The problem and prospects of auditing profession in BD PDF

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“The problems and prospects of auditing profession in Bangladesh”

Course Title: Advanced Audit and Assurance Services Course code: 602

Submitted ByMohammad Jubair Hossain Id: 11606018 (10th Batch) Department of AIS, Comilla University, Cumilla

Table of Contents Introduction ..................................................................................................................................... 3 The problems of auditing profession in Bangladesh....................................................................... 4 The prospects of auditing profession in Bangladesh ...................................................................... 6 Conclusion ...................................................................................................................................... 8 References ....................................................................................................................................... 9

Introduction The word “audit” comes from the Latin word audire, meaning “to hear” “to listen”. According to Flint (1988), audit is a social phenomenon which serves no purpose or value except of its practical usefulness and its existence is wholly utilitarian. The individual who does the work of auditing is called auditor. External auditors come in from outside the organization to examine accounting and financial records and provide an independent opinion on these records. Law requires that all public companies have their financial statements externally audited. Internal auditors work for the organization as internal employees to examine records and help improve internal processes such as operations, internal controls, risk management, and governance. Auditors play a vital role for a country. Auditor’s responsibility to shareholders in particular and Stakeholders in general is really important. Auditor should always keep mind that their requirement according to laws, regulations and public expectation is very high. At present most of the auditors as well as client conscious about the applicable standards, laws, rules, and regulations. Auditors ensure that auditing standards has been complied. In case of non-compliance, auditors provide suggestion to the management of client to provide necessary adjustments. If management is unwilling to provide adjustments, auditors issued modified audit report.

The problems of auditing profession in Bangladesh Auditing has evolved from a routine checking of the books of account to a vital part of the governance process of companies (Afroze and Aulad, 2020). Factors such as the volume of transactions, information technology, globalization and the constant increase in the complexity and number of laws, regulations and standards governing entities and their auditors have all impacted drastically on the evolving role of the registered auditing profession. One of the consequences of this was the demise of Arthur Andersen and the resultant decrease in the number of big audit firms from five to four. A further consequence was the drastic interventions by governments, regulators and the auditing profession itself, which have given rise to various and onerous new laws, regulations and standards that govern financial reporting and the auditing thereof. The corporate collapses, business failures and fraudulent financial reporting scandals of the late 1990s and early 2000s led to a very turbulent time and resulted in a credibility crisis for the auditing profession (Ahmed et al., 2020). Problems in overall audit profession faces can be classified as in-house problems and outdoor problems. In house problems are problems internal to the auditors and the auditing profession whereas outdoor problems come from the external sources on which auditors and audit profession has no control over. In-House problems: In house problems are challenges internal to the auditors and the auditing profession. Some of these problems can be controlled by the profession or the audit firm itself. Whereas there are some problems those are internal to the profession but out of control. Those problems are inherent challenges. Audit firms and profession frequently adopts different safeguards to overcome these problems or to reduce them to an acceptable level. Most of the inhouse problems of auditing profession in Bangladesh are listed below: ❖ Limited number of employees ❖ Lack of motivation in human resources ❖ Lack of expertise in audit staffs ❖ Familiarity or self-interest threats ❖ Cost in excess of revenue ❖ Testing is used

Outdoor problems: There are some problems relevant to the auditor and audit professions which are not directly internal to the firms and has no or significantly lower control over them. These problems are the outdoor problems which are caused mostly from the side of readers or users of the financial statements, management of the clients, governments and regulatory bodies. These problems of auditing profession in Bangladesh are listed below: ❖ Expectation gaps ❖ Client pressure ❖ Client is not cooperative ❖ Excess feeding of information ❖ Misguiding or misrepresenting information ❖ Regulatory requirement ❖ New legislation, regulations and standards ❖ Increased IT Risks

The prospects of auditing profession in Bangladesh The prospect of audit practice in Bangladesh is very bright if the problems involved in audit practice as pointed out earlier by the respondents can be removed (Hasan-or-Rashid, 2018). But it is true that 100% removal of the problems is not always possible. However, the respondents were requested to mention the major suggestions as to the removal of the problems. The responses of the respondents were tabulated above. The suggestions to remove the problems in practice of audit in Bangladesh can be discussed in the following manner: Code of Audit and Best Practice Recommendations: Like other countries, Bangladesh needs to have a “Code of Audit and Best Practice Recommendations” which can be either rule based or principles based. Bangladesh Enterprise Institute, audit Committee of ICAB, and SEC have developed separate Codes for audit for Bangladesh. Expertise mentioned that the Government must take initiatives to make these implemented by making necessary changes in the Companies Act. Implement Competition Policy: Expertise reported that Bangladesh needs to formulate a Competition Policy which will ensure a culture of good audit to thrive. Competition policy helps bring about efficiency, reduce price distortions, lower the risk of poor investment decisions, and promote greater accountability and transparency in business decisions, and lead to better audit governance. Improve the capacity of the Boards of directors: Expertise pointed out that directors must improve their participation in strategic planning, monitoring of internal control. There is a need for director training, voluntary codes of conduct to expect professional behavior. The most vital thing that can ensure good CG is high standards of ethical and personal behavior. This can only be ensured if the value system of society imposes this on their people as the norm in every aspect of life. Ensure the legal and regulatory framework: Government should ensure the legal and regulatory framework which may include, among other things: (i) strengthening disclosure requirements (ii) ensuring that regulators have the capacity to monitor companies (iii) clarifying and strengthening the fiduciary duty of directors etc. mentioned by again expertise.

Strengthening the Capacity of the Government: The Securities and Exchange Commission (SEC) of Bangladesh need to be strengthened as mentioned by expertise so that it can devise and enforce a code for good CG. The Companies Act has to be amended and updated to have consistency with Bangladesh Audit Standards (BAS), SEC requirements and the Bank Companies Act. Independent Audit Committee should be made compulsory for all listed companies.

Conclusion Audit provided numerous benefits to the organization. Audit brings new expertise to the organization and indicates the weakness or loopholes that exist in the control system. Audit increases credibility and acceptance of the financial statements. Audited financial statements are perceived less risky compared to the un-audited financial statements. Banks and financial institutions rely on the audited financial statements at the time of loan approval decision. The problems facing the auditing profession are both complex and many in number. However, given the rigor of the education and training process, the rigor of the qualification process, the technical competence of auditors, their multidisciplinary knowledge and experience, and a process of continuous learning and development, there is no doubt that the auditor will be able rise to the challenge and succeed. This study has found a number of problems involved in audit in Bangladesh. These challenges are related to the Lack of Capacity Building and Institutional Development, Application or Adoption of Cost Accounting Standard, existing Law sometimes contrary to Cost accounting Standard, Speedy adoption of cost accounting standard suffers from lack of technical and financial resources, Lack of awareness, understanding and application skill by prepares and auditors.

References Afroze, D. and Aulad, A., (2020) Perception of professional accountants about the application of artificial intelligence (AI) in auditing industry of Bangladesh. Perception, 7(2), pp.51-61. Ahmed, T., Mahboob, S., Jannat, T. and Hassan, T., (2020) Factors Influencing Audit Expense and Quality in an Emerging Economy: A Study on Bangladesh. Economics, 7(2), pp.179-188. Hasan-or-Rashid, M.D., (2018) Auditing: present & prospects....