Origin of Audit

The word “audit” is derived from the Latin word ‘audire” which means “to hear”. In olden times,
whenever the owners of a business suspected fraud, they appointed certain persons to check the
accounts. Such persons sent for the accountants and “heard” whatever they had to say connection
with the accounts. It was an Italian, Luca Paciaio, who first published his treatise on double entry
system of book-keeping for the first time in 1494. He mentioned and described the duties and
responsibilities of an auditor, since then; there have been lot of changes in the scope and definition
of audit and the duties and responsibilities of an auditor.

Evolution and Development of Auditing Profession in Bangladesh

Prior 1850:
 During the 18th century industrial revolution brought in large scale production, steam
power, improved facilities and better means of communication. This resulted in the origin
of Joint stock form of organizations. Shareholders contribute capital of these companies
but do not have control over the day to day working of the organization. The shareholders
who have invested their money would naturally be interested in knowing the financial
position of the company. This originated the need of an independent person who would
check the accounts and report the shareholders on the accuracy of the accounts and the
safety of their investment.
 Generally, the early historical development of auditing is not well documented. Auditing
in the form of ancient checking activities was found in the ancient civilizations of China,
Egypt and Greece. The ancient checking activities found in Greece appear to be closest to
the present-day auditing.

1850-1882:
 The first Companies Act in the then British India was enacted in 1850. The accounting
profession was legally accepted in Indian Subcontinent by bringing company law into force
in 1850.
 One of the provisions included in the said Act was a half yearly audit and a report on the
accounts audited to be given by the auditor. In Indo-Pak subcontinent there were a few
British firms of accountants, but they were so busy that their services were not available to
the general public. The public companies used to appoint a European Auditor for
safeguarding the interests of the Indian shareholders.
 According to the law, it was been compulsory to audit the accounts of the organizations
on half-yearly basis. And to do so there needs expert auditor. In that period, the
companies select European and Indian auditors to maintain the interest of the European
and Indian shareholders. As there were no rules to assess the eligibility of Indian auditors,
the lawyers act as an auditor in that period.
1882- 1913:

 Then the Companies Act of 1882 was passed. Regulations 83-94 of Table ‘A’ contained in
the first Schedule to the said Act provided for the audit of accounts of the companies
adopting that Table and for the appointment, remuneration and duties of the auditors.
 It was not necessary for a company auditor in those times to be accountant himself. Some
companies in fact used to employ lawyers as their auditors.

1913-1932:
 It was made compulsory to audit the accounts of a company by an expert and
independent auditor in the Company Act 1913 which was effective from 1st March, 1914.
From the due date, any person who was not certified by government can’t perform the
tasks of an auditor and for that reason, the lawyers and other auditors’ loss their
eligibility.
 For some years after 1913 the Provincial Government used to grant Auditors’ Certificate
to persons who possessed some knowledge of accountancy. At that time there was no
provision of any kind of training and examination of the accountancy
 .In 1918, Provincial Government of Bombay instituted the Government Diploma in
Accountancy (Called GDA) and made regulations for the examination and training of
those who wanted to obtain that Diploma and certificate to practice
 No person could act as the Auditor of a public limited company unless he held an
auditor’s certificate granted by Government. The Provincial Governments were
empowered to grant Auditors’ Certificate but, at the same time the Central government
also reserved the right to recognize members of certain professional bodies as qualified to
function in the capacity of company auditors without obtaining Auditors’ Certificate from
the Government.
 The action taken by the said government received the approval of other provincial and
central Governments. The result was that GDA Diploma becomes the requisite
qualification for the grant of Auditors’ Certificate throughout the then British India. An
Accountancy Board was set up by the Government and was attached to the Sydenham
College of Commerce and Economics, Bombay. This functioned till 1932
 There was no central control upon accounting profession until the “Auditors Certificate
Rule” passed in 1932. Persons who get certificate in pursuance of this law were known as
‘Registered Accountants’ (R.A.).
1932- August 14, 1947:

 Consequently the Government framed Rules under Section 144, of the Companies Act,
1913, called “Auditors Certificate Rules’ 1932”. The objectives of these rules were broadly
as follows:

(a) Registering apprenticeships;

(b) Conducting examinations;
(c) Controlling and regulating the profession of auditing.
  The Accountancy Profession was then being supervised and controlled by the Ministry of
Commerce of the Central Government. With a view to helping the Government, Indian
Accountancy Board was established. The board was only an advisory body. The Auditors
Certificate Rules 1932, required the passing of two examinations – Registered Accountants
first and final. It further laid down the tenure of prescribed training which was required to
be completed during the period of apprenticeship.

August 14, 1947- Dec. 15, 1971:

 Pakistan emerged as a sovereign state on August 15, 1947 and adapted the Auditors’
Certificate Rules, 1932.
 In 1950, the Government of Pakistan made some corrections on Auditors Certificate Rule
and changed it to “Auditors Certificate Rule, 1950”. According to this law, the Ministry of
Commerce preserves a list for accountants and the persons who were in that list got the
authority to use ‘Registered Accountants’. Later the registered accountants established
“Pakistan Institute of Accountant” to preserve their interest and for development of the
profession. This institute tried to make it understand to the government that there need to
establish a separate association to authorize and control the accounting profession. After
that the government realizes the importance of the profession and set up “Council of
Accountancy”- an advisory board.
 In 1952, the Registered Accountants formed a private body known as “Pakistan Institute
of Accountants” with the objects of looking after their own interest and taking up with
Ministry of Commerce, Government of Pakistan, matters affecting the accountancy
profession.
 The Government realized that the profession was rapidly growing in its stature and
importance and in June 1959, the Department of Accountancy was established in the
Ministry of Commerce with a Controller of Accountancy to deal with the professional
instead of a Section Officer.
 Commercial Audit Directorate: The Commercial Audit Directorate was set-up in 1956 by
the government of Pakistan to undertake audit in state-owned commercial organizations.
Following the independence of Bangladesh, the role of the department of commercial audit
expanded because of the nationalization of industries, banks etc. At present, all autonomous
and semi-autonomous public enterprises, government-owned commercial bodies,
including nationalized banks and public enterprises, having minimum 50% government
share are audited by the directorate.
 The Chartered Accountants Ordinance, 1961 received the assent of the President of
Pakistan on March 3, 1961, and was published in Part I of the Extraordinary Gazette of
Pakistan on March 10 1961. The Institute of Chartered Accountants of Pakistan came into
being on July 1, 1961. A draft of the Chartered Accountants Bye-Laws was also prepared
and published for inviting public comments. The amended version called Chartered
Accountants Bye-Laws –1961, was published on the part I of the Extraordinary Gazette of
 Pakistan on July 1, 1961 and was enforced as on that date. As of that date the Department
of Accountancy and the Pakistan institute of Accountants having served a very useful
purpose were liquidated.

1971-Present
 After liberation war in 1971, Bangladesh which was formerly known as East Pakistan
was separated from Pakistan and appeared as an independent country. After
independence, Bangladesh faces lots of problems and difficulties because of a little
number of Bengali accountants.
 For that reason, the government of Bangladesh set up an “Add-hock” committee which
appoints 18 chartered accountants to solve the problems.
 On 6th January 1972, the government passed a law “The Bangladesh Chartered
Accountant Order” and then established “Institute of Chartered Accountants of
Bangladesh” as of the following order. And now this association controls the
accountancy profession in Bangladesh.
 There has another autonomous association “ICMAB” which is also working for the
development of this profession. This institute is related with the cost and management
accountancy profession. Incidentally, The Parliament of Bangladesh made some
additions and alterations of the “Companies Act 1913” and passed the “Companies Act
1994”.
 Financial Management Academy was established to impart training to officers and staff
of the Audit and Accounts Department. The academy was set up in 1962 as Audit and
Accounts Training Centre to offer training to the employees. After the liberation of
Bangladesh, it was upgraded and renamed as the Audit and Accounts Training Academy
and was headed by a Director General. In September 1997, the academy was renamed as
the Financial Management Academy and was made the core centre for providing
financial management training to participants from government ministries/ departments
although imparting training to officers and staff of the Audit and Accounts Department
continued to remain its main business.
 Before acceptance of the International Standards of Auditing (ISA) by the Institute of
Chartered Accountants of Bangladesh (ICAB), detection of errors and frauds, and
prevention of errors and frauds were the two important objectives of auditing in
Bangladesh. At present, Bangladesh follows ISA guidelines in auditing. Auditing
practices are regulated by the Companies Act 1994, the Banking Companies Act 1991,
the Insurance Act 1938, the Securities and Exchange Commission Act 1993, the
Securities and Exchange Rules 1987, the Foreign Donations Regulation Rules 1978, and
the Co-operative Societies Ordinance 1984.
 Audit of the Government: The Constitution of Bangladesh empowers the CAG of
Bangladesh to conduct an audit of the accounts of the Republic and report to the jatiya
sangsad| (parliament) on the findings. In pursuance of Article 128(1) of the constitution,
the public accounts of the Republic and of all courts of law, authorities and officers of the
government are audited and reported on by the Auditor General. For that purpose he or
 any person authorized by him has access to all records, books, vouchers, documents,
cash, stamps, securities, stores or other government property in the possession of any
person in the service of the Republic. According to Article 128(4) of the constitution, the
Auditor General in the exercise of his functions as mentioned in Article 128(1), shall not
be subject to the direction or control of any other person or authority. Having derived his
authority from the Constitution, he with the assistance of ten Directors General placed
under him, conducts audit of all government departments, agencies, public sector
corporations and public companies having fifty percent or more government owned
shares.
 Civil Audit Directorate Following the departmentalization of government accounts, the
Civil Audit Directorate was established in 1985 to strengthen the capability of the C&AG
in discharging his duties. This directorate carries out audits in the following accounts
offices: office of the Controller General of Accounts, Chief Account’s offices, Divisional
Controller of Accounts offices, District Accounts offices and Upazila Accounts offices.
 Railway Audit Directorate The office of the DG Railway Audit, headed by a Chief
Auditor, was established at the Central Railway Building (CRB) Chittagong in 1950. This
office was entrusted with the audit responsibility of the Eastern Bengal Railway and
Pakistan Eastern Railway from 1950 to 1961 and from 1961 to 1971 respectively.
Following the liberation of Bangladesh in 1971, all audit functions of Bangladesh
Railway were conducted by this office which was renamed as the office of the DG
Railway Audit in 1995. Presently the office of the DG Railway Audit is in Dhaka.
Director General performs his responsibilities with the assistance of one director, two
deputy directors, 14 audit and accounts officers and other staff working in the head,
regional and divisional offices.
 Directorate of Works Audit The present office of the Directorate of Works Audit was
established with effect from 18 May 1964 under the name Director of Audit and Accounts
Works and WAPDA, East Pakistan, Dacca. After liberation, it was renamed as Accountant
General Works and WAPDA, Bangladesh, Dhaka and entrusted with the accounting and
auditing function of the works expenditure and auditing the accounts of Bangladesh
WAPDA. Following departmentalization of government accounts, the present office of the
Directorate of Works was established in 1985.
Institute of Chartered Accountants of Bangladesh (ICAB)
Formation: The “Institute of Chartered Accountants of Bangladesh” is established as an
autonomous association in accordance with the “Bangladesh Chartered Accountants Order, 1973”
to control and develop the accounting profession. The association has long standing existence and
operated with its own seal which is the symbol of its existence. The association can occupy, buy
and sell movables and immovable properties.

Functions of ICAB: The functions of the association are-

1. The code of conduct for the accountants should be prepared on the basis of “Chartered
Accountants Order, 1973”.
2. Takes necessary action if any member doesn’t maintain their code of conduct.
3. Keep a list of professional accountants.
4. Set up a standard for foreign certified accountants to work as a professional in
Bangladesh.
5. Arrangement of professional examination.
6. Set up sub-committees if needed, to solve the problems related to the profession.

Institute of Cost and Management Accountants of Bangladesh (ICMAB)

Formation: In 1966, “Pakistan Institute of Industrial Accountants Act” was passed to control the
activities of cost and management accountants. Then “Bangladesh Institute of Industrial
Accountants” was established after independence of Bangladesh. This institute keeps contribution
into the financial management of Banks, Insurance Companies and other organizations. Later in
1977, government of Bangladesh declared “Cost and Management Accountants Ordinance” to
control the manufacturing costs and the profession of management accountants. “Institute of Cost
and Management Accountants of Bangladesh” was then established in accordance with the
ordinance.

Management and Functions of ICMAB: People who were registered before this ordinance or
who were registered later by following the rules and regulations of the ordinance, they will be
considered as member of the “Institute of Cost and Management Accountants of Bangladesh” until
their name exist in the register. [Section 3(1)]

Functions of Council: The functions is as follows-

1. The Council can apply necessary power to achieve the objectives of the ordinance and
to accomplish the functions.
2. Organize the examination for those who are seeking membership of the institute.
3. Student registration and organize training.
 4. Set up standards for achievement of membership.
5. Acceptance of foreign competence and training to provide membership.
6. Provide or cancel certificates for training.
7. Keep records of registered members and publish the list of the members and
practitioners.
8. Set up and receive fees from examinee, students and members.
9. Retract names from register and re-register the names.
10. Maintain honor and dignity of professional competence of the members of the institute.
11. Conduct research work on cost and management accounting by providing financial
support or any other way to the members of council.
12. Provides professional service in case of cost and management accounting.
13. Manage the library and publish books and journals on cost and management
accounting.
14. Apply rules and regulations upon members, officers and employees of the institute.

Council will set up the following standing committees to successfully accomplish the
functions-
- Executive committee
- Education committee
- Examination committee
- Research & Development committee
- System development committee
Cost and Management accountants’ regulation was prepared in accordance with the order
in 1980. The rules and regulations to operate the institute and code of conducts for members
are included in the order.

Role of ICAB & ICMAB in development of Accounting Profession in

Bangladesh
Roles of ICAB is as follows-

1. The code of conduct for the accountants should be prepared on the basis of “Chartered
Accountants Order, 1973”.
2. Takes necessary action if any member doesn’t maintain their code of conduct.
3. Keep a list of professional accountants.
4. Set up a standard for foreign certified accountants to work as a professional in
Bangladesh.
5. Arrangement of professional examination.
6. Set up sub-committees if needed, to solve the problems related to the profession.
7. Maintenance of international standards.
8. Help government to prepare rules and regulations for accounting profession.
Roles of ICMAB is as follows-

1. Organize the examination for those who are seeking membership of the institute.
2. Student registration and organize training.
3. Set up standards for achievement of membership.
4. Acceptance of foreign competence and training to provide membership.
5. Maintain honor and dignity of professional competence of the members of the institute.
6. Conduct research work on cost and management accounting by providing financial
support or any other way to the members of council.
7. Provides professional service in case of cost and management accounting.
8. Manage the library and publish books and journals on cost and management
accounting.
9. Apply rules and regulations upon members, officers and employees of the institute.

Financial Reporting Act (FRA)

 Section 2 (18) - Professional Accountant: Professional Accountant means the member of

The Institute of Chartered Accountants of Bangladesh (ICAB) and The Institute of Cost
and Management Accountants of Bangladesh (ICMAB).
 Section 2 (19) - Professional Accountancy Institution: Professional Accountancy
institution means The Institute of Chartered Accountants of Bangladesh (ICAB) and The
Institute of Cost and Management Accountants of Bangladesh (ICMAB).
 Section 3- Establishment of Council: The Act aims at inspiring the auditing and
accounting system of the country's financial institutions to international standards, and
under the Act, FRC comprising of 12 members will be established, led by a Chairman
appointed by the Government. Moreover, the council will be a statutory body with
members from various government bodies, institutions and professional groups.
 Section 7- The General Objectives of the Council:
The objectives of the FRC would be:
(a) To determine the code of ethics, standards of accounting and auditing profession;
(b) To improve the quality of accountancy and audit services;
(c) To improve the accounting and auditing profession;
(d) To ensure the highest quality of accounting and auditing of listed auditors of the
council.
(e) To enhance the credibility of financial reporting;
(f) To ensure the transparency and accountability of functions of accounting and
auditing profession; and
(g) To motivate for preparing the high quality reporting of financial and nonfinancial
information by public interest entities.

 Section 16- The duties and Responsibilities of Chairman of the Council:The duties and
responsibilities of Chairman of the council will be the following:
(a) Conducting administration of the council;
(b) Conducting and organizing effectively the activities and matters determined by the
 council;
(c) Preparing annual budget and program; and
(d) Performing other duties given time to time by the council.
 Section 21- Annual Report of the Council:
Council shall submit an annual report on its immediate preceding year’s functions to the
Government within 3 months from the completion its fiscal year. The following matters
shall be included in annual report:
(a) Accounts of annual revenues and expenses and related information;
(b) Details analysis of the functions of the council;
(c) Statement of the achieved goals of the council;
(d) Statement of the non-achieved goals with reasons;
(e) Statement of brief description of the members of the council and their honorees
and other .
 Assignment on
History of Auditing Profession in Bangladesh

Prepared For
Shish Haider Chowdhury
Course Instructor
Taxation and Auditing(ACT-304)

Prepared By
Asrafuzzaman
ID:1907
BBA 25th Batch

Institute of Business Administration

Jahangirnagar University

Date of Submission
20th July,2018