Letter of transmittal
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Letter of transmittal

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Letter of transmittal Letter of transmittal Document Transcript

  • LETTER OF TRANSMITTAL August 22, 2013 Mohammad Moniruzzaman, ACA Assistant Professor Department of Accounting & Information Systems University of Dhaka Subject: Submission of Internship Report. Dear Sir, With due respect, it is my great pleasure to submit the internship Report. The report entitled “Determinants of Audit fee: Empirical Study of 50 listed companies in Bangladesh” which is a partial requirement for the completion of MBA degree. I have left no stone unturned to collect data about audit fee and other variable of financial statement that are significant to determine audit fee. I have also collected data about the practice of the audit firm of what they follow to determine the audit fee of their listed client to provide assurance service. I have furnished all the things what I have learnt during the internship program at Rahman Rahman Huq (RRH), Chartered Accountants, 9 Mohakhali C/A, Dhaka-1212.I hope that this report will meet the standards of your judgments. I have tried my best to make this report interesting, informative and better one. Any mistake or shortcoming in this report would be apologetically considered as my fault. I, therefore, pray and hope that you would kindly accept my report and oblige thereby. Sincerely yours Md Ibne Nayeem Hasan MBA, 14th Batch, Sec: A, ID # 460 BBA, 14th Batch, Sec: B, ID # 14095 Department of Accounting & Information Systems University of Dhaka i
  • PREFACE Today we are very much involved in the business era. Only book-based knowledge is not enough to cope with real business environment. Effective combination of theoretical knowledge with practical experience is the key to success. Considering this, internship program is included in the degree Master of Business Administration( MBA) from the Department of Accounting & Information Systems of University of Dhaka. I have selected the audit firm as my field to conduct my internship program which runs for two months only. I am an articled student of KPMG Rahman Rahman Huq (RRH) also. I tried my best to collect relevant and significant data as much as possible and prepare the report with my best effort. I regret for any undue mistakes in this report. If the report do little support to any student, teacher, researcher or analyst, I may consider my effort does not go in vain. ii
  • STUDENT’S DECLARATION I, Md. Ibne Nayeem Hasan, a student of MBA 14th Batch, Department of Accounting & Information Systems, University of Dhaka, do hereby declare that the internship report titled “Determinants of Audit fee: Empirical Study of 50 listed companies in Bangladesh.” is the outcome of three months practical work on the topic mentioned above under the supervision of Mohammad Moniruzzaman, ACA, Assistant Professor, Department of Accounting & Information Systems, University of Dhaka, Bangladesh. I also declare that this report is an original work and no part of this report has been copied from elsewhere. In addition I would also like to mention that this report has not been published or submitted for being published or submitted for awarding any degree, diploma or recognition. Sincerely Yours Md. Ibne Nayeem Hasan MBA, 14th Batch, Sec: A, ID # 460 BBA, 14th Batch, Sec: B, ID# 14095 Department of Accounting & Information Systems University of Dhaka iii
  • LETTER OF ACCEPTANCE This is to certify that Md. Ibne Nayeem Hasan, MBA 14th batch Sec :A, ID No: 460, Department of Accounting & Information Systems, has completed his internship report titled on “Determinants of Audit fee: Empirical Study of 50 listed companies in Bangladesh” under my supervision as a part of partial requirement for obtaining Master of Business Administration (MBA) degree in Accounting & Information Systems. This report can be accepted for evaluation. Mohammad Moniruzzaman, ACA Assistant Professor Department of Accounting & Information Systems University of Dhaka iv
  • ACKNOWLEDGEMENT In every scene of one's life there are some persons who make other's life precious. They provide inspiration support, and maximum effort to help in different way to make other's smile at the end of an event. In same manner to completion of this internship report, I cannot deserve all the praise. There were lot of people who helped me by providing valuable information, guidance and their valuable time. At first, I would like to express my gratitude to almighty Allah for enabling me the strength and opportunity to complete the report within the schedule time successfully. It was a great pleasure to prepare internship report titled “Determinants of Audit fee: Empirical Study of 50 listed companies in Bangladesh.” I have benefited from the cooperation of many people during the preparation of the report. First of all, I would like to tender my gratitude to my esteemed Sir Mohammad Moniruzzaman, ACA for his sincere guidance about how to prepare the report. Without his guidance, it would very difficult for me to complete the report. I express my deep gratefulness to Ali Ashfaq FCA, partner, Rahman Rahman Huq; Yakub Ali ACA, Rahman Rahman Huq, Assistant Manager, Rahman Rahman Huq for selecting me to the statutory audit client named ECPV Chittagong Ltd and granting me the access of different correspondence file related to audit and advisory services. But there are also so many people who helped me during this period by their valuable speech, time, hospitality & co-operation. I like to mention their name also. I like to thank Md Fuad Hasan (Supervisor) and Abul Hasnat Md. Lutful Abedin (Audit Assistant) Rahman Rahman Huq. The Internship program cannot be successful without their proper guidance and kind co-operation. v
  • EXECUTIVE SUMMARY This study investigates the factors affecting the level of audit fees paid by companies to their auditors. Firstly, all the likely factors thought to be affecting the level of audit fees were identified through a literature survey. These factors were classified into three groups i.e., size, complexity, and others. The relative importance of these factors was determined empirically and statistically. The empirical study was undertaken by mailing two questionnaires to samples of 100 companies, and 100 audit firms. Preliminary interviews were carried out in order to identify if the most important factors collected through the literature should be considered suitable for final conclusion. The questionnaires were not used to collect data or to quantify the subjective factors. They were used to assess the degree to which the factors previously identified were important determinants of the audit fee, and whether other determinants should also be considered. The data for the statistical analysis was obtained from published data i.e., Data Stream, Companies' Annual Reports,. In carrying out the statistical analysis, Multiple Regression arid Correlation Techniques were used to assess the magnitude of the association between the size and complexity factors and audit fees. An audit fee regression model was developed which explains of the variation in audit fees of the 50 listed companies in Bangladesh. on the basis of their size and complexity. The results of both the empirical study, and the statistical analysis revealed that the company size (total assets, market capitalization, capital expenditure, operating cash flow), and its complexity (sponsorship shareholding) are the major objective determinants of audit fees. The empirical study also revealed that the quality of the company's internal control system, competition in the audit market, and the risk involved in the audit work are the major subjective determinants of audit fees. In addition, the statistical analysis revealed that the factors total long term debt, sponsorship shareholdings , and total employment costs are the most significant predictors of audit fees. Chapter 1 describes the induction and other information of the audit fee. Chapter 2 describes data analysis using different statistical tools and chapter 3 describes recommendation and conclusion with references. vi
  • EXECUTIVE SUMMARY This study investigates the factors affecting the level of audit fees paid by companies to their auditors. Firstly, all the likely factors thought to be affecting the level of audit fees were identified through a literature survey. These factors were classified into three groups i.e., size, complexity, and others. The relative importance of these factors was determined empirically and statistically. The empirical study was undertaken by mailing two questionnaires to samples of 100 companies, and 100 audit firms. Preliminary interviews were carried out in order to identify if the most important factors collected through the literature should be considered suitable for final conclusion. The questionnaires were not used to collect data or to quantify the subjective factors. They were used to assess the degree to which the factors previously identified were important determinants of the audit fee, and whether other determinants should also be considered. The data for the statistical analysis was obtained from published data i.e., Data Stream, Companies' Annual Reports,. In carrying out the statistical analysis, Multiple Regression arid Correlation Techniques were used to assess the magnitude of the association between the size and complexity factors and audit fees. An audit fee regression model was developed which explains of the variation in audit fees of the 50 listed companies in Bangladesh. on the basis of their size and complexity. The results of both the empirical study, and the statistical analysis revealed that the company size (total assets, market capitalization, capital expenditure, operating cash flow), and its complexity (sponsorship shareholding) are the major objective determinants of audit fees. The empirical study also revealed that the quality of the company's internal control system, competition in the audit market, and the risk involved in the audit work are the major subjective determinants of audit fees. In addition, the statistical analysis revealed that the factors total long term debt, sponsorship shareholdings , and total employment costs are the most significant predictors of audit fees. Chapter 1 describes the induction and other information of the audit fee. Chapter 2 describes data analysis using different statistical tools and chapter 3 describes recommendation and conclusion with references. vi