University of Jahangir Nagar

Institute of Business Administration

BBA Programme 27th Batch

Auditing and Taxation
Lecture 3 & 4

Course Teacher:
Shish Haider Chowdhury
shish.1965@gmail.com
018 19225594

10 June 2020
 History of Auditing Profession

For a logical analysis the history has been subdivided into certain specific periods and is
described below:

1: 1850-1882: The first Companies Act in the then British India was enacted in 1850.

One of the provisions included in the said Act was a half yearly audit and a report on the
accounts audited to be given by the auditor. In Indo-Pak subcontinent there were a few
British firms of accountants, but they were so busy that their services were not available to
the general public. The public companies used to appoint a European Auditor for
safeguarding the interests of the Indian shareholders.

2: 1882- 1913: Then the Companies Act of 1882 was passed. Regulations 83-94 of Table ‘A’
contained in the first Schedule to the said Act provided for the audit of accounts of the
companies adopting that Table and for the appointment, remuneration and duties of the
auditors. It was not necessary for a company auditor in those times to be accountant
himself. Some companies in fact used to employ lawyers as their auditors.

***3: 1913-1932: The Companies Act, 1913, was passed to be effective as from 1 st April,
1914. No person could act as the Auditor of a public limited company unless he held an
auditor’s certificate granted by Government. The Provincial Governments were empowered
to grant Auditors’ Certificate but, at the same time the Central government also reserved
the right to recognize members of certain professional bodies as qualified to function in the
capacity of company auditors without obtaining Auditors’ Certificate from the Government.
Consequently the members of English, Scottish and Irish Institutes of Chartered Accountants
and of the English Society of Incorporated Accountants and Auditors were recognized as
qualified auditors.

Section 181 of the Companies Act,1913 required that every company should cause to be
kept proper books of account with respect to:
(a) all sums of money received and expended by the company and the matters in
respect of which the receipt and expenditure take place;
(b) all sales and purchases of the goods by the company;
(c) the assets and liabilities of the company
(d) in case of a company pertaining to any class of companies engaged in production,
marketing, transportation , processing, manufacturing, milling, extracting and mining
activities, such particulars relating to utilization of material, labor and other items of
overhead cost.

Thus the broad outlines the maintenance of books of accounts was made mandatory under
the Company law.

For some years after 1913 the Provincial Government used to grant Auditors’ Certificate to
persons who possessed some knowledge of accountancy. At that time there was no
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provision of any kind of training and examination of the accountancy. In 1918, Provincial
Government of Bombay instituted the Government Diploma in Accountancy (Called GDA)
and made regulations for the examination and training of those who wanted to obtain that
Diploma and certificate to practice.
The action taken by the said government received the approval of other provincial and
central Governments. The result was that GDA Diploma becomes the requisite qualification
for the grant of Auditors’ Certificate throughout the then British India. An Accountancy
Board was set up by the Government and was attached to the Sydenham College of
Commerce and Economics, Bombay. This functioned till 1932.

4. 1932- August 14, 1947: Till 1932 there was no centralized control over the profession of
accountancy, but the necessity for such control was increasingly being felt because of
changing requirements of the time and growing needs of the economy. Consequently the
Government framed Rules under Section 144, of the Companies Act ,1913, called “Auditors
Certificate Rules’ 1932”. The objectives of these rules were broadly as follows:

(a) Registering apprenticeships;

(b) Conducting examinations;
(c) Controlling and regulating the profession of auditing.

The Accountancy Profession was then being supervised and controlled by the Ministry of
Commerce of the Central Government. With a view to helping the Government, Indian
Accountancy Board was established. The board was only an advisory body. The Auditors
Certificate Rules 1932, required the passing of two examinations – Registered Accountants
first and final. It further laid down the tenure of prescribed training which was required to
be completed during the period of apprenticeship.

5. August 14, 1947- Dec. 15, 1971: Pakistan emerged as a sovereign state on August 15,
1947 and adapted the Auditors’ Certificate Rules, 1932. Amendments were made in 1950
and the affairs of the accounting profession were then administered under the Auditors’
Certificate Rules, 1950. A person who passed the Registered Accountants first and final
examination and who satisfied the Ministry of Commerce, Central Government of Pakistan
that he had completed the prescribed practical training could have his name placed on the
registered maintained by the said Ministry and was entitled to use the designation
‘Registered Accountant’ (RA).

In 1952, the Registered Accountants formed a private body known as “Pakistan Institute of
Accountants” with the objects of looking after their own interest and taking up with Ministry
of Commerce, Government of Pakistan, matters affecting the accountancy profession. The
Government realized that the profession was rapidly growing in its stature and importance
and in June 1959, the Department of Accountancy was established in the Ministry of
Commerce with a Controller of Accountancy to deal with the professional instead of a
Section Officer.

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The Chartered Accountants Ordinance, 1961 received the assent of the President of
Pakistan on March 3, 1961, and was published in Part I of the Extraordinary Gazette of
Pakistan on March 10 1961. The Institute of Chartered Accountants of Pakistan came into
being on July 1, 1961. A draft of the Chartered Accountants Bye-Laws was also prepared and
published for inviting public comments. The amended version called Chartered Accountants
Bye-Laws –1961, was published on the part I of the Extraordinary Gazette of Pakistan on July
1, 1961 and was enforced as on that date. As of that date the Department of Accountancy
and the Pakistan institute of Accountants having served a very useful purpose were
liquidated.
***6. December 16, 1971 Onward: Through the war of liberation, the then East Pakistan
emerged as an Independent country- Bangladesh on 16 December, 1971. A Council was
constructed by the Government of Bangladesh under notification No, SEC-XII/9M-132/72/
318 (50) dated the 27th March 1972, issued by the ministry of commerce after the 16th day of
December 1971. The profession of Chartered Accountants is governed by the following:

1. The Bangladesh Chartered Accountants Order, 1973

2. The Bangladesh Chartered Accountants Bye-Laws-1973
3. Forms of Application, Certificates, Agreements etc.
4. Directives of the council and the decisions of the institute.

Cost Audit: The Pakistan Institute of Industrial Accountants was registered in the year 1951
by a group of Government and business executives for the advancement of Accounting and
Cost Accounting. In July 1966, The National Assembly of Pakistan Passed an Act entitled the
‘Cost and Industrial Accountant Act, 1966 (XIV 1966)’ to regulate the profession of Cost and
Industrial Accountancy and Pakistan Institute of Industrial Accountants was established to
regulate the profession of Cost and Industrial Accountants.

The Cost and Industrial Accountant Act, 1966 was replaced and on November 8,1977 the
President of Bangladesh enforced the ‘Cost and Management Accountants Ordinance 1977
in 1977 and Cost and Management Accountants Regulations 1980. Section 220(1) of
Companies Act 1994 provides that where in the opinion of Government it is necessary to do
in relation to any company required under section 181 to include in its books of Accounts
the particulars referred to therein, the government may by order direct that an audit of cost
accounts of the company shall be conducted in such manner, as may specified in the order,
by an auditor who shall be a Cost and Management Accountant within the meaning of the
Cost and Management Accountants Ordinance 1977. This audit will be in addition to an
audit conducted under section 210 of the Act.

Institute of Chartered Accountants of Bangladesh(ICAB)

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Formation: Institute of Chartered Accountants of Bangladesh was formed according to
Bangladesh Chartered Accountants Order 1973. The Institute of Chartered Accountants of
Bangladesh is now a statutory autonomous body and is administered by a council of twenty
members. It is a permanent entity and approved legally. The council is assisted by the five
standing committees known as (1) Executive committee, (2) Examination committee, (3)
Investigation and disciplinary committee, (4) the articled student’s committee and (5) the
Technical and Research committee.

Membership:

According to Bangladesh Chartered Accountants Act section 4(1) the following persons can
be enlisted in the institute:

(i) The Bangladeshi citizens who involved in accounting profession as chartered

accountants.
(ii) The people who passed in the examination selected by the institute and who
completed certain trainings.
(iii) Those who passed the examination of any institute of accountancy and who
completed certain trainings. (These persons should be accepted by ICA council as
member and such exams and trainings should also be approved)
(iv) Any citizen of Bangladesh who passed any examination from any institute outside
Bangladesh before this Order and completed the training program accordingly; and
got admitted as a member of that institute.
(v) Any Bangladeshi citizen who passed the final examination of before 25 th march, 1971
under Auditor’s Rule 1950” or Chartered Accountant Ordinance 1961.

Classification of members: The Chartered Accountants Bye-Laws also provide for the
formation of regional committees to look after the interests of the members. The members
of Institute of Chartered Accountant of Bangladesh are divided into two classes:

a. Associate
b. Fellow

a. Associate: The persons whose names are enlisted in the institute., are called associate
members. They can use ‘A.C.A’ after their names.
b. Fellow: If an ACA is involved regularly in the accounting profession of Bangladesh for
at least 5 years before or after the declaration of Charter Accountant Order in
Bangladesh or the then Pakistan, or after partial declaration of that Order; then they can
be enlisted as Fellow of the institute after submitting certain application & fees and with
the acceptance of the council. And they can use ‘F.C.A’ after their names.

Management: The management of ICAB is performed in following way:

(i) For management of this institute, there will be a management council consisting
of 17 members from professional accountants and government selected 3
members as representatives of commerce, finance and education ministries.
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 (ii) The declaration of that council will be of 3 years
(iii) One member will be elected as chairman three others will be elected as assistant
chairmen from the council.
(iv) To solve any problem regarding this profession, necessary subcommittees will be
formed.
(v) There will be a Fund to run the operations of the institute, which will be
controlled by that council.

Functions: The principal functions of ICAB are as follows:

(i) It writes work rules for professional accountants8 under Charter Accountant
Order and take necessary actions if members do not follow the rules of their
professions.
(ii) It keeps a list of professional accountants.
(iii) It fixes the least qualification required to get the right of working as professional
accountants, who gets certificates from abroad.
(iv) It takes necessary examinations and publishes results in order to create
professional accountants.
(v) Other than the above functions, it publishes journals, arranges seminar,
workshop, discussion program etc.

Institute of Cost & Management Accountants of Bangladesh

Formation: Institute of Cost and Management Accountants of Bangladesh was formed

according to the Cost and Management Accountants Ordinance 1977, The Institute of Cost
and Management Accountants of Bangladesh is now a statutory autonomous body and is
administered by a council.
Classification of members: The members of the institute are of two classes:
1. Associates and
2. fellows.

A person shall on his name being entered in the register, be an associate and so long as his
name remains so entered shall entitled to use the letters ‘A.C.M.A.’ after his name to
indicate that he is an associate member of the institute.
A person who has been an associate for a continuous period of not less than five years and
who possesses such qualifications as the council may prescribe, may apply to council for
admission as a fellow. A person who was immediately before the commencement of the
Cost and Management Accountants Ordinance 1977, a fellow of the dissolved institute, and
such person shall be entitled to use the letters ‘F.C.M.A.’ after his name to indicate that he is
a fellow member of the institute.

Constitution and composition of the council:

1. There shall be a council of the institute for management of the affairs of the institute
and for perform the functions assigned to it under the Cost and Management
Accountants Ordinance 1977.

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 2. The council shall be composed of the following persons, namely:
a. Eight persons to be elected by the members of the institute from amongst the
fellows and
b. Four persons to be nominated by the government.

3. An officer or employee of the institute shall not be eligible for election or nomination
as a member or the council.

Honorary office bearers of the council: The council shall at a meeting specially called for the
purpose to elect from amongst its members the following honorary office bearers, namely-

a. A President
b. 2 Vice presidents
c. A Secretary
d. A Treasurer
Duration and dissolution of the council: The duration of the council shall be of three years
from the date of its first meeting on the expiry of which a new council shall be constituted in
accordance of the provisions of the Cost and Management Accountants Ordinance 1977.

Functions:
1. The council shall exercise such powers and perform such functions as may be necessary to
carry out the purposes of the above Ordinance.
**2. In particular, and without prejudice to the generality of the forgoing provisions, the
powers and functions of the council shall include:
a. The examination of candidates for membership of the institute and the prescribing
of fees for such examination;
b. The registration and training of students;
c. The prescribing of qualifications for entry of persons as members of the institute;
d. The recognition of foreign qualifications and training or experience for the purpose
of membership of the institute;
e. The granting, refusal and cancellation of certificates of practice;
f. The maintenance of the Register and publications of the list of members of the
institute and also the names of the members of the institutes who hold the
certificates of practice.
g. The regulation and maintenance of the status and standards of professional
qualification of the members of the institute.
h. The rendering of professional expertise service in the field of Cost and Management
Accounting and in such other related fields.

Committees of the council: The committee shall constitute from amongst its members the
following standing committees, namely:
a. An Executive Committee,
b. An Education Committee;
c. An Examination Committee;
d. A Research & Development Committee;
e. A Disciplinary Committee.
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