Internship Report on Verification of Alternative Cash Assistance Files

Jagannath University Faculty of Business Studies Department of Accounting &Information Systems

Verification of Alternative Cash Assistance Files: A Study on ACNABIN Chartered Accountants

Submitted To: Department of Accounting & Information Systems Faculty of Business Studies Jagannath University

Submitted By: M. Shahriar Ahmed ID: M140201087 Session: 2014-15 Batch: 6th

Supervised By: Md. Ruhul Amin Mollah Assistant Professor Department of Accounting & Information Systems

Submission Date: 26-01-2017

Internship Report On “Verification of Alternative Cash Assistance Files”

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Date of Submission: 26 January, 2017

Internship Report On

Verification of Alternative Cash Assistance Files Supervised By: Md. Ruhul Amin Mollah Assistant Professor Dept. of Accounting & Information Systems

Prepared by: M. Shahriar Ahmed ID: M140201087 Program: MBA Batch: 6th Session: 2014-2015 Dept. of Accounting & Information Systems

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Date of Submission: 26 January, 2017

Letter of transmittal January 26, 2017 Md. Ruhul Amin Mollah Assistant Professor Department of Accounting & Information Systems Jagannath University Subject: Submission of Internship Report. Dear Sir, I take pleasure in submitting the report on “Verification of Alternative Cash Assistance Files” as a requirement of MBA program, Department of Accounting and Information Systems for our consideration. I have completed the report in due time and met all the proposed objectives. Apart from the academic knowledge gained, this internship program and preparation of report has given me the opportunity to understand the audit procedure and auditor’s independence. I have tried my best to make this report comprehensive and informative one. I hope you will appreciate my endeavor and find the report up to your expectation. It has to be mentioned further that without your advice and co-operation it would not be possible for me to complete this report. I shall be gratified to answer any sort of queries you think necessary regarding the report. Yours Sincerely,

M. Shahriar Ahmed ID NO. : M140201087 Department of Accounting and Information Systems Jagannath University

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Declaration I am M. Shahriar Ahmed, student of Masters of Business Administration, Department of Accounting & Information Systems from Jagannath University, hereby I declare that the internship report titled

“

Verification of Alternative Cash Assistance is prepared after the ”

completion of my internship at ACNABIN, Chartered Accountants. I also declare that the internship report is prepared for academic purpose only and is my srcinal work under the extensive supervision and guidance of Assistant Professor Md. Ruhul Amin Mollah, Jagannath University.

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Certificate of Supervisor M. Shahriar Ahmed, ID no. : M140201087, Department of Accounting and Information Systems, Jagannath University has completed internship report under my supervision. He has done this report on “Verification of Alternative Cash Assistance Files” as a part of requirement for obtaining the degree of Masters of Business Administration. I have gone through the report and found it a well written report. He has completed the report by himself. I wish him every success in life.

Md. Ruhul Amin Mollah Assistant Professor Department of Accounting and Information Systems Jagannath University

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Preface In the early of year 2016, I was granted the unique opportunity to be employed by ACNABIN Chartered Accountants Firm as an Internee. Under the supervision of External Auditor Department, I was fortunate enough to undertake 90 days internship that expanded my horizons and my way of thinking. My major job in the aforesaid firm was based within the Auditing of audit clients and primarily involved practical understanding under the supervision of concerned manager and partner. During the internship period I got the opportunity to be engaged in auditing several clients e.g. AB Bank Ltd., Dhaka Bank Ltd., Shahjalal Islami Bank Ltd., and along with these audit jobs I got a tremendous opportunity to be part of preparing of work file and certificates which enriched my domain of practical knowledge.

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Acknowledgement By the name of God I started this internship report and finally it has been completed. However, the special thanks to my honorable supervisor Md. Ruhul Amin Mollah, Assistant Professor, Department of Accounting and Information Systems, Jagannath University. The supervision and support that he gave truly help the progression and smoothness of the internship program. The cooperation is much indeed appreciated. My grateful thank goes to Mr. M. Moniruzzaman, FCA who has created the opportunity to get the practical knowledge. Besides, this internship program makes me realized the value of working together as a team and as a new experience in working environment, which challenges us every minute. Moreover, great appreciation goes to the other students and staffs of ACNABIN those who help me a lot during the survey. The whole program really brought us together to appreciate the true value of respect of each other. Last but not least I would like to thank my friends and fellows those who work together as intern at ACNABIN.

M. Shahriar Ahmed ID NO. : M140201087 Department of Accounting and Information Systems Jagannath University

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Abstract Exports can contribute remarkably to extract and can ensure the bright prospect of an economy. To increase the domestic production and exports, administrators of every country might take some initiatives and might inspire its exporters as well as the local producers. At this stage, Bangladesh Government is trying to motivate its people in order to increase exports as well as to active other economic factors. Cash incentive is one of the most important initiatives taken by government to inspire the exporters in order to earn foreign currency as well as to motivate the local producers to increase the local production. Each year, Government spends a considerable amount of national budget on cash incentive facility. After that government as well as economy also gets a tremendous feedback from it. In last couple of years, exports trend to be gradually increased along with GDP which is a great positive sign for the economy. However, this paper will show how exports are responding with the cash incentive facility and how much cash incentive facility works as a motivational factor. Finally I believe, this paper will be very helpful to know the overall cash incentive procedure, because here one can easily understand the auditor’s procedures and their practices f or verification of cash assistance files. It will also work as a practicable guideline for all parties involved in cash incentive process.

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Table of Contents

Chapters

Chapter-1

Chapter-2

Chapter-3

Chapter-4

Particulars Letter of Transmittal Declaration Approval Certificate Preface Acknowledgement Abstract Introductory Part 1.1 Introduction 1.2 Background of The Study 1.3 Objectives of The Study 1.4 Scopes of The Study 1.5 Literature Review 1.6 Methodology of The Study 1.7 Limitations of The Study An overview of ACNABIN Chartered Accountants 2.1 Overview of the organization 2.2 Mission, vision, values 2.3 About Partners 2.4 Background Overview of Alternative Cash Assistance 3.1 Introduction to Alternative Cash Assistance 3.2 Importance of giving Cash Incentive to composite sector of Bangladesh 3.3 Sectors in which cash incentive is given 3.4 Conditions for eligibility of Alternative Cash Incentives Procedures of executing Cash Incentive Audit 4.1 Procedures for Executing Cash Incentive Audit 4.2 Application for cash incentives 4.3 The application is officially received by the Bank 4.4 Letter issued by the Bank to the concerned

Partner of the Firm 4.5 Commencement of the Cash Incentive Audit 4.6 Preparation of the Working File 4.7 Review of the Working File

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Page No. i ii Iii iv v vi 1 2 2 3 3 4 4 5 6

7 7 8 9 10 11-12 12-13 14 15 16 17 18 18 18 18 18-21 21

Chapter-5 Chapter-6 Chapter-7

4.8 Preparation of Control Sheet and CrossChecking 4.9 Partner’s Review and Signature 4.10 Submission of the Certificate to the Bank Case Study 5.1 Study on 5 Industries Learning 6.1 Learning from the Internship Program Findings, Recommendation & Conclusion 10.1 Findings 10.2 Recommendations 10.3 Conclusions References

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21 22 22 24 25-28 29 30 31 32 33 34 35

Verification of Alternative Cash Assistance Files

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1.1 Introduction: Audit is the procedure of a formal examination of an organization’s accounts or financial situation. An audit may also include examination of compliance with applicable terms, laws and regulations. Chartered Accountants perform three type of audit: 

Financial Statement Audit,



Operational Audit &



Compliance Audit.

The persistence of compliance audit is to determine whether the audited client is following specific procedure, rules or regulations by higher specialist. Results of compliance audits are typically reported to someone with in the administrative unit being audited rather than to a board of spectrum of users. Cash Incentive audit can be treated as compliance audit. It is a special types of audit within which the auditors comply with Terms of Reference (TOR), Bangladesh Bank Circular and Import policy to certify suitable amount of cash incentive for the applicants. Cash Incentive will achieve those exporters who will use local yarn from BTMA member mills but not able bounded warehouse and duty draw back facilities. Cash incentive is the assistance in the form of “Cash” given to any party on its fulfillment of certain conditions. Cash incentive system was first introduced in 1994. In the Readymade garments sector of Bangladesh, cash incentive is given as repayment of part of the manufacture cost of Bangladeshi Exporters (Incentive Receiver) when he completes the export process observing with the all requirements of the government (mentioned in the Bangladesh Bank Circulars). In most of cases, there are special reason behind giving cash incentive. It might be given to encourage the child industry, to strengthen the backward or forward connection of any industry, to make the goods of the industry more competitive in the local or foreign market etc. Cash incentive is also used as counter weapon against the undisputable practice of dumping by foreign countries. In Bangladesh, cash incentive is mainly given to export oriented sector to increase the export thereby earning foreign exchange.

1.2 Background of the Study: Since MBA is a job oriented program, so internship is a mandatory part of this program. Realizing the fact, the department of Accounting and Information System has included a 90 days internship program in the course curriculum after the effective completion of the program. To comply with this requirement, I have joined ACNABIN as an internee where I had the opportunity to have the practical knowledge on overall auditing procedure. Gaining a practical knowledge and experience of audit work that is performed in corporations, companies and non-profit organizations. This opportunity has given me an opportunity to observe and perform real world knowledge about the audit procedure, which is followed by the chartered accountancy firms.

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In the internship period I could relate the theoretical knowledge of auditing to practical exposure. From the knowledge and continued working experience gathered from the firm, I have selected the reporting topic “Audit Procedure on the verification of alternative cash assistance”.

1.3 Objectives of the study: The basic objective of writing the report is to fulfill the partial requirement of the MBA program. After getting theoretical knowledge from university, it is all about the application of that knowledge in real world situations. The core objectives behind the study are:  







Establishing relationship between theory and practices in real world situations. Adapting in organizational environment as a professional. Gaining knowledge about the practical experience how audit works are performed in corporations, companies and non-profit making organizations.. Understanding the cash incentive facilities given in the Textile and RMG sector Bangladesh. Obtaining a thorough knowledge of how the cash incentive audit is done and evaluating whether the cash incentive facilities are instrumental in promoting export of Bangladesh.

1.4 Scopes of the study: I have been assigned in ACNABIN and that gave me tremendous scope to familiarize with the audit procedure of the organization. Major parts of scope are point out below:  

 



Background of the host organization and also their position. Audit process, which is followed by the organization for performing Bank audit & Cash Incentives. Nature and importance of it has depicted in this study. Audit methodology of the firm, which is followed by the organization for performing Bank audit & Cash Incentives. Audit administration of the firm, which is followed by the organization for performing Bank audit & Cash Incentives.

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1.5 Literature Review: The previous experiential research offers insights into the cash incentive provided by Bangladesh Bank and its impact on economy. The fiction in this field is not very rich because previously only few research works have been done on this topic. I have seen some of the works and those I want to mention here for more disclosures. Rahman (1995) investigates that under the Cash Incentive Scheme, exporters who do not avail of Duty Drawback facilities and avail Cash compensation (through Bangladesh Bank) to the tune of 25% ( previously, up to 1994 the rate was 15%) of export value of certain nontraditional items. Karmaker (2004) investigates that the objective of the cash incentive scheme has been achieved a lot, although in the previous years a bulk amount of our invaluable public money has been drained out from the treasury with use of fake documentation and counterfeit arrangements. However, introduction of audit on cash incentive files by selective professional audit firms has reduced such corrupt incidences.

1.6 Methodology of the Study: The study has been initiated to explore the insight of the critical issues of the audit procedure on cash incentive. To complete the study both primary and secondary data has been used. Primary Sources of Information: (I) Information collected by working with different audit teams. (ii) Discussing with engagement partner, audit managers, audit staffs and articled students. (iii) Interviewing the client about their cash incentive plan. (iv) Observation during physical factory visit. Secondary Sources of Information: (i) Collection of secondary data from Annual audit report, management audit report, accounting system & audit working papers audited by ACNABIN. (ii) Other information was obtained from various corresponding files of the firm and various books especially from Bangladesh Standards of Auditing (BSA). (iii) Internet was one of the important sources for secondary data collection. (iv) Obtaining information from circulars published by Bangladesh Bank. (v) Also collected data from check-list regarding cash incentives developed by ACNABIN.

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1.7 Limitations of the study: The study is conducted with an objective to make a thorough study of external audit procedure. I have availed many facilities and faced some obstacles during my study. These obstacles may be termed as limitations of the study. These limitations are as follows: 

As an independent audit firm the information of the case study is not adequate for this kind of study. To some extent, the exact audit procedure is not followed due to time and other constrains.



Ever-changing circulars of Bangladesh Bank hamper the consistency of cash incentive audit and slow the pace of audit work.



Many procedural matters were conducted directly in the operations by the top management level which may also gave some sort of restriction.



As auditors, we can only verify the documents submitted by the applicant in support of application, but we cannot identify whether those documents were collected in fair way or not.

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2.1 Overview of Firm:

ACNABIN Chartered Accountants, an independent member of “BAKER TILLY INTERNATIONAL” started its operation at 15 February 1985. Now it has become one of the most reputed Chartered Accountants firm in Bangladesh. In November 2010 the Central Bank of Bangladesh (Bangladesh Bank) ranked ACNABIN as the number one audit firm in the country for audit of banks and financial institutions. In 1993 the United States Office of Regional Inspector General/Audit, Singapore, approved the firm to perform financial audits of USAID fund recipients in Bangladesh. It also represented the former ANDERSEN WORLDWIDE, SC in BANGLADESH. Mailing Address:

BDBL Bhaban (Level-13), 12 Kawran Bazar C/A, Dhaka-1215, Bangladesh. Phones: (880-2) 8144347-52, Fax # : (880-2) 8144353, E-mail : [email protected], Web: http://www.acnabin-bd.com.

2.2 ACNABIN’s Mission, Vision & Values: 2.2.1 Mission: Going beyond the traditional auditor and client relationship by becoming Trusted Business Advisor. 2.2.2 Vision: ACNABIN adhere to the strictest principles of client confidentiality. The sensitive and competitive nature of proprietary information and the maintenance of trustdemand it. ACNABIN do their utmost to earn-and keep-client trust. 2.2.3 Values: “Our culture is driven by the Baker-Tilly International core values:

- To lead by example - To deliver quality services with integrity - To communicate openly, to act ethically - And to foster a community built around civic responsibilities and teamwork. ACNABIN is passionate about helping their clients, while at the same time developing their people’s potential.

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2.3 About Partners: Sl. No.

Name of Partners

1. ABM Azizuddin Senior Partner ICAB Registration # 46 2.

Iftekhar Hossain Senior Partner ICAB Registration # 150

3. A.S.M Nayeem Senior Partner ICAB Registration # 353 4.

Education & Qualification

B.Com. (Hons.), M. Com., FCA

B.Com., FCA

B.Com (Hons), M.Com, MSC (UK), FCA, FCCA

B.Sc., FCA Mohammad Nurun Nabi Senior Partner ICAB Registration # 370

5.

FCA,FCEA(London) ATMA Bari Senior Partner ICAB Registration # 423

6. Md. Moniruzzaman Partner ICAB Registration # 787 7.

B. Com (Hons), M.Com., FCA

M.Com., FCA Md. Rokonuzzaman Partner ICAB Registration # 739

8.

B.Com.(Hons.), M.Com., Md. Mominul Karim Partner ICAB Registration # 934

9.

FCA BBA, FCA

Md. Reajul Islam Partner 10.

ICAB Registration # 1111 Muhammad Aminul Hoque Partner ICAB Registration # 1129

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BBA, MBA, FCA


2.4 Background: Founded in 1985, ACNABIN started with seven partners. The name “ACNABIN” comes from the acronyms of the founder partners: A = ABM Azizuddin C = Anwaruddin Chowdhury N = Abu Syed Mohammad Nayeem A = Mohammad Akhtaruzzaman B = ATMA Bari I = Iftekhar Hossain N = Mohammad Nurun Nabi. At present the partnership comprises four founder partners and two new partners. ACNABIN represented BDO in Bangladesh during 1990-92 and Arthur Andersen from 1992 till the later collapse in 2002.

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3.1 Introduction to Alternative Cash Assistance: A country’s economy like ours is very much dependent on foreign currency. To motivate the export related events our government has taken many steps. Cash incentive is the most common and it is generally taken by the exporter. Actually our government offers three options to the final exporter. i. ii. iii.

Duty Drawback Bonded Warehouse Cash Incentive

In case of Duty drawback, the importer is free from paying any kind of duty in the port and whenever any exporter/importer do not have any warehouse to keep their goods for the necessary time they need without any rent. On the other cash incentive can be taken from the total exported value of the ultimate exported goods. It is up to the exporter for which they will apply for. Generally they go for the cash incentive. Exported goods that are produced locally and gone through a total procedure in Bangladesh will be eligible for the application of cash incentive. Generally, 5% cash incentive is provided on the realized amount of the exported goods. Suppose, the L/C amount was USD 500,000. Export amount was USD 350,000 and realized amount is USD 300,000. They will get incentive of USD 12,000 (USD 300,000 * 80%* 5%), if there is no wastage. Appendix (Details Calculation) Though the work can be done by the applicant and the bank but due to some dishonest tactics by a group of people it is forwarded to a third party for providing a certificate assuring the actual amount to be paid by the Bangladesh Bank. Previously, many companies applied for the amount of money which is not exactly real. But with the help of particular bank they got that amount. To avoid the manipulation; audit is done in favor of the client and Government. Our audit is done in nine steps starting from “Application for cash incentives submitted by the exporter” and ends with “The certificate that is submitted to the bank”. Our total actions for auditing the alternative cash assistance are shown in the next page. For each assurance that we submit for approval to the concerned partner is reviewed and signed, if the documents that are submitted to us is found legal and perfect with the requirement to be eligible to get the cash assistance. Most important thing is we have to provide the Absolute Assurance rather than Reasonable Assurance as it is redirected to the Bangladesh Bank.

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For providing this kind of assurance our firm gets certain amount of audit fee on the actual claim of the client (if everything found ok). Claim of the party (Amounts in BDT)

Audit Fee (Amounts in BDT)

Up to 5,00,000

4,000

500,001 to 1,000,000

5,000 7,000

1,000,001 or above

Audit Fee 7,000 6,000 5,000 4,000 3,000

Audit Fee

2,000 1,000 0 Up to 5,00,000

5,00,001 to 10,00,000

10,00,001 or above

Claim of the Party

Figure: Audit fee according with bill amount

3.2 Importance of Giving Cash Incentive to Composite sector of Bangladesh: Composite sector is the most talented sector in our country. Composite is the main contributor of our export income. At present, almost 76% of our total export income is earned by exporting RMG. But in phase of recent MFA (Multi-fiber Arrangement) and quota phase out, the composite sector of Bangladesh will face upsetting threat of losing foreign market. It is because the competitive advantage of our composite sector is the low labor cost compared to our competitors (China, India etc). But our material and other production costs are very high since we are to import almost all raw materials (Yarn, Fabrics) and accessories from abroad. The irony of fate is that, we have to import most of the raw materials from our

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competing countries (in foreign market) like India and accessories from China. In the phase of quota system out, they might stop supplying those inputs to Bangladesh and start using those for additional production to capture our market abroad. So, our composite sector is very much vulnerable as long as we cannot establish a strong backward linkage for composite sector within Bangladesh. Stepping into the shoes of the Bangladeshi exporters of composite, the Government of Bangladesh has offered alternative Cash Incentive to the composite sector of Bangladesh for the following reasons: To rise the export of composite To launch and strengthen the backward linkage of composite. To inspire to establish more yarn producing factories in Bangladesh    

   

To stimulate to use local yarn instead of foreign ones since it costs a great deal of our hard fought foreign currencies To make our fabrics and RMG more competitive in foreign markets To make our composite sector sufficient from the foreign yarn To create market for the local yarn producers. To boost more value addition in the composite sector.

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3.3 Sectors in Which Cash Incentive is Given: Cash incentive facility is given to several sectors at different rate. Govt. has expanded this facility to the following sectors: Sectors

Cash Incentive Rate

Export-oriented domestic textile sector in lieu of customs bond and duty

4%

drawback Small and medium garment factories

4%

Frozen Shrimp and Other fishes: A.

B.

Glazing amount for export of frozen s hrimp Upto 20%

10%

Above 20% to 30%

9%

Above 30% to 40%

8%

Above 40%

7%

Glazing amount for export of other fishes Upto 20%

5%

Above 20% to 30%

4%

Above 30% to 40%

3%

Above 40%

2%

Jute yarn A.

Diversified Jute Products

10%

B.

Jutable Products

7.5%

C.

Jute Yarn

5%

100% Halal meat

20%

Agro- products

20%

Potato export

20%

Elephant grass (Hogla), paddy straw (Khor) and sugarcane bark (Akherchobra)

15%-20%

Bone dust

5%

Pet bottle

10%

Ship export

5%

Leather goods

12.5%

New products/ new market expansion

3%

Products of light engineering

15%

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3.4 Conditions for Eligibility of Alternative Cash Incentives: Alternative Cash Incentives will be payable only if the exported products are produced within Bangladesh using yarn collected from member mills of BTMA and no Duty Drawback facility or Bonded Warehouse facility is enjoyed at any stage of production. Cash Incentive facilities are given upon fulfillment of the following conditions: 









Only one party among the yarn manufacturer, fabrics supplier and exporter will get Cash Incentives. Applicant for Cash Incentives will submit his application to the negotiating bank within 180 days of the realization of export proceeds. Alternative Cash Incentives will be payable only after the export price is received in foreign currency. ( Realized Value) If the name of the applicant as the cash incentive receiver is not mentioned in the Back to Back L/C, the applicant will be rejected immediately. Authorized dealer, after receiving all necessary information and certificates, will compute the payable amount as Alternative Cash Incentives to the applicant.

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4.1 Procedures for Executing Cash Incentive Audit: The procedures of executing cash incentive audit are shown in the following diagram:

Application for the cash incentive submitted by the exporter

The application is officially received by the bank

Letter issued by the bank to the concerned partner

Commencement of the cash incentive audit.

Preparation of the working paper file

Review of the working paper file

Preparation of control sheet and cross checking of workings

Partners review and signature

The certificate is submitted to the bank

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4.2 Application for cash incentives: Application for Cash Incentives is submitted by the Exporter along with all necessary documents to the Export Division of the Bank through which the export is completed. It is done only after the date of the proceeds realization since it is the proceeds of the exported goods, on receipt of which the exporter becomes eligible to apply for Alternative Cash Incentives. Normally the application is supported with a number of different documents required by different authorities (GOB, Bangladesh Bank, the Bank of the exporter, Auditor etc.) to be submitted with the Application. All those are first filed with the application in a file properly and then submitted to the Export Division of the Bank through which the export was made. All photocopies must be attested in the files.

4.3 The application is officially received by the Bank: The Export Division of the concerned branch of the Bank officially receives the file of the application and necessary documents. Then the authorized officer of the concerned branch of the Bank needs to attest those documents. Before making the attestation, he checks all documents submitted to the bank. If he finds any error or incompleteness, the applicant must fulfill them and make the file in the form and manner required by the bank.

4.4 Letter issued by the Bank to the concerned Partner of the Firm: Then the Head Office of the bank issues a letter asking the Audit Firm to complete audit work regarding the application for Alternative Cash Incentives.

4.5 Commencement of the Cash Incentive Audit: On receipt of the letter from the International Division of the Head Office of the bank, the audit firm sends auditors to the concerned bank and the Cash Incentive Audit officially commences. On completion of the attestation, the authorized officer of the concerned branch of the Bank sends the file to the auditors and auditors starts their work as per the Terms of Reference (TOR) recommended by the Bangladesh Bank in the FE Circular no. 291.

4.6 Preparation of the Working File: As an auditor, our first work regarding the audit of cash incentive file is to prepare a working file for each file of application. It is the first-hand work of such audit. For this purpose, we have a standard format prepared and given to us by the Audit Firm. A specimen copy of this file is given in the annexure. We put down that information of the application file in this format which is relevant for our audit persistence. Information that we put down in our working format from different documents are presented chronologically in the following section.

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



Application Name of the applicant Date of application Office address Factory address Applied amount (both in USD$ and in Taka) Value of the production (from the cost break up submitted with the application by the Applicant): Cost of yarn Knitting and overhead cost Dyeing and over head cost



TIN, VAT, AND Export registration certificate Registration No. & validity TIN No. VAT Registration No.



Master L/C or contract (attested copy) L/C No. & date of issue Goods exported (fabrics / T-shirt /polo shirt etc.) Quantity (in pieces) Term (FOB / C&F) Commission (if any) Original amount of the L/C (in USD) Transferred amount of the L/C (in USD) Notifying party



Back To Back L/C a) Local (attested copy) L/C No. Date of the L/C Beneficiary of the L/C (the supplier of yarn or accessories) Items (yarn or accessories) Quantity (in kg. in case of yarn)

Amount (in US$) Master L/C No. Name of the incentive receiver (the exporter)

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b) Import (attested copy) L/C No. Date of the L/C Quantity (in kg. in case of yarn) Amount (in US$) Master L/C No. & date 

BTMA certificate (for cash incentive purpose) Certificate No. Date of the Certificate Export LC number / Contract number. Date of that Export LC / Contract Back to Back LC (for yarn) number Date of Back to Back LC (for yarn)



Items (yarns) Quantity (in kg.) Commercial invoice number & date Date of delivery Gate pass date

BENEFICIARY CERTIFICATE

Date of the certificate Back to Back LC No. Date of Back to Back LC Name of the beneficiary (the supplier of yarn) Quantity of inputs supplied (yarn) Master LC No. Date of Master LC

Declare that the beneficiary has not and will not apply for cash incentives, duty drawback facilities and bonded warehouse facilities. In this document, the Declaration is the most important part for us to check. We need to make sure that the declaration is complete and unambiguous. Here the beneficiary is the supplier of the yarn. The term “Beneficiary” is used since the yarn supplier benefits from the Alternative Cash Incentives System offered by the GOB. It is for this very reason that exporters become interested in using local yarn which in turn directly increases the business of the local yarn manufacturer and supplier. 

PROCEEDS REALIZATION CERTIFICATE (ORIGINAL COPY)

Reference no. of the certificate Export L/C No. Date of the Export L/C EXP. No. Date of realization Realized value in US$

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

COMMERCIAL INVOICE:

Commercial Invoice No. Date of issuing the Export Invoice I Commercial Invoice Quantity / Unit (in pieces) EXP. No. Gross amount (in US$) Net amount (in US$) Commission (if any) Gross weight (from Packing List) Net weight (from thethe Packing List) Export L/C no. 

BILL OF LADING (BL) B/L No. Date on which the goods were shipped on board EXP No. Freight (if prepaid, from freight certificate) Gross weight Master LC No. Name and address of the notifying party



BILL OF EXPORT

Master L/C no. Master L/C date EXP. no. Short shipment pieces (if any) Quantity /Unit (in pieces) Gross weight Net weight Name and address of the notifying party.

4.7 Review of the Working File: Senior articled student then reviews this working file to ensure that it is true & fair. He ensures the mathematical accuracy of the certified amount. He also verifies that the certified amount is calculated considering all relevant items mentioned in the Bangladesh Bank circulars.

4.8 Preparation of Control Sheet and Cross-Checking : At this stage, we are to prepare a Control Sheet containing the most important and relevant information regarding each application. It is solely for the purpose of the Audit Firm. In fact, it is a bird’s eye view of all the applications. It acts as a database which facilitates the systematic controlling of our working files and the application files.

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After this, it is cross checked by the In-charge of the Cash Incentive Audit. He initially compares the control sheet with the working files and if he finds any discrepancies, he goes for the srcinal file to sort and correct the discrepancies.

4.9 Partner’s Review and Signature: Last of all, the concerned Partner takes one final check of the whole matter. If in his opinion, everything is in conformation, then we start preparing the certificates of cash incentives. If the partner, on the other hand, has any queries, he asks the In-charge to resolve the matter. After all these steps, we prepare the final copy of Alternative Cash Incentives Certificate as per the Attachment-“Ga” of the FE Circular no. 291 dated June 02, 2002. For every single application, a separate certificate is prepared.

4.10 Submission of the Certificate to the Bank: After the signature of the Partner cash incentive certificate is issued. Then this certificate is submitted to the Head Office of the bank. At that time the application of that certified file will also be submitted. The Head Office of the negotiating bank will receive this certificate and the certified amount will be paid to the applicant provided that sufficient fund is available.

The format of Alternative Cash Incentives Certificate as per the Attachment-”Ga” are as follows:

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SL. #

Bank ID #

Certificate Applicant M/S………………………………….exported through export L/C number……………………dated……………………. for $....................................... vide exp number …………………….of…………………… Bank …………………branch …………….containing export value of $......................................... against which $....................................... has been repatriated on……………………………….and cash incentive claim is Tk. ………………… Amount repayable as per TOR after audit is Tk. ……………… (in words) only which is hereby certified to be true and fair.

Signature:

Date: Name of the Partner: Name and address of the Audit Firm

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5.1 Study on 5 industries: During my internship period I have observed various companies files which were presented to the respective bank for audit. Of those companies some were Garments industries, some were Jute, some were Handicrafts, Fish, Leather etc. I have taken 5 companies for my study on the random basis. Name of the industries are as follows: NAME OF THE INDUSTRIES

CRITERIA

1. Viyellatex Ltd

Garments

2. Alema Textiles Ltd.

Garments

3. M.S. Jute Limited

Jute

4. Desh Enterprise

Handicrafts

5. Italy Footwear

Leather

25


The following hypothetical examples are very much near to the real world scenario of the above five (05) parties. In this section it is presented whether Bangladesh Bank can save money by appointing external auditor rather than Bank Calculation or Bangladesh Bank auditors. 1. Viyellatex Ltd 297, Khairtul, Tongi, Gazipur, Bangladesh. S. No.

L/C No. Contract No.

L/C Value (USD)

Bank Calculation(TK)

Certified by Audit (TK)

Audit Fees (TK)

1

M180534

16100

48611

47605

4,000

2

99210DL25955504

39317

118552

118552

4,000

3

99210DL25955505

65669

199266

199266

4,000

4

00347MA009650

36006

109756

109756

4,000

5

DCTA0211253

104338

318590

318590

4,000

6

00051011095975

173448.47

439881

439881

4,000

99210DL259969195

145320

349237

349237

4,000

1583893

1582887

28,000

7

Total =

2. Alema Textile Limited Shafipur, Kaliakoir, Gazipur. Sl . N o.

L/C No.

L/C

Contract No.

Bank

Certified by

Au

Value

Calculation(TK

Audit (TK)

dit

(USD)

)

Fe

1

5473557318

238590

415134

414347

5000

3

DCHMN312893

22504.20

43785

25648

4000

4

00180010017011A1

259260

622103

622103

5000

5

KAL-2/2013/001/TEX-ASS

206616.5

360016

357810

4000

1441038

Total =

26

1419908

18000


3. M.S. Jute Limited

Sharsa, Jeasore.

Sl . N


1

Cont: PC/MIXL/AJWML/SAC/FT/EXP

L/C Value (USD)

- 340/12

148000

Bank Calculation(TK ) 712620

Certifi ed by Audit 712620

Audi t Fees 5000

LC-121014LCS

113680

728248

728248

5000

3

MIXL/BBMB/ECPJ-278/12

860000

577200

577200

5000

4

SLP/141112/5

265300

315583

315583

4,000

5

AEC/IMAF/23/12-13

36907.5

294405

294405

4,000

6

MIXL/BBMB/ECPJ-318/13

860000

456136

456136

4,000

3084192

3084192

27,000

2

Total =

4. Desh Enterprise

21, Madan Saha Lane Sutrapur, Dhaka-1100.

Sl. No.

1


01/2013

L/C Value

Bank

Certified

Audit Fees

Calculation (TK)

by Audit

(TK)

USD 1000000

Total

27

448222

TK 448922

448922

448922

4000 4000


5. Italy Footwear Shimrall, Narayangonj, Bangladesh.

Sl.

TT No.

No.

L/C Value

Bank

Certified by

Audit

(USD)

Calculation

Audit (TK)

Fees

(TK)

1

PON/126118821;

20570;5000;

PON/127654892 & PON/128130715

5000 &10570

PON/124660515

2

295261

15161; 10161

&

(TK)

295261

196090

& 5000

4,000

196090

4,000

PON/122895156 491351

Total =

491351

8000

Bangladesh Bank provided by certified audit amount and client AB Bank Ltd. Pay audit fees: Sl. No.

Company Name

Certified by Audit (TK)

Audit Fees (TK)

1582887

28,000

1.

Viyellatex Limited

2.

Alema Textile Limited

3.

M.S JuteLimited

3084192

27,000

4.

Desh Enterprise

448922

4000

5.

Italy Footwear

491351

1419908

7027260

Total =

28

18000

8000 85000


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6.1 Learning from the Internship Program: During the internship period in ACNABIN-Chartered Accountants, as an internee, was extensively experiencing. I have gone through a lot of new situations, experienced a very new environment and learned about professional life. In the processing of collecting, gathering, synchronizing several information and preparing this report; I have learned many Audit procedures & techniques, facts such as how to make a working file, how to give certificates to the client. From this time I also learn how to handle the clients and how to communicate with different people. I also learnt how to overcome different situations. From the organization I also learn how to work together to maintain a chain of command and also know the importance of team work. The learning’s f rom Internship program was a new experience since such event is very new in a student’s life.

30


31


7.1 Findings From the study it has become possible to know about export incentives provided by the government to the exporters. Cash incentive is one kind of export incentive for which specified rate is proposed by the government for particular sectors. From the study overall findings are given below – 

Cash Incentive facilities are provided from 1994 to increase export and to establish



backward linkage. For cash incentive, Bangladesh Bank acts as regulator.



All the applicant of cash incentive have functional as per central bank circular



Any exporter can hold the Cash Incentive facility subject to the condition of no duty draw back facilities and bonded ware house facilities for the exported goods.



Before applying for incentive, they collect a certificate from their respective industry regulatory body like; BGMEA, BTMA etc. Also the procedure to apply is complex and time consuming.



Local Exporters have to member of BTMA member before applying for cash incentive.



External auditors are contributing a lot to protect the misuse of public money.



Auditors have to mostly depend on the documents provided by the clients. So it is found that the papers, which are provided by the client, are not always appropriate.



Although auditors are missing some provisions e.g. delay in carrying out audit work within 7 days or issuing certificate for the wastage of more than 16% all of these issues do not provide any evidence that the applicant are getting more benefits for the cash assistance.



The amount of Cash Incentive paid by Bangladesh Bank through the negotiating bank to the applicant after certificate issued by auditor.



If the negotiating bank pays cash incentive irregularly then Bangladesh Bank can collect the money by debiting the respective bank account from their reserve fund.



Only one party among the yarn manufacturer, fabrics suppliers and exporter will get Cash Incentive.



Factory visit which is done by auditor is not sufficient, because in factory visit some technical issue occurs. For this task the auditors are not expert.

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7.2 Recommendations Cash Incentive Audit by independent auditors plays a vital role to defend the misuse of public money. Cash incentive audits are not free of problems. All of these problems can be solved by the BB through various Circulars and sincerity of Auditors, Banks and Applicants of cash incentive receiver. The problems or unresolved issues which have found in conducting research study can be solved in the following ways: 





 



Audit activities should be performed as per the latest published circulars of Bangladesh Bank for rate and other requirements. So, auditors should become up-todate. Audit delay can help the cash incentive receiver to produce false documents to get cash incentive. So to reduce audit delay auditors should firstly confirm from the bank whether the applicant submitted all the required documents. After getting confirmation auditors should go to the bank to start audit work, this will help them to execute audit work within 7 days. Auditors should take expert before going to visit the factory of applicants. Expert consent is needed to ensure whether goods are actually produced in this factory. Utilization declaration provided by the exporter should be verified by the expert. Auditors should not go to visit exporter’s factory by fixing date with the exporter. If they do so, it can help the exporter to manipulate his documents and information. Exporters’ bank should not be given the power for everything because bank always wants to retain its existing clients and tries to attract new clients and for this they sometime attest all the documents of the client without checking its legality. With the collaboration of banks exporter can go for malpractice. Cash incentive is contributing a lot to endorse the export in different sectors. So it may be a wise decision for BB to extend the date. BB must also increase the rate of cash incentive in some sector to make it more meaningful.

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7.3 Conclusions Alternative Cash Incentive is one of the most auspicious issues in our economy. It plays an important role in our economic development. It is a matter of hope that, in the recent past, a dramatic change has been seen in different export sector of Bangladesh. Number of textile mills, factories, project, and farm has increased. Another surprising result around us is that a lot of spinning mills have been established recently even though Bangladesh is not a producer of cotton. All these are, to a great extent, results of cash incentive given in the different sector of Bangladesh. So, backward connections of all sectors have been strengthened by the cash incentive. In view of the above mentioned facts, we can conclude that cash incentive is a fair as well as a rewarding venture of the Govt. of Bangladesh in promoting the export. We can also infer that in the forthcoming days of quota-free world, cash incentive will act as a catalyst to the survival of the export sector of Bangladesh in the global market. The correlation coefficient between cash incentive and export of different products is highly positive representing that apart from few misuses, cash incentive is bringing in huge foreign currencies for Bangladesh. Before payment of cash incentive previously it was not audited. But now the amount of cash incentive is paid after certified the amount by the external auditor. For the payment of cash incentive it should be justified whether the application for cash incentive and other relevant documents are true and accurate and complete. If it is not audited by the external auditor then accountability, true and fairness of the payment of cash incentive can’t be achieved. Reduce misappropriation of fund and accountability can ensure only through audit by external auditor. So, while cash incentive is needed to increase the inflow of foreign currencies into Bangladesh, independent cash incentive audit is needed to save public money. In the absence of independent audit of cash incentive files, deserving exporters will be deprived of cash incentive while false exporters will enjoy the misusebenefits of cash incentive. There will be no real extra export causing inflow of foreign currencies, but every year there will be undesirable disbursement of public money as cash incentive. So, Bangladesh Bank, Auditors, Bankers and all other personnel who are related in this aspect have to extend their helping hands for solving this problem.

34


References ACNABIN Chartered Accountants, Audit Manual, Audit Procedure of Cash Assistance.

ACNABIN Chartered Accountants, Certificates at 18 December, 2016 (for the years 2015-16 & 2016-17) for the Audit of Alternative Cash Assistance of Viyellatex Ltd. provided to AB Bank Ltd., Motijhil Branch,Dhaka.

ACNABIN

Chartered Accountants,

Certificates at 20 December, 2016 (for the years 2016-

17) for the Audit of Alternative Cash Assistance of Alema Textiles Ltd. provided to AB Bank Ltd., Mirpur Branch, Dhaka.

Bangladesh Bank, Foreign Exchange Circular No.-07 (for textile goods), August 07, 2000 Available from: www.bb.org.bd [Accessed: 15 February, 2014]

Bangladesh Bank, Foreign Exchange Circular No.-09, March 05, 2001 Available from: www.bb.org.bd [Accessed: 15 February, 2014]

Bangladesh Bank, Foreign Exchange Circular No.-12, July 07, 2013, Available from: www.bb.org.bd [Accessed: 15 February, 2014]

Bangladesh Export Statistics (2000), Export Promotion Bureau (EPB)Deb, U & Bairagi, S.K, November 2-3, 2009, Paper for the Asia-Pacific Trade Economists’

Conference on Trade-

Led Growth in Times of Crisis

Karmaker, S.C: Impact of cash incentive scheme of Bangladesh Government on export promotion: An assessment, The journal of cost and management accountant (December-2004): 22-29

Rahman, M 1995: Promotion of foreign investible resources flows to Bangladesh: Dynamic and Incentives, Dhaka University Journal of Business Studies 16(1):29 (Para 5)

35

Internship Report on Verification of Alternative Cash Assistance Files

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