CHAPTER 1:

Introduction to the Project

1.1. ntroduction
As a mandatory requirement of the Bachelor in Business Administration (BBA) program under School of Business at North South University, this report entitled - "Audit Program, Procedure & Evaluation with Special Reference to Practical Parties" - is a connived depiction of the three month long internship program at the A. Qasem & Co. under the faculty-supervision of Mr. Tashfeen Hussain, Business Faculty, North South University and organizational supervision of Mr. Sohel Kasem FCA, managing partner of A. Qasem & Co. For my internship purpose, I have got attachment with a recognized Chartered Accountancy Firm A Qasem & Co. I have gone through the financial statement audit of Reckitt Benckiser Bangladesh Ltd. and Sanofi-Aventis. This internship program gives me the opportunity to come into close contact with the audit procedures regarding the issuing of the audit report to the concerned organization whether their financial statements prepared with conformity of the Generally Accepted Accounting Standards (GAAP), Bangladesh Accounting Standards (BAS), Bangladesh Standards of Auditing (BSA) and other rules and regulations. My organizational supervisor Mr. Sohel Kasem, FCA has suggested me to work on the financial statements of Reckitt Benckiser Bangladesh Ltd. and Sanofi-Aventis.

1.2.

Objective of the Report

The purposes of this report cognates the point of internship. The internship

objective was to gather practical knowledge and experiencing the corporate working environment with the close proximation to the business firms and the experts who are leading and making strategic decisions to enhance the growth of a financial institution. It is basically to bridge the gap between the theoretical knowledge and practical understanding. In theory we have got a lot of understanding about the business world and its activities. But it remains incomplete unless and until we can apply the knowledge in practical world. To this regard this report will contemplate the knowledge and experience accumulated from internship program. With the set guidelines and proposal by the School of Business of North South University and with the kind advice of both the Organization and Internship Supervisor this report comprise of an organization part and a project part.

The objectives of preparing the report cover the following area -

BROAD AREA:
To know about the general facts of A. Qasem & Co., one of the leading chartered accountancy Firm in Bangladesh. To have an orientation with accounting professional environment Bangladesh. To gain experience on different function of audit firm which provide different types of client. To have some practical exposure that will be helpful for my future career in accounting Professional.
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SPECIFIC AREA:
Evaluating the role of Bangladesh Standards of Auditing (BSA) in conducting the audit. To know the procedures of issuing audit report. To find out whether or to what extent the audit of the financial statements conducted by the audit firm is effective.

1.3.

Significance
In this report the whole audit program and procedures will be discussed and

evaluated. The purpose of conducting an audit is to enable the auditor to express an opinions whether the financial statements are prepared in all material respects and in accordance with the framework Bangladesh Accounting Standards (BAS). So, this evaluation of audit procedure would be of great help to companies, employees, management practitioners and all other stakeholders. Through this, companies can get a clear picture about audit procedures. Moreover, it will also help companies to figure out its strengths and weaknesses. It can be helpful to employees and other personnel of management who may be from different field but still have to face the audit program. General people who look for investing their money in prospectus companies will also know how effective audit procedures are. So, ultimately the whole discussion and evaluation criterias can be helpful for the society at large.

1.4.

Methodology
The study will be exploratory in nature and is oriented to find out the insights

of the study objectives. Both the primary as well as the secondary form of information is used to prepare the report. The details of these sources are highlighted below

PRIMARY SOURCES:
Primary data sources will be the officials of A. Qasem & Co. and also officials of Reckitt Benckiser Bangladesh Ltd. and Sanofi-Aventis. Major sources of primary information will be discussions with Ms. Akhter Sanjida Kasem FCMA, FCA, acting partner of A. Qasem & Co.

SPECIFIC AREA:
a. Internal Sources Financial Statements of RBBL and Sanofi-Aventis Bank Statements and Bank Conformation Letter Any information and documents collected during the audit sessions

b. External Sources Different books and periodicals about auditing Bangladesh Accounting Standards (BAS), Bangladesh Standards of Auditing Newspapers Website information

1.5.

Sampling Plan
Target Population o Articled students of A. Qasem & Co. and employees of Reckitt Benckiser Bangladesh Ltd. and Sanofi-Aventis are the target population for the study.

Sampling Type o Simple random sample will be used for the report purpose.

Sampling Size o About 30 articled students of A. Qasem & Co, 5 employees of Reckitt Benckiser Bangladesh Ltd. and 5 employees of Sanofi-Aventis will be taken as sample.

1.6.

Samples Selection and Data Analysis

Both Management staffs and other staffs have been selected as samples. To get

mathematical figures, statistical tools like Frequency & Charts, Cross Tabulation, Chi Square Test etc. will be used. In this report, MS Excel will be used for database, report writing, figures and graphs.

1.7.

Limitations of the Study

I have tried my best to provide with all necessary information about the audit

process in my study. But due to the exhaustive nature of this study most secret and strategic ethics could not be brought out in this study. Severe time limitation also has huge bearing on this study because I had to maintain an office hour of 9 AM to 5 PM. Due to time, resources and data constraint together with secrecy of data I could not perform a rigorous research to project the findings on the study. During the preparation of my report Ive been encountered with several problems which may be termed as limitations of the study. These are:

Lack of a sound research background or prior experience. Taking relevant papers and documents were strictly prohibited. Many procedural matters were directly conducted by the top management level, which may also gave some sort of restrictions, because I was not able to reach all the needed information which might be required for my study. To protect the organizational confidentiality, some parts of the report might not be so in depth what it should be. Because of large area of operation, I could not collect data from all the relevant areas. As secondary data were not available I have to rely mostly on primary data and where there is no primary data available Ive to rely on my understanding of the subject matter being as the team member of several audit work.

CHAPTER 2:

The Organization

2.1.

Background
In this era of globalization nothing can be more important than credible and

comparable financial statements. Donors and investors rely heavily on the financial statements for making capital allocation decision. International investors diffuse their capital among various sectors depending on the performance of the respective sectors. For these Bretton Woods Institutions (e.g. World Bank, IMF, UNDP) stress highly on credible financial statements which is the result of auditing. Every international standard setter like IFAC, IASB, IOSCO is stressing more on adoption of ISAs and IASs for reporting harmonization than ever. Bigger donors and investors are now crunching the numbers for investing their wealth. The audit market in Bangladesh has attained robust growth with the economic growth at 5.5% (GOB 1996-2004). Before independence ICAP used to be the professional body for auditing. After independence in 1973 ICAB (Institute of Chartered Accountants of Bangladesh) came into play. Since then ICAB has been the main professional body responsible for private and public sector auditing in Bangladesh. There are currently 171 audit firms. Only six audit firms have international affiliation. Most of these firms (110) are sole proprietorship firms. Majority of the partnership firms are two partner firms (47). A firm can be formed with highest 7 partners according to the rules of ICAB. Most of the firms (147) operate from single office. 23 of the firms operate from two offices while only 1 firm has three offices.

2.2.

Profile of A. Qasem & Co.

A. Qasem & Co. is one of the most reputed and successful audit firms in

Bangladesh. Founder partner Late Mr. A. Qasem, FCA set up A. Qasem & Co. in the year 1953 in Chittagong. Branches were set up in Dhaka & Karachi. At present AQC operates from two offices in Dhaka & Chittagong respectively. Over the last five decades the firm has been associated with many

notable organizations in then Pakistan & Bangladesh. A. Qasem & Co. provides a broad range of financial & consultancy services. As a prominent local firm, in fact the oldest audit firms of Chartered Accountants in Bangladesh, the concerned parries are able to combine a detailed knowledge of local statute, custom, regulation & requirements with the resources and skill of a highly motivated and dedicated team of professionals available with the firm.

The firm is now being led by Mr. Sohel Kasem, FCA and managing partner of the firm. He served his articles with Coopers & Lybrand, London and qualified as a Chartered Accountant from the Institute of Chartered Accountants of England and Wales in 1981. Besides being the managing partner of the firm, he was also the President of the Institute of Chartered Accountants of Bangladesh (ICAB) for 2004.

The other partners of the A. Qasem & Co. Ms. A. Sanjida Kasem; Fellow Member of both ICAB and ICMAB. Mr. Kamran I. Choudhury; Fellow Member of the Institute of Chartered Accountants of England and Wales. Mr. Motaleb Hossain, ACA Mr. Hamidul Islam, ACA Mr. Mofazzul Hossain, ACA

2.2.1. nternational

Affiliation

AQC is an Associate Firm of PricewaterhouseCoopers (PWC), which is one of the largest professional firms in the world, operating in 152 countries with 150,000 partners and staffs worldwide. PricewaterhouseCoopers (or PwC) is one of the world's largest professional services firms. It was formed in 1998 from a merger between Price Waterhouse and Coopers & Lybrand, both formed in London. PricewaterhouseCoopers earned aggregated worldwide revenues of $28 billion for fiscal 2008, and employed over 146,000 people in 150 countries. In the United States, where it is the fifth largest privately owned organization, it operates as PricewaterhouseCoopers LLP. PricewaterhouseCoopers is a Big Four auditor, alongside KPMG, Ernst & Young and Deloitte Touche Tohmatsu. At present, AQC has about 90 professional staff. Being an Associate Firm of
PricewaterhouseCoopers, AQC is able to supplement its own resources with the experience and expertise of the staffs in South Asia, India, North America, Continental Europe and many other parts of the world.

The following Firm Data Sheet will give more detailed informationName of the Firm Founded in Total number of Chartered Accountants Principle A. Qasem & Co., Chartered Accountants 1953 11 Mr. Sohel Kasem FCA, FCA (England & Wales) Partners Ms. A. Sanjida Kasem FCA, FCMA Mr. Kamran I. Choudhury, FCA Mr. Motaleb Hossain, ACA Mr. Hamidul Islam, ACA Mr. Mofazzul Hossain, ACA Director, Consulting Director, Human Resource Audit Mangers Mr. Shakil Kasem Mr. Wadud Choudhury Ms. Nusrat Jahan, ACA Mr. Obed Pandit, ACA Mr. Imran Ahmed, ACA Mr. Mamun Ahmed, ACA Mr. Fazlul Haque, ACA Foreign Investment Advisor Professional Staff Articled Students International Affiliation Mr. Jainul Abedin 90 54 PriceWaterhouseCoopers (PWC) 1 London Bridge London SE, 9QL, UK Contact Address: Gulshan Pink City, Suites# 1-3 (Level- 7), Road # 103, Gulshan-2, Dhaka-1212 Phone:8837285-7 E-Mail: qasem@dhaka.agni.com Web site: www.aqcbd.com

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2.2.2.

Organizational Structure

Partners
Directors
Senior Audit Manager
Assistant Senior Manager

Tax Wing

IT Wing

Consultancy Wing

Office Manager
Accountant
Internal Administrative Staff

Manager
Assistant Manager
Audit Supervising Senior Audit semisenior Assistant

Audit Assistant

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2.2.3.

Reputation of the Firm

From its early commencement in 1953, A. Qasem & Co. expanded rapidly, and within a couple of years it had been able to establish full fledged offices in Dhaka, Chittagong, which made it one of the leading accounting firm in Bangladesh. However, its professional activities in Bangladesh have grown manifold in diversified fields and today it is acknowledged as the leading firm of accountants and financial consultants in Bangladesh.

AQC, together with its management consulting operations, established an extensive accounting, audit and tax practice, and has also carried out large number of feasibility studies, project planning, economic and statistical surveys and market studies etc. besides, it has executed a good number of consultancy air-water-railway transportation, health and family planning, water supply and sewerage, energy saving and conservation, communication sectors etc. A distinguishing feature of AQC's practice has been its catalytic role to bring under one umbrella the qualifications and experiences of top graded professionals available in the country, specialized in corporate and public finance, macro-economic policy planning and analysis, management appraisal, computer application, perfect planning and monitoring, market survey, manpower planning and training, pre-investment studies, institutional reforms etc.

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2.2.4.

Client Collection Procedure

The client collection procedures of AQC are1. Quotation: The client invites quotation for audit through newspaper and AQC may submit the bidding and it can have the audit if selected by the client. 2. Support of Ex-student: Many times ex-students of AQC holds the top positions of different company who may propose the name of AQC as their auditor. 3. Influence from Ex-partner: Ex-partners of AQC holding the influential position in different sectors may favor the name of AQC as auditor. 4. Sometime publicity may be made through functions in different clubs, where our partners meet with his management of different clients. 5. In case of multinational client, they use the same audit firms' services globally. For example, Citi group head office conduct their audit by PWC, as a result all the subsidiaries of Citi group conduct their audit by PWC associate firm like AQC. 6. Quality and reputation is also an important factor, which helps to get international client. Say BAT globally has the audit services of PWC. So, BATB should conduct their audit by A. Qasem & co. in Bangladesh because A. Qasem and Co. is the affiliated firm of PWC in Bangladesh. 7. There may be international bidding. If there is no representative firm of any global audit firm in Bangladesh by which the MNC conducts their audit, then this MNC may invite tenders from reputed Bangladeshi audit firm to conduct the audit of this MNC's Bangladeshi subsidiary. 8. AQC sometimes have offer for audit of a client through SEC.

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9. NGO bureau has list of all NGOs in Bangladesh. Audit of NGO is also mandatory. As a result AQC have audit of NGOs through NGO bureau.

2.2.5.

Client Acceptance Process

When a proposal for audit service of a client comes to AQC, it does not readily accept the proposal, rather it does it through a process called client acceptance process. If AQC agrees to accept the client then it sends its willingness to client, which subsequently followed by appointment letter from client. So, to accept a client AQC has stipulated guidelines and evaluation process such as: Obtain relevant factual information about the prospective client. Evaluating clients accounting system and ICS. Than documenting the report accepting or rejecting the client. If AQC accepts the client than client will send appoint letter to AQC. Documentation of acceptance report of this type is not required for: PWC referred client. Audit of insolvency. But this is not end of the process. Rather approval from Risk Management Partner of AQC is required if the client is of following type, such as: Listed company. Client had qualified audit opinion during any of last three years. Client changes their auditor frequently. Client has huge deposit in financial statement.

14

Sentinel process can be described by following diagram:

Sentinel Request

PWC's reply within 48 hours

Pre approval not required

Pre approval required

Preparation of client acceptance document

Obtain preapproval

Proposal/ Appointment

Yes

No

LOE

Decline by AQC

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2.2.6.

List of Professional Services

There are various professional services are performed by A. Qasem & Co. which are described belowi. Audit and Accounting Services Audit/Attestation Reviews and compilation of financial statements Regulatory compliance attestation Interim reports Special reports/ agreed-upon procedures Offerings (stock Exchange.) and offering document Assistance Review and reporting on internal control Information risk management Computer security reviews Internal audit outsourcing Accountant services Forensic and investigative accounting / litigation support Due diligence assistance Valuations Corporate governance

ii.

Tax and legal Services Corporate taxation Mergers and Acquisition. (Tax Aspects) Outsourcing services VAT Taxation of individuals International taxation Expatriate tax services Company law

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iii.

Management consultancy: Financial Management Business strategy Policy and economic studies Market entry studies Compensation benefits Systems development and implementation (manual and computerize)

iv.

Corporate Finance Mergers and Acquisitions (taxation, accounting, local statutory compliance aspects)

v.

Corporate Recovery Liquidations

vi.

Corporate Services Executive search and selection Privatizations Company formation Branch/ Liaison Office setup Expatriate work permit

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2.2.7.

List of Audit Clients

As one of the oldest and largest audit firm in the country, A. Qasem & Co. proud to have several reputed companies as client in following sectors: 1. Oil, Gas and Power Sector: Shell Bangladesh Exploration and Development B.V. Shell Bangladesh Marketing Ltd. PGS Onshore Inc. Meghna Petroleum Ltd. Grant Geophysical Inc. NEPC Consortium Power Ltd.

2. Banks and Financial Institutions: Bangladesh Bank American Express Bank Ltd. Shamil Bank of Bahrain E.C. Mercantile Bank Ltd. The Bank of Nova Scotia GSP Finance and Leasing, Co. Ltd. International Leasing and financial Service Ltd. American Life Insurance Co. Ltd. (ALICO) National Housing Ltd. Uttara Bank Ltd.

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3. IT and Telecommunication: IBM International Bangladesh Ltd. TM international (Bangladesh) Ltd.

4. Pharmaceutical Companies: Glaxo Smithkline Bangladesh Ltd. Novartis Banladesh Ltd. Sanofi-Aventis Bangladesh Ltd. Roche Bang1adesh Ltd.

5. International NGOs and Foreign Funded Projects: CARE Bangladesh and projects Engender health Inc. Handicap International New Zealand Baptist Missionary Society Pathfinder International Save the Children Sweden South Asia Partnership Transparency International PLAN International Swiss contact HASAB

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6. National NGOs: Acid Survivors Foundation Ananya Samaj Kalyan Sangstha Association for Social Advancement Bangladesh Jatiya Andha Kalyan Samity, Dmajpur Bangladesh National Women Lawyers' Association Bangladesh Women's Health Coalition BNSB Eye Hospital Concerned Women for Family Development

7. Other National & Foreign Companies: Unilever Bangladesh Ltd. Imperial Tobacco Bangladesh Ltd. Mahkota Technologies SDN. BHD (formerly GEC Malaysia) JOIMAC Ltd [Toll collectors of Jamuna Bridge] Op-Seed Co. (BD) Ltd. Germanischer Lloyd Bangladesh Limited Basse Sambre ERI. SA Merchandise Testing Laboratories (Bangladesh) Ltd Greyfab (Bangladesh) Ltd.

A. Qasem & Co. have significant continuing experience in the area of company formation, secretarial services and financial and tax related advice. It has successfully assisted in the formation of more those 750 companies in Pakistan and Bangladesh.
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CHAPTER 3:

Practical Parties

3.1.

Reckitt Benckiser Bangladesh Limited

Type Public LSE: RB 1814 1938 by merger of Reckitt & Sons Founded and J&J Colman. 1999 by merger of Reckitt & Colman and Benckiser. Headquarters Slough, England, UK Adrian Bellamy (Chairman) Key people Bart Becht (CEO) Colin Day (CFO) Industry Chemicals Cleaning products, healthcare, Products condiments 4.922 billion (Year to 31 March Revenue 2008) Net income 674 million (Year to 31 March 2008) Employees 19,900 (2004) Website http://www.reckittbenckiser.com/

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3.1.1.

Company Background

The company was formed by a merger between Britain's Reckitt & Colman and the Dutch company Benckiser NV in December 1999. The origins of Reckitt Benckiser's main predecessor businesses are set out below. Various other businesses have also been purchased over the years. Colman's was founded in 1814 when Jeremiah Colman began milling flour and mustard in Norwich, England Johann A. Benckiser founded a business in Germany in 1823. Its main products were industrial chemicals. Isaac Reckitt rented a starch mill in Hull, England, in 1840. He diversified into other household products and in due course passed on his business to his four sons. Reckitt & Sons listed on the London Stock Exchange in 1888 In 1938 Reckitt & Sons merged with J&J Colman to become Reckitt & Colman Ltd. Reckitt & Colman sold the Colman's food business in 1995 but still has some food brands. It divides its brands into six categories: surface care, fabric care, dishwashing, home care, health and personal care, and food. Benckiser moved HQ from Germany to the Netherlands and went public in 1997. In October 2005, Reckitt Benckiser agreed to purchase the over-the-counter drugs manufacturing business of Boots Group, Boots Healthcare International, for 1.926 billion. The three main brands acquired were Nurofen in analgesics; Strepsils sore throat lozenges; and Clearasil anti-acne treatments.
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3.1.2.

Nature of Business

Reckitt Benckiser is one of the world's leading manufacturers of cleaning products, and a member of the FTSE 100 Index of the largest companies traded on the London Stock Exchange. It is headquartered in the town of Slough just to the west of Greater London. Reckitt Benckiser has operations in more than sixty countries and sells its products in more than 180 countries. Turnover for the year to 31 December 2006 was 4,922 million. Profits before tax were 874 million, and net profits were 674 million. The company focuses on high-margin products and has shown strong growth in earnings per share in recent years. At 31 December 2006, it had a market capitalization of 16.878 billion.

3.1.3.

Product and Services

There are 17 Power brands accounted for 62% of Rekitt Benckisers net revenues in 2008, and 61% in 2007. Reckitt Benckisers most profitable and most recognized brands are: Vanish, Calgon, Woolite, Lysol, Dettol, Cillit Bang, Harpic, Finish (previously Electrasol in North America), Air Wick, Mortein, Strepsils, Mucinex, Nurofen, Gaviscon, Veet, Clearasil.

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3.1.4.

Ownership Structure

JAB Investments, 15.4% Legal & General Investment Management, 3.2% MFS Investment Management, 3.1%

3.1.5.

Competitors

Clorox Colgate-Palmolive Henkel Procter & Gamble S. C. Johnson & Son Unilever

3.1.6.

Reckitt Benckiser in Bangladesh

Reckitt Benckiser Bangladesh Limited (RBBL) was incorporated in Bangladesh on 15th April 1961 under the Companies Act 1913 as amended in 1994. It is a Public limited company and its shares are listed on Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited, and are placed under A category. In Bangladeshi market, the company is engaged in manufacturing and marketing of Household & Toiletries, Pharmaceuticals and Food products. Its famous brands in Bangladesh are- Dettol, Harpic, Mortin, Veet etc.

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3.1.7.

Organizational Structure

Executive Director/ Country Director

Head of Finance & Accounts

Head of Marketing

Head of Sales

Head of Supply Chain

Head of IT

Headof HR

Finance Manager

Brand Manger

RSM

Supply Chain Manager

IT Manager

HR Manager

Executive Trainee

ASM

Production Executive

IT Executive

Officer

ASE

Officer

Officer
TSO

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3.2.

Sanofi-Aventis Bangladesh Ltd.

Sanofi-Aventis is the one of worlds leading pharmaceutical companies and the

largest in Europe. Present in more than 100 countries, with around 11,000 scientists, it has around 100,000 employees working to improve health and wellbeing. Its global headquarters are in Paris, France. Sanofi-aventis focuses its activities on 7 major therapeutic areas: Cardiovascular Thrombosis Oncology Central Nervous System Metabolic Disorders Internal Medicine Vaccines

The Sanofi-aventis portfolio of marketed products includes several medicines that are world leaders in their respective classes, in the areas of thrombosis, cardiovascular disease, sleep disorders, epilepsy, diabetes and cancer. Sanofi-aventis more than 25 research centers on three continents, Sanofi-aventis coordinates its Research and Development on a worldwide basis. The Sanofi-aventis annual R&D budget exceeds four billion Euros and ranks among the three largest budgets of global pharmaceutical industry. Sanofi-aventis currently possesses one of the richest and most innovative portfolios in the industry with more than 100 molecules and vaccines in development, half of which are in advanced stages (phases II and III).
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3.2.1.

Sanofi-Aventis in Bangladesh

Sanofi-aventis Bangladesh Limited is the new entity that has been formed due to the amalgamation of three legal entities- Aventis Limited, Fisons (Bangladesh) Limited and Hoechst Marion Roussel Limited. The legal integration process has taken few years after the global merger between Sanofi-synthalebo and Aventis in September 2004 and finally the existing three legal entities have amalgamated as Sanofi-aventis Bangladesh Limited on December 11, 2007. The new name of the newly amalgamated company has been

registered with the Registrar of Joint Stock Companies and Firms on January 31, 2008. Sanofi-aventis, a leading global pharmaceutical Group, discovers, develops and distributes therapeutic solutions to improve the lives of everyone. The Group is present in more than 100 countries with around 11,000 scientists and more than 100,000 employees worldwide. Sanofi-aventis has a portfolio containing a wide range of innovative vaccines and medicines, particularly in its areas of excellence and expertise such as Thrombosis, Diabetes, Cardiovascular diseases, Oncology, disorders of the Central Nervous System, Vaccines and Internal Medicine. Sanofi-aventis Bangladesh Limited has a diverse portfolio of products ranging from widespread names like Fimoxyl, Sefrad, Clexane,

27

Amaryl, Profenid etc to traditional names like Flagyl, Stemetil, Oracyn-k, Frisium etc to revolutionary original research product like Eloxatin, Taxotere and Lantus. Sanofi-aventis Bangladesh Limited, being the largest global pharmaceutical company in Bangladesh, is making a considerable contribution in the national economy of Bangladesh in addition to the technology transfer in the local pharmaceutical field. Apart from that, Sanofi-aventis Bangladesh Limited is strongly committed as a socially responsible organization. Projects like My child matters carried out in partnership with UICC (International Union against Cancer) to fight against child cancer is one of the numerous examples of the organizations commitment to the society. Sanofi-aventis Bangladesh Limited contributed a total of Taka 28.4 crore to the national exchequer in the form of Tax, VAT, custom duties etc. in 2007. The Government of Bangladesh holds 45% shares in the company. All the business transactions and communications will now be carried out in the name of Sanofi-aventis Bangladesh Limited. Doctors, chemists and institutions and other key stakeholders have been duly communicated about the merger and have been requested to update their records adapting to the new entity Sanofi-aventis Bangladesh Limited. Decision about the legal merger has also been communicated to all employees through internal events. Sanofi-aventis Bangladesh Limited has always been committed in meeting and exceeding the stakeholders expectations and earning the respect of various institutions as the long-term professional partner of choice.

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3.2.2.

Product and Services

Sanofi-aventis in Bangladesh provides medicines to treat patients with illnesses in several therapeutic areas:

Metabolic Disorders Amaryl (glimepiride tablets) Lantus (insulin glargine [rDNA origin] for injection)

Thrombosis Clexane (enoxaparin sodium)

Central Nervous System Epilim (sodium valproate et valproic acid)

Oncology Taxotere for Injection Concentrate (docetaxel)

Cardiovascular Tritrace (ramipril)

Primary Health Care Asec (Omeprazole) Asinar (Ranitidine) Enocef (Ceftriaxone) Fimoxyclav (Potentiated amoxycillin+clavulanic acid) Fimoxyl (Amoxycillin) Fiprox (Ciprofloxacin) Profenid (Ketoprofen) Sandom (Domperidone) Sefrad (Cephradine) Sefurox (Cefuroxime)

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3.2.3.

Sanofi-Aventis Finance
Sections
Finance and Accounting

Activities
Profitability measure Monitoring assets and liabilities Preparing financial statements Financial Plan Budgetary plan Expense monitoring

Finance Controller

3.2.4.

Sanofi-Aventis Finance Controlling

Controlling Non Routine

Routine

Yearly Basis

Monthly Basis
Sales Reporting Product P&L Business Unit P&L

Ad-hoc Reporting

Brand Plan Business Plan

Mgt. P&L

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CHAPTER 4:

RBBL & Sanofi-Aventis

Financial Accounting

4.1.

Fund

Proposes for fund accompanied by trustee board

1. Trust deed should prepare in this time. 2. Rules of Provident fund should prepare according to the companys rules that must satisfy the govt. regulations.

Submitted to Board of Revenue. If DCT satisfies then approval is given.

Fund activities started.

Idle is invested either at: 1. For employees loan 2. For secured investments as Treasury Bill

31

4.2.

Fixed Assets

4.3.

Accounts Receivable

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CHAPTER 5:

Audit Program & Procedures

5.1.

Audit Phases
The audit process is the sequence of all the activities pertaining to the completion

of an audit. In RBBl and Sanofi-aventis all the audit events are pretty much same because of the similarities in their organizational structure. This process can be divided into four phases as follows: A. Accepting the audit engagement B. Planning the audit C. Performing audit tests, and D. Reporting the findings.

5.1.1.

Accepting the Audit Engagement

The phase of accepting the audit engagement involves the following steps: 1. Clients information to be appointed as auditor(s) 2. Evaluate integrity of management 3. Identify special circumstance and unusual risks 4. Assess competence to perform audit 5. Evaluate independence 6. Determine ability to use due care 7. Prepare engagement latter.

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1. CLIENTS INFORMATION TO BE APPOINTED AS AUDITOR (S): The auditor has to receive the clients intimation to be appointed as auditor or auditors. Soliciting clients or professional work either directly or indirectly by circular, advertisement, personal communication, interview or by any other means will be treated as professional misconduct. [para 9 of schedule C, part-1 vide Bye-law 134 of the Bangladesh Chartered Accountants Bye-law, 2004].

2. EVALUATE INTEGRITY OF MANAGEMENT THROUGH : Communicating with predecessors auditor or review the communication made by the predecessor auditor. Review previous experience with existing client On the ground of code of ethics, the existing auditor should advise whether there is any professional reason thats why the proposed successor auditor should reject the proposal. Make inquires of other third parties

3. IDENTIFY SPECIAL CIRCUMSTANCE AND UNUSUAL RISKS : Assess prospective clients legal & financial stability. Evaluate entities audit ability. Audit ability is not complied if there is/are Poor or absent condition of accounting records. No or poor internal control system. Previous incidence of imposing restrictions to conduct any audit.

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4. ASSESS COMPETENCE TO PERFORM AUDIT: Identify the audit team- including the partners, seniors and staff assistants who will do the audit job. Consider the need for consultation and the use of specialists. Competence of auditing in a computer information system (CIS) environment. 5. EVALUATE INDEPENDENCE : Here main considerations include: Identify threats to independence. Evaluate whether these threats are clearly insignificant. In case of not clearly insignificant threats- identify and apply appropriate safeguards to eliminate or reduce the threats to an acceptable level. 6. DETERMINE ABILITY TO USE DUE CARE : Auditor should apply the required professional care throughout each level of the audit process. Important considerations in this case: Assess timing of appointment for having the opportunity to employ all the audit tests 7. PREPARE ENGAGEMENT LATTER: According to BSA 210, the objective of engagement letter is to avoid misunderstanding where principal contents are objective, management responsibility, scope of the audit, details of reporting of the audit, inherent limitations etc

35

The new edition of the "AICPA Audit and Accounting Manual" suggests key ingredients for engagement letters. Identification of the client Records retention policy Description of the services to be provided Staffing of the engagement Explanation of how fees and costs will be billed Description of client responsibilities Payment terms Designation of client contacts Consequences of non-payment Timing of the work Consequences deadlines Withdrawal and termination Requests for additional services Client signature Provisions to resolve potential ethical conflicts Any matter or terms unique to an engagement that are agreed upon in advance of rendering services Auditor may also include here arrangement regarding the planning of the audit, audit fees etc. of extending completion It is in the interest of both client and auditor that the auditor sends an engagement letter, preferably before the commencement of the engagement. [BSA-210, para-5] It documents and confirms the auditors acceptance of the appointment, the objective and scope of the audit, the extent of the auditor of the auditors responsibilities to the client and the form of any reports (para-5).

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5.1.2.

Planning the Audit

The phase of planning the audit procedure in the overall audit process involves the following steps: 1. Obtain understanding of clients business and industry 2. Evaluate managements use of going concern assumption in the preparation of F/S. 3. Perform analytical procedure 4. Make preliminary judgment about materiality level 5. Consider audit risk exposure 6. Obtain understanding of client internal control system (ICS) The auditor should plan the audit work so that the audit will be performed in an effective manner. [para-2, BSA-300] As per BSA 300, the auditor should develop and document an overall audit plan describing the expected scope and conduct of the audit. Matters to be considered by the auditor in developing the overall audit plan include the following: Knowledge of the business Understanding the Accounting and internal control Systems Risk and materiality Nature, timing and extent of procedures Co-ordination, direction, supervision and review Planning means

developing a general strategy and a detailed approach for the expected nature, timing and extent of the audit. The auditor plans to perform the audit in an efficient and timely manner. [para-3, BSA-300]

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1. OBTAIN UNDERSTANDING OF CLIENTS BUSINESS AND INDUSTRY : The auditor should obtain an understanding of the entity and its environment, sufficient to identify and assess the risks of material misstatement in financial statements whether due to fraud or error, and sufficient to design and perform further audit procedures Auditor can understand about clients business and industry by following way: a) Review prior years working papers: If the current audit is a continuing engagement, then prior years working paper may be reviewed again to understand the entitys activities in a better way. b) Review industry and business data: Information about the industry in which the client operates may be collected from various industry publications. To gather knowledge about the clients business, the auditor may- Review the memorandum of association and the article of association and various laws of the entity. - Read the minutes of the meetings of the Board of directors and the annual General Meeting (AGM) of the shareholders or any other extraordinary shareholders meeting to obtain information about such events as dividend announcements and shareholders approval of business reorganizations. - Analyze recent annual and interim financial statements, income tax returns, value added tax (VAT) returns, and other reports submitted to regulatory agencies. The information obtained should be documented by the auditor and retained in permanent file for future use.

38

c) Visit client operations: Auditor can visit the operating facilities and offices to

obtain knowledge about a new clients operating characteristics

d) Make inquiries of management: Inquiries of management are useful to

understand the recent business developments of the entity.

e) Determine existence of related parties: According to para-2 of BSA-550 the

auditor should collect sufficient audit evidence regarding the identification of related party and their transactions, whether it is material to effect the financial statement.

2. EVALUATE MANAGEMENT S USE OF GOING CONCERN ASSUMPTION :

The going concern assumption (GCA) concept is relevant to auditors because in many jurisdictions the GCA is implicit in the application and interpretation of accounting policies and, unless otherwise stated, this assumption is assumed in the preparation of the financial statements. (In broad terms, an entity is considered a "going concern" if it is able to pay its debts as and when it fall due.)

Where the GCA does apply, an auditor needs to satisfy him or herself that it is appropriate for management to prepare financial statements on the going concern basis. Therefore, when the auditor forms an overall opinion on the financial statements, the auditor considers the potential for going concern problems.

39

Matters that an auditor may consider include:

Financial indications, such as a deteriorating accounts payable ratio, a deteriorating current ratio, fixed term borrowings approaching maturity without any prospect of replacement financing being available.

Operating indications, including loss of key management without replacement, loss of a major market segment, correspondence from suppliers requesting more stringent credit terms such as COD.

Litigation, and in particular, whether there are any pending legal proceedings that could result in a judgment that may be incapable of being met.

In forming an opinion on the appropriateness of the GCA, the auditor considers events that may occur (or have occurred) in the 18 month period following the current balance date.

In order to form an opinion about the appropriateness of the GCA, auditors gather evidence using a combination of the following audit procedures:

Inspection of: correspondence files, minutes of directors' meetings and meetings of the audit committee, current management accounts, cash flow forecasts, submissions for capital expenditure.

Inquiry of senior management regarding future plans. Analytical procedures, especially ratio analysis. Management representation letter Legal representation letters

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3. PERFORM ANALYTICAL PROCEDURE: According to para-2, BSA-520 the auditor should apply analytical procedure at the planning and overall review stage of the audit. Analytical procedures are an important part of the audit process and consist of evaluations of financial information made by a study of plausible relationships among both financial and non-financial data. Analytical procedures range from simple comparisons to the use of complex models involving many relationships and elements of data. A basic premise underlying the application of analytical procedures is that plausible relationships among data may reasonably be expected to exist and continue in the absence of known conditions to the contrary. Particular conditions that can cause variations in these relationships include, for example, specific unusual transactions or events, accounting changes, business changes, random fluctuations, or misstatements. Analytical procedures are used for the following purposes: a) To assist the auditor in planning the nature, timing, and extent of other auditing procedures b) As a substantive test to obtain evidential matter about particular assertions related to account balances or classes of transactions c) As an overall review of the financial information in the final review stage of the audit

Analytical Procedure means the analysis of significant ratio and trends and relationship that are inconsistent with other relevant information or deviate from predicted amount. [para-3, BSA-520]

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4. MAKE PRELIMINARY JUDGMENT ABOUT MATERIALITY LEVEL: According to BSA 320 Audit Materiality, when planning the audit, the auditor considers what would make the financial statements materially misstated. The auditors assessment of materiality, related to specific account balances and classes of transactions, helps the auditor decide such questions as what items to examine and whatever to use sampling and analytical procedures. Materiality judgments involve both quantitative and qualitative considerations as follows: Quantitative Guidelines Qualitative Guidelines

These are based on numerical absolute These are related to the causes of amount and ratios such as for example: misstatements. A misstatement that is immaterial material. may be

5% to 10% of pre-tax net income (10% quantitatively for smaller income, 5% for larger qualitatively income) 1/2 % to 1% of gross revenues 1/2 % to 1% of total assets 1% of shareholders equity

Qualitatively

material misstatements may be as follows: A misstatement attributable to an irregularity by the client. A misstatement attributable to an illegal

A variable percentage based on the act by the client. greater of total assets or gross revenue. The auditor should be alert about the qualitatively material misstatement, but it ordinarily is not practical to design procedures to detect them.

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5. CONSIDER AUDIT RISK E XPOSURE : BSA 400 defines audit risk as "the risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated."

In theory, audit risk ranges anywhere from zero (0.0), where there is complete certainty of no material misstatement, to one (1.0), where there is complete certainty of a material misstatement. In practice, however, audit risk is always greater than zero. There is always some risk of material misstatement as it is not possible, (except for the audit of the simplest of financial statements), due to the limitations inherent in both accounting and auditing, to be absolutely certain a material misstatement will not exist.

Audit risk model The audit risk model is used primarily for planning purposes in deciding how much evidence to accumulate in each transaction cycle. It is usually stated as follows: Audit Risk Model: PDR = AAR / IR x CR

Where,

PDR = Planed detection risk

AAR= Acceptable audit risk

IR = Inherent risk

CR = Control risk

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Its important to notice that

IR, inherent risk, is the perceived level of risk that a material misstatement may occur in the client's unedited financial statements, in the absence of internal control procedures.

CR, control risk, is the perceived level of risk that a material misstatement in the client's unaudited financial statements will not be detected and corrected by the management's internal control procedures.

DR, detection risk, is the perceived level of risk that a material misstatement in the client's unaudited financial statements will not be detected by the auditor.

The product of inherent and control risk (i.e. IR x CR) is referred to as the risk of material misstatement. In practice, however, auditors evaluate risk components using terms such as low, moderate or high rather than using precise probabilities.

6. OBTAIN UNDERSTANDING OF CLIENT INTERNAL CONTROL SYSTEM (ICS): Internal control is the process designed and affected by those charged with governance, management, and other personnel to provide reasonable assurance about the achievement of the entitys objectives with regard to reliability of financial reporting, effectiveness and efficiency of operations and compliance with applicable laws and regulations.

According to Para 43 of BSA 315, ICS consists of the following components:

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a) Control environment: It includes functions and the attitudes, awareness and actions of those charged with governance and management concerning the entitys internal control and its importance in the entity. [Para 67, BSA 315] b) Risk assessment process: This process forms the basis for how management determines the risks to be managed. [Para 76, BSA 315] c) Information system: Information systems including the related business process, relevant to financial reporting and communications [Para 80, BSA 315] d) Monitoring the controls: Monitoring of controls is a process to assess the effectiveness of internal control performance over time. The actual audit process comes from planning. The nature, extent, and timing of planning vary with the size and complexity of the entity, experience with the entity and knowledge of the entitys business. In the planning section auditor will document the following maters in their working paper: Auditors understanding of the entitys business and its industry and environment, its accounting policies and practices, and its financial performance Auditors assessment of risks of material misstatement relevant to the audit, including error and fraud risks. Auditors audit strategy in response to these risks, and Auditors planned audit approach for significant accounts and disclosures.

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5.1.3.

Performing the Audit Tests

The third phase of the audit process is performing audit tests. As mentioned earlier, the auditors main responsibility is to express an independent opinion whether the financial statement are free from material misstatement. But this opinion should be backed by appropriate audit evidence. For collecting this audit evidence different audit test are performed. The phase of performing audit tests in the overall audit process involves the following steps: 1) Obtain evidential matter through audit tests. 2) Evaluate the evidence obtained for sufficiency and appropriateness and 3) Document the audit evidence in working papers.

1) OBTAIN EVIDENTIAL MATTER THROUGH AUDIT TESTS: With a view to obtaining evidential matter, following audit tests are performed: a) Tests of control: These are the procedures which test whether the client is complying with designed internal controls. Tests of control are performed to obtain audit evidence about the effectiveness of the: - Design of the accounting and internal control systems, that is, whether they are suitably designed to prevent or detect and correct material misstatements - Operation of the internal controls throughout the period - Inspection of documents - Inquiries about, and observation of, internal controls -Reperformance of internal controls.

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b) Substantive tests: Substantive tests are performed to obtain audit evidence to detect material misstatements in the financial statements. The following tests are performed in this stage: - Analytical procedure: Analytical procedures are used to assess the fairness of management assertions about financial statements. And it also consists the analysis of significant ratios and trends and there deviation from predictable amounts - Tests of details of transactions: Tests of details of transactions involve examining the evidential support for the individual debits and credits to an account and are done though vouching and tracing. - Tests of detail of balances: Tests of details of balances involve examining the evidential support for the ending balances directly.

2) EVALUATE THE EVIDENCE OBTAINED FOR SUFFICIENCY AND APPROPRIATENESS: The evidence collected by the auditor through different audit tests should evaluate before expressing any opinion about clients financial statements. The auditors have to verify whether the collected evidences are sufficient or not. Based on these evidences the audit opinion may be unqualified, qualified, adverse or disclaimer.

3) DOCUMENT THE AUDIT EVIDENCE IN WORKING PAPERS : Audit documentation is the written record of the basis for the auditor's conclusions that provides the support for the auditor's representations, whether those representations are contained in the auditor's report or otherwise. Audit documentation also facilitates the

47

planning, performance, and supervision of the engagement, and is the basis for the review of the quality of the work because it provides the reviewer with written documentation of the evidence supporting the auditor's significant conclusions. Among other things, audit documentation includes records of the planning and performance of the work, the procedures performed, evidence obtained, and conclusions reached by the auditor. Audit documentation also may be referred to as work papers or working papers. AQC follows the BSA-230 for documentation and U.S. firms follow the SAS-96. An accounting estimate is an approximation of a financial statement element, item, or account. Accounting estimates are often included in historical financial statements becausea) The measurement of some amounts or the valuation of some accounts is uncertain, pending the outcome of future events. b) Relevant data concerning events that have already occurred cannot be accumulated on a timely, cost-effective basis. Accounting estimates in historical financial statements measure the effects of past business transactions or events, or the present status of an asset or liability. Examples of accounting estimates include net realizable values of inventory and accounts receivable, property and casualty insurance loss reserves, revenues from contracts accounted for by the percentage-of-completion method, and pension and warranty expenses.

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5.1.4.

Reporting the Findings

The phase of reporting the findings in the overall audit process involves the following steps: 1. Compete the field work 2. Evaluate the findings

3. Communicate with client 4. Consider the post audit responsibilities 5. Form the final audit opinion

6. Issue the auditors report.

1) COMPLETE THE FIELD WORK: For the purpose of audit completion, first the field work of the audit is to be completed. In completing the field work, the auditor performs specific auditing procedures to obtain additional audit evidence. The procedures are as follows: a) Make subsequent events review: The term subsequent events is used to refer to both events occurring between period end and the date of the auditors report, and facts discovered after the date of the auditors report [para-2 BSA 560] The auditor should consider the effect of subsequent events on the financial statements and on the auditors report [para-2 BSA-560]

b) Read minutes of meetings: The minutes of meetings of shareholders, the board of directors (BOD) and its subcommittees (finance committee, audit committee, etc) may contain the matters that hate audit significance. The auditor has to ensure
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that the minutes during the relevant period under audit have been made available to him.

c) Obtain client representation letter: The auditor should obtain written representations from management on matters material to the financial statements when other sufficient appropriate audit evidence cannot reasonably be expected to exist. The possibility of misunderstandings between the auditor and management is reduced when oral representations are conformed by management in writing [para-4, BSA-580]

2) EVALUATE THE FINDINGS: Before expressing any audit opinion auditor have to evaluate the findings. Findings should evaluate because of following reasons: a) To determine the types of opinion to be expressed b) To determine whether the audit of financial statements has been conducted in due conformance with the applicable International Standards on auditing (ISA) adopted by the ICAB as Bangladesh Standards on auditing (BSA)

3) COMMUNICATE WITH THE CLIENT: Before disclosing the final report the auditor has to communicate with the audit committee and management. The communication with the audit committee generally involves the following: a) Communicate internal control systems matters: Though the audit period, auditor has identified different strength and weakness of the clients internal

50

control system. Before finalize the audit report, auditor should communicate those to the client.

b) Communicate matters pertaining to conduct of the audit: According to paragraph 11 of BSA 260, the auditor should consider audit matters of governance interest that arise from the audit of the financial statements and communicate them with governance. Ordinarily such matters include the following: The selection of, or changes in, significant accounting policies and practices that have, or could have, material effect on the entitys financial statements. Material uncertainties related to events and conditions that may cast significant doubt on the entitys financial statements.

c) Prepare management letter: The observations of the auditor during the course of the audit regarding many facets of the business organization and operations are usually informed to the management though a latter called management latter.

4) CONSIDER THE POST AUDIT RESPONSIBILITIES : After completing the audit, the auditor should consider the following post audit responsibilities: a) Subsequent events occurring between the date of the auditors report and the actual date of issuance of the auditors report: It is the management responsibility to inform auditor if any events occur which may effect materially to financial statement from the date of audit report to the date of financial statements

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are issued [para-8, BSA-560]. When, after the date of the auditors report but before the financial statements are issued, the auditor becomes aware of a fact which may materially affect the financial statements, the auditor should consider whether the financial statements need amendment, should discuss the matter with management, and should take the action appropriate in the circumstances [para-9, BSA-560]

b) Discovery of facts existing at reporting date: If the auditor is aware of such facts and if the facts may have affected the audit report that was prepared, the auditor is required to determine the fact, the client should revise the financial statements and the auditor should issue a revised report.

c) Discovery of omitted procedure: After the date of audit report, the auditor may conclude that one or more audit procedures considered necessary in the circumstances was omitted from the audit. But it is not obligatory to disclose by the auditor.

d) Form the final audit opinion: At this stage, the auditor should review and assess the conclusions drawn from the audit evidence obtained as the basis for the expression of an opinion on the financial statements [para-2 of BSA-700]. This review and assessment involves considering whether the financial statements have been prepared in accordance with an acceptable financial reporting framework being either Bangladesh Accounting standards (BASs) [as adopted by the ICAB from the International Accounting standards (IASs)] or relevant national

52

standards or practices. It may also be necessary to consider whether the financial statements comply with statutory requirements [para-3 of BSA-700] e) Issue the auditors report: As per paragraph 5 of BSA 700, the auditor should make the final report that includes the following basic elements, ordinarily in the following layout:
- Title - Addressee - Opening or introductory paragraph - Scope paragraph (describing the nature of an audit) - Opinion paragraph containing - Date of the report - Auditors address - Auditors signature

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5.2.

Fraud

As per ISA and BSA 240 "The Auditors Responsibilities Relating to Fraud in an Audit of Financial Statements" the term fraud refers to an intentional act by one or more individuals among managements, those charged with governance, employees, or third parties, involving the use of deception to obtain an unjust or illegal advantage.

The primary objective of the audit of the financial statements of an entity is to form (and communicate to the financial statements users) an opinion on management's assertions inherent in the financial statements. This implies that the audit objective includes the detection of misstatements in management's assertions, irrespective of whether or not the misstatements arise from fraud. Auditors argue, however, that bearing in mind it only examine a selection of transactions, and that perpetrators of fraud often conceal their fraud, it is not possible to offer reasonable assurance that an audit will detect misstatements arising from fraud. This argument is reinforced by the facts that:

Fraud often involves the use of sophisticated techniques, such as printing bogus suppliers' invoices and other stationery.

An employee involved in fraud will often make fraudulent representations to the auditor.

The fraud may involve collusion between two or more persons. The fraud may be perpetrated by a member of management who, unbeknown to the auditor, overrides internal control procedures.

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Nevertheless, auditors identify and assess the risks of material misstatement due to fraud when planning an audit. To do this, auditors obtain a detailed understanding of the nature of the entity's business, the reporting and supervisory responsibilities within the organization, and the types of fraudulent misstatements that are likely to occur.

Whether or not an auditor is responsible for detecting a specific fraud depends on the circumstances. On the one hand, it depends on the complexity of the fraud (the greater the complexity, the lesser the responsibility) and on the other it depends on the adequacy of the auditor's planning, performance and judgment (the lesser the adequacy, the greater the responsibility). In many jurisdictions, the final decision rests with the judiciary.

Well known types of fraud include lapping and kiting. Less publicized, but still a common fraud is where a senior executive of an entity, whose remuneration (or even continued employment) may be based on the financial results of the entity, misstates the value of an accounting estimate in order to increase (or sometimes decrease or change the composition of) the net income of the entity. This type of activity is an example of what is sometimes euphemistically referred to as earnings management. For example, the executive may overstate the value of an asset (e.g. a stockpile of raw materials where the value is based on the estimated volume), or understate the value of a liability, particularly provisions for expenses incurred but not paid. Auditors often find this type of fraud particularly difficult to detect, especially where there is collusion between the executive and another party, including another employee. In such circumstances auditors consider accounting estimates with a degree of professional skepticism: the greater the risk of material misstatement, the greater the degree of professional skepticism.

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Various studies have shown that fraud usually involves cash at bank (diverted receipts or fictitious disbursements), inventory (misappropriation or deliberate misstatement, such as that referred to above) and accounts receivable (deliberate misstatement).

5.3.

Audit Sampling

The auditor often is aware of account balances and transactions that may be more likely to contain misstatements. 2 He considers this knowledge in planning his procedures, including audit sampling. The auditor usually will have no special knowledge about other account balances and transactions that, in his judgment, will need to be tested to fulfill his audit objectives. Audit sampling is especially useful in these cases. As per BSA 530 Audit Sampling(sampling ) involves the application of audit procedures to less than 100% of items within an account balances or class of transactions such that all sampling units have a chance of selection. This will enable the auditor to obtain and evaluate audit evidence about some characteristic of the items selected in order to form or assist in forming a conclusion concerning the population from which the sample is drawn. SAS 39 (AU 350) also follows the same procedures. The third standard of field work states, Sufficient competent evidential matter is to be obtained through inspection, observation, inquiries, and confirmations to afford a reasonable basis for an opinion regarding the financial statements under audit. Either approach to audit sampling, when properly applied, can provide sufficient evidential matter.

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5.4.

Audit Evidence

As per BSA 540, the auditor should obtain sufficient appropriate audit evidence as to whether an accounting estimate is reasonable in the circumstances and when required, is appropriately disclosed. Montgomerys Auditing was the primary source for auditors about the purpose and content of audit work papers until Statement on Auditing Procedure (SAP) 38 was issued in 1967, 55 years later. But from 1967 until now, authoritative auditing standards have provided guidance primarily for the ownership and custody of auditors work papers, with only very broad guidelines as to the content and objectives of the work papers.

Statement on Auditing Standards (SAS) 41, issued in 1982, changed very little from SAP 38. Like its predecessor, SAS 41 reestablished that auditors should have work papers, the form and content of which should follow its broad guidelines and meet the circumstances of a particular engagement. The work papers would constitute the principal record of the work done and conclusions reached, and provide the principal support for auditors reports. It provided primarily that the work papers should document the following:

The work has been adequately planned and supervised; Internal control has been appropriately studied and evaluated; and The evidence obtained and procedures performed afford a reasonable basis for an opinion.

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At the time of SAS 41s issuance, there were very few explicit requirements elsewhere in professional standards to document specific matters. These requirements consisted principally of an audit program, a legal letter, a client representation letter, and a notation that material internal control weaknesses were communicated orally if not reported in writing.

As per BSA 540, the auditor should adopt one or a combination of the following approaches in the audit of an accounting estimate: a) Review and test the process used by management to develop the estimate; b) Use an independent estimate for comparison with that prepared by management; c) Review subsequent events which confirm the estimate made. As per BSA 550 the auditor should perform audit procedures designed to obtain sufficient appropriate audit evidence regarding the identification and disclosure by management of related parties and the effect of related party transactions that are material to the financial statements. Audit procedures concerning related parties--- Prior year work paper review; Entitys procedures review; Inquiry of Directors; Review of principal shareholders; Review of meeting, minutes; Review of income tax return.

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5.5.

External Confirmation

In the audit we need external confirmations in relation to account balances and their components. For these we send confirmations letter to debtors of the entity, to bank for bank balances and other information and lawyers of the clients. As per ISA (UK and Ireland) and BSA 505 external confirmations may be used in following: Bank balances and other information from bankers. Accounts receivable balances. Stocks held by third parties at bonded warehouses for processing or on consignment. Property title deeds held by lawyers or financiers for safe custody or as security. Investments purchased from stockbrokers but not delivered at the balance sheet date. Loans from lenders. Accounts payable balances.

As per SAS 12 (AU 337) With respect to litigation, claims, and assessments, the independent auditor should obtain evidential matter relevant to the following factors: a) The existence of a condition, situation, or set of circumstances indicating an uncertainty as to the possible loss to an entity arising from litigation, claims, and assessments. b) The period in which the underlying cause for legal action occurred. c) The degree of probability of an unfavorable outcome. d) The amount or range of potential loss.
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As per SAS 67 (AU 330) Confirmation is the process of obtaining and evaluating a direct communication from a third party in response to a request for information about a particular item affecting financial statement assertions. The process includes Selecting items for which confirmations are to be requested. Designing the confirmation request. Communicating the confirmation request to the appropriate third party. Obtaining the response from the third party. Evaluating the information, or lack thereof, provided by the third party about the audit objectives, including the reliability of that information.

5.6.

Quality Control for Audit

It is Quality control policies and procedures are implemented at both the level of the audit firm and on individual audits. A system of quality control is broadly defined as a process to provide the firm with reasonable assurance that its personnel comply with applicable professional standards and the firms standards of quality The AICPA Principles of Professional Conduct provide, among other things, that members should practice in firms that have in place internal quality-control procedures to ensure that services are competently delivered and adequately supervised. As per SAS 25 (AU 161), a firm of independent auditors has a responsibility to adopt a system of quality control in conducting an audit practice. Thus, a firm should establish quality control policies and procedures to provide it with reasonable assurance that its

60

personnel comply with generally accepted auditing standards in its audit engagements. The nature and extent of a firms quality control policies and procedures depend on factors such as its size, the degree of operating autonomy allowed its personnel and its practice offices, the nature of its practice, its organization, and appropriate cost-benefit considerations.

As per quality control section 20: The quality control policies and procedures applicable to a firms accounting and auditing practice should encompass the following elements: a) Independence, Integrity, and Objectivity b) Personnel Management c) Acceptance and Continuance of Clients and Engagements d) Engagement Performance e) Monitoring

As per BSA 220 the audit firm should implement quality control policies and procedures by maintaining the following procedures Professional requirement Skills and competence Assignment of work Delegation Consultation Acceptance and retention of clients Monitoring
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5.7.

Confidentiality

Auditors do not disclose any confidential information except where, after consultation with the RMP or legal department (if any, or external legal counsel) as necessary, it is determined that: There is express, written authorization from the client obtained prior to any disclosure, unless seeking such authorization is prevented or otherwise excused by law (for example, in the case of a governmental money laundering investigation); There is a professional right or duty to disclose certain information (for example, to comply with technical standards and ethics requirements; to protect the professional interests of PWC-AQC (Audit firms) in legal proceedings; to comply with a professional quality regulatory or peer review; to respond to an inquiry or investigation by a professional or regulatory body or in cases of known or suspected illegal acts); or Disclosure is required by law, regulation or judicial proceeding (for example, production of documents or other provision of testimonial evidence in the course of legal proceedings pursuant to subpoena or court order; or disclosure to the appropriate public authorities of infringements of the law that come to light).

For U.S. firms Rule 301 of the AICPA Code of Professional Conduct states: A member in public practice shall not disclose any confidential client information without the specific consent of the client

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The AICPA Code of Professional Conduct as it relates to confidential client information does not: restrict consultation within the firm on professional matters; prohibit disclosure of confidential client information upon the request of the client; affect compliance in certain states with a validly issued and enforceable subpoena or summons prohibit review of a members professional practice under AICPA or state CPA society authorization; Preclude a member from initiating a complaint with or responding to an inquiry made by a recognized investigative or disciplinary body.

Firm professionals are required to affirm their understanding of the AICPA rules governing the treatment of confidential client information in writing upon commencement of employment with the firm. This affirmation is updated annually thereafter, and upon promotion to the management group.

For PWC-AQC follow the guidance contained in Section 4 of the International Federation of Accountants ("IFAC") Code of Ethics for Professional Accountants ("IFAC Code"). Section 4 of the IFAC Code sets out a conceptual approach to identifying and managing confidentiality issues. PWC personnel and firms follow guidance set forth therein and also the supplemental provisions outlined below that are applicable to partners and professional staff. Policies and guidance that are substantially repeated from the IFAC Code are identified by their corresponding paragraph numbers.

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CHAPTER 6:

Statistical Analysis

6.1.

Research

A. Qasem & Co. has successfully provided various audit and financial services since 1953. Time to time, it has updated and modernized its audit program and procedures. In the following section a statistical analysis has been described explaining- whether the audit program performed by A. Qasem & Co. is effective for its client companies or not.

6.1.1.

Exploratory Research

An in-depth interview with Ms. Akhter Sanjida Kasem FCMA, FCA, acting partner of A. Qasem & Co. was carried out in order to gain some prior knowledge on the factors the are involved in evaluating the effectiveness of the audit program. Discussion with the officials of Reckitt Benckiser Bangladesh Limited and Sanofi-aventis was also done. The purpose of the interview and discussions was to determine The key factors that a client company considers while facing the audit program How client companies react to each of these factors. How A. Qasem & Co. treats these factors

From their expert opinions, the following was key factors and issues were identified: 1. Steps of the Audit Program: One of the most important factor is what are the steps that come together to develop the whole audit program. Different accountancy firms follow different

64

steps and have different procedures. Client companies emphasizes on these steps significantly as they need to comply with these steps and respond accordingly.

2. Time required for the Audit Program: Time is a very crucial factor for every client company as it is always required to have the audit report within a certain period. For example, it is very important for companies to publish the annual report timely to their investors or shareholders. Moreover, companies require audit report timely for making the internal decisions. Thats why accountancy firms are always assigned with a deadline within which they need to submit the audit report. Their efficiency is measured based on how they meet their deadline.

3. Cost of the Audit Program: Another important factor is whether the audit program is feasible enough for the client company. Normally the audit fee is set based on the nature of the company, measurements of all the accounts, workloads etc. The audit fee is also subjected to negotiation between the accountancy firm and client company. Now, the cost of the audit program must be balanced with the outcome otherwise this service would be of no value. Companys preferences on different accountancy firms largely depends on this factor

4. Quality of the Auditors: Auditors are the main drivers of an audit program. They are mainly responsible for providing a quality audit report. Though the procedures and steps are set from

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the accountancy firm but the success of the audit program mainly depends on the quality of the auditors. Thats why the credibility of an accountancy firm is measured by their auditors. Client companies also give importance on this credibility factor greatly as they dont value all the accountancy firms audit report on same scale.

6.1.2.

Research Methodology & Goals

A questionnaire survey of was conducted as part of the primary data collection. The questionnaire was created based on the factors identified during the exploratory research. It was then distributed among the relevant respondents. The respondents were asked to answer all the questions truthfully and to the best of their knowledge. The answers were later compiled to carry out the final analysis. The purpose of the questionnaire survey was three-folds: 1. To find out how the respondents complies each factor with A. Qasem & Co. Respondents were directly asked how they measure each factor on a given range. The range was developed on the scale of five measurements. 2. To find out whether A. Qasem & Co. performs sufficiently regarding each factors according to the respondents. Respondents were directly asked whether they think the performance of A. Qasem & Co. is enough or not. 3. Finally, an open related question was asked to find out the overall opinion of respondents about the audit program of A. Qasem & Co.

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6.1.3.

Research Design
Analyze data collected using SPSS software. Test the Hypothesis

Conduct an in-depth interview to identify the key variable related to the research issue

Design Questionnaire based on factors identified through exploratory research

Analyze the results of the SPSS processing. Interpret the findings. Concluded and recommend

Conduct questionnaire survey to collect primary data. Gather and organize data collected.

Present a summary of the entire research in the form of a report

The research design followed a framework as shown in the above diagram. This was appropriate to the scenario in question which was regarding the evaluation of the audit program of A. Qasem & Co. The results from the primary data would be compiled to carry out a causal research.

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6.1.4.

Data Collection Method

Data was collected on the basis of distributing the questionnaire to each of the individual respondents personally.

The interviewer was present while the questionnaires were filled out and assisted when they encountered any difficulties.

The entire process of filling out the survey questionnaire was supervised in order to ensure that the respondents were answering sincerely.

6.1.5.

Measurement Scales

The questionnaire designed included both open and closed-ended questions. The closed ended questions were of the following types of questions: Frequency- Determination Determinant-choice Simple-dichotomy

The Category distinction used for the purpose of the data analysis involved a determinantchoice question that was used to determine how effective the audit program is according to the respondents.

6.1.6.

Design of the Recording Forms

The questionnaires were introduced immediately after the interviewer met each of the respondents. The respondents were very briefly informed of the survey and its purpose,

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but not in a very detailed fashion. Since the purpose of the study was to gain a generalized opinion, the quick presentation of the questionnaires immediately after meeting with the respondents ensured that the questions would be answered in the most sincere way possible, without any premeditation on behalf of the respondents. Respondents were requested to answer truthfully and without bias. The questionnaire survey was designed with the purpose of tackling four main factors. The sequence of the issues was designed in a way that enabled the respondents to firstly weigh the key factors for themselves. The survey length was 3 pages and included 13 questions. The survey took about 10 to 15 minutes to complete for each of the respondents. The questions were simple, and to the point and worded simply, so that the necessary data could be generated. The sequence of issues began with General Information to obtain the age and gender of the respondents. Then comes the designation of the respondents. Then a direct question was asked about which factor is the most important regarding an audit program. After these questions, 2 questions were asked regarding each factor. First one is how the respondents measure the performance of A. Qasem & Co. regarding that factor and second one is whether this performance is sufficient enough for the audit purpose. Finally, an open related question was asked to find out the overall opinion about the audit program of A. Qasem & Co.

6.1.7.

Response Incentives

No form of tangible response incentive was provided to the respondents and therefore no cost was occurred in providing the statistical analysis. Respondents were guaranteed confidentiality as a form of intangible incentive.
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6.1.8.

Sampling Method

The sampling frame used for the survey was a single type. It included all the 40 respondents chosen for the questionnaire survey. Respondents were selected with the use of both random sampling procedure and selective procedure. Random procedure was followed for the articled students and other officials of A. Qasem & Co. Selective procedure was followed for the officials of Reckitt Benckiser Bangladesh Ltd. and Sanofiaventis Bangladesh Ltd. There were no refusals during the survey process.

6.1.9.

Editing and Cleaning Data

The survey was done being making sure of that none of the questions were unanswered. And the respondents were also helped in understanding the questions. As a result all the questions were answered and no extra coding or editing needed to be done.

6.1.10.

Coding Data

The survey was done being Most of the questions in the questionnaire required respondents to provide nominal answers. Most of the questions were MCQ. So all MCQ type of questions were assigned a numerical value from 1, 2, 3 etc. and the question with only yes and no answers were assigned 1 and 2 for yes and no respectively. The open ended question wasnt coded as there were many comments about the audit program of A. Qasem & Co.

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6.1.11.

Data Entry

The data was analyzed using the computer software SPSS 12.00. In order to analyze data using this software it is very important that data was entered into the system very accurately and cautiously. For running SPSS, data is very important. Without proper data entry no one can use the software as wrong data will lead us to a wrong outcome. After starting the software, at the bottom left side there is the data view and variable view windows. Space provided for name, the desired variable name was typed. The name cannot be more than 8 characters.

After that line 2 of the name column was clicked, on the next variable column and the Gender was typed. Then the codes 1 and 2 were used to represent males and females respectively. There is no need to use decimal values for this variable. Then by clicking on

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the label, a label for the variable was provided. In the field for value, 1 was typed and in the field for label female was typed into the program. Then in the same way create the label of male for a value 2.

In this way, all the option from the questionnaire were typed that the respondents choose according to the value that we use. By doing this it was possible to enter the option into the system where the surveys findings could be analyzed in term of statistical analysis and this is of course extremely important for any marketing research programs. Coding the non-numeric data into numeric form is not only important but it very useful to analyze the data in a form which is measurable and can be compared with other data and do cross tabulation.

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6.2.

Data Summarization

The purpose of the survey is to analyze how effective the audit program of A. Qasem & Co. is for the client companies. To analyze this properly and more effectively it is always better to use several methods and tools. Thats why, the following methods were used:

FREQUENCY AND CHARTS: Frequency and chart is one of the most wide spread ways of summarizing a set of data. We have used the frequency to make the charts and from the charts we have seen the answers of the respondents and answered them accordingly.

CROSS TABULATION : Cross tabulation method enables us to analyze the data from various perspectives. This tool helps us to relate the different variables and compare and contrast them in orderly fashion which of course helps to understand the variable from different point of view.

CHI SQUARE TEST: Chi Square test help to test the significance in the analysis of frequency distribution. Accordingly categorical data on variable or dichotomous may be statistically analyzed. Calculation of the Chi Square allowed us to find out whether the disparity between the observed frequency distribution and the expected distribution could be recognized to sampling variations.

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6.3.

Data Analysis Methods

Data analysis is an important part of any survey research. And the methods to analyze the data are also very critical as the entire result depends on the methods. So data analysis is the most important part of the survey. A set of data was collected that must now be turned into the actionable information. The process by which data is analyzed can lead to variety of alternative courses of actions. Any fault in the analysis can lead to costly decision don the road, so extreme caution and careful review must be followed throughout the process. Any negligence during analysis can lead to disaster. To analyze data some statistical tools were used and terms like- mean, standard deviation, chi-square table etc. Graphical analysis is a very useful tool to understand the broader picture of the data and of course it is very easy to understand. Graphical analysis simply means presenting data in a variety of visual formats that make it easy to see patterns and identify differences among the result set. Bar diagrams, histograms and pie chart were also used in the analysis. This data analysis was based on quantitative way the primary data were collected through survey questionnaires. And all the questionnaires were filled up by the respondents each of the questions was coded along with the variables in SPSS. This database then became the foundation of additional analysis. By the help of the data sheets it was possible to analyze them using various methods like frequency percentage and cross tabulation.

6.4.

Survey Pretest
Sometimes it is very difficult to go for a full length survey and then find the

lacking of the survey due to time constrains and cost associated with the massive survey. So researchers go for a relatively small scale survey to get some idea about the true

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populations feedback. In order to find out the fundamental problems in the survey design the process of pretest was done. The pretest was done in two steps. In first step of pretest the questionnaire was screened with the course instructor. In the second stage a trial run among the few respondents was done. When honorable instructor screened the questions he advised to adjust a lot of questions in order to make it look more professional and to find out the vague response provided by the respondents. And when a trial was done on the respondents some flaws were in the questionnaire which were later corrected.

6.5.

Ethical Consideration
It was made sure that the respondents were surveyed individually and of no pressure It was made sure that the data were not manipulated to prove the hypothesis The personal information of the respondents were never disclosed The respondents were felt comfortable while conducting the survey No name or address or telephone number were asked in the questionnaire to keep privacy of the respondents It was made sure that the data are kept confidential The responded were informed about the purpose of the research as it is their right to be informed The research was tried to represent as accurately as possible It was tried to maintained high standards with accurate data. No manipulation, misrepresentation or intentional methods were taken

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6.6.

Data Analysis

GRAPHICAL ANALYSIS:
1. Most Important Factor:

Respondents
Others Quality of the Auditors Cost of the Audit program Time required for the Audit program Steps of the Audit program 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% Respondents

According to this bar chart, 50 % of the respondents think that Quality of the Auditors is the most important factor in an Audit Program. Where, 20 % of the respondents think that Cost of the Audit Program is the most important factor in an Audit Program. Another 20 % of the respondents think that Time required for the Audit Program is the most important factor in an Audit Program. Only 10 % of the respondents think that Steps of the Audit Program is the most important factor in an Audit Program. No respondent think there is any other factor important for the audit program. So, according to most of the respondents, the most important factor in audit program is Quality of the Auditors.

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2. Steps of the Audit Program:

Not Good 0% Normal 25%

Very Bad 0% Excelent 15%

Better than others 60%

According to this bar chart, 60 % of the respondents think that Steps of the Audit Program of A. Qasem & Co. is better than others. Where, 25 % of the respondents think that the steps of the audit program are normal. Another 15 % of the respondents think that the steps of the audit program are excellent. No respondent think that these steps are not good or very bad. So, according to most of the respondents, the steps of the audit program are better than others.

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3. Evaluation of A. Qasem & Co. regarding Steps:

120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% Yes No Series1

All the respondents agreed that the steps of A. Qasem & Co. are effective enough to serve the audit purpose. So, we can summary that most of the respondents think that the steps conducted by A. Qasem & Co. are better than others and sufficient enough to serve the audit purpose.

4. Time required for the Audit Program:

70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

Too Short Not that much short Average Not that much long Too Long

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According to this bar chart, 67.5 % of the respondents think that Time required for the Audit Program by A. Qasem & Co. is average. Where, 22.5 % of the respondents think that it is not that much long. Another 10 % of the respondents think that it is not that much short. No respondent think that the time is too short or too long. So, according to most of the respondents, the time required for the audit program is average.

5. Evaluation of A. Qasem & Co. regarding Time:

No Series1

Yes

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

All the respondents agreed that the steps of A. Qasem & Co. use sufficient time for the audit purpose. So, we can summary that most of the respondents think that the time required by A. Qasem & Co. is average and sufficient enough to serve the audit purpose.

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6. Cost of the Audit Program:

60.0% 40.0% 20.0% 0.0% Very Cost Effective Not that much cost effective Average

Not that much costly

Very costly

According to this bar chart, 57.5 % of the respondents think that Cost of the Audit Program of A. Qasem & Co. is average. Where, 27.5 % of the respondents think that it is not that much costly. Another 15 % of the respondents think that it is not that much cost effective. No respondent think that it is very cost effective or very costly. So, according to most of the respondents, the cost of the audit program is average.

7. Evaluation of A. Qasem & Co. regarding Cost:

Yes No

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Here, 92.5% respondents said that agreed that the cost charged by A. Qasem & Co. justifies their audit service. Where, 7.5% respondents disagreed with it. So, we can summary that most of the respondents think that the cost charged by A. Qasem & Co. is average and justifies their audit service.

8. Quality of Auditors:

Excelent

Better than others

Normal

Not Good

Very Bad

Very Bad Not Good Normal Better than others Excelent

0.0% 0.0% 17.5% 70.0% 12.5%

According to this bar chart, 70 % of the respondents think that the quality of auditors of A. Qasem & Co. is better than others. Where, 17.5 % of the respondents think that it is normal. Another 12.5 % of the respondents think that it is excelent. No respondent think that it is very bad or not good. So, according to most of the respondents, the quality of the auditors of A. Qasem & Co. is better than others.

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9. Evaluation of A. Qasem & Co. regarding Quality:

100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Yes No

Series1

All the respondents agreed that the auditors of A. Qasem & Co. are qualified enough for the audit purpose. So, we can summary that most of the respondents think that the quality of the auditors of A. Qasem & Co. is betters than others and they are qualified enough to conduct the audit program.

Interpretation
Now, most of the respondents think that quality of auditors is the main driving factor in evaluating audit program. And, according to most of them, the quality of auditors of A. Qasem & Co. is better than other chartered accountancy firm and the auditors are qualified enough to conduct the audit program. Moreover, A. Qasem & Co. had positive ratings in almost all other factors. So, from the analysis of the graphical charts, the audit procedure of A. Qasem & Co. is proved to be effective for the client companies.

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CHI SQUARE TEST:

Respondents Preference vs. AQCs Performance regarding Steps

Null Hypothesis (H0): Respondents preference does not have any association with AQCs performance regarding steps. Alternative Hypothesis (HA): Respondents preference does have association with AQCs performance regarding steps. Cross Tab
Steps of the Audit Program 1 10.0% 2 8.3% 1 16.7% 4 10.0% Impotance of Factors Time required for Cost of the the Audit Audit program Program 1 2 10.0% 7 29.2% 0 .0% 8 20.0% 20.0% 5 20.8% 1 16.7% 8 20.0% Quality of the Auditots 6 60.0% 10 41.7% 4 66.7% 20 50.0%

Steps of audit program

Normal

Better than others

Excelent

Total

Count % within Steps of audit program Count % within Steps of audit program Count % within Steps of audit program Count % within Steps of audit program

Total 10 100.0% 24 100.0% 6 100.0% 40 100.0%

As p-value is greater than the .025, we reject the null hypothesis. So, there is some association between respondents preference and AQCs performance regarding steps.
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Respondents Preference vs. AQCs Performance regarding Time

Null Hypothesis (H0): Respondents preference does not have any association with AQCs performance regarding Time. Alternative Hypothesis (HA): Respondents preference does have association with AQCs performance regarding Time.

As p-value is greater than the .025, we reject the null hypothesis. So, there is some association between respondents preference with AQCs performance regarding time.

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Respondents Preference vs. AQCs Performance regarding Cost

Null Hypothesis (H0): Respondents preference does not have any association with AQCs performance regarding Cost. Alternative Hypothesis (HA): Respondents preference does have association with AQCs performance regarding Cost.

As p-value is greater than the .025, we reject the null hypothesis. So, there is some association between respondents preference and AQCs performance regarding cost.

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Respondents Preference vs. AQCs Performance regarding Quality:

Null Hypothesis (H0): Respondents preference does not have any association with AQCs performance regarding Quality. Alternative Hypothesis (HA): Respondents preference does have association with AQCs performance regarding Quality.

As p-value is greater than the .025, we reject the null hypothesis. So, there is some association between respondents preference and AQCs performance regarding Quality.

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REGRESSION :

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The R of the model Suggest that there is 19.7% match with the depended with the independent variable. Which suggest 19.7% change in made due to change in the dependent variables. But still it is not the perfect model for our analysis because we got 27.6% error and beside it the sample size is rather for regression analysis.
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6.7.

Findings
program is the quality of the auditors. We can also find out that A. Qasem & Co. have quality auditors better than other accountancy firms and it has positive impact in all other factors.

1. From the charts and graphs we can see that the most important factor in audit

2. From cross tabulation and chi square test, we can see that respondents preferences on the importance of factors have some association with all four factors- steps, time, cost and quality. 3. Though the regression analysis doesnt support the model but it is because it has large error term the sample size is comparatively small for regression analysis. So, in summary we can say that, the audit procedure of A. Qasem & Co. is statistically proved to be effective for the client companies.

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CHAPTER 7:

Conclusion

Auditors play a vital role for a country. Auditors responsibility to shareholders in particular and stakeholders in general is really important. Auditor should always keep in 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. After getting full affiliation of PWC, A. Qasem & Co. (AQC) has also to follow the PWC guidelines. There are also representative firms of big four audit firms in Bangladesh as well as many multinational companies operate in Bangladesh. It requires quality audit for all the related parties. So in this competitive market, audit firms tend to increase their quality to international level to hold clients.

I wish, despite of my limitations, this experience of sharing work with such experienced personnel would help me a lot for my professional career. There are numerous scopes for research on this issue such as the structure of audit process, compliance and comparison of audit standards in local companies and in multinational companies, improvement of the audit procedure. My report would be justified if the report could help for the further studies on auditing.

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Refferances
Applegute, D. (2004) The U.S. corporate audit function: Despite fundamental similarities between external and internal auditing, several differences separate the two professionals, working paper.WWW.findarticle.com Arens, A.A., and J. K.Loebbecke.2000.Auditing: an integrated approach (8th ed.), New Jersey:Prentice-Hall. Bazerman, M.H., Loewenstein, G., and Moore, D.A. (2002), Why Good Accountants Do Bad Audits, Harvard Business Review, Nov. pp 9598. Bazerman, M.H., Morgan, K.P. and Loewenstein, G.F. (1997), The impossibility of auditor independence, Sloan Management Review, Summer, Issue, 38:4. Bhattacharjee, S., Moreno, K., and Yardley, J. (2005) Auditors as Underwriters: An Alternative Framework, International Journal of Auditing, Vol. 9, No. 1, pp. 1-19, March 2005 Caplan, D. and Kirschenheiter, M. (2002), A Model of Auditing Under BrightLine Accounting Standards Garrison, M.J., and J.D. Hansen. 1999. "Using The Engagement Letter To Limit Auditors' Professional Liability Exposure." The Ohio CPA Journal (JulySeptember) Vol. 58, No. 3, pp. 59-62. Hayward, J. (2003), Thinking not ticking: Bringing competition to the public interest audit, Centre for the Study of Financial Innovation (CSFI), London. IFAC (2004), Handbook of International and Assurance and Ethics

Pronouncement, January 01, 2004 www.reckittbenckiser.com www.Sanofi-Aventis.com www.google.com and Annual report of RBBL and Saofi Aventis and journal

of the ICMAB and ICAB accordingly.

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Appendix

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Appendix- A
APPENDIX A.1: AUDIT ENGAGEMENT LETTER Chairman of the Board of Directors, XYZ Industries 24 Lakeside View, Gulshan, Dhaka.

As you are aware, at the last annual general meeting of the shareholders of XYZ Industries, this firm was appointed to audit the financial statements of the company for the year ended December 31, 20x5. This letter explains our understanding of the scope and objectives of the audit engagement as well as the method of determination of our fees. We would appreciate your acknowledgement that this is also the understanding of the Board of Directors.

We will conduct the audit in accordance with BSA (Adoptedftonz IS.9). The objective of our audit is to form an opinion as to whether the financial statements are, in all material respects, presented fairly and in accordance with BAS (IAS) and other regulations and to communicate this opinion to your shareholders.

Please note that the purpose of the audit is not to detect instances of fraud or to report on the adequacy of the company's accounting information system and related control procedures. Neither is the purpose of the audit to provide a warning as to the likelihood of business failure. However, if, during the course of our audit, we become aware of any fraud or significant weaknesses in either the information or operating systems of the company, we will notify you accordingly.

Please also note that we are not responsible for the preparation of the financial statements. If we were to be responsible for their preparation, we would not be able to provide an independent opinion on their presentation. The responsibility for the preparation of the
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financial statements rests with the management of the company. In fact, prior to issuing our audit opinion, we will be requesting the Board of Directors to approve the financial statements. In this regard, the financial statements comprise the balance sheet as at December 31, 20x5, the statement of income and expenditure for that year and the explanatory notes attached to those accounting statements.

In forming our opinion, we will not examine all transactions relating to the financial statements. To do so would be prohibitively costly. Instead, and in accordance with appropriate auditing standards, we will form our opinion based on both an examination of a selection of representative transactions and an evaluation of accounting policies and information derived there-from. As a result, and bearing in mind other limitations (of the audit, internal control procedures and accounting information generally), our audit will provide less than absolute assurance that the financial statements are free of material misstatement.

We recognize that the company's officers and employees are generally fully occupied attending to their own duties. However, in order for us to conduct our audit effectively, we will need to make inquiries to, and receive representations from, some of the company's officers and employees as well as a number of third parties with whom XYZ Industries has dealings. We intend to carry out this work with as little disruption as is possible. In addition, we will require access to any records, accounting or otherwise, that we consider may be relevant to the formation of our opinion on the financial statements.

Our fee for the audit will be based on the actual time spent by this firm (in planning the audit, and in gathering and evaluating the necessary evidence we need to form an opinion on the financial statements), plus out-of-pocket costs. We attach a schedule setting out the total estimated fee and the dates each installment is payable. This estimate is based on our audit staff not encountering any unforeseen problems. If we become aware of any unforeseen problems or other matters that could alter this estimate, we will immediately
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notify you to explain the situation and hopefully resolve any problems.

We trust this letter clearly sets out the scope and objectives of our audit of the company's financial statements for the year ended December 31, 20x5, as well as the method of determination of our fees. Unless we notify you otherwise, these matters or arrangements will also apply to future audit engagements.

Please sign and return the attached copy of this letter to acknowledge that the letter properly sets out the Board's understanding.

Sincerely, (signed) Mr. X

Partner, A. Qasem & Company

Copy: Chairman of Audit Committee.

[Attachment: Schedule of estimated audit fees payable]

I acknowledge that this letter sets out the Board's understanding of the scope and objectives of the audit engagement, as well as the methods of determination of the annual audit fees.

...................................... {signature) ................(date) Chairman of Directors XYZ Industries.

In-Charge Auditor: ................................................

Manager: ...........................................................
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APPENDIX - A.2: BANK BALANCE CONFIRMATION LETTER

The Branch In-Charge HSBC 2, Dilkusha C/A G.P.O. Box # B Dhaka-1000

Date:3 January 2009

Dear Sir Re: Annual audit of accounts of RBBL for the year ended 31 December 2008. As the duly appointed auditor of the above organization we would request you to please send direct to us at our address printed above the following information/ certificate as at the close of business on 31 Decmber 2008 confirming: a) b) The balances on all accounts carried by you in the name and/or on behalf of our above named client. Facilities granted in respect of loans, overdrafts, cash credits or any other facilities stating the limit authorized, amount drawn and the nature of security/collateral held by you. All investments, bills of exchange or other documents of title held by you for their account specifying whether held for safe custody or as security. Contingent claims against our above client in respect of bills under discount guarantees or otherwise.

c) d)

Please note that this request relates to all such balances, documents of title and contingent claims etc. at the above closing date. Our client, by signing below, has authorized you to provide us with the information requested. An addressed envelope is enclosed for your reply. Alternatively you may use our fax number or email address mentioned in top-right corner of this letter for reply. Yours faithfully

(Md. XXXX ) For AQC I/we authorize you to provide all the Above information to our auditors

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APPENDIX - A.3: DEBTORS BALANCE CONFIRMATION LETTER Manager Account and Finance Dhaka 1258 Bangladesh Date: 3 January 2009. Dear Sir(s) Re: Confirmation of Balance Outstanding

In connection with the periodical examination of our accounts, we shall appreciate your confirming directly to our auditors, AQC the status of your account(s) with us as at 31 December2008. Our books show the following balance(s): Due from you Tk.xxxxxx Due to you Tk. _________

Please compare the above with your records and report in the space provided below. Please return the entire form duly signed at the appropriate space below. A stamped envelope addressed to the auditors is enclosed herewith for your early reply.

Thanking you in anticipation.

Sincerely yours,

AQC Dhaka 1212

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APPENDIX-A.4: LAWYERS CONFIRMATION LETTER

Date: 3 January 2009. MR. XY Dhaka-1200 Dear Sir Ref: Annual audit of accounts of RBBL for the year ended 31 December 2008. You are probably aware that we act as auditors for the above. We are currently carrying our audit of the company for the year ended on 31 December 2008. In this respect we shall be grateful to receive from you the following information in respect of each legal action (if any) concerning the company: 1. Nature of the action

2. An assessment of the likely outcome 3. Quantification of the outcome, if possible 4. Company has no unsatisfied judgment or claims including those of former employees. 5. There are no legal fees for which bill have not yet been raised.

Yours faithfully

External Auditor auditors AQC Chartered Accountants

_______________________________ I/we authorize you to provide all the above information to our

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Appendix- B
SET- 1

Please choose the option you think most appropriate

1. Gender: a. Male b. Female 2. Your Age Group: a. 21-30 b. 31-40 c. 41-50 d. 51-60 e. Above 60

3. Designation: a. Department Head b. Financial & Accounting Executive c. Management Official d. Other

4. According to you, which one is the most important factor of an audit program? a. Steps of the Audit Program b. Time required for the Audit Program c. Cost of the Audit Program d. Quality of the Auditors e. Others

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5. What is your perception about different steps of the audit procedure conducted by A. Qasem & Co.? a. Excellent. b. Better than others c. Normal d. Not Good e. Very Bad 6. Do you think these steps are effective enough to serve the audit purpose? a. Yes b. No 7. What is your perception about the time required by A. Qasem & Co. for conducting the audit program? a. Too Short b. Not that much Short c. Average d. Not that much Long e. Too Long 8. Do you think this time is sufficient enough to serve the audit purpose? a. Yes b. No

9. What is your perception about the cost for conducting the audit program by A. Qasem & Co.? a. Very Cost Effective b. Not that much Cost Effective c. Average d. Not that much Costly e. Very costly

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10. Do you think this cost justifies the service provided by A. Qasem & Co.? a. Yes b. No 11. What is your perception about the quality of the auditors of A. Qasem & Co.? a. Excellent. b. Better than others c. Normal d. Not Good e. Very Bad 12. Do you think the auditors are qualified enough to serve the audit purpose? a. Yes b. No

13. Write your comment briefly about the whole audit program conducted by A. Qasem & Co.? Ans.

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SET- 2

Please choose the option you think most appropriate

1. Gender: a. Male b. Female 2. Your Age Group: a. 21-30 b. 31-40 c. 41-50 d. 51-60 e. Above 60 3. Designation: a. Audit Manager b. Supervisor c. Articled Student d. Other 4. According to you, which one is the most important factor of an audit program? a. Steps of the Audit Program b. Time required for the Audit Program c. Cost of the Audit Program d. Quality of the Auditors e. Others 5. What is your perception about different steps of the audit procedure conducted by A. Qasem & Co.? a. Excellent. b. Better than others c. Normal
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d. Not Good e. Very Bad 6. Do you think these steps are effective enough to serve the audit purpose? a. Yes b. No 7. What is your perception about the time required by A. Qasem & Co. for conducting the audit program? a. Too Short b. Not that much Short c. Average d. Not that much Long e. Too Long

8. Do you think this time is sufficient enough to serve the audit purpose? a. Yes b. No

9. What is your perception about the cost for conducting the audit program by A. Qasem & Co.? a. Very Cost Effective b. Not that much Cost Effective c. Average d. Not that much Costly e. Very costly

10. Do you think this cost justifies the service provided by A. Qasem & Co.? a. Yes b. No

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11. What is your perception about the quality of the auditors of A. Qasem & Co.? a. Excellent. b. Better than others c. Normal d. Not Good e. Very Bad 12. Do you think the auditors are qualified enough to serve the audit purpose? a. Yes b. No 13. Write your comment briefly about the whole audit program conducted by A. Qasem & Co.? Ans.

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