An Article on Problems and Prospects of Trade Union in Bangladesh [Trade Union movement in Bangladesh]

 University of Dhaka

Problems and Prospects of Trade Union in Bangladesh

Trade Union:

Trade Union is an organization of workers who have banded together to achieve common goals such as protecting the integrity of its trade, achieving higher pay, increasing the number of employees an employer hires, and better working conditions. It’s a group of employees in a particular sector, whose aim is to negotiate with employees overpay, job security, working hours, etc. using the collective power of the members.

Some Authors definitions are given below

“Trade union is a continuous association of wage earners for the purpose of maintaining and improving the conditions of their working lives.”

 -Sydney & Webb

Functions of Trade Union:

The most common, but by no means only purpose of trade unions are maintaining or improving the conditions of employment. Over the last three hundred years, many trade unions have developed into a number of forms, influenced by differing political and economic regimes. The immediate objectives and activities of trade unions include protection and promotion of the interests of their members. Regulating the relations between workers and employers or workers and workers or employers and employers is another objective of trade unions. Besides these there are some more objectives of trade unions. They are -

Provision of benefits to members:

Early unions would give their members unemployment pay in case they were hurt on the job, unfairly fired, or sick. This is usually done by the government today. Unions may also give their members a lawyer to represent them if they are ever sued in court or charged with a crime. Early trade unions, like Friendly Societies, often provided a range of  benefits to insure members against unemployment, ill health, old age and funeral expenses. In many developed countries, these functions have been assumed by the state; however, the

provision of professional training, legal advice and representation for members is still an important benefit of trade union membership.

Collective bargaining:

Where trade unions are able to operate openly and are recognized by employers, they may negotiate with employers over wages and working conditions. The leaders of a union work with management (the people who run the business) in order to get a contract that gives workers what they want. This is because union leaders can threaten to strike.

Industrial action:

Trade unions may enforce strikes or resistance to lockouts in furtherance of particular goals.

Political activity:

Trade unions may promote legislation favorable to the interests of their members or workers as a whole. To this end they may pursue campaigns, undertake lobbying, or financially support individual candidates or parties (such as the Labor Party in Britain) for public office. Unions often work to get laws passed which help their cause. Some raise money for politicians who are friendly to unions. They also lobby for laws which help out unions. Some political parties are very close to unions, like the Labor Party in the United Kingdom.

Article 8 of the International Covenant on Economic, Social and Cultural Rights ensure the right to form and join trade union and use strikes

Strikes

If collective bargaining does not work, unions often use strikes to get their demands. However, the threat of a strike is usually enough: over 98% of union contracts are renewed without a strike.

With these four major objectives trade unions of Bangladesh work for maintaining or establishing these minor objectives. Workers satisfaction and protect their rights are focus point of trade unions.

1.       Democracy and Human Rights; Empowerment and Equality; Dignity, Credibility and Responsibility of trade union; are among the major objectives of trade unions.

2.       To strengthen the capacity of the trade union movement to become recognized as an active partner in the social dialogue regarding the development process of Bangladesh.

3.       To contribute to the effective participation and functioning of the TU movement in the tripartite mechanism.

4.       To develop a workers friendly mind-set of the society where workers rights are recognized and honored.

5.       To contribute to a greater unity in labor movement and encourage organizing more workers in Trade Unions.

6.       To contribute to strengthening of the democratic process of Trade Unions and their ability to improve services to their members.

7.       To contribute to the process of establishing an exploitation free society by ensuring workers fair share in the national wealth and development.

8.       To contribute to strengthening national, regional and international solidarity and networking of the workers organizations and Institutions.

9.       To enhance the ability and skill of the TU movement to render services, and the capacity in order to address the priorities of their members.

10.     To enhance the ability and skill of the TU movement to recruit more members and gain more practical strength to combat challenges.

Trade Union in Bangladesh:

As a developing country trade union plays an important role in Bangladeshi industrial society. There have been found three basic structure of trade union in Bangladesh.

       National Federation: National Trade Union federation consists of basic unions irrespective of job categories. A National Federation was constituted by two or more basic trade unions irrespective of the Trade. Now it needs 20 registered basic/Industrial Unions.

       Industrial Federation: It is the body of unions from the same industrial sector. It deals with common problems and demands of the sector. Basic unions within the sector are its members.

       Basic Union: This is the main union formed by the direct participation of the workers Grass root level activists are the members of this Factory level/ workplace based unions. Elected body of industry of factory level unions works as Collective Bargaining Agent- CBA

Total number of registered trade unions in Bangladesh

Categories	Total number of unions/federations	Number of unions included	Number of members
National federation	32	1,264	1,263,665
Industrial federation	108	721	640,221
Garments federation	26	80	50,149
Basic union	5,242	-	2,069,614

BANGLADESH TEXTILE & GARMENT WORKERS LEAGUE

Membership

 Potential membership   :         57,100

Actual membership        :         52,800

Thereof women              :         17,277

Baseline information on membership

Textile:                 Male :         29,120        Female :        1,605

Garments:            Male :           6,403        Female :      14,147

Home workers:     Male :               -            Female :        1,525 

Gender distribution in decision-making structure (female Percentage) 

Federal level                   16%

Union level                     10%

Branch level                    3% – 5%

Characteristics of Trade Union in Bangladesh:

There are some common characteristics which are found in Bangladeshi trade unions. Such as

1.     Lack of awareness about trade unions: Most of our Bangladeshi industrial workers come from the rural area and approximately maximum of them have a very low educational background or none. So they don’t well understand that what are trade union for and how can they achieve their legal right by trade union.

2.     Paternalistic/hierarchical system: Our society is more or less used to the paternalistic method of governing. There are some factors which do not let the system to be fully democratic. The workers do not have equal say in the decision making.

3.     Lack of proper information: Information gap to the root level members in the associations is common phenomena. So they just fall victims of sudden decision given by the leaders.

4.     Leaders sometimes forgo common interest:Sometimes leaders do not take proper care of employee interest. They give emphasize on their personal interest and let the common interest be relaxed.

5.     Negative attitude towards unionism:  As all the members are not appropriately known to the legal rights and functions of trade union, they may slower trade union for achieving its goal by creating negative impact.

6.     Provision of equal right of men and women:Our trade unions have long sought about the portions enjoyed by men and women workers and they have achieved a result that our workers regardless of men and women enjoy equal wages.

7.     Take part in political activities: Our trade union leaders not only lead the workers of the organizations but also play an important role in the political field of the nation thus contributing to the national development.

8.     Instigated by political interest: Too much involving in politics of the leaders may create consolidations in the way of achieving goal.

9.     Take part in management process: Our union leaders take active part in the decision making of the organization management and thus they make sure that the sayings and frustrations of common workers are being presented before the employer.

10.                        Bargaining with the employer: In the time of bargaining situations our trade union leaders take active part in the bargaining and present their issue on behalf of the members. Thus they manage to collect the rightful position o the workers in the organization.

History of Trade Union in Bangladesh:

The British rulers introduced Trade Union Act, 1926. The main purpose of the Act was to provide registration for trade unions and in certain respects.The East Pakistan Trade Unions Act, 1965 was enacted repealing the Trade Unions Act, 1926. The Labor Disputes Act, 1965 was enacted and Industrial Relations Ordinance, 1969 was enacted integrating the above two Acts.

Government of Bangladesh declared a labor policy in 1972. The right to strike and collective bargaining in the nationalized industries was prohibited for six months by Presidential order no. 55 in May 1972.

In 1973, the right to strike and lockout, as granted by IRO, 1969 was withdrawn.

In 1974 Act completely suspended the democratic rights of workers by prohibiting trade union activities such as strikes, lock-outs, and collective bargaining.

The military regime of 1975 imposed restrictions on the rights of collective bargaining.

The Industrial Relations (Amendment) Ordinance, 1977 liberalized the Rights of Freedom of Association.

The Labor Policy of 1980 restored the right to freedom of association to a considerable extent.

In 1982 the military regime banned trade union activities, strikes, and right of freedom of association.Full trade union activities were restored by the democratic government in 1991.

In 2006, an updated, consolidated and unified version of labor laws was enacted.

During the Emergency in 2007-2008 that lasted for 23 months, trade unions and collective bargaining were prohibited and the determination of collective bargaining agent could not be made. However, full trade union activities were restored by the democratic government in 2009.

Bangladesh Labor Law 2006 chapter XIII completely describes how a trade union will be formed and registered in Bangladesh. Any trade union in Bangladesh must be registered and regulated under this law.

Strength and weakness

As many 23 central federation till now being registered. No central federation has strength that they can launch nation wide struggle independently. They do not have such organizational or financial resource either. Almost all political party has a trade union.All these except a few trade union, mostly depend on support and financial help from the political party. That is also a reason that the ruling party’s trade union center has much more affiliate unions than others. When there is shift of government will be shift in affiliation also. The trade unions here also depends on support from International Trade Union Federation and Foundations. They gets funds from International Trade Union Federation and Foundations for holding seminars, publications and other activities. The gate free passage to go abroad to attend seminars and meetings. The foreign visit is so frequent for some trade union leaders that they are almost occupy with arrangements of travel – procure visa, preparing seminar paper and others and left hardly any time to do trade union work.

This become an important aspect of trade union movement here. An example can be sit here, Jatiyo Sramik League, labor wing of Awamy League has recently took affiliation of International Confederation of Trade Union. Formerly it was with former Soviet Union led World Federation of Trade Union. Abolish of Soviet Union and socialist state in eastern Europe WFTU had lost its membership and resource and now noting a position to offer free air ticket for foreign trip and offer hospitality in Hotel Metropole or Hotel Ukrine in Moscow to its affiliates in developing countries. Though AL chief Sheikh Hasina took personal initiative in the beginning of eighties to get SL affiliated with WFTU, SL did not lost no time to shift to ICFTU. Though there are mounting pressure for trade union unity from the workers, the trade union movement, initially set up as an extended hand of a political party, continues to function more or less as an extended hand of the political party of its affiliation.

Trade unions in Bangladesh and its impact

Limitations

In Bangladesh Trade Unions have a lot of unavoidable problems. These are

1. Lack of consciousness: Trade union are not actually completely aware       about employees legal rights and duties.

2. Lack of Unity: In Bangladesh trade unions are separated for political influence.

3. Lack of knowledge: The workers of Bangladesh don’t have enough knowledge about their rights and duties.

4. Political influence: In Bangladesh, trade unions work a part of political parties not as a free right saving association.

5. Division of trade union: Bangladesh is a country where every organization has more trade unions in name only. The overall productivity got down.

Positive impacts

Trade union plays a major role in creating ideal working conditions.

1. Trade union always helps management to create better policies for workers.

2. Trade unions negotiate for the standard wage and benefits with the management.

3. Trade union helps the management to increases the productivity as well as the profit.

4. Political influence’s existence makes the trade union not to interfere in management decisions.

5. Trade union is hugely helping the management to produce more and implementing management tactics.

Negative impacts

1. Trade Unions are creating a surplus of manpower but not of productivity.

2. Trade union of Bangladesh bargains more than they understand because of the limitations of their knowledge. If don’t consult then they strike.

3. Trade Unions have equal power of management then clashes are started.

4. In companies labors are awarded for good work and threatened for bad work. But if it’s punished then trade union interfere and don’t let to happen the punishment. So it increases crime of the labors.

5. Trade union leaders always try to save their interest first then the labor.

6. For the power of politics trade union always dishonor the management.

Problems of trade unions in Bangladesh

The shortcomings or the weakness of the trade union movement in Bangladesh are as follows:

1. Lack of Balanced Growth

Trade unions are often associated with big industrial houses. A vast majority of the working population is without any union backing. The entire agricultural sector is highly unorganized in Bangladesh. The agricultural workers are subject to all kinds of exploitation. The same is true with respect to those working in small scale and cottage industries. Lack of balanced growth of trade unions in all sectors is one of the major weakness of the trade union movement in Bangladesh.

2. Low Membership

Trade unions, with the exception of few have low membership. This is because many employees are not willing to join unions although they are ready to enjoy the benefits arising out of the union actions. The reasons for the hesitation of employees to join unions include, among others, the need to take pat in strikes and such other programmer, fear of pay cut and fear of punishment.

3. Poor financial Position

Low membership is one of the reasons for the poor financial position of the unions. Moreover, the subscription payable by every member is kept low. Some members may not even make a prompt payment of the small amount of subscription. These are also not very many sources from which unions can get funds. They may probably depend on contributions from philanthropists. The poor financial position can only weaken the trade union movement.

4. Political Control

Most popular trade unions in Bangladesh are affiliated to certain political parties. These political parties are only keen on making every grievance of the working class a political issue to attain political gains. As a result the problem only gets wide publicity and remains unsolved.

5. Multiplicity of Unions

Often there exists more than one union within the same industry each backed by a political party. These various unions have conflicting ideology. If one union comes out with a strike proposal another union may work against it. As a result, none of the unions is actually able to solve the problems of the workers.

6. Inter-Union Rivalry

The existence of many unions within a particular industry paves way for what is called inter-union rivalry. These unions do not work together for the cause of the workers. Each union may adopt a different approach to the problem. The inter-union rivalry may become a more serious problem of the workers. As a result, the employees are unable to derive the benefits of collective bargaining.

7. Lack of able Leaders

Another barrier to the growth of trade unions is the lack of able leaders. Some union leaders give a strike call even for petty problems that can easily be resolved through talks. On the other hand, there are leaders who have secret pact with the management. They get bribes from the government and work against the interests of the employees. Some leaders don’t convene a meeting of the general body at all even when a crisis develops. They take unilateral decisions that are thrust on the employees.

8. Lack of Recognition

Most management is not prepared to recognize trade unions. This happens because of any of the following reason.

The existence of low membership that reduces the bargaining power of the union.

The existence of more unions within the same industry.

Inter-union rivalry.

The indifferent attitude of the employees themselves towards trade unions.

9. Opposition from Employers

Apart from the fact that most employers are not prepared to recognize trade unions, they also do not let their employees from a union. This the employers are able to achieve by adopting certain punitive measures like intimidating employees victimizing union leaders, initiating disciplinary action against employees indulging in union activities and so on. Some employers also start rival unions with the support of certain employees. Sometimes, they may go to the extent of bribing union leaders to avert a strike or such similar show of protest by employees. The employers fail to understand that the union enables the employees to express their grievances in a democratic manner and can also be used as a means of promoting better labor management relationships.

10. Indifferent Attitude of the Members

Union leaders alone cannot be blamed for the weakness of the trade union movement. The indifferent attitude of the members of certain unions is also a barrier. Some members do not even make a prompt payment of the subscription amount. The treasurer of the union has to go behind them, remind and persuade them to pay the subscription that is often a very small amount. There are on the other hand, members who do not attend the general body meetings nor do they bother to know what is discussed in such meetings. There are still others who do not take part at all in any of the programmer of the union organized to press the demands of the employees like slogan shouting procession, demonstration, hunger strike etc. Members generally expect the office-bearers to do all that is necessary to achieve the demands.

Prospects of trade unions in Bangladesh

The experts discussed the problems and prospects of the trade unions in Bangladesh

Today there’re trade union activities of Bangladesh where the politicians, representatives of the state apparatus, MPs, the businessmen and journalists gathered under the auspices of the discussion.

In Dhaka, there was the regular meeting of the discussion on the theme “Trade unions in Bangladesh: the role of the social modernization.”

The panelists discussed the role that trade unions must belong to the effective model formation of the social and labor relations at the present stage. They  discuss the issues of trade union for the prevention of the social and labor conflicts, the role of unions in improving the labor law of the country, in particular the adoption of the New Law “About Trade Unions”, the subject to collective bargaining.

The panelists also discussed the initiative of  on the establishment of Trade Unions Council. The Council is the standing advisory body to the fund, which aims are to facilitate the tasks implementation for the social partnership development and collective bargaining regulation of the social and labor relations for the group fund.

The meeting of the trade union experts was attended by Chairman, Federation of Trade Unions of Bangladesh. After limited time duration a general meeting is held at different places. Here governing bodies of central trade union attend with president and general secretary as well as organizing secretary. Sometimes representatives of government attend the meeting and plays roles to maintain the worker’s right. Different online, print, and electric media’s journalists gather there.

Suggestions

At different trade union’s meeting and newspaper experts and specialists suggest various solutions to solve present different problems and prohibitions. These are as follows

1. Strengthening bilateral collective bargaining for solving problems quickly and effectively.

2. Multiplicity of trade union creates the rivals in a union. So it must be reduced.

3. Political involvement must be reduced.

4. Organization must support financially as trade unions support the worker.

5. Training programs under trade union should be helpful to develop the skills of the workers.

6. Trade union’s function should be increased and widened throughout the organization.

7. Union leader must be given importance and encourage the members.

8. If trust between workers and management increases, productivity increases.

9. Management must help and guide trade unions to settle industrial clashes and crisis.

10. Trade unions always should demand reasonable thing to the management.

________0________

References:

Azijul Haque, functions and introductory part, 2013,

http://www.banglajol.info/index.php/JBT/article/download/9995/7427

Mesbahuddin Ahamed, An article of Trade union in Banladesh, Registered Trade Union And their members, 2013.

Dr. M. Ataur Rahman, Industrial Relation, Zahin Publication, 2014.

BBS (2009), Gender Statistics of Bangladesh 2008, Government of Bangladesh.

Assignment on Auditing

UNIVERSITY OF DHAKA

Department of Management

Assignment On: Auditing

Submitted To:

Mr. Md. Mosharraf Hossain

Professor

Department of Management

Prepared By:

Md. Azim- ul- Islam

18150

Sec: B

Department of Management

                                                                                   Submission date

                                                                                  10^th November, 2013

                                  

                                                                                 

1.    Differences between auditing and investigation.

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. On the Other hand Investigation is a detailed inquiry or systematic examination.

Subject	Auditing	Investigation
1.Purpose	An audit is carried out for the purpose of ascertaining whether or not the balance sheet and profit and loss account show true and fair view of the state of company's affairs and its profit or loss	But an investigation aims at establishing a fact or is carried out for some particular purpose i.e. to know the financial position of the concern or the earning capacity of the concern etc.
2.Relates	The audit relates to checking of all books and record.	The investigation relates to critical checking of particular records
3. On Behalf	Audit is conducted on behalf of owners only. The appointment is made by them.	The investigation may be conducted on behalf of owners and outsiders like investors
4.Period	An audit is related to only a year or six months.	Investigation may cover several years.
5.Done by	The auditor is must be a chartered accountant.	The investigator may or may not be a charted accountant.

2. Objectives of Auditing:

 Basic objective of auditing is to prove true and fairness of results presented by profit and loss account and financial position presented by balance sheet. Its objectives are classified into two groups. Which are given bellow:

2.1: Primary Objectives of Audit

The main objectives of audit are known as primary objectives of audit. They are as follows:

i. Examining the system of internal check.

ii. Checking arithmetical accuracy of books of accounts, verifying posting, costing, balancing etc.

iii. Verifying the authenticity and validity of transactions.

iv. Checking the proper distinction of capital and revenue nature of transactions.

v. Confirming the existence and value of assets and liabilities.

vi. Verifying whether all the statutory requirements are fulfilled or not.

vii. Proving true and fairness of operating results presented by income statement and financial position presented by balance sheet.

2.2: Subsidiary Objectives of Audit

These are such objectives which are set up to help in attaining primary objectives. They are as follows:

i. Detection and prevention of errors

Errors are those mistakes which are committed due to carelessness or negligence or lack of knowledge or without having vested interest. Errors may be committed without or with any vested interest. So, they are to be checked carefully. Errors are of various types. Some of them are:

·       Errors of principle

·       Errors of omission

·       Errors of commission

·       Compensating errors

ii. Detection and prevention of frauds

Frauds are those mistakes which are committed knowingly with some vested interest on the direction of top level management. Management commits frauds to deceive tax, to show the effectiveness of management, to get more commission, to sell share in the market or to maintain market price of share etc. Detection of fraud is the main job of an auditor. Such frauds are as follows:

* Misappropriation of cash

* Misappropriation of goods

* Manipulation of accounts or falsification of accounts without any misappropriation

iii. Under or over valuation of stock

 Normally such frauds are committed by the top level executives of the business. So, the explanation given to the auditor also remains false. So, an auditor should detect such frauds using skill, knowledge and facts.

iv. Other objectives

* To provide information to income tax authority.

* To satisfy the provision of company Act.

* To have moral effect

3. What is continuous auditing?

         Continuous auditing enables internal audit to continually gather from processes data that supports auditing activities

Continuous auditing is an automatic method used to perform auditing activities, such as control and risk assessments, on a more frequent basis. Technology plays a key role in continuous audit activities by helping to automate the identification of exceptions or anomalies, analyze patterns within the digits of key numeric fields, review trends, and test controls, among other activities

  Continuous audit or a detailed audit is an audit which involves a detailed examination of books of account at regular intervals i.e. one month or three months. The auditor visits clients at regular intervals during the financial year and checks each and every transaction. At the end of the year auditor checks the profit and loss account and the balance sheet. A continuous audit is not of much use to small firm as its accounts can be audited at the end of the financial year without much loss of time.    

    3.1 Components of continuous auditing:

Continuous auditing is made up of three main parts: continuous data assurance (CDA), continuous controls monitoring (CCM), and continuous risk monitoring and assessment (CRMA).

4. Continuous Auditing; Advantage & Disadvantage

4.1: Advantages of Continuous Audit:

1.  Early Location of Errors and Frauds
In the Continuous Audit, the audit visits the clients after a short period. So, he is in a position to check the information completely in detail. It is helpful in checking the errors and frauds easily. If the audit is conducted after the year ended. It is not possible to find the errors or frauds easily.

2. Check on Frauds
In the Continuous Audit the errors are located earlier. So it is also helpful in the early correction of errors and frauds because it is located at the time when it can be corrected earlier.

3. Quick Rectification
Due to Continuous Audit errors are located easily and rectified at an early stage.

4. Special Attention
Before the finalization of accounts an auditor has a sufficient time to pay proper attention to the checking of account and detection of frauds and errors.

5. Guidance to Client
The auditor remains in touch with the business details, so he also indicates about the mistakes and gives valuable suggestions to the client to keep the accounts in proper manner.

6. Useful for Declaration of Dividend
The continuous audit is also helpful for the declaration of the dividend. As the accounts are checked throughout the year, so the audit accounts are ready for the declaration of dividend.

7. Upto Date Accounts
Accounts of the business are kept up to date by the staff because they know that auditor may visit and check the accounts at any time.

8. Chance of Over Looking Reduces
Auditor has a close contact with the details of the accounts and he has also sufficient time to check the records. So the chances of overlooking are reduced in this type of audit.

9. Quick Presentation of Accounts
Continuous audit is very useful because accounts are maintained regularly. So as the financial years end final audited accounts are presented before the shareholders.

10. Accounts Completion
Another audit benefit is the early completion of the accounts checking. The results of audit can be found out just at the end of the accounting period.

11. Moral Check
In the continuous audit the auditor make the surprise visit in the business. The clerks are not aware about the visit. So they are alert and efficient in their work. There is less chances of frauds in this type of business.

12. Convenient for Auditors
In this audit, the several visits paid by the auditor to the client's office in enable his work to proceed easily and smoothly. It also increases his confidence in his capacity to do his work efficiently and effectively.

13. Regular Staff
The regular visits performed by the auditor, make the clerks alert to maintain the accounts up to date and accurate for fear that the auditor may land up in the office any time.

14. Sufficient Time
Continuous audit provides sufficient time to the audit staff. The important and ambiguous matters may require more time to draw conclusion. There is ample time for such matters.

15. No Missing Entries
Continuous audit is also helpful in keeping the full record. In the record there are no missing entries.

16. Early Correction of Errors
The continuous audit is helpful for early correction of errors. The auditor can point out

17. Prompt Filing of Returns
The continuous audit is also helpful for the prompt filing of returns. The management can submit audited account to the registrar as soon as the end of the year.

18. Early Meetings
This audit is helpful for the early meeting of the shareholders. The accounts are presented for the distribution of profit.

19. Surprise Visits
The continuous audit provided chances of surprise visit to audit staff. The accounting staff becomes alert due to surprise visit. It is essential for eliminating the chances of error and frauds.

20. Upto Date Record
The continuous audit is useful for keeping the up to date record. Such record is needed by management for borrowing funds, settlement of tax and dealing with labour union.

21. Even Work Load
Due to even workload, the audit staff feels the satisfaction. The books of accounts are maintained as the routine matters. And there is less chances of errors and frauds.

22. Auditor Advice
In the continuous audit the auditor can find the weakness of the business during the year and he can make the suggestion for the improvement of the business.

23. Close and Extensive Check
As the auditor visits the client's office after a month or so, but at regular intervals, a detailed close and exhaustive cheek can be possible. If the audit is to be under taken after the end of the year, such detailed checking will be difficult.

24. Technical Detail
In a continuous audit, the auditor is more in touch with the technical details and business affairs. So, the auditor can help his clients by giving him the valuable suggestions to improve business.

25. Distribution of Work
Continuous audit is also helpful in distribution of load of work on the staff. The work of audit continues the whole year. The audit staff can easily make the audit program according the time required.

4.2 Disadvantage of Continuous Audit:

In spite of the above-mentioned advantages of a continuous audit, there are certain drawbacks of such and audit which are as follows:

1. Alteration of Figures
The records and figures in the books of accounts, which have already been checked by the auditor, may be altered after the audit is over. A dishonest clerk can do it do defraud the accounts.

2. Expensive
Continuous audit is more expensive as compared to other kinds of audit, because the auditor has to devote more time to this audit.

3. Inconvenience
In this audit, the auditor visits the client's office at regular intervals to check the accounts and records these frequent visits made by the auditor may dislocate the work of his client and cause convenient to him.

4. Mechanical Work
The work of audit becomes too mechanical because it remains continue throughout the year.

5. Queries Problem
If the auditor's two visits interval is long then so many queries remains outstanding.

6. Small Business
Continuous audit is not fit for small business concerns. A small business has few transactions so there is no need of audit for whole one year. The owner as manager can know facts behind books as details audit is burden.

7. Client Work
The demerit of continuous audit is that the work of the client suffers due to clash of duties and the client staff remaining busy for the whole years. When the audit work is started work of accounting staff as books are not spare.

8. Staff Initimacy
The accounting staff and audit staff work side by side for the whole year. Friendship among the employees and auditors may lead to error and frauds. The sympathetic view of audit staff may fail to show true and fair view.

9. Missing Link
In the audit the auditor has to come at regular interval to check the accounts and hence the link between the past and present work cannot be maintained. Consequently the thread of work is very likely to be lost.

10. Low Income
The continuous audit keeps the staff busy for one year. They are not able to start and complete many audits at the same time. The given to one business is much higher as compared to final audit. So it is not suitable for audit staff from financial point of view.

11. Spoon Feeding
Frequent visits by the auditor may induce the client's staff to depend upon him even for minor things.

12. Expensive
A continuous audit is an expensive form of audit in that the more frequent visits by the auditor means the higher fees of auditor.

13. Wastage of Time
This type of audit is not helpful for the auditor because in this time period they cannot conduct any other audit. So this is low-income audit for the auditor.

14. Words of Client
Another disadvantage of the audit is that the works of the client staff suffer due to the work of both positive. The books of the accounts are not free for the other party to do.

15. Type of Business Concern
This is not fir for the small type of business concern. In the small business concern, there are only few transactions. So there is no need for this concern.

16. Mechanical Work
In this type of audit, the auditor has to repeat all the products as bookkeeper does where as audit work by nature should not be under thinking and boring.

17. Extensive Notes Taking
In this type of audit possible alteration after audit can be avoided by taking note on diary regarding audit of internal control. So the continuous audit requires the compilation of bundle of notes.

18. Chances of Collusion
Frequent visits of auditor may establish some unhealthy relationship between the client's staff and auditor's staff. Thus there are chances of moral check. Upon them and there may be collusion between them.

5. Interim auditing definition, merits & demerits:

Definition:

In normal word Interim means half yearly. It is conducted usually between two annual general meetings and only one time, not in intervals.

INTERIM AUDIT is an audit conducted during the fiscal year usually as a means of minimizing the work and time involved in concluding the audit after the fiscal year. Interim audit is the audit which is conducted between the two annual audits for the purpose of finding the interim dividend. It may be monthly quarterly or half yearly. When any partner or owner or director or a businessman wants to know the reliable results during the financial year then such type of audit may be applied.

             An audit which conducted in between the two annual audits with a view to find out interim profits to enable the company to declare an interim dividend is known as Interim Audit. It is a kind of audit which is conducted between the two periodical or balance sheet audits.

5.1: Advantages of Interim Audit:

1. Publication Of Interim Figures:-In some cases the publication f interim figures is compulsory. So in such cases interim audit is very useful.

2. Easy Detection of Errors:-By conducting the interim audit errors and frauds can be easily detected in time.

3. Check on Staff:-When the staff of the client knows that at any time during the year accounts are checked for the interim period then they will not commit any fraud.

4. Completion of Final Audits:-If interim audit is countered then final audit can be completed very soon and easily.

5. Suggestions Implementation:-In case of interim audit auditor's suggestions can be quickly implemented.

6. Satisfactory Work:-Staff of the client may work with proper attention satisfactorily along with the advice of the auditor.

7. Convenient:-Interim audit is very convenient for the management because they invite the audit staff when their business activity is low.

8. Interim Dividend:-The management can easily prepare the accounts for proposed interim dividend. Interim audit is very useful to declare this dividend.

9. Moral Check:-All the work done by any staff members of the company is checked by the auditor in the interim audit, so it provides the moral check.

10. Case Of New Partner:-In a business when new partner enters, interim audit determines correct position of assets and liabilities.

11. Death Case:-When any partner dies then interim audit is very helpful in determining the position of assets and liabilities.

12. Retirement Case:-If any partner wants to leave or retire from the business then interim audit can easily determine the correct position of its assets and liabilities.

13. Price Fixing:-Goods and services prices are fixed by the management and cost is calculated by adding the profit. The selling price is fixed and for this purpose interim audit is desirable.

14. Encourages Investment:-Due to interim audit investor rely more on the company performance. He purchases and sells the shares keeping in view the audit report.

5.2: Disadvantages of Interim Audit:

1. Disturbance:-Regular accounting work of the interim audit disturbs the office work of the client. It is a disadvantage of this audit.

2. Burden of Work:-Audit staff will have also to prepare the audit notes when they will finish the interim audit. So the burden of work increases in this way.

3. Changing In Figures:-A dishonest official may change the figures of accounts which is already audited by the auditor. So there are also chances of fraud in such type of audit. It is a disadvantage.

4. More Expensive:-This type audit only increases the expenses of business because it is not compulsory by law.

5. Not Useful For Third Party:-It has no use for third party because this audit is used only to improve the efficiency and effectiveness of the accounting system.

6. Interim auditing Vs. Continuous auditing

Subject	Interim auditing	Continuous auditing
1. Fee	The fee of interim audit is low.	The fee of continuous audit is high.
2. Legal Position	The interim audit is not compulsory by law.	Continuous audit is compulsory by law.
3. Objectives	Interim audit checks and determines the profit or loss for the particular period.	Continuous audit shows the true and fair view of the financial statement.
4. Scale Of Business	Interim audit is conducted for the both large scale and small scale business.	Continuous audit is conducted only for large scale business.
5. Scope	In interim audit there is no detailed checking of accounts.	In continuous audit there is a detailed checking of accounting records.
6. Verification	Verification of assets and liabilities are done when interim audit is conducted	In continuous audit it is done when balance sheet is prepared.
7. Period Of Audit	Interim audit period is upto the particular date.	Continuous audit period is for one whole year.

7. Definition of Balance Sheet Auditing

An audit is an inspection of a company's accounting records, usually done by an independent certified public accountant.

               A balance sheet approach to an audit consists of checking for the correct recording of the existence, ownership and value of a company's assets and liabilities. With the balance sheet approach, the assumption is made, that if all the balance sheet accounts are tested and verified, then the company's profit/loss statement will not be significantly misstated. Usually, this type of audit focuses heavily on the reporting of a company's financial transactions, such as cash and other assets and the receipt and disbursement of funds (accounts receivable and accounts payable).

                   Balance sheet audit means limited audit in which all the balance sheet accounts are verified and tests imposed only on those profits and loss items that are directly related to the assets and liabilities such as repairs and maintenance , provision for description,bad debts etc.

8. Procedures to Conduct Balance Sheet Auditing

•        The auditor should examine the minute book of the concern, especially those items which have a bearing on the accounts.

•        He should examine and compare the profit and loss account with that of the previous year to see whether there is any material different between the two.

•        He should compare the increase (or) because in the expenses between the two periods with the turnover, making necessary adjustments regarding allowances, sales tax (or) any other variations during the period under reviews.

•        He should investigate into the cause of any variation in the gross profit and pay attention to the valuation on closing stock.

•        He should see whether there has been any change in the rate of depreciation charge during the current year and if so, what is its effect on the revenue account.

•        He should investigate into the items of non-recurring nature, e.g., profit made (or) loss suffered on the sale of a fixed asset.

•        He should pay attention to any substantial change in the fixed assets as compared to the previous year especially regarding the valuation of assets.

•        Similarly any variation in the current assets as compared to previous year should be inquired into.

•        If there is any material alteration in the pre-payments and the accruals, he should pay attention to such a variation.

•        He should pay attention to other items of the balance sheet for any substantial change from the normal figure.

•        He should verify the assets held and liabilities owing.

•        He should ascertain whether any capital commitment exits and whether there is any item on which a subsequent loss may arise and whether any provision has been made therefor.

9. Qualities of an Auditor:

i. Professionally Competent:-

It is a basic quality of an auditor. He must have a complete and thorough knowledge of the accountancy. To understand the accounting details he can apply his knowledge and skill. It is only possible if he has a sound background in accountancy and he is professionally competent.

ii. Honest:-

It is also very important quality of an auditor. Justice Hindley says "An auditor must be honest. He must not certify what he does not believe to be true and he must take a reasonable care and skill before he believes that what he certifies is true.

iii. Auditing:-

An auditor's knowledge of auditing must be up to date. He must know the techniques of auditing. He must have the knowledge of other subjects relating to auditing.

iv. Knowledge of Taxation Law:-

Various types of taxes are imposed by the government on the business. For example in some countries Income tax, sales tax, gift tax is imposed. So if auditor has not a considerable knowledge about the taxation. He cannot perform his services properly.

v. Computer Expert:-

The auditor must be able to operate the computer. Today the business organizations are using computers. If auditor does not know to use computer, he cannot work efficiently.

vi. Knowledge Of management System:-

The auditor must have the knowledge of management information system. It helps him to understand the internal set up of the business concern and its operation.

vii. Preparation of Budget:-

The auditor must know that how the organization prepares the budget. If he does not know then it will be not possible for him to audit the various heads of the budget.

viii. Intelligent:-

It is also important quality of an auditor that he should be intelligent. He must be able to understand the technical details of any business.

ix. Qualification:-

For a professional auditor it is necessary that he should be charted accountant. According to companies ordinance it is essential qualification for auditor.

x. Tactful:-

In a particular situation auditor should deal tactfully. He should ask the questions in such a manner that it does not show about his ignorance or weakness.

xi. Maintain Secrecy:-

The auditors’ nature of work is confidential. He should maintain secrecy from others about the affairs of his client.

10. What do u mean by vouching and voucher?

    ‘Voucher’ is the original documentary evidence in support of any payment or receipt of money by the business. It would be with the help of the voucher that the accuracy of entry can be checked. Voucher alone can tell us about the nature and sources of the transaction, its value and authority. It substantiates the book entries and confirms their reality. Such evidence may be primary and collateral. Certain Vouchers provide primary evidence while others constitute collateral evidence.

The following may be a few of the examples of vouchers for certain transactions:

1) Cash Received – Counterfoils of Receipts issued, Contracts, Minutes, Correspondence, Confirmation of balances by Debtors etc.,

2) Cash Paid – Original receipts from Payees, Invoice Bills, Demand Notes, Wages Books, Salaries Books, Contracts, Correspondence, Confirmation by Creditors etc.

3) Purchases – Invoices, Books, Copies of Orders, Correspondence etc.

4) Sales – Copies of Invoices, Orders Record, Goods Outward Book, Correspondence etc.

Similarly, evidence can be had with regard to transactions like Purchases and Sales Returns, Bills Receivable and Payable and Journal Entries.

All vouchers relating to business transactions should be carefully preserved and properly filed.

10.1: Vouching

       Vouching is the essence of auditing and is also the most important duty of an auditor. Examination of the vouchers is called ‘vouching’. The term vouching means a careful examination of the original documentary evidence, such as invoices, receipts, statements, correspondence, minutes, contracts, etc., with a view to prove the accuracy of the entries in the books of account and to ascertain as far as possible that no transactions have been omitted from books. ‘Vouching’ implies the substantiation of the entries in the books by reference to any documentary or other evidence of an authoritative nature offered in support of the transactions. It is a method of verifying the accuracy and the authenticity of the entries recorded in the books. To vouch a statement is to confirm it by evidence. Vouching helps an auditor in establishing the truth of entries in the books of account and completeness of the record.

11. Procedure in regarding to vouching the debit side of the cash book

a. Checking of internal system: With reference to cash payments, auditor should analyze the internal check system and keep in view the weak points while auditing.

b. Inspection of wages and salaries: The auditor should inspect the certified wages sheet and also test a few items for his satisfaction. He should also compare the contract and the appointment orders with the salaries.

c. Petty cash checking: Auditor should examine the petty cash in hand and verify the balance of petty cash with cashbook.

d. Checking of payable bills: The auditor should examine these bills with the returned bill. If these are paid through bank then passbook should be checked.

e. Checking of revenue and expenditure: The auditor should prove that proper allocation has been made between capital, revenue and expenditure.

f. Creditors payments: Auditor should also verify or examine the record and documentary evidence about the payments made to the creditors.

12. Duty of an auditor in connection  with credit purchase:

There is a good internal check system regarding the purchases, the auditor should now proceed to vouch the purchase book.

•        Whether the invoice is in the name of his client, as sometimes invoices have been produced for goods which have never purchased for the business (or) goods might have been purchased by an official of the company for his personal use while the payment is made through the company.

•        Who is authorized to place orders for goods? Only a responsible officer should be allowed to do so.

•        The date of the invoice should relate to the period under review. This is done to prevent the production of old invoices for which the payment had already been made. 

•        Whether the clerk, who has checked the invoice with the order book to see that those goods have been sent for which the order was placed and that the rates and quantities are correct, has signed the invoice. He should also see that only those goods which are dealt with by the client have been purchased.

•        The auditor should also see that the goods mentioned in the goods mentioned in the invoice are not capital goods. If they are capital goods, they should not be carried to the purchase book but should be carried to the fixed asset account.

•        He should, as a ‘test check’, compare some invoice with the goods inward book (or) the gatekeeper’s inward book in order to see that the goods have been actually received. This would prevent the inclusion of fictitious invoices (or) the duplicates as ‘original’ ones.

•        The auditor should check the casts and cross casts of the purchases book.

•        He should see whether trade discount has been debited from the invoice before making the entry in the purchases book. Expenses as freight, custom duty, control duty, etc., which have been incurred in connection with the purchase, should be debited to the purchases account.

•        He should compare the goods inward book and the stock sheets with the purchases book to ensure that all goods taken into stock have been entered in the purchases book. In order to inflate profit, the management sometimes include the goods in the closing stock while no entry in made in the purchases book. In this connection he should pay particular attention to the purchases made at the close of the year to see that they are included both in the purchases book as well as in the stock book. Otherwise he will be held responsible to pay damages as was decided in the case of smith vs. offers and others. In case the goods have not been received bot the invoice only has been received, no entry should be passed through any book. Similary if the goods have been received but the invoice has not been received, goods should not be included in the stock book. In short, if an entry is made, it should be made both in the purchases book as well as in the stock bank.

•        The auditor should stamp the invoices (or) cancel it after he has compared ti with the entries in the purchases book to prevent its being produced again.

•        Sometimes the officials of the company purchase goods through the company in order to take advantage of the trade discount. In such a case, the account of the official should be debited and goods account credited. If this is not done, it would mean the company pays for the goods purchased by the officials.

•        While examining the invoices, if the auditor comes across invoices marked ‘copy’ (or) ‘duplicate’, he should satisfy himself that they were obtained in respect of any those invoices which have been actually lost (or) mislaid and that they have not already been entered anywhere else in the purchases book.

•        In order to be sure that all the invoices are included, the auditor should ask his client to write to all the creditors to send their statement of account direct to the auditor who will compare them with ledger accounts.

•        If an invoice runs into several pages, the auditor should see that the grand total is corrent.

13. Internal check as regards sales:

The whole system of credit sales should be kept under proper control and supervision. There should be a separate Sales Department for the purpose. The Sales Department should have charge of receiving orders, supplying goods to customers, preparing invoices and maintaining accounts of goods supplied.

The Sales Department should function as a composite of some sub-departments. The procedure of its working may be like this:

(1) All orders received should be entered in the Orders Received Book and properly numbered. The original order or its copy should then be sent to the Dispatch Department.

(2) The Dispatch Department should take steps to pack the goods as per the order. It should prepare a statement showing the goods packed.

(3) The statement so prepared by the Dispatch Department should be sent to the Counting House where the list of goods should be checked and rates, etc. entered in it. The invoice will then be prepared in triplicate by means of carbon papers.

(4) Two copies may be sent to the customers who will then return one of them after signing it in token of having received the goods. Thus, it will serve the purpose of delivery note. The third copy will be retained for further reference.

(5) The Accounts Department should prepare documents like Railway Receipt, Bill of Lading, etc.

(6) All goods supplied on order should be entered in the Goods Outward Book which should be checked at frequent intervals with the Orders Received Book.

(7) The Invoice Book should also be compared with the Goods Outward Book and the Orders Received Book.

(8) The Sales Book should be written up with the help of the copies of invoices.

14. Problems in Valuation of Assets

Valuating the asset is the important factor in decision making. Valuation is the one that investor primarily focuses during investment. Valuation is essential before investment the investment made without valuation will yield huge losses.

 Some of the problems faced while valuating the asset are,

•        The values of the asset are highly volatile. It is difficult to identify the cost. The asset prices are subjected to demand supply variation. It is difficult to predict the demand in most of the cases. Demand is highly volatile based on the market condition and economic conditions.

•        The tax and other cost related to the asset are variable. It keeps changing with the government policies. Investor while estimating the cost cannot predict these changes. It is important to include these cost while the estimation of value of the asset. These costs have a huge impact in the price of the asset. The complex factor in this is that the taxes vary with asset as well. The tax won’t be same for different assets. It won’t be same for different area as well, for ex the tax paid to an asset at one part won’t be the same in other part.

•        The risks involved in an asset are usually difficult to calculate. The risk is a huge factor in asset valuation estimation. The assets that have a huge yielding capacity may have a huge risk associated with it. If the investor goes by the yielding capacity alone then he might end up making huge loss as well, whereas the asset with less risk and lesser yielding capacity may yield more than the riskier one. The problem with risk evaluation is difficult to estimate the risk and the level to which it can impact the yield.

•        Market risk and other such inestimable risk are difficult to be included in the asset valuation. These risks however cannot be ignored as these risks are immediate and have a huge impact on the yielding as well.

15. Differences between internal audit and statutory audit:

Following are the main points of difference between internal audit and statutory audit:

 1. Appointment: The management of the organization makes the appointment of an internal auditor. The statutory auditor is appointed by different authorities. First statutory auditors are appointed by the shareholders in the annual general meeting.

 2. Qualification: Qualifications of the statutory auditor are prescribed in the companies act, 1956. Essentially a person should be a practicing chartered accountant to be appointed as a statutory auditor. There is no fixed qualification for the position of an internal auditor.

 3. Objects: The main object of the statutory audit is to form an opinion on the financial statement of the organization auditor has to state that whether the financial statements are showing the true and fair view of the affairs of the organization or not. The main object of the internal audit is to detect and prevent the errors and frauds.

4. Scope: The scope of the statutory audit is fixed by the company’s act 1956. it cannot be changed by mutual consent between the auditor and the management of the audited business unit. The scope of the internal audit is fixed by the mutual consent of the auditor and the management of the unit under audit.

5. Remuneration: Remuneration of the statutory auditor is fixed by the appointing authority, I e in case of first auditors, the auditors the directors fix the Remuneration in case of the subsequent auditors the company in its general meeting fixes the remuneration. In case of internal auditor the management who appoints him fixes his Remuneration.

6. Report: The statutory auditor submits his report to the shareholder of the company in its general meeting. The internal auditor submits his report to the management of the company who is also his appointing authority.

7. Removal: The procedure of removal of the statutory auditor is very complex. Only the company in the general meeting can remove the auditor. It also has to take the permission of the central government. The management of the entity can remove internal auditor.

16. Basic elements of auditing report:

a) Title:

The title indicates the nature of report. The title should be like-‘auditor’s report’ (or) ‘branch auditor’s report’. The title distinguishes this report from other reports like director’s report of an accountant report on compilation of the account etc.

b) Addressee:

The auditor’s report should address the person to whom it is meant to be forwarded. The requirements of the engagement (or) the relevant statute may determine the person to whom the report should be submitted. Generally the report is submitted to the person who appoints the auditor.

c) Opening or Introductory Paragraph:

The introductory should identify.

i. The financial statements with respect to which audit opinion is given-financial statements are identified by title, period covered, the entity which it relates etc.

ii. The clear marking of the responsibility between management and auditor- the report should state that the financial statements are the responsibility of the management; the auditor’s responsibility is limited to expression of opinion thereon. The preparation of the financial statements involves making of significant accounting estimates, determination of appropriate accounting principle and methods used in preparation of financial statements. These determination will have to be made appropriately by the management having regard to the reporting frame work of financial statements, as chosen by (or) is required to be complied with, by the management.

d)  Scope paragraph:

The scope paragraph specifies the work performed by auditor. The scope of audit work is governed by the terms of engagement, statutory provisions and the pronouncements of the institute. The scope of the audit as affected by the statute (or) the pronouncements of the ICAI, cannot be modified (or) whittled down by the terms of engagement, agreement (or) any arrangement between auditor and auditee. The auditor should specify in the scope paragraph that auditing has been conducted in accordance with the established auditing standards. This is both an expression of auditing procedures carried out as well as an expression of assurance to the readers that the auditing conducted could be taken to be one in accordance with what AAS have mandated auditors to do in audit situations.

The scope paragraph should indicate that auditor had planned and performed the audit to obtain reasonable assurance whether financial statements are free from material misstatement. Specifically the scope paragraph describes the audit as including.

i.     Examining on a test basis, evidence to support the account, disclosures in financial statements.

ii.     Assessing accounting principles used in the preparation on financial statements.

iii.     Assessing the significant estimates made by management in preparation of financial statements.

iv.     Evaluating the overall financial statement presentation.

The report, besides describing what an audit is, should mention that the audit has provided reasonable basis for expression of opinion.

e) Opinion paragraph:

The opinion paragraph of the report should indicate the financial reporting framework used to prepare the financial statements and state the auditor’s opinion as to whether the financial statements give a true and fair view in accordance with that financial reporting framework and comply with the statutory disclosure requirements. In addition to the opinion on true and fair view of the financial statements, the auditor may be required to express opinion on specific matters required by statute. In such cases, besides, expressing opinion on the truth and fairness of financial statements, the auditor should specify his opinion on such additional matters as well. For e.g. the companies Act, 1956 requires auditor in terms of section 227 (2) to express whether in his opinion the said accounts give information as required by the Act.

f) Date of the report:

The date of report indicates the date on which the auditor signs his report. It indicates that the auditor has considered the effect on the financial statements and also on his reports of events occurred upto that date. Again this date should not precede the date on which the financial statements were approved by the management. Because, the auditor’s responsibility is to express opinion on the financial statements as prepared by the management.

g) Place of report:

The town in which the audit report is signed should be indicated.

h) Auditors signature: The report should be signed by the auditor in his personal name. where the firms is auditors of the entity, the signature should be in the personal name of the partner signing as well as in the firm name. the membership number of the individual signing the report should invariably be mentioned.

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