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

Date of Submission: 26th 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

Date of Submission: 26th 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 auditors 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

i
 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 original work under the
extensive supervision and guidance of Assistant Professor Md. Ruhul Amin Mollah, Jagannath
University.

ii
 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

iii
 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.

iv
 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

v
 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 auditors procedures and their practices for
verification of cash assistance files. It will also work as a practicable guideline for all parties
involved in cash incentive process.

vi
 Table of Contents

Chapters Particulars Page No.

Letter of Transmittal i
Declaration ii
Approval Certificate Iii
Preface iv
Acknowledgement v
Abstract vi
Chapter-1 Introductory Part 1
1.1 Introduction 2
1.2 Background of The Study 2
1.3 Objectives of The Study 3
1.4 Scopes of The Study 3
1.5 Literature Review 4
1.6 Methodology of The Study 4
1.7 Limitations of The Study 5
Chapter-2 An overview of ACNABIN Chartered 6
Accountants
2.1 Overview of the organization 7
2.2 Mission, vision, values 7
2.3 About Partners 8
2.4 Background 9
Chapter-3 Overview of Alternative Cash Assistance 10
3.1 Introduction to Alternative Cash 11-12
Assistance
3.2 Importance of giving Cash Incentive to 12-13
composite sector of Bangladesh
3.3 Sectors in which cash incentive is given 14
3.4 Conditions for eligibility of Alternative 15
Cash Incentives
Chapter-4 Procedures of executing Cash Incentive Audit 16
4.1 Procedures for Executing Cash Incentive 17
Audit
4.2 Application for cash incentives 18
4.3 The application is officially received by 18
the Bank
4.4 Letter issued by the Bank to the concerned 18
Partner of the Firm
4.5 Commencement of the Cash Incentive 18
Audit
4.6 Preparation of the Working File 18-21
4.7 Review of the Working File 21

vii
 4.8 Preparation of Control Sheet and Cross- 21
Checking
4.9 Partners Review and Signature 22
4.10 Submission of the Certificate to the Bank 22
Chapter-5 Case Study 24
5.1 Study on 5 Industries 25-28
Chapter-6 Learning 29
6.1 Learning from the Internship Program 30
Chapter-7 Findings, Recommendation & Conclusion 31
10.1 Findings 32
10.2 Recommendations 33
10.3 Conclusions 34
References 35

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Verification of Alternative Cash Assistance Files

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Verification of Alternative Cash Assistance Files

1.1 Introduction:
Audit is the procedure of a formal examination of an organizations 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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Verification of Alternative Cash Assistance Files

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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Verification of Alternative Cash Assistance Files

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 non-
traditional 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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Verification of Alternative Cash Assistance Files

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.

5
Verification of Alternative Cash Assistance Files

6
Verification of Alternative Cash Assistance Files

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 : acnabin@bangla.net, Web:
http://www.acnabin-bd.com.

2.2 ACNABINs 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 trust-
demand 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
peoples potential.

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Verification of Alternative Cash Assistance Files

2.3 About Partners:

Sl. No. Name of Partners Education &
Qualification

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

ABM Azizuddin FCA
Senior Partner
ICAB Registration # 46
2. B.Com., FCA
Iftekhar Hossain
Senior Partner
ICAB Registration # 150
3. B.Com (Hons), M.Com,
A.S.M Nayeem MSC (UK), FCA, FCCA
Senior Partner
ICAB Registration # 353
4. B.Sc., FCA
Mohammad Nurun Nabi
Senior Partner
ICAB Registration # 370
5. FCA,FCEA(London)
ATMA Bari
Senior Partner
ICAB Registration # 423
6. B. Com (Hons), M.Com.,
Md. Moniruzzaman FCA
Partner
ICAB Registration # 787
7. M.Com., FCA
Md. Rokonuzzaman
Partner
ICAB Registration # 739
8. B.Com.(Hons.), M.Com.,
Md. Mominul Karim
FCA
Partner
ICAB Registration # 934
9. BBA, FCA
Md. Reajul Islam
Partner
ICAB Registration # 1111
10. BBA, MBA, FCA
Muhammad Aminul Hoque
Partner
ICAB Registration # 1129

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Verification of Alternative Cash Assistance Files

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.

9
Verification of Alternative Cash Assistance Files

10
Verification of Alternative Cash Assistance Files

3.1 Introduction to Alternative Cash Assistance:

A countrys 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. Duty Drawback
ii. Bonded Warehouse
iii. 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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Verification of Alternative Cash Assistance Files

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
1,000,001 or above
7,000

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 10,00,001 or above
10,00,000
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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Verification of Alternative Cash Assistance Files

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. Glazing amount for export of frozen shrimp
Upto 20% 10%
Above 20% to 30% 9%
Above 30% to 40% 8%
Above 40% 7%
B. 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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Verification of Alternative Cash Assistance Files

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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Verification of Alternative Cash Assistance Files

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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Verification of Alternative Cash Assistance Files

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. Items (yarns)

Date of the Certificate Quantity (in kg.)
Export LC number / Contract number. Commercial invoice number & date
Date of that Export LC / Contract Date of delivery
Back to Back LC (for yarn) number Gate pass date
Date of Back to Back LC (for yarn)

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 the Packing List)
Net weight (from the 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 birds 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 original file to sort and correct the discrepancies.

4.9 Partners 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

numberdated. 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

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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. L/C No. L/C Bank Certified Audit

No. Contract Value Calculation(TK) by Audit Fees
No. (USD) (TK) (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

7 99210DL259969195 145320 349237 349237 4,000

Total = 1583893 1582887 28,000

2. Alema Textile Limited

Shafipur, Kaliakoir, Gazipur.

Sl L/C No. L/C Bank Certified by Au

.
Contract Value Calculation(TK Audit (TK) dit
N No.
(USD) ) Fe
o.
1 5473557318 238590 415134 414347 es
5000
3 DCHMN312893 22504.20 43785 25648 (T
4000
4 00180010017011A1 259260 622103 622103 k)
5000
5 KAL-2/2013/001/TEX-ASS 206616.5 360016 357810 4000
1
Total = 1441038 1419908 18000

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3. M.S. Jute Limited

Sharsa, Jeasore.

Sl L/C No. L/C Bank Certifi Audi

. Contract Value Calculation(TK ed by t
N No. (USD) ) Audit Fees
o.
1 Cont: 148000 712620 (TK)
712620 5000
PC/MIXL/AJWML/SAC/FT/EXP
- 340/12
2 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
Total = 3084192 3084192 27,000

4. Desh Enterprise
21, Madan Saha
Lane Sutrapur,
Dhaka-1100.

Sl. L/C No. L/C Bank Certified Audit Fees

No.
Contract Value Calculation (TK) by Audit (TK)
No.
(USD) (TK)
1 01/2013 1000000 448222 448922 4000

Total 448922 448922 4000

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5. Italy Footwear

Shimrall, Narayangonj, Bangladesh.

Sl. TT No. L/C Value Bank Certified by Audit

No. (USD) Calculation Audit (TK) Fees
(TK) (TK)

1 PON/126118821; 20570;5000; 295261 295261

4,000
PON/127654892 5000 &10570
&
PON/128130715

2 PON/124660515 15161; 10161

196090 196090
& & 5000 4,000

PON/122895156
Total = 491351 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)

1. Viyellatex Limited 1582887 28,000

2. Alema Textile Limited 1419908 18000

3. M.S JuteLimited 3084192 27,000

4. Desh Enterprise 448922 4000

5. Italy Footwear 491351 8000

Total = 7027260 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 learnings from Internship program was a new experience since such event is very new
in a students life.

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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-to-
date.
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 exporters 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 cant 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 misuse-
benefits 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.

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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)

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