CASH INCENTIVE AUDIT OVER LEATHER SECTOR

ACNABIN Chartered Accountants

Prepared by
Samira Mohammadi Enam
143011098

Supervised by
Sumaiya Zaman
Assistant Professor
School of Business (USB)

Submitted in Partial Fulfillment of the Requirements for the Degree

Bachelor of Business Administration

September 2018
Cash Incentive Audit over Leather Sector
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the intention of passing it off as their own work.

Name SAMIRA MOHAMMADI ENAM (BLOCK LETTERS)

ULAB ID # 143011098

Signature _____________________________ Date 09.09.18

 Internship Report Approval Form

Student Name Samira Mohammadi Enam ID No. 143011098

Major: Finance Year: 2018

Mobile Phone: 01534108315 Email: samira.enam.bba@ulab.edu.bd

INTERNSHIP/PROJECT INFORMATION

Internship Organization: ACNABIN Chartered Accountants

Internship /Project Report Topic: Cash Incentive Audit over Leather Sector

____________________________________________________________________

____________________________________________________________________
Term (Tick one): □ Spring 2018 ☑ Summer 2018 □ Fall 2018

SUPERVISOR APPROVAL

(Tick One)

☑Approved □ Not Approved □ Partial Re-write □ Full Re-write

Remarks (For Not Approved):

____________________________________________________________________

____________________________________________________________________

Signature: ____________________________________ Date: 09.09.18

Name: Sumaiya Zaman

E-mail: sumaiya.zaman@ulab.edu.bd

Phone: 01922921137
Table of Contents
Executive Summary .................................................................................................viii
PART A: Internship Experience ............................................................................... 1
Chapter One: Organization Profile ........................................................................... 1
Overview ................................................................................................................... 1
Services offer by ACNABIN .................................................................................... 2
SWOT Analysis of ACNABIN ................................................................................. 2
Operational Organogram of ACNABIN ................................................................... 3
Five Forces in ACNABIN ........................................................................................ 4
Chapter Two: Internship role and responsibility .................................................... 5
Introduction ............................................................................................................... 5
Nature of the Job ....................................................................................................... 5
Job Responsibility ..................................................................................................... 6
PART B: Research Project ........................................................................................ 7
Chapter One: Research Design.................................................................................. 7
Background ............................................................................................................... 7
Objectives ................................................................................................................. 7
Scope......................................................................................................................... 7
Methodology ............................................................................................................. 8
Limitations ................................................................................................................ 9
Chapter Two: Theoretical Background .................................................................. 10
Incentives over exporting business ......................................................................... 10
Importance of export incentive ............................................................................... 10
Government’s intention behind cash incentive ....................................................... 11
Export documents required for incentives .............................................................. 11
Cash Incentive rate varies from sector to sector ..................................................... 12
Importance of Cash Incentive to Leather Sector of Bangladesh ............................. 13
Conditions for applying Cash Incentive Facilities .................................................. 14
Chapter Three: Analysis and Findings ................................................................... 15
Cash Incentive Audit............................................................................................... 15
Cash Incentive Audit process step by step .............................................................. 15
Process of preparing calculation to submission of certificates ............................... 22
Different Circulars that are used in leather sectors ................................................. 23
 Calculation rate for leather sectors ......................................................................... 24
Issues should be considered by Auditor.................................................................. 24
One month income from leather sector ................................................................... 26
A leather sector certificates includes ...................................................................... 27
Critical Findings ..................................................................................................... 29
Chapter Four: Recommendations and Conclusions .............................................. 30
Conclusions ............................................................................................................. 30
Recommendations ................................................................................................... 30
References .................................................................................................................. 32
Appendices: ............................................................................................................... 33
List of Figures

Figure 1: ACNABIN's SWOT ...................................................................................... 3

Figure 2: Operational Organogram ............................................................................... 3
Figure 3: Methodology of the report ............................................................................. 8
Figure 4: Process for cash incentive ........................................................................... 15
Figure 5: Process of preparing calculation to submission of certificates .................... 23
Figure 6: Certificate Page ........................................................................................... 28

List of Tables

Table 1: Rate of Cash Incentive in different sectors ................................................... 12

Table 2: Leather export earnings last few years ......................................................... 13
Table 3: Audit fees taken by Firm .............................................................................. 22
Table 4: Rate of cash incentive for Leather ................................................................ 24
Table 5: Leather products ceiling price....................................................................... 25
Table 6: Bangladesh Bank’s saving of July ................................................................ 26
Table 7: Audit delays example ................................................................................... 26
Table 8: July month income from leather sector......................................................... 27
 Executive Summary

The research of this report was done on “Cash Incentive Audit over finished leather,
Crusted leather, and leather products” and this report is based on the cash incentive
department’s activities in ACNABIN Chartered Accountants. There were several
processes and concepts are taken into interpretation while doing the report. Processes
and concepts like cash incentive audit process, the process of preparing calculation to
submission of certificates, export documents required for incentives, conditions for
applying cash incentive facilities, issues should be considered by an auditor, etc. were
explored. This report is a mixture of the knowledge gain from the B.B.A. program and
practical experience gain from the internship program. This report includes ACNABIN
Chartered Accountant’s firm profile and my job responsibility as an intern over there.
But this report is mainly about my actual Cash incentive audit knowledge during the
internship period. Based on the critical findings, recommendations were also given.

viii
 PART A: Internship Experience
Chapter One: Organization Profile
Overview

The name “ACNABIN” comes from the shortenings of the founder partners’ names:
A stands for Aziz-uddin
C stands for Chowdhury
N stands for Nurun Nabi
A stands for Anwaruddin
B stands for Bari
I stands for Iftekhar
N stands for Nayeem
During February, 1985, ACNABIN Chartered Accountants was founded with a mission
to constantly enhance value by helping its clients to be successful ("ACNABIN
Chartered Accountants", 2018). The firm is in public practice for more than 33 years.
It is a member firm of Baker Tilly International which is the top 12 as an audit firm in
the globe. ACNABIN’s culture is driven by the Baker Tilly International core values.
They are obsessive about serving their clients.

ACNABIN is one of the largest partnership firms which was established with an idea
to build an institute which would provide an environment for learning, leadership,
teamwork and continuous growth. Over the past thirty-three years, the firm has a stand
in a position of a leading audit firm in Bangladesh and most well-known chartered
accountancy firms in Bangladesh with global affiliations. Right now, ACNABIN
Chartered Accountants has ten partners. Those partners have expertise in audit,
business consulting, accounting, review, business process, taxation, technology
solutions, training, and outsourcing; they have run the firm as a multifunction
accounting organization.

Short profile of ACNABIN given below:

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 Name of the Firm •ACNABIN Chartered Accountants
Date of
•15th February 1985
Registration
Head Office's •BDBL Bhaban (Level-13), 12 Kawran Bazar Commercial
Address Area, Dhaka-1215, Bangladesh.

Dhaka Extension •T.K. Bhaban (Level-9), 13 Kawran Bazar Commercial

Office Area, Dhaka-1215, Bangladesh.

Branch Office's •Jahan Building No. 7 (1st Floor, North Side), 59 Agrabad
Address Commercial Area, *Chottogram-4100, Bangladesh

•(+88-02) 41020030
Phones
•(+88-02) 41020035

Fascimile •(+88-02) 41020036

E-mail •acnabin@bangla.net

Web •http://www.acnabin.com/

Services offer by ACNABIN

ACNABIN offers a wide range of quality services to its clients in the private and public
sectors in Bangladesh. Their services are:
• Audit & Assurance
• Tax & legal advice
• Advisory Services
• Consultancy
• Outsourcing
• Others

SWOT Analysis of ACNABIN

Here is a short overview of ACNABIN’s SWOT analysis is given below, this following
SWOT analysis brings key strength and weakness of ACNABIN and also describes the
opportunity and threat of ACNABIN too.

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 Strength Weakness
•Deliver quality services with integrity. •Time Constraints
•Communicate openly •Sometimes work programs are not
•Act ethically followed properly
•Teamwork •Misjudge a situation
•Professional Judgment •Lacking in knowledge about the
•Strong brand equity client’s business
•Brand visiablity and advertising lesser

SWOT

Opportunities Threats
•Clients growth •Risk of Fraud
•Emerging market and expansion •High competition in market
abroad •Economic slowdown
•Market demand incresing
•Increase in comapnies looking for
expert solutions

Figure 1: ACNABIN's SWOT

(Source: Audit Manual, ACNABIN Chartered Accountants)

Operational Organogram of ACNABIN

Partners

Managers

Assistant Supervisors/ Job

Managers in charges

Articled
Students

Junior
Excutives

Interns

Figure 2: Operational Organogram

(Source: Audit Manual, ACNABIN Chartered Accountants)

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Five Forces in ACNABIN

Professor Michael Porter, well-known for his “five forces model” that gives a deep
explanation about the condition of competition in any industry. It would be beneficial
to apply to an audit firm.

• The threat of New Entrants: The threat of new entrants is practically zero. In
fact, if any new competitor comes in the market than that will be a risk for him
to be well-known in the market and compete with the top listed firms of this
market.
• The threat of Substitute Products: There are no substitute products in the
market for an audit firm. Such an audit is a legal requirement by Bangladesh
Bank.
• The Bargaining Power of Buyers: Client’s power is very limited in this
sector. They only have a choice of few top listed firms, which will possibly
audit for their competitors and clients always try to go for the top listed and
well-reputed firm like ACNABIN.
• The Bargaining Power of Suppliers: The suppliers of ACNABIN are people
and their bargaining power is low since most of the people want to work for
ACNABIN already.
• Rivalry among Existing Firms: Rivalry between competitors is high.
ACNABIN’s current competitors are Rahman Rahman Huq, Hoda Vasi
Chowdhury & Co, MABS & J Partners etc. Yet those firms are offering the
same service in the market.

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 Chapter Two: Internship role and responsibility
Introduction
During twelve weeks of the internship program, I was appointed to the Cash incentive
department of ACNABIN Chartered Accountants. Here, in the incentive department, I
was chosen for the leather sector. In this firm, I got the experience of working under
the pressure of responsibilities, maintaining chain of commands and working in a team.
ACNABIN trained me for maintaining disciplines wherever I even get to know how to
reach a mutual understanding between different people while working together. This
practical orientation is required for a person before entering into the corporate world.
There is a list of things given below which I have learned at ACNABIN Chartered
Accountants are:
• The exact definition of responsibility
• Responsibility to the profession
• Necessity of commitment
• Auditing and Reporting duties
• Working with honesty
• Working self-sufficiently
• Client dealings
• Working with auditing standards
• Punctuality and disciplines
• Ability to interact with different types of individuals

Nature of the Job

Appointed in a Chartered Accountancy firm named ACNABIN Chartered Accountants

as an Intern in their Cash Incentive Department from 19th June 2018 to 18th September
2018.

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Job Responsibility

• Follow orders of the seniors.

• Receive files and give input in file status.
• Prepare calculation sheets for applications of leather products, finished leather,
and crust leather.
• Send queries to the commercials and meetup them with the help of
commercials.
• Review calculations which already initiated.
• Send files for input and draft check before certificate issue.
• The initial check of certificates.
• Prepare certificates bunch for the signs.
• Prepare certificates bunch for courier after coming from the signs.
• Make correction if there any errors find out during the draft check and certified
check.
• In charge of stationary, laptops, and keys which belongs to the incentive team.

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 PART B: Research Project
Chapter One: Research Design
Background

ACNABIN Chartered Accountants firm which is a well-known CA firm in Bangladesh.

I am working in Verification of alternative cash assistance department of ACNABIN
Chartered Accountants. As I am working in the verification of alternative cash
assistance department, so it will be easier for me to complete my internship report on a
related topic within this department.

Objectives

The main objective of this report is to present practical knowledge which going to be
gain through working with ACNABIN.

• To know the procedure of cash incentive facilities given in leather sector.

• To gain a practical knowledge of how the cash incentives audit process is work
by ACNABIN Chartered Accountants.
• To know the rules and regulation sets by the Bangladesh bank over cash
incentives.

Scope

The report will cover most of the procedure followed by ACNABIN which will be only
related with cash assistance given to a foreign exporter of leather sector. But this report
will not go into other sectors and services of ACNABIN.

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Methodology

The report will mainly focus on primary data. All the data and information will be
collected by practical experiences and direct sources. But for preparing this report, I
had to use different circulars published by Bangladesh Bank about cash incentive and
documents which are submitted along with applicant’s file. To complete this report, I
had to use both primary and secondary data.

Methodology

Primary Sources Secondary Sources

Bangladesh Bank’s
Self-Observation in Foreign Exchange
ACNABIN Policy Department
circulars.

Discussing with seniors Export promotion

and job in charge. bureau (EPB) of
Bangladesh

Personal conversation THE CUSTOMS ACT

with clients (1969)

Monthly Business
Review by IDLC

Figure 3: Methodology of the report

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Limitations

Main limitation of my report is I was got limited responsibility in ACNABIN as I was

the most junior among the firm. Basically, I don’t have more knowledge on audit
procedure of verification of alternative cash assistance as the seniors of ACNABIN
Chartered Accountants. Here, I was just allocated in leather sector of cash incentive
department whether my seniors are experts in multiple sectors of this department.

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 Chapter Two: Theoretical Background
Incentives over exporting business

Every country incredibly has a lot of addiction toward foreign currency. So in our
country, our government has taken several steps to encourage the export-related
activities. Our government provides incentives to motivate export. Right now, our
government provides 3 choices to the ultimate exporter as incentives –
• Duty drawback: If any exporter apply for Duty drawback than he/ she is free
from paying any kind of duty in the port
• Bonded warehouse: Under bonded warehouse facility whenever an exporter
does not have any warehouse to keep their merchandises for the needed time
they requisite, they can use this bonded warehouse without any charge.
• Cash incentive: Cash incentive is that the help within the form of “Cash” given
to any party on its fulfillment of definite conditions. This cash incentive can be
taken from the total exported value of the ultimate exported goods.

Most of the exporter from Bangladesh are apply for cash incentive which becomes
common and this facility is only given to the exporter on some term and conditions
which fix by Bangladesh bank through circulars. It is up to the exporter that they'll
apply for. Usually, most of them choose the cash incentive.

Importance of export incentive

With a view to encouraging exports in accordance with the export-led financial growth
strategy of Bangladesh, the authorities of Bangladesh gives export incentives to
selected export sectors. The sectors to experience such cash incentives and the
respective rates to be provided are up to date every year via circulars issued with the
encouragement of Bangladesh Bank.
It is miles to be referred to that such cash incentives are given just to those exporters
who do no longer need the duty drawback facility or the bonded warehousing facility.
Bangladesh Bank also has requirements for appointment of audit firms to direct reviews
on cases of cash incentives.

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Government’s intention behind cash incentive

If the cash incentives are given to the exporter than the exporters are getting financial
help from the government and feel motivated. Because of cash incentive, Export
amount increase within our country. So, ultimately cash incentives help:
• To expand local value.
• To expand the new marketplace for export.
• To extend foreign remission and to extend the foreign currency reserve.
• To use the native raw materials rather than foreign raw materials
• To make competitive advantages for native raw materials and finished product
of some selected sectors like leather, RMG sector against that of the
neighboring countries.
• To facilitate a lot of price addition in a different sector.

Export documents required for incentives

According to Section 131 of the Customs Act, 1969, Export always requires clearance
of Customs. This section mention that if the export declaration is not submitted to
customs in prescribed format, and not approved by the customs authority than
merchandise will not be permitted to load in containers or ship for export. Few things
should be clearly mentioned in the declaration ("THE CUSTOMS ACT", 1969), like:
• Name of exporters,
• Name of foreign buyers/importers,
• Description of goods,
• Value, and
• Name of transport operators.

Master L/C or Contract Invoice or Purchase Invoice, Commercial Invoice, Packing

List, EXP Form, Certificate of Origin of export goods, etc. documents have to submit
with bill of export for customs clearance that instructed through the Prescribed Bill of
Entry and Bill of Export Form Order, 2001 which issued by the NBR. Documents
requirements vary sector wise.

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After the documentary check and physical confirmation of export shipments where
exportable goods are loaded into containers and stuffed into the ship/aircraft/truck than
the export declaration is accepted by the Customs authority. Export is process finished
after the ship/truck/airlines depart the port, and customs officer who can be PO-on-
Board/gate division officer in charge signs on the back of the 2nd copy of the shipping
bill. Authorized officers check the merchandises before it proceeds to the port area.

Cash Incentive rate varies from sector to sector

In the fiscal year of 2017-2018, maximum 20% cash incentive given against exporting
merchandises and in 27 categories of goods and products getting cash incentive as per
Bangladesh Bank year wise circular. The exporters will have to apply to their respective
bank to get the incentives within six months after the repatriation of the export’s value.
Cash incentive facility is given to several sectors at a different rate based on year
circular published by Bangladesh Bank. Govt. has expanded this facility to the
following sectors:
Exported products Rate
Export-oriented domestic textile sector in lieu of 4.00%
customs bond and duty drawback
Small and medium garment factories 4.00%
Frozen Shrimp 7.00% to 10.00%
Potato, halal meat and agro-products 20.00%
Plastic products 10.00%
Ship export 10.00%
Leather products 15.00%
Finished and crusted leather 10.00%
Diversified Jute products 20.00%
Finished jute goods 10.00%
Jute yarn 5.00%
Software, ITES, Hardware 10.00%
Table 1: Rate of Cash Incentive in different sectors
(FEPD Circular No. 31, 2017)

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Importance of Cash Incentive to Leather Sector of Bangladesh

The leather is the second one biggest export section of Bangladesh after RMG in getting
incentives from the government, as suggested in the budget for 2017-18. According to
EPB (Export Promotion Bureau), export of finished leather, crusted leather and leather
products contributes a widespread amount in national revenue.
Bangladesh exports its finished leather, crusted leather, and leather products to
countries like Canada, Belgium, France, Germany, Italy, Poland, the UK etc. (Monthly
Business Review, 2017). The total proportions of the global leather marketplace are
worth approximately $215 billion, according to IDLC Business Review. In total global
leather and leather product’s marketplace, Bangladesh’s portion is 0.5% (Monthly
Business Review, 2017).
In 2012, Bangladeshi government ordered to relocate tannery business from
Hazaribagh to Savar. Replacement of tannery at Savar tannery industrial area, wherever
Central Effluent Treatment Plant (CETP) is underneath-production has a positive
impact on the expansion of the leather sector and through audit, we have a tendency to
check that the factory is found at Savar and isn't harmful to the atmosphere.
Few top export items from Bangladesh are crusted leather, finished leather, leather
shoes, travel bags, wallets, belts, etc. Thus, a large scope of revenue generation from
the leather sector in Bangladesh. So, for booming this sector and to grab the attention
of new businesspersons, the exporting leather goods, and leather can be very attractive
through cash incentive. Cash incentive assistance could help a lot in such expansion.
Fiscal Year Leather export earnings
2013-14 $1.12 billion
2014-15 $1.13 billion
2015-16 $1.16 billion
2016-17 $1.23 billion
2017-18 $1.08 billion
Table 2: Leather export earnings last few years
("Export Promotion Bureau of Bangladesh ", 2018)

The Government of Bangladesh has offered alternative Cash Incentive to the leather
sector of Bangladesh for the following reasons:

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 • To boom the export of leather.
• To establish and strengthen the backward linkage of leather.
• To encourage to establish more leather product generating factories in
Bangladesh.
• To make our products more competitive in foreign markets.
• To make our leather sector sufficient from the foreign market.
• To establish a market for the local leather product producers.
• To encourage more value addition in the leather sector.

Conditions for applying Cash Incentive Facilities

In the case of the leather exporter, there are three items –

• Crust leather,
• Finished leather &
• Leather products.

For the different sector, there are different conditions which should be eligible to apply
for cash incentive facility. If an exporter wants to take the Cash Incentive facility, then
they have to fulfill the following conditions:
• Duty drawback facilities and bonded warehouse facilities have to ignore to get cash
incentive.
• Only one party among the leather product manufacturer, crust leather suppliers,
and finished leather exporter will get cash incentive.
• Application for cash Incentive will submit his application to the negotiating bank
within 180days of the realization of the export proceeds. (FEPD Circular No. 09,
2015)

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 Chapter Three: Analysis and Findings
Cash Incentive Audit

A formal method that is accompanied by an auditor where they find out errors which
known as Audit. Alternative Cash Incentive audit is one sort of audit. In Cash incentive
audit, auditors involve with the activities of inspection required documents and
calculating the amount whether or not it's satisfying the circulated amount of
Bangladesh Bank. If the documents are relevant and therefore the amounts are fulfilling
the central banks circulated markup then the audit firm can provide the certificate to
their clients. Only Bangladesh Bank has the right to provide the cash incentive.

Cash Incentive Audit process step by step

The whole process step by step are shown in the following diagram:

The exporter submit The application is Letter issued by the

application for the officially received by bank to the concerned
cash incentive the concerned bank partner

Start of the cash Preparation of the Review of the

incentive audit. working paper file working paper file

Preparation of control
Partners review and The certificate is
sheet and cross
signature submitted to the bank
checking of workings

Figure 4: Process for cash incentive

(Source: Audit Manual, ACNABIN Chartered Accountants)

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Step 1: Application for Cash Incentive
The Exporter submits an application for Cash Incentives along with all required
documents to the Export Division of the Bank through which the export is made. It’s
done after the date of the proceeds realization since it is the proceeds of the exported
goods, on receipt of that the exporter becomes suitable to apply for Alternative Cash
Incentives. Generally, the application is maintained with a number of different
documents which are mention as required by different authorities to be submitted with
the Application. All photocopies of required documents must be attested within the
files.

Step 2: The application is officially received by the Bank

A concerned branch of the Bank’s Export Division officially receives the files of the
application and required documents. Then the documents are attested by the authorized
officer of the concerned branch of the Bank. The responsible officer verifies all
documents submitted to the bank along with the application before attestation. If he
catches any error or incompleteness than he has to reject the application. The applicant
has to correct them and sort the file in the method and manner required by the bank.

Step 3: Letter issued by the Bank to the concerned Partner of the Firm
Then the Head Office of the concerned bank sends a letter with requesting the Audit
Firm to complete audit work concerning the application for Alternative Cash
Incentives.

Step 4: Start of the Cash Incentive Audit

The audit firm sends auditors to the concerned bank and the Cash Incentive Audit
officially starts on receiving of the letter from the Export Division of the Head Office
of the bank. After attestation of all required documents, the authorized officer of the
concerned branch of the Bank sends the files to the auditors and according to
Bangladesh Bank’s FE Circular no. 291, the auditors start their work as per the Terms
of Reference (TOR).

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Step 5: Preparation of the Working File and Certificates
Our first work regarding the audit of cash incentive files is to organize a working file
for every file of the application as an auditor. It’s the first-hand work of such audit. The
Audit Firm gave us a standard format to prepare this working files. For each
application, a separate certificate is prepared. So we have to prepare a separate
calculation for each application.
Information that we have to check during our working process is given below in the
following section:

➢ Application
✓ Name of the applicant
✓ Date of application
✓ Office address
✓ Factory address
✓ The quantity of Exported Goods
✓ Export Value
✓ Shipment date
✓ Realization Value
✓ Realization date
✓ Applied amount (both in USD$ and in Taka)

During the time of the audit, we check the applied amount which claimed by the
applicant in the application is correct or wrong. Most of the time, we find out the
amount wrong. As an auditor, it’s our responsibility to find out the exact amount should
be paid as a cash incentive for that application. Sometimes we find that the date of
application is missing and other mismatches find out in the application. In that time,
we send a query to the applicant is asked to correct those in the application. Here,
during calculation for the applicant as per the cash incentive rate at the date of
shipment. In the calculation, we convert the US dollar figure into BDT and we ask the
bank to provide us the incentive files with the Rate File of the bank and we use the OD
sight exchange rate of USD.

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➢ Master L/C or contract (attested copy)
✓ L/C No. & date of issue
✓ Goods exported (crust/finished leather or leather products)
✓ Quantity (in pieces or square foot)
✓ Term (FOB / CFR)
✓ Commission (if any)
✓ The original amount of the L/C (in USD)
✓ Transferred amount of the L/C (in USD)
✓ Notifying party
✓ Transshipment
✓ Partial shipment

Most of the time, incentive applications applied through Master L/C. The actual amount
fully transferred on behalf of the exporter through L/C, then both the actual amount and
transferred amount are the same. Sometimes there are numbers of amendments along
with the L/C. That time, we have to check each amendment’s amount and quantity than
sum up the total amount and quantity. If the freight is prepaid by the exporter than the
Term is CFR mentioned in L/C and then we have to check freight certificates are
attached with the application. In the “Notifying Party” section, we have to check the
name of the agent appointed by the importer. The name of the party who going to get
the incentive is mentioned in the amendment of the L/C. If it is missing in the L/C or
in amendments than the incentive application will be rejected.

➢ Bangladesh Finished Leather, Leather Goods, and Footwear Exporters

Association Certificate:
✓ Certificate No.
✓ Exported Goods
✓ Date of the Certificate
✓ Quantity
✓ Export LC number / Contract number.
✓ Date of that Export LC / Contract
✓ Commercial invoice number & date

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 ✓ Shipment Date

➢ Proceeds Realization Certificate (Original Copy)

✓ Reference no. of the certificate
✓ Export L/C No.
✓ Date of the Export L/C
✓ EXP. No.
✓ Date of realization
✓ Realized value in US dollar/ EURO
✓ Freight Amount

Proceeds realization certificate (PRC) must be submitted with the application files.
PRC’s Original copy has to be submitted and the photocopy is not accepted. If the
photocopy is submitted instead of the original copy than the audit firm won’t issue a
cash incentive certificate for the application. Sometimes mismatch found in PRC. That
time we have to inform it immediately to the bank and asked them to correct the PRC.

➢ Commercial Invoice
✓ Commercial Invoice No.
✓ Date of Commercial Invoice
✓ Quantity / Unit (in pieces/ square foot)
✓ EXP. No.
✓ Export L/C no.
✓ Bill of lading no.
✓ Contract no. and date
✓ Commission (if any)
✓ Gross amount (in US$)
✓ Net amount (in US$)

We check commercial invoice mainly for cross-checking the total quantity and total
amount. We carefully the commercial invoice to identified is the correct commercial

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invoice of that file. Sometime mismatch found, to that time we send a query with asking
to correct them.

➢ Bill Of Lading (BL)

✓ Name and address of the notifying party
✓ B/L No.
✓ Date of shipment
✓ EXP No. and date
✓ Master LC No. and date
✓ Contract No. and date
✓ Gross weight
✓ Freight prepaid or freight collect

In BL, the date of shipment is the important information during the audit because the
rate of cash incentive applicable for the exporter decide based on the date of shipment.
If freight is prepaid mention in BL than we required the freight certificate along with
BL. In back page of BL, export product description required by customs and as an
auditor I have to check that.

➢ Packing List:
✓ Commercial Invoice number and date
✓ Proforma Invoice /Contract form Number
✓ Proforma Invoice / Contract form Date
✓ Quantity
✓ Gross weight
✓ Net weight

We have to check the Packing List attached with the Commercial Invoice for the gross
and net weights and for quantity recheck with commercial invoice.

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➢ Proforma Invoice or Contract Paper:
✓ Contract Value
✓ Contract Number Date
✓ Exporter Name
✓ Importer Name
✓ Quantity

It is prepared by the concerned bank and about quoting of products and prices. Here,
we check the point given above.

➢ EXP Form:

It is provided with an EXP number, the things that we check here is:

✓ Exporter Name
✓ Importer Name
✓ Quantity
✓ Export value
✓ Exp Number
✓ Exp Form Date
✓ Bill Of Lading Number
✓ Bill Of Lading Date
✓ Custom Registration No. and Date

Step 6: Review of the Working File and Certificates

This working file is reviewed by senior articled student again. He/ She recheck the
calculation of the certified amount which should be given for incentive and send them
for input. He/ She verifies the calculations and prepare certificates considering the
Bangladesh Bank master circulars and year wise circulars. Certificates also review
twice by the articled students.

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Step 7: Keep information in the records
In this stage, we record the important and related information regarding each
application in Control Sheet file. It is especially for the purpose of the Audit Firm. This
control sheet file is an overview of all the applications. Everything checked again by
the In-charge of the Cash Incentive Audit. He/ She initially compares the control sheet
with the working files and if he/ she finds any error then check the original files for
clarification.

Step 8: Partner’s Review and Signature

After certificate prepared and review than those send for partner’s sign by the manager.
The Partner takes one final check of the whole matter. If the partner has any queries,
he asks the In-charge to clarify the matter. Finally the concerned Partner of the firm
issues these Cash Incentives Certificates by properly signing them.

Step 9: Submission of the Certificate to the Bank

After the signature of the Partner cash, the incentive certificates are issued by the firm.
Then the certificates are submitted to the Head Office of the bank. The application of
that certified file will also be submitted with the certificates. The Head Office of the
concerned bank will receive certificates and the certified amount will be paid to the
applicant. Then the audit firm gets its fixed fees from the bank.

Amount of cash incentive Audit Fee (Amounts in BDT)

Less than 5,00,000 4000
5,00,000 or above but Less than 10,00,000 5,000
10,00,000 or above 7,000
Table 3: Audit fees taken by Firm
(Source: Audit Manual, ACNABIN Chartered Accountants)

Process of preparing calculation to submission of certificates

In ACNABIN process of preparing calculation to submission of certificates step by

step is given below:

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 Check all the relivent documents

Prepare a calulation sheet and queried are written down

Review calulation and queries

Queries are send to the commercials

Queries meet through commercials

Calulations submitted for input

Draft printed

Draft reviewed

Go for correction (if any error found in draft)

Certificate printed

Submission and invoice no. are collected from admin

Certificate reviewed

Go for correction (if any error found in certificates)

Certificates prepared for the ACNABIN partner's sign

Everything cross checked by In-charge of Cash Incentive

Manager reviewed again

Partner reviewed and signed

Working papers are stored

Cerficates are curriered to the concern bank

Figure 5: Process of preparing calculation to submission of certificates

(Source: Audit Manual, ACNABIN Chartered Accountants)

Different Circulars that are used in leather sectors

For Leather Product:

• Master Circular Number: 9 & Date: April 17, 2000
• Year Wise Circular:
• 2017-18: Number 31; Date: August 17, 2017
• 2016-17: Number 24; Date: September 20, 2016

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For Crust Leather:
• Master Circular Number: 5 & Date: April 11, 2010
• Year Wise Circular:
• 2017-18: Number 31; Date: August 17, 2017
• 2016-17: Number 24; Date: September 20, 2016

For Finished Leather:

• Master Circular Number: 23 & Date: November 22, 2009
• Year Wise Circular:
• 2017-18: Number 31; Date: August 17, 2017
• 2016-17: Number 24; Date: September 20, 2016

Calculation rate for leather sectors

From the data collected, the incentive rate declared by Bangladesh Bank and followed
by the auditor. Cash incentive rate for Leather:
Leather Type Rate of Cash Incentive
1. Finished Leather(Circular 23) 10%
2. Crust Leather (Circular 5) 10%
3. Leather Products (Circular 9) 15%
Table 4: Rate of cash incentive for Leather
(Source: BB FEPD circulars)

Issues should be considered by Auditor

Some issues should be considered during certificate print. They are as follows:
• Calculation of maximum acceptance value (for Leather sector only)
According to Bangladesh Bank circular, an exporter can get an incentive on maximum
95% of net FOB (Freight on Board) export value in Leather sector.

• The rate of incentive is properly followed or not

From the description and calculation done about “Whether Cash Incentive is provided
as per Bangladesh Bank requirement” it is seen that incentive rate is properly followed
as per Bangladesh Bank rate in Leather sector.

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• Ceiling Price of Leather Products
According to Bangladesh Bank circular no. 5, 9 and 23 there is some ceiling price on
the export price on which the govt. is willing to approve a cash incentive. For finished
leather, the amount is $3 per square foot and for crust leather, there is no ceiling price.
For Crust Leather there is no Ceiling price.
The cash incentive is given on the highest ceiling amount of net FOB. The ceiling price
for Leather products are –
Products Ceiling Price
Bags $45
Boots & Shoes $35
Sandal $20
Wallet $30
Purse $35
Belt $25
Table 5: Leather products ceiling price
(Source: BB FEPD Circulars)

• Bangladesh Bank’s saving by Auditors

In 1986, the cash incentive system was first presented as “Cash Compensatory
Scheme” (CCS) by Bangladesh Bank. That time Bank calculation was considered as
the absolute calculation and there was no necessity of the audit. For the period of 1997,
some abuse of cash incentive process was proved. So, from 20 April 1997, Bangladesh
Bank ordered the applicants to submit their applications to the negotiating bank. Here
the auditors of the negotiating bank audit the cash incentive applications.

Date Applicant Export Realization Claim Bank Audited

Value Value Amount Approved Amount
(USD) (USD) (BDT) (BDT) (BDT)
05.07.18 ABC 947,419.28 947,300.28 11,577,403 11,577,403 11,577,403
Footwear
Industry Ltd.
10.07.18 Apex 424,823.53 424,664.03 3,393,208 3,393,208 3,393,208
Tannery Ltd.

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 22.07.18 BBJ Leather 279,167.88 279,167.88 3,287,239 3,287,239 3,287,239
Goods. Ltd.
26.07.18 BBJ Leather 239,795.5 239,795.5 2,969,386 2,969,386 2,946,217
Goods. Ltd.
31.07.18 ABC 9,46,670.4 946,026.4 11,700,784 11,700,784 11,574,042
Footwear
Industry Ltd.
Total 32,928,020 32,928,020 32,778,109

Table 6: Bangladesh Bank’s saving of July

(Source: Audit Manual, ACNABIN Chartered Accountants)

Bangladesh Bank Saving Amount= (Bank approved amount – Audited amount) =

(32,928,020 - 32,778,109) = BDT 149,911. This amount is saved by ACNABIN in the
month of July from the leather sector.

• Audit Delays performed

At first audit firm gets a forwarding letter from the particular bank for start the audit.
According to Bangladesh Bank, Audit work have to complete within 7 working days.
But if audit work extends this 7days than that known as Audit Delay.
This happened not because of auditor’s carelessness. Mainly happened due to errors in
documents and queries of those errors didn’t meet up in time. When the applicants take
time to meetup errors than that delay the audit work and auditors delay to provide
certificates. Audit delays example given below:
SL Applicant's Name Forwarding Certification Days Max. Audit
Date Date Worked Days Delay
Allowed

1. ABC Footwear Ltd 10.07.18 19.08.18 29 7 (22)

Table 7: Audit delays example
(Source: Audit Manual, ACNABIN Chartered Accountants)

One month income from leather sector

In the month of July, 2018, ACNABIN issued 69 certificates of leather sector for
different applicants and claimed BDT 363,400 from Agrani Bank (Client of
ACNABIN) as their Audit fee.

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 Date Applicant File Quantity Audit Fee + Vat 15%
(BDT)
05.07.2018 ABC Footwear 13 70,000+10,500= 80,500
Industry Ltd.
10.07.2018 Apex Tannery Ltd. 12 50,000+7,500= 57,500
22.07.2018 BBJ Leather Goods. 7 31,000+4,650= 35,650
Ltd.
26.07.2018 BBJ Leather Goods. 12 50,000+7,500= 57,500
Ltd.
31.07.2018 ABC Footwear 25 115,000+17,250= 132,250
Industry Ltd.
Total Fee: 363,400/=

Table 8: July month income from leather sector

(Source: Audit Manual, ACNABIN Chartered Accountants)

A leather sector certificates includes

A certificate bunch not just only mean the certificates that include more few documents
& those are:
• Submission: It’s a letter which needs to write for make clear and substantive
information about file quantities, party names, dates etc. though this submission
letter.
• Invoice: Here, An invoice is a commercial document issued by the audit firm
which mentions the audit fees have to pay by the concerned bank to the audit firm.
• Summary: Summary of application files given in a table format where the L/C no.,
date, amount, claim amount, audit amount, the bank approved, file no. includes.
• Certificate page: That is the main certificate with finalizing the cash incentive
amount.
• DEDO: In this sheet, we figure out the maximum acceptable value for that
application. This page only includes in finished leather and leather products
certificates.
• Annexure A: In this sheet, we do the calculation to find out the actual amount
which should be provided as an incentive.

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• Annexure B: This sheet not relevant always. This sheet only added when there are
more than one L/C, proforma invoice and contract note used for the application.

SL: # Bank ID: #

CERTIFICATE

Applicant M/S_______________________________ exported through export L/C

number______________________ dated __________________ for
USD__________________ vide EXP number _____________________________ of
Agrani Bank Limited, _____________ Branch, _____________, containing export
value of USD______________________ against which
USD_____________________ has been repatriated on USD ________________ and
cash incentive claim is BDT. ___________________

Amount repayable as per ToR after audit is BDT. ___________________________

only which is hereby certified to be true and fair.

Signature:
Date:
Name of the Partner:
Name and Address of the Audit Firm:

Figure 6: Certificate Page

(Source: Audit Manual, ACNABIN Chartered Accountants)

Only the Submission, Invoice, Summary & Certificate Pages are signed by one of the
partners of ACNABIN and other pages are sealed with ACNABIN seal. (Check
Appendices to see actual documents)

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Critical Findings

During the internship period in ACNABIN, I get the opportunity to learn new things.
Some observations of mine during audit given below:

1. Auditors go for factory visit when a new client send their files for the cash
incentive.
2. ACNABIN audit work as a safeguard for government money.
3. Documents are not perfect always. Most of the time, we found error and
mismatch in Export document, Application, Association certificates too.
4. Sometimes important documents are missing.
5. Applicant claim for the bigger amount which more than they should get and
here ACNABIN find out the proper amount.
6. ACNABIN audit Cash Incentive Files as per the rules and regulation of
Bangladesh Bank Circulars.
7. Fraudulent activities can be done commonly on behalf of the Bank and
respective clients. That’s way before certified any file, ACNABIN checks the
files very carefully and reviewed in every step by expert auditors.

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 Chapter Four: Recommendations and Conclusions
Conclusions

In this report, I had tried to deliver the cash incentive audit process which ACNABIN
follows and offers to its clients. Cash incentive audit is mainly a step by step process.
The cash incentive is one kind of assistance which is provided by Bangladesh Bank to
promote export in our country and provided in the form of “cash”. It only was given to
the party who fulfillment the certain conditions of cash incentive application has been
required. It plays a significant role in our financial development. It is a matter of joy
that a notable change has been seen in the leather sector of Bangladesh. The number of
leather factories has been increased. Those developments are results of cash incentive.
ACNABIN have great kind of internal control, inflexible ethical moral, disciplines and
strong chain of command which help them in earning a top listed brand status in the
market. Auditing for cash incentive applications is a legal requirement to save
Bangladesh Bank money and ACNABIN doing this job in a perfect way.

Recommendations

Through my internship period experience, sometimes auditors face problem during

Cash incentive audits but those can be easily solved by the Bangladesh bank Circulars
and senior auditors, banks, and applicants. Some common problems which can be
solved by the following issues:
1. The auditors should always have the proper knowledge of rules, regulation,
and rates which are sets by Bangladesh bank and have the updated information of
Bangladesh bank circulars.
2. Job in charge should give some brief idea about the applicant’s business to
all the team member.
3. Working process must be appropriately presented to the juniors/ new students/
interns and.
4. In charge of the team must be well-organized and he/she should properly
oversee the work of his/her juniors.

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5. Each of the members of the team should be given proper time (neither much
nor less) to complete the entire working process properly.
6. Applicants should be ordered or instructed to provide the required documents
to the auditors.

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References

ACNABIN Chartered Accountants. (2018). Retrieved from http://www.acnabin.com/

Bangladesh Bank. (2015). FEPD Circular No. 09 [PDF]. Retrieved from
https://www.bb.org.bd/mediaroom/circulars/fepd/aug112015fepd09.pdf
Bangladesh Bank. (2017). FEPD Circular No. 31 [PDF]. Retrieved from
https://www.bb.org.bd/mediaroom/circulars/fepd/aug172017fepd31.pdf
Export Promotion Bureau of Bangladesh-Government of the People's Republic of
Bangladesh. (2018). Retrieved from http://epb.gov.bd/
IDLC. (2017). Monthly Business Review [PDF]. Retrieved from
http://www.idlc.com/.../Monthly%20Business%20Review%20-
%20September%202017.pdf
THE CUSTOMS ACT. (1969). Retrieved from
http://bdlaws.minlaw.gov.bd/print_sections_all.php?id=354

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Appendices:

Calculation sheet of leather products:

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Query Sheet:

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Submission:

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Invoice:

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Summary:

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Certificate Page:

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DEDO for leather products:

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DEDO for finished leather:

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Annexure A:

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Annexure B:

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