According to the assessment of accounting and auditing practices conducted by the World Bank in 2003, Bangladesh suffers from "institutional weaknesses in regulation, compliance, and enforcement of standards and rules" and Bangladeshi auditing practices are not in line with internationally accepted standards. The World Bank noted that Bangladesh Standards on Auditing (BSAs) are based on International Standards on Auditing (ISAs); however, BSAs have not been updated in line with the international standards. The World Bank therefore recommended improving the accounting and auditing framework by adopting ISAs without any modifications and setting up an independent oversight body to enforce international standards and codes. A comparative analysis of national standards with ISAs conducted by the South Asian Federation of Accountants (SAFA) confirmed that Bangladesh adopted most of ISAs and other International Auditing and Assurance Standards Board (IAASB) pronouncements. However; the subsequent revisions made by the IAASB have not been incorporated. As of July 2006, the SAFA noted that the adoption of revised ISAs is under review in Bangladesh and that the old versions are still in use. Furthermore, the 2007 Institute of Chartered Accountants of Bangladesh self-assessment explained that the adopted international standards have been modified to reflect the local legal environment. BSAs are mandatory for listed companies.

General Overview

According to the assessment of accounting and auditing practices conducted by the World Bank in 2003, Bangladesh has suffered from "institutional weaknesses in regulation, compliance, and enforcement of standards and rules" (cover page). The World Bank consequently made many recommendations which included but were not limited to improving the accounting and auditing framework by adopting International Financial Reporting Standards (IFRSs) and International Standards on Auditing (ISAs) without any modifications and setting up an independent oversight body to enforce international standards and codes. It also recommended developing a simplified reporting framework for small and medium sized entities (SMEs). Furthermore, the World Bank pointed out that although the Bangladesh Standards on Auditing (BSAs) are based on ISAs, the national standards have not been updated in line with the international standards. The South Asian Federation of Accountants (SAFA) conducted a comparative analysis of national standards with ISAs for five South Asian countries including Bangladesh. In this analysis, the SAFA confirmed that Bangladesh has adopted most of ISAs and other International Auditing and Assurance Standards Board (IAASB) pronouncements. However; the subsequent revisions made by the IAASB have not been incorporated into the national standards. As of July 2006, the SAFA noted that the revised ISAs are under review in Bangladesh while the old versions continue to be in use. The 2007 Institute of Chartered Accountants of Bangladesh (ICAB) self-assessment further clarified that ISAs are modified to reflect local legal and regulatory requirements.

The legal framework for Bangladeshi accounting and reporting requirements as described in the World Bank assessment of 2003 is primarily governed by the Companies Act of 1994. The Companies Act mandates that all companies registered under the Act must prepare annual audited financial statements. The enforcement of the provisions of the Companies Act is conducted by the Office of the Registrar of Joint Stock Companies (RJSC). However, the World Bank noted that "RJSC has no technical capacity to identify accounting and auditing violations; in most cases it does not even enforce timely filing of annual audited financial statements" (p. 6).

Listed companies are regulated by the Securities and Exchange Commission (SEC) and comply with SEC accounting and disclosure requirements. Per the SEC rules, all listed companies are legally required to follow BSAs. The ICAB 2007 self-assessment confirmed that "the Securities and Exchange Rules of 1987 make it mandatory for the listed company auditors to follow ISAs as applicable in Bangladesh" (p. 37). Furthermore, the World Bank noted that new rules were issued in 2000, mandating that "auditors will verify that the financial statements have been prepared in accordance with IAS and the audit has been carried out in accordance with ISA" (p. 2). However, even though the SEC was working towards improving the quality of financial reporting, it lacked trained staff to monitor compliance with the specified requirements, the World Bank noted.

The Bangladesh Bank regulates the banking sector and, empowered by the Bank Companies Act of 1991, sets accounting and auditing requirements in addition to the Companies Act. The World Bank pointed out that "the banking regulator has no mechanism to monitor and enforce accounting and financial reporting requirements" (p. 7). Furthermore, the assessment noted that "no attempt is made to determine the reliability of the auditor's opinion on a set of financial statements" (p. 7). The Bangladesh Bank also approves the appointment of bank auditors and regulates nonbanking financial institutions as well. Governed by the Insurance Act of 1938, the Chief Controller of Insurance regulates the insurance sector. Under the Act, insurance companies are required to file annual audited financial statements to the Chief Controller of Insurance. The World Bank observed that even though the Chief Controller of Insurance organized "special audits" to monitor compliance with the specified reporting requirements, external auditors conducting the audits in most cases lacked industry knowledge.

Established by Bangladesh Chartered Accountants Order of 1973, the ICAB is the national accounting and auditing standard-setter and regulator of the accountancy profession. The World Bank noted that the ICAB had not established an effective and efficient arrangement to ensure compliance with auditing standards and code of ethics. The World Bank recommended strengthening the capacity of the ICAB and improving the professional education and training arrangements. The ICAB and the Institute of Cost and Management Accountants of Bangladesh are listed as members on the International Federation of Accountants website. The ICAB is also a member of the SAFA and the Confederation of Asian and Pacific Accountants (CAPA).

The Principles

ISA 200 Objective and General Principles Governing an Audit of Financial Statements (effective 2006)

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According to the 2006 SAFA analysis, ISA 200 is under review in Bangladesh.

ISA 210 Terms of Audit Engagements (effective 2006)

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According to the 2006 SAFA analysis, ISA 210 is under review in Bangladesh.

ISA 220R Quality Control for Audits of Historical Financial Information (effective 2005)

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According to the 2006 SAFA analysis, ISA 220R is under review in Bangladesh.

ISA 230R Documentation (effective 2006)

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According to the 2006 SAFA analysis, ISA 230R is under review in Bangladesh.

ISA 240 The Auditor’s Responsibility to Consider Fraud in an Audit of Financial Statements (effective 2004)

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According to the 2006 SAFA analysis, ISA 240 is under review in Bangladesh.

ISA 250 Consideration of Laws and Regulations in an Audit of Financial Statements (effective 2004)

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According to the 2006 SAFA analysis, ISA 250 is under review in Bangladesh.

ISA 260 Communications of Audit Matters With Those Charged With Governance (effective 2004)

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According to the 2006 SAFA analysis, ISA 260 is under review in Bangladesh.

ISA 300 Planning an Audit of Financial Statements (effective 2004)

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According to the 2006 SAFA analysis, ISA 300 is under review in Bangladesh. The World Bank in it 2003 assessment noted that "lacking practice-oriented methodological guidelines, auditors generally find it difficult to handle audit planning due to the lack of legal requirements concerning group accounting and consolidation" (p. 10).

ISA 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (effective 2004)

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According to the 2006 SAFA analysis, ISA 315 is under review in Bangladesh.

ISA 320 Audit Materiality (effective 2004)

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According to the 2006 SAFA analysis, ISA 320 is under review in Bangladesh.

ISA 330 The Auditor’s Procedures in Response to Assessed Risks (effective 2006)

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According to the 2006 SAFA analysis, ISA 330 is under review in Bangladesh. The 2003 World Bank assessment pointed out that "lacking practice-oriented methodological guidelines, auditors generally find it difficult to handle important concepts such as audit risks due to the lack of legal requirements concerning group accounting and consolidation" (p. 10).

ISA 402 Audit Considerations Relating to Entities Using Service Organizations (effective 2004)

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According to the 2006 SAFA analysis, ISA 402 is under review in Bangladesh.

ISA 500 Audit Evidence (effective 2004)

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According to the 2006 SAFA analysis, ISA 500 is under review in Bangladesh.

ISA 501 Audit Evidence - Additional Considerations for Specific Items (effective 2004)

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According to the 2006 SAFA analysis, ISA 501 is under review in Bangladesh.

ISA 505 External Confirmations (effective 2004)

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According to the 2006 SAFA analysis, ISA 505 is under review in Bangladesh.

ISA 510 Initial Engagements — Opening Balances (effective 2004)

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According to the 2006 SAFA analysis, ISA 510 is under review in Bangladesh.

ISA 520 Analytical Procedures (effective 2004)

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According to the 2006 SAFA analysis, ISA 520 is under review in Bangladesh.

ISA 530 Audit Sampling and Other Selective Testing Procedures (effective 2004)

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According to the 2006 SAFA analysis, ISA 530 is under review in Bangladesh.

ISA 540 Audit of Accounting Estimates (effective 2004)

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According to the 2006 SAFA analysis, ISA 540 is under review in Bangladesh.

ISA 545 Auditing Fair Value Measurements and Disclosures (effective 2004)

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According to the 2006 SAFA analysis, ISA 545 is under review in Bangladesh.

ISA 550 Related Parties (effective 2004)

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According to the 2006 SAFA analysis, ISA 550 is under review in Bangladesh.

ISA 560 Subsequent Events (effective 2006)

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According to the 2006 SAFA analysis, ISA 560 is under review in Bangladesh.

ISA 570 Going Concern (effective 2004)

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According to the 2006 SAFA analysis, ISA 570 is under review in Bangladesh.

ISA 580 Management Representations (effective 2004)

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According to the 2006 SAFA analysis, ISA 580 is under review in Bangladesh.

ISA 600 Using the Work of Another Auditor (effective)

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According to the 2006 SAFA analysis, ISA 600 is under review in Bangladesh.

ISA 610 Considering the Work of Internal Auditing (effective 2004)

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According to the 2006 SAFA analysis, ISA 610 is under review in Bangladesh.

ISA 620 Using the Work of an Expert (effective 2005)

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According to the 2006 SAFA analysis, ISA 620 is under review in Bangladesh.

ISA 700 The Auditor’s Report on Financial Statements (effective 2006)

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According to the 2006 SAFA analysis, ISA 700 is under review in Bangladesh.

ISA 701 Modifications to the Independent Auditor's Report (effective 2006)

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According to the 2006 SAFA analysis, ISA 701 is under review in Bangladesh.

ISA 710 Comparatives (effective 2004)

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According to the 2006 SAFA analysis, ISA 710 is under review in Bangladesh.

ISA 720 Other Information in Documents Containing Audited Financial Statements (effective 2004)

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According to the 2006 SAFA analysis, ISA 720 is under review in Bangladesh.

ISA 800 The Auditor’s Report on Special Purpose Audit Engagements (effective 2006)

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According to the 2006 SAFA analysis, ISA 800 is under review in Bangladesh.