Draft Management Report of SBC-11-08-2022-by Mustafiz

MABS & J Partners Mahfel Huq & Co.
Chartered Accountants Chartered Accountants
Contents
Transmittal Letter.......................................................................................................................................................... 4
Executive summary....................................................................................................................................................... 5
About the auditors & competence................................................................................................................. 6
Identification of client and any other intended users........................................................................7
Nature of the business............................................................................................................................................. 7
Composition of team................................................................................................................................................ 7
Audit methodology.............................................................................................................................................. 10
Details of key findings............................................................................................................................................ 11
1. Outstanding Rent Receivables.............................................................................................................. 11
1.01 Outstanding Rent Receivables are carried forward for a long period.........................11
1.02 There was a mismatch between accounts & schedule..............................................................11
2. Rental Income.............................................................................................................................................. 12
2.01 Amount for the Rental Income in accounts did not agree with supporting documents.
................................................................................................................................................................................... 12
3. Reserve for exceptional loss.................................................................................................................. 12
3.01 The reserve for exceptional loss is overstated......................................................................12
4. Negative Net Premium in Engineering.............................................................................................. 13
4.01 There is higher re-insurance ceded than re-insurance premium underwritten in
Engineering.......................................................................................................................................................... 13
5. Investment.................................................................................................................................................... 15
5.01 There is no investment committee in SBC..............................................................................15
6. No tax was deducted at sources........................................................................................................... 16
6.01 No tax was deducted at sources from the payments of Re-insurance Premium to
overseas insurance broker/company........................................................................................................ 16
7. General Reserve.......................................................................................................................................... 16
7.01 Mispresentation of the accounts................................................................................................. 16
8. Fixed Assets are not revalued............................................................................................................... 17
8.01 No revaluation of fixed assets has been done since inception........................................17
9. Underwriting................................................................................................................................................ 18
9.01 Inability to provide documents for Premium Deposit.......................................................18
10. Written policy for Commission on Re-insurance..........................................................................19
10.01 There is no written policy for payment of commission rate............................................19
11. Fire Commission Paid............................................................................................................................... 19
11.01 Fire commission paid is overstated in the accounts...............................................................19
12. Loss in Fire Revenue Account.................................................................................................................. 20
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12.01 There is a significant loss incurred in Fire Revenue Account.............................................20

13. Accrual basis is not followed in Re-insurance..................................................................................... 20
13.01 Re-insurance Premium underwritten does not match accounting period of SBC......20
14. Bridge Loan.................................................................................................................................................. 22
14.01 Bridge Loan carried forward for a long period of time..........................................................22
14.02 Difference in accounts & schedule.................................................................................................. 22
15. Management Expense.............................................................................................................................. 23
15.01 Non-compliance with the circular of IDRA................................................................................. 23
16.01 There was a mismatch between accounts & schedule...........................................................23
17. Amount due to other persons or bodies carrying on insurance business..............................24
17.01 No explanation for the liability........................................................................................................ 24
18. Property, plant & equipment..................................................................................................................... 24
18.01 Fixed Assets register, Assets Identification Tag & Fixed Assets Management Policy
were not maintained properly...................................................................................................................... 24
19. Assets & Liabilities carried forward....................................................................................................... 25
19.01 Debenture Loan carried forward for a long period of time..................................................25
19.02 Crop Insurance Department carried forward for a long period of time.........................25
20. General................................................................................................................................................................. 26
20.01 Accounting Software (ERP)............................................................................................................... 26
20.02 There was a lack of sufficient security of business information........................................27
20.03 No audit was conducted for the Provident fund & Pension Fund......................................27
20.04 There was no internal audit report for the Head Office.........................................................27
21. Miscellaneous................................................................................................................................................... 28
21.01 Expense exceeding the Budget......................................................................................................... 28
21.02 There was a mismatch between accounts & its supporting documents.........................29
21.03 Lack of Training Requirements on posting of entries, Change Management Policy,
Acquisition and Development Policy, Incident and Problem Management and
Administration Activities Monitoring........................................................................................................ 29
21.04 Some expenditures are falsely treated......................................................................................... 30
21.05 Cash book register was not updated............................................................................................. 31
21.06 Mismatches among accounts, ledgers & registers...................................................................31
22.01 Accrual basis is not maintained....................................................................................................... 32
22.02 Lack of proper maintenance of accrual concept.......................................................................32
22.03 Failure to provide documents.......................................................................................................... 33
22.04 Insurance Stamp & Cash defalcation............................................................................................. 33
22.05 Inappropriate accounts....................................................................................................................... 34
22.06 Lack of proper documentation and policies............................................................................... 34
22.07 Wrong treatment of items.................................................................................................................. 35
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22.08 Lack of proper maintenance of accounts..................................................................................... 35

22.09 Inconsistent method of paying remuneration........................................................................... 35
22.10 Failure to comply with the Budget................................................................................................. 36
22.11 No Internal Audit Report was found.............................................................................................. 36
23.01 Non-compliance in claims paid........................................................................................................ 37
23.02 Non-compliance in fire claim............................................................................................................ 37
23.03 Lack of proper documents................................................................................................................. 38
23.04 Rules violation in employment........................................................................................................ 38
24.01 Income Recognition.............................................................................................................................. 39
24.02 Inadequate maintenance of ledgers............................................................................................... 39
24.03 Delayed deposits.................................................................................................................................... 40
24.04 Lack of proper documentation and policies............................................................................... 41
24.05 Mismatch between trial balance & supporting documents..................................................41
24.06 Non-compliance with Accrual concept......................................................................................... 42
24.07 Expenses exceeding the Budget....................................................................................................... 42
24.08 Deviation in Claims paid between Trial Balance & its supporting documents............43
24.09 Misstatement in Interest income.................................................................................................... 43
24.10 Expenses mismatched with supporting documents...............................................................44
25. ECGD Observations......................................................................................................................................... 44
25.03 Lack of proper documents and procedure.................................................................................. 45
Conclusion:..................................................................................................................................................................... 46
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Transmittal Letter
Date: August 01, 2022
Managing Director
Sadharan Bima Corporation (SBC)
33, Dilkusha, C/A, Motijheel, Dhaka-1000
Subject: Management Report on the External Audit of Sadharan Bima Corporation

for the year ended December 31, 2021.
Dear Sir,
In terms of your appointment letter dated January 03, 2022, we, the undersigned, have audited the
accounts of Sadharan Bima Corporation for the financial year 2021. We have examined the accounting
records, registers, and financial statements on a test basis as considered necessary to satisfy ourselves.
We have reviewed the internal control system as applied by the management in the maintenance of
accounting records and the preparation of financial statements.
We set out in the following pages our management letter containing certain matters concerning the
internal control, accounting practices, and procedures of your company that came to our attention
during our audit. To facilitate the prioritization of resources within Sadharan Bima Corporation to
address these observations, we have assigned a risk grading to each observation on the following basis:
Grade Basis
Significant control weakness or business risk that requires immediate management
A
attention.
Control weakness that should be included in management's plan to address in the
B
forthcoming year.
C The matter, which is procedural in nature or observation only.
Each point contained in this report is divided into seven sections outlining the following:
 Observation
 Risk
 Exposure rating
 Recommended action plan
 Management response
 Implementation date
 Individual responsible for the implementation
It is pertinent to mention here that our audit procedures are designed and performed primarily to
obtain reasonable assurance about whether the financial statements are free from material
misstatements, whether caused by error or other irregularities. Accordingly, we have carried out tests
and evaluations of your systems only to the extent necessary for us to decide on reliance to be placed on
your procedures and controls in the process. Thus, such tests and evaluations may not bring to light all
the weaknesses that might exist in the systems of internal control and accounting procedures, which a
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more exhaustive special review of the system might reveal. Please also note fraudulent collusion can
override the effectiveness of most controls.
We would like to take this opportunity to express our thanks to the management and staff of the
company at all levels for the co-operation and assistance that they have extended to us during our audit.
Please do not hesitate to contact us should you require further clarification regarding any of the matters
discussed in this report.
Thank you.
Yours faithfully,
J C Biswas FCA Abdus Sattar Sarkar FCA

Partner Partner
5
Executive summary
About the auditors & competence

MABS & J Partners Chartered Accountants
MABS & J Partners is one of the oldest audit firms in Bangladesh with around 42 years of professional
experience and Central Banks ranking as one of the top six firms at their last ranking done in March
2017. Recently, BB has published their latest enlistment of CA firms in Alphabetic Order and
discontinued the ranking of firms. However, we are in the latest list in Alphabetic Order; MABS & J
Partners attends upon and meets the demand of the diversified services of its valued clients. It has
developed expertise in Audit & Assurance, Forensic & Investigative Audit, Accounting Services,
Taxation, Secretarial work, Corporate Finance, Stocks & Securities Management, Management
Consultancy, Human Resources Consultancy, Information Technology Consultancy, Initial Public
Offering (IPO) & Fund Raising, Outsourcing & Payroll Services, Feasibility & Market Study, Review of
Financial Management System and Performance Audit of various national and multinational
organizations. Our continuous efforts to ensure quality, practical advice, ethical solutions, and integrity
have resulted in a magnificent growth of the firm over the last few years.
MABS & J Partners, Chartered Accountants is a member firm of Nexia International, UK since February
2013. Nexia, one of the leading, top eight global networks of independent accounting and consulting
firms as per the Survey of Accountancy 2020, is providing a comprehensive portfolio of audit,
accountancy, tax, and advisory services with more than 727 offices in over 122 countries across the
world. MABS & J Partners is one of the member firms among 250 firms in the Nexia network.
Mahfel Huq & Co. Chartered Accountants
Mahfel Huq & Co. was established in 1974 by Mr. Howlader Mahfel Huq as a sole practitioner
accounting firm and became the first accounting firm registered in the independent Bangladesh. In
2002, the firm was converted into partnership by a merger with Abu Mohammad Kaiser & Co but
retained its first name. For the last four decades the firm has evolved to provide unmatched client
services and has grown considerably to be able to provide top class client services which is unparalleled
in the industry.
We offer a full range of bookkeeping, auditing (internal & external), accountancy, taxation, VAT
compliance, payroll, company formations, financial accounts, management accounts, business planning
and cash flow forecasts.
Since then it has grown to be a respectable Grade – A firm by Bangladesh Bank and also enlisted with
Bangladesh Securities and Exchange Commission (BSEC), Micro Credit Regulatory Authority, NGOAB,
PKSF, IDCOL & LGSP. Customer satisfaction is our top priority and we pride ourselves on building long
lasting relationship with our clients. We provide a fast, reliable, friendly and professional service at an
affordable price. We have the skills to match your requirements.
We are available during normal office hours, but are happy to arrange out of the hour’s appointments to
suit your needs. Mahfel Huq & Co is an independent member firm of AGN International, one of the Top 5
international associations of accounting and consulting firms. Headquartered in London, United
Kingdom, AGN International’s 184 member firms are represented in 90 countries around the globe by
over 12,000 staffs generating an aggregate income in excess of US$1.6 billion.
Member Firms of AGN International assist clients in meeting the challenges posed both by local and
cross border ventures. These firms advise companies
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Identification of client and any other intended users
Sadharan Bima Corporation (popularly known as SBC) is the only state-owned non-life insurer and
reinsurer in Bangladesh under the Ministry of Finance, Government of the People's Republic of
Bangladesh. Both Sadharan Bima Corporation, the non-life insurer, and Jiban Bima Corporation, the life
insurer, were created under the Insurance Corporation Act (Act No. VI) Of 1973 of Bangladesh.
The office of the Corporation is situated at Sadharan Bima Bhaban, 33, Dilkusha C/A, Dhaka.
Nature of the business
The services provided by Sadharan Bima Corporation include insuring public and private property
risks, providing liability insurance coverage, reinsurance of the risk underwritten by private non-life
insurers, providing Risk Improvement Services, Industrial Development through Equity participation,
and Human Resources Development for the Insurance Industry. Moreover, Sadharan Bima Corporation
itself makes retro-cession to different overseas re-insurers.
Composition of audit team

Considering the importance of the work and the internal control system needed to be reviewed as well
as the financial statements, a team consisting of members with different esteemed professional
backgrounds and experience was formed. The team consisted of the following professionals:
MABS & J Partners

Assigned
Name of professional Qualification Experience
position
Mr. S H Talukder, FCA, CMA (ANZ) FCA, CMA (ANZ) Review Partner 26 Years
Engagement
Mr. J C Biswas, FCA FCA 38 Years
Partner
Engagement
Mr. Mostafizur Rahman ACCA Affiliate 7 Years
Manager
Mr. Mizanur Rahman ICAB Certificate Level Senior Associate 2 Years
Mr. Abdur Rahim Munshi ICAB Certificate Level Mid-level Senior 1.5 Years
Mr. Hasibur Rahaman ICAB Certificate Level Junior Associate 1 Year
Mr. Mohiuddin Rashed ICAB Certificate Level Junior Associate 1 Year
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SBC Head office Team
Engagement
Mr. Mostafizur Rahman ACCA Affiliate 7 Years
Manager
Mr. Mohiuddin Rashed ICAB Certificate Level Junior Associate 1 Year
SBC Dhaka Zonal Office
SBC Khulna Zonal Office
Mahfel Huq & Co.
Assigned
Name of professional Qualification Experience
position
Mr. Howlader Mahfel Huq FCA FCA Review Partner 48 Years
Engagement
Mr. Md. Abdus Satter Sarkar FCA FCA 8 Years
Partner
Mr. Md. Abbas Ali Mallik ACCA Affiliate Director 7 Years
Mr. Samiul Islam ACCA Affiliate Senior Manager 5 Years
Engagement
Mr. Ali Mortuza CA(CC) 4 Years
Manager
Mr. Anisur Rahman ICAB Certificate Level Senior Associate 1.5 Years
Mrs. Shitina Das Tumpa ACCA Junior Associate 1 Year
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Ms. Karuna Noore Hoque Trainee Auditor Junior Associate 1 Year
SBC Head office Team
Engagement
Mr. Ali Mortuza CA(CC) 4 Years
Manager
SBC Dhaka Zonal Office
SBC Narayanganj Zonal Office
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Audit methodology
We apply a five-step method that helps us to quickly understand your business and to deliver results at
speed.
Evaluation Conclusion
Risk Audit
Planning of internal and
assessment testing
controls reporting
Step one: Planning
Here, our expert teams work to understand your operations, internal controls, and information systems.
We then construct an audit timetable that meets your requirements. The result: a tailored audit strategy
is made that is structured around your business or organization.
Step two: Risk assessment
Next, we use this knowledge to assess your financial reporting risk – particularly in business-critical
areas. We identify issues early to allow time for thorough investigation and resolution.
Step three: Evaluation of internal controls
Robust internal controls are the key to a more stable organization. Where possible we test your internal
controls and suggest improvements.
Step four: Audit testing
Our teams use sophisticated tools, including data interrogation software, to analyze your balances and
transactions, and enhance your operations.
Step five: Conclusion and reporting
In this step, we apply an additional check to ensure the accuracy of our work. We then turn the raw
results into actionable insights, so you can rapidly drive improvements across your organization.
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Details of key findings
1. Outstanding Rent Receivables
1.01 Outstanding Rent Receivables are carried forward for a long period.
Observation:
1. An amount of BDT 11.49 crore is shown as Outstanding Rent Receivables from different tenants
of SBC. Gross rent income for the year 2021 was BDT 13.10 crore therefore outstanding rent
receivable should be around BDT 1.1 crore which is equivalent to one month rent income. The
total outstanding rent receivable balance amount has been carried forward in the financial
statements since long. IFRS 09 requires to measure and recognize lifetime Expected Credit Loss
(ECL) for the financial assets with significantly increased credit loss. However, no such loss
allowance has been measured and recognized in the financial statements of the corporation as
on 31 December 2021 although there is a significant credit loss is evident against the receivable.
Risk:
 Asset in the financial statements has been overstated by the long pending outstanding rent
receivable amount.
Exposure rating: A
Recommended action plan:
 The management should take proper action to recover the outstanding rent receivables. If the
management is unable to recover the outstanding rent then the unrecoverable amount should be
written off.
Management Response:
Implementation date:
Individual responsible for the implementation:
1.02 Mismatch was found between accounts & scheduled balance of outstanding rent.
Observation:
In the course of our audit on outstanding rent, we have found a mismatch between accounts &
scheduled balance of outstanding rent.
Details are shown in the table below:
SL No. Particular Balance as per Balance as per Difference

accounts schedule
1 Outstanding rent 114,998,347 170,568,720 55,570,373
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Risk:
 Assets might be understated in the financial statements.
Exposure rating: A
 Management should investigate the reason behind the mismatch of outstanding rent and take
proper actions to resolve.
2. Rental Income
2.01 Amount for the Rental Income in accounts did not agree with supporting documents.
Observation:
The financial statements of the corporation showed that the amount earned for the rental income
during the year was BDT 131,054,697 whereas the amount in the supporting documents was BDT
132,352,117. Therefore, the difference of rental was BDT 1,297,420.
Risk:
 The amount may be misstated in the accounts of the corporation;
 Income of the corporation may have been understated.
Exposure rating: A
 Management should record actual rental income in the Financial Statements and should keep
proper supporting documents for rental income.
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3. Reserve for exceptional loss

3.01 The reserve for exceptional loss has been overstated.
Observation:
According to section 06 of fourth schedule of the Income Tax Ordinance, 1984, the reserve for
exceptional loss must not exceed the premium income of that year or the average of the preceeding
three years’ premium income. Therefore, it should not exceed BDT 6,978,064,907. However, the
reserve is overprovisioned since it is shown as BDT 8,170,656,842 in the accounts.
Risk:
 Due to non-compliance with Income Tax Ordinance, 1984, the corporation might have to face
consequences from the Tax Authorites.
 This might result in the understatement of the general reserve.
Exposure rating: A
The management should take proper action regarding the above fact and should comply with Income
Tax Ordinance, 1984.
4. Negative Net Premium in Engineering Business
4.01 Re-insurance ceded premium was higher than re-insurance premium underwritten
in Engineering Business
Observation:
In Engineering Business of SBC, re-insurance premium underwritten is less than re-insurance ceded
for the period. Hence, it results in negative net premium for the year.
The details of re-insurance premium underwritten and re-insurance ceded are written below:
[Amount in BDT]
Engineering Insurance
Premium
Facultive
Quarter No. Quarter Months Amount
1st April-June 2021 7,718,402
2nd July-September 2021 34,870,450
3rd October-December 2020 21,892,133
4th January-March 2021 2,452,821
Sub Total: 0
Surplus
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1st April-June 2021 1,695,845
Sub Total: 0
PSB
1st January-March 2021 283,417,354
2nd April-June 2021 587,448,597
3rd July-September 2021 415,937,881
4th October-December 2021 638,565,948
Sub Total: 0
Total
[Amount in BDT]
Engineering Re-insurance ceded

Facultive
1st April-June 2021 954,086,684
October-December 2020 1,186,014,208

3rd
October-December 2021 1,166,693,025
Sub Total: 0
Surplus
14
1st April-June 2021 120,457,575
Sub Total: 0
Auto Facultive
1st April-June 2021 128,532,012
Sub Total: 878575557
Total:
Risk:
 It questions the transperancy and reliability of the financial statements;
 Overstatement of premium income in one year and understatement in another year.
Exposure rating: A
 The management should take proper action regarding the above fact.
5. Investment
5.01 There is no investment committee in SBC

Observation:
Investment is a fundamental function for an insurance business to generate non-operating revenue
and all decisions related to investments are taken by the Investment Committee of an organization.
Hence, we apprehend that it was a prerequisite to forming an Investment Committee with the
approval from the Board of Directors as the Committee can play a vital role on the financial
performance specially to achieve the overall return on investment. However, we observed that no
Investment Committee of SBC was established by the board of SBC.
15
Moreover, SBC does not have any written and approved investment policy.
Details of investment are shown in the table below:
Investment Amount in
Particular BDT
2021
Loan 1,459,960,348
Government Securities 755,047,252
Investment in shares 35,625,282,433
Bangladesh Fund 1,060,000,000

Debentures 32,337,967
Investment in FDR 17,467,700,000
Investment Properties 488,280,543
Total 56,888,608,543
Risk:
 The shareholders’ fund may not have been invested properly, for their best interests;
 The corporations may not have received expected returns on these investments.
Exposure rating: A
 We recommend that the Board should take initiative to establish an investment committee and
develop a written investment policy.
6. No tax was deducted at sources
6.01 No tax was deducted at sources from the payments of Re-insurance Premium to overseas
insurance broker/company.
Observation:
While verifying reinsurances ceded, we observed that a total amount of BDT 5,904,565,348 was paid
to a non-resident reinsurance company during the year 2021 as re insurance premium. However, no
tax was deducted at sources from the payments. Applicable tax rate is @ 10% as per section 56 (18)
of Income Tax Ordinance 1984. Hence, the uncollected tax amount stands at Taka 590,456,535 on
that payment.
Risk:
 Due to non-compliance with the section 56 (18) of the Income Tax Ordinance 1984 the tax
authority may impose a penalty/fine for such non-deduction of tax at source.
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Exposure rating: A
 The management should deduct tax at source by complying with the relevant tax rules &
regulations before paying insurance premium to the non-residence reinsurance company/broker.
7. General Reserve
7.01 Mispresentation of the accounts

Observation:
The Consolidated Statement of Financial Position show various reserves which should be included in
the General Reserve to avoid mispresentation of the financial statements and to comply with IAS 1.
Risk:
 Non-compliance with the requirements IAS 1 could adversely impact the credibility of the
financial statements.
 The General Reserve might result in being understated.
Exposure rating: A
 The management should take appropriate actions in order to solve the issue.
8. Fixed Assets are not revalued
8.01 No revaluation of fixed assets has been done since inception

Observation:
As per the International Accounting Standards (IAS) 16-Property, Plant, and Equipment, fixed assets
that have significant changes in fair value should be revalued every three or five years or at a
reasonable interval. However, during our audit, we observed that no valuation of the corporation’s
fixed assets has yet been done.
Value of year-wise fixed assets have been appended value.
SL. No Year Cost WDV
1 2021 BDT 158,93,63,341 BDT 90,70,43,610
Total BDT 158,93,63,341 BDT 90,70,43,610
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Risk:
 Assets in the financial statements might have been over/under stated; and
 Non-compliance with the requirements of IAS 16 could adversely impact the credibility of the
Exposure rating: A
 We presume that there have been significant changes in the fair value of the company's fixed
assets as there was no revaluation conducted since inception. Hence, we recommend that the
management of SBC should take proper initiative to revalue the Corporation’s assets.
9. Underwriting
9.01 Inability to provide documents for Premium Deposit

Observation:
Premium Deposit is a significant portion of the Financial Statements for SBC. It accumulates to BDT
125,62,09,759. However, the Underwriting department was un-cooperative and we were not given
any information to verify the stated amount and conduct a fair audit.
Premium Deposit (BDT)

Particular
2021
Premium Deposit Fire 9,423,819
Premium Deposit Marine Cargo 1,237,910,956
Premium Deposit Marine Hull 384,188
Premium Deposit Motor 764,607
Premium Deposit Misc. 7,419,854
Premium Deposit WIBCI 3,738
Premium Deposit ENGG 121,619
125,62,09,759
Total
Risk:
 There can be misstatement and wrong valuation in the books of accounts;
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 This can lead to other manipulations.
Exposure rating: A
 The management should ensure that an appropriate and systematic audit can take place.
10.Written policy for Commission on Re-insurance
10.01 There is no written policy for commission rate.

Observation:
SBC receives premium and pays commission to 45 insurance companies in Bangladesh. During the
course of our audit, we have noticed that there is no written policy which determine the rate of
commission rate for payment of commission to these 45 insurance companies.
Risk:
 Risk of overpayment of commission that will eventually adversely impact on the general reserve
of SBC.
Exposure rating: A
 The management should develop a policy to determine the commission rate.
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11.Fire Commission Paid
11.01 Other commissions has been included as fire commission.

Observation:
Fire commission paid is shown BDT 1,706,812,557 in the financial statements of the fire revenue
account. However, as per the trial balance of re-insurance accounts, the fire commission was BDT.
1,585,261,630. The difference of BDT 121,550,927 was for the other commission. As a result, loss on
fire revenue account of SBC has been increased to BDT. 56.9 croe.
Risk:
 This might result in the overstatement of profit in the Misc. revenue account and understatement
of profit in the fire revenue account..
Exposure rating: A
 The management should allocate commission expenses in accordance with the premium receive .
12. Loss in Fire Revenue Account
12.01 The fire revenue account of SBC has been making loss for last two years.
Observation:
The SBC has reported loss on fire revenue account of BDT. (569,835,394) in 2021 and BDT.
(780,431,310) in 2020. This might be due to the higher commission paid against of commission
received in the fire revenue account. As per the fire revenue account of SBC commission income on
re-insurance ceded was BDT. 2.89 crore whereas commission payment was BDT. 170.68 crore.
Risk:
 Risk of overpayment of commission that will eventually adversely impact on the general reserve
of SBC
Exposure rating: A
 Management should investigate to find out the reason behind the loss on fire business and should
take proper steps to make it profitable one.
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13. Accrual basis of accounting.
13.01 . Accrual basis of accounting was not followed for Re-insurance accounts.
Observation:
According to paragraph 27 of IAS 1, an entity has to prepare its financial statements using the accrual
basis of accounting. However, re-insurance premium income includes previous years’ amount. The
details of Fire Premium Income are given below:
[Amount in BDT]
Fire Insurance Premium
Facultive
1st April-June 2021 323,825,991
Surplus
1st April-June 2021 796,650,242
2nd July-September 2020 1,035,272,375
4th January-March 2021 1,091,322,357
PSB
1st January-March 2021 86,238,560
2nd April-June 2021 193,693,842
3rd July-September 2021 215,645,978
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4th October-December 2021 92,786,056
Risk:
financial statements;
 There can be misstatement in the books of accounts.
Exposure rating: A
 The management should follow accrual concept as per IAS 1.
 Transactions should be accounted for in the period in which they occurred.
14.Bridge Loan
14.01 Bridge Loan carried forward for a long period of time.

Observation:
During the course of our audit, we have found that Bridge Loan of BDT 25,792,845 was carried
forward for a long period of time and the corporation did not take any action to recover the said
amount from ICB. In this regards this arises a risk of expected credit loss because most of the clients
have no existence in real life.
Risk:
 Investment of SBC might have been overstated by the amount which is not recoverable.
Exposure rating: A
 It is recommended to take step in order to recover the loan from ICB or make a loss allowance as
per IFRS-9 para-5.5.1.
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14.02 Difference in accounts & schedule

Observation:
As per the Investment schedule, Bridge Loan is BDT 25,750,486. However, the accounts show amount
of BDT 25,792,845. It is overstated by BDT 42,359.
Risk:
 Assets might be overstated.
Exposure rating: A
 Management should explain the difference in the amounts.
15. Management Expense
15.01 Non-compliance with the circular of IDRA

Observation:
In accordance with the IDRA SRO no. 280/Act 2018 dated on 26 September 2018, we calculated
management expense of SBC and we have notiched that the SBC has made excees expense of
management. Details are shown in the underneath table:
SL No. Particular Amount in BDT

1 Acual Management Expense 3,662,618,202
2 Management expense as per IDRA SRO 3,346,697,049
Excess management expense 315,921,153
Risk:
 It indicates non-compliance with the IDRA SRO resulting the Corporation may have to pay excess
Tax on disallowed expenses as per Income Tax Ordinance 1984.
Exposure rating: A
23
 Management should comply the provision of section 39 of Insurance Act 2010 as amended and
relevant SRO regarding limitation of expenses of management for non-life insurance business.
16. Amount due from other person
16.01 There was a mismatch between accounts & schedule

Observation:
During our audit we have found a mismatch between the accounts and the schedule balance of
amount due from other persons or bodies carrying on insurance business.
Details are in the below table:
SL No. Particular Amount in BDT.

1 Amount as per accounts 10,141,649,987
2 Amount as per schedule 10,172,992,069
Difference 31,342,082
Risk:
 Asset in the financial statements might be understated by the amount.
Exposure rating: A
 Management should take proper steps to identify the reason for the difference.
17. Amount due to other persons or bodies carrying on insurance business.
17.01 No explanation for the liability

Observation:
During our audit, we have asked for the details of Amount due to other persons or bodies carrying on
insurance business of BDT 4,512,870,076. However, the management has failed to provide an
appropriate explanation for the amount.
Risk:
 Liabities in the financial statements might be misstated.
24
Exposure rating: A
 Management should take proper steps to identify the reason for the difference.
18. Property, plant & equipment
18.01 Fixed Assets register, Assets Identification Tag & Fixed Assets Management Policy
were not maintained properly
Observation:
During the course of our audit, we found out that the Fixed Assets register, Assets Identification Tag
& Fixed Assets Management Policy were not updated accurately.
Risk:
 Assets may be disposed without authorization;
 It indicates poor Internal control;
 Absence of asset identification tag leads to the inability of identifying the specific asset from the
Fixed Asset Register (FAR). Moreover, this reduces management’s ability to track assets
including inter-plant transfers and increases the scope for asset misappropriation;
 It creates chance for misuse/loss of fixed assets;
 It reduces control over the fixed assets.
Exposure rating: A
 The management should take proper steps in order to resolve this issue, ensure assets are
properly tagged with unique asset IDs, implement fixed asset management policy to ensure
control and proper utilization of fixed assets.
19. Assets & Liabilities carried forward
19.01 Debenture Loan carried forward for a long period of time.

Observation:
During the course of our audit, we have found that investment in debenture of BDT 32,337,967 was
carried forward for a long period of time.
Upon discussion with the concern of SBC, we were informed that these investments were made
through ICB long ago and we are communicating with ICB to recover the investment value. However,
as there is no physicalcal existence of most of the companies therefore ICB is unable to recover the
investment value and pay it back to SBC.
25
Risk:
 Assets are being overstated in the financial statements of SBC.
Exposure rating: A
 Management of SBC should take proper initiative to recover the investment value if the
investment value is not recoverable then it should be written of in the financial statements.
19.02 Crop Insurance Department carried forward for a long period of time.
Observation:
During the course of our audit, we have found that Crop Insurance Department of BDT 14,966,838
was carried forward for a long period of time and the management did not provide an appropriate
explanation.
Risk:
 Liabilities are being overstated.
Exposure rating: A
 It is recommended to write off the amount.
20. General
20.01 Accounting Software (ERP)

Observation:
Integrated Books of Accounts were not maintained by Sadharan Bima Corporation (SBC). Accounting
software was not maintained by Sadharan Bima Corporation (SBC) for keeping books of accounts.
Additionally, we have observed the following internal control deficiencies in Sadharan Bima
Corporation:
01. Segregation of duty between maker/checker was not effective.

02. No monthly review of provision balances has occurred.
03. No Aging schedule was maintained.
26
04. No review of nominal ledger balances at year-end has occurred

05. There were frequent changes in the trial balance and nominal ledger. Moreover, the names used
for the accounts in the ledgers does not match with its supporting documents such as cheque
payment vouchers.
06. The corporation has used Microsoft Access for recording and accounting of transactions. This
system was not adequate to record the transactions of SBC. Additionally, the balance can be changed
easily.
07. As a reputed corporation, SBC should have sufficient and appropriate manpower in the accounts
and finance department as well as the operation department of the corporation. However, in our
professional judgment, SBC should recruit more qualified and professional manpower in the
corporation. A separate trial balance for the Head Office of SBC is not maintained due to lack of
manpower & administration.
09. During our audit, it has come to our attention that at SBC, the personal files of the employees were
not properly documented and sorted, we could not find employee NID, ID card photocopies.
Risk:
 Data accuracy of confidentiality of financial statements will be hampered due to not maintaining
accounting software.
Exposure rating: A
 The management should implement the accounting ERP system immediately.
20.02 There was a lack of sufficient security of business information

Observation:
Built-in password-related rules in the system were not effective. They used MS Access for
documentation that was not secured for the accounting of financial statements. SBC didn’t have
documented IT policy for media devices, internet, spam mail, and related support.
Risk:
 In absence of an appropriate IT Security policy, sensitive business information is vulnerable to
external threats and the management may find it difficult to identify their security objectives and
there is a possibility to lose accountability, integrity, and availability of data and other resources.
Exposure rating: A
 Management should take steps for implementing a complete and appropriate detailed
Information Technology Security Policy.
27
20.03 No audit was conducted for the Provident fund & Pension Fund.
Observation:
During our audit, we have requested an audited provident fund report but they failed to provide it to
us.
Risk:
 The amount for the provident fund may be misstated in the accounts of the business.
Exposure rating: A
 SBC should have its provident fund audited to verify that no irregularities have taken place.
20.04 There was no internal audit report for the Head Office
Observation:
During our audit, we have requested to internal audit department to provide all the internal audit
report during 2021. However, the department has failed to provide all the audit report for the Head
Office & all of the Zonal Offices. We were only provided three internal audit report of SBC’s Zonal
Offices which does not contain proper planning and procedure.
Risk:
 It indicates inefficient internal controls since in absence of an internal audit there is poor
accountability on the part of the head office and zonal offices regarding compliance with laws,
regulations, and other external requirements.
Exposure rating: A
 Management should ensure that internal audit is conducted with the proper planning and
procedures. The internal audit department should prepare annual audit plan which should be
approved from the board/audit committee and conduct audit accordingly.
21. Miscellaneous
28
21.01 Expense exceeding the Budget

Observation:
As per the Budget of Fixed Assets department of SBC, Furniture should be BDT 1,200,000. However,
the accounts show amount of BDT 1,396,122. It exceeded the Budget by BDT 196,122.
Risk:
 Non-compliance with the Budget could adversely impact the credibility of the financial
statements.
 It indicates poor internal control.
Exposure rating: A
 The management should explain the causes for the excess amount & should accquire post factor
budget approval.
21.02 There was a mismatch between accounts & its supporting documents
Observation:
There are some mismatches between accounts & its supporting documents. The list is given below:
[Amount in BDT]
As per supporting
Particular As per accounts Deviation
documents
Furniture 1,396,122 1,148,874 247,248
Photostate Machine 614,270 555,775 58,495
Aviation Claims paid 6,969,683 6,427,362 542,321
Total 8,980,075 8,132,011 848,064
Risk:
 It might lead to Assets & Expenses being overstated.
Exposure rating: A
 The management should take proper steps to avoid such mismatch in the future.
29
21.03 Lack of Training Requirements on posting of entries, Change Management Policy,

Acquisition and Development Policy, Incident and Problem Management and Administration
Activities Monitoring
Observation:
Irregularities in recording transaction and reporting of Financial Statements are found frequently.
Moreover, there is no control over posting of journal entries and alteration of financial transaction,
Corporation has no change management policy related to any upgrades/changes. Responsible Person
do what they wish without any approval of Management, It does not have incident or problem
management procedure, which is a critical business driver for a successful business and Corporation
does not practice administrator activities monitoring.
Risk:
 It may become irrecoverable in absence of monitoring and necessary step to resolve;
 It indicates poor inter control;
 Due to lack of professional staff, there might be risk of error arising. Moreover, there is risk of
misstatements and manipulation in the financial statements due to absence of accountability
when it comes to posting of entries;
 In the absence of change management policy, various information risks and functions that
Sadharan Bima Corporation needs to manage may not get clear direction, which is a vital
factor for success in an organization with good profit and management;
 Without approved acquisition and development policy, management may face inappropriate
developed program releases which may cause program instability;
 In absence of incident management procedure Corporation’s information security can be
damaged if incidents arise from external or internal sources. This may result in financial loss
and loss of organization reputation. Without an effective IT help desk, it could take more time
to solve a problem which may cause business loss;
 Without regular monitoring, there is a chance of inappropriate and unauthorized access. This
may result in fraudulent activities by the Administrator to remain undetected.
Exposure rating: A
 Strong internal control should be implemented.
 Professional staff should be trained on the laws, standards and regulations so that they are up
to date and reflect those in the financial statements.
 Sadharan Bima Corporation should have approved change management policy which should
be reviewed and updated periodically.
 Sadharan Bima Corporation should practice monitoring of administrator activities at least
twice a year.
 Management should develop an effective software acquisition and development policy.
 Sadharan Bima Corporation should develop a charter for incident management which include
operational and communication plan. Management should introduce ticketing portal for help
desk problem management.
30
21.04 Some expenditures are falsely treated.

Observation:
Some revenue expenditures have been recorded as capital expenditures. The list is given below:
[Amount in BDT]
Particular Revenue Expenditure Amount
Office Building Vat & Tax 158,039
Photostate machine Photostate maintenance 58,495
Building Resident Honarium 4,800
Total 221,334
Moreover, a capital expenditure has been recorded as a revenue expenditure.

[Amount in BDT]
Particular Capital Expenditure Amount
Office Building Building maintenace 145,236
Risk:
 It leads to assets and profit being either overstated or understated.
Exposure rating: A
 The management should treat expenditures properly to avoid misstatement in the accounts.
21.05 Cash book register was not updated

Observation:
During the course of our audit we did not find the cash book to be updated by the corporation. In this
regard, we could not confirm the cash balance of the cash book register.
Risk:
Exposure rating: A
 The management should maintain proper cash book.
31
21.06 Mismatches among accounts, ledgers & registers

Observation:
There are some discrepancies between accounts, ledgers & registers. The list is given below:
[Amount in BDT]
Particular As per Accounts As per Ledger As per Register Deviation
Books 29,899 33,984 4,085
Photostate 614,270 555,775 58,495
machine
Audit fee payable 450,500 460,000 9,500
Total 72,080
Risk:
 It indicates inconsistency in maintaining books of accounts;
Exposure rating: A
 The management should take proper steps in order to resolve this issue.
22. Dhaka Zonal Observations
22.01 Accrual basis is not maintained

Observation:
basis of accounting. Due to not maintaining accrual basis, Wasa bill should have been BDT 1,397,140
as per supporting documents. However, the trial balance shows BDT 1,824,758. It is overstated by
BDT 427,618.
Risk:
 Expense is overstated.
Exposure rating: A
 The management should follow accrual concept properly.
32
22.02 Lack of proper maintenance of accrual concept

Observation:
For not following accrual concept, Electricity Charge Paid is understated by BDT 334,477 in the trial
balance. It should have been BDT 4,005,319 as per supporting documents whereas the trial balance
shows BDT 3,670,842.
Risk:
 Expense is understated.
Exposure rating: A
 The management should take proper steps to avoid such mismatch in the future.
22.03 Failure to provide documents

Observation:
During our course of audit, we asked for the deed of Office Rent of BDT 9,749,514.86 for verification
but the management did not provide it. Moreover, the ledger of Office Rent was not found in the
books.
Risk:
 There can be misstatement and wrong valuation in the books of accounts;
 It reflects poor internal control of the management.
Exposure rating: A
 The management should be capable of providing all of the necessary documents.
 The management should implement methods of proper internal control.
22.04 Insurance Stamp & Cash defalcation

Observation:
IFRS 09 requires to measure and recognize lifetime Expected Credit Loss (ECL) for the financial
assets with significantly increased credit loss. However, Insurance Stamp defalcation of BDT
232,515,874 and Cash defalcation of BDT 1,240,425 are carried forward for a long time and is shown
as an asset. Whereas it should have been written down a long time ago since there is not any
33
possibility to recover the said amount.

Risk:
 Non-compliance with the requirements of IFRS-9 could adversely impact the credibility of the
 Asset is overstated.
Exposure rating: A
 The management should write off the defalcated amount.
22.05 Inappropriate accounts

Observation:
The trial balance of Dhaka Zone does not contain all of the items such as accrued expenses, due to not
following the accounting principles.
Risk:
 There can be misstatement in the books of accounts.
 This can lead to other manipulation.
Exposure rating: A
22.06 Lack of proper documentation and policies

Observation:
During our course of audit, the management provided only one document to verify Advance
Purchase. Moreover, the document, worth of BDT 27,000, was not properly signed and narrated.
Therefore, it raises questions for its authenticity.
Risk:
 It indicates poor internal control of the management;
34
Exposure rating: A
 The management should take appropriate actions in order to solve these issues.
22.07 Wrong treatment of items

Observation:
In the Local Office Branch of Dhaka Zone, a transaction is wrongly posted in the Petty Cash Book,
which created a discrepancy of BDT 2,600 between the ledger and the Petty Cash Book. The stated
amount should be in Business Development Expenses whereas it is recorded in Claim Paid Motor.
Risk:
 There is misstatement in the books of accounts;
Exposure rating: A
The management should maintain proper books of accounts.
22.08 Lack of proper maintenance of accounts

Observation:
Although Municipal Tax Paid of BDT 2,250,547.20 is recorded in the trial balance, the ledger could
not be found. Furthermore, all of the journal vouchers are not properly signed, which questions
internal control and policies.
Risk:
 There can be misstatement in the books of accounts;
 It indicates poor internal control of the management.
Exposure rating: A
The management should take appropriate actions in order to solve these issues.
35
22.09 Inconsistent method of paying remuneration

Observation:
As per Income Tax Ordinance 1984, sec 30 (1) organization must pay remuneration by bank transfer
to employees having gross monthly salary of BDT 20,000 or more. However, the organization has
inconsistent method of paying remuneration. Furthermore, the salary sheet is not updated and is not
inclusive of all information.
Risk:
 It reflects weak internal control system of the Zonal Office;
 Non-compliance with Income Tax Ordinance 1984.
Exposure rating: A
 The management should comply with Income Tax Ordinance 1984.
22.10 Failure to comply with the Budget

Observation:
As per the clause 13 of budget of 2021 of SBC, there should be a summary of expenses sent to the
budget department every quarter of the year. However, it is not properly maintained.
Risk:
 Non-compliance with the Budget of SBC could adversely impact the credibility of the financial
statements;
Exposure rating: A
 Entity should take necessary steps to settle the issue.
36
22.11 No Internal Audit Report was found.

Observation:
During our audit, we have requested for the Internal audit report. However, the management has
failed to provide it.
Risk:
 Non-compliance with laws, regulations, and other external requirements;
 It indicates poor internal control of the management.
Exposure rating: A
 The management should take appropriate steps in order to solve this issue.
23. Narayanganj Zonal Observations
23.01 Non-compliance in claims paid

Observation:
According to Insurance Act 2010, claims should be paid within 90 days. However, claim no:
H-127755 amount of BDT 6,61,902 taka, which was intimated on 01.01.2019, was paid on 26.12.2021.
Risk:
 Non-compliance with Insurance Act 2010.
Exposure rating: A
 The management must follow rules & regulations.
37
23.02 Non-compliance in fire claim

Observation:
We have observed that a few rules/formalities were not properly followed in the fire claim no: H-
127755. For example, there was a lack of policy note and proposal form.
Risk:
 It indicates non-compliance with the policy of SBC regarding claims procedure;
Exposure rating: A
 Management should take proper measures so that policies and regulations are properly
followed.
23.03 Lack of proper documents

Observation:
Proper documents worth of BDT 22,559,949 could not be collected for the policy of Marine Cargo No-
SBC/NGJ/LOC/MC-01/02/2017. It is due to uncooperative behavior.
Risk:
 There can be misstatement in the policies.
Exposure rating: A
 The management should be able to provide appropriate documents.
23.04 Rules violation in employment

Observation:
The security guard of the Zone is employed through a third party, Al-Arafat Services. However, the
employment is extended by issuing a letter from SBC. Moreover, the letter for the month of October is
missing.
38
Risk:
 It doesn’t comply with the policies of SBC;
Exposure rating: A
 The management must implement methods of proper internal control.

24. Khulna Zonal Observations
24.01 Income Recognition

Observation:
Premium deposited around BDT 3,881,318 have not been recognized as income for a long period of
time. Some examples are shown below:
[Amount in BDT]
MR No & Date Party name Amount
RT. No. B-340440, M\S. Jessore Jute 152,960
14.5.2013 Industries Ltd. Jessore
RT. No. B-355761, M\S. Jessore Jute 135,752
29.5.2014 Industries Ltd. Jessore
RT. No. B-407164, M\S. The Crescent Jute 260,286
09.10.2016 Mills Co Ltd. Khulna
RT. No. B-344618, M\S. Eastern Jute Mills 160,508
16.7.2013 Ltd. Khulna
RT. No. B-356089, M\S. Eastern Jute Mills 118,388
02.10.2014 Ltd. Khulna
RT. No. B-437678, M\S. Khalishpur Jute 154,373
02.01.2018 Mills Ltd. Khulna
Risk:
 Income has been understated whereas liability has been overstated;
Exposure rating: A
 Management should take appropriate measures so that premium deposit and premium income are
carefully calculated & disclosed in the financial statements.
39
24.02 Inadequate maintenance of ledgers

Observation:
Ledgers are not appropriately maintained. For example, interest earned on Motor Cycle Loan is posted
into Advance Motor Cycle loan. Furthermore, Motor Cycle Loan ledger of the branches doesn’t contain
an opening balance.
Risk:
 There can be misstatement since Income is included in Current Assets;
 Income is understated whereas Current Assets are overstated.
Exposure rating: A
 The management should be capable of recording transactions properly.
24.03 Delayed deposits

Observation:
As per the collection statement, some money receipts (MR) were issued to the parties but the amounts
were credited to the Bank Account later than the required date. Some examples are listed below:
[Amount in BDT]
Check issue No & Check Deposit

Name of party Amount Delay
Date date
B 506968 SSCAP Project Seed 3,546 25.05.21 6 days
19.05.21
B 537912 2,277 18.02.21 7 days

11.02.21
BDBL
B 537937 2,024 09.12.21 4 days
05.12.21
Risk:
 It reflects weak internal control.
Exposure rating: A
40
24.04 Lack of proper documentation and policies

Observation:
We have observed that some formalities\rules were not followed in premium collection files. Some
examples are listed below:
Type
Name of the party Policy/Cover note No. of Observation/Remarks
Policy
Khulna University, Khulna SBC/KLN/LO/PUB/MV/PV/POL-
17/01/2021
Sundarban Gas Co. LTD SBC/KLN/LO/PUB/MV/PV/POL-
07/01/2021
Project Director, Extension SBC/KLN/LO/PUB/MV/PV/POL- Motor
and Augmentation of Power 05/01/2021
Distribution System Project,
WZPDCL
Bangladesh Cable Shilpa Ltd SBC/KLN/LO/PUB/FI/F/POL- Proposal form could
07/10/2021 not be found
Bangladesh Cable Shilpa Ltd SBC/KLN/LO/PUB/FI/F/POL-
06/10/2021
M/S. Khalishpur Jute Mills SBC/KLN/LO/PUB/FI/F/POL-
Ltd. 05/07/2021
Mr. Tapan Saha, M/S. Bappi SBC/KLN/LO/PVT/FI/F/POL- Fire
Traders 44/12/2021
Md. Saiful Molla, M/S. Sonia SBC/KLN/LO/PVT/FI/F/POL-
Engineering Traders 43/12/2021
Md. Azizur Rahman, M/S. SBC/KLN/LO/PVT/FI/F/POL-
Nurjahan Tiles Centre. 42/12/2021
Risk:
 It reflects poor internal control;
 Entity might fail to identify the accurate policy and its holder.
Exposure rating: A
 Zonal management should take appropriate measures so that premium collection procedures are
followed properly and the Head Office authority should strengthen its monitoring in this respect.
41
24.05 Mismatch between trial balance & supporting documents

Observation:
Basic Salary (Staff) is overstated in the trial balance. It should be BDT 5,602,170 as per supporting
documents (Salary Sheet) whereas the trial balance shows BDT 5,736,325. After discussion with the
concerned person, we were informed that the difference of BDT 134,155 is the remuneration paid to
casual staff. Thus it should be included in that account accordingly.
Risk:
 Expenses might not be allocated properly;
 It reflects weak internal control.
Exposure rating: A
 The management should maintain appropriate accounts and conform to the Budget.
24.06 Non-compliance with Accrual concept.

Observation:
basis of accounting. However, the Zone does not abide by it. For example, the cost of Mujib Barsa
celebretion 2020 is included in the trial balance of 2021, overstating expenses by BDT 45,770.
Risk:
 Expense is overstated.
Exposure rating: A
42
24.07 Expenses exceeding the Budget.

Observation:
Some expenditures exceeded the approved Budget. The list is given below:
[Amount in BDT]
Name of As per Trial
As per Budget Exceeded Amount
particular Balance
Festival Allowance 3,761,460 3,700,000 61,460
(Staff, Officer)
Internet Expense 179,260 161,000 18,260
Lunch Subsidy 2,970,000 2,700,000 270,000
Risk:
 Non-compliance with the Budget could adversely impact the credibility of the financial statements;
 It indicates ineffective internal control of the management.
Exposure rating: A
 The management should take appropriate actions in order to solve these issues.
24.08 Deviation in Claims paid between Trial Balance & its supporting documents
Observation:
There is some mismatch between the balance of Claims paid in the Trial Balance with the supporting
documents.
[Amount in BDT]
As per Trial As per supporting
Name of particular Deviation
Balance documents
Marine Claim paid 769,767 566,728 203,039
Misc. Claim paid (Pvt) 121,503 112,500 9,003
Fire Claim paid (Pub) 175,326 168,651 6,675
Motor Claim paid (Pub) 361,876 244,125 117,751
Total 1,428,472 1,092,004 336,468
Risk:
 Claims paid are overstated;
 This might result in the understatement of profit.
Exposure rating: A
 The management should explain the deviation.
43
24.09 Misstatement in Interest income

Observation:
Interest on Motor Cycle Loan is understated by BDT 9,913 in the trial balance. It should be BDT 94,138
as per supporting documents whereas the trial balance shows BDT 84,225.
Risk:
 Interest earned has been understated in the financial statements.
Exposure rating: A
 The management should maintain proper accounts.
24.10 Expenses mismatched with supporting documents

Observation:
basis of accounting. Due to not maintaining accrual basis, Electricity Charge Paid is overstated by BDT
21,166 in the ledger balance. It should be BDT 200,678 as per supporting documents whereas the
ledger shows BDT 221,844.
Risk:
 This might result in understating profit.
Exposure rating: A
 The management should maintain proper ledgers.
25. ECGD Observations
25.01 Tax adjusted without the the approval of NBR

Observation:
Department had adjusted the AIT & source tax from 2008-2021 without the approval of NBR, also
there is no clearance of tax assessment of ECGD from the year 2008-2009 to 2020-2021. As per
schedule of ECGD total AIT was BDT 330,015,124 and tax provision was BDT 375,446,375.
44
Risk:
 The current assets and the provision for tax liability have been understated in the financial
statements.
Exposure rating: A

 The management should take appropriate steps in order to solve this issue.
25.02 No calculation of right-of-use assets & lease liability
Observation:
According to the section 9 of the IFRS 16 (Leases), the ECGD shall assess whether the contract is, or
contain a lease. As per section 23 and 29 of the IFRS 16, the ECGD shall measure the right-of-use assets
and as per section 26 and 36, the ECGD shall measure the lease liability. However, in our audit, it
reveals that the standards in this regard were not being followed.
Risk:
 This can lead to assets being understated;
 The liability section of the financial statements are being understated
Exposure rating: A

 The management should calculate right-of-use assets & lease liability.
25.03 Lack of proper documents and procedure

Observation:
We have observed the following internal control deficiencies in ECGD:
01. During our audit, we asked for the photocopies of cheque to verify transactions, however, the
management did not keep any copies.
02. There are errors of commission in the books of account due to inconsistent posting. For
example, the entries of general entertainment are sometimes posted into business
development expenses.
03. Internal Audit was not conducted for ECGD.
45
04. The ledger is maintained inconsistently. Sometimes it’s maintained quarterly, sometimes the
full year’s balance is shown at the last date of the accounting period
Risk:
 Non-compliance with laws, regulations, and other external requirements;
 It indicates poor internal control of the management;
 There can be misstatement in the books of accounts;
Exposure rating: A
 The management should be capable of providing all of the necessary documents.
25.04 Discrepancies
Observation:
There is a mismatch between accounts & its supporting documents. The list is given below:
As per supporting
Name of particular As per Accounts Deviation
documents
Medical, conveyance,
washing & Mobile BDT 239,375 BDT 238,900 BDT 475
allowances
Moreover, there are some mismatches between accounts & ledgers. The list is given below:
Name of particular As per Accounts As per ledgers Deviation
Car maintenance BDT 61,287 BDT 55,485 BDT 5,802
Depreciation BDT 58,266 BDT 56,404 BDT 1,862
Total BDT 119,553 BDT 111,889 BDT 7,664
Risk:
 This can lead to assets being understated;
 The liability section of the financial statements are being understated.
Exposure rating: A

 The management should calculate right-of-use assets & lease liability.
46
Conclusion:
Finally, we would like to request to consider all of our observations, effect, and our recommendation for
the better performance and control of the note of financial statements. We would also like to thanks all
of your respective officers to support us to make this assignment complete.
47

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Chartered Accountants Chartered Accountants

12.01 There is a significant loss incurred in Fire Revenue Account.............................................20

22.08 Lack of proper maintenance of accounts..................................................................................... 35

Date: August 01, 2022

Subject: Management Report on the External Audit of Sadharan Bima Corporation

C The matter, which is procedural in nature or observation only.

J C Biswas FCA Abdus Sattar Sarkar FCA

About the auditors & competence

Mahfel Huq & Co. Chartered Accountants

Identification of client and any other intended users

Nature of the business

Composition of audit team

MABS & J Partners

Mr. Mizanur Rahman ICAB Certificate Level Senior Associate 2 Years

Mr. Hasibur Rahaman ICAB Certificate Level Junior Associate 1 Year

Mr. Mohiuddin Rashed ICAB Certificate Level Junior Associate 1 Year

SBC Head office Team

Mr. Mizanur Rahman ICAB Certificate Level Senior Associate 2 Years

Mr. Hasibur Rahaman ICAB Certificate Level Junior Associate 1 Year

Mr. Mohiuddin Rashed ICAB Certificate Level Junior Associate 1 Year

SBC Dhaka Zonal Office

Mr. Mizanur Rahman ICAB Certificate Level Senior Associate 2 Years

SBC Khulna Zonal Office

Mr. Hasibur Rahaman ICAB Certificate Level Junior Associate 1 Year

Mahfel Huq & Co.

Mr. Md. Abbas Ali Mallik ACCA Affiliate Director 7 Years

Mr. Samiul Islam ACCA Affiliate Senior Manager 5 Years

Mrs. Shitina Das Tumpa ACCA Junior Associate 1 Year

Ms. Karuna Noore Hoque Trainee Auditor Junior Associate 1 Year

SBC Head office Team

Mrs. Shitina Das Tumpa ACCA Junior Associate 1 Year

Ms. Karuna Noore Hoque Trainee Auditor Junior Associate 1 Year

SBC Dhaka Zonal Office

Mrs. Shitina Das Tumpa ACCA Junior Associate 1 Year

Ms. Karuna Noore Hoque Trainee Auditor Junior Associate 1 Year

SBC Narayanganj Zonal Office

Step one: Planning

Step two: Risk assessment

Step three: Evaluation of internal controls

Step four: Audit testing

Step five: Conclusion and reporting

Details of key findings

1. Outstanding Rent Receivables

Individual responsible for the implementation:

SL No. Particular Balance as per Balance as per Difference

Individual responsible for the implementation:

Individual responsible for the implementation:

3. Reserve for exceptional loss

Quarter No. Quarter Months Amount

1st April-June 2021 7,718,402

2nd July-September 2021 34,870,450

3rd October-December 2020 21,892,133

4th January-March 2021 2,452,821

1st April-June 2021 1,695,845

2nd July-September 2021 4,382,179

3rd October-December 2020 4,291,770

4th January-March 2021 59,944,597

1st January-March 2021 283,417,354

2nd April-June 2021 587,448,597

3rd July-September 2021 415,937,881

4th October-December 2021 638,565,948

Engineering Re-insurance ceded

Quarter No. Quarter Months Amount