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Internship Report
TABLE OF CONTENTS
Chapter-1 ...................................................................................................................................................... 3
INTRODUCTION ......................................................................................................................................... 3
1.1 Introduction ........................................................................................................................................ 4
1.2 Scope of the report ............................................................................................................................. 4
1.3 Objectives of the report...................................................................................................................... 4
1.4 Methodology of the study .................................................................................................................. 5
1.5 Limitation of the study........................................................................................................................ 5
Chapter-2 ...................................................................................................................................................... 6
COMPANY OVERVIEW ............................................................................................................................... 6
2.1 Background ......................................................................................................................................... 7
2.2 Firms Practice..................................................................................................................................... 7
2.3 Firms Aim ........................................................................................................................................... 7
2.4 Firms Commitment ............................................................................................................................ 7
2.5 Partners Profile ................................................................................................................................... 7
2.6 Services that provided by the firm...................................................................................................... 9
2.6.1 Assurance..................................................................................................................................... 9
2.6.2 Direct Tax Compliances................................................................................................................ 9
2.6.3 Indirect Tax Compliances ........................................................................................................... 10
2.6.4 Accounting ................................................................................................................................. 10
2.6.5 Other Services ............................................................................................................................10
2.7 Firms Clients...................................................................................................................................... 10
2.7.1 Manufacturing ...........................................................................................................................10
2.7.2 Financial Sector ..........................................................................................................................11
2.7.3 Power, Oil & Petroleum ............................................................................................................. 11
2.7.4 Trading & Service .......................................................................................................................11
2.7.5 Education Sector ........................................................................................................................12
2.7.6 Non-Government Organization (NGO) ......................................................................................12
Chapter-3 ....................................................................................................................................................13
THEORETICAL BACKGROUND OF AUDITING.....................................................................................13
3.1 Definition of Accounting and Auditing..............................................................................................14
3.2 Distinction between Auditing & Accounting.....................................................................................16
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
3.3 Requirement of an Effective Audit.................................................................................................... 17
3.4 Types of Audit ................................................................................................................................... 18
3.5 AICPA Generally Accepted Auditing Standards.................................................................................20
3.5.1 General Standards:.....................................................................................................................20
3.5.2 Standards of Field Work............................................................................................................. 21
3.5.2 Standards of Reporting .............................................................................................................. 22
3.6 Audit Risks......................................................................................................................................... 23
3.7 Types of Audit Documentation ......................................................................................................... 24
3.8 Contents of an Audit File...................................................................................................................25
3.9 Audit Responsibilities........................................................................................................................26
3.9.1 Responsibilities of Management: ..............................................................................................26
3.9.2 Responsibilities of Auditors: ...................................................................................................... 27
3.10 Bangladesh Standards on Auditing (BSA) .......................................................................................27
3.11 International Standards on Auditing (ISA) ......................................................................................29
Chapter-4 ....................................................................................................................................................31
AUDIT PROCEDURE FOLLOWED BY MARHK & CO. .......................................................................... 31
4.1 Annual audit procedures of MARHK & CO. Chartered Accountants ................................................32
4.1.1 Identify firms overall goals........................................................................................................ 33
4.1.2 Gather & evaluate initial information........................................................................................35
4.1.3 Assess general risks....................................................................................................................36
4.1.4. Assess account-specific risks..................................................................................................... 36
4.1.5 Development of effective and efficient audit plan/ work program........................................... 39
4.1.6 Conduct audit testing.................................................................................................................39
4.1.7 Evaluate and communicate audit results...................................................................................41
Chapter-5 ....................................................................................................................................................49
FINDINGS, RECOMMENDATION & CONCLUSION.............................................................................. 49
5.1 Findings of the Study.........................................................................................................................50
5.2 Recommendation of the Study ......................................................................................................... 51
5.3 Conclusion......................................................................................................................................... 52
5.4 Appendix ........................................................................................................................................... 53
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Chapter-1
INTRODUCTION
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
1.1 Introduction
Human being cannot gain all knowledge by reading books, journals, newspaper and his/her
academic text book. Each and every people in our society face new challenges every day while
they work. Only academic education is not enough for the students to learn things and
confidence among student to reach his/her own desired destination in days to come and stand
on his own feet. The students of Bangladesh University of Business & Technology who are
enrolled in the BBA program have to take a mandatory 3 months internship program at any
organization. Students have the opportunity to gain practical knowledge through the internship
program. In this program I was assigned to work with MARHK & CO. one of the renowned
Chartered Accountants firm in Bangladesh. The assignment is to gain a practical experience
how the audit work is planned, performed and administrated in different institution and
organizations in Bangladesh.
Audit methodology of the firm, which is followed by the organization for performing
any audit.
Work in the field level by testing the accounting policies, records and accounts as a part
of audit team of MARHK & CO.
An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Chapter-2
COMPANY OVERVIEW
6|Page
An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
2.1 Background
Firm MARHK & CO., was established in the year 1999, and has since that time it has been
providing quality services since inception. The firm has strong team of qualified staff and
associates with other experts in various fields.
Providing their clients with a full range of high quality services in auditing,
accounting, taxation, company law and secretarial services and management
consulting.
Carrying out all aspects of their work to high level of professionalism and
excellence.
Giving their clients value for money in the services we provide
An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Kazi Mustaid
Murshed, FCA
2.6.1 Assurance
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
2.6.4 Accounting
Limited scope review/ due diligence review of financial statements/ MIS reports
(frequency mutually agreed upon)
Transition of accounts prepared under Bangladeshi GAAP to IFRS or US GAAP
and review thereof
Reconciliation of statutory filings with the books of accounts
Retainer services for book closure activities
Stock and Asset verification and reconciliation
An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Chapter-3
THEORETICAL BACKGROUND OF
AUDITING
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Auditing is the process by which a competent, independent person accumulates and evaluates
evidence about quantifiable information related to a specific economic entity for the purpose of
determining and reporting on the degree of correspondence between the quantifiable information
and established criteria. This definition includes several key words and phrases. To understand the
definition, different terms are discussed below:
Competent, Independent Person: The auditor must be qualified to understand the criteria used
and competent to know the types and amount of evidence to accumulate to reach the proper
conclusion after the evidence has been examined. The auditor must also have an independent
mental attitude. It does little good to have a competent person who is biased performing the
evidence accumulation when unbiased information and objective thinking are needed for the
judgments and decisions to be made. Independence cannot be absolute by any means but it must
be a goal that is worked toward; and it can be achieved to a certain degree.
Evaluating Evidence: Evidence takes many different forms, including oral testimony of the
audit (client), written communication with outsiders and observation by the auditor. It is important
to obtain sufficient quality and volume of evidence to satisfy the audit objectives.
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Economic Entity: Whenever an audit is conducted, the scope of the auditors responsibility must
be made clear. The primary method involves defining the economic entity and the time period. In
most instances the economic entity is also a legal entity such as a corporation, unit of government,
partnership or proprietorship. In some cases, however, the entity is defined as a division, a
department or even an individual.
Reporting: The final stage in the audit process is the audit report the communication of the
findings to users. Reports differ in nature but in all cases they must inform readers of the degree
of correspondence between quantifiable information and established criteria. Audit can be applied
to virtually every facet of an organizations operations. Such audits are both challenging and
interesting because the auditor is charged with developing objective criteria by which an operation
can be evaluated and the auditor by necessity becomes intimately familiar with many operational
aspects of an organization.
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Accounting
GAAP
Recording of
transactions and
preparation of
financial statement
Evaluation of
financial statement
Audit
An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Operational Audit: Operational Audit refers to the study of business operations for the purpose
of making recommendations about the economic and efficient use of resources, effective
achievement of business objectives and compliance with company policies. At the completion of
an operational audit recommendations to management for improving operations are normally
expected. The goal of operational audit is to help managers to discharge their management
responsibilities and improve profitability. An operational audit can be applied to virtually every
facet of an organizations operations. Such audits are both challenging and interesting because the
auditor is charged with developing objective criteria by which an operation can be evaluated and
the auditor by necessity becomes intimately familiar with many operational aspects of an
organization. Because of many different areas in which operational effectiveness can be evaluated,
it is impossible to characterize the conduct of a typical operational audit.
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Audit of Financial Statements: Financial statements audits are conducted to determine whether
financial statements are presented fairly in accordance with Generally Accepted Accounting
Principles (GAAP). However, public sector financial audits also determine whether financial
statements are presented in accordance with applicable laws and regulations. An audit of financial
statements is conducted to determine whether the overall financial statements that is quantifiable
information being verified are stated in accordance with specific criteria. The financial statements
most commonly included are the statement of financial position, income statement and statement
of cash flow including accompanying footnote. The assumption underlying an audit of financial
statements is that they will be used by different groups for different purposes. Therefore, it is more
efficient to have one auditor perform an audit and draw conclusion that can be relied upon by all
users.
Internal Audit:
organization to examine and evaluate its activities as a service to the organization. The objective
of internal auditing is to assist members of the organization in the effective discharge of their
responsibilities. Internal audit is practiced by auditors employed by an organization such as a bank,
hospital, city government or industrial company. The Institute of Internal Auditors (IIA) is the
international organization that governs the standards, continuing education, and generals rules of
the conduct for internal auditors as a profession.
Interim Audit: Interim audit refers to the procedures applied prior to the clients year end,
primarily for the purpose of lowering the assessed risk level. The interim audit phase consists of
resting the clients internal accounting controls and performing substantive tests of transactions.
Interim audit procedures performed several weeks or months before the balance sheet date. In
recent years, certain changes in the information processing environment have begun to alter the
traditional approach to the interim audit. Instead of testing the internal control procedures during
a single interim time period auditors are applying these tests along with tests of selected
transactions at frequent intervals throughout the year. This sometimes referred to as Continuous
Audit. This type of audit is especially applicable to those clients with sophisticated computer based
accounting applications.
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Governmental Audit: Governmental audit may be defined as testing and reporting on conformity
with laws and regulations relating to recipients of federal financial assistance. Governmental audit
refers to the independent auditors responsibility for determining compliance with laws and
regulations when engaged in audits of state and local governmental units as well as other not-forprofit entities that are the recipients of federal finance assistance. Governmental auditors are
employed by various state, local and federal agencies.
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Independence in Mental Attitude: The auditor must have an independent mental attitude.
Auditors independence means that the auditors must be independent of management if they are
to adequately serve the interests of financial statements users. Auditors are expected to be unbiased
and impartial with respect to the financial statements and other information when they audit. They
are expected to be fair both to the companies and executives who issue financial information and
to the outside persons who use it. Auditors independence has two aspects: independence in facts
and independence in appearance. Auditors must not only be independent in their mental attitude
toward audit- independence in facts but also must be perceived by users as independent of the
client independence in appearance.
Due Professional Care: The forth general standard involves due professional care in the
performance of all aspects of auditing. The exercise of due professional care requires observance
of all the general standards and the field work standards. Auditors must be competent, be
independent, plan and supervise the audit, understand the internal control system and obtain
sufficient competent evidence if they expect to be properly careful. The standard of due care
requires that the prudent auditor apply judgment in a conscientious manner that is carefully
check the relevant factors before reaching a decision. Due professional care also suggests that the
auditor makes a reasonable effort to ensure that the financial statements are free from material
misstatements. Due professional care includes consideration of the completeness of the working
papers, the sufficiency of the audit evidence and the appropriateness of the audit report. As a
professional, the auditor must avoid negligence and bad faith, but the auditor is not expected to
make perfect judgments in every instance.
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
developing the audit programs. To ensure an adequate quality of auditing assistants must be
properly supervised. Supervision of assistants includes instructing assistants to be sure they know
that what they are to do and why keeping informed about significant problems encountered,
reviewing their work and work papers and resolving differences of opinion among the audit staff.
Understand the Internal Control Structure: A sufficient Understanding of the internal control
structure is to be obtained to plan the audit and to determine the nature, timing and extent of tests
to be performed. Organizations implement accounting systems and control structures so that it can
process large volumes of data in an efficient manner that should minimize the possibility of
misstatements occurring. The controls identified by an organization to ensure that only properly
authorized transactions are processed and that the transactions are fully, accurately and timely
recorded are referred to as the organizations internal control. One of the most widely accepted
concepts in the theory and practice of auditing is the importance of the clients internal control
structure to generate reliable financial information. If the auditor is convinced that the client has
an excellent internal control structure that includes adequate internal controls for providing reliable
data and for safeguarding assets and records, the amount of audit evidence to be accumulated.
Sufficient Competent evidence: Sufficient competent evidential matter is to be obtained through
inspection, observations, inquiries and confirmations to afford a reasonable assurance basis for an
opinion regarding the financial statements. Evidence is all the influences upon the minds of
auditors that ultimately guide their decisions sufficient competent (reliable and relevant) evidence
must be obtained to evaluate the assertions embodied in the financial statements including the
related footnotes.
An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
principles, the change must be described in the footnotes to the financial statements are referred to
in the audit report.
Disclosures: Informative disclosures in the financial statements are to be regarded as reasonably
adequate unless otherwise stated in the report. Readers of the financial statements are usually not
in a position to know whether the disclosure and related footnotes are adequate. If nothing is
mentioned in auditors report, the readers can assume that the disclosures are adequate. The auditor
is guided by FASB and other authoritative pronouncement to determine whether the required
disclosures have been made.
Opinion: The report shall either contain an expression of opinion regarding the financial
statements taken as a whole, or an assertion to the effect that an opinion cannot be expressed. When
an overall opinion cannot be expressed, the reasons therefore should be stated. In all cases where
an auditors name is associated with the financial statements, the report should contain a clear-cut
indication of the character of the auditors work and the degree of responsibility the auditors is
taking The type of opinion rendered depends on the results of the auditors examination. The
auditors report should indicate the type of examination performed and the degree of responsibility
taken for it.
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Control risk is the risk that a misstatement could occur in an account balance or class of
transactions that could be material individually or when aggregated with misstatements in other
balances or classes will not be prevented, detected and corrected on a timely basis by the
accounting and internal control systems.
Detection risk is the risk that an auditors substantive procedures will not detect a misstatement
that exists in an account balance or class of transactions that could be material individually or when
aggregated with misstatements in other balances or classes.
Audit Documentation
Auditors are required to prepare and retain written documentation that provides a sufficient
appropriate record of the basis for the audit report and evidence that the audit was planned and
performed.
Audit Plan
Risk analysis
Audit Programmers
Checklists
Correspondence and
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System information
Title deeds
An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Planning
The main element of this section is likely to be the Audit Planning Memorandum. This document
is the written audit plan and will be read by all members of the audit team before work starts. Its
contents are likely to include:
Background information about the client, including recent performance
Changes since last years audit
Key accounting policies
Important laws and regulations affecting the company
Clients trial balance
Preliminary analytical review
Key audit risks
Overall audit strategy
Materiality assessment
Timetable of procedures
Deadlines
Staffing and budget
Locations to be visited
Performance
Working papers are likely to consist of:
Lead Schedule- showing total figures, which agree to the financial statements
Back- up Schedule- breakdowns of totals into relevant sub totals
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Work completed
Conclusions drawn
Who received it
Completion
The completion stage of an audit has a number of standard components
Going concern review
Subsequent events review
Final analytical review
Accounting Standard checklist
Letter of representation
Summary of adjustments made since trial balance produced
Summary of unadjusted errors
Draft final
Draft report to these charged with governance
An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
internal
control to ensure compliance and an effective system of assessing the effectiveness of these control
systems.
120
200
210
220
230
Audit Documentation
240
250
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
260
300
310
315
Understanding the Entity and Its Environment and Assessing the Risks of
Material Misstatement
320
Audit materiality
330
400
401
402
500
Audit Evidence
501
505
External Confirmations
510
520
Analytical Procedures
530
540
545
550
Related Parties
560
Subsequent Events
570
Going Concern
580
Management Representations
600
610
620
700
710
Comparatives
720
800
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
1000
1004
1005
1009
1014
ISA 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in
Accordance with International Standards on Auditing
ISA 240, The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements
ISA 265, Communicating Deficiencies in Internal Control to Those Charged with Governance
and Management
ISA 315, Identifying and Assessing the Risks of Material Misstatement through Understanding
the Entity and Its Environment
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
ISA 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and
Related Disclosures
ISA 600, Special Considerations-Audits of Group Financial Statements (Including the Work
of Component Auditors)
ISA 706, Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent
Auditor's Report
ISA 805, Special Considerations-Audits of Single Financial Statements and Specific Elements,
Accounts or Items of a Financial Statement
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Chapter-4
AUDIT PROCEDURE FOLLOWED BY
MARHK & CO.
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Irregularities
Going Concern
Client Value
Consider materiality.
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
will be placed.
addressed.
Controls system
misstatements.
substantive tests.
Substantive tests
Substantive tests
Internal reports
Error
Irregularities
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Efficiency
Client value
Errors
Errors are unintentional misstatements or omissions of accounts or disclosures in the financial
statements may involve:
a) Mistakes in gathering or processing accounting data from which financial statements
are
prepared.
b) Incorrect accounting estimates arising from oversight or misinterpretation of facts.
c) Mistakes in the application of accounting principles relating to amount, classification and
manner of presentation or disclosure.
The audit team is required to design the audit to provide reasonable assurance through detection
of material errors.
Irregularities
Irregularities are intentional misstatements or omission of amounts or disclosures in the financial
statements, including fraudulent financial reporting and misappropriation of assets. So there is
always a risk that material irregularities may occur and not to be detected. This risk is increased
by the possibility of managements dominate of internal controls, collusion, forgery or unrecorded
transactions.
Efficiency
The audit team should design audit procedures that accomplish the overall goals discussed above
in the most efficient manner. Performing an efficient audit involves:
a) Performing risk assessment and planning with adequate partner and manager involvement.
b) Designing the combination of audit procedures based on the risk assessment that will efficiently
reduce the risk of undetected material misstatements.
c) Assigning work to adequately trained and supervised persons with appropriate experience and
skill levels.
Client Value
It has long been a tradition of the firm to provide enhanced value to clients as an integral part of
our audits. This strategy has allowed us to differentiate our approach are diverse from other firms.
Delivering added value as an integral part of an audit and effectively communicating the added
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
value information that is a key factor in building and maintaining a sound relationship with client
top management and directors etc.
Considering materiality
Annual Report
Ledger Book
Internal Reports
Ensuring that the records are complete, accurate and properly authorized,
b)
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
After involving with a client, Auditors try to understand the internal control structure of the client
business as much as possible because understanding of the clients internal control structure helps
auditor to determine the extent of our audit tasks.
reasonable
assurance.
The assessment of risk is accomplished using a top-down approach. The audit team focuses
initially on high level information. The nature and extent of documentation is vary significantly
based on an entitys size, complexity, ownership characteristics and level of risk.
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Cash, Bank, Inventory, Fixed Assets, Accounts Receivables, Accounts Payables, Revenue,
Expense, Payroll, Net Assets, Retained Earnings, and Fund balances, Other Assets, Other
Liabilities, Investment and Loan.
The Auditors of MARHK & CO. generally assess the risks at account balance level in view of the
following items:
The complexity of underlying transactions and other events which might require
using
The completion of unusual and complex transactions, particularly at or near period end.
Audit Risks
In determining the nature, timing and extent of substantive procedures required to reduce audit
risk to an acceptably of the auditor should consider the assessed levels of inherent and control
risks. In this regard MARHK & CO. consider:
a)
b)
c)
2.
They perform their audit with appropriate professional skepticisms and due processional care.
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Inquiries of Management
When planning the audit, MARHK & CO. Chartered Accountants make inquiries of management:
a) To obtain an understanding of:
1. Management evaluation of the risk that the financial statements may be materially
misstated as a result of fraud and error.
2. Management has put the accounting and internal control systems in place to address
such risk.
b) b) To obtain knowledge of management understands regarding the accounting and
internal control system in place to prevent and detect error.
c) c) To determine whether management is aware of any kind fraud that has affected the
entity or suspected fraud that the entity is investigating and
d) d) To determine whether management has discovered any material errors.
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
results of its assessment of the risk that the financial statements may be materially misstated as a
result of fraud.
Communication
When the auditor identifies a misstatement resulting from assumed fraud or error, then auditors
responsibility is to communicate to the management those charged with governance in some
circumstances, to regulatory and enforcement authorities.
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Test of controls
Test of control is an approach to further reducing the assessed level of control risk by testing a
sample of transactions and estimating pertinent error rates. Test of control may assume the form
of observation, reprocessing or document testing.
Test of control approach is likely to be effective when:
1.
2.
3.
The auditor performs tests of control to determine, how well the companys control actually
functioned during the period under audit.
Substantive tests
Substantive tests are procedures performed to detect misstatements in financial statement balances.
The Auditor perform the following two types of Substantive tests:
Analytical procedures
Details tests
Analytical Procedures are the testing of financial information by evaluating actual vs. expected
relationships among financial and non-financial data. Analytical procedures may be used as a
substantive test of balances and for a final review of yearend financial statements. The auditor
should apply analytical procedures at the planning and overall review stages of the audit.
Analytical procedures include the consideration of comparisons of the entitys financial
information with
Anticipated results of the entity, such as budgets or forecasts, or expectations of the auditor,
such as an estimation of depreciation.
Similar industry information, such as a comparison of the entitys ratio of sales to accounts
receivable with industry averages or with other entities of comparable size in the same
industry.
MARHK & CO. Chartered Accountants generally apply analytical procedures at near the end of
the audit when forming an overall conclusion as to whether the financial statements as a whole
are consistent with the auditors knowledge of the business.
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Details tests
Detailed tests may include in the following matters
a) Confirmation of third parties- Bank Account Payable & Account Receivable
b) Observation of asset Inventory count, Cash Count and Fixed Assets count
c) Tests of reconciliation- Bank reconciliation
d) Analysis of account
e) Vouching
f) Exception tests
g) Cut off tests
h) Inquire
i) Valuation tests
j) Evaluation of Financial Statements
k) Reading of minute of meeting of stockholder, directors and committee.
Confirmations
The audit team should determine whether the use of external confirmations is necessary to obtain
sufficient appropriate audit evidence to support certain financial statement assertions. In some
situations, audit evidence from external sources is more reliable than internal audit evidence.
Accordingly, audit evidence in the form of written responses to confirmation requests received
directly by the auditor from third parties who are not related to the entity being audited, may assist
in reducing audit risk for the related assertions to an acceptably low level. Examples of accounts
receivables, accounts payables and bank balance confirmation form that are used by MARHK &
CO. Chartered Accountants to confirm the clients balance of various accounts receivables and
accounts payables.
b)
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Report Title
Introductory Paragraph
Scope Paragraph
Opinion Paragraph
Auditors signature
Report Title: The audit report must contain a title. Also, except when the auditor lacks
independence, the title must include the word independent, to distinguish it from other kinds of
reports rendered by CPAs.
Audit Report Address: The auditors report should be mentioned appropriately addressed as
required by the circumstances of the engagement and local regulations. The report is ordinarily
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
addressed either to the shareholders or the broad of directors of the entity whose financial
statements are being audited.
Introductory Paragraph: The introductory paragraph identifies the financial statements covered
by the audit report and clearly differentiates managements responsibility for preparing the
financial statements from the auditors responsibility for expressing an opinion on them.
Management responsibility is direct, where the auditor has an indirect responsibility for exercising
due care in conducting the audit and expressing an opinion on the financial statements. In contrast,
the auditors responsibility is to audit these financial statements in order to express an opinion. An
illustration of these matters in an introductory paragraph is:
We have audited the accompanying balance sheet of the ABC Company as of June 31,20XX
and the related statements of income and cash flows for the year ended. These financial
statements are the responsibility of the companys management. Our responsibility is to express
an opinion on the financial statements based on our audit.
Scope Paragraph: The auditors report should be describe the scope of the audit by starting that
the audit was conducted in accordance with BSA & ISA. Scope refers to the auditors ability to
perform audit procedures deemed necessary in the circumstances. The reader needs this as an
assurance that the audit has been carried out in accordance with established standards are practices.
The report should include a statement that the audit was planned and performed to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
The auditors report should describe the audit as including:I.
Examining on a test basis evidence to support the financial statements amounts and
disclosures.
II.
III.
IV.
The report should include a statement by the auditor that the audit provides a reasonable assurance
basis of the opinion. An illustration of these matters in a scope Paragraph is:
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA) & ISA
(International Standards on Auditing). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free from
material misstatement. An audit includes examining on a test basis, collection of evidence
supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management as well
as evaluating the overall financial statements presentation. We believe that our audit provides
a reasonable assurance basis for our opinion
Opinion Paragraph: The opinion Paragraphs of the auditors report should clearly indicate the
financial reporting framework used to prepare the financial statements and state the auditors
opinion as to whether the financial statements gives a true and fair view in accordance with that
financial reporting framework and where appropriate, whether the financial statements comply
with statutory requirements. The terms used to express the auditors opinion are give a true and
fair view or present fairly, in all material respects and are equivalent. In addition to an opinion
on the true and fair view (or fair presentation, in all material respects), the auditors report may
need to include an opinion as to whether the financial statements comply with other requirements
specified by relevant statutes or low. An illustration of these matters in an opinion paragraph is:
In our opinion, the financial statements give a true and fair view of ( present fairly, in all
material respects), the financial position of the company as of June 31,20XX and of the results
of its operations and its cash flows for the year ended in accordance with Bangladesh
Accounting Standards (BAS).
Date of Audit Report: The report should be signed by the auditor and usually is dated as of the
close of audit field work. This inform the reader that the auditor has considered the effect on the
financial statements and on the report of events and transactions of which the auditor become
aware and that occurred up to that date.
Auditors Address: The report should name a specific location, which is generally the city where
the auditor maintains the office that has responsibility for the auditor.
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Bangladesh University
of Business & Technology (BUBT)
Auditors signature: The report should be signed in the name of the audit firm. The auditors report
is generally signed in the name of the firm because the firm assumes responsibility for the auditor.
Emphasis of matter
Qualified opinion
Adverse opinion
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
ii.
The addition of such an emphasis of matter paragraph does not affect the auditors opinion. The
paragraph would preferably be included after the opinion paragraph and would ordinarily refer to
the fact that the auditors opinion is not qualified in this respect.
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
adverse opinion, after that a company must correct its financial statement and have it re-audited,
as investors, lenders and other requesting parties will generally not accept it.
(C) Disclaimer of Opinion
In some instance, an auditor is unable to complete an accurate audit report. This may occur for a
variety of reasons, such as an absence of appropriate financial records. When this happens, that
time MARHK & CO. Chartered Accountants issues a disclaimer of opinion, stating that an opinion
of the firms financial status could not be determined.
The principal purpose of management letter is to enable the auditor to give comments on
the accounting records, systems and controls that has examined by auditor. Significant
areas of weakness in systems and controls that might lead to material errors should be
highlighted and brought to managements attention.
A letter to management is also a useful means of communicating matters that have come
to the auditors attention during the audit that might have an impact on future audit.
Contents
Generally the following matters, arising out of the audit
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
Points made in previous years management letter should be reviewed. Where they have not been
dealt with effectively, the auditors should enquire why appropriate action has not been taken.
Management response:
The auditor should request a reply to all the points raised, indicating what action management
intends to take as a result of the comments made in the management letter. It should be made clear
in the report that the auditor expects at least an acknowledgement of the letter or where they
considers it appropriate, the directors discussion of the letter to be recorded in the board meeting.
Basic Elements of the Management Letter
The management letter includes the following basic elements ordinarily in the following present:
a)
Addressee
b)
Transmittal Letter
c)
Title
d)
Background Information
e)
f)
i.
Compliance
ii.
Authorization
iii.
Accuracy
iv.
Monitoring
v.
Safeguarding
ii.
Effect (What impairment was caused by not complying with the criteria)
iii.
iv.
Management Response
g)
h)
i)
Auditors signature.
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Bangladesh University
of Business & Technology (BUBT)
Chapter-5
FINDINGS, RECOMMENDATION &
CONCLUSION
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Bangladesh University
of Business & Technology (BUBT)
Performance of the students must be supervised by the audit team supervisor to ensure
the quality of audit performance. Which is not happen in most of the audit program.
Audit standard require before performing the task auditors must need to know about
the clients business nature. But in some case, the student of MARHK & CO. Chartered
Accountants are not given proper orientation about the new clients business. As a
result, perform the audit activities without having proper knowledge about the clients
business.
Auditors cannot examine all the documents and sample size has taken as random basis
which may cause the misjudgments of the subject matter.
Most of the time evidences are not collected properly to assure the accuracy of the
information.
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
The auditor should select at least three quarter of the documents regarding the financial
statements to verify so that the chance of material misstatements in the untested
documents can be reduced and the audit report will be more reliable.
To get an outline regarding the new clients business, MARHK & CO. Chartered
Accountants arrange proper orientation for the students so that they can be able to
verify the documents and issue the audit report properly.
Junior students must need to supervise by the supervisor to ensure their performance.
They must need to be concern about following the proper audit procedure.
They should prepare audit team by proper number of member with different level of
skills to ensure the reliability of the audit program.
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
5.3 Conclusion
In this report, I have tried my level best to cover the details audit procedures as followed by
MARHK & CO. Chartered Accountants in accordance with Bangladesh Standards on Auditing
(BSA) and International Standards on Auditing (ISA) in providing auditing service to its clients.
At first I have tried to give the theoretical understanding about the audit and its related issues to
the users so that they can get a clear view about the audit then I have also studied the rules and
regulations that are required by the ICAB for auditing. MARHK & CO. Chartered Accountants
performs an excellent job in providing audit services for the clients. The staffs who are directly
associated with the excellence of audit service deserve to be acclaimed for their endeavor to this
end. MARHK & CO. Chartered Accountants believes in creating the difference in the market place
by offering impeccable quality.
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.
Bangladesh University
of Business & Technology (BUBT)
5.4 Appendix
www,google.com
www. Wikipedia.co
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An Audit Procedure of Chartered Accountants firm with special reference of MARHK & CO.