Audit report

A report on
“External audit plan & program of Beximco Synthetics Limited’’
Course code: F -310
Group no:
Submission date: 9th
March, 2015

1
Section: B
B.B.A 18th
Batch
Department of Finance
University of Dhaka
Serial no Name ID NO Remarks
01. Sanjida Rahman Liza 18-010
02. Rahima Nazat Ara 18-074
03. Fowziah Nahid Priya 18-096
04. Hamida Akter Hera 18-146
05. Sneharthi Ghosh 18-152
GROUP PROFILE

2
9th
March, 2015
Mohammad Salahuddin Chowdhury
Assistant Professor
University of Dhaka.
Subject: Submission of report on ―External audit plan & program of Beximco
Synthetics Limited’’
Dear Sir,
We are obliged to submit the report entitled ―External audit plan & program of
Beximco Synthetics Limited’’as a partial requirement of our course ―Auditing‖ (F-310)
under your instruction.
Apart from the academic knowledge gained from this course, preparation of report has given us
the opportunity to acquaint ourselves with the concept of risk assessment, materiality and other
variables. We also learned a lot about audit opinion, auditing in inventory area. We believe that
the experience we have acquired from this study will be an invaluable asset in our lives.
We are extremely grateful to you for your valuable guidance, diligent effort and supervision. We
have tried our best to follow your instructions, schedule and discipline obediently.
Sincerely,
Sanjida Rahman Liza
ID: 18-010
On behalf of the group members of group no-
BBA 18th
Batch
University of Dhaka.
LETTER OF TRANSMITTAL

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We express our thanks to our dear course teacher Mohammad Salahuddin Chowdhury for
assigning us a report dealing with preparing audit plan and program of Beximco Synthetics Ltd.
In this regard, we would also like to thank ourselves as our good teamwork and successful team
spirit. Without cooperation and the support from each other, it would not be possible to prepare
such a resourceful report.
The presentation of this report is of a great expectation in our BBA program and we are quite
happy to submit it. Theoretical knowledge is valued when it is successfully applied in practical
scenario. In this respect we found this report a great opportunity to deal with some special
concentrations of real world problems.
So lastly we would again like to express our heartfelt thanks to our course teacher for providing
such scope to gain practical knowledge and enrich our study with realistic implication of
knowledge.
ACKNOWLEDGEMENT

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Throughout this report we have planned an audit report and determined the audit program that
would be performed for giving the auditor’s opinion in the annual report on the basis of the
financial statements of Beximco Synthetics Limited for the year 2013. For this we have
conducted several tests and procedures.
We have determined the objective of the audit and scope of the audit. Our primary responsibility
is to form and express an opinion on the financial statements based on an audit. We would
comply with ethical requirements and plan and perform the audit to obtain reasonable, but not
absolute assurance, on whether the financial statements are free of material misstatement,
including those misstatements caused by fraud or error.
We would have also understand the environment of Beximco Synthetic Limited, the important
characteristics of the clients, the reporting framework, management responsibilities, auditors’
responsibilities etc.
While completing the audit procedure, we would have conduct some tests of controls and the
substantive procedures. We would use sample rather than population. We would give special
emphasis on some items. They are the non-current assets, inventories, receivables, accounts
payables and other provisions etc.
We would also test the revenue system and the purchase system of Beximco Synthetics Limited.
For this, we would have to communicate with different third parties and collect the required
evidences from them.
Based on the evidence collected, we would give opinion on the financial statements of Beximco
Synthetics Limited. If there is any material misstatement in the financial statements, we would
give qualified opinion. But if there is no material error or misstatement, we would provide an
unqualified opinion stating that the financial statements provide true and fair view.
Executive Summary

5
Serial
No.
Chapters Contents Page No.
01. Chapter 01:
Introduction
1.1:Introduction: 07
1.2:Scope of our audit:
I. Our audit
objective
II. Terms of the
engagement
III. Our
delivarebles
07-08
02. Chapter 02:
Our Audit PLAN
2.1:UNDERSTANDING THE
ENTITY’S ENVIRONMENT
I. General economic
factors & industry
II. Important
characteristics
III. Financial
performance
IV. Reporting
framework
2.2:MANAGEMENT
RESPONSIBILITIES
2.3:AUDITOR’S
RESPONSIBILITIES
2.4:OUR AUDIT APPROACH:
I. Overview
II. Risk analysis
III. Materiality
IV. Fraud & error
V. Compliance with
authorities
VI. Internal control
VII. Our
responsibilities
relating to other
information in the
annual report and
similar documents
09
10
11
11-17
Table of Content

6
03. CHAPTER 03:
Our Audit Program
3.1: Examining The Internal
Control Of Beximco Synthetics
Ltd.
3.2:Revenue & Purchase System
3.3:Audit Sampling
3.4:Substantive Procedure
3.5:Audit Of Specific Items
18-20
20-21
21-23
24-25
26-35
04. Chapter 04:
Independence & Audit
management
4.1:INDEPENDENCE
4.2:AUDIT MANAGEMENT
I. Audit team
II. Audit timetable
III. Audit hours &
costs
36
36-37
05. Chapter 05: Auditor’s Report 38-39
06. Chapter 06: Engagement Letter
Bibliography
40-41
42

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Introduction:
We are pleased to provide our Audit Planning of the financial statements of BEXIMCO
SYNTHETICS LTD. together with our independence and engagement letters. This document is
intended to provide for the clarification and understanding of roles in the financial reporting and
financial audit process. In this document, we also outline our understanding of current
accounting and reporting issues to be considered for reporting on financial statements of
BEXIMCO SYNTHETICS LTD. The primary purpose of documenting our approach is to
present the process that takes place before and during the audit. We view the development of our
audit service plan as an important process that provides all parties to the audit process with an
opportunity to reassess the audit needs, focus areas, approach and expectations for performance.
Our Audit Strategy has been developed based on our knowledge and experience, as well as
discussions with management regarding the organization and developments during the current
year. This plan will be subject to change as we evaluate additional information and assess the
results of our procedures completed during the course of our work.
The terms of our engagement are itemized in the engagement letter which has been included as
Appendix A.
Scope of our audit:
 Our audit objective:
Our primary responsibility is to form and express an opinion on the financial statements based
on an audit. Management with the oversight of the Board of the Centre prepares the financial
statements.
An audit of the financial statements does not relieve management of their responsibilities. We
will conduct our audit in accordance with International Standards on Auditing (ISA). Those
standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable, but not absolute assurance, on whether the financial statements are free of
material misstatement, including those misstatements caused by fraud or error.
The objectives of the annual audit are to provide an independent opinion on whether:
Chapter 01:
Introduction

8
 The financial statements of Beximco Synthetics Ltd.. present fairly, in all material
respects, the financial position of the Centre as at 31 December 2013, and its financial
performance, its cash flows changes in equity and notes to the financial statements.
 The accounting standards have been applied on a basis consistent with that of the
preceding year; and
 The transactions that have come to our notice during the audit of the financial statements
have, in all significant respects, been in accordance with the rules and Regulations of
legislative authority.
 Terms of our engagement:
As required by our professional standards, we obtain a written confirmation from management
of Beximco Synthetics Ltd. outlining our common understanding of, and our agreement on, the
terms of the engagement for this audit. Our engagement letter is included in Appendix A. We
will be pleased to discuss matters of interest relating to the terms of the engagement that the firm
may require.
 Our deliverables
At the conclusion of the audit, we will provide the following reports:
 Independent Auditor’s Report.
 Report to the Board of the Centre and Report to the Director —Audit Results. These
reports are prepared to assist the members of the Board and the Director in their review
of the financial statements. The reports provide disclosures required by professional
standards and other information we believe will be useful to the members of the Board
and the Director in their work.
In addition to our reports, we expect to provide a management letter. This is a derivative
communication, on issues that do not require Board involvement, that identifies opportunities
for changes in procedures that would improve systems of internal control, streamline operations,
and/or enhance financial reporting practices.

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Understanding the entity’s environment:
General Economic factors and industry condition:
The Year 2013 was a difficult year for the Company as smooth business operation was
hampered badly due to political unrest, garments workers agitation, shortage of gas supply. The
prolonged political unrest ahead of parliamentary election in January 2014 also dented consumer
and investor confidence. As a result demand and sales price of the yarn decreased significantly.
During the year under report, the Company has produced 7,019,090 kgs of POY 115 denier
filament yarn as compared to 7,156,632 kgs of POY denier of last year representing 1.92%
decrease. Total DTY production was 6,404,199 kgs both in Intermingle and Non-Intermingle
form as against 6,653,387 kgs in the previous year a decrease of 3.75%. Gross turnover has
decreased to Tk. 1,321.09 million from Tk. 1,396.88 million representing 5.42% fall compared
to last year due to decrease of demand and sales price. These are the main reasons for hampering
our production and profitability during the year under review.
GDP growth is expected to be below targeted forecast, owing to a decline in remittances and
sloth of investment and overall economic activities. Domestic demand was depressed because of
the prolonged political unrest ahead of parliamentary elections in January 2014. This is reflected
in lower private credit growth, a decline in imports of consumer goods and capital machinery,
and modest growth in imports of raw materials. In addition the garment industry faces
challenges in adopting tough compliance and safety standards.
Important characteristics of the client:
: Beximco Synthetics Limited, a member of BEXIMCO Group, has been aBusiness
manufacturer of Polyester Filament Yarns, namely, Partially Oriented Yarn (POY) and Draw
Texturized Filament Yarn (DTFY) since July 1, 1994 and has an annual production capacity of
28 million linear meters. The company operates in a single industry segment. It is engaged in
manufacturing and marketing of Polyester Filament Yarn namely, Partially Oriented Yarn
(POY) and Drawn Texturized Yarn (DTY) which it sells in the local market.
: Beximco Synthetics Limited (the Company) is a Public LimitedAbout the company
Company incorporated in Bangladesh in 1990 under the Companies Act, 1913. It launched its
manufacturing operation in 1994. The company became a listed company in 1993.The shares of
Chapter 02:
Our audit plan

10
the Company are traded in Dhaka and Chittagong Stock Exchanges of Bangladesh and the
debentures of the company were listed with Dhaka Stock Exchange of Bangladesh.
: The registered office of the company is located at House No. 17, Road No. 2,Location
Dhanmondi R/A, Dhaka. The industrial units are located at Kabirpur, Savar, Dhaka.
Financial performance:
Turnover 1,337,836
Gross Profit 1,344,148
Net Profit Before Tax (27,910)
Net Profit After Tax (35,086)
Earnings Per Share .4
Stock Dividend (%) -
Total Assets 3,318,659
Shareholders’ Equity 2,170,329
Reporting framework:
Reporting Framework and Compliance thereof The financial statements have been prepared in
compliance with the requirements of the Companies Act 1994, the Securities and Exchange
Rules 1987, the Listing Regulations of Dhaka and Chittagong Stock Exchanges and other
relevant local laws and regulations as applicable and in accordance with the applicable
Bangladesh Financial Reporting Standards (BFRSs) including Bangladesh Accounting
Standards (BASs) adopted by the Institute of Chartered Accountants of Bangladesh (ICAB)
based on International Accounting Standards (IASs) and International Financial Reporting
Standards (IFRSs).
MANAGEMENT RESPONSIBILITIES:
:Financial Statement Preparation
The responsibility for financial statement preparation including the notes thereto and
representation lies with management. This responsibility includes the determination of
significant estimates made in the preparation of the statements.
:Internal Controls and Reporting Process
Being responsible for preparing the financial statements includes responsibilities relating to
internal control, such as designing and maintaining accounting records, selecting and applying
accounting policies, safeguarding assets and preventing and detecting error and fraud, and
ensuring the preparation of the financial statements in accordance with generally accepted
accounting principles.
Management is also responsible for assessing the impact of any audit differences detected during
the preparation and audit of the financial statements, individually and in aggregate, on the fair
presentation of amounts and disclosures contained in those financial statements and determining

11
adjustments needed. Depending upon the circumstances surrounding errors in financial
statements, errors may be considered fraudulent financial reporting if controls are not sufficient
to prevent or detect such or if the errors go uncorrected.
Auditor’s responsibilities:
The role of the Audit Committee includes the following:
 Oversee the financial reporting process.
 Monitor choice of accounting policies and principles.
 Monitor Internal Control and Risk Management process.
 Oversee hiring and performance of external Auditors.
 Review along with the management, the annual financial statements before submission
to the Board for approval.
 Review along with the management, the quarterly and half-yearly financial statements
before submission to the Board for approval.
 Review the adequacy of internal audit function.
 Review statement of significant related party transactions submitted by the management.
 Review Management Letters/ Letter of Internal Control weakness issued by statutory
auditors.
 To review whether all the applicable Rules, Regulations, Guidelines, Notifications,
Directives, etc framed/issued by the regulatory authorities have been complied with.
 Our audit approach
 Overview
 Our audit is conducted in accordance with Bangladesh Standards on Auditing. Our audit
approach is designed to allow us to execute a good quality and efficient audit. We do this
by:
 (a) Gaining an understanding of the Company and its environment by focusing on new
developments, economic factors, key business issues affecting the Company, as well as
management’s monitoring of controls and business processes;
 (b) Identifying significant audit risks, sharing our perspectives, obtaining feedback, and
ensuring our audit is tailored to these risks;
 (c) Using well-reasoned professional judgment, especially in areas that are subjective or
that require estimates;
 (e) Considering Company’s internal controls, information technology, and data systems
 (f) To the extent we consider it practicable, relying on the work of the BEXIMCO
SYNTHETICS Ltd.’s Internal Audit.
 Our approach will include a mixture of key controls reliance, substantive analytics, and
detailed testing. Our understanding of the Centre also drives our assessment of
materiality and the identification of audit risks.
 Throughout the audit, we will scale our work based on the size of an account balance, its
complexity, and its impact on the financial statements.

12
 :Financial statement assertions
 In the planning phase, we designed the tests that will be used during the audit; assertions
allow the auditor to focus on what is most important to financial statement users. We
found out these findings included below:
 Transactions
 All transactions are completely, accurately recorded, and adjusted with the appropriate
accounting period & proper accounts.
 Account balances
 The entity has rights to Assets, liabilities and besides assets, liabilities, equity interests
also existed and recorded completely with appropriate valuation.
 Presentation and disclosure
 Related all notes about the transactions that means why the amount of taka changes over
the period are disclosed completely with accurate valuation.
 Designing audits
 It is not possible to design a practical audit that eliminates all risk of misstatement.
 We design audits to focus on areas that have the highest likelihood of containing material
misstatements, and use methodologies that provide reasonable assurance that
misstatements do not exist. To do so, we consider two key factors in planning and
executing audits: materiality and audit risk.
 Assessing audit risk
 Audit risk is the risk that the auditor may unknowingly fail to modify his opinion on
financial statements that are materially misstated. It relates to
 (1) The risk that the financial statements prepared by management are materially
misstated (material misstatement risk) and
 (2) The risk that the auditor will not detect such material misstatement (detection risk).
Misstatement risk and detection risk are inversely related. The greater the material
misstatement risk, the less the detection risk the auditor can accept. Conversely, the
lower the material misstatement risk, the greater the detection risk acceptable by the
auditor. When audit risk is high, external auditors design audits with more extensive
testing, less reliance on the work of others and less interim work. As that risk diminishes,
auditors rely less on extensive testing and more on the work of others, and perform more
interim work during the audit cycle.
 Evaluating risk of material misstatement
 The auditor evaluates a company’s risk of material misstatement by evaluating:
 • Inherent risk (natural risk irrespective of internal controls). Some examples of inherent
risk considerations include: volume, complexity, susceptibility of an asset to theft,
estimates, and industry circumstances.
 • Control risk (risk that the internal control system will not prevent or detect a material
misstatement). Some factors that influence inherent risk can also impact control risk
(complexity, judgment required, susceptibility to fraud). Other control risks include the
nature of operations, changes in operations and environmental factors.

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 Risk analysis
 Our audit is risk-based. Significant risks are those risks of material misstatement or non-
compliance with significant authority instruments that, in our judgment, require special
audit consideration. We have identified the following significant audit risks and other
risks, including business risks with a potential audit impact, as part of our planning
process.
 These risks were identified based on discussions with management, our knowledge of the
Company, and current developments in your environment, including internal controls.
 The following table summarizes the most important risks, from our perspective, that we
want to share:
Risk area Our audit approach
Management override of controls We will audit all significant and unusual
journal entries, and accounts and business
transactions/contracts entered into during the
year. We will review assumptions used by
management in making significant estimates
and assess them for reasonableness. We will
review management’s procurement and
expense approval policies and test a sample of
transactions to ensure that these policies have
been executed.
Revenue recognition Revenue, revenue from receipts from
customers against sales is recognized when
products are dispatched to customers, that is,
when the significant risk and rewards of
ownership have been transferred to the buyer,
recovery of the consideration is probable, the
associated costs and possible return of goods
can be estimated reliably, and there is no
continuing management involvement with the
goods. Receipts from customers comprise sales
price against domestic sales.
Going Concern After making enquiries, the directors, at the
time of approving the financial statements,
have determined that there is reasonable
expectation that the Company have adequate
resources to continue operation for the
foreseeable future. For this reason, the
directors have adopted the going concern basis
in preparing the financial statements.
Acquisition and disposals of
Properties
We will test, on a sample basis, acquisitions
and disposals of properties. For the
transactions tested, we will review supporting

14
purchase and sales agreement to understand
key terms. We will also vouch, on a sample
basis, funds paid or received as a result of
these transactions. For the transactions
examined, we will ensure that title to the
property has indeed been transferred. Finally,
we will read the disclosures in the consolidated
financial statements in respect of these
transactions for compliance with GAAP.
Valuation of investments We will confirm investment balances with
custodians and investment managers where
appropriate, to ensure the existence of
investments held at year-end. We will test the
valuation, on a sample basis, by examining
supporting market based information to value
the investments.
Financing arrangements We will confirm all financing arrangements
(bank loans, debentures and project financing)
and outstanding at year-end. We will
recalculate all covenants associated with these
financing arrangements.
Employee benefits The Company maintains Contribution plan for
its eligible permanent employees. The
eligibility is determined according to the terms
and conditions set forth in the deed. The
company has accounted for and disclosed of
employee benefits in compliance with the
provisions of BAS 19: Employee Benefits
Related Party Disclosures The company did not carry out any transaction
with related parties during the year under
review. Therefore, disclosure of information as
required by BAS 24: Related Party Disclosures
is not applicable.
Inventories Inventories are carried at the lower of cost and
net realizable value as prescribed by BAS 2 :
Cost is determined on weighted average cost
basis. The cost of inventories comprises of
expenditure incurred in the normal course of
business in bringing the inventories to their
present location and condition. Net realizable
value is based on estimated selling price less
any further costs expected to be incurred to
make the sale.

15
 Judging materiality
 Materiality is used to evaluate audit findings and determine whether any uncorrected
errors render financial statements materially inaccurate. Both quantitative and qualitative
measures are used to judge materiality.
 Quantitative materiality is calculated as a percentage of a meaningful financial statement
number, such as pretax net income or total assets. Auditors then use a fraction of that
overall materiality number to design their tests. This fraction of overall materiality is
called the ―tolerable error.‖ It represents the maximum undetected error that the auditor
is willing to accept or ―tolerate‖ in the samples he or she selects for testing. The presence
of qualitative risk considerations may cause the auditor to adjust testing scopes. They
might also influence the auditor’s conclusions about the significance of an identified
error that might, in purely quantitative measures, be considered immaterial.
 We have set our preliminary materiality for the audit as follows:

Basis 31 December 2013
Overall materiality % 2013
1 Revenue
1 Gross
profit
5 Profit
before tax
10 Profit after
tax
2 Total asset
17120 TK(Average of 5
percentage calculations)
 Fraud and error
 When planning and conducting the audit, we consider the possibility that fraud or error,
if sufficiently material, may affect our opinion on the financial statements. Accordingly,
we maintain an attitude of professional skepticism throughout the audit, recognizing the
possibility that a material misstatement due to fraud could exist.
 In order to fulfill our responsibilities related to fraud, we plan to perform the following
procedures:
 • Inquire of management, internal auditor, and others related to knowledge of fraud or
suspected fraud, the fraud risk assessment process, and how fraud risks are addressed.
 • Inquire about matters raised before the Accountability Committee regarding fraud and
alleged fraud, dishonesty, negligence and disregard of established Centre procedures or
directives.
 • Consider whether fraud risk factors exist as part of our client acceptance and
continuance procedures.
 • Analytical procedures, primarily over revenue, and considering unusual or unexpected
relationships identified in performing analytical procedures in planning the audit.

16
 • Incorporate an element of unpredictability in the selection of the nature, timing, and
extent of audit procedures to be performed annually.
 • Perform additional required procedures to address the risk of management’s override of
controls, including:
 − examining journal entries and other adjustments for evidence of possible material
misstatement due to fraud;
 − reviewing accounting estimates for biases that could result in material misstatement
due to fraud (including a retrospective review of significant prior years’ estimates); and
 − evaluating the business rationale of significant unusual transactions.
 If, at any point throughout the audit, we become aware of suspected fraud involving
management, employees who have significant roles in internal control, and other cases
where fraud results in a material misstatement in the financial statements, we will advise
on a timely basis. We will discuss the nature, timing, and extent of the audit procedures
necessary to complete the audit.
 Compliance with authorities
 All transactions which we review for the purpose of expressing an opinion on the
company’s financial statements are also reviewed for compliance with the Financial
Regulations and legislative authority of the company.
 Internal audit
 The Financial Regulations of the Company require the Director to maintain an internal
audit that provides an effective current examination and/or review of financial
transactions. We identify areas where internal audit work could provide us with audit
assurance and determine the impact on the external audit procedures.
 Our responsibilities relating to other information in the annual
report and similar documents
 The Company, Beximco Synthetics Limited may wish to publish the financial
statements, including our audit reports, in other documents, such as in an annual report.
International Standards on Auditing require us to review publications before they are
published to ensure that the financial statements and our auditor’s report have been
reproduced accurately. We will also read other information within the publications for
the purpose of identifying material inconsistencies, if any, with the audited financial
statements or material misstatements of fact. We will also expand the review described
above to include the Internet version of the publications.
 Performing audit tests
 We perform two different types of audit tests: tests of controls and substantive
procedures.
 are designed to evaluate the effectiveness of the internal control systemTests of controls
in preventing or in detecting and correcting errors before they result in a material
misstatement in the financial statements. In this case we did:
 • A walkthrough, from beginning to end, of one or more transactions; and
 • Selecting samples of controls at a point in time, or over time, and observing or re
performing them to obtain evidence that they operate effectively.
 Audit committee considerations: We have to know whether internal control areas exist
that the auditor does not believe are effective enough to warrant any level of audit

17
reliance. Such areas may lead to errors in internal reports used for decision-making
purposes.
 are designed to detect material misstatements at the assertionSubstantive procedures
level by testing the output from the financial reporting process. Procedures consist of:
 • tests of details, which may include inspection, observation, external confirmation,
recalculation, and/or inquiry on a sample of transactions or accounts; and
 • Substantive analytical procedures, which may range from simple comparisons to
complex analyses using advanced statistical techniques. Examples may include
analyzing financial trends over time, comparing financial ratios (e.g., gross margin
percentages) to established expectations, and comparing financial and non-financial
information (e.g., payroll costs and number of employees).
 Audit committee considerations: If an our substantive procedure discovers a material
error,
 it is because the internal control system did not. Substantive procedures are performed
for each material class of transactions, account balance and disclosure.

18
Examining the internal control of Beximco Synthetics Ltd.:
Internal control:
Internal control is the process designed to ensure reliable financial reporting, effective and
efficient operations, and compliance with applicable laws and regulations. Safeguarding assets
against theft and unauthorized use, acquisition, or disposal is also part of internal control.
Internal control comprises five components. We have to assess each component of Beximco
Synthetics Ltd.:
1. The control environment:
At first we have to assess the management style and the expectations of upper‐level managers of
Beximco Synthetics Ltd., particularly their control policies. An effective control environment
helps ensure that established policies and procedures are followed. We will also assess
management's integrity, ethical values, and philosophy; defined organizational structure with
competent and trustworthy employees; and the assignment of authority and responsibility. And
these components are included in the control environment of an organization.
:2. Risk assessment process
Risk assessment process is the process by which management in a business identifies business
risks relevant to financial reporting objectives and decides what actions to take to address those
risks.
• Internal controls are implemented to minimize business risk.
• In audit, considering business risk is important because issues which pose threats to the
business may in some cases also be a risk of the financial statements being misstated.
We will assess business risk and the entity’s risk assessment process of SPL in the following
way:
Chapter 03:
Our audit program

19
3. Information system:
We will obtain information about internal controls of beximco synthetics from a variety of
sources like:
 Manuals of internal controls and copies of internal control policies
 Minutes of meetings of the risk assessment group
 Previous year controls
 Asking people involved with internal control about controls
 Observation of controls in the organization
We will use three types of documents to record the information collected from internal control:
 Narrative notes
 Questionnaires
 Diagrams
:4. Control activities
Control activities are the specific policies and procedures management uses to achieve its
objectives. We will be concerned with understanding whether a control prevents an error or
detects and corrects an error.
Control activities may be manual or computerized.
If Beximco has a manual control activity system they may include:
Authorization
Performance review
Information processing
Physical control
Segregation of duties
We have to test each control activity to assess the risks involved in it or to assess whether they
really works in a proper way or not.
Identify
relevant
business
risks
Estimate the
impact of risks
Assess the
likelihood of
occurrence

20
And if Beximco has a computerized or it control system then we can divide
them in two:
: General control may include the following:General controls
 Development of computer applications
 Prevention or detection of unauthorized changes to programs
 Testing and documentation program changes
 Controls to prevent wrong programs or files being used.
: we will test application control for finding:Application controls
 Controls over input- completeness
 Controls over input-accuracy
 Controls over input-authorization
 Controls over processing
 Controls over master files and standing data
We can test application controls by examining the following:
 Manual controls exercised by the user
 Controls over system output
 Programmed control procedures
:5. Monitoring of internal control
We should also review whether the firm monitors the internal control system properly and
timely to ensure that they still meet their objectives, and they still operate effectively and
efficiently.
.:Audit plan for revenue and purchase system of Beximco Synthetics Ltd
At the planning level we have to consider the following things of Beximco Synthetics Ltd.:
How specific internal controls in revenue and purchase system mitigate risk and their
limitation
Internal controls of Beximco Synthetics Ltd. in a given scenario
Internal control strengths and weaknesses in a given scenario
The extent to which tests of controls should be used in a given set of circumstances.
Revenue system:
Revenue system is usually the most important system in a business. Obviously, it is important
for companies to ensure that they invoice promptly and collect cash promptly, to ensure that
they have sufficient capital to continue operating.
To examine the revenue system of Beximco Synthetics Ltd.. we have to go through the four-step
process of revenue system. They are:

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Sales orders
Despatch and invoicing
Recording
Cash collection
To examine each area of revenue system of the firm we have to conduct the following tasks:
 At first we have to identify the risk associates with every steps,
 Set the control objectives and control points to mitigate those risks,
 Finally test the control system.
Purchase system:
The purchase system is another important system in a business. It is important for companies to
ensure that they have an uninterrupted supply of the goods and services they need in order to run
their business.
Key issues are therefore choosing the right suppliers and negotiating good credit terms, then
managing payments so as to create the correct balance between keeping customers happy and
making the most of the credit available.
To examine the purchase system of beximco synthetics we have to go through the following
areas:
Ordering
Goods inward and recording of invoices
Payment system of Beximco Synthetics Ltd..
To examine each area of purchase system of the firm we have to conduct the following tasks:
 At first we have to identify the risk associates with every steps,
 Set the control objectives and control points to mitigate those risks,
 Finally test the control system.
Audit Sampling
While auditing the financial statements of Beximco Synthetics Limited, we will not consider all
the items, balances or transactions. Rather we would use sampling as it is less costly and less
time consuming. Again, to examine all the information available would be impractical so we
will use audit sampling to produce valid conclusions.
Audit sampling
Audit sampling involves seeking evidence from less than 100% of items of the balance or
transaction being tested by using sampling techniques. All sampling units have a chance of
selection. Audit sampling provides auditors with reasonable basis on which to draw conclusions
about the entire population. Audit sampling can be applied using either statistical or non-
statistical approaches.

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When we will test 100% of items
When the population is made up of a small number of high value items, there is a high risk of
material misstatement and other means do not provide sufficient appropriate audit evidence, then
100% examination may be appropriate.
The BSA requires assurance providers to determine appropriate means of selecting the items for
testing. It distinguishes between statistically-based sampling and non-statistical methods.
Statistical sampling
Statistical sampling involves random selection of the sample items, and the use of probability
theory to evaluate sample results, including measurement of sampling risk.
Non-statistical sampling
Non-statistical sampling involves sampling items discriminately without the use of probabilities
or measurement.
We, as the auditor of Beximco Synthetics Limited will select certain items from a population
because of specific characteristics they posses. The results of items selected in this way cannot
be projected onto the whole population but may be used in conjunction with other audit evidence
concerning the rest of the population
Some specific characteristics that may be considered while sampling
 High value items
We will select high value items while sampling. As, Beximco Synthetics Limited is a
company with large amount of capital, we will use the items which are above BDT
1,00,000.
 Items that are suspicious
 Items that are usually prone to error
 Items above a certain amount
We will also select items this way may mean a large proportion of the population can be
verified by testing a few items.
 Items to obtain information
We will select items to obtain information about the client’s business, the nature of
transactions, or the client’s accounting and control system.
 Items to test procedures
We will select items to test procedures to see whether particular procedures are being
performed.

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Designing the sample by auditors
The BSA requires the auditor to consider the objectives of the audit procedure and the attributes
of the population from which the sample will be drawn, and to consider the sampling and
selection method.
As assurance providers of Beximco Synthetics Limited we will consider the specific audit
objectives to be achieved and the audit procedures that are most likely to achieve them. We will
also consider the nature and characteristics of the audit evidence sought, possible error
conditions and the rate of expected error. These will help us to define what constitutes an error
and what population to use for sampling.
Here error means either control deviations, when performing test of control, or misstatements,
when performing substantive procedure and expected error is the error that the auditor expects to
be present in the population.
The population from which the sample is drawn must be appropriate and complete for the
specific audit objectives. The BSA distinguishes between situations where overstatement or
understatement is being rested.
As assurance providers of Beximco Synthetics Limited, we have defined the sampling unit in
order to obtain an efficient and effective sample to achieve the particular audit objectives.
The sampling Units that mean the individual items constituting a population used by us are:
 Sales invoices
 Receivables' balances
 Credit entries in bank statement
There may be some error that can be said tolerable. That means, the maximum error in the
population that the auditor would be willing to accept.
The main methods of selecting samples
 Radom selection is a method where all items in the population have an equal chance of
selection.
 Systematic selection involves selecting items using a constant interval between
selections, the first interval having a random start
 Haphazard selection an alternative to random selection, care must be taken so as not to
make a bias selection
 Block selection for example, sampling 50 consecutive checks for authorization. Block
sampling can be misleading as errors may occur in the same time period
 Monetary Unit sampling value-weighted selection in which sample size, selection and
evaluation results in a conclusion in monetary amount
Here, we will use random sampling while auditing the financial statement of Beximco
Synthetics Limited.

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Substantive procedures
Substantive procedures are tests to obtain audit evidence to detect material misstatement in the
financial statements. Here, we will conduct analytical procedures and the test of detail of
transactions, account balances like current assets, non-current assets, liabilities and disclosures
of Beximco Synthetics Limited for the year 2013.
:Assertions used by the auditors
The following assertions will be used by the auditors-
Confirmation of ownership (right and obligation)
Existence
Accuracy
Valuation and allocation
Completeness
Presentation and disclosure (classification and understandability)
Cut-off (correct accounting period)
Audit procedure
There are some typical audit tests that will be conducted by our auditors. While auditing
Beximco Synthetics Limited, we will follow the some procedures. These tests are-
 Confirming compliance with law and accounting standards
 Reviewing notes for understandability
 Reviewing of post year-end items
 Cut-off testing
 Analytical review
 Confirmations
 Reconciliations to control accounts
 Recalculation of correct amounts
 Third party confirmation
 Reviewing invoices for proof that item belongs to the company
 Matching amounts to invoices
 Confirming accounting policy consistent and reasonable
 Reviewing post year-end payments and invoices
 Expert valuation
 Physical verification
 Inspection of supporting documentation
 Confirmation from directors that transactions relate to business
 Inspection of items purchased

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Some other areas for consideration of the audit evidence
 Comparable information from prior periods
 Anticipated results of the entity, from budgets or forecasts
 Expectations prepared by the auditors
 Examine changes in products, customers and level of return
 Consider the effect of inflation, industrial disputes, changes in production methods and
changes in activity on the charge for wages
 Obtain explanations for all major variances
 Compare trends in production and sales and assess the effect on any provisions for
obsolete inventory
 Ensure that changes in the percentage labor or overhead content of production costs are
also reflected in the inventory valuation
 Review rent with annual rent per rental agreement
 Review rates with previous year and know rates increases
 Review interest payable on loans with outstanding balance and interest rate per loan
agreement
 Review hire or leasing charges with annual rate per agreement
 Review vehicle running expenses to vehicle
 Review other items related to activity level with general price increase and change in
relevant level of activity
 Review other items not related to activity level with general price increases
 Ensure expected variations arising from industry, local trends or known disturbances of
the trading pattern have occurred.

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The audit of specific item
Non-current assets:
Non-current assets are those assets which can’t be easily traded in the market without significant
loss in cash. There are two types of non-current assets. They are-
Tangible non-current assets
Examples of tangible non-current assets include land, buildings, plant, vehicles, fittings and
equipment.
:Aspects of non-current assets that should be considered while auditing
 That all acquisitions are authorized
 That all disposals are authorized
 That all proceeds from disposals are accounted for
 Security arrangements over non-current assets are sufficient
 Non-current assets are maintained properly
 Depreciation is reviewed every year
 All income is collected from income-yielding assets
 What are the audit procedures for tangible non-current assets
 Obtain and prepare a summary of tangible non-current assets showing how gross book
value, accumulated depreciation and net book value reconcile with the opening position
 Compare non-current assets in the general ledger with the non-current assets register and
obtain explanations for differences
 Agree a sample of the assets that physically exist are recorded in the non-current assets
register
 In the event that the non-current asset register does not exist, obtain a schedule showing
the original costs and present depreciated value of major non-current assets
 Reconcile the schedule of non-current assets with the general ledger
Non
current
assets
Tangible
non
current
assets
Land &
buildings
Equipment
s
Plant &
fittings
Intangible
non
current
assets
Licences
Developm
ent costs
Purchased
brands

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 Confirm that the company physically inspects all items in the non-current asset register
each year
 Inspect high value items and additions confirming that items inspected exist, are in use,
are in good condition, and have correct serial numbers
 Review records of income-yielding assets
 Reconcile opening and closing vehicles by numbers as well as amounts
 Verify valuation to valuation certificate
 Consider the reasonableness of valuation, considering the experience of valuer , scope of
work, methods, assumptions used, and whether the valuation bases are in line with
accounting standards
 Re-perform calculation of revaluation surplus
 Confirm whether valuations of all assets have been updated regularly
 Inspect that the client has recognized revaluation losses and that revaluation gains are
credited to equity
 Review depreciation rates
 Ensure depreciation has been charged on all assets with a limited useful life
 Ensure that the depreciation charges on re-valued items are based on the re-valued
amount
 Ensure that depreciation policies and rates are disclosed in the accounts
 Review insurance policies and consider the adequacy of non-current assets insured
values and check expiry dates
 Verify title to land and buildings by inspection of title deeds, land registry certificate,
leases
 If deeds are being held inquire the purpose for which they are held
 If deeds are not being held obtain a certificate from solicitors or bankers stating that they
are free from lien or mortgage
 Inspect registration documents for vehicles held confirming that they are in the client’s
name
 Confirm all vehicles are used for the client’s business
 Examine documents of title for other assets
 Review evidence of charges in statutory books and by company search
 Review leases that the company has kept covenants
 Examine invoices received after year-end, orders and minutes for capital commitments
 Inspect a sample of non-current asset accounts for a sample of purchases to ensure they
have been properly allocated
 For self-constructed assets verify material, labor and overhead costs to invoices, wage
records etc.
 Ensure that expenses capitalized are those that
 Enhance the economic benefits in excess of its previous standard
 Replaces or restores a component
 Relates to major inspection or overhaul that restores the economic benefit
 Finance costs have been capitalized
 Verify disposals
 Recalculate profit or loss on disposal
 Check that disposals have been authorized by reviewing boards minutes

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 Consider whether proceeds are reasonable
 If asset was used as security ensure release from security has been correctly made
 For assets that are fully depreciated inspect the register to ensure no further depreciation
is charged
Intangible non-current assets:
Examples of intangible assets include goodwill, licenses, development costs and purchased
brands.
The audit procedures for other non-current assets
 Goodwill:
 Agree the consideration to sales agreement by inspection
 Consider whether asset valuation is reasonable
 Agree goodwill calculation by recalculation
 Review the impairment review and discuss with management
 Research and development
 Confirm that development cost meet IAS criteria by inspecting details of projects and
discussion with technical managers
 Confirm feasibility and viability by inspection of budgets
 Recalculate amortization calculation
 Inspect invoices to verify expenditure incurred on R&D projects
 Other intangibles
 Agree purchases to purchase documentation by inspection
 Inspect specialist valuation of intangibles and ensure it is reasonable
 Recalculate amortization calculation
Inventory
IAS2 defines inventory cost as comprising all cost of purchase and other cost incurred in
bringing inventory to its present condition and location. Inventory is an area of major
importance for the auditor and, historically, has been the balance sheet item that creates most
problems
The audit procedures for inventory
 Complete the disclosure checklist to ensure that all the disclosures relevant to inventory
have been made
 Physically inspect inventory held at third party locations or review confirmations
received from third party and match to general ledger
 Observe the physical inventory count
 Verify that inventory held for third parties are not included in the year-end inventory
figure
 Ensure build-and-hold inventory is not included in the year-end inventory
 Confirm that any inventory held at third party locations are included in the year-end
inventory listing
 Obtain and agree inventory listing to general ledger

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 Review the inventory listing to ensure it is mathematically correct
 Vouch a sample of inventory items to suppliers’ invoices to ensure it is correctly valued
 Ensure standard costing is correctly valued
 Agree the valuation of raw materials to invoices and price list
 Confirm that an appropriate basis of valuation is being used by discussing with
management
 Agree labor cost to wage records
 Compare standard labor cost with actual labor cost
 Inquire of management any slow-moving or obsolete inventory that should be written
down
 After year-end examine finished goods that have been sold to ascertain whether any
finished goods need to be written down
 If significant levels of finished goods remain unsold for an usually period of time,
discuss with management and consider the need to make allowances
 Compare the gross profit % to the previous year or industry data
 Compare raw material, finished goods and total inventory turnover to the previous year
after considering current conditions
 Compare inventory days to the previous year or industry average
 Compare the current year standard costs to the previous year after considering current
conditions
 Compare actual manufacturing overheads costs with budgeted or standard manufacturing
overhead costs
 Note the numbers of the last GDNs and GRNs before the year-end and the first GDNs
and GRNs after the year-end and check that these have been included in the correct
financial year
 Cast the inventory listing and test the mathematical extensions of quantity multiplied by
price
 Inquire of management and review any loan agreements and board minutes for evidence
that inventory has been pledged or assigned
 Inquire of management about warranty obligations issues
 Review the inventory listing to ensure that inventory has been properly classified
between raw materials, work-in-progress and finished goods
 Read the notes to the accounts relating to inventory to ensure they are understandable
 Review the financial statements to confirm whether the cost method used to value
inventory is accurately disclosed
 Read the notes to the accounts to ensure that the information is accurate and properly
presented at the appropriate amounts

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Receivables:
The assertions that apply to receivables
 All sales transactions recorded have occurred and relate to the entity
 All sales transactions that should have been recorded have been recorded
 Amounts relating to transactions have been recorded accurately
 Amounts relating to transactions have been recorded in the correct period
 All transaction are have been classified correctly
 Recorded receivables exist
 The entity controls the rights to receivables and related accounts
 All receivables that should have been recorded have been recorded
 All disclosed events and transactions relating to receivables have occurred and pertain to
the entity
 All disclosures required have been included
 Financial information is appropriately presented and described and disclosures clearly
expressed
The audit procedures for receivables
 Agree the balance from the individual sales ledger account to the aged receivables’
listing and vice versa
 Match the total of the aged receivables’ listing to the sales ledger control account
 Cast and cross-cast the aged trial balance
 Trace a sample of shipping documentation to sales invoices and into the sales and
receivables ledger
 Complete the disclosure checklist to ensure that all the disclosures relevant to receivables
have been made
 Review detailed statement of financial position to ensure all likely prepayments have
been included
 Prepare a receivables circularization on a sample of year-end receivables
 Follow up all balance disagreements and non-replies to the receivables’ confirmation
 Examine the customer’s account and customer correspondence to assess whether the
balance outstanding represents specific invoices and confirm their validity
 Examine underlying documentation
 Inquire from management explanations for invoices remaining unpaid after subsequent
ones have been paid
 Observe whether the balance on the account is growing and if so, find out why by
discussing with management
 Review bank confirmation for any liens on receivables
 Inquire of management, review loan agreements and review board minutes for any
evidence of receivables being sold or factored
 Compare receivables’ turnover and receivables’ days to the previous year
 Compare receivables’ turnover and receivables’ days to the industry data
 Compare the aged analysis of receivables from the aged trial balance to the previous year

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 Review the reasonableness of the allowance for the allowance of bad debts through
discussion with management
 Compare bad debt expense as a % of sales to the previous year
 Compare bad debt expense as a % of sales to the industry data
 Confirm adequacy of allowance by reviewing correspondence with customers and
solicitors
 Examine large customer accounts individually and compare to the previous year’s
balance
 Obtain further information regarding the recoverability of old debts by discussions with
management and review of customer correspondence
 Recalculate prepayments from the prepayments’ listing to ensure it has been accurately
calculated
 Sample sales invoices around year-end, inspect the dates and compare with the dates of
dispatch and the dates recorded in the ledger for application of correct cut-off
 Sample sales returns around year-end and trace to the related credit entries
 Perform analytical procedures on sales returns comparing the ratio of sales returns to
sales
 Take a sample of sales invoices and examine for proper classification into revenue
accounts
 Take a sample of sales invoices and compare prices and terms to the authorized price list
and terms
 Sample invoices and recalculate discounts to ensure they have been properly calculated
and applied
 Sample invoices and recalculate tax to ensure they have not been included in sales
 Sample sales transactions recorded in the ledger, vouch the sales invoices back to
customer orders and dispatch documentation
 Discuss with management whether any receivable have been pledge assigned or
discounted and whether such items require disclosure in the financial statement
 Review for understandability notes relevant to receivables in the draft financial statement
Read the disclosure notes to ensure the information is accurate
:Cash and Bank
Cash in the financial statements represent cash in-hand and cash on deposit in bank accounts.
The audit objectives as regards to Banked cash
 Recorded cash balances include the effects of all transactions that occurred
 Year-end transfers are recorded in the correct period
 The entity has legal title to all cash balances shown at the year-end
 Recorded balances are realizable at the amounts stated
 Recorded cash balances exist at the year-end
Bank balances are usually confirmed directly by the bank in question. Obtaining third party
confirmation from the client’s bank and reconciling these with the accounting records will cover
the assertions such as, completeness, existence, rights and obligation, and valuation.

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Contents that would be included in the confirmation requests
 Balances due to the client entity’s current, deposit, loan and other accounts
 Balances due from the client entity’s current, deposit, loan and other accounts
 Request for nil balances on accounts
 Request information on accounts which were closed in the 12 months prior to the chosen
confirmation date
 Confirmation of contingent liabilities
 Securities held on behalf of the client in safe custody
 Maturity on loans
 Interest terms on loans
 Interest on overdrafts
 Details of any collateral given or received
:The audit plan for Bank would include
 Obtaining standard bank confirmations
 Re-performing arithmetic of bank reconciliation
 Tracing cheques shown as outstanding from the bank reconciliation to the cash book prior to
the year-end and to the after-date bank statements and obtaining explanations for any large
or unusual items not cleared at the time of the audit
 Review bank reconciliation previous to the year-end bank reconciliation and test whether all
items are cleared in the last period or taken forward to the year-end bank reconciliation
 Obtain satisfactory explanations for all items in the cash book for which there are no
corresponding entries in the bank statement by discussion with finance staff
 Obtain satisfactory explanation for all items in the bank statement for which there are no
corresponding entries in the cash book by discussion with finance staff
 Verify contra items appearing in the cash books and bank statements with original entry
 Verify that un-cleared deposits are paid in prior to the year-end by inspecting pay-in slips
 Examine all deposited checks of which payment has been refused by the bank
 Verify the bank balances with reply to standard bank letter and with the bank statements
 Inspect the cash book and bank statement for exceptional entries or transfers
 Identify whether any accounts are secured on the assets of the company by discussion with
management
 Consider whether there is a legal right of set-off of overdrafts against positive bank balances
 Determine whether the bank accounts are subject to any restrictions by inquiries with
management
 Review disclosures for bank to ensure completeness and accuracy in accordance with
Cash:
Cash balances or floats are often individually immaterial but they may require some audit
emphasis because of the opportunities for fraud that could exist where internal control is weak
and because they may be material in total. Where the auditors determine that cash balances are
potentially material they may conduct a cash count. Cash may include notes, coins, unbanked
cheques received, IOUs and credit card slips.

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Cash count:
 All cash and petty cash books should be written up to date in ink at the time of the count
 All balance must be counted at the same time
 All negotiable securities must be available and counted at the same time the cash balances
are counted
 At no time should auditors be left alone with the cash and negotiable securities
 All cash and securities counted must be recorded on working papers and subsequently filed
on the current audit file
 Reconciliation should be prepared
Audit procedure for cash:
 Agree counted cash balances held to petty cash book or other records
 Count all balances simultaneously
 All counting should be done in the presence of the individuals responsible
 Enquiries should be made into any IOUs or cashed cheques outstanding for a long period of
time
 Obtain a certificate of cash-in-hand from responsible officials
 Confirm that bank and cash balances as reconciled are correctly stated in the financial
statements
 Follow up that un-banked cheques or cash receipts have been paid in and agree to the bank
reconciliation by inspection of relevant documents
Liabilities
A liability is a present obligation of the entity arising from past events, the settlement of which
is expected to result in an outflow from the entity of resources embodying economic benefits.
Liabilities include accounts payables, accruals and other payables.
The assertions for Liabilities
All purchase transactions recorded have occurred and relate to the entity
All purchase transactions that should have been recorded have been recorded
Amounts relating to transactions have been recorded appropriately
Purchase transactions have been recorded in the correct period
Purchase transactions are recorded properly in the accounts
Trade payables and accrued expenses are valid liabilities
Trade payables and accrued expenses are the obligations of the entity
All liabilities have been recorded
All liabilities are included in the accounts at appropriate amounts
All disclosed events and transactions relating to liabilities have occurred and relate to the
entity
All disclosures required have been included
Financial information is appropriately presented and described
Financial information is disclosed fairly and at appropriate amounts

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Audit procedure for accounts payable and accruals
 Obtain a listing of trade accounts payables and agree the total to the general ledger by
casting and cross casting
 Test for unrecorded liabilities by inquiries of management on how unrecorded liabilities
and accruals are identified
 Obtain selected suppliers’ statements and reconcile these to the relevant suppliers’
accounts
 Perform a confirmation on accounts payables for a sample
 Complete the disclosure checklist to ensure that all the disclosures relevant to liabilities
have been made
 Compare the current year balances for trade accounts payables and accruals to the
previous year
 Compare the amounts owed to a sample of individual suppliers in the trade accounts
payables listing to amounts owed to these suppliers in the previous year
 Compare the payables’ turnover and payables’ day to the previous year and industry data
 Re-perform casts of payroll records to confirm completeness and accuracy
 Confirm payment of net pay per payroll records to cheque or bank transfer summary
 Agree net pay per cashbook to payroll
 Inspect payroll for unusual items and investigate them further by discussion with
management
 Vouch selected amounts from the trade accounts payables listing and accruals listing to
supporting documentation
 Obtain selected suppliers’ statements and reconcile these to the relevant suppliers
amount
 For a sample of vouchers, compare the dates with the dates they were recorded in the
ledger for application of correct cut-off
 Test transactions around the year-end to determine whether amounts have been
recognized in the correct financial period
 Perform analytical procedures on purchase returns, comparing the purchase returns as a
% of sales or cost of sales to the previous year
 Recalculate the mathematical accuracy of a sample of suppliers’ invoices to confirm the
amounts are correct
 Recast calculation of remuneration
 Re-perform calculation of statutory deductions and other deductions to confirm whether
correct
 For a sample of vouchers, inspect supporting documentation such as authorised purchase
orders
 Agree individual remuneration per payroll to personnel records, records of hours worked,
salary agreement
 Confirm existence of employees on payroll by meeting them, attending wages pay-out,
inspecting personnel and tax records, and confirmation from managers
 Review the trade payables listing to identify any large debits or long-term liabilities
which should be disclosed separately

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 Read the disclosure notes relevant to liabilities in the draft financial statements and
review for understandability
 Read the disclosure notes to ensure the information is accurate and properly presented at
the appropriate amounts
:Confirmation of accounts payables
Confirmation of trade payables provides evidence primarily for the completeness assertion.
Where the auditor is concerned about the presence of unrecorded liabilities, regular suppliers
with small or zero balances on their accounts and a sample of other accounts will be confirmed
as well as large balances.
:Audit procedure for Non-current liabilities
 Obtain or prepare schedule of loans outstanding at the year-end date
 Compare opening balances to previous year’s papers
 Test the clerical accuracy of the analysis
 Compare balances to the general ledger
 Agree name of lender to register of debenture holders
 Trace additions and repayments to entries in the cash book
 Confirm repayments are in accordance with loan agreement
 Verify that borrowing limits imposed by agreements are not exceeded
 Examine signed Board minutes relating to new borrowings or repayments
 Obtain direct confirmation from lenders of the amounts outstanding, accrued interest and
what security they hold
 Verify interest charged for the period
 Confirm assets charged have been entered in the register of charges and notified to the
registrar
 Review restrictive covenant and provisions relating to default
 Review any correspondence relating to the loan
 Review confirmation replies for non-compliance
 Review minutes and cashbook to confirm all loans have been recorded
 Review draft accounts to ensure that:
– Disclosures for non-current liabilities are correct and in accordance with
– Any elements repayable within one year should be classified under current
liabilities
:Provisions and contingencies
A provision is a liability of uncertain timing or amount and. A contingent liability is a possible
obligation that arises from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the
control of the entity or a present obligation that arises from past events but is not recognized
because it is not possible that an outflow will be required to settle the obligation or the amount
of the obligation cannot be measured with sufficient reliability. We would also conduct audit
procedure related to the provisions and contingencies to ensure that the financial statements are
truly and fairly stated.

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Independence
Auditor independence refers to the independence of the external auditor. It is characterized by
integrity and an objective approach to the audit process. The concept requires the auditor to
carry out his or her work freely and in an objective manner.
The IFAC Code of ethics states that it is in the public interest and, therefore, required by this
Code of Ethics, that members of assurance teams, firms and when applicable, network firms be
independent of assurance clients. Code of Ethics for Professional Accountants requires us to
maintain independence from the Company. In determining which relationships to report, we
consider relevant rules and related interpretations prescribed by the Institute of Chartered
Accountants of Bangladesh (ICAB) and applicable legislation, covering such matters as:
 holding a financial interest, either directly or indirectly, in the company;
 holding a position, either directly or indirectly, that gives the right or responsibility to
exert
 significant influence over the financial or accounting policies of the company;
 personal or business relationships of immediate family, close relatives, senior officials,
or
 retired senior officials, either directly or indirectly, with the company; and
 over familiarity with the company due to a long-standing relationship.
To provide further assurance, our quality management system requires us to ensure safeguards
are applied to eliminate identified threats to independence, or reduce them to an acceptable level
to ensure that we complied with relevant ethical requirements regarding independence. Our audit
staff is required to annually declare any personal relationships that could be perceived as placing
them in a conflict of interest position. We also have policies designed to ensure that auditors do
not remain on the same audit for excessive periods of time.
At this time, we are not aware of any relationships between the company and our audit staff that,
in our professional judgment, may reasonably be thought to bear on our independence.
Audit management
Audit team
The audit of the Company’s 2013 year-end will be completed by a team composed of senior
personnel from our Office who are involved in the planning, coordination, and direction of the
XYZ & Co. is consulted by the audit team on sensitive, complex, and/or difficult issues. The
Chapter 04:
Independence & Audit
Management

37
Audit Principal is responsible for audit quality and ensures that audits are carried out in
compliance with Office policies, professional standards, and the Office’s system of quality
control.
Senior staff involved in this year’s audit includes:
Senior staffs Designation
Mr. X Auditor General
Ms. Y Assistant Auditor General
Mr. Z Audit Principal
Mr. K Director
Audit timetable
After consulting with management, we have established the following timetable that highlights
the timing of the audit’s major activities.
Activity Time
Board of the Company Meeting—
presentation of audit plan
17-18 January 2013
Interim Audit Visits 4 to 16 February 2013
Year-end Audit 17 to 26 February 2014
Clearance meeting with management 27 February 2014
Finalization of audit, including audit
adjustments
15 March 2014
Signed audit opinion End of March 2014
Board of the Company Meeting –
presentation of audit results
To be determined
Audit hours and costs
Fees, including travel costs, for the 2013 financial statements audit have been set at 142,500
Taka. We are pleased to note that this is a decrease of 5% over the fees incurred for the 2012
financial statement audit. These fees are calculated on the basis of the time we anticipate
spending on the audit of the Company, and on the levels of skill and responsibilities involved.
The various components of the fees were discussed with management of the company in
determining the most economical alternatives and an agreement was reached that estimates for
the various travel components are the lower of the best rates available to the company.

38
XYZ & Co.
Chartered Accountants
Dhaka 1000, Bangladesh
Telephone +880………..
Email: xyx&co.@gmail.com
Auditors’ Report to the Shareholders
We have audited the accompanying financial statements of Beximco Synthetics Limited, which
comprises the Statement of Financial Position in the year 2014, Statement of Comprehensive
Income, Statement of Changes in Equity and Statement of Cash Flows for the year then ended
and all related consolidated financial statements and a summary of significant accounting
policies and other explanatory notes.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with Bangladesh Financial Reporting Standards (BFRS), the Companies Act
1994, the Securities and Exchanges Rules 1987 and other applicable laws and regulations. This
responsibility includes: designing, implementing, and maintaining internal control relevant to
the preparation and fair presentation of financial statements that are free from material
misstatement, whether due to fraud or error; selecting and applying appropriate accounting
policies; and making accounting estimates that are reasonable in the circumstances.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those
standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance whether the financial statements are free from material
misstatement.
Chapter 05:
Auditor’s report

39
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion
In our opinion, the Financial Statements including consolidated financial statements, prepared in
accordance with Bangladesh Financial Reporting Standards, we will try to assess whether they
give a true and fair view of the state of the company’s affairs and of the results of its operations
and its cash flows for the year then ended and comply with the companies Act 1994, the
Securities and Exchanges Rules 1987 and other applicable laws and regulations.
Further to our opinion in the above paragraph, we state that:
(i) We have obtained all the information and explanations which to the best of our
knowledge and belief were necessary for the purpose of our audit and made due
verification thereof;
(ii) In our opinion, proper books of account as required by law have been kept by Beximco
Synthetics Limited and its subsidiary so far as it appeared from our examination of those
books;
(iii) The company’s Statement of Financial Position, Statement of Comprehensive Income
and its Statement of Cash Flows dealt with by the report are in agreement with the books
of account and returns;
(iv) The expenditure incurred was for the purpose of the company’s business.
Auditors
XYZ & Co.
Dhaka, 29 July, 2014

40
To the board of directors or the appropriate representative of senior
management:
You have requested that we audit the financial statements of Beximco Synthetics Ltd which
comprise the balance sheet as at 31 December 2013, and the profit and loss account, statement
of cash flow for the year then ended ,and a summary of significant accounting policies and other
annexed notes .we are pleased to confirm our acceptance and our understanding of this
engagement by means of this letter .our audit will be made with the objective of our expressing
an opinion on the financial statements.
:Responsibilities of directors and auditors
As directors of Beximco Synthetics ltd you are responsible for ensuring that the company
maintains proper accounting records and for preparing financial statements which give a true
and fair view and have been prepared in accordance with the Companies Act 1994. You are also
responsible for making available to us, as and when required, all the company’s accounting
records and all other relevant records and related information, including minutes of all
management and shareholders’ meetings. We are entitled to require from the company’s officers
such other information and explanations as we think necessary for the performance of our duties
as auditors.
We have a statutory responsibility to report to the members whether in our opinion the financial
statements give a true and fair view, whether they have been properly prepared in accordance
with the Companies Act 1994 and whether the information given in the director’s report is
consistent with the financial statements.
Scope of Audit:
Our audit will be conducted in accordance with the Bangladesh Standard on Auditing issued by
ICAB and will include such tests of transactions and of the existence ,ownership and valuation
of assets and liabilities as we consider necessary. We shall obtain an understanding of the
accounting records have been maintained by the company. We shall expect to obtain such

41
appropriate evidence as we consider sufficient to enable us to draw reasonable conclusions
therefrom.
As our part of our normal audit procedures, we may request you to provide written confirmation
of certain oral representations which we have received from you during the course of the audit
on matters having a material effect on the financial statements. In connection with the
representations and the supply of information to us generally we draw your attention to s 397A
of the Companies Act 1994 under which it is an offense for an officer of the company to mislead
the auditors.
(Whether appropriate) We shall not be treated as having notice ,for the purpose of our audit
responsibilities ,of information provided to members of our firm other than those engaged on the
audit.
Once we have submitted our report we have no further direct responsibility in relation to the
financial statements for that financial year. However, we expect that you will inform us of any
material event occurring between the date of our report and that of the Annual General Meeting
which may affect the financial statements.
We look forward to full cooperation with your staff and we trust that they will
make available to us whatever records; documentation and other information are
requested in connection with our audit.
[Insert additional information here regarding fee arrangements and billing as appropriate]
This letter will be effective for future years unless it is terminated, amended or suspended.
Please sign and return the attached copy of this letter to indicate that it is in accordance with
your understanding of the arrangements for our audit of the financial statements.
XYZ & Co
Acknowledged on behalf of
Beximco Synthetics LTD
…………..
Date:……

42
BIBLIOGRAPHY:
Assurance Study Manual –CA Professional Stage Knowledge Level
www.google.com.

Audit report

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