A Term Paper

on
“Ethical Requirements & 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: 14th March, 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
 Letter of Transmittal

14th March, 2023

Kanon Kumar Sen

Lecturer

Department of Accounting & Information Systems

Jahangirnagar University

Subject: A term paper submission on “Ethical Requirements and Auditor Independence Relating
to an audit”.

Dear Sir,

It is a great pleasure for us to be able to hand over the term paper on “Ethical Requirements and
Auditor Independence Relating to an audit”.

This report is actually based on whether auditors comply with ethical guidelines while conducting
an audit of financial statements. Auditor independence is also focused in this term paper. We have
tried our best level to comply with your requirements for preparing this paper. We have completed
the term paper by using the knowledge that we have gained from the course Auditing and
Assurance. All of us have given our maximum efforts to make this report as effective as possible.

We hope that you will find this report worth reading. Please bestow us with any suggestions or ask
for clarification about something that you would like us to explain. We sincerely hope that you
will appreciate our hard work and excuse the minor errors. We are grateful for your guidance,
supervision and inspiration. Thank you very much.

Sincerely yours,

Members of Team Spiritual Squad

Department of Accounting and Information Systems

Jahangirnagar University
 Table of Contents
Abstract……………………………………………………………………………..1

Introduction………………………………………………………………………...2

Research Objectives……………………………………………………………...…3

Literature Review………………………………………………………………..…4

Data Collection & Variable Definition ………………………………..……………9

Methodology………………………………………………………………………10

Case Study on Nurani Dyeing and Sweater Ltd………………………..…...10

Case Study on Universal Financial Solutions Ltd……………………….....12

Case Study on Crescent Group……………………………………………..14

Solutions to Address Problems…………………………………………….16

Findings and Interpretations…………………………………………..……….…..18

Conclusion…………………………………………………………….………......19

References………………………………………………………………….....…..20
 Abstract
The well-known and widely publicised series of financial scandals have revealed that public trust
in the audit process has been severely decreased. Growing mistrust has led to questioning the role
of the auditor and his contribution to social welfare, as the auditor is seen as an actor acting in the
public interest. This concern prompted us in this study to investigate whether and how the
perceived ethics of auditors affects public trust in the profession. In the research methodology
section we will use three cases based on financial fraud occurred recently in Bangladesh, where
we show how the auditor's deviation from ethical requirements and independence leads to financial
fraud. This term paper also explores how to avoid this situation. The results show that increased
audit effort will increase a positive impact on public trust. Also, increased regulation and
communication between auditors and regulatory bodies is likely to have a positive impact on
public confidence. To sum up, the increasing emphasis on ethics and independence will also
increase the quality of the audit.

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 Introduction
The most talked-about and important issue at the moment is the independence and ethical
requirements of auditors. Some top companies of the world named Enron, World Com, and
Lehman Brothers, as well as Bangladeshi companies named Universal Financial Solutions
Limited, Nurani Dying & Sweater Limited, and Crescent Group, all failed, raising significant
concerns about the integrity and independence of the auditors. Auditors frequently encounter
problems regarding financial integrity while carrying out their tasks, which puts their ethical
principles and independence to the test.
Independence and the auditors' ethical conduct are closely tied in the auditing profession. Whether
or not the auditors are "seen" or "perceived'' to act independently depends on how they act. Three
well-known Bangladeshi incidents involving auditors' independence and ethical standards are
included in this paper. Also, the study is being done to see how the judgements of auditors are
affected directly and indirectly by their lack of independence and ethical restrictions. The results
showed a sizable area where independence and ethical standards were not maintained during the
audit. Also, the ongoing accounting scandal incidents serve as support for the auditors' continued
use of dubious professional judgments with ethical implications.
No one has the courage to talk about how often an auditor is helpless and forced to offer biased
opinion. Throughout our investigation, we have made an effort to uncover these actual truths.
Many people are reluctant to speak the truth because of the influence of some powerful
organizations, yet it is clear that there are ongoing concerns about the independence and integrity
of the auditing profession.
Therefore, the auditor's view is crucial to creditors, outside parties, and investors. A lack of
independence or ethical standards will cause an auditor to form an incorrect opinion. The users of
the audit report will suffer a significant loss as a result. Auditors are subject to a variety of
independence threats when doing their tasks, which could affect their decision-making.
Additionally, since greater pressure clouded the auditors' judgment, our research implies that it
may be linked to unethical decision-making. The prominence of the customer is perceived as
exerting pressure and endangering the independence and judgment of the auditors. By examining
all three of the aforementioned situations, this study aims to provide additional proof.
The purpose of this study is to determine how audit quality is affected by auditor independence
and audit fees. Public accounting firms that are ICAB (Institute of Chartered Accountants of
Bangladesh) members serve as the study's sample data. According to the study's findings, audit
fees and auditor independence both have a considerable impact on the level of assurance provided
by an audit. There is lack of honesty in the Auditors of Bangladesh also. Although there is not
much discussion about. Corruption is another factor behind this, the political background of
companies can make barriers in the time of imposing laws. If the laws are implemented strictly
then auditors could be aware.
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 Research Objectives
The main objective of our research is to provide a complete understanding about ethical
requirements and auditor independence. Our focus is here that when auditors give unqualified
opinion, whether they actually comply with ethical requirements or not and whether they are
independent or not. Our whole research is conducted to address two fundamental issues.
Problem -1: The problem is here that the auditors in Bangladesh, with the exception of a few large
firms, are not allowed to express independent opinions and to speak the truth (Islam, 2019). They
have some pressures to give unqualified opinion. Even in many cases, although there exists a
material misstatement or fraud in financial statements, auditors are bound to give unqualified
opinion (Islam, 2019). Sometimes, there is no scope for auditors to work on behalf of public. As a
result, stakeholders are not getting true, fair and reliable financial statements.
Problem -2: In Bangladesh, there is a weakness in the implementation of ethical requirements and
regulations in the ground of auditing (Ahmed, 2020). 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 and they are sometimes busy with their self-
interest even by compromising their professionalism (Ahmed, 2020). In many cases, they do not
comply with ethical requirements and they are not independent from client.

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 Literature Review
In the auditing profession auditor's ethics and independence is a major concern. Every year, many
researchers and regulatory bodies has conducted hundreds of inspection of registered auditing
firms.
This literature review is based on the published articles and research about ethical requirements
and auditor Independence.
In June 2005, the IESBA (International Ethics Standards Board For Accountants) provides a
revised code of ethics for professional accountants. The revised code creates a conceptual
framework for all auditors to follow in order to ensure compliance with the five fundamental
ethical principles, including:
01.Integrity: A professional accountant should be straight forward and honest in all professional
and business relations.
02.Objectivity: A professional accountant should not allow bias, conflict of interest or undue
influence of others.
03.Professional Competence and Due Care: A professional accountant should maintain
professional knowledge and skills. He should act diligently either.
04. Confidentiality: A professional should not reveal information unless a legal or professional
right and duty.
05. Professional Behavior: An auditor must adhere to high standards of behavior to maintain
public confidence (Davis, 2012).

Ethics:
Ethics is a set of moral principles or values that are necessary for an audit team to function in an
orderly manner. Ethics is the glue that holds an organization believes together (Arens and
Loebbecke, 2000, p.76). The following are the six core ethical values that the "JOSEPHSON
Institute" associates with ethical behavior:
01.Trustworthiness: Including honesty, reliability and loyalty.
02.Respect: Including notions, such as civility, courtesy, dignity, tolerance and acceptance.
03.Responsibility: Being accountable for ones actions and exercising restraint.
04.Fairness: Including issues of equality, impartiality, proportionality and due care.
05.Caring: Acting altruistically and showing benevolence for the welfare of others.

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06.Citizenship: Obey laws and perform your fair share to make society work, including voting,
serving on juries, and conserving resources.
Auditors' legitimacy to act on behalf of the public is based on moral grounds and their
accountability to all stakeholders is confirmed by the audit report. Moreover, the auditors’
fiduciary responsibility marks their legitimacy on the market with the aim to enhance the quality
of the financial report, portraying in a complete and honest way the company’s accounts. The audit
report is structured into three sections: the first section presents the auditors’ legitimacy on the
market which is justified by their fiduciary responsibility to the public, the second section
examines ethics in the audit profession, while the third discusses accountability and the importance
of public trust in auditors. Enforcement of a code of ethics is essential for auditors to ensure
impartial and moral behavior. Ethics play a crucial role in making sure that the auditors have the
same interests as the investors and other stakeholders (Arens and Loebbecke, 2000, p.77).

Auditor Independence:
Auditors Independence refers to the ability of the external auditor to act with integrity and
impartiality dumping his/her auditing functions (Akpom and Dimkpah, 2013). According to
Shockley (1981, p.785), the value of auditing services depends upon the fundamental assumption
that certified public accountants are independent of their clients. Independence can be
characterized as maintaining on impartial view while carrying out audit tests, evaluating the results
and formulating the audit report. The effectiveness of the audit report is increased by auditors
independence since it ensures that the auditors plans and performs the audit objectively (Chepkorir,
2013, p.2). It is believed that once auditor fails to identify incorrect information on financial
statements, it can challenge the value of the audit and possibly damage the reputation of the firm
(Fearnley, Beattie and Brandt, 2005).

Figure: Auditor Independence

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Independence is an essential attribute for audits, as it determines how credible and reliable
financial statements will be to investors. The IESBA code defines independence as both
independence of mind and appearance, which enhances the auditors ability to act with integrity.

Factors That Affect Auditor Independence:

There are many factors that affect auditor independence such as audit firm size, the firms tenure,
the level of competition in the market, the size of the audit fee, the audit Committee and provisions
for no-audit services.
The following are the five threats that can potentially compromise the independence of auditors :
Self-Interest Threat: Self-interest threats arise from auditors acting in their own interests, which
can include emotional, financial, or other personal interests.
Self-Review Threat: Self-review threats arise from auditors reviewing their own work or the work
of others in their firm, making it difficult to evaluate without bias.
Advocacy Threat: An advocacy threat exists when an auditor is involved in promoting a client,
potentially compromising their objectivity. An example is the auditor assisting in selling ABC
Company while also serving as the company's auditor
Familiarity Threat: The relationship between directors and auditors is characterized by a
'Familiarity' or 'Trust Threat' where the auditor is over influenced by the personality and qualities
of directors or knows the client too well.
Intimidation Threat: An intimidation threat exists when an auditor is intimidated by management
or directors to prevent them from acting objectively (Schmidt, 2023, p.03).

Professional Skepticism in Auditing:

Professional skepticism is a critical mindset that helps the auditor's capacity to perceive and
respond to conditions that may indicate possible misrepresentation. A critical evaluation of audit
evidence is part of it.
“Where the accountant has certified to the securities on hand when he has not even gone through
the motions of counting them, also a clear case of false representation” (Patterson 1950, p. 43).
Professional skepticism indicates that an auditor's judgment and decisions reflect high risks in
erroneous management assertions based on the information provided (Nelson, 2009). This study
explores professional skepticism in an effort to understand more about why cases of material
financial statement fraud elude the external audit process (Dyck, 2014).
Six personal traits, or characteristics that define professional skepticism. These include :

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A questioning mind, > Suspension of judgment, > search for knowledge, > Inter personal
understanding, > Autonomy and > Self-esteem.
Professional skepticism is a critical component of audit quality and is vital to the job duties and
performance of internal auditors. It consists of three elements :
1.Attributes: This refers to the auditor's general knowledge, skill, and ability. To fulfill their
duties, internal auditors must have the necessary knowledge, abilities, and other capabilities.
2.Mindset: This relates to the honesty and integrity of the auditor who, while acknowledging the
possibility of fraud, falsification, or misrepresentation of material facts, does not presuppose the
honesty or dishonesty of the audit client. Internal auditors should not be content with less than
compelling evidence, even though they can normally trust that management and personnel are
honest.
3.Action: This component focuses on the significance of carrying out a thorough risk assessment,
organizing the engagement in light of the risks involved, guaranteeing stern engagement
monitoring, and diligently compiling and analyzing audit evidence (Plumlee, 2019).

Fraud vs Error in Audit:

Misstatements can be the result of fraud or mistake. The primary distinction between fraud and
error is whether the mistake was caused by an unintentional activity or a purposeful one that
involved dishonesty (Gandhi, 2022).

Fraud:
Fraud is an intentional act that involves the use of deception to obtain an unfair or illegal advantage.
It can be committed by one or more members of management, those responsible for governance,
employees, or third parties. Although the term "fraud" has a broad legal connotation, the auditor
is solely concerned with fraud that materially misstates financial report. These omissions might
entail both qualitative and quantitative factors and result from either dishonest financial reporting
or the misappropriation of assets.
Fraud frequently involves management overriding controls through the deliberate use of methods
like:
➢ entering fake information in the journal, especially near the end of the accounting quarter;
➢ failure to recognize certain items when they should have been in the financial statements;
➢ failing to provide disclosures required by the appropriate financial reporting framework or
disclosures necessary for a fair presentation, or omitting, hiding, or misrepresenting such
disclosures;
➢ hiding information that might have an impact on the financial statements' quantities;

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 ➢ engaging in intricate transactions with the intention of misrepresenting the entity's financial
condition or performance;
➢ editing reports to remove information about questionable transactions or behavior;
➢ taking advantage of insufficient IT process controls on IT applications;

Error:
Unintentional errors in the financial accounts are what are referred to as errors and are
distinguished from fraud separately. Mistakes may occur because of:
➢ inaccuracies in the underlying records and accounting data, either mathematical or clerical;
➢ a factual oversight or misinterpretation; or
➢ the unintended misuse of accounting principles.
The cause of an error and whether it was purposeful or not should be determined as part of the
auditor's evaluation of the error (Team, 2019).

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 Data Collection & Variable Definition
In this term paper, both qualitative and quantitative research methods were employed. To
familiarize ourselves with the country audit context and issues related to the auditor's
independence, we gathered secondary source data consisting of various mass media texts
(newspapers, magazines, news articles, etc.), books, and Google Scholar.
This term paper was designed in such a way to explain the relationship between independent
variables such as non-audit services, audit fee, audit quality, auditor rotation, audit standard, and
one dependent variable, external auditor independence.
For our research purposes and to analyze the issues related to audit independence in our country,
we have selected three companies (Nurani Dying and Sweater Limited, Universal Financial
Solutions Limited, and Crescent Group) whose external auditor failed to maintain ethical
requirements and independence while auditing financial statements.
In the next section, we will discuss in more detail their financial scam and auditor fraud. Data
collection sources for these three companies are mentioned below:
Data Collection for Nurani Dyeing and Sweater Limited:
On September 28, 2022, the New Age published an article under the title, "BSEC to sue 3 issue
managers and auditors." From these secondary sources, we have collected information for Nurani
dying and sweater limited (Case 1). where it was mentioned that the company conducted fund
embezzlement and hid its true financial statements from investors. But the audit firm (Ahmed
Zaker & Co.) gave a clean report (Mahmud, 2022).
Data Collection for Universal Financial Solutions Limited:
In the case study of Universal Financial Solutions Limited, we will discuss how Ahmed Zaker &
Co., an audit firm, helped the company hide 158 crore of investors' money from mutual funds
(Tuhin, 2023). All the information is collected from the Daily Star business report published on
January 19, 2023.
Data Collection for Crescent Group:
For case 3 (the crescent group), we collected our secondary source data from a news article
published by the Business Standard on August 10, 2020. where it was highlighted that the Crescent
Group had a loan scandal of more than 3000 crore with the help of three auditing firms
(Khan,2019).
Moreover, to identify the problems that arise from the auditor's departure from ethical
requirements and independence and to solve this problem, we collected secondary source data
from an analysis published by Khan Tariqul Islam, FCA, on the Financial Express (May 12, 2019).

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 Methodology
In the introduction section, we have mentioned some problems that are created when auditor
departs from ethical requirements due to lack of auditor independence. Now we are going to solve
those problems by analyzing three relevant cases.

CASE - 1: Nurani Dying & Sweater Limited:

Company Profile:
Nurani Dyeing & Sweater Limited is formed in Bangladesh and is operated in Bangladesh. Head
office of this company is situated in Dhaka. Basically it operates it's business in the Textile
Industry. The company was formed on 2005. Currently about 310 people is working in Nurani
Dyeing & Sweater Limited. The recent financial information indicated a net sales revenue drop of
31.21%.

Figure: Nurani Dying & Sweater Limited Logo

Audit Firm Profile:

Ahmed Zaker & Co. was formed in 1979. It is a leading Chartered Accountancy firm. It provides
audit, tax and advisory services. The clients of this firm are the businesses in Bangladesh of wide
range of sectors.

Figure: Ahmed Zaker & Co. Logo

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When Auditor Is the Abettor of Forgery:
The Bangladesh Securities and Exchange Commission decided to file a criminal case against
auditors of the mentioned company. It is found that the statutory auditor gave unqualified opinion
notwithstanding abetting forgery and fraudulent activities in the company's IPO. The Statutory
auditor name was Ahmed Zaker & Co (Mahmud, 2022).
Some obtained data from the case of fraudulent activities by Nurani Dyeing and Sweater Ltd
are given below:
1. Allegations arises of fund embezzlement
2. Long term loan taken from AB Bank Tk 57.2 crore and 42.95 crore in 2016 & 2017 respectively.
3. Actual loan was 168.96 crore in 2018
4. Actual financial position was hidden in financial statements
5. The statutory auditor gave clean report ( unqualified opinion) on financial statement during the
IPO that also deceived the investors with false information (Mahmud, 2022)
From these data, it is clear to us that there was lack of honesty, integrity and independence.
Why the auditor gave unqualified opinion on the audit report notwithstanding found the misstated
information in the obtained documents?
Why he didn’t think about investors that his opinion was going to deceive them.
Didn’t this violate the stated guidance of auditing?
Didn’t the auditor deviate from his ethical requirements?

The main reason behind this could be the greediness for money. The auditor might find substantial
amount of bribe for giving the unqualified opinion. And another factor would be the ruin of
conscience of auditor. Finally the insufficiency of professional and ethical values of auditor was
responsible for this.

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CASE 2: Universal Financial Solutions Limited:
Company Profile:
Universal Financial Solutions Limited (UFS) is an Asset Management Company whose license
was issued in 2010 by the Bangladesh Securities and Exchange Commission (BSEC).There was
a takeover by the current sponsors in May 2013 with a change in management. This has injected
a blend of vision and dynamism into its operations. Within a very limited time period since its
takeover, UFS has already attained some notable mandates for working as an advisory partner of
raising funds for country's renowned institutions including different banks and insurances.

Figure: Universal Financial Solutions Ltd. Logo

When Auditors Help UFS to Commit Fraud:

Audit Firm Profile:
Ahmed Zaker & Co. (AZC), a renowned chartered accountancy firm founded in 1979, offers
audit, tax and consultancy services to companies in Bangladesh operating in a variety of
industries.

Auditor’s Fraud:
As Ahmed Zaker & Co (AZC) Chartered Accountants did not show up for any inquiry hearings
regarding four mutual funds managed by UFS Asset Management, the accounting company has
been prohibited from auditing any listed firms or mutual funds. In total, Tk 158 crore worth of
investor money from mutual funds was stolen by UFS Asset Management. (Tuhin, 2023).
So, several major auditing issues may arise for the following causes:
➢ Inadequate management commitment .
➢ Internal conflict of interests .
➢ No or inadequate audit preparations .
➢ Lack of timely writing and publication of audit reports .

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For this reasons a normal audit as the outcome does not involve giving an opinion on financial
statement.
Here is our case related research problem that we found, the auditor did not support management
responses to inquiries. And planning the audit engagement was not crucial.
For these lack of issues, The audit company is not permitted to perform any additional audits for
any mutual funds managed by Universal Financial Solutions, nor is it permitted to serve as the
auditor of any mutual fund or publicly traded corporation.
To these data, the auditor's goals are to obtain reasonable assurance that there are no major
misstatements in the financial statements overall, whether they are the result of fraud or error, and
to publish an auditor's report that includes the auditor's opinion. Actually, Trust between UFS and
its clients has been the foundation of the company's success. We are dedicated to protecting the
privacy, security, and integrity of the personal data of our current, potential, and former clients.

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Case - 3: Crescent Group Curse on Janata Bank:
Company Profile:
In 1977, Crescent Group started its journey with just one venture, Crescent Tanneries Limited. The
extraordinary success of Crescent Tanneries inspired the company to broaden its scope and
establish three other ventures: Crescent Leather Products Ltd., Rupali Composite Leatherwear
Ltd. and Crescent Footwear Ltd. Currently, the group not only processes finished leathers and raw
hides, but it also manufactures leather products such as shoes, bags, wallets, key rings, belts and
sandals for the domestic and international markets.
Janata Bank Ltd. was established in 1972. It is the second largest state-owned commercial bank in
Bangladesh. Its headquarter is located in Motijheel, Dhaka. The bank has an extensive nationwide
network of 872 branches. In order to serve the needs of the nation and promote sustainable growth,
Janata Bank offers all commercial banking services to its customers.

Figure: Crescent Group & Janata Bank Logo

Audit Firm Profile:

Since the early 1980s, Aziz Halim Khair Choudhury (AHKC) has been considered as one of the
leading chartered accountancy firms in Bangladesh. According to Bangladesh Bank, AHKC is
currently ranked eighth among all A Grade firms of chartered accountants. PKF International, has
designated the company as an exclusive correspondent firm. AHKC provides a comprehensive
range of services such as accounting, auditing, payroll services, advising, tax planning and tax
services to help both individuals and organizations.

Figure: Aziz Halim Khair Choudhury Logo

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When Auditors Shield Fraud Company:
Crescent Group has loan scandal totaling more than Tk 3000 crore with the state-owned Janata
Bank (Khan, 2019). Mainly three auditing firms (Syful shamsul Alam & Co., Aziz Halim Khair
Choudhury and SF Ahmed & Co.) are held responsible for helping scam-ridden Crescent Group
to get cash incentives although the group had Tk 408 crore pending export bills. Crescent Group
has been accused of taking out loans against false export bills in collaboration with some
executives of Janata Bank (Khan, 2019).
Aziz Halim Khair Choudhury (AHKC) performed general audit of Janata Bank’s Imamganj branch
whereas Syful shamsul Alam & Co. audited the cash incentives (Khan, 2019). It has been found
that auditor Aziz Halim Khair Choudhury (AHKC) concealed frauds in audit report. Despite being
aware of Crescent Group’s loan forgeries, the auditor fails to mention the inconsistencies in the
audit report. No information about forgery, cheating, irregularities, violation of rules were reported
in the audit report. Instead auditor AHKC gave unqualified opinion. Here this case relates to our
research problem.

Figure: Facts and Consequences

Why AHKC did not mention the irregularities in the audit report? One reason may be that the
auditor wanted to aid Crescent Group to commit fraud by violating ethical guidelines. Another
reason may be concerned with that many Chartered Accountants in Bangladesh claims that
auditors are paid a relatively minimal fee for general inspection but are expected to perform an
international quality audit which is unfair.

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What Are the Solutions to Address the Problems?
Previously, In the section on Research objectives, we identified that problems can occurs if auditor
deviates from ethical requirements and violates independence. We have also included three real
life scenario (case study) that show how auditor's failure to maintain integrity results in financial
fraud. Here, in this section, we will outline some solutions to address these issues and these
solutions are gathered from various news analysis. These solutions are described as follows:
1. Drastic Audit Policy Reform:
In order to reduce the damage and to ensure the independence of the auditors, a radical
audit reform is needed. Every Chartered accountant firm is needed to define the internal
audit policies and systems for independence assessment in accordance with the regulatory
framework in order to more effectively control non compliance (Mittal, 2020).

2. Ensure Auditor Job Security and The Rotation of Auditors:

Auditors will be able to maintain ethical requirement and exercise full independence only
if they do not have the risk or fear of loosing the audit next years. If a company’s auditor
is appointed for five years, at which time no one can remove them and provided that for
the next five years the same auditor cannot appointed for the same company, then the
auditors will be completely independent. In that case, after their appointment they will be
certained that they will not be removed for the next five years, and cannot be appointed
for another five years. To ensure this, we need to amend the companies Act,1994 (Financial
Express,2019).

3. Restrictions on Non-Audit Services :

While serving as a clients auditor, auditors should be prohibited from providing any non
audit services to the same client, such as Tax service, management consultancy and
information technology (IT)(Financial Express, 2019). It will significantly reduce their
Reliance on audit clients. There are also several threats that can arise from non audit
services to the same client such as self review, self interest, familiarity, advocacy and
intimidation threats.
So, auditors must be restricted to provide any non audit services to the same audit clients
while serving as a client auditor.

4. Increasing Audit Fees:

Auditor fees should be significantly increased so that auditors can conduct a
comprehensive audit with experienced and qualified professionals. The quality of the audit
and auditors level of effort in auditing clients financial statements depend on the audit fees
(Khan, 2019). Therefore, in order to improve the quality of the audit, ICAB(Institute of
Chartered Accountant of Bangladesh) is required to set higher audit fees for the auditor.

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 5. ICAB and SEC Should Take Disciplinary Actions :
Both the ICAB(Institute of Chartered Accountant of Bangladesh) and the SEC (Security
and Exchange Commission) should take punitive action against auditors when they engage
in wilful negligence in duty and violate professional and ethical standards and
independence, especially when they sign false and misleading financial
statements(Financial Express, 2019). In addition, ICAB should suspend the auditors audit
licence and impose monetary penalty for compromising professional ethics and for any
professional misconduct.

So, The problems can be resolved if the government, ICAB and SEC are serious about reforming
the audit system, making auditors independent, and improving accounting and auditing standards.

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 Findings & Interpretations
In our audit report, what ethics the auditors work with, how independent the auditors are, how
honestly they work, if not, why they don't do it, has been discussed and we have worked on these.
From analyzing three cases, we have found that auditors have given wrong audit opinion. They
have concealed the fraudulent activities of client companies. The main reason behind this can be
greediness for money. The auditors may take substantial amount of bribe for giving unqualified
opinion. Moreover, audit fee is not sufficient in Bangladesh. Insufficiency of professional and
ethical values of auditors are also responsible for giving inappropriate audit opinion. Weakness in
the implementation of ethical requirements also motivates some auditors to work arbitrarily and
give wrong conclusions.
An auditor should not be affected by any influences that compromise his integrity, objectivity and
professional skepticism. If the auditor does not have independence from client and there exists any
pressure due to which the auditor is always bound to give an unqualified opinion, then the auditor
should withdraw from the audit engagement.
Finally, we want to say that the auditors should obviously work honestly so that we who are
stakeholders can verify the real information while buying shares. This can only be done when the
auditor and client’s managerial body all work together honestly. We want to ensure that our entire
corporate journey is very smooth. It is possible because we believe that people can do anything.
So we should work with integrity and let others work with integrity.

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 Conclusion
This term paper is actually an indication of whether an auditor is complying with all relevant
ethical requirements and whether the auditor is independent while conducting an audit. Through
three real life scenarios, we have tried to highlight a situation where the auditor gives inappropriate
audit opinion without complying ethical requirements. Our whole research has been conducted to
find out the reasons behind the situation and we have also recommended some solutions by
applying our knowledge and judgement. We actually have attempted to show what we think about
the judgments of the pending cases may be. In the context of Bangladesh, ensuring auditor job
security, restrictions on non-audit services, increasing audit fees and taking disciplinary actions
are some influential tools to increase ethical practice and auditor independence in the audit field.
But the real culprit must be punished. An auditor must follow ethical guidelines and also maintain
independence throughout his work from audit planning to reporting, even after the audit work has
been finished.

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 References
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