government agencies, there has been an increasing need for performance audits, examining their success in satisfying mission objectives. As a result, there are now audit professionals who specialize in security audits, information systems audits, and environmental audits. In financial accounting, an audit is an independent assessment of the fairness by which a company's financial statements are presented by its management. It is performed by competent, independent and objective person(s) known as auditors or accountants, who then issue an auditor's report based on the results of the audit. In cost accounting, it is a process for verifying the cost of manufacturing or producing of any article, on the basis of accounts measuring the use of material, labor or other items of cost. In simple words the term, cost audit, means a systematic and accurate verification of the cost accounts and records, and checking for adherence to the cost accounting objectives. According to the Institute of Cost and Management Accountants of Pakistan, a cost audit is "an examination of cost accounting records and verification of facts to ascertain that the cost of the product has been arrived at, in accordance with principles of cost accounting."

Types of auditors
Auditors of financial statements can be classified into two categories: 1. External auditor / statutory auditor:

External auditor / statutory auditor is an independent Public accounting firm engaged by the client subject to the audit, to express an opinion on whether the company's financial statements are free of material misstatements, whether due to fraud or error. For publicly-traded companies, external auditors may also be required to express an opinion over the effectiveness of internal controls over financial reporting. External auditors may also be engaged to perform other agreedupon procedures, related or unrelated to financial statements. Most importantly, external auditors, though engaged and paid by the company being audited, are regarded as independent auditors. The most used external audit standards are the US GAAS of the American Institute of Certified Public Accountants; and the ISA International Standards on Auditing developed by the International Auditing and Assurance Standards Board of the International Federation of Accountants.
2. Internal auditor:

Internal auditors are employed by the organization they audit. They perform various audit procedures, primarily related to procedures over the effectiveness of the company's internal controls over financial reporting. Due to the requirement of Section 404 of the Sarbanes Oxley Act of 2002 for management to also assess the effectiveness of their internal controls over financial reporting (as also required of the external auditor), internal auditors are utilized to make this assessment. Though internal auditors are not considered independent of the company they perform audit procedures for, internal auditors of publicly-traded companies are required to report directly to the board of directors, or a sub-committee of the board of directors, and not to management, so to reduce the risk that internal auditors will be pressured to produce favorable assessments. The most used Internal Audit standards are those of the Institute of Internal Auditors. Objectives and advantages of Audit The objectives of an audit may broadly be classified as 1. Primary Objectives 2. Secondary objectives.

Primary Objectives:

The main purpose of audit is to judge the reliability of the financial statements and the supporting accounting records for a particular financial period. The Companies Act, 1956

requires that the auditor of a company has to state whether in his opinion the accounts disclose a true and fair view of the state of company's affairs, profit and Loss Account and Balance Sheet of the state of affairs of a business, the auditor carries out a process of examination and verification of books of accounts and relevant documents. Such an examination will enable the auditor to report to his client on the financial condition and working results of the organization. While carrying out the examination of the various books of accounts, relevant documents and evidences, the auditor may came across certain errors and frauds. Despite such a possibility the detecting of errors and frauds is an incidental object. However, laymen have always associated the detection of errors and frauds as the main function of an auditor which is not true. At the same time audit also discloses how far the accounting system adopted in the organization is adequate and appropriate in recording the various transactions as well as the weakness of these systems.
Secondary Objectives:

As stated above, an auditor has to examine the books of accounts and the relevant documents in order to report on the financial condition of the business. In the process of such an investigation of accounts certain errors and frauds may be detected. These are discussed under the following two heads:
A. Detection and Prevention of Errors B. Detection and Prevention of Frauds Detection and prevention of Errors: Various types of errors are mentioned below: 1. Clerical Errors: Such an error arises on account of wrong posting. For example, an amount received from Thomas is credited to Sunny. Though there is wrong posting still the trial balance will agree. Clerical errors are of three types as follows: Errors of Commission: There errors are caused due to wrong posting either wholly or partially of the amount in the books of original entry or ledger accounts or wrong calculations, wrong totaling, wrong balancing, and wrong casting of subsidiary books. For example Rs. 500 is paid to a vendor and the same is recorded in the cash book. While posting to the ledger, the Vendor's account is debited by Rs. 500. It may be due to carelessness of the clerk. Most of the errors of commission are reflected in the trial balance and these can be discovered by routine checking of the books.

Errors of Omission:

Such errors arise when the transactions are not recorded in the books of original entry or posted to the ledger. For example, sales are note recorded in the sales book or omission to enter invoices in the purchase book. For example Rs. 200 is paid to a vendor. The entry in the cash book is made on the credit side but posting to the vendor side is omitted. Errors due to entire omission will not affect the trial balance whereas errors due to partial omission will affect the trial balance and can be detected. Compensating Errors:

When two or more errors are committed in such a way that the result of these errors on the debits and credits is nil, they are referred to as a compensating errors. For example, Anil's account which was to be debited for Rs. 500 was credited for Rs. 500 and similarly, Sunil's account which was to be credited for Rs. 500 was debited for Rs.500. These two mistakes will nullify the effect of each other. Both the sides of the trial balance are equally affected. As such, these errors are difficult to locate unless detailed investigation is undertaken.

Errors of Principle: Such errors are committed when some fundamental principle of accounting is not properly observed in recording transaction. For example, if there is incorrect allocation of expenditure or receipt between capital and revenue or when closing stock is over-valued. Though trial balance will not disagree, the Profit and Loss Account may be very much affected. Sometimes, such errors are committed deliberately to falsify the accounts or unintentionally due to lack of knowledge or sound principles of accounting. Thus, a thorough examination is to be done to locate such errors. Detection and Prevention of Frauds: Frauds are always committed deliberately and intentionally to defraud the proprietors of the organization. If the frauds remain undetected, they may affect the opinion of the auditor on the financial condition and the working results of the organization. It is, therefore, necessary that the auditor should exercise utmost care to detect such frauds.

The Auditors Report on Financial Statements The audit report is the auditors formal means of communicating with financial statement users a conclusion about the audited financial statements. In issuing an audit report, the auditor must meet the four generally accepted auditing standards of reporting. The following discussion explains the audit report, important variations of the audit report, and the assurances that are communicated to financial statement users. A standard report is the most common report issued. It contains an unqualified opinion stating that the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of the entity in conformity with generally accepted accounting principles. This conclusion may be expressed only when the auditor has formed such an opinion on the basis of an audit performed in accordance with GAAS. Because of its importance in a financial statement audit, a basic understanding of the form and content of the standard report is essential. The ASB last changed the form and content of the standard report in 1988 by issuing, Reports on Audited Financial Statements . This report, which has stood the test of time, was designed to better communicate to users of audited financial statements the work done by the auditor and the character and limitations of an audit. A second objective was to clearly differentiate between the responsibilities of management and the independent auditor in the financial statement audit. To the right of the sample report is a listing of the basic elements of the report. Each of these elements is prescribed. It should be noted that the standard report has three paragraphs, which are referred to as the introductory, scope, and opinion paragraphs. Each of these paragraphs is explained in the following sections.
Title and Address

Similar to the auditors report on financial statements, the auditors report on internal controls over financial reporting contains a title, Report of Ernst & Young LLP, Independent Auditors, which indicates that the auditor is independent of the company being audited. In this case the report is addressed to the board of directors and stockholders of Intel Corporation. Introductory Paragraph The introductory paragraph of the report contains three factual statements. A primary objective of this paragraph is to clearly distinguish between the responsibility of management and the auditor. The wording of this paragraph is presented below: We have audited the balance sheets of the X Company for the years then ended. This sentence states that the auditor has audited specific financial statements of a designated company. Each of the financial statements is identified, together with the dates appropriate to each statement.

These financial statements are the responsibility of management. This wording acknowledges that responsibility for the financial statements rests with management. Conversely, this sentence is intended to refute the notion that the auditor develops the representations underlying the financial statements. Our responsibility is to express an opinion based on our audits. This sentence specifically indicates the auditors responsibility. The auditors role is to conduct an audit and to express an opinion based on the findings. When read in conjunction with the second sentence, there is a clear differentiation between the responsibility of management and the responsibility of the auditor.
Scope Paragraph

As its name suggests, the scope paragraph describes the nature and scope of the audit. It satisfies the portion of the fourth reporting standard that requires the auditor to give a clear-cut indication of the character of the audit. The scope paragraph also identifies several limitations of an audit. The wording of this paragraph is: We conducted our audits in accordance with the standards of the Public Companies Accounting Oversight Board (United States). In the report of a private company, this would refer to conducting an audit in accordance with generally accepted auditing standards. In this context, these standards include the 10 GAAS, all applicable SASs, and applicable standards of the PCAOB. This sentence asserts that the auditor has met these standards. These standards require that we audit to obtain reasonable assurance financial statements are free of material misstatement.

This sentence identifies two significant inherent limitations of an audit. First is the acknowledgment that the auditor seeks only reasonable, rather than absolute, assurance. Thus, the reader is informed that there is some risk in an audit. Second, the concept of materiality is introduced. An audit is planned and performed to discover material, but not all, misstatements in the financial statements. An audit includes examining, on a test basis, evidence supporting the financial statements.

This wording further explains another inherent limitation of an audit. The words test basis indicate that less than 100 percent of the evidence was examined. Furthermore, a test basis implies that there is a risk that evidence not examined may be important in assessing the fairness of the overall financial statement presentation and disclosures. An audit also includes assessing the accounting principles significant estimates evaluating the overall financial statement presentation. This sentence provides further insight into the character of the audit. It states that the auditor exercises judgment in assessing and evaluating managements financial statement representations. Reference to significant estimates by management means that the financial statements are inherently imprecise. We believe that our audits provide a reasonable basis for our opinion. This sentence identifies another limitation of an audit by stating that only a reasonable basis is needed for an opinion. The concept of a reasonable, rather than a conclusive or absolute, basis is consistent with the concepts of test basis and reasonable assurance stated earlier in the paragraph. This sentence also contains an assertion that the auditor has formed a positive conclusion about the scope of the audit work performed.
Opinion Paragraph

The opinion paragraph satisfies the four reporting standards, as explained below. In our opinion, the financial statements referred to above
In interpreting the meaning and significance of this clause, it is proper to conclude that the opinion is being expressed by a professional, experienced, and expert person or persons. It is incorrect, however, to conclude that this phrase says, We certify, We guarantee, or We are certain (or positive). The second part of this clause makes reference to the financial statements identified in the introductory paragraph; the titles of the individual statements are not repeated. The expression of an opinion satisfies the fourth standard of reporting.

present fairly, in all material respects financial position results of their operations and their cash flows The intended connotation of the words present fairly is that the financial statements are presented reasonably and without bias or distortion. An auditor does not use the words accurately, truly, factually, correctly, or exactly because of the existence of estimates in the financial statements. The auditors opinion on fairness pertains to the financial statement taken as a whole. It does not apply to the accuracy or correctness of individual accounts or components of each financial statement. An unqualified opinion expresses the auditors belief that the financial statements accomplish their stated purpose by presenting fairly the entitys financial position (balance sheet), results of operations (income and retained earnings statements), and cash flows (statement of cash flows). An unqualified opinion also means that any differences between management and the auditor on material accounting matters have been resolved to the auditors satisfaction.

The phrase in all material respects informs users that the auditors opinion does not attest to the absolute accuracy of the financial statements. This limitation is stated because of the test basis of an audit and the inclusion of significant estimates in the financial statements. in conformity with generally accepted accounting principles This clause satisfies the first standard of reporting that states the report shall indicate whether the financial statements are prepared in accordance with GAAP. The term generally accepted accounting principles provides the criteria for the auditors judgment as to the fairness of the financial statements. Independent auditors agree on the existence of a body of U.S. GAAP, and these sources of GAAP are detailed in, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles in the Independent Auditors Report.

Types of Audit Opinions: The opinions expressed in the auditors report may be: 1. Unqualified 2. Other than Unqualified a) qualified b) adverse, or c) disclaimer of opinion.

Arens (1991) described the form and content of an audit report as the followings:

Standard Unqualified Audit Report:

The most common type of audit report is the standard unqualified audit report. It is used for more than 90 percent of all audit reports. An unqualified audit report is expressed when the auditor is satisfied that the conditions set out below have been met in all material respects:

the financial information has been prepared using acceptable accounting policies, and adhering to principles specified in Statements of Accounting Standard, which have been applied on a consistent basis;

the financial information complies with the relevant legislation and regulations so far as they affect financial information and promulgations of the ICPAS; the view presented by the financial information as a whole is consistent with the auditors knowledge of the business of the entity; there is adequate disclosure of all material matters for a true and fair presentation of the financial information.

When the above conditions are met, the standard unqualified audit report is issued.

Departure from Statements of Accounting Standard: It is one of the preconditions for the issuance of an unqualified opinion that financial statements comply with statements of accounting standard. However, in rare circumstances a departure from accounting standard may be necessary in order to present financial statements that give a true and fair view. The preface to Statements of Accounting standard requires that in the case of any departure, the financial statements should fully disclose and explain the departure.

Where a departure is not fully disclosed and explained in the financial statements and the effect of the departure, in the opinion of the auditor, does not alter his opinion as to the truth and fairness of the

financial statements, the auditor should disclose and explain the departure in his report. Such disclosure and explanation include in the report will not be construed as a qualification of his opinion.

Emphasis of a matter: Under certain circumstances the auditor may wish to draw the readers attention to important matters, which are already disclosed in the financial statements, to ensure that those are not overlooked. It is not the intention of the auditor to qualify his report by such reference but is aimed at emphasizing the specific matter. Accordingly, it is suggested that such reference should be made, not in the opinion paragraph of the audit report, but in a separate paragraph.

The following are examples of explanatory information the auditor may feel should be expressed:

1. the existence of significant related party transactions; 2. important events occurring subsequent to the balance sheet date; 3. the description of accounting matters affecting the comparability of the financial statements with those of the preceding year.

Audit Reports Other than Unqualified:

Whenever the auditor is in a state of uncertainty or is in disagreement with management on matters that affect the financial statements materially, he must issue a report other than an unqualified report. In these circumstances there are three types of audit reports the auditor could choose from: qualified opinion, disclaimer of opinion and adverse opinion. Initially, in deciding whether to qualify his opinion, the auditor should have regard to materiality of the matter in the context of the financial statements on which he is reporting. A qualification of opinion is not warranted if the matter is not material. Where the auditor is of the view that the matter is of material significance to the truth and fairness of the financial statements, he has to make a further decision as to whether or not the matter is of fundamental importance to the statements as a whole, before selecting the appropriate opinion to be expressed. An uncertainty becomes fundamental when its potential impact on the financial statements could be so great

as to invalidate the truth and fairness of the financial statements as a whole. A disagreement becomes fundamental when the impact of the misstatements is so great that the financial statements are, in the opinion of the auditor, misleading. Use of an Explanatory Paragraph: When a report that is other than unqualified is issued, an explanatory paragraph should be inserted between the scope paragraph and the opinion paragraph to explain the qualification that affects the opinion. In the explanatory paragraph, the auditor should give a clear description of all substantive reasons for his conclusions and, unless impractical, should include a quantification of the possible effect on the financial statements.

Qualified Opinion: There are two forms of qualified opinion subject to qualified opinion and except for qualified opinion. Subject to Qualified Opinion: This opinion is relevant when the auditor is uncertain whether a particular matter which he considers material has been fairly stated in the financial statements. The uncertainty could arise due to scope restriction consequent to which the auditor is unable to carry out audit procedures which he considers are essential, or due to inherent uncertainties associated with the nature of the matter. In a subject to qualified opinion the auditor disclaims an opinion on a particular matter in the financial statement which he considers is of material significance. The auditor does not consider the matter as being of fundamental importance, and he believes that the overall financial statements do give a true and fair view. The wording of the opinion expressed indicates that the auditor is of the view that the financial statements give a true and fair view subject to either:

(a) any adjustments that he might have found to be necessary if the scope of his audit work had not been limited, or (b) any adjustments that might have been necessary if the outcome of the uncertainty had been known.

Except for Qualified Opinion: Except for qualified opinion is issued when the auditor is in disagreement with management on a particular matter which is considered material but not fundamental. The opinion will express the auditors satisfaction as to the truth and fairness of the financial statements except for the particular matter in dispute.

Disclaimer of Opinion A disclaimer of opinion is issued in a situation when the auditors uncertainty extends to a matter or matters of fundamental importance as a result of which he is unable to satisfy himself as to whether the overall financial statements present a true and fair view. The necessity for disclaiming an opinion may arise because of a severe limitation of the scope of the audit examination, or because it is not possible to identify any particular area or amounts affecting the true and fair view due to uncertainties is pervasive to the financial statements.

Adverse Opinion: An adverse opinion is expressed only when the auditor believes, after a full investigation, that the overall financial statements are so fundamentally misstated, or are misleading as a whole that they do not present a true and fair view. It is the most extreme form of audit report and is considered as a measure of last resort.

An adverse opinion is distinguished from a disclaimer of opinion in that the latter can arise only from a lack of knowledge by the auditor, whereas to express an adverse opinion the auditor must have knowledge that the financial statements do not present a true and fair view.

Chapter-3 Auditing: Bangladesh Perspective

Audit in Bangladesh: The Companies Act 1994 makes it compulsory for every company to have its accounts audited by qualified auditors. The desirability of this provision can be based on the fact that shareholders who contribute the capital of the company leave its management and control in the hands of directors. Auditors are there to safeguard the interest of shareholders. The qualified chartered accountants from the Institute of Chartered Accountants of Bangladesh (ICAB) are eligible for auditing practices after getting sufficient experience in this field through a firm established through the approval of ICAB. Chronological incidents of Company Audit (ICAB, 1999) reveal the following sequential incidents towards auditing standards and practice in Bangladesh over the years: 1850: Indian Joint Stock Companies Act (enacted in UK as the 1844 Act) All incorporated companies required to have their annual financial statements audited. The Act did not require that the auditor be independent or be a professional accountant. The audit report was to state whether the balance sheet gave a full and fair view of its state of affairs. 1859: Nichols Case: The judgment stated that it was part of the auditors duty to discover fraudulent misrepresentation. This was the start of fraud and error detection as the main audit objective for the next 80 years or so. 1896: Re. Kingston Cotton Mill: The judge remarked that the auditor was a watchdog not a bloodhound, and that what was required of him was the exercise of what was regarded at the time as reasonable skill and care in the circumstances. 1913: Companies Act (India): Every company required to have its accounting books and records audited. A report had to be made on the balance sheet and profit and loss account. Auditors had to be professionally qualified. 1932: Auditors Certificate Rule: A comprehensive set of rules governing the regulation and training for the auditors.

1936: Amendments to 1913 Act: Increasing awareness took place about the importance of financial information to investors. 1947: Partition adopted by Pakistan. 1950: Auditors Certificate Rules 1950: These replaced the 1932 rules. Under these rules persons who fulfilled specified conditions in relation to practical and theoretical training could have their names entered in the register and use the designation Registered Accountant. Only a registered accountant could be appointed auditor of a public limited company. 1961: Institute of Chartered Accountants of Pakistan (ICAP): ICAP was formed from registered accountants. Government created department of accountancy. 1973: Formation of ICAB: Bangladesh liberated in 1971 creating a major problem because of the lack of an institute. In 1972 Institute of Chartered Accountants of Bangladesh formed under Bangladesh Chartered Accountants Order 1973 (P.O. No. 2 of 1973). 1973: Onwards: Bangladesh had been participating in the creation of International Accounting and Auditing Standards. Increasing awareness of the role of accounting and auditing was been going on.

Auditing Standards: These prescribed basic principles and practices which members are expected to follow in the conduct of an audit. Apparent failures by members to observe these standards may be enquired into by appropriate committees of the accountancy bodies and may lead to disciplinary action. Major accountancy bodies of the world have issued auditing standards to be followed by their respective members. The major accounting bodies of the United Kingdom and Eire formed themselves into a body known as the Consultative Committee of Accountancy Bodies. This body through its sub-committee known as Auditing Practices Committee (APC) is issuing auditing standards and guidelines (ASC). The initial major standards issued by the APC encompassed: (i) (ii) (iii) The auditors operational standard The audit report Qualification in audit reports.

There is more detailed guidance on how the auditing standards may be applied in practice. Since it would be impossible to establish a code of rules sufficiently elaborate to cater for all situations these guidelines

are not mandatory. However, they do represent a code of current best practice and an auditor would be unwise to ignore them unless he had good grounds for doing so. In a court of law for instance, the court would be likely to use auditing standards and guidelines as indicative of best practice and would be likely to judge the auditors work against the advice laid down in the guidelines or standards.

Auditing statements: In addition to the auditing standards and guidelines, some accounting bodies also issue auditing statements on the general principles of auditing. International Federation of Accountants: The International Federation of Accountants (IFAC) came into existence on 7 October 1977 with the board objective of the development and enhancement of a co-coordinated worldwide accountancy profession with harmonized standards. In working toward this objective, the Council of IFAC has established International Auditing Practices Committee (IAPC) to develop and issue, on behalf of the Council guidelines on generally accepted auditing practices and on the form and content of audit reports (ICAB, 1999).

The Institute of Chartered Accountants of Bangladesh (ICAB): The Institute of Chartered Accountants of Bangladesh (ICAB), being the only institute in Bangladesh for providing CA education, combines a high value qualification with a reputation as the countrys best institution for training and supports the chartered accountants. ICAB pursues the following objectives: Regulate the accountancy profession and matters connected therewith in the country. Ensure sound professional ethics and code of conduct by its members Provide specialized training and professional expertise in accounting, auditing, taxation, corporate laws, management consultancy, information technology and related subjects. Impart mandatory continuing professional education (CPE) to its members. Foster acceptance and observe of International Financial Reporting Standards (IFRSs) and International Standards on Auditing (ISA) and adopt IFRSs and ISA in Bangladesh as Bangladesh Financial Reporting Standards (BFRSs) and Bangladesh Standards of Auditing (BSA) respectively.

Keep abreast of latest development in accounting techniques, audit methodology, information technology, management consultancy and related fields. Liaise with international and regional organizations to influence the development of efficient capital market and international trade in services.

ICAB adopts the standards as Bangladesh Standards on Auditing (BSA) as listed in appendix1:

General Principles of an Audit: The Auditor should comply with the Code of Ethics for Professional Accountants issued by the Council of the Institute of Chartered Accountants of Bangladesh. Ethical principles governing the auditors professional responsibilities (ICAB, 2004) are: (a) Independence; (b) Integrity; (c) Objectivity; (d) Professional competence and due care; (e) Confidentiality; (f) Professional behavior; and (g) Technical Standards The auditor should conduct an audit in accordance with BSAs or ISAs as adopted in Bangladesh. These contain basic principles and essential procedures together with related guidance in the form of explanatory and other material. The auditor should plan and perform an audit with an attitude of professional skepticism recognizing that circumstance may exist that cause the financial statements to be materially misstated. An attitude of professional skepticism means the auditor makes a critical assessment, with a questioning mind, of the validity of audit evidence obtained and is alert to audit evidence that contradicts or brings into question the reliability of documents or management representations. For example, an attitude of professional skepticism is necessary throughout the audit process for the auditor to reduce the risk of overlooking suspicious circumstances, of over generalizing when drawing conclusions from audit observations, and of using faulty assumptions in determining the nature, timing and extent of the audit procedures and evaluating the results thereof. In planning and performing an audit, the auditor neither assumes that management is dishonest nor assumes unquestioned honesty. Accordingly, representations

from management are not a substitute for obtaining sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the audit opinion.

Scope of an Audit: The term scope of an audit refers to the audit procedures deemed necessary in the circumstances to achieve the objective of the audit. The procedures required to conduct an audit in accordance with BSAs should be determined by the auditor having regard to the requirements of BSAs, relevant professional bodies, legislation, regulations and, where appropriate, the terms of the audit engagement and reporting requirements.

Reasonable Assurance: An audit in accordance with BSAs is designed to provide reasonable assurance that the financial statements taken as a whole are free from material misstatement. Reasonable assurance is a concept relating to the accumulation of the audit evidence necessary for the auditor to conclude that there are no material misstatements in the financial statements taken as a whole. Reasonable assurance relates to the whole audit process. An auditor cannot obtain absolute assurance because there are inherent limitations in an audit that affect the auditors ability to detect material misstatements. These limitations result from factors such as: The use of testing. The inherent limitations of any accounting and internal control system (for example, the possibility of management override or collusion). The fact that most audit evidence is persuasive rather than conclusive. Also, the work undertaken by the auditor to form an opinion is permeated by judgment, in particular regarding: (b) The gathering of audit evidence, for example, in deciding the nature, timing and extent of audit procedures; and (c) The drawing of conclusions based on the audit evidence gathered, for example, assessing the reasonableness of the estimates made by management in preparing the financial statements.

Further, other limitations may affect the persuasiveness of audit evidence available to draw conclusions on particular financial statement assertions (for example, transactions between related parties). In these cases certain BSAs identify specified audit procedures which will, because of the nature of the particular assertions, provide sufficient appropriate audit evidence in the absence of: (a) Unusual circumstances which increase the risk of material misstatement beyond that which would ordinarily be expected; or (b) Any indication that a material misstatement has occurred. Accordingly, because of the factors described above, an audit is not a guarantee that the financial statements are free of material misstatement (ICAB, 2004).

Chapter 4 Findings and Analysis

Findings regarding structure of the audit report issued Table-3: Extent of compliance as to the standard structure of the audit report:
SL No. 1 Structure Component Title Mentioning of Independent Auditor in the title 2 Addressee Mentioning like Shareholders of the XYZ Company (Full name) 3 Opening Introductory Paragraph or Identification of Financial Statements A statement of the responsibility, of the management opinion. 4 Scope Paragraph (Describing the nature audit) of an A description of the work the auditor(s) performed Reasonable basis of opinion 5 Opinion Paragraph Reference statements 6 Date report 7 Auditors address Full address with holding number City where the audit firm located No address at all 8 Auditors signature Signature in the name of the firm Signature in the name of partner 18 71 01 65 8 20 78.89 1.11 72.22 8.89 of the Mentioning the date of completion 89 98.89 to the financial reporting 90 90 100 100 90 100 Reference to the BSA or relevant national standards or practices Requirement of planning and performance 90 100 90 100 regarding the financial statements and of the auditor(s) regarding 90 90 100 100 76 84.44 Description No. of audit report complied (N=90) 2 2.22 %

framework used to prepare the financial

Signature as S/d No signature at all 9 Heading of the paragraph Mentioning the head of the paragraph before starting the paragraph

16 1 20

17.78 1.11 22.22

From the above findings we can infer that introductory paragraph, scope paragraph and opinion paragraph were complied fully with the standard practice as guided. But in case of title, addressee, date of the report, auditors' address, auditors' signature, heading of the paragraph component of the audit report were not been complied to the fullest extent. The great deviation from standard practice was identified in the 'title' component. Only 2.22 percent audit report titled as 'Independent auditor's report'. But this compliance should be 100 percent. 'Auditors' addresses were given in the audit report almost all cases but only 20 percent audit report inserted the address of the firm with holding number, which is directed as standard practice. However, only one audit report (1.11 percent of the sample studied) did not insert any address in the audit report, which seems to be a great violation of the standard given regarding the audit report. Auditors' signature was given almost all cases but 8.89 percent of the audit report was issued with the signature in the name of partner concerned and 72.22 percent of the audit report was issued with the signature in the name of audit firm, which should be the standard practice. It was observed that 17.78 of the audit report was issued with the signature as 'S/d, which should not be the standard practice. It is worthy to mention that one audit report was issued without any signature of the auditors, which is a major violation of the prescribed standard for the structure of the audit report. Substantial part of the audit report studied (84.44 percent) addressed to the shareholders of the concerned company with the full name of the company but 15.56 percent did not address to the shareholders of the concerned company with the full name of the company, which could be attributed as the violation of the standard practice. It is a good practice to mention the name of the paragraph before starting each paragraph in the audit report to indicate specific segment of the audit report for the good understandability of the message of the report to

the users. But only 20 percent of the audit reports studied mentioned the name of the paragraph before starting each paragraph. Finding regarding the nature of the audit report issued: The findings in relation to the nature of the audit report are presented in the following table: Table-4: Nature of the audit report issued for the companies studied (listed and unlisted)
Sector Number of Sample Bank Institute Investment Engineering Food and Allied Products Fuel and Power Textile Pharmaceuticals Chemicals Paper and Printings Service and Real estate Cement IT Sectors Tannery Ceramic Insurance Miscellaneous Total 1 1 4 1 4 1 2 8 90 1(100%) 1(100%) 4(100%) 0 3(75%) 1(100%) 2(100%) 8(100%) 77(86%) 0 0 0 0 0 0 0 0 0 0 0 0 1(100%) 1(25%) 0 0 0 12(13%) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1(1%) and 14 11 5 2 13 11(79%) 4(37%) 5(100%) 2(100%) 12(92%) 0 0 0 0 0 2(14%) 7(63%) 0 0 1(8%) 0 0 0 0 0 1(7%) 0 0 0 0 and Financial 23 Nature of the audit reports studied Unqualified Emphasis of matter 23(100%) 0 Qualifie d 0 Disclaim er 0 0 Adverse

From the above findings we can infer that substantial part (86% of the total sample) of the audit reports studied was issued as 'Unqualified'. A small portion of the audit reports studied was issued as 'Qualified' mentioning the standard indications of qualified audit report of 'Except for' and 'Subject to' in the opinion paragraph of the audit report. On the other hand, only one audit report was issued as 'Adverse opinion'. So, it can be clearly understood, qualified and adverse audit reports are issued for listed companies in a greater number in Bangladesh. Further study can be made on this regard for finding out the independence of the auditor engaged in auditing for the Bangladeshi listed companies as the economic condition indicates for issuance of more number of qualified, disclaimer and adverse audit reports.

Nature of the audit report issued for the listed companies studied
Name of Companies the Nature of the audit reports studied Unqualifie d Emphasis of matter Qualified Disclaim er Adverse

Bank and Institute: AB Bank Ltd. Bank Asia Ltd.

Financial

City Bank Ltd. Dhaka Bank Ltd. Dutch Bangla Bank Ltd. Al-Arafha Islami Bank Ltd. Trust Bank Ltd. IFIC Bank Ltd. Exim Bank Ltd. Prime Bank Ltd. Standard Bank Ltd. IDLC Ltd. Peoples Leasing MIDAS Financing Phoenix Finance & Inv.

ENGINEERING: Aftab Automobiles Anwar Galvanizing Atlas Bangladesh Aziz Pipes Ltd. BD. Auto cars Ltd.

Name of Companies

the

Nature of the audit reports studied Unqualifie d Emphasis of matter Qualified Disclaim er Adverse

Food and Products: AMCL(Pran)

Allied

Olympic Industries Ltd. Apex Foods Ltd. Dhaka Fisheries Tripti Industries Ltd. Fu-Wang Foods Meghna Cond.Milk National Tea Co.

Rahim Food Zeal Bangla

Fuel and Power: DESCO BD. Welding Jute: Jute Spinners Ltd. Textile: Al-Haj Textile Altex Industries Apex Spinning Bex Tex H R Textile

Name of Companies

the

Nature of the audit reports studied Unqualifie d Emphasis of matter Qualified Disclaim er Adverse

Pharma & Chemical: ACI Limited Beximco Pharma Paper and Packaging: Hakkani Pulp & Paper Service: Eastern Housing Summit Alliance Port Cement: Meghna Cement Lafarge Surma Cement IT: Daffodil Computers In Tech Online Tannery:

Apex Tannery Ceramic: Monno Ceramic Insurance: Asia Ins. Ltd. Asia Pacific Gen. Ins. Delta Life Insurance

Name of Companies

the

Nature of the audit reports studied Unqualifie d Emphasis of matter Qualified Disclaim er Adverse

Islami Insurance Janata Insurance Meghna Life Insurance Popular Life Insurance Green Delta Insurance Rupali Insurance

Republic Ins. Co. Ltd. Miscellaneous: Beximco Ltd.

0 0 0

TOTAL

A chart has been inserted depict the nature of the audit report issued: Chart-

Natureof the audit report issued by the listed companies

Qualified 7% Adverse 0%

Disclaimer 0% Emphasis of matter 0%

Unqualified 93%

Findings of Analysis Nature of the audit report:

From the above analysis we can infer that substantial part (93.33% of the total sample) of the audit reports studied was issued as Unqualified. A small portion of the audit reports studied was issued as Qualified mentioning the standard indications of qualified audit report of Except for and Subject to in the

opinion paragraph of the audit report. On the other hand, no audit report was issued as Adverse opinion, or Disclaimer.

So, it can be made on this regard for finding out the independence of the auditor engaged in auditing for the Bangladeshi listed companies as the economic condition indicates for issuance of more number of qualified, disclaimer and adverse audit reports.

Chapter 5 Recommendation

The following points are recommended after the study :

The auditor should give more emphasis on the guidelines suggested by ISA 700. Prepare the audit reports is to confirm the accuracy of the financial statements thats why investors can really and easily take investment & credit decisions on the basis of the report. Every audit report must be prepared in accordance with report title. Auditor responsibility should be increased to prepare the audit report. The company should be flexible to provide proper information during the audit.

Chapter 6
Conclusion

The most common way for users to obtain reliable information regarding the financial position and the results of the operation of a business is to have an independent audit performed. The audited information is then used in the decision-making process on the assumption that it is reasonably complete, accurate, and unbiased. Independent audit report expresses an opinion on the fairness of the financial statements presented by the management of the company, indicating the weakness in the internal control system and its application ineffectiveness, if any, resulting in improvement in strong internal auditing environment to foster the corporate governance practice in the company. Typically, shareholders engage the auditor to provide assurance to users that the financial statements are reliable to use the information contained in the financial statements for making decision. If the financial statements are ultimately determined to be incorrect, the auditor can be sued by both the users and shareholders. Auditors obviously have considerable legal responsibility for their work towards expressing audit report on the fairness of the financial statements. A measure of uniformity in the form and content of the auditors report is desirable because it helps to promote the users understanding and to identify unusual circumstances when they occur for taking the decision needed for each user. Auditors should work more independently with the responsibility towards the stakeholders of the respective company to play an important role in flourishing

the progressive economy in the country while issuing their audit report to portray the real picture of the balance sheet of the company.

Chapter 7 Bibliography

Ahmad, J.U. (2004), Draft Code of Corporate Governance-Bangladesh, The Bangladesh Accountant, October-December.

Ahmed, M. U. and Yusuf, M. A. (2005), Corporate Governance Bangladesh Perspective, The Cost and Management, Vol.33, No. 6, November December 2005, pp. 18-26.

Arens, A.A. and Loebbecke, J.K. (2000), Auditing: An Integrated Approach, 8th edition, Prentice Hall International, Inc., USA.

Arens, A. A., Loebbecke, J.K. and Ambanpola, K.B. (1991), Auditing In Singapore-An Integrated Approach, 5th edition, Prentice Hall International, Inc., USA.

Bagrial, A. K. (2000), Company Law, 10th edition, Vikas Publishing House Pvt. Ltd., Delhi.

Boynton, W. C., Johnson, R. N. and Kell, W. G. (2001), Modern Auditing, 7th edition, John Wiley & Sons, Inc., NewYork, USA.

Cadbury, A. (2003), Corporate Governance-An Industry Perspective: Diverse Demands;Disciplined Approach, The Institute of Chartered Accountants of India (Publication of the 12th All India Conference of Chartered Accountants, January, Delhi).

Chowdhury, D. (2004), Incentives, Control and Development-Government in private and Public Sector with Special Reference to Bangladesh, Dhaka Viswavidyalay Prakashana Sangstha, Dhaka.

Committee on Corporate Governance (September 1999), Code of Best Practice for Corporate Governance, Korea. Corporate Governance Committee (1997), Corporate Governacne Priciples-A ICAB (2004), Bangladesh Standard on Auditing, Bangladesh. ICAB (1999), Study Manual on Auditing: Intermediate Group-A, Lesson-1, pp. 1-20. Japanese View (Interim Report), Corporate Governance Forum of Japan, October 30.

IASB (2006), International Financial Reporting Standards (IFRSs) 2006, London, UK.

Kabir, M. H. (2005) Setting Accounting Standards: Bangladesh and International Perspectives, The Cost and Management, 33(6), pp. 5-17.

Otley, D. and Berry, A. J. (1980) Control, Organization and Accounting, Accounting , Organization and Society, 5(2), 231-244.

McMahon, J. T. and Ivancevich, J. M. (1976) A Study Control in a Manufacturing Organization: Managers and Nonmanagers, Administrative Science Quarterly, March, 66-83.

Tannenbaum, A. S. (1968) Control in Organization, McGraw-Hill, NewYork.

Zikmund, W. G. (2003), Business Research Methods, Thomson Learning, USA

Chapter 8 Appendix
Appendix 02: Unqualified Auditors Report for a listed company, (other than a bank or insurance
company) AUDITORS REPORT TO THE SHAREHOLDERS OF ABC COMPANY LIMITED We have audited the accompanying balance sheet of the ABC Company Limited as of December 31, 20XX, and the related profit & loss account and cash flows for the year then ended. The preparation of these financial statements is the responsibility of the Companys management. Our responsibility is to express an independent opinion on these financial statements based on our audit. Scope: We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Opinion: In our opinion, the financial statements, prepared in accordance with Bangladesh Accounting Standards (BAS), give a true and fair view of the state of the Companys affairs as of December 31, 20XX, and of the results of its operations and its cash flow for the year then ended and comply with the applicable sections of the Companies Act 1994, the Securities and Exchange Rules 1987 and other applicable laws and regulations. We also report that: a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof.

b) in our opinion, proper books of account as required by law have been kept by the company so for as it appeared from our examination of those books and (where applicable) proper returns adequate for the purposes of our audit have been received from branches not visited by us. c) the companys balance sheet and profit and loss account dealt with by the report are in agreement with the books of account and returns. d) the expenditure incurred was for the purpose of the companys business. AUDITOR Date Address

Appendix 03: Unqualified Auditors Report for a listed banking company

AUDITORS REPORT TO THE SHAREHOLDERS OF ABC COMPANY LIMITED We have audited the accompanying balance sheet of the ABC Company Limited as of December 31, 20XX, and the related profit & loss account and cash flows for the year then ended. The preparation of these financial statements is the responsibility of the Companys management. Our responsibility is to express an independent opinion on these financial statements based on our audit. Scope: We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Opinion: In our opinion, the financial statements, prepared in accordance with Bangladesh Accounting Standards (BAS), give a true and fair view of the state of the Companys affairs as of December 31, 20XX, and of the results of its operations and its cash flow for the year then ended and comply with the applicable sections of the Bank Company Act 1991, the rules and regulations issued by the Bangladesh Bank, the Companies Act 1994, the Securities and Exchange Rules 1987 and other applicable laws and regulations. We also report that:

i) ii)

we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof. in our opinion, proper books of account as required by law have been kept by the company so for as it appeared from our examination of those books and (where applicable) proper returns adequate for the purposes of our audit have been received from branches not visited by us.

iii) iv) v)

the companys balance sheet and profit and loss account dealt with by the report are in agreement with the books of account and returns. the expenditure incurred was for the purpose of the companys business. the financial position of the company at December 31, 20XX and the profit for the year then ended have been properly reflected in the financial statements; the financial statements have been prepared in accordance with the generally accepted accounting principles;

vi) vii) viii)

the financial statements have been drawn up in conformity with the Bank Companies Act. 1991 and in accordance with the accounting rules and regulations issued by the Bangladesh Bank. adequate provisions have been made for advances which are in our opinion, doubtful of recovery; the financial statements conform to the prescribed standards set in the accounting regulations issued by the Bangladesh Bank after consultation with the professional accounting bodies of Bangladesh;

ix) x)

the records and statements submitted by the branches have been properly maintained and consolidated in the financial statements; the information and explanations required by us have been received and found satisfactory.

AUDITOR Date Address

Appendix 04: Unqualified Auditors Report for a listed insurance company

AUDITORS REPORT TO THE SHAREHOLDERS OF ABC COMPANY LIMITED We have audited the accompanying balance sheet of the ABC Company Limited as of December 31, 20XX, and the related profit & loss account and cash flows for the year then ended. The preparation of these financial statements is the responsibility of the Companys management. Our responsibility is to express an independent opinion on these financial statements based on our audit. Scope: We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Opinion: In our opinion, the financial statements, prepared in accordance with Bangladesh Accounting Standards (BAS), give a true and fair view of the state of the Companys affairs as of December 31, 20XX, and of the results of its operations and its cash flow for the year then ended and comply with the applicable sections of the Companies Act 1994, the Insurance Rules 1958, the Securities and Exchange Rules 1987 and other applicable laws and regulations. We also report that: i) ii) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof; in our opinion, proper books of account as required by law have been kept by the company so for as it appeared from our examination of those books and (where applicable) proper returns adequate for the purposes of our audit have been received from branches not visited by us;

iii) iv) v)

the companys balance sheet and profit and loss account dealt with by the report are in agreement with the books of account and returns. the expenditure incurred was for the purpose of the companys business; as per section 40-C(2) of the Insurance Act 1938 as amended, we certify that to the best of our knowledge and belief and according to the information and explanations given to us, all expenses of management wherever incurred and whether incurred directly or indirectly, in respect of Insurance business of the company transacted in Bangladesh during the year under report have been duly debited to title related Revenue Accounts and the Profit and Loss account of the company; and

vi)

as per regulation 11 of part I of the third schedule of the Insurance Act 1938 as amended, we certify that to the best of our information and as shown by its books, during, the year under report the company has not paid any person any commission in any form outside Bangladesh in respect of any of its business reinsured abroad.

AUDITOR Date Address

Appendix 05: Auditors Report-Modified Opinion

AUDITORS REPORT TO THE SHAREHOLDERS OF ABC COMPANY LIMITED We have audited the accompanying balance sheet of the ABC Company Limited as of December 31, 20XX, and the related profit & loss account and cash flows for the year then ended. The preparation of these financial statements is the responsibility of the Companys management. Our responsibility is to express an independent opinion on these financial statements based on our audit. Scope: We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Opinion: In our opinion, the financial statements, prepared in accordance with Bangladesh Accounting Standards (BAS), give a true and fair view of the state of the Companys affairs as of December 31, 20XX, and of the results of its operations and its cash flow for the year then ended and comply with the applicable sections of the Companies Act 1994 and other applicable laws and regulations. Without qualifying our opinion we draw attention to Note X to the financial statements. The Company is the defendant in a lawsuit alleging infringement of certain patent rights and claiming royalties and punitive damages. The Company has filed a counter action, and preliminary hearings and discovery proceedings on both actions are in progress. The ultimate outcome of the matter cannot presently be determined, and no provision for any liability that may result has been made in the financial statements. We also report that:

a) b)

we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof; in our opinion, proper books of account as required by law have been kept by the company so for as it appeared from our examination of those books and (where applicable) proper returns adequate for the purposes of our audit have been received from branches not visited by us;

c)

the companys balance sheet and profit and loss account dealt with by the report are in agreement with the books of account and returns;

AUDITOR Date Address

Appendix 06: Qualified Auditors Report-Limitation on Scope

AUDITORS REPORT TO THE SHAREHOLDERS OF ABC COMPANY LIMITED We have audited the accompanying balance sheet of the ABC Company Limited as of December 31, 20XX, and the related profit & loss account and cash flows for the year then ended. The preparation of these financial statements is the responsibility of the Companys management. Our responsibility is to express an independent opinion on these financial statements based on our audit. Scope: Except as discussed in the following paragraph, we conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Opinion: We did not observe the counting of the physical inventories as of December 31, 20XX, since that date was prior to the time we were initially engaged as auditors for the Company. Owing to the nature of the Companys records, we were unable to satisfy ourselves as to inventory quantities by other adjustments, if any, as might have been determined to be necessary had we been able to satisfy ourselves as to physical inventory quantities.

In our opinion, except for the effect on the financial statements of the matter referred to in the preceding paragraph, the financial statements, prepared in accordance with Bangladesh Accounting Standards (BAS), give a true and fair view of the state of the Companys affairs as of December 31, 20XX, and of the results of its operations and its cash flow for the year then ended and comply with the applicable sections of the Companies Act 1994 and other applicable laws and regulations. Subject to the above, we also report that: d) e) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof; in our opinion, proper books of account as required by law have been kept by the company so for as it appeared from our examination of those books and (where applicable) proper returns adequate for the purposes of our audit have been received from branches not visited by us; f) the companys balance sheet and profit and loss account dealt with by the report are in agreement with the books of account and returns; AUDITOR Date Address

Appendix 07: Qualified Auditors Report-Disclaimer of Opinion

AUDITORS REPORT TO THE SHAREHOLDERS OF ABC COMPANY LIMITED We were engaged to audit the accompanying balance sheet of the ABC Company as of December 31, 20XX, and the related statements of income and cash flows for the year then ended. These financial statements are the responsibility of the Companys management. We were not able to observe all physical inventories and confirm accounts receivable due to limitations placed on the scope of our work by the Company. Because of the significance of the matters discussed in the preceding paragraph, we do not express an opinion on the financial statements.

AUDITOR Date

Address

Appendix 08: Qualified Auditors Report-Adverse Opinion

AUDITORS REPORT

TO THE SHAREHOLDERS OF ABC COMPANY LIMITED We have audited the accompanying balance sheet of the ABC Company Limited as of December 31, 20XX, and the related profit & loss account and cash flows for the year then ended. The preparation of these financial statements is the responsibility of the Companys management. Our responsibility is to express an independent opinion on these financial statements based on our audit. Scope: We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Opinion: As more fully explained in note...................no provision has been made for losses expected to arise on certain longterm contracts currently in progress because the directors consider that such losses should be offset against future profits expected to arise on other long-term contracts. Bangladesh Accounting Standard (BAS)-11 however requires that provision should be made for foreseeable losses on individual contracts. If losses had been so recognized the effect would have been to reduce the profit after tax for the year and contract work in progress at 31 December 20XX..........by Tk..................

In our opinion, because the effect of the matter discussed in the preceding paragraph, the financial statements do not give a true and fair view of the financial position of the Company as of December 31, 20XX, and of the results of its operations and its cash flow for the year then ended in accordance with Bangladesh Accounting Standards (BAS). We also report that: g) h) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof; in our opinion, proper books of account as required by law have been kept by the company so for as it appeared from our examination of those books and (where applicable) proper returns adequate for the purposes of our audit have been received from branches not visited by us; i) the companys balance sheet and profit and loss account dealt with by the report are in agreement with the books of account and returns;

AUDITOR Date Address