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The process of issuing audit report by ca firm

  2. • Md. Enamul Islam Shemul • Student of Patuakhali Science and Technology University • Faculty of Business Administration and Management • Session 2013-14
  3. Our selected topic name is “The process of issuing audit report by CA firm”
  4. Introduction Auditing is a vital issue in an organization especially in public limited companies. Audits are most effective when performed by qualified professionals who work together and are focused on clear objectives. The project nature of audits, the professional characteristics of the Audit Firm’s staff and the advanced communication technology available to auditors make it possible for teams to function effectively. Each audit can be viewed as a project, an activity with a start and finish. A team is formed to accomplish the project. Everyone who will participate in the project is part of the team. This includes staff auditors, support staff, senior auditors, supervisors, and managers at both the regional and headquarters levels. Team members are valued for their knowledge. All audits are conducted in accordance with government auditing standards; and, as applicable, in compliance with State and local laws and regulations.
  5. Objectives of the study The main objective of the study is to analyze the procedure of providing an audit report. Based on this specific objective, the following complementary objectives will be highlighted-  To know how preparing audit report.  To know how the audit procedure  To identify about how to accumulate and process evidences to make an audit report.  To know how the audit engagement procedure occurred with the audit firm  To know how they maintain audit activities.
  6. Methodology of the Study The preparation of the report provides some understandings on “Audit procedure” in Bangladesh. The information is collected from Secondary sources. Information collected from audit working papers Information collected from various publications, books, files and Internet
  7. Organizational Profile G. KIBRIA & CO. is one of the Bangladesh’s leading professional services firm, provides audit, tax, corporate risk services, financial advisory and consulting to a wide range of local and multinational clients. The firm was established in the year 1983 under the Institute of Chartered Accountants of Bangladesh (ICAB), and it has become one of the leading professional services firm in Bangladesh. The firm is providing service to its clients including both multinational and local companies. The firm has significant presence across manufacturing, services, commercial, financial, non-government organization and public sector entities in the country. The firm has been classified as “A” category firm by the Bangladesh Bank. The firm has been selected as panel external auditor of Bangladesh Security Exchange Commission (BSEC), panel valuer of Bangladesh Security Exchange Commission (BSEC).
  8. Audit Process Each and every company maintains their own internal accounting system. Though they have their own accounting system but at the end of the day an independent audit firm checks all their workings and provides opinion about true and fairness of their accounts. Audit process suggested by Audit Practice Manual (APM) may be summarized as follows • 1. Planning. • 2. Collection of evidence. • 3. Controlling and recording. • 4. Review and opinion
  9. Planning Before any work planning is essential which will lead to success. However, in our profession planning is the key measures. An audit planning is more detailed than the strategy and sets out the nature, timing and extent of audit procedures to be performed by the engagement team members in order to obtain sufficient appropriate audit evidence. Planning document includes about the company and its business.  What the entity does?  How it conducts its business?  What are the risks and where?  How the auditors are going to audit the company?
  10. Collection of audit evidence The audit program manual describes how to get an effective collection of evidence from the clients. It is a very crucial task for the auditor to collect documents for the client because sometimes the internal management does not cooperate with the auditors. Audit Tests: Audit tests are referred to in practice by a variety of names. Generally, audit tests can be divided into two types, compliance and substantive tests.
  11. Audit Documentation 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. • Objectives of audit documentation: – Improve audit quality – Enhance public confidence • Contents of audit documentation: – Planning and performance of the work – Procedures performed – Evidence obtained – Conclusions reached by the auditor
  12. Filling working paper: For the proper handling of the audit we divide the records into two files- • Permanent audit files contain information of continuing importance to the audit. • Current audit files contain information of relevance to the current year’s audit. Audit report: The auditor's report is a formal opinion, or disclaimer thereof, issued by either an internal auditor or an independent external auditor as a result of an internal or external audit or evaluation performed on a legal entity or subdivision thereof (called an "auditee").
  13. Elements of an Audit Report: The audit report should include the following basic elements, usually in the following layout: • Title • Address • Introductory paragraph • Scope paragraph • Opinion paragraph • Date of the report • Auditor's address • Auditor's signature
  14. Controlling and recording Audit Evidence: Audit evidence includes all the information contained within the accounting records underlying the financial statements, and other information gathered by the auditors, such as confirmations from third parties. Quality of evidence: • External Audit evidence from external sources is more reliable than that obtained from the entity's records • Auditor Evidence obtained directly by auditors is more reliable than that obtained indirectly or by inference • Entity Evidence obtained from the entity's records is more reliable when related control systems operate effectively • Written Evidence in the form of documents (paper or electronic) or written representations are more reliable than oral representations • Originals Original documents are more reliable than photocopies, or facsimiles
  15. Assessment of Risk Audit risk is present in the giving of any audit opinion on financial statements. Elements of audit risk include those arising: • from the business environment in which the entity operates; • from the operation of the entity's control systems; or • From the failure of audit procedures, including 'sampling risk'.
  16. Review and opinion This section deals with how partner can review the overall audit and form an opinion. Auditing Program Manual provides some checklists which can be used to review the overall performance of the client.
  17. How Does A CA Firm Accept Audit Engagements? Consider Reputational Risks When deciding whether to accept a new engagement, audit firms carefully consider the reputation and integrity of company management. Consider Requisite Auditor Expertise During the engagement acceptance process, the audit firm also evaluates whether it has the necessary industry-specific expertise (e.g., energy, biotechnology, or financial services) and resources to perform the engagement with competence and due professional care.
  18. Consider Auditor Independence Public company auditors are subject to strict independence rules as promulgated by the BSEC. As such, a firm will review the investment holdings, business and personal relationships of its partners and professionals, and other matters of the firm and its personnel to make sure it is independent and free from relationships that would prevent its auditors from, in fact or appearance, objectively performing the audit. Continuance of Engagement Each year prior to the commencement of a recurring audit, the audit firm updates its understanding of the engagement, the company’s management, and its own capabilities to determine whether the firm should continue serving as independent auditors. Companies are constantly evolving and, as a result, it is important to reassess the prudence of continuing to be associated with a particular company on an ongoing basis.
  19. Types of Audit report Standard unqualified: Auditors frequently issue the standard unqualified audit report opinion. Unqualified report with explanatory paragraph Auditors may issue the unqualified audit report with explanatory paragraph or modified wording report. Qualified Audit report or Opinion: Qualified opinion report can result from a limitation on the scope of the audit or failure to follow generally accepted accounting principles. Adverse Audit Report or Opinion: It is used only when the auditor believes that the overall financial statements are so materially misstated or misleading that they do not present fairly the financial position or results of operations and cash flows in conformity of generally accepted accounting principles. Disclaimer of Audit Report or Opinion: It is issued when the auditor is unable to be satisfied that the overall financial statements are fairly presented.
  20. True and Fair View True: Information is factual and conforms to reality, not false. In addition the information conforms to required standards and law. The accounts have been correctly extracted from the books and records. Fair: Information is free from discrimination and bias in compliance with expected standards and rules. The accounts should reflect the commercial substance of the company’s underlying transactions.
  21. Findings • Auditing is an organized and systematic process. • From Pre-Engagement to Reporting, all auditing process steps need to be maintained step by step. • In Pre-Engagement meeting a total framework of audit process needs to be drawn. • Good communication must exist between the audit team members and audit committee, the organization being audited. • Audit Risk must be assessed properly - important to meet the audit standards concerning errors, irregularities and illegal acts. • The auditor gives his opinion true and fair view.
  22. Conclusion Both science and art, the independent audit is a wide-ranging, complex undertaking that calls upon not just technical expertise but also a skeptical mindset and the willingness to exercise professional judgment. High-quality financial reporting plays an important role in promoting the integrity and reliability of the financial information that is the lifeblood of our capital markets. A comprehensive, quality financial reporting framework, overseen by an independent audit committee of the board, helps promote continuous improvement to the audit process that will enable audits to remain effective even in the face of a rapidly changing business environment.