Term Paper

On
A Study on Government Audit
 Executive Summary

The auditing is done to find out irregularities regarding stock management, fixed asset
management, proper implication of Bangladesh Accounting standards, VAT Act,
Income tax ordinance, labor law and other included in internal control system. In the
audit a follow up of the previous year’s audit is verified whether that is solved or not.
If not, recommendation on taking proper action is communicated to the management.

But the effort will best be obtained when the transparency of financial reporting will
be ensured through a system where the audit procedure will be more flexible and easy
to understand. Because it will ensure greater accessibility of people to disclose and
evaluate as well as understand and implement the auditing and accounting knowledge.

The auditing profession has contributed and will be contributing a greater extent in
ensuring transparency and efficiency of internal control system of various sector of
Bangladesh. The achievement of the auditors will be then when the maximum people
of the country will be aware about their rights and then proper transparency will come
conquering all obstacles.
 CONTENTS
Page No.
Chapter One
Introduction
1.1 Introduction
1.2 Purpose of the study
1.3 Basic Promises
1.4 Auditors' Responsibility
1.5 Types of Audit
1.5 Scope of an audit:
Chapter Two
Historical Background of the study
2.1 Audit in Bangladesh:
2.2 Control, Corporate Governance and Audit:
2.3 Economic significance of the audit:
2.4 Auditing standards:
2.5 International Federation of Accountants:
2.6 General principles of an Audit:
Chapter Three
Database
3.1 Findings regarding structure of the audit report issued:
3.2 Field Standards for Performance Audits
3.3 Planning
3.4 Supervision
3.5 Compliance with Laws and Regulations
3.6 Study and Evaluation of Management Controls
3.7 Audit Evidence
3.8 Written Reports
3.9 Timeliness
Chapter Four
Findings of the Study
4.1 Findings of analysis standard structure of the audit report:
4.2 Findings of analysis nature of the audit report:
Chapter Five
Recommendation, Conclusion
5.1 Recommendation
5.2 Conclusion
References
 Chapter One
Introduction
1.1 Introduction:
In today’s society the exercise of an auditor’s to the economic and ethical leadership sets the
bounding standard or in other words equips an auditor in such a way that recognizes him as
a reliable body. With the growing conscious recognition of the importance of financial data
in the ordering of everyday business and economic life, the need of basic economic facts
providing a constantly enlarging opportunity for the accounting profession. The auditors'
reports have an especial capacity to fulfill the need for reliable and authoritative financial
material not only because of the reputation or prestige of the certified statements, but also
because of the significance generally attached by the business man to the functions of the
auditor and his reports. These functions, and the scope of these reports, have in the past been
definitely related to the character of and changes in business activity. Audits and reviews are
basically procedures performed on the financial statements of a company, for the purpose of
determining whether the financial statements include any material misstatements.
Misstatements are essentially wrong numbers due to numerical errors, fraud, or errors in
interpreting the accounting rules. Misstatements are material if they are large enough to
make a difference to a user of the financial statements, such as a bank or investor. And the
person who involved in auditing is known as auditor. It also provides the techniques
necessary to examine the internal control system of a company and perform operational or
compliance audits by internal or external auditors.

The early conceptions of the functions of the auditor were such as to confine him to the
duties of a mere checker and verifier of debits and credits. As business became more
complex in its interrelationships there has been a compensating broadening demand for the
acceptance of wand formerly unrecognized responsibilities by the auditor

Bangladesh Standards on Auditing 700: The Auditor’s Report on Financial Statements

described the following guidelines to comply by the auditor:
The purpose of this Bangladesh Standard on Auditing (BSA) is to establish standards and
provide guidance on the form and content of the auditor’s report issued as a result of an
audit performed by an independent auditor’s of the financial statements of an entity. Much
8
of the guidance provided can be adapted to auditor’s reports on financial information other
than financial statements.
The auditor should review and assess the conclusions drawn from the audit evidence
obtained as the basis for the expression of an opinion on the financial statements.

This review and assessment involves considering whether the financial statements have
been prepared in accordance with an acceptable financial reporting framework I being
either Bangladesh Accounting Standards (BASs) or relevant national standards or
practices. It may also be necessary to consider whether the financial statements comply
with statutory requirements.

The auditor’s report should contain a clear written expression of opinion on the financial
statements taken as a whole.

The Constitution of the People's Republic of Bangladesh places the Office of the
Comptroller and Auditor General in a unique position of trust which requires that all work
of the office be carried out in accordance with the highest professional standards. This
entrusts us with a responsibility to ensure high standards of quality, adopt best practices and
set benchmarks against which to measure the quality and output of our work. It is, therefore,
incumbent upon us, to establish and codify internationally acceptable and modern
professional standards to govern all our audit work so that we can efficiently and effectively
carry out the responsibilities bestowed on us by the Constitution.

In the absence of our own auditing standards, until now, we have taken guidance from a
variety of sources: basic principles and guidelines pertaining to the Office laid down in our
Constitution, guidance contained in the existing Audit Code and Audit Manuals, standards
recommended by INTOSAI and those used by other national audit offices. Often, these
standards are inadequate to serve our purpose. The 'Government Auditing Standards' will fill
an important void in our practice and fulfill the long-felt need to have our own standards,
which meet our requirements and are also consistent with international norms.

This document on 'Government Auditing Standards' lays down the basic standards that auditors
are expected to meet in conducting their audits. Although designed primarily for the
9
guidance of auditors and officials of the Audit Department of Bangladesh, I believe that
these standards would be of much benefit to the internal auditors of public sector
organizations as well. Broadly speaking, the standards lay stress on the importance of
independence and professional competence of staff; exercising due care; proper planning
and supervision; reasonableness of criteria; sufficiency, reliability and relevance of
evidence to support conclusions; and fairness and completeness in reporting. Each standard
is supported by explanations to assist the auditor in understanding its meaning and
significance. All staff engaged in the audit are expected to closely follow the standards,
which cover the whole audit cycle - planning, examination and reporting. Extensive training
in the new standards and professional development of staff at all levels will be needed over
time, as well as modifications in organizational structure, systems, and procedures may be
required in the Audit Directorates and in the C&AG's Secretariat. The development and
adoption of 'Government Auditing Standards' represent a significant milestone in the
process of modernizing government auditing in Bangladesh. These standards have been
prepared as part of the ongoing reform initiatives being initiated and implemented in the
Department. It is my firm belief that the adoption and application of these Government
Auditing Standards will contribute in a major way in raising the standard and quality of
government auditing in Bangladesh. As a result, my Office will be able to play a more
effective and enhanced role in promoting greater transparency, accountability and good
governance in the public administration of Bangladesh.

The Government Auditing Standards are issued under the authority of Article 128 of the
Constitution of the People's Republic of Bangladesh and the Comptroller and Auditor
General (Additional Functions) Act, 1974.

1.2 Purpose of the study

1.2.1 The Constitution of the People's Republic of Bangladesh gives the Comptroller and
Auditor General wide discretionary powers in interpreting and applying his mandate in
deciding what to audit, how to audit, and when to audit. This unique position of trust places
a responsibility on the Office of the Comptroller and Auditor General(Office) to carry out
its work in accordance with the highest professional standards.

1.2.2 The aim of the Office is to promote public accountability and foster sound financial
management practices in government. It does so by providing factual, objective and timely
10
information to Parliament on the performance of government by highlighting waste, system
weaknesses, deficiencies and the economic, efficient and effective use of public resources.

I.2.3 This document contains the government auditing standards to be followed by the
Office and its staff in carrying out audits of public sector organizations and their
programmes and activities. Each standard is supported by explanations of its meaning and
significance, and guidelines for its application.

1.2.4 The standards provide a framework for the establishment of procedures and practices
to be followed in the conduct
of an audit. They constitute the criteria or yardstick against which the quality of the results
of audit is evaluated.
Further guidance on how to meet these standards is contained in the Audit Code and
Audit Manuals.

1.2 Basic Promises

1.2.1 Accountability process: Democracy rests on an elaborate structure of accountability
at all levels of government.
The need for accountability has caused a demand for more information. Public officials,
legislators, citizens and other users of audit reports want and need to know whether public
funds are managed properly and in compliance with laws and regulations, whether
programmes and services are achieving their purposes and whether they are operating
economically, efficiently and effectively.

1.2.2 Accountability of public managers: Persons or entities that are entrusted with the
responsibility of managing public resources need to render an account of their activities to
the public. They are responsible for:
• applying those resources economically, efficiently, and effectively to achieve the
purposes for which the resources are furnished;
• complying with applicable laws and regulations. They must implement systems designed
to achieve that compliance;
• establishing and maintaining effective controls to ensure that appropriate goals
and objectives are met;
11
resources are safeguarded; laws and regulations are followed; and reliable data are
obtained, maintained and fairly disclosed;
• providing fair and complete financial reports and other information to appropriate levels
and branches of government for the resources provided to carry out government
programmes and services.

1.2.3 Acceptable accounting standards: Acceptable accounting standards for financial

reporting and disclosure in the public sector are a prerequisite for fair presentation of
financial information and the result of operations. Appropriate authorities should
promulgate such standards. Audited entities must comply with them and apply them in a
consistent manner.

1.3 Auditors' Responsibility

1.3.1 Compliance with established standards: All audit work of the Office should comply
with the established standards to ensure consistently high quality. The Office is thus
responsible for ensuring that a) the audit is conducted by personnel who collectively have
the necessary qualifications, competence and skills, b) independence is maintained, c)
applicable standards are followed in planning, conducting and reporting the results of the
audit, and d) the Office has an appropriate internal quality control system in place.

1.3.2 Activities within mandate: All audit activities should be within the Office's audit
mandate. The full scope of the Office's mandate includes financial statement audits,
regularity (or compliance) audits, and performance audits.

1.4 Types of Audit

1.4.1 Financial Statement Audits: A financial statement audit is the examination of
the financial statements of an audited
entity with the primary objective of expressing an opinion on whether the
financial statements truly present the
expenditures and receipts in the case of accounts prepared on cash basis
(Government Accounts). In the case of
accrual accounts the opinion shall be whether financial statements present a fair and
true picture of the financial
position, results of operations, and cash flows.
12
1.4.2 Financial statement audits can be of government ministries and government
commercial enterprises. The audit of government commercial enterprises involves
reviewing, commenting upon, or supplementing, the audit report of the statutory auditor of
the enterprise, and/or conducting supplementary audit as considered appropriate.

1.4.3 Regularity or Compliance Audits: A regularity or compliance audit is an

examination of the management of expenditures and receipts, and financial systems and
transactions of the audited entity to determine whether the entity has complied with specific
applicable laws, rules, regulations, procedures, etc. that apply to it.

1.4.4 Forensic audit: It is a special type of compliance audit. It involves an

investigative examination of pre-identified cases brought to the attention of the auditor
to determine the validity of allegations of fraud and other financial wrongdoing.

1.4.5 Performance audits or Value-for-Money audits: The terms 'Performance Audit' and
'Value-for-Money Audit essentially mean the same thing and are used interchangeably by
different SAIs in different parts of the world. For example, the United States, countries in
the Indian sub-continent and other countries use the term performance audit, while Canada,
the U.K, among others, use the term value-for-money audit. For our purpose the term
Performance Audit has been adopted.

1.4.6 A performance audit or value-for-money audit is an objective and systematic

examination of a public sector organization's programme, activity, function, or management
systems and procedures to provide an assessment of whether the entity in the pursuit of
predetermined goals has achieved economy, efficiency and effectiveness in the utilization
of its resources (the 3 Es). The purpose is to provide information to stakeholders to improve
public accountability and assist decision-makers, who are ultimately answerable to the
Parliament.

1.4.7 With the advent of information technology and concern for the environment, two new
areas of focus in performance audits have become essential: EDP audit and environmental
audit. In an EDP audit an examination is conducted to give an opinion on the development
and applications of computer-based systems in an audited entity and the adequacy of
administrative and organizational controls as to their accuracy and reliability in processing
13
and analyzing information. An environmental audit is another type (4th E) of performance
audit in which the objective is to assess the nature and extent of the environmental impacts
of an entity's activities.

1.5 Scope of an audit:

The term “scope of an audit” refers to the audit pr ocedures 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.

.
14
 Chapter Two
Historical Background of the study

2.1 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: Nichol’s 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.
15
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.

2.2 Control, Corporate Governance and Audit:

The term control is used at a wide range of levels. At one extreme it means effects to
achieve organizational goals and objectives; at another extreme the concern of control is to
see if there are two approved signatures on a disbursement check; and in between there are
all sorts of resources and operational activities, which must be dealt with (Chowdhury,
2004). Otley and Bery (1980) view that the study of organization and the study of control
are interrelated. According to McMahon and Ivancevich (1976), an organization implies
control. The above view has support from Tannenbaum (1968) when he claims that an
organization without some form of control is impossible. He states that an organization can
16
be seen as the relationship of human beings, the exercise of power, use of resources, and
the distribution of resources. All these organizational issues need to be planned, carefully
designed, directed, motivated, and controlled. There are control mechanisms internal and
external to the organization. The external control mechanisms include market competition,
government regulations, the market for takeovers, and corporate governance and
monitoring by shareholders, auditors, and independent outside experts (Chowdhury, 2004).
Committee on Corporate Governance (September 1999) suggests that external auditors
shall perform fair audits independently from the corporation concerned, its management
and controlling shareholders, so that shareholders and other users may maintain confidence
in the corporation’s accounting information. Sir Adrin Cadbury perfectly said, “Corporate
governance is considered withholding balance between economic and social goals and
between individual and community goals. The aim is to align as nearly as possible the
interests of individuals, corporations and society” (Cadbury, 2003). Corporate governance
has become a top priority for the regulatory bodies with the objective of providing better
and effective protection to all stakeholders and also to make the market confident as
research reveals a positive correlation between corporate governance and share prices
(Ahmad, 2004). Various elements of corporate governance discussion includes the legal
framework, ownership structure, shareholding and protection of minority shareholders,
board of directors, and the role of capital markets and Securities and Exchange
Commission (SEC) in corporate governance, accounting and auditing standards,
independent auditor’s report(Ahmed, 2005). Corporate Governance Committee (1997)
stated remarkably, “An audit committee is to be created within the board of directors. All
the members of the committee are to be non-executive directors. Its function will be to
audit the quality of compliance achievements, as well as the appropriateness of risk
management of management. Auditors should audit beyond the normal inspection of
compliance by management, and at the very least should make due judgments on the
strategic decisions made by the board of directors. The quality of corporate auditing has to
be upgraded by designating more than one independent auditors and by a more
systematized auditing” (Corporate Governance Committee, 1997).

2.3 Economic significance of the audit:

Economic significance of the audit of the financial statements of the company emphasizes
the great importance of the audit. ICAB well stated: In Bangladesh as in most other
developed and developing societies, the owners of resources place them in the custody or
17
stewardship of others. Examples of this process are the shareholders (owners) of a company
committing the resources of the company to the stewardship of the directors; the public at large
committing publicly owned resources to the stewardship of elected representatives. The
owners hold the stewards accountable. Under the stewardship system of financial reporting, the
shareholders, who defector represent the ownership of corporate entity, are distinct separate
from the board of directors, who defector represent the management of the company. The share
holders appoint the directors in the company annual general meeting to manage the entity in
the best interest of the ownership. The shareholders need an honest, unbiased, objective,
independent expert, professional opinion, and evaluation of the performance of responsibilities
entrusted upon the directors. The management is unlikely to render that opinion and appraisal
with any degree of objectivity. Hence the auditor acts as a “bridge” helping to make
management accountable to shareholder, through his audit report on the company’s financial
information. The concept of audit independence also enumerates from the application of this
system of stewardship reporting of financial reporting. The accountability is frequently in the
form of annual reports incorporating financial statements. The typical example is the annual
report and accounts of limited companies produced by the directors in accounting for their
stewardship to the shareholders. Before these financial statements can be accepted by the
owners, they need to be examined by audit (ICAB, 1999).
Thus the role of the audit is essentially linked with the role of accounting information, and
may be summarized (ICAB, 1 999):
(a) The owners of resources (investors) must make decisions on the employment of
these resources;
(b) Such decisions are linked with the expected returns from investments;
(c) In the absence of forecast information the investors look at historical data as a guide
to the future;
(d) Such data is provided by the stewards of the resources (e.g. the company
management);
Since their interest may conflict with the investors, the audit serves the function of lending
credibility to the financial statements.
We have seen that the need for an external audit arises primarily when the ownership and
management of an enterprise are separated. There are, however, certain inherent
advantages in having financial statements audited even where no statutory requirement
exists for such an audit:
18
· Disputes between management may be more easily settled. For instance, a partnership
which has complicated profit-sharing arrangements may require an independent
examination of the accounts to ensure as far as possible an accurate assessment and
division of those profits;
· Major changes in ownership may be facilitated if past accounts contain an unqualified
audit report. For instance, where two sole traders merge their business to form a new
partnership;
· Applications to third parties for finance may be enhanced by audited accounts.
However, do remember that a bank, for instance, is likely to be far more concerned
about the future of the business and available security than the past historical cost
accounts, audited or otherwise;
· An auditor may well discover major errors and fraud during his audit, even though
such a discovery is not the primary objective of the audit;
· The audit is likely to involve an in-depth examination of the business and so may
enable the auditor to give more constructive advice to management on improving the
efficiency of the business (ICAB, 1999).

2.4 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) The auditor’s operational standard
(ii) The audit report
(iii) 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
19
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 auditor’s
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.
2.5 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 country’s 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.
20
 · 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:
2.6 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.
21
 Chapter Three
Database

3.1 Findings regarding structure of the audit report issued:

Table 4.1 describes the extent of compliance of auditing standards followed by the auditors
of the sample companies:
Table: Extent of compliance as to the standard structure of the audit report:
SL Structure Description No. of audit report %
No. Component complied (N=60)

1 Title Mentioning of “Independent 2 3.33

Auditor” in the title

2 Addressee Mentioning like 48 80.0

“Shareholders of the XYZ
Company (Full name)”

3 Opening or Identification of Financial 60 100

Introductory Statements
Paragraph A statement of the 60 100
responsibility, of the
management regarding the
financial statements and of
the auditor(s) regarding
opinion.

4 Scope Reference to the BSA or 60 100

Paragraph relevant national standards or
(Describing practices

the nature of Requirement of planning and 60 100

an audit) performance

A description of the work the 60 100

auditor(s) performed

Reasonable basis of opinion 60 100

22
 5 Opinion Reference to the financial 60 100
Paragraph reporting framework used to
prepare the financial
statements

6 Date of the Mentioning the date of 59 98.33

report completion

7 Auditors’ Full address with holding 18 30.0

address number

City where the audit firm 50 83.33

located

No address at all 0 0

8 Auditors’ Signature in the name of the 52 86.67

signature firm

Signature in the name of 8 13.33

partner

Signature as ‘S/d’ 10 16.67

No signature at all 0 0

9 Heading of Mentioning the head of the 20 33.33

the paragraph before starting the
paragraph paragraph

3.2 Field Standards for Performance Audits

This chapter prescribes standards for fieldwork (planning and conducting the audit)
for performance audits.
The scope of performance audit should embrace:
• audit of the economy with which the entity has ut ilized resources in the pursuit of its
objectives in accordance with sound administrative principles and practices, and
management polic ies;
23
• audit of the efficiency of utilization of human, financial and other resources, including
examination of information systems, performance measures and monitoring arrangements,
and procedures followed by audited entities for remedying identified deficiencies; and

• audit of the entity's effectiveness in achieving its predetermined objectives, and audit of
the actual impact of activities compared with the intended impact.

3.3 Planning
All audit work should be adequately planned.
3.3 .l In planning the audit, auditors should:
• develop an understanding of the entity and the programme area subject to audit;
• define audit objectives;
• define audit scope;
• establish a methodology to achieve those objectives;
• establish audit criteria;
• consider the work done by others;
• consult and obtain advice as appropriate;
• provide sufficient staff and other resources; and
• develop a written audit plan.

3.3.2 Understanding the Entity: Prior to commencing detailed planning of an audit of an

entity, it is important to understand the larger context in which the entity operates. In order
to do this, the audit team should have up-to-date knowledge of:
• significant legislative authorities;
• organizational arrangements;
• the environment in which the entity operates;
• accountability relationships;
• major control systems;
• key personnel;
• spending levels and revenues;
• the entity's clients;
• the objective, mission and expected results;
• major operations, including those in the field;
• major risks facing the entity; and
24
 • prior deficiencies and known weaknesses.

3.3.3 Maintenance of pertinent data on the structure, functions and operations of audited
entities will assist the Office in identifying areas of materiality and risk and areas holding
potential for improvements in administration.

3.3.4 Audit objectives: Audit objectives must be carefully considered and clearly stated.
They identify the audit subjects and performance aspects to be examined (for example the
3Es). as well as the potential finding and reporting elements that the auditor expects to
develop.

3.3.5 Audit objectives are normally expressed in terms of what questions the audit is
expected to answer about the performance of an activity, such as results achieved, or the
economy and efficiency of resource utilisation. Theymust be defined in a way that will
allow the audit team at the end of the audit to conclude against each of the objectives.

3.3.6 Audit Scope: Scope is the framework, boundary, limit or subject of the audit. Scoping
the audit involves narrowing the audit to a relatively few matters of significance that pertain
to the audit objective and are critical to achieving the intended result of the audit subject. It
describes the parts or functions of the entity that are the subject of the audit as well as the
time period covered by the audit. There are three underlying principles in establishing the
scope of the audit:
• Relevance to the mandate: Auditors should determine whether the issues selected for
audit are within the mandate of the Office and are of interest to parliamentarians.
• Matters of significance: Identifying matters of significance for audit involves answering
the following types of questions:
• Does the subject have an important impact on resu lts?
• Is it an area of high risk?
• Does it involve material amounts?
• Is it an issue of visibility or of current concern? Is it of interest to parliamentarians
and the public?
• Will it result in improved performance, accountab ility or value for money?
• Audibility: Audibility relates to the ability of the audit team to carry out the audit
in accordance with standards.
25
The team may decide not to carry out the audit because it may not have or cannot acquire
the required expertise, suitable criteria are not available, or the area is undergoing
significant change, etc.

3.3.7 Approach and Methodology : The approach and methodology comprise the
techniques that will be used by the auditor in gathering evidence and conducting his
analysis. Examples of gathering evidence could include review of entity documentation and
files, reports and studies, conducting surveys, field visits to project sites, interviews with
entity staff and subject matter experts, etc. Analytical methods could include statistical
sampling, year-to-year comparisons, trend analysis, comparisons with other entities in the
same or similar line of activities, etc.

3.3.8 Audit criteria: Audits must have suitable criteria that focus the audit and provide a
basis for developing
observations. Criteria are reasonable and attainable standards of performance and control
against which compliance,
adequacy of systems and practices, and the economy, efficiency and effectiveness of
operations can be evaluated
and assessed. The assessment of whether or not criteria are met results in audit observations.

3.3.9 Criteria should be developed for each line of enquiry. They should be:
• relevant: criteria that contribute to making observations and reaching conclusions against
the audit objectives;
• reliable: criteria that result in consistent conclusions when used by different auditors in
similar circumstances;
• neutral: criteria that are free from bias;
• understandable: criteria that are clearly stated and not subject to different interpretations;
and
• complete: all the criteria that could affect the observations and conclusions are identified
and used.
3.3.10 Primary sources of criteria are the controls, standards, measures, results, commitments
and targets adopted by the entity itself or imposed by legislative bodies. The auditor should
review these criteria to assess their relevance to the audit to ensure they are reasonable and
26
Complete. Where the entity's own measures are found to be suitable, they can be adopted as
Audit criteria.

3.3.11 I Where the entity does not have well-established standards for measuring or judging
performance consistent with the
Audit objectives, acceptable criteria may be obtained from the law, regulations, standards
developed by professional
Bodies, performance data of similar organizations, and through other analytical methods.

3.3.12 Considering the work of others: Auditors should determine if audits or evaluations
of the subject in question have
been done by others. They may be useful sources of information for planning and
performing the audit. Audit teams
should rely on the work of others when the work has been carried out in accordance with
the Office's standards.
This can be cost-effective as it can eliminate duplication of effort.

3.3.13 Consultation and advice: Performance audits are complex exercises requiring a
wide range of skills, expertise
and experience to be completed cost-effectively. Considerable judgment is required at all
stages of the audit. Audit
team should consult with knowledgeable staff and advisory groups within the Office,
subject matter specialists, and
others as appropriate, including entity management, to obtain advice and guidance before
finalising the audit plan.

3.3.14 Sufficient resources : An adequate number of auditing staff and supervisors with
appropriate skills, knowledge and
experience should be assigned to the audit. Consultants should be used, as necessary when
in-house skills are not
available or insufficient. Adequate other resources should be made available, such as travel
funds, for the team to
carry out its work.
27
3.3.15 Written Audit plan: A written audit plan should be prepared for each audit. The
contents of the plan should
include:
• the audit objectives;
• the audit scope, major considerations and the rat ionale for the scoping decisions,
reasons for any limitations to
the scope;
• the audit criteria and their sources;
• description of the planned audit approach and met hodology;
• identification of audit staff and external consultants, including their qualifications
and special knowledge or skills;
• the estimated cost of the audit (staff hours and other costs); and
• the timing, the key milestones, and the main control points.
3.4 Supervision
The work of the audit staff at each level and audit phase should be properly supervised.
3.4.1 Supervision involves directing audit staff and monitoring their work to ensure that the
audit objectives are met.
Supervision is an essential and continuous process that requires that the audit team leader and
other supervisors
should:
• ensure that all team members fully understand the audit objectives;
• provide a clear outline to auditors of what is ex pected from them;
• provide counsel, advice and on the job training a s needed;
• ensure that audit procedures are adequate and pro perly carried out;
• ensure that the standards and reporting process are followed;
• ensure that audit evidence is appropriate, suffic ient and documented and that it supports
audit observations and
conclusions; and
• ensure that only necessary work is carried out an d that budgets, timetables and schedules
are kept.
3.5 Compliance with Laws and Regulations
The auditor should design audit steps to provide reasonable assurance of detecting acts that
may be noncompliant with laws and regulations that are significant to audit objectives. The
28
auditor also should be alert to situations or transactions that could be indicative of illegal
acts.
3.5.1 Auditors should determine if laws and regulations governing the entity are significant
to audit objectives, and, if they
are, assess the risk that significant illegal acts could occur. Based on that assessment, the
auditor should design and
perform procedures to provide reasonable assurance of detecting significant illegal acts.
3.5.2 The auditor's assessment of risk includes considerations of whether the entity has
controls that are effective in
preventing-or detecting illegal acts.

3.6 Study and Evaluation of Management Controls

Auditors should obtain an understanding of management controls that are relevant to the
audit. When controls are significant to audit objectives, auditors should obtain sufficient
evidence to support their judgement about such controls.
3.6.1 Management is responsible for establishing effective management controls. In the
broadest sense these controls
include policies and procedures for:
• planning, organizing, directing and controlling p rogramme operations;
• ensuring that a programme meets its objectives;
• ensuring that valid and reliable data are obtaine d, maintained and fairly disclosed
in reports;
• ensuring that resource use is consistent with laws and regulations;
• ensuring that resources are safeguarded against waste, loss and misuse;
• measuring, reporting, and monitoring performance.
The extent of the study and evaluation of internal control depends on the objectives of the
audit and on the degree of reliance intended.
3.7 Audit Evidence
Sufficient, reliable and relevant evidence should be obtained to support the auditor's
judgement and conclusions.
3.7.1 The auditor's findings, conclusions and recommendations must be based on evidence.
The evidence must be
sufficient, reliable and relevant.
29
3.7.2 Evidence is sufficient if there is enough of it to support the auditor's findings.
Evidence is relevant if it has a logical,
sensible relationship to the finding. Evidence is reliable if it is consistent with fact, i.e. it is
valid.
3.7.3 Evidence may take a variety of forms. It may be:
• Physical, i.e. obtained by direct inspection. Whenever possible, it would be better to
obtain photographs or videotapes to support such observations;
• Testimonial, i.e. based on interviews and discussions. Those should be substantiated by
other evidence,
whenever possible;
• Documentary, i.e. based on copies of actual documentation;
• Analytical, i.e. confirmation from third parties, including measurements or standards of
performance used as a basis for , developing criteria; and statistics, comparisons, analysis,
rationale. etc. developed by the audit team.
3.7.4 Auditors should have a sound understanding of techniques and procedures such as
inspection, observation, enquiry
and confirmation, and be proficient in interviewing skills to collect audit evidence.
3.7.5 Working papers: Auditors should adequately document the audit evidence in
working papers, including the basis
and extent of the planning, work performed and the findings of the audit. Working papers
serve three purposes.
They provide support for the auditor's report, aid the auditors in conducting and supervising
the audit, and allow others to review the quality of audits. They should be sufficiently
complete and detailed to enable an experienced auditor having no previous connection with
the audit subsequently to ascertain from them what work was performed to support the
conclusions.
3.7.6 Well-organized and complete working papers are of critical importance when
reviewing findings with office management, briefing the C&AG, providing support at PAC
briefings, answering subsequent queries from the client
and others, and planning future assignments.
3.7.7 Audit observations: The comparison of the evidence against criteria will result in the
identification of observations.
The observations are the basis for forming overall conclusions against audit objectives.
30
3.8 Written Reports
Auditors should prepare written audit reports communicating the results of each audit.
3.8.1 I The reputation and credibility of the Office depend to a great extent on the quality of
the reports it produces. The
reports are what parliamentarians see of the work of the Office. Consequently, they have to
meet the highest
standards for content and presentation.

3.8.2 Written reports communicate the results of audits to parliamentarians and others;
reduce the chance of misunderstanding about results reported; and facilitate follow-up to
determine whether appropriate corrective actions have been taken. The need to maintain
public accountability for government programmes demands that written audit
reports be produced.

3.9 Timeliness
Audit reports should be issued to make the information available for timely use by legislators
and others. To be of maximum use, the audit report must be produced in a timely manner. A
carefully prepared report may be of little value to decision-makers if it arrives too late.
31
 Chapter Four
Findings of the Study
4.1 Findings:
The findings of government audit are given below:
 To find out whether the Institution’s funds including Government aid or
grant received by the same are properly spent for the specific purpose for
which the said aid or grant was sanctioned.
 To verify the authenticity of the statements submitted by the authority of
the institutions for any individual connected with it to the Government or
the Board or Directorate having jurisdiction over the same or to any
Government agency.
 To verify if the conditions of grants or aid received from the Government
have been properly complied with.

 To verify the qualifications of the Teachers and other employees of the

institutions in order to determine their eligibility for receiving various
contributions from the Government in respect of salaries and other
benefits.

 To verify whether the conditions of eligibility for affiliation/recognition by

competent authority have been met by the institution concerned.

 To check if various administrative orders and instructions by competent

authorities including Governing Bodies/Managing Committee of
institutions have been duly carried out.
 To audit the accounts of Government and Non- Government institutions.

 To supervise the academic activities of both the Government and Non-

Government institutions.

To take up special investigation/inspection and audit in the government

Offices/Agencies/Bodies etc. under the Ministry of Education as and when instructed.
After the successful piloting of Performance Audit in Bangladesh, OCAG conducted
performance audits regularly through the nine Audit Directorates
33
 Chapter Five
Recommendation, Conclusion

5.1 Recommendation
Audits must have necessary and sufficient observations to support conclusions made against
each objective. The auditor should assess the significance of the observations in relation to
the audit objectives. At the extreme ends of the performance spectrum-fully satisfactory
performance or highly unsatisfactory performance concluding against the overall objective
may not pose a problem. In the majority of cases, however, the auditor will have to use
judgement in reaching a conclusion.

They cover the need for written audit reports and their timeliness and content. Where
deficiencies in performance have been identified the auditor needs to develop
recommendations to guide corrective action. Normally the recommendations should be
stated in broad terms of what needs to be done, with the specifics of how it can be done
being left to entity management. When developing recommendations, the auditor should
take management views into account, consider the cost and feasibility of implementing the
proposed action, and understand the effects on results, both positive and negative, if the
recommendations are adopted. As appropriate, a legal opinion should be sought in cases
involving sensitive or confidential information.

The following points are recommended after the study:

· The auditor should give more emphasis on the guidelines suggested by BSA 700.
· In carrying out their responsibilities as professionals, members should exercise
sensitive professional and moral judgments in all their activities.
· In all matters relating to the assignment, independence in mental attitude is to be
maintained by the auditor or auditors.
· The company should be flexible to provide proper evidence during the audit.
34
5.2 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 auditor’s report is desirable because it
helps to promote the user’s 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.
35
 References

1. www.wikipedia
2. www.google.
3. Budget 2015-2016