Auditing
BBA 4315
First section:
Auditing begins where accounting ends- Explain with examples
Auditing begins, where accountancy ends. “An auditor has to verify the entries passed
by the accountant and the final accounts prepared by him. Auditing is, therefore a
critical and independent examination of the accounts with the help of vouchers,
documents and the information thus obtained. The job of an auditor is thereof to ensure
after due verification and thorough scrutiny of accounts as to whether the transaction
entered into the books are legitimate or not. Note that an auditor is required to submit
his report to the effect whether or not the Balance Sheet is a true to the representation
of the existing state of a business concern.
What is the primary object of audit?
1. Main objects:- To verify the fair view and correctness of the accounts, balance
sheet and profit and loss account as per the companies act and other related laws.
2. Secondary Objects:- As given below:-
a) Detection and Prevention of Errors:- as follows:-
Error of Omissions:- When a transaction is incorrectly recorded either wholly or
partly. For example – wrong casting, wrong calculations, wrong postings and wrong
carry forwards etc. In this case the trial balance may not be affected but the error
can be discovered when the transaction is vouched or checked.
Error of Commission:- When transaction has recorded but has been wrongly
entered in primary books or ledger posting etc. For example, purchase invoice for
Rs.1480/= is posted for Rs.1840/=. This type of errors may be intentional or
unintentional.
Error of Principles:- When entries are not passed according to the fundamental
principles of accountancy. For example, wrong allocation of expenditure between
capital and revenue, ignoring the outstanding assets and liabilities etc. Such errors
may be committed either intentionally or unintentionally.
Compensating Errors or Off-setting Errors:- When an error is counter balanced
or compensated by any other error or errors so that the net effect becomes nil. For
example, if A’s Account was debited for Rs.10/= instead of Rs.100/= and B’s account
was debited for Rs.100/= instead of Rs.10/=. Through proper scrutiny of ledger
accounts, the errors may be detected.
b) Detection and Prevention of Frauds:- Frauds can be detected as follows:-
1. Fraud in case of Cash:- can be detected as follows:-
Omitting to enter cash received.
Entering less cash received than the actual receipt.
Making fictitious entries on the payment side of the cash book.
Entering more amount on the payment side of cash book that actual payment.
2. Misappropriation of Goods:- To prevent this type of fraud, a proper type of
accounting control must be exercised on sales, purchases and stock taking etc.
3. Fraudulent Manipulation of Accounts:- This class of fraud is found very less but
if it happens, this is because of Director, Managers and top responsible persons
only. These frauds can be classified as follows:-
Showing more profit so that they can get more commission etc.
Showing less profit so that they can purchase shares in the market at lower price.
Showing less profit to avoid income tax.
What is continuous audit and where is applicable?
Continuous audit is an internal process that examines accounting practices, risk
controls, compliance, information technology systems and business procedures
on an ongoing basis. Continuous audits are usually technology-driven and
designed to automate error checking and data verification in real time. A
continuous audit driven system generates alarm triggers that provide notice
about anomalies and errors detected by the system.
BREAKING DOWN Continuous Audit
An internal auditing department normally has a set schedule to do its work,
whether monthly, quarterly, semi-annually or annually. An individual or team
spends time in each area to gather information, review and analyze data, and
publish their reports for management and the audit committee of the Board of
Directors. A continuous audit is implemented via technology, and these mini logs
assist the internal auditor(s) in between their regularly scheduled formal audits.
Explain the types of errors that may exist in spite of the agreement of trial balance
A Trial Balance will not disclose the following errors:
The Trial Balance is not absolute proof of the accuracy of ledger accounts. It is a proof
only of the arithmetical accuracy of the postings. The total of debits may be equal to the
total of credits yet still there may be errors.
Such errors are not disclosed by a trial balance and they are:
1. Errors of Principle:
ADVERTISEMENTS:
An error of principle is an error which violates the fundamentals of book-keeping. For
instance, purchase of furniture is debited to Purchase Account, instead of Furniture
Account; Wages paid for the erection of plant is debited to Wages Account, instead of
Plant Account; the amount spent on extension of building is debited to Repairs Account
instead of Building Account etc. These types of errors do not affect the total debits and
total credits but affect the principle of book-keeping.
2. Errors of Omission:
If a transaction is completely omitted, there will be no effect on the Trial Balance. When
a transaction goes completely unrecorded in both aspects or a transaction after being
recorded in the books of primary entry is not at all posted in the ledger, the error is an
error of omission. For instance, if a credit purchase is omitted to be recorded in the
Purchase Day Book, then it will be omitted to be posted both in the Purchase Account
and the Supplier’s Account. This error will not, however, result in the disagreement of
Trial Balance.
3. Posting to Wrong Account:
Posting an item to wrong account, but on the correct side. For instance, if a purchase of
Rs 200 from Ramu has been credited to Raman, instead of Ramu and this error will not
affect the agreement of Trial Balance. Thus, Trial Balance will not detect such an error.
4. Error of Amounts in Original Book:
If an invoice for Rs 632 is entered in Sales Book as Rs 623, the Trial Balance will come
out correctly, since the debit and credit have been recorded as Rs 623. The arithmetical
accuracy is there, but in fact there is an error.
5. Compensating Errors:
If one account in the ledger is debited with Rs 500 less and another account in the
ledger is credited Rs 500 less, these errors cancel themselves. That is, one error is
neutralized by similar error on the opposite side.
The auditing is a systematic examination of the books, accounts, vouchers of a business- discuss
A precise definition of the term ‘auditing’ is difficult to give. Some of the definitions given
by different authors are as follows:
According to the International Federation of Accountants (IFAC); An audit is the
independent examination of financial information of an entity, whether profit oriented or
not and irrespective of its size, or legal form, when such an examination is conducted with a
view to expressing an opinion thereon.
Spicer and Pegler, have defined audit as; “such an examination of the books, accounts and
vouchers of a business, as will enable the auditor to satisfy himself that the Balance Sheet is
properly drawn up, so as to give a true and fair view of the state of the affairs of the
business, and whether the Profit and Loss Account gives a true and fair view of the profit or
loss for the financial period, according to the best of his information and the explanations
given to him and as shown by the books; and if not, in what respect he is not satisfied”.
According to the American Accounting Association (AAA); “Auditing is a systematic process
of objectively obtaining and evaluating evidence regarding assertions about economic
actions and events to ascertain the degree of correspondence between those assertions and
established criteria and communicating the results to interested users”.
According to Montgomery; “Auditing is a systematic examination of the books and records
of a business or the organization in order to ascertain or verify and to report upon the facts
regarding the financial operation and the result thereof”.
It is clear from the above definitions that;
auditing is the systematic and scientific examination of the books of accounts and
records of a business,
enables the auditor to judge that the Balance Sheet and the Profit and Loss Account are
properly drawn up so it exhibits a true and fair view of the financial state of affairs of the
business and profit or loss for the financial period.
The auditor will have to go through various books and accounts and related evidence to
satisfy himself about the accuracy and authenticity to report the financial health of the
business.
Companies are expected to pass their audits, as the results are very important to the
company’s reputation and success.
Audits are very valuable to external company affiliates, such as shareholders and investors,
because they provide an extra reassurance of their choice in investments when issues arise.
How does accountancy differ from auditing?
Auditing is a luxury for the small business- give arguments
Auditing may be luxury from the point of view of an ordinary businessman because of
following reasons:-
1. The remuneration paid to the auditor is an unnecessary waste of funds.
2. Too many formalities attached to auditing create difficulties for an average
businessman.
3. The businessman feels that auditing means waste of time and disturbance in routine
work of the accountant and his subordinates.
4. Audit is not perfect method of detecting errors and frauds.
Thus, auditing for a small business may be luxury
Mention important objectives of auditing
Objectives of Auditing:
The basic objective with which auditing is done are:
1. Verification of accounts and statements.
2. Detection of errors or frauds.
3. Prevention of errors or frauds.
The auditor is given a free hand to the books, accounts, statements enabling him to
thoroughly check them and if satisfied to certify that books have been properly drawn up
and represent a true view of the financial position of the business. He gives his special
attention to the direction of errors which may be innocently or intentionally committed.
What are the differences between bookkeeping and accountancy?
BASIS FOR
BOOKKEEPING ACCOUNTING
COMPARISON
Meaning Bookkeeping is an activity of Accounting is an orderly
recording the financial recording and reporting of the
transactions of the company financial affairs of an
in a systematic manner. organization for a particular
period.
What is it? It is the subset of accounting. It is regarded as the language
of business.
BASIS FOR
BOOKKEEPING ACCOUNTING
COMPARISON
Decision Making On the basis of bookkeeping Decisions can be taken on the
records, decisions cannot be basis of accounting records.
taken.
Preparation of Not done in the bookkeeping Part of Accounting Process
Financial process
Statements
Tools Journal and Ledgers Balance Sheet, Profit & Loss
Account and Cash Flow
Statement
Methods / Sub- Single Entry System of Financial Accounting, Cost
fields Bookkeeping and Double Accounting, Management
Entry System of Bookkeeping Accounting, Human Resource
Accounting, Social
Responsibility Accounting.
Determination of Bookkeeping does not reflect Accounting clearly shows the
Financial Position the financial position of an financial position of the entity.
organization.
What are the differences between investigation and audit?
BASIS FOR
AUDITING INVESTIGATION
COMPARISON
Meaning The process of inspecting the An inquiry conducted, for
books of accounts of an establishing a specific fact or
entity and reporting on it, is truth is known as Investigation.
known as Auditing.
BASIS FOR
AUDITING INVESTIGATION
COMPARISON
Nature General Examination Critical and in depth
examination.
Evidences The evidences are persuasive The evidences are
in nature. unquestionable, therefore, its
nature is decisive.
Time Horizon Annually As per requirement
Performed by Chartered Accountant Experts
Reporting General Purpose Confidential
Obligatory Yes No
Appointment an auditor is appointed by The management or
the shareholders of the shareholders or one-third party
company. can appoint investigator.
Scope Seeks to form an opinion on Seeks to answer the questions,
financial statement. that are asked in the
engagement letter.
Second section:
Fraud does not necessarily involve misappropriation of cash or goods- discuss giving illustration
Describe briefly the main classes of errors and frauds
Is the auditor expected to detect all errors and frauds?
What do you mean by teeming and landing process of fraud?
Enumerate the position of auditors in regard to errors and frauds affecting financial statements
What are the merits of an audit?
What are the importance of internal control?
What are the points that auditor must bear in mind while examining the vouchers
What are the points that auditor need to keep in mind while auditing the sales
Third section
What does verification means?
What points does verification of assets involve?
What are the duties of an auditor regarding the valuation and verification of stock in trade of a
manufacturing concern?
How would you verify provision for taxation and sundry creditors for goods supplied?
Distinguish between verification and valuation of assets
An auditor is not a value but he is intimately connected with the value – discuss
In case of valuation of assets, the auditor may start his work with a suspicious mind- do you
agree?
Fourth section
Explain the term internal control, internal check, and internal audit
Distinguish between internal check and internal audit
Suggest a good and sound system of internal control for payments by cheques
What is a voucher and what points must be taken into consideration while examining a voucher
Narrate internal check system as regards purchase
Discuss the duties of an auditor as regards to credit purchase and credit sales
What is the relation between routine checking and vouching?
Mention six names of documents which are used as voucher
Fifth Section
Define cost audit
The term Cost Audit means the examination of books of account and vouchers to
ascertain their accuracy. The exact calculation of the cost of a product is called Cost
Audit. The Institute of Cost & Works Accountants of India defines ‘cost audit‘ as “an
audit of efficiency of minute details of expenditure While work is in progress and not a
post-mortem examination.
What are the procedures of cost audit?
What inquiries an auditor make before beginning of cost audit
What are the purposes of cost audit?
What are the conditions under cost audit is conducted
What are the limitations of cost audit?
What is management audit?
Discuss the importance of management audit
Difference between management audit and statutory audit
Discuss the duties of management auditor
Difference between financial audit and management audit
MISC
Describe the rules and regulations governing the Accounting Profession of Bangladesh
What are the financial and accounting responsibilities of directors?
Short notes:
I. Interim audit
II. Leasehold property
III. Cash book
IV. Floating asset
V. Auditor`s guidelines
VI. Continuous audit
VII. Contingent liability
VIII. Manipulation of accounts
Organisational behaviour
BBA 4317
First section
What is organisational behaviour?
Explain the variables of organisational behaviours
Describe the challenges of today’s organisational behaviour
Discuss the fundamental elements of organisational behaviour
Discuss the contributing fields of organisational behaviour
Explain the opportunities of organisational behavior
Second section
What is attitudes?
Explain different types of attitudes
What is job satisfaction?
Explain the outcomes of job satisfaction
Describe the consequences of job satisfaction
What is the relationship between job satisfaction with absenteeism, turnover and productivity?
Identify and describe the traits in the Big Five personality model
What is values?
Explain the importance of values
Describe various types of values
What do you mean by work force diversity?
What is personality?
Describe the major personality attributes influencing organisational behaviour
Discuss the personality determinants
Difference between Types A personality and Type B personality
What are emotions?
What is emotional intelligence?
Why emotional intelligence is different from emotion
Discuss various types of emotions
Discuss the dimensions of emotion
What is perceptions?
State in brief the factors that influence perception
How does selectivity affect perception?
How selectivity can create perceptual distortion
Perception making judgements about others- discuss
Is there any link between perception and individual decision making?
Explain the ethical standards in decision making
Third section
Define organisational culture
Discuss the functions of organisational culture
How does employees earn culture in an organisation?
How an ethical organisational culture can be developed
Difference between strong culture and weak culture
Explain the three forces that play particularly important role in sustaining culture
Characteristics of organisational culture
Fourth section
Theories and applications:
I. Trait theory
II. Behavioural theory
III. Contingency theory of leadership
IV. Why does Fielder use LPC (least preferred co-workers) questionnaire
V. Distinguish between theory X and theory Y
VI. Motivational implications of McGregor`s about Theory X and Y
VII. Path goal theory of leadership
VIII. Discuss the attribution theory of perception
IX. Managerial grid of leadership
X. Discuss the findings of University of Michigan studies in leadership
Fifth section
What are the three critical situational variables identified by Fiedler?
What is the most effective leadership style to use?
What are the difference between groups and teams?
Contrast self-managed team and cross functional teams
What is leadership?
Explain the qualities of leadership
Leaders are born not made –discuss
Describe different types of teams
How can an individual be turned into a team player
Why is team popular
Sixth section
What do you mean by power and politics?
Discuss various tactics of power
What are the factors contribute to political activity in an organisation
Discuss various sources of power
What is workplace politics?
Explain the power in an action in the workplace politics
Distinguish power from politics
Marketing Management
BBA 4319
Identify and discuss the reasons that make marketing so important in the present business context
Write about the scope of marketing
Explain the statement marketing management is basically demand management
What are the three key management questions that the holistic marketing is designed to address?
How can marketers answer them?
Enumerate the strategies a company can follow for intensive growth
Define marketing research
Three categories of marketing research firms fall in
Mention and describe the decisions necessary to be taken from developing the research plan
How can market leaders expand the total market and defend market share
How would you decide on the attack strategies to be pursued by the market follower?
What are the characteristics of products?
How do marketers classify products?
How can companies use packaging labelling warranties and guarantees as marketing tools?
What is meant by differentiation?
Discuss the alternative tools of differentiating a company`s offering
When should a company initiate a price change?
Discuss the main factors of managing the sales force
What are the main principles of personal selling?
How can a company improve its marketing skills?
Define marketing management
Identify different stages of demand and discuss the corresponding marketing tasks
Identify a Bangladeshi organisation involved in societal marketing concept and write in detail
What is strategic planning gap?
Discuss the ways to fill the strategic planning gap
How to develop a marketing plan for a new product
Who is a market leader?
What are the characteristics of a market leader?
How would you decide on the attack strategies to be pursued by the market challenger?
Discuss the market niche strategies
Identify the different level of a product and enumerate the customer value hierarchy
Justify if packaging is a component of product mix or not
Why packaging and labelling are essential factors while setting product strategy
What is product mix pricing?
A suitable method of pricing the product of a new company
Discuss the strategies in the consumer adoption process
Why has market demassification occurred?
Are there any ethical issues faced by a marketer while practicing direct marketing
Advantages and disadvantages of interactive marketing
Who are opinion leaders?
Why opinion leaders are important to both customers and marketers
Main considerations of corporate social responsibilities
Benefits and drawbacks of word of mouth as a communication tool
Explain the core marketing concept
Why is holistic marketing more important in today`s business world
What is corporate mission?
What are the elements of marketing mix?
How marketing mix presented from customer`s view point
How can companies more accurately measure and forecast demand
Explain the reasons of high rate of failure of new product
What factors influence the adoption process of a new product?
Differentiate among market penetration strategy, market development strategy and product
development strategy
What are the main consideration in setting pricing objectives?
Explain the different price setting methods
How should a company respond to a competition price change?
What decisions do companies take in designing and managing a sales force?
Short notes
Brand extension
Customer relationship marketing
Product life cycle
New product
Core marketing concepts
Marketing plan
Ingredient branding
Auction pricing
Marketing audit
Competitive advantage
Holistic marketing
Niche marketing
Co-branding
Cause-related marketing
Corporate social responsibility
