...Management Audit Status of Cost and Management Audit in Bangladesh It is obviously understood that considering the aforesaid multifarious and multidimensional benefits of cost accounting and management auditing the Government of Bangladesh has made keeping cost books and cost accounts compulsory in the Companies Act, 1994 through section 181. The relevant part may be seen from clause (d) of subsection (1) of section 181. Section 220: Audit of certain matters by Cost and Management Accountants: (1) Where in the opinion of the Government, it is necessary to do in relation to any company required under clause (d) of sub-section (1) of section 181 to include in its books of accounts the particular referred to therein the Government may, by order, direct that an audit of cost accounts of the company shall be conducted in such manner as may be specified in the order by an auditor who shall be a "cost and management accountant" within the meaning of the Cost and Management Accountants Ordinance, 1977 (LIII of 1977). (2) An audit conducted by an auditor under this section shall be in addition to an audit conducted by an auditor appointed under section 210. With the advancement of economic development of Bangladesh the Government found in the year of 2001 that it was the proper time to introduce cost audit in Bangladesh and therefore the Government made it compulsory through promulgation of an SRO dated July 8, 2002 the contents of which are produced below: (a) Cost Audit...
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...flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The major audit issue involved will be determining that the client has properly categorized costs between research and development (those costs involved in establishing technological feasibility) and those costs that should be capitalized. The auditors will have to determine at what point the software product reached the point of technological feasibility. We conducted our audit in accordance with auditing standards generally accepted in (the country where the report is issued). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Furthermore, our ratio analysis showed no major changes. However, our audit did reveal that a number of the ratios show significant changes which seem due primarily to the increased level of profitability. In our opinion, the financial statements referred to above present...
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...Determinants Of Audit Fees: Empirical Evidence From Emerging Economy Kamal Naser* Hamed Abdullhameed** & Rana Nuseibeh*** Abstract This study investigates the structure of audit fees in an emerging economy, Jordan. Data were collected from a sample of companies listed on the Amman Stock Exchange that forms 90% of the total population and fairly presents all industrial sectors within the economy. Consistent with previous research, the results of the analysis revealed that corporate size, status of the audit firm, industry type, degree of corporate complexity and risk are the main determinants of audit fees in the Jordanian environment. Unlike previous studies, however, variables such as corporate profitability, corporate accounting year-end and time lag between year-end and the audit report date appeared to be insignificant determinants of audit fees in the sampled companies. Key Words: * Audit fees, Emerging Economy, Jordan. S S cientific Journal of Administrative Development Vol.5 I.A.D. 2007 Dean College of Business Administration, Al-Ain University of Science and Technology, UAE. ** Freelance Financial Analyst, Jordan. *** Link Officer, National Health Service (NHS), UK. 84 Determinants Of Audit Fees: Empirical Evidence From Emerging Economy Introduction Although a number of studies have provided empirical evidence on the relationship between audit fees and the attributes of audited companies, most have tended to focus on developed economies...
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...Sarbanes-Oxley Act. In 2002, the Sarbanes-Oxley Act was passed into law by the United States Congress. After a series of high profile corporate scandals, such as Enron and WorldCom, the Congress of the United States passed this legislation “to improve and maintain investor confidence. The law requires companies to have more independent board directors (not just company insiders), to adhere strictly to accounting rules, and to have senior managers personally sign off on financial results.” (Bateman, 173). Before the fall of corporations like Enron and WorldCom, there was also far too much corporate fraud during the Internet bubble. According to Stanley Block and his co-authors, “The major accounting firms had failed to detect fraud in their accounting audits, and outside directors were often not provided with the kind of information that would allow them to detect fraud and mismanagement.” (Block, 12). What is the definition, in a nutshell, of the Sabarnes-Oxley Act? This is something that needs to be defined and understood before examining the positive and negative impacts of this law upon corporate America. The Sarbanes-Oxley Act “establishes strict accounting and reporting rules in order to make senior managers more accountable and to improve and maintain investor confidence.” (Bateman, 173). In their book, Foundations of Financial Management, the co-authors go into some more detail about this important law concerning accounting rules and procedures. “The Sarbanes-Oxley Act of 2002 set...
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...communication that expresses a conclusion about the reliability of a written assertion of another party. Audit of historical financial statements: A form of attestation services, the auditor issues a written report expressing an opinion about whether the F/S is in material conformity (一致) with accounting standards. e.g.: listed company must provide shareholders with annual financial statements that are audited by an independent accounting firm. Review of historical cost financial statements: A form of attestation services, a public accounting firm issues a written report that provides less assurance than an audit as to whether the financial statements are in material conformity with accounting standards. Auditing standards: Establish mandatory (强制) requirements and provide explanatory (解释) guidance to auditors in fulfilling their professional responsibilities in the audit of financial reports. Auditing: Is the accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria. Auditing should be performed by a competent, independent person. Compliance audit: 合规性审计 One of three primary types of audits, a review of an organization’s financial records performed to determine whether the organization is following specific procedure, rules or regulations set by some higher authority. An audit performed to determine whether an entity that receives financial assistance from the Federal Government...
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...assessments automatically on a more frequent basis. According to Canadian Institute of Chartered Accountants (CICA) and the American Institute of Certified Public Accountants (AICPA), Continuous Auditing is defined as a methodology that enables independent auditors (both internal & external) to provide written assurance on a subject matter using a series of auditors’ reports issued simultaneously with, or a short period of time after, the occurrence of events underlying the subject matter (Searcy and Woodroof, 2003). The Institute of Internal Auditors' (IIA) Global Technology Audit Guide (GTAG 3) defined continuous auditing as any method used by auditors to perform audit-related activities (including control and risk assessments) on a more continuous (occurring without interruption) or continual (occurring at repeated intervals.) basis. Continuous auditing requires specialized skills of audit personnel to monitor information electronically and incorporate the use of intelligent agents, computer modeling, and other software tools. Continuous auditing also gives end users of information more timely assurance that the information is correct and may eventually lead to continuous reporting where financial information is updated and published as events occur. From the above definitions, we can conclude that the...
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...the three previous audits resulted in unqualified opinions. Toys City's year end is 31 December, and Goodman & Goodman has agreed to provide the audit report on 1 March, 2010, ten days before the annual board of directors meeting. Mr. Lam, the manager from Goodman & Goodman in charge of the Toys City engagement, recalls that last year there was a 25 percent budget overrun. He attributes one-third of the overrun to unforeseen circumstances and the remaining two-thirds to poor planning. He estimates that poor planning resulted in approximately 130 hours and $3,400 in audit fees that were not billed to Toys City. In an effort to avoid another costly overrun, Mr. Lam wisely decided to devote more time to audit planning. By talking to various people, Mr. Lam learns that a project management technique known as Critical Path Method (CPM) could assist an auditor in sequencing all audit detail work (including work requested from client personnel), efficiently allocating personnel resources, highlighting potential audit bottlenecks, estimating completion time, and providing a framework for relevant feedback and control as the audit progresses. Thus, he decides to spend an additional 17 hours planning this year's audit, including computer setup and analysis time, using CPM. Audit planning During the slow month of August 2009, Mr. Lam and Ms. Ip, the senior-in-charge of the Toys City engagement, analyzed the audit plan for Toys City. Basically the audit work could be divided...
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...1666 K Street, NW Washington, D.C. 20006 Telephone: (202) 207-9100 Facsimile: (202) 862-8430 www.pcaobus.org ) CONCEPT RELEASE ON AUDITOR ) INDEPENDENCE AND AUDIT FIRM ) ROTATION; ) ) NOTICE OF ROUNDTABLE ) ) PCAOB Release No. 2011-006 August 16, 2011 PCAOB Rulemaking Docket Matter No. 37 Summary: The Public Company Accounting Oversight Board ("PCAOB" or "Board") is issuing a concept release to solicit public comment on ways that auditor independence, objectivity and professional skepticism could be enhanced. One possible approach on which the Board is seeking comment is mandatory audit firm rotation, which is explored in detail in this release. However, the Board seeks advice and comment on other approaches as well. The Board will also convene a public roundtable meeting in March 2012, at which interested persons will present their views. Additional details about the roundtable will be announced at a later date. Public Comment: Interested persons may submit written comments to the Board. Such comments should be sent to the Office of the Secretary, PCAOB, 1666 K Street, N.W., Washington, D.C. 20006-2803. Comments also may be submitted by e-mail to comments@pcaobus.org or through the Board's Web site at www.pcaobus.org. All comments should refer to PCAOB Rulemaking Docket Matter No. 37 in the subject or reference line. Comments should be received by the Board no later than 5:00 PM EST on December 14, 2011. Board Contacts: Martin F. Baumann, Chief Auditor...
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...considered a significant change to federal securities law, but at the time, the costs were unknown. Today after nine years, companies have realized that the costs of this act are not be stopping the fraud as originally expected, and it is having some unintended consequences to the securities industry. The most important, and possibly the most costly parts of this act are corporate responsibility, increased internal controls, new auditing requirements, privatization of businesses, and the reaction to this act by foreign entities. Title I & II– Public Company Accounting Oversight Board and Auditor Independence The act established the Public Company Accounting Oversight Board (PCAOB), which was placed in charge of developing and enforcing professional standards, ethics, and competence of accounting professionals providing services to publicly traded companies. The PCAOB recently announced its budget for 2011 would be $204.4 million to perform these duties (Financial News, 2010). One of their guidelines is that public accounting firms that provide audit services to public companies can no longer provide any bookkeeping, consulting, actuarial, or investment services that may interfere with their objective findings in an audit, and to guarantee auditor independence the act provides for the mandatory rotation of lead auditor's. Title III– Corporate Responsibility The act also provides for an audit committee whose primary duty is to the Board of Directors and the investing public...
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... |7.12% |4.18% |1.77% |3.68% | | |Merchandise Inventories |63.83% |40.51% |47.16% |36.99% | | |Account Payable |54.98% |35.22% |40.74% |16.96% | | |Accrued Expenses |16.62% |13.33% |13.49% |1.90% | | | | | | | | |Pro Forma Income Statement Ratio |1984 |1985 |1986 |1987 | | |Cost of Good Sold |77.89% |75.87% |74.11% |77.23% | | | | | | | | | |Liquidity & Activity Ratios |1984 |1985 |1986 |1987 | | |Current |0.93 |1.56 |1.40 |2.41 | | |A/R Turnover | |12.75 |105.20 |53.85 | | |A/R Turnover in Days | |28.62 |3.47 ...
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...Exercises, Problems and Simulations | 1. List and describe the activities auditors undertake before beginning an engagement. | 1, 2, 3, 4 | 53, 54, 55, 62, 66 | 2. Identify the procedures and sources of information auditors can use to obtain knowledge of a client’s business and industry. | 5, 6, 7, 8, 9 | 52, 56, 59, 65 | 3. Perform analytical procedures to identify potential problems. | 10, 11, 12, 13, 14, 15 | 47, 48, 49, 51, 58, 63, 64 | 4. List and discuss matters of planning auditors should consider for clients who use computers and describe how a computer can be used as an audit tool. | 16, 17, 18, 19, 20, 21, 22 | 57, 60 | 5. Review audit documentation for proper form and content. | 23, 24, 25 | 50, 61 | SOLUTIONS FOR REVIEW CHECKPOINTS 4.1 A CPA can use the following sources of information to help decide whether to accept a new audit client. Financial information prepared by the prospective client: * Annual reports to shareholders * Interim financial statements * Securities registration statements * Annual report on SEC Form 10K * Reports to regulatory agencies Inquiries directed to the prospect's business associates: * Banker * Legal counsel * Underwriter * Other persons, e.g., customers, suppliers Predecessor auditor, if any, communication, re: integrity of management, disagreements with management ...
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...three previous audits resulted in unqualified opinions. Toys City's year end is December 31, and Goodman & Goodman has agreed to provide the audit report on March 1, 1998, ten days before the annual board of directors meeting. Bert, the manager from Goodman & Goodman in charge of the Toys City engagement, recalls that last year there was a 25 percent budget overrun. He attributes one-third of the overrun to unforeseen circumstances and the remaining two-thirds to poor planning. He estimates that poor planning resulted in approximately 130 hours and $3,400 in audit fees that were not billed to Toys City. In an effort to avoid another costly overrun, Bert wisely decided to devote more time to audit planning. By talking to various people, Bert learns that a project management technique known as Critical Path Method (CPM) could assist an auditor in sequencing all audit detail work (including work requested from client personnel), efficiently allocating personnel resources, highlighting potential audit bottlenecks, estimating completion time, determining the probability of meeting a completion deadline, and providing a framework for relevant feedback and control as the audit progresses. Thus, he decides to spend an additional 17 hours planning this year's audit, including computer setup and analysis time, using CPM. Audit planning During the slow month of August 1997, Bert and Craig, the senior-in-charge of the Toys City engagement, analyzed the audit plan for Toys...
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...Working? This article written by Stephen D. Willits and Curtis Nicholls was printed in the CPA journal in April of this year. To give a brief history of SOX after the corporate fraud in the early 2000’s the SEC felt pressure to respond. Their response to the fraud committed my giant corporations such as Enron and WorldCom was the Sarbanes-Oxley Act. The main point of SOX was to try to limit or ideally eliminate corporate fraud by cracking down on self-regulating audit. The answer as to whether SOX is working or not is not as simple as yes or no. Some say that the scope of SOX was too wide while others maintain that it did not go far enough. The basis for the success of SOX comes down to cost versus benefit. Section 404 of SOX seems to have drawn the greatest criticism. Section 404 states that companies must issue reports concerning the internal control structure and the procedures for financial reporting. The purpose of this section was assessing the internal control and procedures of any company. The problem was the cost. Shortly after SOX was enacted companies (depending on size) report spending between 4 and 10 million dollars in order to comply with section 404. This number was expected to decrease as companies adjusted to the new laws; however there have been conflicting reports as to whether that has come to fruition. In respond to the political pressure the SEC was facing regarding section 404 they replaced it with a more relaxed version in 2007. The SEC went even further...
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...How the Sarbanes Oxley act affected the audit industry The government change in policy that has the biggest influence on my career choice has to be the Sarbanes Oley act of 2002. This act is what influenced my decision not be an auditor in a big six firm or smaller accounting firm, this change in law is why I choose to go into the private company accounting route. First let me start off by informing you want the Sarbanes – Oxley act is, it is a government act that changed the old SAS no. 59 as a result of the Enron and World Com financial collapses (Ryu 2009). The law was enacted to enhance the standards for all US based public companies financial reporting, this happened as a result of the Enron and World Com financial collapses (Elson 2008). This law was designed to help create auditor independence, so financial reports that are relied upon from prospective shareholders and lenders are accurate.(Li-ying 2011). The law, as I have said was enacted as a knee jerk reaction to the Enron collapse, it was discovered that Arthur Anderson the accounting firm for Enron was both their internal and external auditors. The two companies were so comingled it was hard to differentiate which employee worked for who, both the CEO and CFO both had previously worked for Arthur Anderson (Ryu, 2009). The law which is known as SOX changed how responsible auditors were for the opinions they gave on the financial reports they audited. The outside public depended on these reports to make financial...
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...the corporate sector works with transparency and provides full disclosure of information as and when required. The transparency purpose of Sarbanes Oxley Act is fulfilled by ensuring real time disclosure of information, the adherence to guidelines of the Generally Accepted Accounting practices, full financial details being made available of all the transactions not mentioned in balance sheet. This purpose of Sarbanes Oxley Act is also fulfilled by an expanded disclosure of financial and non financial control measures in force in every company. Similarly, public certification of these internal controls and financial measures also helps fulfilled the purpose of Sarbanes Oxley Act (Bing). The objective of Sarbanes Oxley Act is to make company audit committees, the auditing...
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