Quality of Audit Report of the Listed Companies in Bangladesh:

A Compliance Study

Abstract

This study first identifies the importance of audit report for an organization and then tries to
find out the quality of audit report of the listed Public Limited Companies (PLCs) in
Bangladesh. The ten criteria were identified from the guidelines suggested by International
Standard on Auditing (ISA) and were taken as benchmark for this study. A sample of 186
PLCs has been surveyed to determine the nature and extent of audit report disclosure by
computing total score and an Audit Report Disclosure Index (ARDI). The results show that
audit report disclosure varies widely within the sample companies with a mean score of 8.334
out of total score 10 (ARDI 83.98). The results also show that the audit firms are focusing
more on auditors opinion, management responsibility, auditor responsibility, introductory
paragraph and little focus is placed on title, auditor signature and auditor address. More over,
the components that the audit company follows are varying from client to client; mostly they
follow the British Model for audit reporting and did not give a proper thought in the audit
report disclosure

Key Words: Audit, Audit Report, International Standard on Auditing, Components of

Audit Report.

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Electronic copy available at: http://ssrn.com/abstract=1849143

 Introduction

It is observed that the term ‘auditing’ is used far more widely than just to mean the ‘attestation
of accounts’. Equally, even references to attestation are meaningless without a clear view of
‘to what?’ and ‘for what?’ we are attesting. Reports are essential to audit and assurance
engagements because they communicate the auditor’s findings. Users of financial statements
rely on the auditor’s report to provide assurance on the company’s financial statements (Arens
2000). Clarity here will certainly help communications. The rise of corporate reporting of the
last decade has brought with it an increase in the ‘attestation’, verification’ and/or ‘auditor’s’
statements attached to such reports. There is more than a little concern over the quality of
these ‘attestations’ (Ball et al. 2000; Owen et al. 2000).

The demand for auditing services arises from a need to facilitate dealings between the parties
involved in business relationships-shareholders, creditors, public authorities, employees and
customers’ etc. Exchanges between such parties are usually costly since informational
asymmetries give rise to uncertainty concerning the performance of the contractual
obligations. In this context of contractual opportunism and along with other instruments and
safeguards, accounts are used to enhance the likelihood of performance and demonstrate a
willingness to perform to potential contracting parties (Jensen and Meckling 1976). The
preparation of accounts is controlled by one of the parties only (either the executives of a large
company or an individual businessman in smaller undertakings). In this way, figures can be
produced at lower cost but they are also used-perhaps principally-for internal management and
control purposes. This dual capacity of executives and businessmen as agents to be monitored
and as those responsible for actually preparing the accounts reduces the value of the latter to
third parties (Defond 1992). A review of accounts by an independent expert, the external
auditor, is useful to enhance their credibility in the eyes of other contracting parties who are
not involved in their preparation. There is thus a demand amongst companies for independent
auditing to reduce their contractual or transaction costs. This has been verified empirically by
observing that the increased contractual conflict resulting from a greater separation between
ownership and control or a higher level of indebtedness leads to greater demand for auditing
services (Francis and Wilson 1988).

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Electronic copy available at: http://ssrn.com/abstract=1849143

Clients are mainly harmed not when their audit has low quality but when some other clients
of the same auditing firm unexpectedly fails, without any warning from the auditor.
Therefore, clients have very strong incentives to monitor, evaluate and compensate audit
firms’ quality. Meaningful regulation would focus on helping this monitoring process by
providing useful information. Agency cost increase; there is an increase in higher quality
audits either voluntarily undertaken by the managers or externally imposed by the
stockholder or creditors (Watts and Zimmerman 1986). Many authors judge audit quality in
different ways. As example Frankel et al. 2002; Chung and Kallapur 2003; Myers et al. 2003;
Butler et al. 2004, assert that biased earnings reporting can be used to draw inferences about
audit quality and use the magnitude of discretionary accruals as a proxy for audit quality.
Jackson et al. (2007) find that audit quality increases with audit firm tenure; they also
conclude that mandatory audit firm rotation will not improve audit quality. In this study, we
want to find out the quality of audit report through the nature and extent of information
disclosed in the audit report by the audit firms in compliance with the components suggested
by International Standard on Auditing 700.

Rules relating to audit report

Auditor Report under the Companies Act 1994 has the following provisions:

Provision of section 183(3):

The balance sheet and the profit and loss account or income and expenditure account of a
company shall be caused to be audited by the auditor of the company as in the Companies
Act provided, and the auditor’s report shall be attached thereto or there shall inserted at the
foot thereof a reference to the report and the report shall be read before the company in
general meeting and shall be subject to inspection by any member of the company.
Provision of Section 213(3):
The auditor shall make a report –
• to be presented in annual general meeting of the company
Scope of the Audit: The auditors shall be on-
• the accounts examined by him , and
• every balance sheet and profit and loss account and

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 • every other document declared by the Companies Act to be part of or annexed
to the balance sheet or profit and loss accounts which are laid before the
company in general meeting during his tenure of office.
Basic Opinion in Audit Report:
The report shall state whether, in his opinion and to the best of his information and according
to the explanation given to him, the said account give the information required by the
Companies Act in the manner so required and give a true and fair view-
a) in the case of the balance sheet, of the state of the company’s affairs as at the end of
its financial year;
b) in the case of the profit and loss account, of the profit of loss for its financial year.
Provision of Section 213(4):
Further Coverage of Opinion in the Audit Report: The auditors’ report shall also state-
a) whether he has obtained all the information and explanation which to the best of his
knowledge and belief were necessary for the purposes of his audit;
b) whether, in his opinion, proper books of account as required by law have been kept
by the company so far as it appears from his examination of those books and proper
returns adequate for the purpose of his audit have been received from branches not
visited by him;
c) whether the company’s balance sheet and profit and loss account dealt with by the
report are in agreement with the books of account and returns.
Provision of Section 213(5):
Qualified opinion in the audit report: If any of the above matters on audit reports [as per
sections 213(3) and 213(4)] are answered in the negative or with a qualification, the auditors’
report shall state the reason for the answer.
Provision of Section 213(6):
Audit Report to Include Government Specified Matter: The Government may, by general or
special order, direct that in the case of such class or description of companies as may be
specified in the order, the auditor’s report shall also include a statement on such matters as
may be specified therein.
Provision of Section 213(7):
Restriction on Reporting by the Auditor: The accounts of a company shall not be deemed as
not having been and the auditors’ report shall not state that those accounts have not been,

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properly drawn up on the ground merely that the company has not disclosed certain matters,
of-
(a) those matters are such as the company is not required to disclose by virtue of any
provision contained in the Companies Act or other law for the time being in force;
and
(b) those provisions are specified in the balance sheet and profit and loss account of
the company.
Provision of Section 214:
Auditor’s Signature: The persons himself or herself appointed as auditor or where an audit
firm is appointed only a partner in that audit firm practicing in Bangladesh shall put his or her
signature on the auditor’s report or any other document required of the company by law to be
signed or authenticated by the auditor.

Elements of Audit Report

As per International Standard on Auditing 700 audit report should have to maintain the
following elements:

Title:
The auditor’s report should have a title that clearly indicates that it is the report of an
independent auditor. A title indicating the report is the report of an independent auditor, for
example, “Independent Auditor’s Report,” affirms that the auditor has met all of the
relevant ethical requirements regarding independence and, therefore, distinguishes the
independent auditor’s report from reports issued by others.

Addressee:
The auditor’s report should be addressed as required by the circumstances of the engagement.

Introductory Paragraph:
The introductory paragraph in the auditor’s report should identify the entity whose financial
statements have been audited and should state that the financial statements have been audited.
The introductory paragraph should also:

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 (a) Identify the title of each of the financial statements that comprise the complete set
of financial statements;
(b) Refer to the summary of significant accounting policies and other explanatory
notes; and
(c) Specify the date and period covered by the financial statements.

Management’s Responsibility for the Financial Statements

The auditor’s report should state that management is responsible for the preparation and the
fair presentation of the financial statements in accordance with the applicable financial
reporting framework and that this responsibility includes:
(a) Designing, implementing and maintaining internal control relevant to the
preparation and fair presentation of financial statements that are free from material
misstatement, whether due to fraud or error;
(b) Selecting and applying appropriate accounting policies; and
(c) Making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility:
Auditor’s responsibility includes the following items:

Auditor should express the opinion of the financial statement based on audit.

The auditor expresses the opinion in order to contrast it to management’s
responsibility for fair presentation of the financial statement.

The auditor’s report should state that the audit was conducted in accordance with
International Standard on Auditing.

Auditor’s opinion:
Auditor’s report includes some parts. This are

The auditor should express the conclusion given a true & fair view in all material
respect, in accordance with applicable financial reporting framework.

When an auditor expressing an unqualified opinion, then he should state that the
financial statement gives a true & fair view or present fairly in all material respect.

If the auditor doesn’t follow the International Financial Reporting Standard, in that
case he should identify the jurisdiction or country of origin of the financial reporting
framework.

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Other reporting responsibility:
When the auditor addresses other reporting responsibilities within the auditor’s report on the
financial statements, these other reporting responsibilities should be addressed in a separate
section in the auditor’s report that follows the opinion paragraph.

Auditor’s signature:
The audit report should be signed by the auditor who audits the firm. The auditor’s signature
is either in the name of the audit firm, or the personal name of the audit firm or both.

Date of the auditor’s report:

The auditor should date the report on the financial statements not earlier than the date on
which the auditor has obtained sufficient appropriate audit evidence on which to base the
opinion on the financial statements.

Auditor’s address
The report should name the location in the country or jurisdiction where the auditor
practices.

Objectives of the Study

The main objectives of this study are:

1. To give an overview of audit report including its importance in listed Public Limited
Companies (PLCs).
2. To analyze the scenario of audit report disclosure practice in Bangladesh;
3. To compare the current audit report disclosure practice with the instruction suggested by
International Standard on Auditing.
4. To highlight the area of regulatory framework regarding audit report and reporting aspects
in Bangladesh.
5. To know what sorts of initiatives should be taken by audit firm for improving the quality of
audit.

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 Methodology of the study

Selection of Sample
For this study, the population was the total number of audit reports published by the listed
public limited companies (PLCs) in their annual reports, which was found to be 269( total
number of listed companies as on 1st January 2008) . Out of these, a sample of 186 (69.14
percent) audit reports has been selected from annual reports of 2006 under simple random
basis. The sample audit reports have been surveyed extensively for quality of audit report
since they are enlisted in the Dhaka Stock Exchange (DSE). The relevant reports were
collected from the library of the Dhaka Stock Exchange. The population and sample have
been shown below in Table 1 on the basis of audit report of various industrial sectors. In
addition to above secondary data has been collected through studying several relevant Acts,
IAASB handbook 2007, articles, national and international study materials and other printed
material of Securities and Exchange Commission.

Table 1: The population and sample of the study

Sectors Population Sample Percentage
Bank 46 37 80.43%
Cement 8 6 75.00%
Ceramic 4 4 100.00%
Engineering 23 15 65.22%
Food & Allied 35 22 62.86%
Fuel and Power 9 4 44.44%
Insurance 35 27 77.14%
IT Sector 7 6 85.71%
Jute 4 4 100.00%
Paper and Printing 8 3 37.50%
Pharmaceuticals and Chemicals 25 17 68.00%
Services and Real Estate 5 3 60.00%
Tannery Industries 8 6 75.00%
Textile 39 25 64.10%
Miscellaneous 13 7 53.85%
Total 269 186 69.14%

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In this study, an attempt has been made to find out the nature and extent of information
disclosed in the audit report of disclosing companies by comparing with the components
suggested by International Standard on Auditing 700 in 2007.

Scoring of the Disclosure Index

In examining each of these components, a dichotomous procedure is followed where each

company was awarded a score of ‘1’ if the company’s audit report appears to have disclosed
the concerned component and ‘0’ otherwise. The score of each company’ audit report was
totaled to find the net score of the company. An Audit Report Disclosure Index (ARDI) was
then computed by using the following formula:

Total Score of the Individual Company

ARDI= × 100
Maximum Possible Score

In this study, the maximum possible score obtainable by a company is 10. So in particular,
ARDI for this study becomes:

Total Score of the Individual Company

ARDI= × 100
10

Findings of the Study

The study has attempted to examine the components of audit report disclosure in public
limited companies (PLCs) enlisted with Dhaka Stock Exchange (DSE) in Bangladesh.

Total Score and Audit Report Disclosure Index of Listed Public Limited Companies:

The Audit Report Disclosure Index (ARDI) has been computed by calculating total score for
each disclosing audit report by the sample companies. Individual ARDI of each company’

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audit report has been shown in Exhibit-A1 in the Annexure. Descriptive statistics of Total
Score is shown in Table 2:

Table 2: Descriptive Statistics of Total Score

Sector N Minimum Maximum Mean Std. Deviation

Bank 37 7.00 9.00 8.784 0.534
Cement 6 8.00 9.00 8.667 0.516
Ceramic 4 8.00 9.00 8.5000 0.577
Engineering 15 8.00 10.00 8.467 0.640
Food and Allied 22 5.00 9.00 7.773 1.232
Fuel 4 8.00 9.00 8.5000 0.577
Insurance 27 6.00 9.00 8.370 0.839
Jute 4 8.00 10.00 8.750 0.957
Paper 3 6.00 8.00 6.667 1.155
Pharmaceuticals 17 7.00 9.00 8.412 0.795
Service 3 8.00 9.00 8.667 0.577
Tannery 6 6.00 9.00 8.334 1.211
Textile 25 7.00 10.00 8.360 0.757
Miscellaneous 7 8.00 9.00 8.428 0.535
Total 186 5.00 10.00 8.334 0.263

Source: Compiled and Computed from Exhibit- A1; N: Number of Audit Reports.

According to ISA 700 guidelines, we identified ten criteria about audit report of a company.
In this survey, a total of 186 companies have found to disclose audit report in their respective
annual reports as it is mandatory for listed company. Moreover, three companies have been
found to disclose maximum ten criteria (Sonali Aansh industries, National polymer industries
and Ashraf textile mills ltd.) and Bionic Sea Food Company disclose lowest five criteria in
their respective audit report. The average score is found to be 8.334 (average ARDI 83.98)
with average standard deviation of 0.263 (maximum standard deviation is in Food & Allied
sector and minimum in Cement Sector). Following table shows the frequency distribution of
total score and ARDI:

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 Table 3: Frequency Distribution of Total Score and ARDI
Score ARDI N Cumulative N Percentage Cumulative %
5 50 1 1 0.54% 0.54%
6 60 7 8 3.76% 4.30%
7 70 15 23 8.06% 12.37%
8 80 60 83 32.26% 44.62%
9 90 100 183 53.76% 98.39%
10 100 3 186 1.61% 100.00%

As shown in the above table, the highest number of company’s audit report (100) falls in the
ARDI score of 53.76% and in the upper extreme (ARDI 100.00%) as well as in the lower
extreme (ARDI 50.00%) there exists three and one company’s audit report respectively. The
results shows that the state of audit report disclosure in the annual reports of PLCs is not so
poor as the average score (8.334) is above 5 (half of maximum score of 10). But, it is
apparent that the audit firm of the listed PLCs did not seem to be much interested in
following ISA 700 guidelines and did not give a proper thought in the audit report disclosure.

Extent of Sector-wise and Item-wise Audit Report Disclosure by the Listed PLCs:

The audit report disclosure practices of different industrial sectors of Bangladesh with
reference to the selected ten components are shown in Exhibit-A2 in the Annexure. Based on
the sectors of the companies, the exhibit shows that Banking sector scored the maximum
average of ARDI (87.84) followed by Jute sector (87.50) and then Cement and Service &
Real Estate Sector (86.67). The lowest average score of ARDI was obtained by Paper and
Printing Sector (66.67). This is an indication of the fact that the Banking sector is showing
great commitment towards disclosing their audit report.

Among the ten criteria, the survey found that maximum audit report (186 audit report out of
186) focused on introductory paragraph and focus on title (Independent Auditor Report) (only
2.69% audit report, 5 in numbers) was the minimum.

Extent of Audit Firm-wise Audit Report Disclosure by the Listed PLCs:

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Preparation of audit report or to express an opinion on the statements based on an audit is the
responsibility of the auditor. But in this study we found that audit firm did not follow the
audit report components suggested by ISA 700. More over, the components that the audit
company follows are varying from client to client. A descriptive statistics of individual audit
firm which were audited more than two sample companies are given below:

Table 4: Descriptive Statistics of Audit Firm

Audit Firm N Minimum Maximum Mean Std. Deviation

A. Matin & Co. 3 8.00 9.00 8.33 0.57
A. Qasem & Co. 6 7.00 9.00 8.00 0.89
A. Wahab & Co. 4 8.00 9.00 8.75 0.50
ACNABIN 3 9.00 9.00 9.00 0.00
Ahmed Zaker & Co. 3 7.00 8.00 7.67 0.57
Ata Khan & Co. 6 8.00 9.00 8.50 0.54
Aziz Halim Khair Choudhury 3 8.00 9.00 8.67 0.57
Chowdhury Bhattacherjee & Co 3 9.00 9.00 9.00 0.00
Haque Shahalam Mansur & Co 4 7.00 9.00 8.00 0.82
Hoda vasi Chowdhury & Co 7 8.00 9.00 8.86 0.37
Howladar Yunus & Co 9 8.00 9.00 8.56 0.53
K. M. Alam & Co 4 5.00 9.00 7.00 1.63
Khan Wahab Shafique Rahman & Co 9 7.00 9.00 8.33 0.87
M. A. Malek Siddique Wali & Co 12 8.00 9.00 8.42 0.51
M. J. Abedin & Co 13 8.00 9.00 8.77 0.44
Rahman Rahman Huq 10 8.00 9.00 8.90 0.32
S, F. Ahmed & Co 4 9.00 9.00 9.00 0.00
Sarwar Salamat & Co 4 6.00 9.00 8.00 1.41
Syful Shamsul Alam & Co 9 8.00 9.00 8.78 0.44

From the descriptive statistics it was found that, only ACNABIN, Chowdhury Bhattacherjee
& Co and S, F. Ahmed & Co did not have standard deviation, i.e., they follow same level of
componets for all clients. All other audit firms did not follow the consistency for all clients.
Among the audit firm Sarwar Salamat & Co (Std. Deviation 1.41, maximum 9.00, minimum
6.00) and K. M. Alam & Co (Std. Deviation 1.63, maximum 9.00, minimum 5.00) are the
worst , because their standard deviation are higher than the others.

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Basis of Reporting:
From the study we also found that accounting practice in Bangladesh mostly follow the
British Model as reflected in the auditors’ report regarding reporting of financial statements .
Almost all of the listed sample companies directly use the expression “true and fair view”.
The other expression “true and correct view” used by the remaining companies is also an
inherited terminology of the British Model (Bala and Habib 1996). But no audit report of the
listed companies contain the expression “ fair presentation”, which shows that accounting
practice is least inclined towards American Model. However, a handful of listed companies
show adherence to GAAP in preparing financial statements. Only this aspect of the American
Model is in practice in our country to a large extent.

According to the guidelines suggested by ISA 700 the following are the findings:

1.Title: A member in public practice shall be independent in the performance of professional

service as required by standards. Independence in auditing means taking an unbiased
viewpoint in the performance of audit tests, the evaluation of the results, and the issuance of
the audit report. According to ISA 700- the auditor’s report should have a title that clearly
indicates that it is the report of an independent auditor, for example, “Independent
Auditor’s Report”. But from the study we found that only 2.69 %( 5 audit report out of 186)
companies audit report follow the title criteria of ISA 700.This companies are Monno
ceramic(Audited by Muhammad Shaheedullah & Co), National polymer industries( Audited
by M.N. Islam & Co), Sonali Aansh industries( Audited by K.M.Hasan & Co) , Ashraf textile
mills ltd( Audited by K.M. Hasan & Co), Alhaj Textile Mills ltd( Khan Wahab Shafique
Rahman & Co). From the total number of companies Ceramic Sector (1 audit report out of 4 ,
25.00%), Jute sector (1 out of 4 companies audit report, 25.00%), Textile Sector (2 audit
report out of 25, 8.00%), Engineering Sector (1 out of 15 companies audit report, 6.67%),
mentioned about title as per ISA guidelines.

2. Address: According to the study, 174 companies out of 186 companies (93.55%)
mentioned about address in the audit report. From the total number of audit report Banking
Sector (34 audit report out of 37 , 91.89%), Cement Sector (6 companies audit report out of 6,
100%), Ceramic Sector (4 audit report out of 4 , 100%), Engineering Sector (15 audit report s

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 out of 15 , 100%), Food & Allied Sector (19 audit reports out of 22 , 83.36%), Fuel and
Power Sector (4 out of 4 audit reports, 100%), Insurance Sector (23 audit reports out of 27 ,
85.19%), IT Sector (6 out of 7 audit reports, 83.33%), Jute Sector (4 out of 4 audit reports,
100%), Paper and Printing (3 audit reports out of 3 , 100%), Pharmaceuticals & Chemical
Sector (16 audit reports out of 17 , 94.12%), Service and Real Estate Sector (3 out of 3 audit
reports, 100%), Tannery Industry ( 6 out of 6 audit reports, 100 %), Textile Sector (25 audit
reports out of 25, 100%) and Miscellaneous Sector (7 audit reports out of 7, 100%)
mentioned about address in the audit report disclosure.

3. Introductory Paragraph: Introductory paragraph is the only one elements of audit report
that all the sample audit reports (186 audit reports out of 186, 100%) mentioned in their
respective audit report.

4. Management Responsibility: Out of the 186 PLCs, 184 company’s audit report (98.92%)
mentioned about the management responsibilities in their audit report. German Bangla Food
Ltd. (Food and Allied Industry, Audited by Rahman Thakur & Co) and Sonali Paper (Paper
and Printing Industry, Audited by Shaha & Co) did not mention about management
responsibility in their audit report.

5.Auditor Responsibility: A total of 184 audit reports (98.92%) mentioned about the auditor
responsibility in their audit report. German Bangla Food Ltd. (Food and Allied Industry,
Audited by Rahman Thakur & Co) and Sonali Paper (Paper and Printing Industry, Audited by
Shaha & Co) did not mention about auditor responsibility in their audit report.

6. Auditors Opinion: According to the study, 184 companies (98.92%) mentioned about the
auditors opinion in their audit report. Delta Life Insurance Company Ltd.( Insurance Sector,
Audited by M. A. Quader Kabir & Co ) and German Bangla Food Ltd. (Food and Allied
Industry, Audited by Rahman Thakur & Co) did not mention about auditors opinions in their
audit report.

7. Other Reporting Responsibility: A total of 173 audit reports out of 186 audit reports
(93.10%) mentioned about other reporting responsibility in the audit report. From the total
number of audit reports Banking Sector (97.30%), Cement Sector (100%), Ceramic Sector (
75%), Engineering Sector (100%), Food & Allied Sector (95.45%), Fuel and Power Sector

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(75%), Insurance Sector ( 92.59%), IT Sector ( 100%), Jute Sector (100%), Paper and
Printing (66.67%), Pharmaceuticals & Chemical Sector (82.35%), Service and Real Estate
Sector (100%), Tannery Industry (100 %), Textile Sector (88 %) and Miscellaneous Sector
(100%) mentioned about other reporting responsibility in the audit report disclosure.

8. Auditor Signature: According to the study, we found auditor signature in 133 sample
companies (71.51%) audit report. 37 Banking Sector, 4 Cement Sector, 2 Ceramic Sector, 7
Engineering Sector, 11 Food & Allied Sector, 4 Fuel and Power Sector, 20 Insurance Sector,
5 IT Sector, 3 Jute Sector, 15 Pharmaceuticals & Chemical Sector, 3 Service and Real Estate
Sector, 4 Tannery Industry, 15 Textile Sector and 3 Miscellaneous Sector constitute these 133
audit reports. No company in the paper and printing sector found auditor signature in their
audit report.

9. Date: From a total of 186 PLCs, 172 audit reports mentioned date in their audit report. All
audit reports (100%) in the Banking, Cement, Ceramic, Fuel and Power, IT, Jute, Service and
Real Estate and Miscellaneous sector mentioned date in their report. But 1 Engineering, 3
Food and Allied, 1 Insurance, 1 Paper and Printing, 2 Pharmaceuticals & Chemical, 1Tannery
Industry and 4 Textile Sector did not mention the date in audit report.

10. Auditors Address: About 89.78% audit reports (167 in number) mentioned auditor
address in their audit report. Banking Sector (34 audit reports, 89.19%), Cement Sector (6
audit reports, 100%), Ceramic Sector (4 audit reports, 100%), Engineering Sector (15 audit
reports, 100%), Food & Allied Sector (17 audit reports, 77.27%), Fuel and Power Sector (3
audit reports, 75%), Insurance Sector (25 audit reports, 92.59%), IT Sector (5 audit reports,
83.33%), Jute Sector (3 audit reports, 75%), Paper and Printing (3 audit reports, 100%),
Pharmaceuticals & Chemical Sector (15 audit reports, 88.24%), Service and Real Estate
Sector (2 audit reports, 66.67%), Tannery Industry ( 5 audit reports , 83.33 %), Textile Sector
(24 audit reports, 96%) and Miscellaneous Sector (7 audit reports, 100%) mentioned about
the auditors address in the audit report disclosure.

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 Concluding Remark

The discussions in this paper provide an insight into the entire area of audit together with an
overview of audit report disclosure and it components compliance with International
Standard on Auditing. The outcome of the study found that audit firm ignore in disclosing
independent audit report. But auditing is the process that evaluates evidence about
quantifiable information for the purpose of determining and reporting on the degree of
correspondence between the quantifiable information and established criteria. The audit
report does not provide guarantee to the correctness of the financial statement but provide a
reasonable assurance. So in all matters relating to the assignment, independence in mental
attitude is to be maintained by the auditors. The findings indicate that 12.37% of the sample
reports studied earned audit report disclosure scores less or equal to 70% and the index of
86.02% of the sample is between 70% - 90%. While the remaining 1.61% of the sample
companies’ score 100%. However title, auditor signature and auditor address related
information has not been disclosed in the audit reports by the listed public companies to an
acceptable level.

The focus of audit quality in this study has been based on comparing with the component
suggested by ISA. Other criteria like existence of audit committee, mandatory rotation of
auditor or biased reporting etc. for determining quality of audit report are not considered. It is
to be noted that the approach to construct a disclosure index- the number of items actually
disclose divided by the number of items that should have been disclosed – contains an
elements of judgment in deciding the number of items relevant to a particular company.
However, it should be kept in mind that inspite of the limitations pointed out in the above
discussion, disclosure indexes can provide a useful tool for measuring quality which is the
main objective of the present study.

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 Exhibit- A1: Audit Report Disclosure Index (ARDI) of listed public companies

Sl Sl
Name of the Company Score Name of the Company Score
No. No.
1 Ashraf textile mills ltd. 10 94 Prime Insurance 9
2 Sonali Aansh industries 10 95 Pubali Bank 9
3 National polymer ind. 10 96 Social Investment Bank Ltd. 9
4 Mercantile Insurance Co. Ltd 9 97 Zeal Bangla Sugar Mills Ltd. 9
5 Prime finance & investment 9 98 Midas financing 9
6 Reckitt Benckiser Bd. Ltd. 9 99 The City Bank Ltd. 9
7 Meghna Life Insurance Co. Ltd 9 100 Aramit Cement 9
8 Pragati Insurance 9 101 Karnaphuli Insurance Co. Ltd. 9
9 Pragati Life Insurance Limited 9 102 Mutual Trust Bank 9
10 Al-Amin Chem.; Industries Ltd. 9 103 Sreepur Textile Mills Ltd 9
11 LankaBangla Finance Ltd. 9 104 GMG industries corporation. 8
12 Quasem Dry Cells limited 9 105 Kohinoor Chemical Co. 8
13 Style Craft Ltd 9 106 Glaxo Smith Klin Bangladesh 8
14 NCC Bank Ltd. 9 107 IDLC 8
Sajib Knitwear and Garments
15 Dhaka Bank ltd. 9 108 8
Ltd.
16 One Bank 9 109 Dhaka fisheries 8
17 Daffodil Computers Ltd. 9 110 Tamijuddin textile Mills Ltd 8
18 Sandhani Life Insurance Co. Ltd. 9 111 Delta spinners Ltd. 8
Modern Dying & Screen Printing
19 9 112 Gemini Sea Food ltd. 8
Ltd
20 Phonex Leather 9 113 Uttara bank ltd 8
21 Sonargaon Textiles 9 114 Agni System Ltd. 8
22 Square Pharmaceutical. Ltd 9 115 Power grid co. of bd ltd 8
Eastern Lubricants Bleder
23 Square Textile Ltd. 9 116 8
Limited
24 Bengle Fine Ceramic Ltd 9 117 Progressive Life Ins. Co. Ltd 8
25 Reliance Insurance Ltd. 9 118 BDCOM online ltd. 8
26 Bengal biscuits 9 119 GQ ball pen 8
27 Eastern Bank Ltd. 9 120 Meghna condensed Milk 8
28 Lafarge Surma cement 9 121 Sinorbangla industries ltd 8
29 Shahjalal Islami Bank 9 122 United insurance 8
30 United leasing 9 123 Janata Insurance company Ltd. 8
31 Berger Paints Bangladesh ltd. 9 124 Northern Jute 8
32 National Tea Company Ltd 9 125 Agrani insurance co. ltd 8
33 Fareast Islami Life Insurance 9 126 Altex Industries Limited 8
34 First Lease International Ltd 9 127 Atlas Bangladesh 8
35 Phoenix Insurance Co 9 128 Mita Textiles Limited 8
36 United Commercial Bank ltd. 9 129 Arbee textile 8
37 Usmania Glass Factory Sheet Ltd 9 130 Info. Service Network 8
Delta Life Insurance Company
38 Samata Leather Complex Ltd 9 131 8
Ltd.
Bangladesh Industrial Finance
39 9 132 Federal Insurance 8
Co.
40 Bangas Limited 9 133 Apex food 8
National Life Insurance Co.
41 Eastland Insurance 9 134 8
Ltd.
42 Rahima food corporation ltd 9 135 Dynamic Textile Industries ltd 8
43 Rupali Bank 9 136 Aftab Automobiles Ltd. 8
44 Alhaj Textile Mills ltd 9 137 Apex spinning & Knit mills ltd 8
45 Green Delta Insurance 9 138 Standard Ceramic 8

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Sl Sl
Name of the Company Score Name of the Company Score
No. No.
46 National Bank Limited 9 139 The IBN SINA 8
47 Oriental bank ltd 9 140 Apex Adelchi Ltd. 8
48 Rupali Insurance 9 141 Saihem Textile Mills 8
49 Safko Spinning 9 142 Olympic industries 8
50 Beximco Pharmaceuticals limited 9 143 Tripti Industries ltd. 8
51 Rahim Textaile Mills Ltd 9 144 Eastern Housing 8
52 Savar Refactories Ltd. 9 145 National Tubes Ltd. 8
Bangla Process Industries
53 Apex Tannery ltd 9 146 8
Limited
54 Pharma Aids Ltd 9 147 Aziz Pipes 8
55 Pioneer Insurance 9 148 Monno Jutex 8
56 Ambee Pharma 9 149 Saleh Carpet Mills Ltd. 8
57 Bangladesh Online Ltd. 9 150 BSC 8
Asia Pacific General Insurance
58 Beximco Fisheries 9 151 8
ltd
59 Beximco Synthetics ltd. 9 152 Brac Bank Limited 8
Apex Weaving & Finishing mill
60 Bextex Ltd 9 153 8
Ltd
61 Islamic Finance &Industries Ltd. 9 154 Fu-wang Food 8
62 Jute Spinners Ltd. 9 155 Modern Cement 8
63 Rangpur Foundry Ltd 9 156 Modern Industries Ltd 8
64 Shinepukur Holdings Limited 9 157 Estern Cables 8
65 Prime Islami Life Insurance 9 158 Maq Enterprise 8
66 Libra infusion Ltd 9 159 Wata Chemicals Ltd 8
67 Monno Ceramic 9 160 Al Arafah Islami Bank limited 8
68 Exim Bank Bd. Ltd. 9 161 Meghna Cement Mill Ltd 8
69 Confident Cement 9 162 Fu-Wang ceramic Industry ltd 8
70 premier leasing Int Ltd 9 163 BD Thai Aluminum 8
71 Beach Hatchery Ltd. 9 164 Eastern Insurance Co Ltd. 7
72 Bangladesh Lams Lts. 9 165 IFIC Bank 7
73 Bata Shoe com. Bd. Ltd. 9 166 Amam Sea food Ind. Ltd. 7
74 BOC Bangladesh Ltd 9 167 Peoples Insurance Co. Ltd 7
75 Dutch- Bangla Bank Ltd 9 168 Alpha Tobaco 7
76 Renata Limited 9 169 Fine foods Ltd 7
77 Southeast bank 9 170 Chic Tex Ltd 7
78 Summit Power Ltd. 9 171 Keya Detergent Ltd. 7
79 ACI Limited 9 172 Rahman chemicals ltd 7
80 Prime Bank Limited 9 173 Standard Bank limited 7
81 Arab Bangladesh Bank Ltd 9 174 Pharmaco Int. Ltd. 7
82 Bank Asia 9 175 Mona Food Industry Limited 7
83 Uttra Finance 9 176 Prime Textile Spinning Mills 7
84 SINGER Bangladesh 9 177 Global Insurance 7
85 Samorita Hospital 9 178 Quasem Silk 7
86 Padma Printers 9 179 Legacy Footwear 6
87 Padma Cement Ltd 9 180 Chittagong vegetable 6
88 Purabi General Insurance 9 181 German Bangla Food Ltd. 6
89 Meghna shrimp 9 182 Tulip dairy & food 6
90 BD Dyeing 9 183 Azadi Printers Ltd 6
91 Anwar Galvanizing Ltd. 9 184 Sonali paper 6
92 Marcantile Bank 9 185 Nitol Insurance 6
93 People’s Leasing & Fin. Ser. Ltd 9 186 Bionic Seafood exports ltd 5

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 Exhibit-A2: Disclosure practice of various sectors under different components of Audit report

Sectors

Auditor’s signature
Auditor’s Opinion

Auditor’s address
Other Reporting
Responsibilities

Responsibilities

Responsibilities
Management
Introductory

Avg. ARDI
Paragraph

Auditor’s
Address
Title

Date
0 34 37 37 37 37 36 37 37 33
Bank 87.84%
0.00% 19.54% 19.89% 20.11% 20.11% 20.11% 20.81% 27.82% 21.51% 19.76%
0 6 6 6 6 6 6 4 6 6
Cement 86.67%
0.00% 3.45% 3.23% 3.26% 3.26% 3.26% 3.47% 3.01% 3.49% 3.59%
Ceramic 85.00%
1 4 4 4 4 4 3 2 4 4
20.00% 2.30% 2.15% 2.17% 2.17% 2.17% 1.73% 1.50% 2.33% 2.40%
Engineering 84.67%
1 15 15 15 15 15 15 7 14 15
20.00% 8.62% 8.06% 8.15% 8.15% 8.15% 8.67% 5.26% 8.14% 8.98%
Food & 77.73%
Allied 0 19 22 21 21 21 21 11 18 17
0.00% 10.92% 11.83% 11.41% 11.41% 11.41% 12.14% 8.27% 10.47% 10.18%
Fuel and 85.00%
Power 0 4 4 4 4 4 3 4 4 3
0.0% 2.3% 2.2% 2.2% 2.2% 2.2% 1.7% 3.0% 2.3% 1.8%
Insurance 83.70%
0 23 27 27 27 26 25 20 26 25
0.00% 13.22% 14.52% 14.67% 14.67% 14.13% 14.45% 15.04% 15.12% 14.97%
IT Sector 85.00%
0 5 6 6 6 6 6 5 6 5
0.00% 2.87% 3.23% 3.26% 3.26% 3.26% 3.47% 3.76% 3.49% 2.99%
Jute 87.50%
1 4 4 4 4 4 4 3 4 3
20.00% 2.30% 2.15% 2.17% 2.17% 2.17% 2.31% 2.26% 2.33% 1.80%
Paper and 66.67%
Printing 0 3 3 2 2 3 2 0 2 3
0.00% 1.72% 1.61% 1.09% 1.09% 1.63% 1.16% 0.00% 1.16% 1.80%
Pharceuticals 84.12%
and
Chemicals 0 16 17 17 17 17 14 15 15 15
0.00% 9.20% 9.14% 9.24% 9.24% 9.24% 8.09% 11.28% 8.72% 8.98%
Services and 86.67%
Real Estate 0 3 3 3 3 3 3 3 3 2
0.00% 1.72% 1.61% 1.63% 1.63% 1.63% 1.73% 2.26% 1.74% 1.20%
Tannery 83.33%
Industries 0 6 6 6 6 6 6 4 5 5
0.00% 3.45% 3.23% 3.26% 3.26% 3.26% 3.47% 3.01% 2.91% 2.99%
Textile 83.60%
2 25 25 25 25 25 22 15 21 24
40.00% 14.37% 13.44% 13.59% 13.59% 13.59% 12.72% 11.28% 12.21% 14.37%
Miscellaneous 84.29%
0 7 7 7 7 7 7 3 7 7
0.00% 4.02% 3.76% 3.80% 3.80% 3.80% 4.05% 2.26% 4.07% 4.19%
Total
5 174 186 184 184 184 173 133 172 167
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

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