Department Of A&IS
University Of Dhaka
Date of SubmissionCourse name: Accounting for Specialized Institutions
Md. Sakhawat Hossain
Abdullah Al Noman
Chronological Development of Public sector Auditing in Bangladesh
Historically, the system of maintenance of public accounts in Bangladesh, dates back to the mid
1800s, the days of British-occupied India. Since its independence in 1971, Bangladesh has
started a series of reforms in the accounting and auditing fields in association with donor
agencies. The Accounts Code was revised and updated in September 1996 with the assistance of
the United Kingdom Department for International Development (DFID). During 2000 and 2001,
the Audit Code, Audit Standard, Code of Ethics, and manuals for the various audit directorates
were developed and updated with the assistance of United Nations Development Program
(UNDP), DFID, and The Netherlands Government.
The PFM reform program, including the Financial Management Reform Program started in April
2003 with the following aims:
To strengthen auditing practice and information for improved parliamentary scrutiny of
To enhance aggregate fiscal management and to develop the regulatory framework for
financial and performance management;
To enhance resource allocation, utilization and financial management, resource
management, and performance management capacity in line ministries;
To enhance financial management reporting systems;
To build the capacity of the Financial Management Academy (FIMA) as a sustainable
center of excellence for financial management training in governance.
The five-year Financial Management Reform Program was funded by the DFID and the Royal
Netherlands Government. Its logical framework aimed to assist Bangladesh in adopting IPSAS
and INTOSAI Auditing Standards in the following ways:
Financial management reporting capacity will be strengthened in line ministries and
A plan will be implemented for cash-based financial reporting in conformity with
international standards with disclosure on accrual elements.
Audit work will be re-ordered around evidence-based opinion in line with INTOSAI
The CAG will audit ministries as entities and express an audit opinion as required by the
INTOSAI Auditing Standards.
The systems-based audit manual will enable the CAG to audit ministries as entities .
The form of accounting used by Bangladesh government is the concept on cash accounting basis,
recording the transaction at the time cash is paid or received. on cash accounting. The cash basis
is also used for budgeting. The reasons behind usage of cash accounting by the government are
Cash accounting is Simple
It is certain
It has direct linkage to the funds
On the receipt of government accounting it is extremely difficult to use any option other
than cash basis.
However because of some inherent limitation of the cash basis, there have been some alterations
to strict cash accounting. The alterations fall into three broad categories1.Incorrect treatment of transaction
2.Commercial operations maintaining
memorandum accrual accounts
3.Pragmatic solutions to specific problems
For ex-project expenditures are incorrectly
recorded as disbursed when paid to a project
As long as they are outside government
accounting, they cause no problems.
For ex-Stocks are only charged as expenses
when used, not when paid for.
According to the constitution, all revenues received by the Bangladesh shall form a
fund called the consolidation fund. Other public money received on behalf of the
government shall be credited as Public account.
Annual budget shall is required to show separately the sums required to make
expenditures charged upon or required to meet the expenditures on the consolidation
There are two different sets of published accounts. The finance account covers all
accounting aspects of Consolidated account & Public account. Additionally there are
the annual Appropriation account that simply shows the comparison between actual
turn outs to approved budget amounts.
Government accounts are split into three broad parts. They are- Revenue accounts,
Development account & lastly Public account.
It is the office of the comptroller General of Accounts that has the responsibility for
the preparation & consolidation of accounts.
The flow of the accounting information is shown below-
Figure :Flow of accounting Information
There are a number of weaknesses in the current accounting practices
Lack of expenditure control, the budget can be exceeded without the authority.
Other than the pre audit stages there appears to be a total absence of effective budgetary
Payments between government departments using the exchange account system
frequently take months, sometimes even years to settle.
In case of emergency, expenditure is temporarily booked under a suspense account.
Subsequently, the suspense account should be cleared by transfer to the appropriate head
of accounts .The following procedure is not followed.
Revenue budget accounts against suspense accounts are misleading as allocations for
expenditure should’ve been provided on a more meaningful code.
The Personal ledger deposit ledger accounts are outside the pre audit system.
There are lack of effective control over government departments like-railway, post,
telegraph & telephone .
The transfer of money to autonomous bodies for the execution of development projects
with little effective control over subsequent expenditure.
There are inaccuracies in compiled accounting data because of the absence of
reconciliation, misclassification & misappropriation of funds.
The accounting records of Chief Accounts Officer s & the Controller General of Accounts
frequently do not include direct disbursements for goods & services made from foreign
grants & loans.
The Controller General of account’s cash balance reconciliation with Bangladesh bank is
There is an absence of pre-printed forms & registers for everyday use.
Interest being earned on Bangladesh Bank accounts outside Bangladesh are not brought
The absence of upto date accounting manuals of instruction coupled with the absence of
trained staff aggravates the problem.
A crash program should be immediately initiated to bring the accounts up to date &
reconcile the balances. Any unidentifiable differences should be written off.
Each ministry department should have two accounts. One for receipt, another for
The use of exchange accounts should be stopped & the use of suspense account &
personal ledger should be severely curtailed with a program to quickly review all
existing accounts & close down almost all of them
In order to use effective budgetary control, internal check procedures should be
reviewed, management report should include budget figure & a budgetary control
unit should be established.
A core team of qualified accountants should be recruited directly to assist with the
implementation o the various programs.
So the projected flow of accounting information should be -