A Term Paper Proposal

on

“Ethical Requirements and Auditor Independence Relating to an Audit”

Course Title: Auditing and Assurance - Ⅱ
Course Code: 3203

Submitted To:
Kanon Kumar Sen
Lecturer
Department of Accounting & Information Systems
Jahangirnagar University

Submitted By:
Spiritual Squad
3rd Year, 2nd Semester
Department of Accounting & Information Systems
Jahangirnagar University

Date of Submission: 17th February, 2023

 Team Name: Spiritual Squad

In Diligence, We Keep Wholeness

Class ID Member Name

1749 Aka Rani Roy
1753 Israt Jahan Eva
1759 Farjana Anjuman Anika
1771 Abhijeet Ghosh
1772 Jarit Gomes
1780 Md. Sojib Miah
1792 Md. Noor Hossain
1793 Taherul Islam
 Topic Name: Ethical Requirements and Auditor Independence Relating to an Audit

Introduction:
An auditor has to follow certain ethical requirements in addition to International Standards on
Auditing. Independence enhances the auditor's ability to act with integrity. For the purpose of this
term paper proposal, we try to find out whether the auditors of Bangladesh fulfill ethical
requirements or not. Whether they are Independent or not. That’s why we select some renowned
case and collect data from secondary sources.

Research Objectives:
Our whole research will be conducted to address two fundamental issues.
Problem 1: The problem is here that the auditors in Bangladesh are not allowed to express
independent opinions and to speak the truth. They have some pressures to give unqualified opinion.
Even in many cases, if there exists a material misstatement or fraud in financial statements,
auditors are bound to give unqualified opinion. Sometimes, there is no scope for auditors to work
on behalf of public.
Problem 2: In Bangladesh, there is a weakness in the implementation of ethical requirements and
regulations in the ground of auditing. As a result, a tendency exists among auditors to violate
ethical guidelines and to give inappropriate opinion while conducting audit. The auditors in
Bangladesh have lack of honesty and integrity. Sometimes, the auditors are busy with their self-
interest even by compromising their professionalism. In many cases, they do not comply with
ethical requirements and they are not independent from client.

Literature Review:
As our term paper topic is the, "Ethical Requirements and Auditors Independence Relating to an
Audit ", First of all it is a growing discipline that deals with both academically and practically
with the moral assessment of the ends, means and processes this collection honor and build on the
pioneering work of Denis Goulet, arguably the founding father of development ethics
(Goulet, 1995). According to ISA 200, The auditor is subject to relevant ethical requirements,
including those pertaining to independence, relating to financial statements audit engagements.
Relevant ethical requirements ordinarily comprise parts A and B of the IESBA Code of Ethics
(https://www.accaglobal.com, 2010). The fundamental principles with which the auditor is
required to comply by the IESBA code are:
1. Integrity. 4. Confidentiality
2. Objectivity. 5. Professional behavior.
3. Professional competence and due care.
In our term paper topics, another most important ethical requirement is the auditor independence.
Lindberg and Beck (2002) claim that auditor independence is hailed as the 'cornerstone' in the
accounting profession as it is the core reason as to why the public trusts their professional opinion.
Moreover, Shockey (1982, p.26) defines auditors independence as the independence that an auditor
has from other parties who has interest in financial statements. Auditor should be independent as
the IESBA code. Auditor should be Independence of mind and independence in appearance in the
audit work. ISA 200 also deals with the independent auditors’ responsibility when conducting an
audit of financial statements.

Methodology :
We will use secondary sources data to gather Information about why auditors cannot maintain their
ethical requirement while auditing. These sources include online news portals, online articles,
Daily newspaper, ICAB website and ISA 200.
In the resource objective section, we have mentioned some problem that are created when Auditor
departure from ethical requirement and due to lack of auditor independence. Here we will show
some real life scenario of this problem.
Case-1: Nurani Dyeing and Sweater Ltd.
It is found that the statutory auditor (Ahmed Zakar & Co) gave unqualified opinion
notwithstanding abetting forgery and fraudulent activities in the company's IPO (New Age,2022).
Allegations arises Against the firm for fund embezzlement and Actual financial position was
hidden in financial statements.
Case-2 : Universal Financial Solutions Ltd.
Auditors of Ahmed zaker & co helped Universal financial solutions ltd to defraud tk 158 crore
from the stock market by hiding information while auditing financial statements of mutual funds
(The Daily Star, 2023). The ca firm also did not attend the hearing scheduled as part of an Enquiry
into four scam hit mutual funds
Case-3: Crescent Group:
Crescent group has loan scams of more than Tk 3000 crore with state owned Janata Bank. Mainly
top three auditing firm ( Syful Shamsul Alam & Co, Aziz Halim Khair Choudhury and SF Ahmed
& Co) are held responsible for helping scam-ridden Crescent group get cash incentive although
the group had Tk 408 crore pending export bills and hiding fraud in audit report(The Business
Standard,2020).
How to solve this problem?
To make the auditors independent, a drastic audit reform is essential which are described as
follows: (1) The Companies Act, 1994, needs to be amended to ensure that auditors can be
appointed for five consecutive years and can’t be removed for five years it will ensure they don’t
have to fear lose the audit next year. (2) Auditors should be banned from providing any non-audit
services to the same client such as management consultancy, Information Technology (IT) services
and tax advice. (3) There should be also severe-punitive measures from both the ICAB and the
SEC for compromise in audit report.

Probable Outcome:
The term paper will be actually an indication of whether an auditor is complying with all relevant
ethical requirements while conducting an audit. An auditor should not be affected by any
influences that compromise his integrity, objectivity and professional skepticism. If the auditor
does not have independence and there is any pressure due to which the auditor is always bound to
give an unqualified opinion, then the auditor should withdraw from the audit engagement. Through
three real life scenarios, this term paper will highlight a situation where the auditor gives
inappropriate audit opinion without complying ethical requirements.

References:
Goulet (1995) Denis Goulet and the project of development ethics: Choices in methodology, focus
and organization, Taylor & Francis. Available at:
https://www.tandfonline.com/doi/abs/10.1080/14649880802236755 (Accessed: February 17,
2023).
Lindberg and Beck (2002) Auditor independence and financial statements, Bartleby. Available at:
https://www.bartleby.com/essay/Auditor-Independence-And-Financial-Statements-
PKTXCGQKFV8X (Accessed: February 17, 2023).
Shockey (1982) Auditor independence: Perception or reality - 4908 words: Essay example, Free
Essays. 1982. Available at: https://ivypanda.com/essays/auditor-independence-perception-or-
reality/ (Accessed: February 17, 2023).
https://www.accaglobal.com, A.C.C.A.- (no date) Isa 200, ACCA Global. Available at:
https://www.accaglobal.com/sg/en/member/discover/cpd-articles/audit-assurance/isa-200.html
(Accessed: February 17, 2023).
August, J.N.A. and Alo, J.N. (2020) When auditors shield fraud company, The Business Standard.
Available at: https://www.tbsnews.net/bangladesh/corruption/when-auditors-shield-fraud-
company-117841 (Accessed: February 17, 2023).
New Age (2023) BSEC to sue 3 issue managers, auditors, New Age | The Most Popular Outspoken
English Daily in Bangladesh. Available at: https://www.newagebd.net/article/182316/bsec-to-sue-
3-issue-managers-auditors (Accessed: February 17, 2023).
Report, T.D.S. (2023) Ahmed Zaker & Co banned from Auditing Activities , The Daily Star.
Available at: https://www.thedailystar.net/business/economy/news/ahmed-zaker-co-banned-
auditing-activities-3224931 (Accessed: February 17, 2023).