WELCOME

ELCOME
TO MY
INTERNSHIP
PRESENTATION
 PRESENTED TO
Ms. Afia Muqtadir
Assistant Professor
Department of Business Administration

UNIVERSITY OF ASIA
 PRESENTED BY
MAHFUZA AKTER
(Student of MBA)
ID : 10206038

UNIVERSITY OF ASIA
 TOPIC :
MBA; INTERNSHIP REPOT ON
THE FACTORS AFFECTING AUDITOR INDEPENDENCE
OF AN EXTERNAL AUDIT IN BANGLADESH
The internship report that I have been assigned is an important
requirement of MBA program at University of Asia Pacific. My
practical
practical Study
Study isis on
on K.
K. B.
B. NEWAZ
NEWAZ & & CO.
CO. Chartered
Chartered Accountant
Accountant
Dhaka
Dhaka under
under the
the principal
principal of
of the
the firm
firm Mr.
Mr. AKM
AKM Badiun
Badiun Newaz
Newaz
Khan
Khan FCA.
FCA. II have
have found
found the
the study
study to
to be
be quite
quite interesting,
interesting,
beneficial
beneficial and
and knowledgeable.
knowledgeable. II have
have tried
tried my
my level
level best
best to
to
prepare
prepare an
an effective
effective & & creditable
creditable report.
report.
 K. B .
NEWAZ
& CO
K. B. NEWAZ & CO. are an independent firm of chartered accountants
based in Dhaka, Bangladesh working with clients throughout the
country. The firm has a rich and illustrious history and it is one of the
oldest accounting firms in Bangladesh. The CA firm is energy and vision
and quickly became a community leader in Bangladesh.
K. B. NEWAZ & CO. have gained an extensive experience in auditing,
accounts and taxation work, both in private and public sectors and have
carried out a large number of consultancy assignments along with
information technology consultancy in industrial and commercial
sectors.
K. B. NEWAZ & CO. really do care about the success of their selected
clients. They believe they should not expect to be rewarded, unless they
have provided added value. Their goal is to continually improve the
well-being of their customers and their team members.
 AUDIT

An audit is historically the most important type of assurance

service in Bangladesh. This is because all limited liability
companies registered with the Registrar of Joint Stock
Companies have been required by law to have an audit.
Involves examination of financial statements to prove the true and
fair view of companys affairs.
It is done mainly at year-end after the directors have prepared the
financial statements, although the planning work could be carried
out earlier.
An audit is mainly governed by the international standards on
auditing (ISA).
The auditor must be independent of all the stakeholders such as
management.
It is a statutory requirement that financial statements are audited.
 AUDIT
O R

An auditor is an accountant who specializes in analyzing a

business financial records for accuracy. This is a vital service.
Every business can benefit from a periodic audit. Hiring or
contracting an auditor to look over the records helps to save
money and eliminate inefficiency.
Auditors are used to ensure that organizations are maintaining
accurate and honest financial records and statements.
GENERAL
GENERALPRINCIPLES
PRINCIPLESOF
OFAN
ANAUDIT
AUDITIN
IN
BANGLADESH
BANGLADESH
The Auditor should comply with the Code of Ethics for
Professional Accountants issued by the Council of the Institute of
Chartered Accountants of Bangladesh. Ethical principles
governing the auditors professional responsibilities (ICAB, 2004)
are:
Independence;
Integrity;
Objectivity;
Professional competence and due care;
Confidentiality;
Professional behavior; and
Ethnical Standards
The auditor should conduct an audit in accordance with BSAs or
ISAs as adopted in Bangladesh. These contain basic principles
and essential procedures together with related guidance in the
form of explanatory and other material.
 AUDIT
INDEP OR
ENDE
NCE
Auditor independence has been defined by different people
above but there are some concept about an auditor that needs
to be emphasized. The concept requires that auditor should
carry
out his work freely and in an objective manner.
Audit independence is defined as an auditor' unbiased mental
attitude in making decisions throughout the audit and financial
reporting .The attribute of independence is a very specialized
concept for auditors. Looking for maintaining the highest ethical
standard for the accounting profession, independence refers to
the quality of being free from influence, persuasion or bias In
addition, independent auditor is expected to be without bias with
respect to the client under audit and should appear to be
objective to those relying on the results of the audit.
 EXTER
NAL
AUDIT
Independent auditors are sometimes called external auditors
because The external auditor must be independent from the
client audited, both in mind as in appearance and the external
auditor is someone who is able, in the light of all relevant facts
and circumstances, to form an objective and impartial opinion on
all matters that fall within the scope of his engagement.
An external audit is an independent examination of the financial
statements prepared by the organisation. They are focused on
the financial accounts or risks associated with finance and are
appointed by the company shareholders.
The main responsibility of external audit is to perform the annual
statutory audit of the financial accounts, providing an opinion on
whether they are a true and fair reflection of the companys
financial position.
THE
THEFACTORS
FACTORSAFFECTING
AFFECTINGAUDITOR
AUDITOR
INDEPENDENCE
INDEPENDENCE

Self Interest
15%
24% Self Review
31%
Advocacy
20% 9%
Familiarity
Intimidation
 Self-in
terest
This occurs when the audit firm or a member of the audit team
could benefit from a financial interest in, or other self-interest
conflict with, an audit client. Examples of circumstances that
may create this threat include, but are not limited to:
A direct financial interest or material indirect financial interest
in an audit client;
A loan or guarantee to or from an audit client or any of its
directors or officers;
Undue dependence on total fees from an audit client;
Concern about the possibility of losing the engagement;
Having a close business relationship with an audit client;
Potential employment with an audit client; and
Contingent fees relating to audit engagements.
 Self-re
v iew
This occurs when the audit firm, or an individual audit team
member, is put in a position of reviewing subject matter for
which the firm or individual was previously responsible, and
which is significant in the context of the audit engagement.
Examples of circumstances that may create this threat include:
A member of the audit team being, or having recently been, a
director, officer or other employee of the audit client in a
position to exert direct and significant influence over the
subject matter of the audit engagement;
Performing services for an audit client that directly affect the
subject matter of the current, or a subsequent, audit
engagement; and
Preparation of original data used to generate financial
statements or preparation of other records that are the
subject matter of the audit engagement.
 Advoc
a cy

when the audit firm, or a member of the audit team, promotes,

or may be perceived to promote, an audit clients position or
opinion to the point where objectivity may be compromised.
Examples of circumstances that may create this threat include:
Dealing in, or being a promoter of, shares or other securities
in an audit client; and
Acting as an advocate on behalf of an audit client in litigation
or in resolving disputes with third parties.
 Famili
arity
This occurs when, by virtue of a close relationship with an audit
client, its directors, officers or employees, an audit firm or a
member of the audit team becomes too sympathetic to the
clients interests. Examples of circumstances that may create
this threat include:
A member of the audit team having a close family member
who, as a director, officer or other employee of the audit
client, is in a position to exert direct and significant influence
over the subject matter of the audit engagement;
A former partner of the firm being a director, officer or other
employee of the audit client, in a position to exert direct and
significant influence over the subject matter of the audit
engagement;
Long association of a senior member of the audit team with
the audit client; and
Acceptance of gifts or hospitality, unless the value is clearly
insignificant, from the audit client, its directors, officers or
employees.
 Intimi
da tion

This occurs when a member of the audit team may be deterred

from acting objectively and exercising professional scepticism by
threats, actual or perceived, from the directors, officers or
employees of an audit client. Examples of circumstances that
may create this threat include:
Threat of replacement over a disagreement with the
application of an accounting principle;
Pressure to reduce inappropriately the extent of work
performed in order to reduce fees; and
Dominant personality in a senior position at the audit client,
controlling dealings with the auditor.
Amongst the factors which influence the independence of
an external auditor, the factors which have the most
impact
impact on
on external
external auditors
auditors in
in Bangladesh
Bangladesh are:
are:
Environment:
Environment:
Above
Above all
all the
the environment
environment in in which
which auditor
auditor is
is operating
operating in
in
Bangladesh
Bangladesh itself
itself encourages
encourages dependence
dependence rather
rather than
than
independence
independence of of an
an auditor.
auditor.
As
As Habibullah
Habibullah (1984)
(1984) has
has quoted
quoted a a Chartered
Chartered Accountant
Accountant
on practice, 'We (the auditor) certify statements
on practice,
wrongly prepared. We are sons of the soil. We
are contaminated by the dirty environment'.
 C
Crre
eaatte
eddb
byy tth
heep
prro
offe
esss
sio
ion
n,, le
leggis
isla
lattio
ionno
orr rre
eggu
ula
lattio
ionn
Safeguards should include requirements for entry into the
Safeguards
accounting profession, continuing educational
requirements, professional disciplinary processes, external
reviews of a firms quality control system and legislation
governing the independence requirements of the firm.

Within
Within the
the audit
audit client
client

Safeguards should include a corporate governance

structure, such as an audit committee, to provide
appropriate oversight and communications regarding a
firms services. Other safeguards could include the
employment of high-quality staff in sufficient numbers to
ensure that a member of the assurance team would not
be required to make managerial decisions for the entity
and having internal procedures to ensure an objective
choice when commissioning non assurance engagements.
Concl
usion
There are many factors which affect the
independence of an external auditor and there are
necessary safeguards too. But if an auditor is
honest and is mentally prepared to act honestly
and independently ,then threat can stop him from
doing so.
Specific recommendations to improve the situation are given below :
Auditors should be guided by the rules of the professional body.
An auditor should be punished for violating ethics.
An auditor should not be a party in any way in the clients' organization.
An auditor should not invest in the client's entity as stockholder or lender.
Audit fees should not be fixed by the director.
There should not have any personal relationship between the auditor and
the employees which may influence the receiving of appointment letter.
The audit remuneration must be a reasonable one.
The auditors should be aware of their social responsibility.
THANK
YOU