international auditing

1. International Accounting
Standards and Auditing Standards
IB:401
For BBA 12th Batch

2. Reading
International:
Sources: http://www.ifrs.org/issued-standards/list-of-standards/
Bangladesh Accounting Standards:
http://www.icab.org.bd/icabweb/webGeneralContent/view/378870
Conceptual Framework:
http://www.icab.org.bd/icabweb/webNewsEventNoticeCir/viewPdf?fileWithPath=
/app/share_Storage/Attachments/icabwebcommonupload/images/upload/we
bupload/general_file/general_file/conceptual_framework.pdf
Auditing Standards:
2016-2017-IAASB-Handbook-Volume-1
http://www.icab.org.bd/icabweb/webNewsEventNoticeCir/viewPdf?fileWithPat
h=/app/share_Storage/Attachments/icabwebcommonupload/images/upload
/webupload/general_file/general_file/2016_2017_iaasb_handbook_volume_
1.pdf
2016-2017-IAASB-Handbook-Volume-2
2016-2017-IAASB-Handbook-Volume-3

3. Objectives of this paper:
• The purpose of this course is to examine the accounting
function from an international perspective. It has two
central themes weaving the various topical issues. These
themes are the impact of variations in cultural and belief
systems on the theory and practice of accounting, and
the determinants and consequences of adopting specific
accounting practices in a multinational organization.
• To know about international accounting standards (IASs)
and its applications;
• To know about international standards on auditing (ISAs)
and its application;
• To know the relevance of using accounting and auditing
standards as students of International business;
• To know how to interpret both categories of standards;

4. Learning Objectives
1. Define Financial accounting and general purpose financial
reports
2. Indicate the scope of regulation relating to external
financial reporting.
3. Explain the central requirements that financial statements
be ‘true and fair’.
4. Describe the International Accounting Standards
Framework
5. Describe the purpose of a conceptual framework
6. Understand what a ‘reporting entity’ is
7. Understand the qualitative characteristics that make
information useful
8. Define the basic elements in financial statements

5. Financial Accounting/International
Accounting/Management Accounting
• A process involving collecting and processing financial
information to meet decision-making needs of external
parties
• Financial accounting can be contrasted with management
accounting.
• Management accounting focuses on providing information
for decision making by parties within the organization (that
is, for internal as opposed to external users) and it is largely
unregulated.
• Financial accounting, by contrast, is subject to many
regulations.

6. Users of general purpose financial
reports
• Users include:
– present and potential investors
– employees
– lenders
– suppliers and other trade creditors
– customers
– Government and its agencies
– the public.
• Users lack the power to demand specific
information to meet their needs.

7. General Purpose Financial Report
• The information rights of outsiders must be
protected and important that certain rules be put
in place to govern how the information should be
compiled
• General Purpose financial report- A report that
complies with the Bangladesh Framework and
accounting standards and meets the needs of
external users

8. True and fair view
• What are the likely consequences if information in
the general purpose reports is not true and fair?
• What does true and fair view mean?
• As part of the reporting requirements what
external party provides an opinion of whether
information contained in the general purpose
reports provide a true and fair view of the financial
affairs of a company?
• What is the purpose of an auditors report?

9. True and fair view
• No fixed definition of true and fair view
• Disclosures are regarded as giving a true and
fair view if they provide all the relevant
information and comply with all the applicable
accounting standards.
• Audit report provides an independent opinion
of the financial information regarding:
– true and fair view
– compliance with the Companies Act 1994 and
Financial Reporting Act 2015
– compliance with accounting standards

10. Sources of external financial
reporting regulation
• What are some sources of regulation that cover
financial reporting in Bangladesh?
• What is an example of a legislation that underpins
financial reporting in Bangladesh?
• What are the functions of the ICAB
• Do accounting standards approved by ICAB have
legal backing?

11. Legislation
• Legislation governing financial reporting in Bangladesh
includes:
– Financial Reporting Act 2015 (FRA)
– Companies Act 1994(CA)
– Securities and Exchange Ordinance 1969
• Financial Reporting Act 2015:
– Applies to all reporting entities.
– Includes:
• the overall financial reporting framework
• reference to the conceptual framework
• the composition of reports
• the true and fair view, and
• the fair presentation override.
– Defines the terms 'reporting entity', 'issuer' and 'GAAP

12. ICAB
The Institute of Chartered Accountants of Bangladesh (ICAB) is the National
Professional Accounting Body in Bangladesh, established under the Bangladesh
Chartered Accountants Order, 1973 (President's Order No. 2 of 1973). for the
purpose of regulating the profession of accountants and for matters connected
therewith.
• To accomplish its mission, ICAB has been endeavoring to:
• Regulate the Accountancy Profession and matters connected therewith
• Administer its members and students
• Ensure professional ethics and code of conduct
• Provide specialized and professional training in Accounting, Auditing, Taxation,
Corporate Laws, Management Consultancy, Information Technology and
related subjects.
• Impart Continuing Professional Development (CPD) to members.
• Foster acceptance and observance of International Accounting Standards/
International Financial Reporting Standards (IAS/IFRS) and International
standards on Auditing /International, Auditing Practices Standards, (ISA/IAPS)
and adopt the same in Bangladesh as Bangladesh Accounting Standards/
Bangladesh Financial Reporting Standards (BAS/BFRS) and Bangladesh
Standards on Auditing/ Bangladesh Auditing Practices Standards (BSA/BAPS)
respectively.

13. Continue…………..
• Foster acceptance and observance of
International Accounting Standards/
International Financial Reporting Standards
(IAS/IFRS) and International Standards on
Auditing /International Auditing Practices
Standards (ISA/IAPS) and adopt the same in
Bangladesh as Bangladesh Accounting
Standards/ Bangladesh Financial Reporting
Standards (BAS/BFRS) and Bangladesh
Standards on Auditing/ Bangladesh Auditing
Practices Standards (BSA/BAPS) respectively

14. • Foster acceptance and observance of International
Accounting Standards/ International Financial
Reporting Standards (IAS/IFRS) and International
Standards on Auditing /International Auditing
Practices Standards (ISA/IAPS) and adopt the same
in Bangladesh as Bangladesh Accounting Standards/
Bangladesh Financial Reporting Standards
(BAS/BFRS) and Bangladesh Standards on Auditing/
Bangladesh Auditing Practices Standards (BSA/BAPS)
respectively
• Keep abreast of the latest developments in
Accounting techniques, Audit
methodology,Information technology, Management
consultancy and related fields and
• Liaise with international and regional organizations
to strengthen mutual cooperation.

15. The Bangladesh Securities Exchange
(BSEC)
• The Bangladesh Securities and Exchange Commission
(BSEC) was established on 8th June, 1993 as the regulator
of the country’s capital market through enactment of the
Securities and Exchange Commission Act 1993. Through an
amendment of the Securities and Exchange Commission
Act, 1993, on December 10, 2012, its name has been
changed as Bangladesh Securities and Exchange
Commission from previous Securities and Exchange
Commission
• The Commission's main functions are:
• Regulating the business of the Stock Exchanges or any
other securities market.

16. • Registering and regulating the business of stock-
brokers, sub-brokers, share transfer agents,
merchant bankers and managers of issues, trustee
of trust deeds, registrar of an issue, underwriters,
portfolio managers, investment advisers and other
intermediaries in the securities market
• Registering, monitoring and regulating of collective
investment scheme including all forms of mutual
funds.
• Monitoring and regulating all authorized self
regulatory organizations in the securities market.
Continue……………………………………

17. Continue……………………………………
• Prohibiting fraudulent and unfair trade practices
relating to securities trading in any securities market.
• Promoting investors’ education and providing
training for intermediaries of the securities market.
• Prohibiting insider trading in securities.
• Regulating the substantial acquisition of shares and
take-over of companies.
• Undertaking investigation and inspection, inquiries
and audit of any issuer or dealer of securities, the
Stock Exchanges and intermediaries and any self
regulatory organization in the securities market.
• Conducting research and publishing information.

18. Conceptual Framework of
Accounting
• What is the conceptual framework?
• What is the purpose of the conceptual
framework?
• What are the benefits of the conceptual
framework?
• What is the structure of a conceptual
framework?

19. Definition of ‘conceptual framework
• A conceptual framework is a coherent system of interrelated objectives and
fundamentals that is expected to lead to consistent standards (FASB US).
• Conceptual frameworks are developed to provide guidance on key issues, such
as:
– the scope and objectives of financial reporting
– the qualitative characteristics of financial information (tied to such notions
as relevance and representational faithfulness)
– the characteristics and recognition criteria for assets, liabilities, income,
expenses and equity.
• Accounting standards are generally developed based on agreement on the key
issues.
• A conceptual framework is needed before accounting standards are developed.
• The Bangladesh Conceptual Framework is called the Bangladesh Framework
which is based closely on the IASB Conceptual Framework

20. The Purpose of the Conceptual Framework
The purpose of the Conceptual Framework of
Financial Reporting to:
– assist the ICAB/standards setter in its role as a national
standard setter
– assist preparers of financial statements in applying Standards
– assist auditors in forming an opinion as to whether financial
statements conform with Standards
– assist users of financial statements in interpreting the
information contained in financial statements prepared in
conformity with Standards.

21. Benefits of a conceptual framework
– Provides a coherent theory to underpin standard setting
– Requires for better accountability from standard setters
– Improves communication between standard setters and
constituents
– Makes the development of accounting standards more
economical
– Increases compatibility and comparability of financial
reports both within and across regulatory jurisdictions.

22. Structure of a conceptual framework

23. Qualitative characteristics of financial
information
• For information to be useful for decision
making what fundamental qualitative
characteristics should it have?
• When is information regarded as being
relevant?
• What is meant by faithful representation?
• What are the four enhancing qualitative
characteristics of financial information?

24. Qualitative Characteristics of Useful
Information
• Financial information should have qualitative characteristics in order to
be useful for economic decision making.
• The fundamental qualitative characteristics are ‘relevance’ and
‘faithful representation’ (Conceptual Framework).
• Other qualitative characteristics which enhance information that is
relevant and faithfully represented are (Conceptual Framework
paragraph AQC 19 ):
– Comparability
– Verifiability
– Timeliness &
– Understandability

25. Qualitative characteristics of financial
information
Relevance − Relevant financial information is capable of making a difference in the
decisions made by users. (Conceptual Framework)
Faithful Representation
– Replaces the qualitative characteristics of reliability
– Information that is complete (Conceptual Framework )
– Information that is neutral (Conceptual Framework)
– Information that is free from error (Conceptual Framework)
Balancing relevance and faithful representation
– Possible for information to be faithfully represented, but not very relevant,
or the other way around.
– There is often a trade-off between relevance and representational
faithfulness.