Auditing a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria. It is an independent examination of financial statements or related financial information of an entity. The results of the examination are finally expressed in the form of a specific opinion communicated to the relevant parties. Auditing of financial statements of companies registered under the companies act 1994 is compulsory in Bangladesh. According to Sec 213(3), the auditor is to make a report to be presented in the annual general meeting of the company on accounts examined by him.

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.

According to the Companies Act 1994, accounts of companies registered under this act must be audited by chartered accountants within the regulations of the Bangladesh Chartered Accountants Order 1973. Similarly, all books of accounts maintained by a non government organisation receiving foreign donations shall be audited by a chartered accountant as defined in the same Order. The accounts of every co-operative society are to be audited at least once in every co-operative year. The audit is to be conducted by the Registrar, or by an audit officer authorised by him, and by such date as may be prescribed. Accounts of enterprises under sector corporations are audited at three levels - corporations internal audit departments, independent professional audit firms, and the Comptroller and Auditor General (C&AG) of Bangladesh. The employees of a corporation on special issues conduct internal audit, sometimes similar to an investigation, and often termed as management audit. The purpose of this audit is to check whether the corporation's rules and regulations are being properly followed at the time of execution of any policy. Chartered accountants to pass opinion about the financial statements annually conduct independent professional audit. The C&AG has the obligation to conduct a government commercial audit where there is any government interest in the form of ownership, or investments, or where the government provides help in the form of subsidies.

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 authorised 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.

The purpose of government audit is to ensure transparency and accountability in the use of resources in all types of government management. The objectives of audit work includes verification of the statements of accounts and statement of income and expenditure to determine whether these are prepared truly and correctly; examination of the adequacy of the audited body's financial management systems and internal control framework; making sure that sufficient arrangements have been made to achieve economy, efficiency and effectiveness in the utilisation of the entity's resources; examination of the trading, manufacturing, profit and loss accounts and balance sheets and other subsidiary books of accounts with regard to state-owned commercial organisations; and undertaking special studies where necessary to determine if environmental legislation and procedures are being strictly followed.

The audit directorates and training academy placed under C&AG are Commercial Audit; Local Audit; Works Audit; Foreign Aided Project Audit; Civil Audit; railway Audit; Post, Telephone and Telegraph Audit; Defense Audit; Mission Audit; Performance Audit and Financial Management Academy (FIMA). Each of the Directorates mentioned above has its own functional set-up headed by a Director General.

Commercial Audit Directorate The Commercial Audit Directorate was set-up in 1956 by the government of Pakistan to undertake audit in state-owned commercial organisations. Following the independence of Bangladesh, the role of the department of commercial audit expanded because of the nationalisation of industries, banks etc. At present, all autonomous and semi-autonomous public enterprises, government-owned commercial bodies, including nationalised banks and public enterprises, having minimum 50% government share are audited by the directorate.

The main responsibilities performed by this directorate are to conduct audits of the initial and final accounts of all government commercial organisations; to ascertain whether the financial statements of the above organisations present a fair and accurate financial position in accordance with accepted accounting and auditing principles; to prepare a general financial statement incorporating a summary of the accounts of statutory bodies and public enterprises; to review the work done by external and internal auditors, including internal control systems within the organisation mentioned above, and to assess the performance made by government own commercial undertakings to ascertain their economy, efficiency and effectiveness.

Local and Revenue Audit Directorate The Director General, Local and Revenue Audit (DG, L&RA), conducts audit in two important fields covering about 12,000 government units/individual offices in a wide range of areas. These are the government offices (other than Post, T&T, Works, Roads and Highways, Railways, Public Health Engineering and Defense directorates) and autonomous and local bodies (city corporations, municipalities, universities, port authorities and other autonomous bodies).

There are concurrent audit parties in port authorities. On the request of the government, C&AG places concurrent audit parties to these organisations against audit fees payable to the government. The office of the concurrent audit party (generally headed by an Audit and Accounts Officer) is located in the premises of the auditee.

Of all the audit directorates, Local and Revenue Audit Directorate is the second biggest office headed by a Director General. Local and revenue audit in the government revenue departments (Income Tax and Customs Department, including the national board of revenue) is aimed at checking the adequacy of the financial system; seeing whether there have been any deviations from established rules and regulations; conducting audits on economy, efficiency and effectiveness to ascertain the performance of concerned offices; and examining the adequacy of the internal control system including taking appropriate action against irregularities and wastage in the use of public resources.

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 departmentalisation of government accounts, the present office of the Directorate of Works was established in 1985.

At present DG, Works Audit is responsible for auditing the Departments of Public Works, Roads and Highways and Housing, Water and Power Development Boards, Dhaka Electric Supply Authority, Water and Sewerage Authority, Civil Aviation Authority of Bangladesh, LGED, Public Health Engineering Department, Rajdhani Unnayan Kartripakkha (rajuk), other City Development Authorities, rural electrification board, Facilities Department, CMMU and House Building Research Laboratory.

The audit functions of the Directorate of Works are to conduct post audit of all transactions incurred under its jurisdiction, local inspection and disposal of inspection reports, audit of stocks and T&P returns, administrative control of the Divisional Accountant, and SACs (Subordinate Accounts Clerk) posted in different divisions under the jurisdiction of DG Works Audit, audit of land acquisition charge and adjustments thereof relating to works executed by the Public Works Division, audit of expenditure incurred against development loans; and audit and scrutiny of the amount lying outstanding under P W Deposit.

Foreign Aided Projects Audit Directorate Different foreign countries and donor agencies provide grants and loans for different development projects in the form of investment or technical assistance. The Director General, Foreign Aided Projects Audit, is responsible for auditing all projects implemented with funding by foreign aid. The main responsibilities of this Audit Directorate are to carry out audits in all donor funded development projects to prevent error and fraud, to ensure accuracy and completeness of accounting records and examine the adequacy of rules and regulation; to prepare the annual audit report and submit the same to C&AG for placement before the parliament; to conduct audits of all Accounts and Financial Statements of donor fund in accordance with the agreement between the government and donors; to express an opinion as to whether the financial statements of the donor funded projects presented are consistent with international standards on auditing, whether the accounts prepared are in accordance with accepted principles and whether they present fairly the results of the operation of the project. In terms of IDA and ADB loans, a separate opinion needs to be furnished for the statement of expenditure.

Civil Audit Directorate Following the departmentalisation 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 Accounts offices, Divisional Controller of Accounts offices, District Accounts offices and Upazila Accounts offices.

The Civil Audit Directorate is mostly concerned with the audit of transactions of expenditure and receipts of the government other than Defense, Railways, Roads and Highways, Post and Telephone and Public Works. The main responsibilities of the Civil Audit Directorate are to audit and certify the appropriation and finance accounts of the government; audit all types of transactions such as payroll, pension, pay fixation, contingent expenditures etc; carry out special audit as directed by the C&AG; and report to parliament through the C&AG based on results of audit. The DG, Civil Audit, performs his responsibilities with the help of one director, four deputy directors, and a number of officers and staff working under him.

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.

DG Railway Audit is responsible for conducting audits of all branches of Bangladesh Railway including the engineering department, traffic departments and accounts department, in accordance with the Railway Audit Manual, Railway Accounts Code, Railway Engineering Code, Railway Mechanical Code and the orders, circulars etc. issued by the government and the C&AG. The audit conducted by the office is mostly regularity audit; performance audit is yet to be introduced in Bangladesh Railway.

PT&T Audit Directorate The DG PT&T Audit office was set up prior to 1935 (during British rule) and was named as AG PT&T (Accountant General Post and Telegraph). Later, it was divided into two units as DC P&;T and AG Civil Calcutta. After the partition of India in 1947, this office was named as C P&T Karachi. After liberation of Bangladesh, this office was redesignated as AG PT&T. In September 1985, this office was subdivided into three units as D PT&T, CAO (postal) and CAO (T&T). Director PT&T is entrusted with the audit activities of Post and Telegraph Ministry while CAO (postal) and CAO (T&T) deal with the accounts of the Postal and T&T departments respectively. The office of the Director PT&T was renamed as DG PT&T in 1995. The number of all auditable units under DG PT&T is 191, of which 97 are in the Postal Department and 94 are in T&T Department. There are four concurrent audit offices in the four directorates of postal life insurance in four divisions. DG PT&T conducts audit of the post office department, T&T Board, including Telephone Shilpa Sangstha (Tongi), Cable Shilpa Ltd (Khulna), and also CAO (Postal) and CAO (T&T).

Defense Audit Directorate DG Defense Audit conducts audit of all units within the armed forces, inter-services organisation office of the CGDF and its subordinate offices. The office of the Director of Audit, Defense Services, established during the British period, was merged with the Military Accounts Department when the C&AG was entrusted with the accounting function of the Republic on promulgation of C&AG (Additional Functions) Act 1974. Following departmentalisation of Military Accounts Department, an independent Audit Directorate for Defense Services was again set up under the control of C&AG. The functions of the directorate are to conduct test audits of all expenditures, receipts and accounts of stores; concurrent audits of Defense service and Defense Finance Department through local audit parties; and audit all sanctions of the Ministry of Finance issued in favour of the Ministry of Defense.

Mission Audit Directorate DG Mission audit directorate conducts audit in Bangladesh Embassies/High Commissions, Trade Commissions, nationalised banks and Biman offices abroad. Former office of the Directorate of Mission and UN Audit was transformed to the office of the Directorate of Mission Audit when Bangladesh ceased to be a member of the UN Board of Auditors in 1984. Prior to the creation of the Directorate of Mission and UN Audit in 1978, the audit function of Bangladesh Diplomatic Missions, the office of the C&AG administered Trade offices, and nationalised enterprises. The main responsibilities of the Mission Audit Directorate are to prepare a budget for the audit programme; form audit parties based on an audit plan; provide necessary support to the members of the audit team to travel; audit the accounts of the CAO, Ministry of Foreign Affairs; pursue audit reports with the concerned departments; and prepare the annual audit report, etc.

Performance Audit Directorate' Performance Audit Directorate was established in October 2005. Performance Audit is an independent evaluation of the economy, efficiency and effectiveness with which the audited entity uses its resources. The office of the C&AG in addition to Financial and Compliance Audits for ensuring better accountability introduces performance Audit. The main responsibility assigned to the Performance Audit Directorate is the enhancement of performance audit capability by:

Providing advice to other audit directorates

Supervising performance audit works of other audit directorates

Conducting performance audit

Working as research wing of the office of the C&AG for improving audit methodology

Developing training modules and deliver training

Developing quality checklists.

Financial Management Academy (FIMA) The office of the DG 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.

Auditing types, systems and procedures Three main types of audit are the regularity or compliance audit, financial statements audit and performance audit (value for money audit). The regularity audit is very traditional and it examines receipts and expenditures and the financial systems and transactions of the audited organisation to see whether it has complied with relevant rules, regulations, laws, procedures, orders etc. A financial statement audit is the examination of the financial statements of an audited body to express an opinion on whether they truly present the expenditures and receipts in the case of the accounts prepared. It includes the audit of the appropriation and finance accounts of the government and of the government owned commercial enterprises. The performance audits examine an organisation's programmes, activities, functions or management systems and procedures to assess whether the organisation has achieved economy, efficiency, and effectiveness in the utilisation of its resources. Bangladesh recently adopted programmes to conduct performance audits on different issues in some organisations.

The auditing system adopted in all audit directorates is very similar. There are, of course, slight variations depending on the nature and scope of the audited organisation. Each audit directorate prepares a year-wise audit plan at the beginning of the financial year on the basis of the budget and risk involved with the organisations under audit. Some organisations are audited every year; some once in every two years and some are once in every three years or more. The director general is entrusted with audit planning and a director and deputy directors help him in the planning exercise. Each audit team has, in general, two/three members assigned with fixed man-days based on risk and volume of work of the concerned organisation.

The DG Audit instructs the audit team as to what percentage of transactions will be subject to audit. The general points taken into consideration in audit planning are volume of transactions of the auditable unit, number of vouchers, and nature of expenditure. Prior to the start of an audit in any organisation, the audit team needs to be familiar with the nature, activities and objectives of the organisation as well as with the annual report and past audit report including the budget book prepared on the organisation.

The audit team gives notice to the audited body well in advance letting them know the exact date of commencing audit and the records required to be examined. Procedures followed in carrying out an audit of any office include initial discussion with the head of the audited body, collection of all the records and information needed for auditing, examination of the records, checking the facts, collection of sufficient evidence in support of his statement, discussions with relevant people, coming to a conclusion and preparation of the report.

The audit team follows the guidelines mentioned in the Audit Code and Manuals and Government Auditing Standards. In some cases, the team follows the special instructions given by the Audit Directorate. In course of the audit work, all queries raised by the auditor are to be clarified by the audited organisation and are to be substantiated by proper supporting documents. Queries not met with valid documents are included in the Audit Inspection Report (AIR). On completion of each audit, the audit team discusses the audit report with the head of the audited organisation and obtains his opinion on it. Then an Audit Inspection Report is issued to him. The Inspection Audit Report, along with the working papers and an observation summary sheet is submitted to the Deputy Director Audit for review, after which the entire report and the audit file, with his comments on it, are submitted to the Director/Director General for final review and approval.

Paragraphs of serious irregularities known as Advance Paragraphs (AP) are communicated, after proper scrutiny, to the concerned management, including the Principal Accounting Officer (Secretary) of the concerned ministry. The auditees are given four weeks time to give explanations on irregularities. Two reminders are issued, allowing an additional two-week time interval in case the explanations are not satisfactory, or if there is no response at all. A DO (Demi-official) letter/ Management letter for such clauses is written to the Principal Accounting Officer giving four-weeks time. If the reply is not satisfactory or there is no reply at all, the report is finalised (as draft clauses) and sent to the C&AG for his approval and for inclusion in the audit report within ninety days.

In respect of a special audit conducted by the C&AG on request of the ministries/departments or on his own, sixty days are required to finalise the audit reports on getting audit inspection reports from the field auditors. Audit objections are settled through discussion with the auditees, broadsheet reply, and through bilateral and tripartite meetings with the relevant organisation and ministry. Despite the time limit within which replies to audit objections are to be given, practically very few organisations including the Audit Department comply with this time schedule. In fact, a long time passes in the course of the correspondences that go on between the Audit Department and the auditee organisation. The audit objections of trivial nature involving fewer amounts of money or those require regularisations, etc. of the audit inspection report are considered as ordinary clauses. Thereafter, necessary actions are taken to settle these cases at the management level.

Serious financial irregularities along with audit comments are incorporated in the Annual Audit Report, after the C&AG has approved them. The Audit Report is then submitted to the President of the Republic by the C&AG to be laid before Parliament. The reports placed before the Public Accounts Committee (PAC) discusses the Parliament. A standing committee of Parliament called the Public Undertaking Committee, (PUC) pursuant to the rule 238 of the 'Rules of Procedure of Parliament', attends to audit reports of the C&AG relating to efficiency and effectiveness of commercially run government organisations. [Md Shamsul Alam Khan]