Contents

Key Terminologies.........................................................................................3
Audit:.......................................................................................................3
Accounting:...............................................................................................3
How are Auditing and Accounting related?.........................................................3
Emergence of Accounting and Auditing.............................................................4
Audits in Bangladesh......................................................................................4
Financial Audit............................................................................................4
Compliance Audit........................................................................................4
Performance Audit......................................................................................4
Internal Audit.............................................................................................5
External Audit............................................................................................5
Historical Development of the Auditing Profession in Bangladesh..........................5
1850 to 1882.............................................................................................5
1882-1913.................................................................................................6
1913-1932.................................................................................................6
1947-1971.................................................................................................6
1971-Present.............................................................................................7
Current Issues of Auditing..............................................................................7
Conclusion....................................................................................................7
References...................................................................................................8
Evolution Of Accounting and Auditing:
An Analysis of the Historical Development
of the Auditing Profession in Bangladesh

Can you imagine a world without consequences? Where you can get by, without
reflecting upon your actions? Would you call that a perfect world? A world without
worry? Sounds nice of course. But reality is often not that kind. Whatever we do, all
of our actions are reviewed, taken account of, and passed judgement upon by some
sort of authority figure or supervisor. That review, my friend, is professionally
known as an audit. In this assignment, we’ll be diving further into the history of
audit, and explore how it has been wrapped around the accounting profession in
Bangladesh. Let’s start then...

Key Terminologies
Audit:
Audit is an evaluation. Audit, a systematic approach of evaluating the truthfulness
of an action/initiative, is often done to control, monitor, revise, and maintain
transparency and compliance with the standard. Auditing can be done for many
actions undertaken. However, to simplify and keep relevancy with this course, we’ll
be emphasizing auditing done against actions that has economic or financial
implication.

Accounting:
Accounting in layman’s term means record keeping of every transaction made. With
the help of accounting, an individual or business makes financial statements which
summarizes the performance of its affiliated entity in a given period.

How are Auditing and Accounting related?

Auditing and Accounting are very different from each other, and, yet, they are
related in an interesting way. So, we have already established that accounting
entails tracking and recording transactions to maintain the books of different
accounts. These accounts are then compiled to form financial statements at the end
of the period. Now, this is where Auditing comes in. Auditing helps one to verify the
accuracy and compliance to law of these accounts. Are these financial statements
true representations of the transactions that took place? Auditing is the key to this
question. Essentially, through internal control, separation of duty, physical locks,
and other measures auditing will be done to match receipts of sales and expenses
against cash generated.
Emergence of Accounting and Auditing
Accounting, also widely known as Double Entry Bookkeeping, originated in the 14 th
Century Italy. Shocking! Right? Many would suspect that it had originated in Greece
or Rome, but no. A certain fellow called Luca Pacoli, is known as the father of
accounting, who is Italian of origin. He wrote the first ever book on Double Entry
Bookkeeping, a concept which he discovered in Venice in 1494. His introduction of
journals and ledgers is what defines the theoretical application of modern
accounting. However, accounting’s history goes beyond the 14 th century and into
the Mesopotamia era, circa 3500 B.C.

On the other hand, the emergence or history of auditing is not as definitive and is
not as well recorded. Around 350 B.C., traces of its origin may be found in the rich
and ancient civilizations of Greece, China, and Egypt as a practice of checking the
activities of trade transactions. Similar checking activities were also observed in the
ancient Exchequer of England.

Audits in Bangladesh
Office of the comptroller and auditor general, or OCAG, is known to be the supreme
entrusted audit institution of Bangladesh, and it generally carries out 3 types of
audits:

I. Financial Audit
II. Compliance Audit
III. Performance Audit

Financial Audit
Financial Audits are done with the purpose of forming an opinion on the credibility
of the public sector agencies in preparing financial statements. The Auditor General
relies on reviewing the financial statements by setting the established reporting
framework requirements as a standard. It is essential for the Auditor General to
attest that the financial statements prepared for public and private entities comply
with the law and the established principals.

Compliance Audit
Compliance Audit is conducted cyclically rather than yearly. It is performed to verify
whether the departments of public and private entities are incurring expenditures
for the designated purposes, and whether these expenditures have been
authorized.

Performance Audit
Performance audits are carried out to assess the performance or achievement of a
specific program or action carried out by a department of a public or private body.
 The evaluation provides a comprehensive understanding of the financial leverage
and economic efficiency attained.

On the basis of auditing party, audit can further be of 2 more types:

Internal Audit
Internal Audit is done by the management & stakeholders inside the company itself
to assess the performance and effectiveness of internal processes.

External Audit
External audits are performed by third parties outside of the organization with the
goal of determining a company's compliance with specified criteria.

Historical Development of the Auditing Profession in

Bangladesh
The development of the auditing profession in Bangladesh can be divided into six
distinct periods.

The Bangladesh Chartered Accounts Order 1973

The Bangladesh Chartered Accounts By-order 1973
Cost Management Accounts Ordinance 1977,2018
The Companies
Auditors
Act 1850 The Companies
Certificate
Act 1882
Rules 1932

1850 1882 1913 1932 1947 1971

The Companies Auditors Certificate Rules 1950

Act 1993 The Chartered Accounts Ordinance 1961

1850 to 1882
I. In 1850, British India passed its first companies act which required a semi-
annual audit and an audit report from an auditor.
II. In 1858, the office of the Comptroller and Auditor General was established as
the British Empire took over the reins of governing British India.
III. In 1860, Sir Edward Drummond, the first Auditor General, was appointed,
taking over both accounting and auditing tasks and after two years,
accounting and auditing departments were established, with European
auditors employed to protect the interests of Indian stockholders.
1882-1913
I. This time period saw the passage of the Companies Act of 1882. This statute
precisely outlined the duties, compensation, and appointment of auditors.
II. During that time, some businesses used to pay lawyers to conduct auditing
duties.

1913-1932
I. The Companies Act of 1913 went into effect, stating that no one could act as
an auditor of a public limited company starting from 1914 unless they had a
government-issued Auditor's Certificate.
II. Members of the English Society of Incorporated Accountants and Auditors, as
well as the English, Scottish, and Irish Institutes of Chartered Accountants,
were regarded as qualified auditors.
III. The central government had the authority to recognize members of certain
professions as qualified auditors without obtaining an Auditors' Certificate
from the government, and soon after, the provincial government was able to
grant Auditors' Certificate to any individual with a reasonable understanding
of accounting.
IV. In 1918, the Bombay province government established the Government
Diploma in Accountancy (GDA) with the goal of establishing guidelines for
training and examination for those attempting to achieve the Diploma and
certificate. The GDP Diploma eventually became a requirement for earning an
Auditors' Certificate.
V. The government established an accounting board linked to the Sydenham
College of Commerce and Economics in Bombay, which operated until 1932.

1947-1971
I. On August 15, 1947, Pakistan became an independent state and adopted the
Auditors' Certificate Rules 1932.
II. In 1950, several changes were made. Under the Auditors' Certificate Rules
1950, one of them was in charge of the accounting profession's affairs. The
position of Registered Accountant was open to anyone who could satisfy the
Ministry of Commerce, Central Government of Pakistan, by passing the
Registered Accountants first and final test (RA).
III. In 1952, the "Pakistan Institute of Accountants" was founded by Registered
Accountants. Because it was a private body, the entity's goal was to protect
their own interests while also dealing with issues affecting the accounting
profession in any way.
IV. In June 1959, the government formed the Department of Accountancy inside
the Ministry of Commerce.
V. In March 1961, following ratification from Pakistan's President, the Chartered
Accountants Ordinance 1961 was published in Part I of the Extraordinary
Gazette of Pakistan.
VI. in 1961, The Institute of Chartered Accountants of Pakistan was also
established. To solicit public feedback, a draft of the Chartered Accountants
Bye-Laws was issued, later renamed the Chartered Accountants Bye-Laws
1961.

1971-Present
I. Following the victory in the 1971 liberation war, the Government of
Bangladesh established a council under notification No. SEC-XII/9M-
132/72/318 (50) issued by the Ministry of Commerce.
II. The Bangladesh Chartered Accounts Order 1973, was activated along with a
string of bylaws.
III. In 1994, the Companies Act 1994 was enacted, and the companies
registered under this act needs to have their financial statements audited by
chartered accountants in accordance with the Bangladesh Chartered
Accountants Order 1973.

Current Issues of Auditing

Today, auditing has surpassed accounting and diversified its necessity into the field
of information technology, blockchain, cryptocurrency, data analytics and such. A
marvelous example of it could be found in blockchain technology. So, blockchain is
the culmination of digital ledgers which approves of transaction instantly without
time lag and extensive paperwork. The field of auditing has been somewhat
threatened by the emergence of auditing, as many professionals question whether
a CPA Auditor is actually required if the transactions processed through blockchain
are peer to peer distributed ledgers containing a history of all previous transactions
and are also irreversible. However, auditing cannot be totally ruled out because no
technology is flawless.

Conclusion
While the auditing profession has been evolving in Bangladesh for some time, and
our local talents are thriving in regional areas, we must remain steadfast in
adopting and creating new auditing technologies to stay one step ahead. Human
touch is predicted to become obsolete in the near future for all applications,
especially in accounting. We can contribute right now by embracing technology to
provide transparency until we reach the dawn of complete automation.

References
Auditing. (2018). Retrieved from Banglapedia:
https://en.banglapedia.org/index.php/Auditing
Chartered Professional Accountants Canada. (2017). Blockchain Technology and Its
Potential Impact on the Audit and Assurance Profession. 277 WELLINGTON
STREET WEST, TORONTO, CANADA  : Deloitte Development LLC. .

Saeed, K. A. (1996). Auditing Principles and Procedures. Lahore, Pakistan.

What is Auditing, Its Types, Purposes, and Some Current Issues. (n.d.). Retrieved
from MSG-Management Study Guide:
https://www.managementstudyguide.com/what-is-auditing-its-types-and-
purposes.htm

Chowdhury, R. and Innes, J. (1998). A qualitative analysis of the audit expectations

gap in the public sector of Bangladesh, International Journal of Auditing, November.