My Hand Note

Students hand note for ICMAB’s Students COST & MANAGEMENT AUDIT
INTRODUCTION TO COST AUDIT
Normally, the term Audit means an examination and verification of some information for
expressing an opinion about the true and fairness of that information. In general, audit is the
relevant terminology of business and accounting sectors. According to the International Federation
of Accountants: An audit is the independent examination of financial information of any entity
whether profit oriented or not and irrespective of its size or legal form, when such an examination is
conducted with a view to expressing an opinion thereon. This type of audit is known as financial
audit which just describe that the information provided by the financial statements are true and fair
and according to the accounting principles and policies followed by the company.
But the question is, does the financial audit is sufficient for business? Suppose, a company have
sufficient documents and there are no fraud or error on those documents, but the expenses and
products prices of the company are clearly over charged. Then, there is nothing to do for an auditor
who is appointed for financial audit. Here, comes the terminology Cost Audit. Cost audit is the
auditing procedure which is concerned with auditing of allocation and apportionment of expenses
under natural heads to determine the cost of functions, products and services.
During World War I, a large number of contracts were awarded on cost plus basis, which made it
necessary for the contractors to maintain cost accounting records. Cost Accounting techniques are
needed not only to help the management exercise cost control, but the cost accounting records are
also needed for such clients who place orders on cost plus basis. In such cases, the client has the
right to examine cost accounting records or have performed cost audit. In USA, Defense suppliers
and contractors have to maintain cost accounting records in accordance with Cost Accounting
Standards laid down by the Cost Accounting Standards Board (CASB). This is subject to cost audit to
ensure its authenticity. The Cost Accounting in its developed form helps the management of
manufacturing concerns in improving the efficiency, in making the business decisions and in
evaluating the performance of entities in the same industrial sector through standardizing the systems
and procedures.
However, it is only in India, Pakistan and Bangladesh that cost audit has been formalized under
Companies Ordinance/Acts. India is the pioneer in introducing Cost Audit since late 60s and now
over 40 industries are covered under Cost Audit Scheme. In India and Bangladesh, only Cost and
Management Accountants are eligible to conduct cost audit. In Pakistan, Chartered Accountants are
also eligible to conduct cost audit. On the subcontinent, Audit of Cost Accounts can be traced back
as early as 1925 when a large number were given contract by the Government of India on cost plus
basis and the Government started verifying and investigating the cost structure of such firms. The
real beginning of Cost Audit, however, started in 1965 when India amended to incorporate the
provisions of Cost Audit. India is the first country in the World in introducing the provisions of
compulsory Cost Audit.
Meaning: The term cost audit means the detailed checking of the costing system, technique
and accounts to verify their correctness and to ensure adherence to the objective of cost
accountancy. The Institute of Cost and Works Accountants of England defined the term as: the
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verification of the correctness of cost accounts and of the adherence to the cost accounting plan. On
the light of Cost Audit Report Rules 1997, we can define the term cost audit as: A process by which
all the cost accounting records are verified to evaluate and measure performance, controls,
management decisions and value analysis for a report to state advantages and limitations of used
techniques highlighting key areas for management attention and recommendations for
improvement.
Nature: Cost Audit is an audit of cost accounts audited by the cost auditor. A qualified CMA
is considering performing cost audit. It is analytical; critical, investigative, concerned with the basis
of cost accounting measurements and performance of management. Cost audit involves verification
of cost accounting data for the purpose of cost control and efficient production process. The
primary objects of cost audit are to verify whether costs have been ascertained on the basis of cost
accounting principles and plan, whether cost records have been properly maintained and whether
the costs of production and sale have been correctly worked out.
Cost audit is not of repetitive nature. Cost audit is only required for the year, if it is so ordered by
the Government or Authority its own. Cost audit is a tool in the hands of management and also
conducted on behalf of different third parties. Statutory cost audit is, however, done as per order of
the Central Government.
Purpose: A lot of concessions and facilities were given to entrepreneurs to establish

industrial undertakings for production of common goods and essential services in our country by
Government. Power was made available at concessional rates. Liberal finances were provided by
the banks and financial institutions. Land was made available with all infrastructures. Transport
facilities were provided. The government in turn had a right to ensure that ultimately the consumer
is benefited in that, he is able to obtain his requirement at a fair price and does not pay for the
inefficiency of manufacturers. In order to assess the extent of efficiency or inefficiency information
on input cost of products, machine utilization, unit selling prices and profitability of individual products
etc., are required.
So, keeping the above discussion on the center point, we can summarize the purposes of Cost Audit
on the following points:
- To verify the accuracy of Cost Accounting data.

- To ensure that the books of cost accounts have been properly maintained acceding to the
principles and practice of costing employed in the industry concerned.
- To verify that the cost of production reports are properly drawn up as per the records
and that they show a true and fair views of the cost of production.
- To detect any error or fraud this might have been committed deliberately or otherwise.
- To verify that the cost accounting procedures prescribed by the management have been
adhered to or not.
- To ascertain the abnormal losses or gains together with their causes.
- To check and critically evaluate unit cost of the finished goods.
Scope: According to the Cost Audit Manual published by the ICMAB, “the cost auditors can
carryout Efficiency Audit, Performance Audit, System Audit, Compliance Audit, Inventory Audit,
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Consumer Audit, Internal Audit, Propriety Audit, Management Audit, Operational Audit, VAT Audit,
Tax Audit, Export Audit, Cash-flow Audit, Export Subsidy Audit and Export Incentive Audit. Audit of
the companies, required to maintain cost accounting records under section 181(1) (D). They can also
carry out voluntary cost audit in other concerns that are required to maintain cost records to
measure performance of any organization”.
Objectives of Cost Audit: Cost audit has the following broad objectives:
- Checking the correctness of cost accounting records.

- Checking the application of cost accounting principles in the matter of cost ascertainment
and cost reporting
- Verifying the adherence of cost accounts to the established systems and procedures.
- Ascertaining how far the cost accounting system is adequate for cost control and
managerial decision-making.
- Ascertaining whether cost reporting procedure is inadequate or wasteful.
- Checking the reconciliation of costing profit or loss with the financial profit or loss.
- Bringing out inefficiencies in the matter of utilization and pronouncement of materials,
utilization of and payment to laborers and incurrence of overheads and direct expenses.
- Casting a moral check on the cost accounting staff and achieving improvement of the cost
accounting system.
However, all the objectives are not common in all types of cost audits. In specific purpose cost
audits only few of the points, varying with purpose, may get prominence and certain additional
objects not cited may be attained.
Advantages of Cost Audit: Cost audit brings different types of advantages to the different
parties. These advantages are discussed below:
To the Management:
- Proper audit of cost accounts helps in revealing errors, frauds and inconsistencies.
- Cost audit brings reliability in cost reports on the basis of which important decisions are taken.
- By concrete suggestions cost audit can bring about improvement in system and procedures.
- Cost audit can improve the cost accounting method as an effective tool in cost control.
- Audited Cost Accounts facilitate inter firm comparison.
To the Cost Accountant:
- Cost audit acts as a check on the performance of the Cost Department staff as regards
accuracy. This is a great benefit to the Cost Accountant.
- The external cost auditor with his varied knowledge and experience can help the Cost
Accountant in the matter of improvement of costing methods and cost reporting.
- The mere fact that the cost accounts will be audited raises the importance of the cost
accounts and the Cost Accountant in the entire organization.
To the Shareholders:
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- By pointing out inefficiencies, cost saving ways, etc. the cost auditor helps in the
improvement of performance and profitability of the entire organization. This benefits
the shareholders immensely.
- The shareholders can rely on the valuation placed on different categories of inventories
certified by the management and reported through the financial statements, when those
have been checked by the cost auditor.
To the Customer:
- When customers purchase on cost plus basis, cost audit enables them to check the cost
of products purchased.
- When there is an escalation clause in sale contract, the customer can verify the increase
in cost through cost audit before agreeing to the addition to original price.
To the Government:
- The Government can have some reliable basis to fix prices of commodities in a price
control scheme through audited cost data.
- An audit of cost structure of an industry enables the Government to take decision on
tariff protection.
- In certain cases audited cost data may help the authorities in fixing up tax or duty on the
cost of finished products.
Disadvantages of Cost Audit: Cost audit also have some disadvantages:

- When the financial accounts are audited, audit of cost accounts is unnecessary.
- If the cost accounts are prepared or maintained by a qualified cost accountant, there can
be no reason for getting such cost accounts audited by another qualified cost accountant.
- Cost audit may create unnecessary hindrance in day-to-day office work.
- The cost auditor may be a qualified person, but he may not be always right in his
judgment. Hence, the opinion of the cost auditor may not always be correct.
- Cost audit involves cost and this may not suit small organizations.
But proper thinking will reveal that many of the disadvantages cited above are not real
disadvantages. If cost accounts are necessary, cost audit is also necessary. Moreover, the
advantages of cost audit far outweigh its disadvantages.
Concept of Efficiency Audit: Efficiency Audit being an independent assessment to judge

whether the resources have flown into the most remunerative channels. Efficiency Audit ensures
the application of the basic economic principles, viz. resources flow into the most remunerative
channels. The main purposes of efficiency audit is to ensure that every unit of money invested in
capital or in other fields gives the optimum returns and the planning of investment between the
different functions and aspects is designed to give optimum results.
Distinction between Financial Audit & Cost Audit
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Financial Audit Cost Audit

1. Financial audit is an audit of financial
1. Cost audit is an audit of cost accounts,
accounts, supporting vouchers or documents
cost statements and cost accounting plan.
and financial statements.
2. A chartered accountant is considered 2. A qualified cost accountant is considered
competent for performing financial audit. competent to perform cost audit.
3. As the source of cost accounts is financial
3. It is not necessary for a financial auditor to accounts, the cost auditor has to make a
examine cost accounts except for the detailed checking of expenses, particularly in
purpose of valuation of inventory. connection with allocation and
apportionment of overheads...
4. The primary objects of financial audit are 4. The primary objects of cost audit are the
to see whether necessary accounts, records verify whether costs have been ascertained
and documents have been maintained by on the basis of cost accounting principles
the organization and whether its Balance and plan, whether cost records have been
Sheet and Profit and Loss Account give true properly maintained and whether the costs
and fair view of the state of affairs and of of production and sale have been correctly
profit or loss respectively. worked out.
5. One of the most important duties of the
5. The financial auditor remains satisfied if
cost auditors is to examine whether the cost
the transactions recorded prove out to be
per unit in respect of each item of cost is
true and they are correctly accounted for.
more under the circumstances and if it is so,
He is not to see whether the amount of an
to find out the reasons therefore. He has to
expense is more or less.
locate inefficiencies and wastes of all kinds.
6. The cost auditor has to not only check the
6. In the matter of stock-in-trade, the
cost of each item of inventory, but also see
financial auditor has only to see whether all
whether the inventories of raw materials
categories of stocks have been including in
and stores have been kept at proper levels,
the accounts in true quantities and values.
commensurate with operational efficiency.
7. Cost audit is a tool in the hands of
management and also conducted on behalf
7. Financial audit is essentially an audit on
of different third parties. Statutory cost audit
behalf of the proprietors or shareholders.
is, however, done as per order of the
Government.
8. As per the Companies Act, financial audit
8. Cost audit is not of repetitive nature. And
is compulsory for each company in each
it is not compulsory for all the companies.
financial year.
9. The financial auditor submits his report to
his client. As per the Companies Act, such a 9. Cost auditor also submits his report to his
report is required to be submitted to the client, which may even be a third party.
shareholders.
10. Financial audit is somewhat a post- 10. Even though cost audit also refers to the
mortem examination. It looks back to the past, it creates thinking for the future. It is,
past. therefore, forward-looking to a great extent.
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Cost Audit is based on the economic principle that resources should flow into the most
remunerative channels. It ensures that every unit of money invested in capital gives the optimum
returns and that the planning of investment between different functions and aspects is designed to
give the optimum results.
The parameters of measuring efficiency include overall rate of return, capacity utilization, utilization
of national, financial, physical and human resources, cash flow performance and the pay back
period of the entire organization. Thus efficiency audit seeks to review these measurement
yardsticks, and evaluates the overall organizational efficiency.
The financial auditor checks all the income and expenditure including depreciation, interest and
also purchases and sales. He certifies the total profit and also the position of assets and liabilities on
a particular date. He does not comment on the efficiency of the company namely, utilization aspect
of the factors of production. This is done by the cost auditor while conducting cost audit. To enable
the cost auditor to make efficiency audit, section 181(1)(d) of the Companies Act 1994 provides for
“maintaining the cost accounting books relating to utilization of materials, labor and other items of
overhead costs”. Since a proper appraisal of the extent of efficiency of utilization of factors of
production is possible in cost audit, it may appropriately be called an efficiency audit.
The nature of cost audit as efficiency audit can understood from the following:
(1) The cost auditor has to report in Para No. 3 of the Annexure of the Cost Audit (Report) Rules
1997, the financial position of the company, indicating inter alia financial ratios like profits
as % of capital employed, profit as % of net sales, current asset as % of current liabilities, net
worth as % of capital employed etc. These ratios help in assessing the operational efficiency
and comparing the financial health of one undertaking with the other.
(2) In Para No. 4 of Annexure, the cost auditor has to indicate the percentage of actual
production in relation to installed capacity. This ratio indicates the utilization of plant and
machinery and measures the internal efficiency.
(3) In Para No. 6 of the Annexure, the cost auditor has to make an analytical study of
consumption of major raw materials per unit of production both in quantity and value.
(4) In Para No. 7, the cost auditor has to compare the actual physical consumption of power
and fuel per unit of production with standards of theoretical norms, if any, and with
preceding year’s actual consumption. Where power is generated company, the comparison
of cost per unit generated is to be made with that purchased power indicating the efficiency
or inefficiency of power generation.
(5) In Para No. 8, the cost auditor has to indicate the total man days of direct labor available
and actually worked. Moreover he has to indicate the direct labor cost per unit of output of
the particular year under audit and compare the same with that of previous two years to
reveal the efficiency of the year under audit.
(6) In Para No. 9, the cost auditor has to furnish information regarding consumption of stores
and spare parts per unit of output which serves as good indicator of upkeep of machines.
Moreover he has to indicate the amount as well as their proportion of closing inventory of
stores and spare parts representing items which have not moved for over 24 months. This
reflects the efficiency in purchases and materials management of the company.
(7) In Para No. 11, the detail of the significant variations is the expenditure under overhead as
compared with the previous years particularly for the product under reference must be
indicated so as to reveal the relative efficiency.
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Thus, the cost audit well designed to bring about the efficiency aspect of operations in a
manufacturing organization.
Value for Money (VFM) Audit: Before discussing about Value for Money Audit, we must
understand the term Value for Money (VFM). VFM can simply be described as ‘getting the best
possible combination of services from the least resources’, i.e. to maximize the benefits available at
the lowest cost. It is generally taken to mean the pursuit of economy, efficiency and effectiveness
which are briefed on below:
Economy: the terms under which the public sector organization acquires human and material
resources. An economical operation acquires these sources in the appropriate quality and quantity
at the lowest cost.
Efficiency: the relationship between goods and services produced and resources used to produce
them. An efficient operation produces the maximum output for a given set of resource inputs, or it
has minimum inputs for a given quantity and quality of service provided.
Effectiveness: how well a program or activity is achieving its established goals or other intended
effects? It is measured on this phase.
VFM is thus the pursuit of economy, efficiency and effectiveness. It is the combination of these
three elements which is important. Thus a production department may be successful in supplying
goods on time and in the quantities required. It is therefore effective. However there is a lot of
waste material arising in the production processes and thus it appears that the department is not
economical. An internal auditor could therefore suggest cost cutting measures in the production
department which satisfies the economy objective. However if the required output of the
department is not produced, the change has not been effective.
The balance between economy and effectiveness is obtained by the third factor – efficiency. Can
the auditor suggest changes in the production processes such that economy is improved, and
effectiveness is not significantly reduced? The adoption of the efficiency criterion may mean in this
case that a decision is made that the benefits of certain cost savings exceed the costs of missing
some production targets.
Audit of public sector organizations are normally carried out by a government organization
or by approved firms of accountants concerned about the VFM. The approach to value for money
includes:
 Undertaking studies which make recommendations for improving economy, efficiency and
effectiveness
 Preparing statistical profiles of each organization which contrast cost and other data with
national averages. These may be published in national newspapers in order to inform
consumers.
 Encouraging organizations to learn from each other, thus disseminating best practice
 Undertaking local projects
 Assessing the effectiveness of management arrangements
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Performance Audit: Performance audit means a critical examination or evaluation of

performance of a business concern. It includes operational performance, financial performance,
social performance, etc. Performance audit mainly looks into operational and financial performance
and overall performance of the business. It is sometime called as efficiency audit.
Performance Audit has been distinguished from Cost Audit in the following points:
Performance Audit Cost Audit

1. Performance audit is a critical examination 1. Cost audit is an examination of cost
of the performance of a business in its accounts and adherence to cost accounting
different spheres. plan.
2. In cost audit the auditor primarily checks
2. In performance audit the auditor primarily
whether the cost accounts have been
checks how far the actual performance is in
prepared by following cost accounting plan
accordance with plans, budgets or pre-
and principles and whether the costs of
determined standards.
production and sales are correct.
3. In the case expenditure the primary 3. In the case of expenditure the primary
consideration in performance audit is consideration of the cost auditor is whether
whether commensurate result has been such expenditure has been properly taken to
obtained from such expenditure. cost.
4. The primary objectives of cost audit are to
4. The primary objectives of performance
check the accuracy of cost accounts, find out
audit are to asses the quality of
inefficiencies in the procurement and use of
performance, bring out the defects or
raw materials and use of labor, and to
loopholes in the systems, identify
consider how far the cost accounts and cost
inefficiencies and advise the management
reports are adequate for the purposes, of
for improvement of performance.
decision-making and control.
5. In performance audit different areas of
operational and financial performance like
production, sales, materials management,
5. In cost audit only the matters relating to
inventory control, control on expenditure,
costs are primarily examined.
usage of capital, profitability, long-term
solvency, liquidity, etc. are thoroughly
examined.
6. The practice of performance audit is very 6. The practice of cost audit is more or less
limited. widespread.
7. No special qualification of the auditor is
required for conducting performance audit.
7. A qualified CMA is only competent for cost
A chartered accountant, a cost accountant or
audit.
a person qualified in business management
can conduct this audit.
Performance audit or efficiency audit involves an appraisal of the performance of a business. For
efficient performance, an organization sets its plans and the interpretation of the plans in financial
and quantitative terms is the budget. Performance audit checks how efficiently various budgets
have been fixed and how far the actual performance is in line with plans or budgets.
By comparison of actual figures with budgets, standards and figures of the past periods, by proper
analysis of data including ratio analysis and by inter firm comparison, performance audit evaluates
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performance in the following areas: (a) sales, (b) production, (c) inventory management, (d) capital
utilization, (e) profitability, and (f) liquidity. It brings out the weakness and imbalances in different
functional areas for subsequent remedial actions by the management.
Social Audit: Social audit may be defined as an assessment of the performance of an

industry as a whole vis-à-vis its social responsibility. But social responsibility now-a-days is not a
total concept relative to an industry. Each organization forming part of an industry is considered to
have specific social responsibility. Social audit may, therefore, be rightly defined as the assessment
of social performance of an organization.
There are several non-commercial organizations or institutions primarily rendering services to the
society. The term ‘social audit’ is not generally referred to such organizations or institutions. On the
other hand, small commercial organizations operating for proprietary interest are not expected to
discharge social responsibility in a significant way. The term social audit is not also meant for such
organizations. Where social responsibility is recognized in addition to commercial objectives, the
term social audit comes under consideration. So, social audit generally means audit of social
performance of corporate form of organizations.
Corporate entities are now regarded as a great social force. They are not expected to be only
engaged in profit earning and paying dividend to the shareholders. They have an important role to
play in the social well-being. They have high responsibility to the society in which they exist. Such
responsibility can be identified in two directions: Internal and External.
Internal Social Responsibility includes:
(a) extending staff benefits comprising of indirect monetary benefits like provident fund, gratuity,
bonus, insurance, leave encashment, etc., holidays and LTC benefits, medical facilities, housing
facility, canteen facility, promotion of staff, recreation and entertainment for staff and
workmen and other benefits.
(b) Keeping the environment of the factory and its surrounding area clean and non-hazardous.
(c) Paying the statutory dues in time.
(d) Supplying quality products at reasonable rates.
(e) Giving fair return to investors commensurate with risk, which is also considered a social
responsibility.
External Social Responsibility includes:
(a) Community development through creation and maintenance of roads, parks, playgrounds and
drinking water facilities.
(b) Tree plantations for improvement of the environment.
(c) Growth and expansion of the business and thereby creating new job opportunities.
(d) Setting up plants in backward areas, etc.
Social audit has to evaluate the performance of a business undertaking in all these directions. The
Objectives of Social Audit in general are the following:
(i) To make an assessment of social performance of an enterprise.

(ii) To bring to light for public knowledge how far an organization has discharged its
responsibility to the society.
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(iii) To inform the management of an enterprise of the accuracy of its social accounts.
(iv) To advise the management in the preparation of social accounts.
(v) To evaluate the socio-economic contributions made by an industry.
(vi) To examine the correctness of the Value Added Statements when the contribution of an
enterprise to the national economy is described through such statements.
(vii) To evaluate with the help of financial data various social actions of an enterprise and
describe them in properly analyzed form in the absence of socio-economic performance
statements.
Social audit assesses the social performance of a business enterprise. Only through social audit one
can get a correct picture of the contributions made by an enterprise to the society. So, social audit
is quite important to the employees of the enterprise, others in the economic community, local
community, general public and the Government.
With the acceptance of the fact that corporate entities have social responsibility in addition to
operating and financial responsibility, attention is now being paid throughout the world to the
development of suitable social accounting system with standards for measurement of social
performance and presentation of annual social accounts. Like the profit and loss account in
financial accounts the preparation of a Socio-economic Operating Statement or Social Income
Statement is advocated by notable proposers in the field of social accounting.
The presentation of Social Balance Sheet is advocate for showing the values of various social assets
like township land and building, plantations, hospital, schools, parks, playgrounds, etc. owned or
created by the enterprise from organization and other equities.
But, without independent audit of such social statements nobody will accept them as true and fair.
Therefore, social audit is as important as financial audit. Social audit also involves systematic
examination of social accounts.
The social auditors may also guide the management in the measurement of social performance,
proper keeping of social accounting records and presentation of social statements. Their specialized
knowledge may be of immense value to the management. Social audit has also an important role to
play in relation to an industry, as it can also successfully assess the overall contribution made by an
industry to the society and the national economy.
Management Audit: The term Management Audit has been defined as an appraisal by a
public accountant or other professional person of management performance. Management audit is
an investigation of a business from the highest level downwards in order to ascertain whether
sound management prevails throughout, thus facilitating the most effective relationship with the
outside world and the most efficient organization and smooth running of internal organizations.
The objectives of management audit are as follows:
(i) To examine and evaluate the quality of management functions and performances.
(ii) To check whether actual performances are in line with objectives and plans.
(iii) To ascertain the defects of the objectives and plans adopted by the management.
(iv)To review the organization structure and identify its weaknesses.
(v) To check whether the management policies, rules and procedures are being duly followed at
different levels of management and identify their weaknesses.
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(vi)To examine different control systems in vogue in the organization and judge their
effectiveness.
(vii) To determine the overall standard of management performance.
(viii) To identify the weaknesses and inefficiencies in different functional areas like
purchases, production, sales, inventory control, cost control, finance, etc.
(ix) To look out ways of removing the weaknesses or deficiencies which exist at different
management areas and levels for improving management efficiency?
(x) To search for ways of production at lesser cost and improving production and selling
efficiencies.
(xi) To determine the best ways of improving management efficiency and performance among
several alternatives available.
Management audit may cover only a specific function or all the functions of an organization. It may
deal with economies of production including its elements like simplification, specialization,
diversification, standardization, expansion, etc. and it can include all the factors of production – raw
materials, plants, labor, and act. In a broad review activity, management audit conducts a detailed
study of: (1) the plans and objectives, (2) the organizational structures, (3) policies, practices,
systems and procedures, (4) methods of control, (5) personnel, (6) layout and physical equipment,
(7) standards for performance, and (8) measurement of results.
The various functional areas covered by management audit are: (1) Sales, (2) Production, (3)
Purchase, (4) Inventory control, (5) Personnel, (6) Accounting and Finance, and (7) General
administration.
Steps in Management Audit: Management auditors are appointed for getting their suggestions on
improving performance of the entire organization or of specific areas. Management audit,
therefore, comprises three basic steps: (1) Examination, (2) Reporting defects and irregularities and
(3) Presenting suggestions for improvements. These basic steps can further be broken down into
the following elemental steps:
- Study of the elements.

- Detailed diagnosis.
- Determination of purpose and relationship.
- Looking for deficiencies.
- Analytical balance.
- Testing for effectiveness.
- Searching for problems.
- Ascertainment of solutions.
- Determination of alternatives.
- Seeking out methods for improvement.
Importance of Management Audit: Management audit properly spots the inefficiencies and
weaknesses of management. It assesses the soundness of plans adopted for attaining the economic
goals of the enterprise. It examines the adequacy of control system for making the plans successful.
If finds the weaknesses of the organization structure. It identifies the deficiencies of management
policies, procedures and programs. Management auditing can be highly useful in strengthening the
management of even non-profit making organizations like universities and other public institutions.
It can also play a useful role in departments or branches of Government by making their functioning
much more effective.
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Management audit is different from financial audit, as will be clear from the following:
Financial Audit Management Audit

1. Management audit is a comprehensive and
1. Finical audit is an examination of
constructive examination of the efficiency of
financial accounts and financial statements.
management at all levels on an organization.
2. The primary objectives of financial audit 2. The primary objectives of management
are to ascertain whether all the audit are to make an evaluation of the
transactions have been properly accounted efficiency of management at different levels
for in the books of account and whether and different areas and make useful
the financial statements of the organization recommendations for removal of weaknesses
give a true and fair view of the result of and inefficiencies and increasing the
operation and the state of affairs. effectiveness of management functioning.
3. Financial audit is concerned with what
has actually happened. Its main function is 3. Management audit is concerned with not
to see that whatever is recorded in the only the present deficiencies or loopholes but
books or other records is true and nothing also the ways for future improvement.
has been left out.
4. Management audit is not required every
4. Financial audit is repetitive. It is required
year. The beneficial effects of one
every year.
management audit lasts for several years.
5. The scope of financial audit is relatively 5. The scope of management audit is much
quite narrow. broader.
6. Only professional accountants like 6. Management audit is performed by a team of
chartered accountants are competent to experts, consisting of management experts,
perform financial audit. professional accountants, engineers, etc.
7. Financial audit involves relatively less cost. 7. Management audit is quite costly.
8. The efficiency of employees is not 8. The efficiency of management staff at different
assessed in financial audit. levels is assessed is management audit.
Propriety Audit: The real meaning of “Propriety Audit” can be understood from the
definition of the term propriety which means “that which meets the tests of public interest,
commonly accepted customs and standards of conduct”. In normal financial audit, a transaction or
expenditure is alright if it is properly authorized, supported by documents and properly recorded in
the books of accounts. But, propriety audit goes a step further. It tests whether the transaction
satisfies the rules of propriety i.e., whether the transaction or expenditure is thoroughly justified
from the consideration of: (i) Public interest, (ii) commonly accepted customs, and (iii) Standards of
conduct.
Thus, if expenditure is apparently more than what it should have been, propriety audit highlights
this. Similarly, if a transaction directly or indirectly benefits the company official who authorizes
this, it does not satisfy the canons of propriety.
Objectives of Propriety Audit: The objectives of propriety audit are to check the following:
- Whether there is a revenue leakage.

- Whether funds have been misappropriated.
- Whether there is wastage or misuse of any kind.
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- Whether legal or financial considerations have been overlooked or flouted in dealing with
the affairs of the company.
- Whether adequate safety of assets has been ensured.
- Whether transactions have been entered into for the best interest of the entity.
Advantages of Propriety Audit: Propriety audit has the following advantages:
- In propriety audit wastes, misuse of assets and frauds are detected. So, guilty persons can
be punished. The loopholes in the internal control systems of the organizations can also
be adequately plugged to minimize these in future.
- If financial considerations or standards of propriety are flouted in any decision, propriety
audit brings these to the notice of the authority. So, decision-makers always remain very
alert and well-judged decisions result in the organization.
- This audit also checks whether or not all the activities of the organization have been
carried on prudently, profitably and in the best interest of the organization. If anything is
pointed out adversely in the audit report, appropriate corrective action can be taken
against it.
- If any asset of the organization is inadequately protected, propriety audit brings this to
light. Accordingly, measures can be taken to protect the asset from loss or damage.
- Inefficiency, extravagance, personal interest on any matter, etc. are detected in propriety
audit. So, adequate preventive measures can be taken against these.
- Propriety audit may cause corrections in financial and general administration. For this,
administrative efficiency of the organization may increase.
- Without the consideration of propriety in some important matters, financial audit and
cost audit will be of little value. These audits can be really effective when propriety audit
in certain areas becomes part of them.
- The shareholders of a company or the proprietors of a business are the maximum
beneficiaries from propriety audit, because propriety audit in commercial organizations
mainly serve their interests.
- Not only the shareholders or the proprietors, but also all those connected with the
business are benefited from propriety audit as this audit keeps an eye on financial
discipline in the day-to-day management of the business, which is also beneficial to the
society at large.
- Propriety audit is indispensable in Government departments and in Government or Public
Organizations, because their activities, transactions, expenditure and decisions are
supposed to be in public interest.
Propriety Audit has been distinguished from Traditional Audit in the following:
Traditional Audit Propriety Audit

1. In traditional audit, all business 1. In propriety audit, the matters required to
transactions or entries in the books of be observed are whether the transactions
accounts are checked with the help of entered into and all the business activities
vouchers and documents and it is including the decisions taken by the
ascertained whether the financial management are in conformity with the
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statements prepared at the end of the year

give a true and fair view of the profit or loss standards of propriety.
and of the state of affairs of the business.
2. It is not a function of traditional audit to 2. It is a function of propriety audit to see
see whether the business is being managed whether the business is being managed
prudently and profitably. prudently and profitably.
3. If an expense is duly approved by the 3. Mere approval and existence of
appropriate authority and supported by valid supporting vouchers against an expense will
vouchers, it meets the acceptance standard not satisfy the auditor in propriety audit. The
of traditional audit. Whether the expense is auditor has to check whether the expense is
higher or not is not to be judged in necessary and whether it is reasonable in
traditional audit. amount or not.
4. In traditional audit all assets described in 4. In propriety audit what is particularly
the Balance Sheet are verified in respect of required to be seen in the case of assets is
existence, title, custody and value, and whether all the assets are adequately
nothing more than those. protected or not.
5. It is not the object of traditional audit to 5. Discovery of wastes and misuse of fund is
discover wastes and misuse of fund. a major object of propriety audit.
6. Detection of fraud or misappropriation of 6. Detection of fraud or misappropriation of
fund is not the primary object or traditional fund is one of the primary objects of
audit. It is a secondary object only. propriety audit.
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FUNDAMENTALS OF COST AUDIT
Principles of Cost Audit: Principles of Cost Audit are discussed below:
1. Planning and Performing Cost Audit: There are certain principles that the cost auditor has to
observe in planning and performing the cost audit. There are also principles that the cost auditor
has to see are being observed by the company he is auditing. On the one hand, the cost auditor has
to safeguard his independence and professional status in planning and performing the cost audit,
ensuring quality and standard of cost audit, as required by his professional body, the ICMAB, as well
as by the related Rules and Regulations, regulating his audit engagement and reporting. On the
other hand, he has also to see that the client unit operates within the legal framework provided for
the industry, maintaining cost accounting records, in accordance with the cost accounting records
order rules applicable to the industry.
2. Code of Ethics: Cost Auditor should comply with the code of ethics for professional accountants.
The fundamental principles governing the professional responsibility of the Cost Auditors are
enumerated as follows:
a. independence;
b. integrity;
c. objectivity;
d. professional competence and due care;
e. confidentiality;
f. professional behavior; and
g. technical standards.
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3. Independence of Cost Auditor: The independence of the auditor (also a cost auditor) is largely
covered by the Companies Act 1994, and the CARR 1997, under which a person who has or had
specified relationships, which go to mar his independence, cannot be appointed as a cost auditor.
4. Integrity and Objectivity: Integrity implies not only honesty but fair dealings and truthfulness.
The principle of objectivity imposes the obligation on all professional accountants to be fair,
intellectually honest and free of conflict of interest. Financial involvement with the client effects
independence and may lead a reasonable observer to conclude that it has been impaired. A
professional cost and management accountant should be straightforward and honest in rendering
professional services as a cost auditor. He has neither any ulterior motives nor any personal ends to
serve. He should be fair and should not allow any prejudice or bias, conflict of interest or any other
influence to override objectivity. Cost audit is to meet the management’s and the Government’s
need for credibility in cost information and cost accounting systems.
5. Professional Competence and Due Care: A professional accountant should not project himself as
having expertise or experience which he does not possess. Attainment of professional competence
requires a high standard of general education followed by specific education, training and
examination in professionally relevant subjects and a period of work experience, with which all
ICMAB members are equipped. Professional competence requires to be maintained by a continuing
awareness of developments in the accountancy profession, including relevant national and
international pronouncements on accounting, auditing and other relevant regulations and statutory
requirements. The cost and management accountant has to maintain professional knowledge and
skill at a level required to ensure that a client or employer receives the advantage of competent
professional service, based on up-to-date developments in practice, legislation and techniques.
5. Confidentiality: A cost and management accountant should respect the confidentiality of

information acquired during the course of performing professional services and should not use or
disclose any such information without proper and specific authority or unless there is a legal or
professional right or duty to disclose. The duty of confidentiality continues even after the end of the
relationship between the cost auditor and the client or the cost and management accountant and
the employer.
7. Professional Behavior: A professional Cost and Management Accountant, being a member of the
Institute of Cost and Management Accountants of Pakistan, should act in a manner consistent with
the good reputation of the profession. He should meticulously avoid any such conduct or behavior
as may cast an unfavorable aspersion on the profession. He has to ensure professional behavior
while meeting his responsibilities to clients, third parties, other members of the cost and
management accounting profession, staff, employers and the general public.
8. Technical Standards: A professional Cost and Management Accountant should carry out
professional services in accordance with the relevant technical and professional standards. A Cost
and Management Accountant has a duty to render professional services with care and skill, in
accordance with the instructions of the clients or employers, insofar as they are compatible with
the requirements of integrity, objectivity, and in the case of Cost and Management Accountants in
public practice, independence. Moreover, they have to conform to the technical and professional
standards laid down by the Institute of Cost and Management Accountants of Pakistan, IFAC, IASC
and the relevant laws, orders, rules and regulations.
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9. Professional Code of Ethics: A distinguishing mark of a profession is its acceptance of

responsibilities to the society. The Cost Auditor’s independence is to be judged by his clients,
Government, employers, employees, investors in the business, the financial community and the
consumers at large, who all rely on the objectivity and integrity of the Cost and Management
Accountant. This reliance imposes a public interest responsibility on the professional cost and
management accountant.
10. Engagement on other occupation: A professional accountant in public practice should not
concurrently be engaged in any business occupation and activity which might impair his integrity,
objectivity or independence or the good reputation of the profession. The code of professional
ethics of the Institute of Cost and Management Accountants of Pakistan must be carefully
observed.
Planning Cost Audit:
1. General: (i) Cost Audit should be planned with professional care, recognizing that circumstances
may exist to cause the cost statements to be materially misstated. For example, management will
be providing cost accounting information in the Schedules and Annexure prescribed in the cost
accounting record orders/rules, and also statements regarding capacity and inventories. The cost
auditor will be finding evidence to support the information provided; but he is not to assume it is
necessarily correct.
(ii) The cost audit should be so programmed and conducted as to provide reasonable assurance
that the cost information provided in the Schedules and Annexure, taken as a whole, are free of
material misstatement. Reasonable assurance is a concept relating to the accumulation of audit
evidence, necessary for the cost auditor to conclude that there are no material misstatements in
the cost accounting information and statements, taken as a whole. The concept relates to the
whole audit process.
(iii) Acquiring an undertaking of the industry, studying the client’s organizational set-up and the
cost accounting control exercised over the various elements of cost are all a part of conducting the
cost audit procedures. In planning cost audit, the personnel requirements of an assignment;
documentation of the cost audit procedures and of audit evidence and quality control exercised
over performing cost audit being important factors, are briefly discussed here. This chapter relates
to the planning done in the cost auditor’s office and the documentation, which has to be looked
after by the cost audit staff.
2. Personnel: Cost audit work is to be assigned to personnel who have the degree of technical
training and proficiency required in the circumstances. The personnel needs should be planned,
keeping in view the staffing and timing requirements of specific cost audit. Qualifications of
personnel as to experience, position, background and special expertise should be evaluated. Care
should be exercised not to assign any staff who may have any disqualifying relationship. The
following aspects of personnel are also to be considered:
(i) Experience: Experience and training of cost audit personnel should be considered,
particularly keeping the relevant industry in view, as the cost and management accounting
procedures and techniques considerably differ on the basis of the nature and type of industry.
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Earlier cost audit or other practical experience of the industry helps in carrying out cost audit of a
unit of that industry.
(ii) Directions: Assistants to whom work is to be delegated need appropriate direction and
supervision. Direction involves informing assistants of their responsibilities and the objective of the
procedures they are to perform. It includes informing them about the nature of the industry,
possible cost accounting and auditing problems that may affect the cost audit routine and the
procedures that they are to perform. The cost audit program, in providing the time budget and the
overall audit plan, should also prove helpful in providing necessary audit directions.
(iii) Supervision: Supervision involves both direction and review of audit work. Personnel
carrying out supervisory responsibilities generally perform the following functions during cost audit:
a) monitor the progress of the cost audit and also assess that:
i) the assistants have the necessary skills and competence to carry out their
assigned tasks;
ii) assistants understand the cost audit directions; and
iii) the cost audit is being carried out according to the overall cost audit plan
and the cost audit program.
b) stay aware of the cost accounting and cost auditing questions, raised during the
cost audit, assess their significance and modify the cost audit plan and the cost audit
program, as considered necessary; and
c) remove any differences of professional judgment between the personnel and
decide the level to which making reference is appropriate.
3.1 Documentation: The cost auditor should document all matters which are important in providing
evidence to support the opinion given in the cost audit report. Documentation here means the
working papers prepared by and for, or obtained and retained by the cost auditor in connection
with the performance of cost audit. Working papers may be in the form of data stored on paper,
film, electronic media or other media. Working papers record the audit evidence, resulting from the
cost audit work performed, to support the cost auditor’s opinion. The extent of working papers is a
matter of professional judgment. They may cover the detailed aspects of the cost audit or may
include the daily work sheets or daily diary maintained by each member of the cost audit staff
engaged on the assignment. The daily work sheets should include all queries raised; with whom
each was discussed and how; and if they were satisfied. The form and content of the working
papers will be determined by the nature and complexity of the business, nature and condition of
the entity’s cost accounting and internal control systems. Use of standardized working papers (such
as checklists, confirmation forms, standard letters etc.) may improve the efficiency with which such
working papers are prepared and reviewed. Standardized working papers facilitate delegation of
work and provide a means to control quality of work. Schedules, statements, analyses and other
documents prepared by the entity may be utilized and made a part of the cost audit working
papers, only after being satisfied that the materials have been properly prepared with due care.
3.2 Confidentiality of Working Paper: The cost auditor should adopt appropriate procedures for
maintaining the confidentiality and safe custody of the working papers and for retaining them for a
period sufficient to meet the needs of the practice and in accordance with legal and professional
requirements of record retention. Working papers are the property of the cost auditor. Although
portions or extracts from the working papers may be made available to the entity at the discretion
of the cost auditor, they are no substitute for the cost accounting records that the entity has to
maintain under the cost accounting records orders rules, applicable to the industry.
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3.3 Working Paper Management: Working paper management improves the cost audit
productivity. The essential aspect of such management is quick retrieval of information from the
files of working papers. The filing system should be sound. Normally working papers are organized
into: Permanent file, Working file and Correspondence and Administrative file. Papers which
normally do not change from year to year are kept in the Permanent file. Permanent file will have
write- up on the organization, manufacturing process etc. The Permanent file is updated at the
beginning of every audit, making changes, if any, since the previous audit. Working paper file
contains details relating to the year of audit. There will be a separate working paper file for every
year. This file should be properly indexed and divided into convenient sections. File management is
a matter of personal preference of the cost auditor.
4. Quality Control: Quality Control policies and procedures should be implemented both at the
level of the cost audit firm and individual cost audits. The cost auditor should implement quality
control policies and procedures designed to ensure that all cost audits are conducted in accordance
with international audit standards or relevant national standards or practices. Quality control
procedures, to a large extent, depend on strict adherence to the laws, orders and rules applicable
to cost audits. The objectives of the quality control policies and procedures include professional
requirements, skills and competence, assigning work to personal having technical training and
proficiency, providing sufficient direction, adequate supervision and review of work. Every cost
auditor has to continuously, monitor that the quality control policies and procedures are being
followed and the quality of work is being effectively achieved. Quality control policies and
procedures should not only be communicated to personnel but also explained and some training
provided to them to ensure that the policies and procedures are understood and implemented. The
cost auditor and his staff members with supervisory responsibilities will consider the professional
competence of assistants performing work delegated to them, when deciding the extent of
direction, supervision and review appropriate for each assistant. Any delegation of work to
assistants should be on the basis of reasonable assurance that such work will be done with due care
by persons having the degree of professional competence required in the circumstances.
Performing Cost Audit:
Background Knowledge and Audit Procedures
1. 1 Knowledge of the Industry and the Entity: Before performing cost audit, the cost auditor must
have or obtain knowledge of the industry and its business environments, sufficient to enable him,
to identify and understand the events, transactions and practices that in the Cost Auditor’s
judgment may have a significant effect on the cost accounting statements of the entity to be
audited, or on the cost audit report. The cost auditor should also have a general knowledge of the
country’s economy and the industry within which the entity operates. He should also have a clear
understanding of the conditions that affect or may be affecting the cost and profit performance of
the entity.
1.2 Updating of knowledge of industry: The knowledge that the cost auditor obtains about the
industry and the entity at the planning stage of the cost audit keeps increasing and updating, while
taking up the assignment and at every stage throughout the performance of cost audit. The cost
auditor keeps re-evaluating the knowledge and information gathered earlier. Knowledge of the
industry, which the cost auditor may already have, may be updated through discussions with the
entity’s senior operating personnel, publications relating to the industry, government surveys,
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statistics, trade journals, visit to the entity’s premises and plant facilities. Knowledge of the industry
and the entity is extremely important in cost performance evaluation. The cost auditor should
ensure that the assistants assigned to a cost audit engagement also obtain sufficient knowledge of
the business to enable them to carry out the cost audit work delegated to them. It should be
ensured that they understand the need to be alert for additional information and the need to share
that information with the principal and other assistants.
1.3 Legal and Regulatory Framework: When planning and performing cost audit procedures, the
cost auditor should keep in view the legal and regulatory framework within which the entity has to
operate. Although it is the responsibility of the management to ensure that the entity’s operations
are conducted in accordance with the laws and regulations and the cost auditor cannot be held
responsible for non-compliance by the entity; he should see that the provisions of the Companies
Act 1994, the relevant cost accounting record order and of the CARR 1997 as far as they relate to
the maintenance of cost accounting records and providing of cost accounting information, are duly
observed and followed by the entity. Non-compliance of such provisions by the entity would have a
material effect on the cost accounting statements, in which case the cost auditor is specifically
required to report whether or not the entity complies with the provisions of laws or regulations
which are directly related to cost audit.
2. Organizational Set-up: While taking up any new cost audit assignment, the cost auditor should,
first of all, study the organizational set-up of the entity. He should get familiar with the
administrative, financial, buying and selling, production and planning functions at the entity. He
should be introduced to the functional heads, as he will be dealing with them during the course of
cost audit. Each function and sub-function should be organized in a logical manner, according to its
nature and size. The size of and the manner in which the various functions are organized have a
direct bearing on the cost of each function performed at the entity. The cost auditor will do well in
discussing the functional set-up with the top management, pass on the concept of activity-based
costing and also offer comments on the set-up, if considered necessary, under the circumstances.
Knowledge of the organizational set-ups of each function helps in obtaining knowledge of the
industry and the entity, referred to in the foregoing paragraphs. The cost auditor has also to verify
and express opinion on the company representations made under the CARR 1997, and on the cost
accounting information provided by the company, in the Schedules and Annexure prescribed in the
cost accounting records rules applicable. He has also to evaluate and offer comments on the
entity’s cost accounting system. He thus has to work, maintaining close liaison with the functional
heads and with various levels of management.
3. Company Representations: Every company shall prepare the financial reports and cost audit
report according to the records and statements specified in the order of the Securities and
Exchange Commission of Bangladesh, Companies Act 1994, and CARR 1997.
4. Production: After checking the stock-in-process at the end of the financial year with the
production records and after adjusting the opening stock-in-process or last year’s closing stock-in-
process, production in quantities of each type of product under reference, should be worked out,
The percentage of production of the product under reference, should be seen in relation to the
installed capacity. If there is any shortfall in production as compared to the installed capacity, brief
comments as to the reasons for the shortfall, shall be offered in the cost auditor’s report. While
laying down particulars to be included in cost auditor’s report to the Directors of the Company,
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further provides that, if there is any addition to the production capacity during the year under
review or in the immediately preceding two years, this may also be mentioned.
5.1. Gathering Cost Audit Evidence: The cost auditor has to follow the International Audit
Standards (IASs) and related technical pronouncements issued by International Federation of
Accountants. Cost audit, like any other audit, involves: (a) planning (b) carrying out audit
procedures or gathering cost audit evidence and (c) drawing reasonable conclusions on which to
base the audit opinion. During the course of audit, the cost auditor should obtain sufficient
appropriate audit evidence for arriving at reasonable conclusions. Audit evidence is the
documented information obtained by the cost auditor in arriving at the conclusions, on which the
audit opinion is based. Audit evidence will consist of source documents, cost accounting records,
cost accounting statements, company representations and corroborating information from other
sources. Cost audit procedures mean tests to obtain cost audit evidence to detect material
misstatements in the statements and in the information provided by the entity. The tests may be
performed on the details of transactions and balances, following analytical procedures. When
obtaining cost audit evidence from substantive procedures, the cost auditor should consider the
sufficiency and appropriateness of audit evidence from such procedures, together with any
evidence from tests of control to support the cost and other information asserted by the
management of the entity. If unable to obtain sufficient appropriate cost audit evidence, however,
the cost auditor should express a qualified opinion or a disclaimer of opinion.
5.2 How Cost Audit Evidence is obtained?: Cost audit evidence is obtained by following procedures
such as: inspection, observation, inquiry and confirmation, computation and analytical procedures
noted below:
(i) Inspection consists of examining records, documents, or tangible assets. Inspection of records
and documents provide cost audit evidence of varying degrees of reliability, depending on their
nature and source and the effectiveness of internal control over their processing. Documentary cost
audit evidences may be created by third parties and held by third parties or held by the entity or
created by the entity and held by the entity.
(ii) The cost auditor may observe the procedures being performed; say the counting of inventories
by the entity’s personnel. Inquiry consists of seeking information from knowledgeable persons
inside or outside the entity. Inquiries may be written or oral, providing new or corroborative
information. Confirmation is the response to an inquiry.
(iii) Computations consist of checking the arithmetical accuracy of source documents and cost
accounting records or of performing independent calculations. Analytical procedures consist of
significant ratios and trends, including the resulting investigation of fluctuations and relationships
that are inconsistent with other relevant information or deviate from predicted amounts. Analytical
procedures include the consideration of comparison of the entity’s cost information for prior
periods, anticipated results of the entity, such as budgets or forecasts or expectations of the cost
auditor, such as an estimation of depreciation. The entity’s cost performance may also be
compared with similar industry cost information.
(iv) Analytical procedures also include consideration of relationships among elements of cost
information that would be expected to conform to a predictable pattern based on the entity’s
experience, such as contribution analysis. Relationships also exist between such direct and indirect
costs as payroll and employee related costs. Various methods may be used in performing analytical
procedures, ranging from simple comparisons to advanced statistical techniques. Choice of
procedures, methods and level of application is a matter of professional judgment. The cost auditor
should apply analytical procedures, when forming an overall conclusion as to whether the cost
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statements as a whole are consistent with the auditor’s knowledge of the business. The conclusions
drawn from the results of such procedures are intended to corroborate conclusions formed during
the audit of individual components or elements of the cost accounting statements and assist in
arriving at the overall conclusion as to the reasonableness of the cost statements. They may also
identify areas requiring further procedures. The extent to which analytical procedures may be
relied upon would depend on the materiality of the items involved.
(v) Cost audit evidence is obtained from an appropriate mix of tests of control and substantive
procedures. The type of tests to be performed is important to an understanding of the application
of audit procedures in gathering cost evidence. The cost accounting system is tested to identify the
characteristics or attributes that indicate performance of a control, as well as possible deviations
and conditions which indicate departures from adequate performance. The cost auditor should
perform audit procedures appropriate to the particular test objective on each item selected.
(vi) The cost auditor should obtain sufficient appropriate audit evidence as to whether the standard
cost, planned cost, budget cost or cost estimate, being used for cost accounting and control
purposes, is reasonable in the circumstances. An understanding of the procedures and methods,
including the cost accounting and cost control, used by the management in making the control
yardstick is important for the cost auditor to plan the nature, timing and extent of the cost audit
procedures. The cost auditor should either review or test the process used by the management to
develop the standard; use an independent standard for comparison with that prepared by the
management or review subsequent events which confirm the standard made.
(vii) The cost auditor should make a final assessment of the reasonableness of the standard
estimate, based on the auditor’s knowledge of the business and whether the yardstick is consistent
with other audit evidence obtained during the audit. After an evaluation of results of cost audit
procedures, the auditor should feel convinced of their being reasonable. Vouching, testing,
examining, analyzing, comparing, confirming, inspecting, reconciling, tracing, verifying the details,
the cost auditor collects audit evidence to form his opinion not only about the production and
capacity utilization, but also on the cost accounting system, inventories and the cost accounting
statements prepared by the management in accordance with CARR, applicable to the industry. Cost
statements differ from industry to industry and reflect how production and auxiliary services are
generally organized.
(viii) The cost audit procedures outlined in the foregoing paragraphs are not only performed on the
statements submitted by the company under the CARR 1997, but are also performed on the cost
accounting records which the industry has to maintain under CARR 1997. The cost accounting
records order rules specifically mention the principal elements of cost involved in the production of
the relevant product and specify adequate and proper accounting records for the same.
Important Elements of Cost
1.1 Raw Materials: Raw materials and other materials which can be directly identified with
production would normally constitute major part of the cost. The cost of raw materials, both in
quantities and value, as given in the statements, should be verified. In case the transport cost of
raw materials is a significant element of cost, as in the case of cement and sugar industry, the
transport cost is determined separately. In case of imported raw materials, the various elements
are: FOB value, ocean freight, insurance, custom duty, clearing/forwarding and inland freight.
Withholding income tax and sales tax would be separately accounted for. Raw materials are the
materials which directly go into the process of manufacture and physically constitute a part of the
product; whereas there may be some direct materials, which are directly identifiable with the
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production process but only help production. Materials which are relatively of insignificant value
viz. material although may be directly conducive to production also classified as indirect material.
Data for raw materials consumption have to be provided for the year under audit, as well as for the
previous two years, for comparison.
1.2 Material Consumption: Components and parts in the case of engineering industries are
referred to as direct materials. Material consumption would normally refer to material consumed in
production. Every cost auditor knows how the figure of material consumption is worked out by
deducting closing inventories, from the receipts and adding opening balance. Consumption of
materials should be carefully checked with the issues to production processes. The use of the term
major raw materials indicates all direct materials; some of which may be small in quantity and
value but large in number, which may not be reported as required. Provisions of the cost
accounting record rules should be kept in mind, as the rules also specify accounting requirements
for raw materials and other direct and indirect materials.
1.3 Comparison with Standards or Estimates: The related legislations provides for comparison of
the consumption of major raw material with the standard requirement, if any. If standards have not
been worked out, there should be estimates on the basis of which management of the entity
exercises control. In the absence of an estimate, the cost auditor should arrive at a standard or
estimate, on the basis of his knowledge of the industry, as mentioned in this Handbook, earlier.
Variances from the standard or estimate and from the figures of the preceding year should be
looked into and commented upon by the cost auditor in his report.
1.4 Maintenance of raw material quantity and cost: The relevant cost accounting record rules
generally provide the manner in which the record of cost and quantity of raw materials shall be
maintained and how the cost is arrived at. The cost of raw materials includes all direct charges up
to works, such as freight, inward transport handling, insurance etc. The basis of .costing of raw
material should be consistently followed, and should be commented upon by the cost auditor.
1.5 Components of Cost of materials: CARR may provide the manner in which cost of purchases,
cost of inspection and receipt should be included in the cost of the raw materials. The cost auditor
should examine the procedures being followed in procuring, planning, purchasing, transporting,
receiving, inspecting, that is all procedures and costs involved in making the materials available at
the point of the production process. Moreover, realizable value of any waste material or by-
product, which may have adjusted the cost of raw materials, be carefully considered and treated in
accordance with the normal or standard cost control practice followed by the industry, according to
the knowledge the cost auditor may have.
2.1 Wages and Salaries: CARR provides that the following particulars relating to wages and salaries
be included in Cost Auditor’s Report to the Director of the company:
(a) total wages and salaries paid for all categories of employees, separately in respect of each of the
following namely:-
i) direct labor cost on production;
ii) indirect employees cost on production;
iii) employees cost on administration;
iv) employees cost on selling and distribution;
v) bonus to workers and employees;
vi) other employees cost, if any (including taxes and levies); and
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vii) total employees cost (total of items (i) to (iv) above)

(b) Salaries and perquisites of directors and chief executive.
(c) Total man-days of direct labor available and actually worked for the year.
(d) Average number of workers employed for the year.
(e) Direct labor cost per unit of output of the product (give information in respect of each).
(f) Brief explanation for variances in item (e) above, if any, as compared to the previous two years.
(g) Comments on the incentive schemes, if any, with particular reference to its contribution
towards increasing productivity and its effect on cost of production..
2.2 Incentive Schemes: Provisions of the cost audit rules in regard to the Cost Auditor’s report
quoted in the foregoing Para, requires the cost auditor not only to carry out a fairly comprehensive
analysis of all wages and salaries paid to all categories of employees, from the Directors and Chief
Executive to workers employed for production, administration, selling and distribution, but also to
examine any incentive schemes and the contribution such schemes make to achieving more
production, higher productivity and their effect on the cost of production. Added marginal cost may
be justified to achieve higher production to meet the public demand.
2.3 Comparison with previous years: Total man-days of direct labor available and actually worked,
during the year, direct labor cost per unit of production; and average number of workers employed
for the year, with explanation for the variances in the direct labor cost per unit of production,
should be compared with the previous two years, and necessary comments on the comparison
included in the Cost Auditor’s report. Detailed study of employees and employee related costs
considerably enlarges the scope of the Cost Auditor’s report.
3.1 Stores and Spare Parts: Although CARR, 1997 refers to stores and spare parts kept in stock by
the entity, .the expenditure per unit of output on stores etc. is related to repairs and maintenance.
Provisions of the applicable CARR also refer to consumable stores, the consumption of some or all
of which may be identifiable with or chargeable direct to production. The cost auditor should
examine and comment upon the system of stores accounting, i.e. recording of receipts, issues and
balances, both in quantities and values.
3.2 Ageing of Inventory: Partly to safeguard against any unfavorable change in the import policy,
industrial units in Bangladesh overstock imported stores and spares. The cost auditor, while
examining the list of stores and spares, should pay particular attention to the ageing of inventories.
He should point out such slow moving items in which there has been no movement over the last
twenty four months.
3.3 Inventory valuation formulas: The various inventory cost formulas (LIFO, FIFO, NIFO), weighted
average cost, base stock, specific identification, latest purchase price have different effect on
costing and asset valuation. If an entity follows a formula which is different from the one generally
followed by the industry, it should be specially commented upon by the cost auditor in his report.
The record keeping should also be examined, which should be on a perpetual inventory system,
indicating quantities and values. Inventories are generally an important item of assets and the
corporate auditors of financial statements attend to the physical count of inventories. The cost
auditor, who takes up the assignment after the financial audit, should take into account the audited
inventory records and balances.
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4.1 Power and Energy: Complete record of costs and quantities of all types of power, fuel and
energy such as electricity, compressed air, gas, steam, fuel oil, compressed air and electricity which
may be generated/produced by the company itself, by its wholly owned subsidiary or sister
concern, or purchased from outside, consumed by the industry, should be available. The cost and
quantity consumed for production shall be shown in the relevant annexure, as required under the
applicable cost accounting record order/rules. The records shall be so maintained as to enable
assessment of consumption of power by different departments or manufacturing units or cost
centers on a consistent basis. Allocation of cost shall be on the basis of actual consumption, if
separate meters, measurement devices are installed; or on the basis of technical estimates, if
separate measurement devices are not installed.
4.2 Cost of Fuel purchased: Adequate record should be available to ascertain the cost of furnace
oil/gas and/or other energy material purchased and charged to various departments/cost centers.
If the cost of furnace oil or gas etc is allocated to different departments on basis other than actual
cost, reconciliation with the actual cost and the treatment of variances should be indicated in the
records. Records of receipts and issues should be so maintained as to clearly show any excess or
shortage at the time of stock taking.
4.3 Power and Fuel cost as a percentage of cost: The cost auditor should examine the power and
fuel cost as a percentage of the total cost. Energy costs have become important, not only because
of the rising trend in prices, but because of scarcity of the material. Energy has to be conserved. In
case any residuary inputs, such as bagasse in the sugar industry, are used as a source of energy,
quantification and evaluation of such inputs should be examined. Both energy consumption and
possible conservation should be discussed with the technical staff of the company. Moreover,
progress made in implementing any energy conservation plan, indicated by the management in the
Directors. reports presented in AGMs, should be examined and commented upon in the Cost
Auditor’s report.
5.1. Repairs and Maintenance: Record of costs incurred on in-house repair and maintenance
facility shall be examined and the basis on which the cost is allocated to various departments shall
be examined. Some repairs and maintenance may have been carried out by outside contractors.
Maintenance policy should be examined from cost benefit point of view. As regards the in-house
maintenance facilities, classification of activities for activity based costing ABC may be a part of the
maintenance policy. Indirect Material consisting of operating supplies/ consumable stores, as
already observed, may be charged direct to production, but such indirect materials as are required
for break-down maintenance (stores and spares) and for regular periodical/planned maintenance,
shall be allocated on the basis of usage or maintenance service actually provided to various
departments.
5.2 Heavy repairs or overhaul cost: Cost incurred in carrying out major repairs and maintenance
may be partly or wholly of capital nature, such as heavy repairs or overhaul costs, the benefit of
which is likely to be spread over a period longer than one financial year. This should be separately
shown and pointed out. Such expenditure should be treated as deferred revenue or capital
expenditure. Repair and maintenance relevant to the current year and capital or deferred revenue
expenditure, the incidence of which is to be spread over a period longer than one financial year,
should be properly differentiated.
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6.1 Depreciation: CARR requires that record of all fixed assets, in respect of which depreciation is to
be provided, shall be maintained. Depreciation is charged according to the depreciation policy of
management, which may be on a straight line or reducing balance method, based on the useful life
of the asset. Any basis adopted should be consistently followed. If any basis, other than the useful
life of the asset, is followed, the impact of providing excess or less depreciation should be pointed
out.
6.2 Provisions of Companies Ordinance: Provisions of the Companies Act 1994, in regard to
depreciation should be kept in view.
7.1 Overheads: Overheads is a well defined and well understood term. According to CARR, 1997 the
total amount of overheads should be identified and divided into four categories: factory overheads,
administration overheads, selling and distribution overheads and financial charges. Reasons for
significant variations in the overheads, compared with the previous two years, have to be given in
the cost auditors report. Providing item-wise break-up into factory overheads, administration
overheads, selling and distribution overheads and of financial charges would go to make the audit
report more meaningful. If not all, significant items may be so analyzed.
7.2 Allocation of Overheads: The basis of allocation/apportionment of overhead cost to cost

centers should be in accordance with the accepted principles of cost accounting, quantification of
services rendered by service departments to cost centers; or on the basis of activities which are
cost drivers
LEGAL STATUS & POSITION OF COST AUDITOR
Meaning: The Cost Auditors are the persons who verify Cost Accounting records to evaluate
and measure performance, controls, management decisions and value analysis for a report to state
advantages and limitations of used techniques highlighting key areas for management attention
and recommendations for improvement.
According to the Companies Act 1994, under section 220, any member of the Institute of Cost
and Management Accountant of Bangladesh can act as a Cost Auditor. That member must be
entitled to practice in his/her name or in the name of the approved firm in Bangladesh provided
that he/she holds a Certificate of Practice, granted or renewed to him/her by the Council.
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Appointment: Companies shall appoint a Cost Auditor through a resolution in the meeting
of the Board of Directors fixing remuneration within a period of 30 days from the end of financial
year of the individual Company. But no person can be appointed or re-appointed as Cost Auditor
without his/her written consent. The appointed Cost Auditor shall intimate the matter to the
Government within a period of 15 days.
A Voluntary Cost Auditor is appointed by the management responsible for achieving the objectives
or for any other purpose in connection with performance of the Company. In that case, intimation
to the Government is not necessary. Besides, cost audit under verbal instruction will be treated as
cost audit.
The board of directors of a Company ordered to have its books of accounts audited as such by the
Government under Section 220(1), shall appoint a cost auditor fixing his remuneration within a
period of 30 days from the end of its each financial year. Provided that, a person cannot be
appointed or re-appointed as cost auditor without his or her written consent. The person appointed
as cost auditor con a company under Section 200(1) shall intimate the matter to the Government
within a period of 15 days.
Qualification, Disqualification, Resignation and Removal: Any person can be appointed

as a cost auditor if he/she is a Cost and Management Accountant. Not only this but also he/she
deserve a certificate of practice issued by the Institute of Cost and Management Accountants of
Bangladesh. Provided that a firm whereof all the partners practicing in Bangladesh are qualified for
appointment as aforesaid may be appointed by its firm name to be Cost Auditor of a Company in
which case any of the partners may act in the name of the firm.
None of the following person shall be qualified for appointment as Cost Auditor of a company,
namely:
- An employee of company under audit.

- A person who is a partner or served under an employee of the Company under audit.
- A person who is indebted to the company for an amount exceeding one thousand taka,
or who has given any guarantee or provided any security in connection with the
indebtness of any third person to the company for an amount exceeding one thousand
taka.
- A person who is a director or member of a private company, or partner of a firm, which is
managing agent of the company.
- A person who is a director, or the holder of shares exceeding five percent in nominal
value of the subscribed capital, of a y body corporate which is the managing agent of the
company.
Provided that where any shares held by a person as nominee or trustee for any third person and
in which the holder has no beneficial interest, such shares shall be excluded in computing the
extent of the subscribed capital for the purpose of this clause.
- A person shall not be qualified for appointment as a Cost Auditor of a company, if he/she
is disqualified for appointment as Cost Auditor of any other body corporate which is
subsidiary of that company or holding company or a subsidiary of that company’s holding
company. Same rule also applicable for a company in the place of body corporate.
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- If a Cost Auditor becomes subject, after his appointment to any of the disqualification’s
specified above, he shall be deemed to have vacated his office as such.
If a cost auditor becomes subject, after his/her appointment to any of the disqualifications, he/she
shall be deemed to have vacated his office as such. These are stated in Section 6 of CARR 1997.
Other rules as could be collected from CMA Ordinance, Rules, case decisions and Finance Act are
stated below from the ICMAB published COST AUDIT MANUAL:
- No company, whether incorporated in Bangladesh or elsewhere, can practice as Cost and

Management Accountant in Bangladesh. If any Company contravenes, then without prejudice to
any other proceedings, which may be taken against the Company, every director, manager,
secretary and other officer of such Company who is knowingly a party to such contravention, shall
be punishable, on first conviction, to five thousand taka.
- A member in full time employment, such as Managing Director or Chief Executive Officer of a
Company, Executive Vice-President & Director of a Group or Group Finance Director of another
Group or Executive Director or General Manager or any other employee who is in full time
employment, can not be a Cost Auditor.
- Again a member, not residing in Bangladesh and officially staying in New York, or London or any
other city/area outside Bangladesh can not be a Cost Auditor in this country. If there is any such
instance, it will be treated as irregular and the member concerned will be guilty of professional and
other misconduct.
- Each practicing member must have a TIN number and a VAT registration number for submitting
necessary Returns to VAT and Income Tax authorities as per requirement. He/she shall obtain TIN
certificate from the DCT under whose jurisdiction he is being assessed and display such certificate
at a conspicuous place of his/her business premises.
Any practicing member leaving his/her business must intimate DCT within 15 days with a return.
Else he/she will be liable for tax subsequent years.
- There are many case decisions that disqualify a CMA in practice.

- The member working as advisor or as part time employee of any organization can however work
as a Cost Auditor.
- A practicing Chartered Accountant of Bangladesh can also be a practicing Cost and Management
Accountant of the Country if he/she is a member of both the institutes and has got license from
both the Institute to practice. The only restriction is that he/she can not be a Financial Auditor
under Section 210 and also a Cost Auditor under Section 220 of the same Company/Organization.
- A Cost Auditor found guilty of professional misconduct in accordance with Rule No. 104 of CMA
Rules or Schedule IV is liable to disqualification to be in practice. Those are reproduced below:
The Council of the ICMAB will soon include some more points in the light of IFAC guidelines and the
same will also be applicable for members in practice. Some of these guidelines may be seen from
2.07 of ICMAB Code of Conduct and Ethics for Cost Auditors of COST AUDIT MANUAL.
Financial Auditor & Cot Auditor: On a financial audit, a financial auditor conducts a task
to check the adequacy and accuracy of the books of accounts of a company and to see whether the
Balance Sheet and Profit and Loss Accounts have been prepared according to the prevalent laws. As
the cost records are not checked in details by financial auditor, there are more chances of
concealment of the facts.
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Other hand, cost auditor examines the implementation of costing methods and to see if the
expenses have been properly incurred and thus cost statement should show a correct and accurate
unit cost. The cost auditor not only brings to light the errors and frauds, but also he detects the
manipulations in the cost accounts.
The field of financial auditor is limited. The main aim of financial auditor is to safe-guard the
interest of shareholders. But the field of cost auditor is wider. The main aim of cost auditor is to
safe-guard the interest of management.
A financial auditor is responsible is responsible to check the authenticity of vouchers, receipts, and
issue notes in respect of purchases and issuance of materials to production department. He is not
responsible to check the production capacity of a concern. He is concerned with only to check the
accuracy of the overheads.
Other hand, the cost auditor is responsible to check the total materials purchased, requisitioned
issued and consumed, and surplus materials returned to the stores. He/she checks the proper
treatment of scraps whether these are sold at some responsible price or the company has to incur
further amount in its disposal. If scraps have been sold, he is to see whether the amounts realized
have been credited to profit and loss account. He/she also checks the treatment of by-products, the
adequacy of wastage, the authenticity of all documents pertaining to the procurement and issuance
of materials.
The cost auditor examines the following in respect of labor cost: the authenticity and accuracy; the
segregation of labor cost into direct and indirect; the proper allocation to each job and process. It is
the duty of the cost auditor to check whether the production capacity has been utilized in
accordance with the scheduled program.
Rights & Powers: A cost auditor has some specific rights & duties which are summarized
below:
- He shall have the right of access at all times to look into the books of accounts and
vouchers of the company whether kept in Head Office of the company or elsewhere.
- He shall be entitled to require from the officers of the company, such information and
explanation as an auditor, may think for the purpose of this audit.
- He can examine as to whether the transactions of the company which are represented
merely by books of entries are not prejudicial to the interest of the company and
whether personal expenses have been charged to revenue account.
- Whether in the opinion of the auditor, proper books of accounts as required by law have
been kept by the company so far as it appears from the examination of those books and
proper returns for the purpose of his audit have been received from branches not visited
by him.
- Whether the cost audit report and the cost statements are based on the information
maintained by the company.
- If in any of the matters referred to above, the auditor is not satisfied, he may give an
indication or a qualified report along with the reasons for the same. In this context, it is
pertinent to note that the cost auditor shall have a right to access at all times to the
books, all cost records of the company from the date he has been appointed as cost
auditor. The company cannot refuse to permit the cost auditor to conduct the cost audit
concurrently.
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Duties & Responsibilities: Cost Accounting books relating to utilization of materials, labor
and other items of overhead costs, maintained by the company under the Companies Act 1994, are
to be audited by the Cost Auditors. According the Cost Audit Rules 1997 stipulates that the Cost
Auditor shall throw light on utilization of men, machines and materials, usefulness and adequacy of
records, internal check, control etc. and give recommendation for cost reduction, increased
productivity and improved performance. This indicates verification of entire management
information data, system and procedure in connection with achieving the objectives of the
Company so that necessary suggestions may be put forward for better profitability economy and
improvement of the organization.
Cost Auditor is not required to comment on the authenticity of data, furnished by Financial Auditor
under the Section 210 of the Companies Act 1994. The Cost Auditor can only rearrange the
Financial Statements, reported by the Financial Auditor, in 1(9) of the annexure to the Cost Audit
report. Authentication of Financial Statements is not the responsibility of Cost Auditor. It is the duty
of Financial Auditor. The Cost Auditor will consider reported data of the Financial Auditor for
analysis and interpretation. If there is an apparent mistake, it will be reported in the same
paragraph. In case of any apparent mistakes as to treatment or principle, it will also be pointed out
in the same paragraph indicating the respective IAS or BAS number.
Scope of Cost Auditors: Cost Auditors can carry out Efficiency Audit, Performance Audit,
System Audit, Compliance Audit, Inventory Audit, Consumer Audit, Internal Audit, Propriety Audit,
Management Audit, Operational Audit, VAT Audit, Tax Audit, Export Audit, Cash-flow Audit, Export
Subsidy Audit and Export Incentive Audit.
They can also carry out voluntary cost audit in other concerns that are required to maintain cost
records to measure performance of any organization. But they can, in no way, carry out Financial
Audit or comment on the adequacy or authenticity of financial data. The Cost Auditors can report
on all aspects of operation and give comment on the prescribed areas with justification for each.
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AUDIT PLANNING, CONTROL & REPORTING
Familiarization with the Industry: A cost auditor should, on his own, do some leg-work
soon after the cost accounting record rules for an industry are introduced. He/she should collect
the data about the industry in general as well as the details of manufacturing process, product
varieties, specialties of the products, special features of cost structure etc. The source of
information for this purpose is the associations of such industry or chambers of commerce. A
comprehensive handbook on the specific industry may also be available from such associations. In
addition, the ICMAB does bring out a cost audit manual which gives a guide line for cost auditors.
It is necessary for the cost auditor to do his own homework before taking up an assignment in an
industry. He/she should visit the factory floor as many times as may be necessary to familiarize
himself with the manufacturing process involved. He/she should also discuss with the technical
personnel and clarify his doubts so that he can take up an audit or any other assignment very
effectively.
A good auditor should be a good accountant. The training for cost audit starts with maintenance of
cost accounts. An auditor should be at least slightly above the accountant in his understanding of
the accounting procedures and the ultimate result of according in the form of reports, cost
statements etc. Therefore, it is necessary for the auditor to have a good training in accounting.
Familiarization with the Organization: Before taking up an audit, the cost auditor should
familiarize with the organizational structure of the company/unit that he/she is auditing. He/she
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should know as to who is answerable for what and to whom so that he/she can directly address
his/her request for information, explanation etc. to the officer concerned. A study of the
organizational structure will also be helpful in making any useful suggestions.
The cost auditor should also familiarize himself/herself with the existing systems and procedures.
Practices vary from industry to industry and from company to company. For example, in public
sector undertaking, no purchases are made without preparing a comparative quotation chart and
without a specific or general sanction for the purchase. In certain factories, receipt of any item of
material or store is documented through a stores receipt report or note. In certain factories, a
register is maintained where all entries are recorded in serial number. Similarly, the bill passing
procedures also differ. The bill is passed through the records only when payment is made.
Similarly, different procedures exist for issue of materials and for personnel records etc. An auditor
should, therefore, familiarize himself/herself with the systems and procedures adopted. While
studying the system, he/she should also take note of any lapse or weak areas so that such instances
can be with the management or brought out in his/her report.
The cost auditor should also study the method of cost accounting viz-a-viz financial accounting.
After all, the basic input data for both the systems arise from the same source, viz. the vouchers.
However, financial accounting might not have taken cognizance of the requirements of the cost
accounting record rules. For example, cost accounting requires valuation of issues of materials and
stores periodically. In financial accounting, the consumption value might be worked out on a
derived basis by evaluating the closing stocks and treating the balancing figure as consumption at
the year end.
The accounting may be integrated with the financial accounting or bifurcated from it. The cost
auditor cannot insist on a bifurcated or integrated system. He/she is only to ensure that the
information required under the Act/Rules is being maintained. He/she can however, suggest to the
management in the interest of better information, any changes in the existing system. Before
making such suggestions, he should study the system and should keep in mind the implications of
the changes from different points of view.
Familiarization with the Production Process Systems & Procedures: The auditor should
have a broad idea of the cost structure of the industry before taking up the work of checking the
records. Familiarization with the production process systems & procedures is very essential for
conducting a cost audit. Every cost auditor must be familiar with the company’s production process
and procedures. Not only this but also a cost auditor must be familiarized with the Cost Structure of
the company. Though materials cost may occupy a substantial portion of the total cost structure in
any industry, the exact extent may vary. The material cost itself may consist of raw materials,
bought-out materials and process materials. Similarly, labor cost may consist of time rate wages
and piece rate wages. Sometimes the rates may be merged in the machine hour rate. However, for
disclosure of elements of cost in the cost statement, they may have to be separated. The plan for
vouching the material costs, labor costs etc. has to be drawn up according to the importance of
such costs and the system adopted for accounting for such costs.
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List of Records and Reports: The company ordered to have its accounts audited under
Sec. 220 shall make available to the cost auditor within 75 days from the end of the financial year of
the company cost accounting records maintained under section 181(1)(d) and such other cost
statements books and papers as may be prescribed by the concerned cost audit order that would
be required conducting the cost audit, and shall render necessary assistance to the cost auditor so
as to enable him/her to conduct and complete the cost audit smoothly.
More specifically the records normally relates to:
(a) Cost center wise installed machines showing machine available hours, actual operating
hours, idle hours, reasons for shortfall.
(b) Machine wise production capacity, Actual production achievement, Reasons for
shortfall/overproduction, if any.
(c) Percentage of achievement with reasons for difference.
(d) Cost center wise input of direct materials/indirect materials and actual output.
(e) Cost center wise direct and indirect labor showing machine wise, shift wise engagements
and giving break up of piece rate, time rate, incentive and other perquisites.
(f) Machine wise or cost center wise consumption of power, fuel, gas, water, treatment and
other utilities showing cost of each and production in the machine/cost center.
(g) Basis of ascertainment, allocation and absorption of different elements of costs including
depreciation, amortization or depletion.
(h) Records of Direct Material, Packing Materials, Stores and Spares, Work-in-process and
Finished Goods Stock.
(i) Cost Accounting Records, Statements and Assets Registers.
(j) Registers of Purchases, Sales, Imports, Exports, Consumption of Materials, Stores and
Production.
(k) Records of loose tools, equipment, foundry, civil works, machining, cold/heat treatment,
plaiting, painting, designing, workshop, etc.
(l) Records of Planning, Budgeting, Evaluation and Control.
When computer is used for recording purpose, the cost auditor will review the Computer Assisted
Aided Techniques (CAAT), check feedback files, programming, resultant compilation and final use
for necessary action at his/her end so far does the same related to cost accounting or performance
of the unit under cost audit.
Commencement of Cost Audit: Before starting the audit work, the cost auditor should
make himself familiar with the environment of the organization. It will help him to ascertain the
existence of a proper internal control system in the organization. It will help him to ascertain the
existence of a proper internal control system in the organization. It will help him to ascertain the
existence of a proper internal control system in the organization. After understanding the whole
situations relating to policy matters, internal control, stages of manufacturing operation, he should
ask the management to furnish the following information:
(i) The details of books of cost accounts in use.
(ii) The name and designation of employees engaged in cost accounts department.
(iii) The system of keeping of books of cost accounts.
(iv) The system of internal control in practice.
(v) The name of the employees responsible for maintaining the vouchers files.
(vi) The production capacity of the factory.
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(vii) The total number of machines in operation.

(viii) The date of acquisition of plant and equipment and methods of calculating of
depreciation.
(ix) The system of inventories control and their methods of valuation.
(x) The system of wages and bonus payment to labor.
(xi) The total number of labor force and the nature of jobs assigned to them.
(xii) The details of overhead expenses.
(xiii) The total number of units produced, sold and unsold during the period under review.
(xiv) The details of assets and liabilities.
It may be advisable to commence audit before the end of the accounting year for which audit is
being undertaken so that the procedural part of the audit report is ready ahead of time. The cost
auditor will then send his staff for verification of basic cost accounting records for the relevant year.
Planning the Cost Audit: In planning the cost audit work the cost auditor should do
preliminary groundwork, as mentioned earlier to enable him to acquaint fully with the product,
industry, technology and general economic scenario. While planning the cost audit program, the
cost auditor should keep in
- The provisions contained in the relevant cost accounting record rules.
- The provisions of the cost audit report rules and guidelines on cost audit issued by the
ICMAB.
- Special features of the industry including economic environment in respect of the
industry such as capacity, production, demand, prices, markets, international scenario.
- The nature of business;
- The object of cost audit;
- The process of manufacturing stage wise production – utilities, technology, etc.
- The system of cost accounting;
- The system of internal control;
- The extent of audit, i.e. whether a detailed audit is required or it is to be limited to the
checking of errors and detection of frauds;
- The areas to be covered.
- Cost behaviors of past two years.
- Control measures in existence.
- Efficiency measures.
Preparation of the audit program: For conducting a cost audit, the cost auditor should have a
useful program. The cost audit program will concern the following principal items:
(1) Records of raw materials and other goods,

(2) Records relating to labor,
(3) Records of overheads,
(4) Depreciation,
(5) Work-in-progress.
All these items are discussed below:
Records of Raw Materials and Other Goods:
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- See that maximum level has been fixed for each category of inventory so that fund is not
unnecessarily tied up in inventory.
- See that re-order level and minimum level have also been fixed for different categories of
raw materials and stores so that production does not suffer for want of these.
- Consider whether the systems of purchase, receipt, inspection, return, issue and record
of raw materials and stores are adequate or not.
- Examine the entries in the Stores Ledger with the help of Goods Receipt Notes, Invoices,
Requisitions, Materials Return Notes, etc. and check the pricing of material issues.
- Ensure that the Bin Card and Stores Ledger records in respect of balances of materials
exactly agree in most cases.
- Enquire whether purchase is made at reasonable terms after inviting tender or
quotations.
- Also enquire whether purchases have been made in required quantities and whether
materials of right quality have always been purchased.
- See whether possibilities of pilferage or loss of materials exist in store or production
departments.
- Examine the direct material costs of manufactured items and ensure their correctness.
- Compare the current figures of usage of raw material per unit of production and the price
per unit of raw material or store for different items with the figures of the last year and
also with the standards, and investigate the reasons of unusual adverse variances.
- Where materials have been lost or wasted otherwise than in production, see that such
loss has been shown separately, and consider whether such loss is controllable.
- Check whether the stock holding limits in the case of different categories or raw materials
and stores are either high or low as against the production program.
Records relating to Labor:
- Examine the internal check in vogue relating to recording of workers’ attendance, job-
time and actual work, preparation of wages-sheets and payment of wages, and identify
the deficiencies in the system of internal check.
- In the case of time-rate wages, examine the time cards and job cards of workers.
- Where wages are paid on piece-rate basis, see that the records of work or output of
workers have been properly kept.
- Check the computations of incentive wages, when incentive wages are also paid in
addition to time-wages and see that the incentives have been duly approved by a
competent authority.
- If workers have worked overtime, check the approval of overtime work and ensure that
overtime is allowed on valid reasons.
- Examine the records of leave and absence of workmen.
- Check the entries in the wages sheets with the help of supporting records and evidence
and check the calculations in the wages-sheets.
- If any part of wages relates to capital works like construction work or installation of
machines, see that part of wages has been properly capitalized.
- See whether idle-time records have been properly kept with reasons for idle time. Check
the segregation of normal and abnormal idle time costs and see that only the normal idle-
time cost has been included in factory overhead.
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- Examine the segregation of wages between direct labor cost and indirect labor cost and
ensure that this is in accordance with cost accounting principles.
- Check the distribution of direct and indirect labor costs to various departments or cost
centers.
- If the direct labor cost per unit of production is found to be quite higher than that of the
last year or higher than standard, the reasons of such adverse variance have to be
investigated.
Records of Overheads: Overheads consist of indirect material cost, indirect labor cost and other
indirect expenses. While checking the records of overheads, the cost auditor should pay attention
to the following points:
- See whether the grand total of overheads as per cost sheets agrees with the total of
indirect expenses, indirect materials and indirect labor costs. When, however, overheads
are recovered to production or sales on pre-determined basis, there will be difference in
totals. In such a case, the amounts of overheads under recovered and over-recovered
have to be checked and the correctness on the basis of overhead recovery for each class
of overhead has to be ensured.
- Check the distribution of different items of indirect expenses to factory overhead,
administrative overhead and selling & distribution overhead and see that the distribution
is correct.
- Check the allocation and apportionment of different items of factory overhead to various
departments or cost centers.
- Ensure that the apportionment of each item of overhead to cost centers or each service
department overhead to production departments has been made correctly on
appropriate basis.
- Ensure the correctness of apportionment of factory overhead between completed units
of production and work-in-progress.
- See whether administrative overhead and selling & distribution overhead have been
taken to manufactured or sold units of goods on the basis of correct principles.
- Compare the overheads of the current period with those of the past period and also with
the budgets and investigate the reasons for unusual variances.
- Check whether the overheads per unit are of reasonable amounts or not.
Depreciation:
- See whether detailed records are maintained for fixed assets, showing therein location,
quantity, cost, addition or deduction and depreciation of each item of fixed assets.
- Ascertain the basis of depreciation for each category of fixed assets and ensure that there
is no change in the basis during the current year.
- In the case of a company, ensure that the basis prescribed in the related regulations and
rules for calculating depreciation of a particular category of fixed assets has been
adopted.
- Examine whether depreciation has been properly distributed to factory overhead,
administrative overhead and selling & distribution overhead according to usage of assets
in different functional areas.
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- Check whether depreciation of factory assets has been properly shown against the
departments or cost centers on the basis of values of assets installed and check the final
apportionment of depreciation cost to production departments.
Work-in-progress:
- Check the basis of valuation of work-in-progress and ensure that the basis is reasonable.
- Enquire whether there has been any change in the basis of valuation of work-in-progress.
- Check the quantities of work-in-progress and see that the quantities have been properly
ascertained.
- In the case of processing unit, see whether the degree of completion of work-in-progress
in respect of material, labor and overhead has been properly ascertained or not.
- Check the material and labor costs of work-in-progress with the help of relevant records.
- If any part of factory overhead is included in the valuation of work-in-progress, see that
this has been properly done.
- Examine whether the cost of work-in-progress is disproportionate to that of finished
goods.
Verification of Records and Reports: The following records are considered as part of the
cost accounting records which must be verified by the cost auditors:
(1) Production:
(a) Consumption registers of raw materials, packing materials, etc.
(b) Production reports.
(c) Scrap, wastage, spoilage and defective reports.
(d) Machine utilization report and idle time report.
(e) Details of production hours, labor and machine hours.
(2) Raw materials stores etc.:

(a) Goods received register.
(b) Bin cards and stores ledger.
(c) Material consumption reports.
(3) Utilities (Steam, power & water):

(a) Records of inputs and outputs.
(b) Records of cost centre-wise allocation of products.
(c) Records for own generated power and purchased power.
(4) Wages and Salaries:

(a) Attendance registers.
(b) Payroll.
(c) Leave wages and gratuity payments.
(d) Overtime & idle time records.
(5) Overheads:
(a) Overheads analysis/distribution registers.
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(b) Overhead absorption details.
(6) Repairs and Maintenance:

(a) Work order register
(7) Work-in-progress and finished goods:

(a) Cost centre-wise/product-wise stock register.
(b) Product-wise finished goods register.
(8) Cost accounts, records and statements:

(a) Cost centre-wise assets register.
(b) Product ledger.
(c) Annexure and proforma as per related rules and regulations.
(d) Reconciliation of profit/loss as per costing and financial records.
(9) Sales:
(a) Sales register including export sales register.
(b) Sales analysis by products (quality, size, variety wise)
The above mentioned cost records shall be maintained on a regular and continuous basis and not at
the end of the year only.
Verification of Performance & Statements: The cost auditor has to examine all the
records, cost performance and statements and financial statements and other relevant data in
course of his audit work. Such examination of the cost and financial statements by the cost auditor
may include the following:
- Financial position including financial ratios as required to be stated in the CARR.
- Licensed capacity, installed capacity, production and capacity utilized.
- Consumption of raw materials, power and fuel, expenditure, salary and wages, stores and
spare parts, provision for depreciation, expenditure on overheads, royalty and technical
aid, abnormal non-recurring costs and other items.
- Sales realization – local and export unit and total for each variety of products.
- Cost proforma maintained by the company as per CARR.
- Reconciliation with financial books.
The examination of cost proforma as per provisions contained in relevant cost accounting records
rules and other items mentioned above may commence only after the end of the accounting year
when all the closing entries are passed through the books of account.
Evaluation of Internal Control Systems: Internal control is the best regard as indicating
the whole system of controls, financial or otherwise, established by the Management in the
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conduct of a business, including internal check, internal audit and other forms of control. Internal
control is fundamental ingredient for the successful operation of the business in modern days.
Internal control can not be identical in its approach in all the organizations. In fact it varies in its
concept and application, having regard to the following: (a) type of business, (b) magnitude of the
business, (c) infrastructure available in the organization, (d) potentially of human resources and
their outlook.
Internal control has been recognized as fundamental and indispensable to modern auditing.
Internal control can be functionally divided into following classification:
i) Administrative Control: This comprises the application of policies. Efforts for achieving
overall objectives and achievement of integrated efforts through guidance, motivation and control.
ii) Operation Control: This is exercised through “management accounting” techniques, viz.
budgetary control, standard costing, profit engineering etc.
iii) Financial Control: This refers to the financial management exercise through authorization,
allocation of duties, accounting/operational manuals, ensuring that MIS is adequate and reliable
and that management plans, objectives and procedures are duly complied with in the pursuit of
safeguarding of assets the interest of shareholders.
Internal control has its all-embracing nature, and it is clear that internal control is concerned with
the controls operative in every area of corporate activity as well as with the way in which individual
controls interrelate. Internal control is the whole system of control, of which internal check and
internal audit are two important constituents.
The evaluation of the internal controls including internal accounting controls gives an opportunity
to the statutory auditor to a clearer insight into the operational systems and an overall view of the
organizational workings to spot weaknesses in the systems and procedures both in respect of
financial and operational areas of the business.
The guiding factor for audit operations by the statutory auditor depends to a great extent on the
soundness or otherwise the internal controls in business. Due to the limitation of time a statutory
auditor can spend on a company’s audit, he has to decide the extent of in-depth audit of many
areas, particularly the checking and verification of routine aspects of financial transactions. The
aspect of internal audit systems and internal control systems has assumed paramount importance
in view of the notification promulgated by the government.
We know control compels events to conform to plans. Internal control as an essential part of
control mechanism within an organization functions for the success of a business by way of
implementation of organizational objectives, policies, plans and philosophy. To assess the
effectiveness of internal control measures, it is essential to measure the extent of accomplishment
of objectives through appraisal, review and evaluation of the related factors. Now, because
appraisal review and evaluation, in most of the organizations are done by the internal auditor
thorough internal audit functioning, the importance of role of an internal auditor in the context of
internal control, can not be exaggerated.
The Internal Auditor should keep in mind the following two sets of basic objectives while evaluating
internal control – (a) to safeguard assets and control transactions and (b) to provide reasonable
assurance, through his opinion report, that there are no material errors in the financial statements.
A review is also necessary to establish the effectiveness of those controls that assure completeness
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of financial information, since this is not really ascertainable through detailed testing of balances
and transactions.
Some of the basic points for evaluating internal control systems are summarized bellow:
Budgetary Control: A budget is a financial and/or quantitative statement prepared and
approved prior to a period of time, to the policy to be pursued during that period for the
purpose of attaining a given objective.
Budgetary control is the establishment of budgets relating to the responsibilities of
executives to the requirements of a policy, and the continuous comparison of actual with
budgeted results either to secure by individual action the objective of that policy or to
provide a basis for its revision. Budgetary control is designed to assist management in the
allocation or responsibility and authority, to aid in making estimates and plans for the
future, to assist in the analysis of the variations between estimated and actual results, and
to develop bases of measurement or standards with which to evaluate the efficiency of
operations.
In order that a budgetary control is operated effectively there must be an efficient
organization for budgetary control. The budgetary control organization is responsible to the
chief executive of a business. An advantage to this system is that decisions can be taken at
the highest level where there is a conflict between the aims of the managers of two or more
divisions. Moreover, where budgetary control has the support of the chief executive, those
executives or managers who are responsible to him will fully co-operate and place more
reliance on budgetary control. While the chief executive bears the responsibility for the
effectiveness of the budget, the detailed preparation and administration of budgetary
control is always delegated to subordinates as a functional responsibility and particularly to
the budget committee with the budget officer as the secretary to the budget committee.
While determining the adequacy or otherwise of the budgetary control system of an
organization, it is essential that cost auditor should evaluate its coverage and effectiveness
i.e., whether the system in operation covers all functions rather than an accounting
exercise. For this purpose, he/she should examine whether the system contributes towards
accomplishing the basic task of planning, coordinating and controlling the activities of the
organization in relation to the product under cost audit.
Capacity Utilization: Capacity can be defined as the rate of output at which there is no
incentive to alter the size of the plant if the rate of output is expected to be permanent. The
cost auditor is required to give his/her suggestions on rectification of general imbalance in
production facilities under the CARR. He/she is also required to give his/her suggestions for
improvement in capacity utilization.
The need for determining production capacity in respect of Industrial Organization in
Bangladesh arises from the following reasons: (i) to meet the requirement under the
Companies Act, 1994, that prescribes the form and contents of the balance sheet as well as
profit and loss account; (ii) for purpose of CARR 1997 where a cost audit has been ordered
by Government; (iii) for internal management purpose; (iv) for assessment of capacities for
national level planning; for fixing the price of product(s) after ascertaining the capacity costs
and per unit incidence thereof, and (vi) for determination of allotment of scarce raw
materials in the form of quotas, import licenses, etc.
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The cost auditor shall consider the following points in the evaluation and measurement of
capacity utilization:
- Method of measuring base machine capacity;
- Clear guideline should be available regarding assessment of capacity. Technical
terminology like licensed capacity, installed capacity, rated capacity etc. should be
properly defined.
- In some industries capacity is influenced by a number of factors and determining a single
base figure requires adjustment of various variables such as volume of vessels, yield of
product, recovery factor, cycle time etc.
- Whether the system provides for comparative studies such as: (i) rated output and actual
output per unit of time, (ii) normal output and actual output per unit of time.
- Determine whether the capacity utilization report is being complied by a person other
than responsible for production.
- Whether capacity measurement is based on capital output ratio or sundry other factors.
Imbalance in production facilities is resulted when the capacities of different equipment of a
plant does not match. One type of equipment is capable of producing more than the
receiving equipments. As a cost auditor following suggestions can be made to rectify such
imbalance:
- The measurement must opt for sub-contracting outside the firm that part of the job
which is restricting the production.
- Install balancing equipment with higher output potential.
- Introduce shift working among the operatives.
- If there are consistent imbalances in the production facilities, entire plant can be replaced
by installing new automatic plant.
- Idle equipments can be sold so that entire attention can be diverted to the critical
equipment.
A Cost Auditor can only give comment on capacity utilization if he/she is well conversant
with the procedure of capacity determination.
Inventory Control: The term inventory includes all idle resources kept in stock for business
purposes. Thus, it includes mainly stock of raw materials, work-in-progress and finished
goods, stores and spare parts, etc. Inventory control is possible with the help of Perpetual
Inventory System along with continuous stock taking. The following aspects may be taken
into consideration for proper inventory control: (1) Maximum, minimum and reorder levels
fixation, (2) Fixed order quantity system and different replenishment systems, (3) ABC
method, (4) Pareto distribution, (5) VED analysis, (6) Just-in-time (JIT) purchasing, (7) Fast
moving, slow moving and non-moving. The cost auditor can get an idea about the internal
control relating to inventory from the questionnaire.
Management Information System: Management Information System or MIS is an

information system making use of available resources to provide managers at all levels in all
functions with the information from all relevant sources to enable them to make timely and
effective decisions for planning, directing and controlling the activities for which they are
responsible.
The cost auditor has to consider various aspects while evaluating the effectiveness of
Management Information System. At first he/she should consider the following aspects
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while appraising the MIS: (i) the content, quality and source of information, (ii) flow of
information from the originator to the receiver, and (iii) correlation of information in the
decisional areas.
Contents and Sources of Information: this may include: (i) whether the information collected
is relevant to the decision problem or whether it will result in the improvement in the
quality of decisions; (ii) whether there is any tendency of the manager to use control data
for post-mortem exercise; (iii) whether the reporting of MIS is regular and uniform for
financial and non-financial information; (iv) whether the information contain unwanted
information; (v) whether the MIS adequately caters to the requirements of decision makers.
Flow of Information: a cost auditor has to proceed on the following lines: (i) System
Organization: (a) system is centralized or decentralized, (b) flow of information from various
units to the control section, (c) estimating the volume of data, transmission time and cost,
(d) cost-benefit analysis of centralized vs. decentralized information. (ii) Data collection and
management: Appraisal should include the following aspects: (a) methodology of collecting
data, (b) whether the data are filtered and classified, (c) whether the data is properly
matched with decision problems, (d) whether the management carry out detailed study
regarding existing frequency, (e) whether system design in free or any possible constraints.
Correlation of MIS with the Decision Areas: cost auditor should examine this aspect from the
following angles: (i) whether input-output analysis is attempted, (ii) whether MIS is helpful
in reducing the effects of uncertainty; (iii) whether MIS is cost-effective; (iv) whether the
information is being supplied to the users very effectively; (v) whether MIS is providing a
feedback for corrective action, and (vi) whether MIS is able to optimize the value of
information.
Risk Assessment:
Preparation of Cost Audit Report: see on CARR 1997.
Placement of Report before the Board of Directors and Finalization: The chief executive
of the company shall present the cost audit report to the board of directors within 30 days from the
date of submission of the same by the auditor. The cost audit report shall not ordinarily be open for
inspection by the members or shall not be submitted to the annual general meeting of the
company.
Provided that if the government considers it necessary for the interest of the general members,
may issue written order recording the reasons for the same to present the whole or part of the
report in the next annual general meeting of the company and in such case the subject shall be
presented in the annual general meeting as directed by the government.
The company ordered to have its accounts audited under Section 220 shall make available to the
Cost Auditor within 75 days from the end of the financial year of Company Cost Accounting records
maintained under Section 181(1)(d) and such other cost statements books and papers as may be
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prescribed by the concerned cost audit order that would be required for conducting the Cost Audit,
and shall render necessary assistance to the Cost Auditor so as to enable him to conduct and
complete the Cost Audit smoothly.
Every cost auditor shall prepare cost audit report (in duplicate) of the company under audit and in
accordance with the procedures as laid down in the schedule of these rules and submit within a
maximum period of 150 days from the end of the financial year, a report on the performance to of
its function for that very year. The cost auditor shall submit the report prepared by him to the
board of directors of the company and a copy of the same shall be sent to the government. Also,
cost auditor shall give clarification, if any, required by government, on the cost audit report
submitted by him within the time, if the government thinks fit.
CODE OF CONDUCTS AND ETHICS
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Professional Misconduct: For the Bangladesh, ICMAB prescribed some professional and
other misconduct on their Cost Audit Manual which is defined in Regulation No. 104 of CMA Rules.
It is includes any act or omission specified in Schedule IV. The points are copied below:
A member of the Institute shall be guilty of professional and other misconduct, if he/she-
(1) Places his professional service at the disposal of or enters into partnership with an
unqualified person or persons in a position to obtain business of the nature in which cost and
management accounts, engage by means which are not open to be a member of the Institute.
(2) Allows any person to practice in his name as a cost and management accountant in practice
unless such person is also a cost and management accountant and is in partnership with or
employed by him.
(3) Pays or allows or agrees to pay or allow directly or indirectly a share commission or
brokerage in the fees or a partner or profits of his processional, business to any person other than a
member of the Institute or a partner or a retired partner or the legal representative or widow of a
deceased partner.
(4) Accepts or agrees to accept any part of the profit of the professional work of a lawyer,
income-tax practitioner, auctioneer, broker or other agent or other person other than a member of
the institute.
(5) Accepts a position as a cost and management accountant in practice previously held by
some other members without first communicating with his in writing.
(6) Accepts an appointment as a cost and management accountant with a concern without first
ascertaining from it whether the legal requirements, if any, have been duty complied with.
(7) Accepts a position as a cost and management accountant in practice previously held by
some other member in such conditions as constitute under-cutting.
(8) Publishes or sanctions the publication of expressions of thanks or appreciation by clients or
promotes in any way laudatory notices with regard to professional matters.
(9) Solicits client or professional work either directly or indirectly by circular advertisement
personal communication or interview or by any other means partaking of the nature of
advertisement.
(10) Advertisement his professional or services or uses any designation or expressions other
than cost and management accountant on professional documents, visiting cards, letter heads or
sign boards unless it be a degree of a University established by law in Bangladesh or recognized by
the government or a little indicating membership of the Institute of Cost and Management
Accountant or any other institution that has been recognized by the government or may be
recognized by the Council.
(11) Allows his name to be inserted in any directory either in the main section or in classified
list, whether, printed or not, so as to appear in leaded type or in any manner which could be
regarded as of an advertising character.
(12) Certifies or submits in his name or in the name of his firm a report of an examination of
cost accounting and related statements, unless the examination of such statements has been made
by him/her or by a partner or any employee in his firm or by another cost and management
accountant in practice.
(13) Permits his name or the name of his firm to be used in connection with an estimate of cost
or earning contingent upon future transactions in a manner which may lead to the belief that
he/she vouches for the accuracy of the forecast.
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(14) Charges or offers to charge, accepts or offers to accept in respect of any professional
employment fees which are based on a percentage of profits or which are contingent upon the
findings or results of such employment.
(15) Engages in any activities including publication of leaflets, booklets, brochures, papers etc,
either signed or unsigned or benami which may be considered as affecting the Institute or the
profession of Cost and Management Accountants.
(16) Allows a person not being a member of the Institute or a member not being his partner to
sign on his/her behalf or on behalf of his/her firm any report or cost or pricing statement or any
other document required by his client.
(17) Discloses information acquired in the course of his professional engagement to any person
other than his clients without the consent of his client or otherwise than as required by any law for
the time being in force.
(18) Express his opinion on cost or pricing statement of any business or any enterprise in which
he/she, his/her firm or a partner in his/her firm has a substantial interest unless he discloses
interest also in this report.
(19) Fails to disclose a material fact known to him/her which is not disclosed in cost or pricing
statement but disclosure of which is necessary to make such statement not misleading.
(20) Fails to report a material misstatement known to him/her to appear in a financial
statement with which he/she is concerned in professional capacity; or fails to invite attention to any
applicable to the circumstances.
(21) Is grossly negligent in the conduct of his/her professional duties.
(22) Fails to obtain sufficient information to warrant the expression of an opinion or his
qualifications are sufficiently material to negate the expression of the opinion.
(23) Fails to keep moneys of his/her client in a separate banking account or to use such
moneys for purposes for which they are intended.
(24) Has been guilty of any act or default discreditable to a member of the Institute.
(25) Contravenes any of the provisions of the Ordinance of the Regulations made there under.
(26) Is guilty of such other Act or omission as may be specified by the Council in this behalf, by
notification in the official Gazette.
(27) Not being a fellow styles himself as a fellow.
(28) Does not supply the information called for by, or does not comply with the direction of the
Council or any of the Council or any of its Committees.
(29) Includes in any statement, return or form to be submitted to the Council any particulars
knowing them to be false.
(30) Does not of pay any money he/she is ordered to pay by the Tribunal appointed.
(31) Adopts one or more of the practices specified in regulation no. 23.
The above do not limit or abridge in any way the power conferred or duty imposed on the Council
or the Disciplinary Committee to inquire into the conduct of any member in any other
circumstances. There are many cases and judgments on irregularities, committed by defaulting
Auditors. These are equally applicable so far it relates to Cost Audit.
The CMA Rules also state in regulation No. 121-123 as follows:
No Cost and Management Accountant who is not a member of a firm of cost and management
accountants shall practice under any name or style other than his own name.
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A Cost and Management Accountant in practice shall not engage in any business or occupation than
the profession of cost and management accounting unless it is permitted by a general or specific
resolution of the Council.
A Cost and Management Accountant in practice may act as liquidator, trustee, executor,
administrator, arbitrator, receiver, adviser or as representative for costing financial matters,
company law and taxation matters or may take up an appointment that may be made by the
government or a court of law or any other authority established under any law, or may act as the
secretary of a company in his professional capacity not being a whole-time employee.
Liability of a Cost Auditor: We know liability of Auditors from Companies Act 1994 or
from case decisions. But these normally relate to mistakes reported in financial statements that are
not audited by Cost Auditors. The case decisions in respect of law of contract and law of tort will be
applicable for Cost Auditors also. If a Cost Auditor fails to exercise the degree of professional care
and skill, appropriate to the case, which is expected from a professional Cost and Management
Accountant, he is liable for negligence to duty.
Rules for conducting Cost Audit have been stated in the Cost Audit (Report) Rules, 1997. Besides,
ICMAB has issued certain guidelines. The Companies may state certain terms in the Appointment
letter. If the Cost Auditor does not perform the same as per terms of engagement letter, rules and
guidelines, as stated above, he may be liable.
Liabilities under law of contract are stated below:
(1) When Cost Auditors accept appointment, they enter into a contract, which imposes certain
obligations upon them. These obligations arise from the terms of the contract.
(2) Both express and implied terms of contracts impact upon Cost Auditors. Express terms are
those stated explicitly in the contract.
(3) The express terms of the Cost Auditor’s contract cannot over-ride the CAAR 1997 by
restricting Cost Auditor’s statutory duties or imposing restrictions upon Cost Auditor’s statutory
rights which are designed to assist them in discharging those duties.
(4) Express terms will however be significant if auditors and client agree that auditor’s
responsibilities should be extended beyond those envisaged by the CARR 1997. Additionally if
Cost Auditors are involved in a non-statutory audit, the express terms will only be those
contained in any specific contract that may exist with the client.
(5) In those circumstances Cost Auditor’s are always likely to be judged on the content of any
report which they have issued. So, they should always ensure that their report clearly states the
effect of any limitation and scope of their work where such limitations exist.
(6) Implied terms are those which the parties to a contract may have left unstated because they
consider them too obvious to express, but which, nevertheless, the law will impart into a
contract.
(7) The implied terms which the law will impart into a contract of the type with which are
currently concerned are as follows:
•The Cost Auditor’s have a duty to exercise reasonable care.
• The Cost Auditor’s have a duty to carry out the work required with reasonable expediency.
•The Cost Auditors have a right to reasonable remuneration.
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(8) Degree of care arises in work of a specialized nature or where negligence is likely to cause
substantial loss.
(9) Cost Auditors should use adopted generally accepted Cost Auditing techniques, if any. In
addition, if auditor’s suspicions are around, they must conduct further investigations until the
suspicions are confirmed or put to rest.
Method of Expressing Interest to Conduct Cost Audit: A member of the institute shall be
guilty of professional and other misconduct, if he/she solicits clients or professional work either
directly or indirectly by circular advertisement, personal communication or interview or by any
other means partaking of the nature of advertisement.
A member of the Institute shall be guilty of professional and other misconduct, if he advertises his
professional or services or uses any designation or expressions other than Cost and Management
Accountant on professional documents, visiting cards, letter heads or sign boards unless it be a
degree of a University established by law in Bangladesh or recognized by the government or a title
indicating membership of the institute of Cost and Management Accountant or any other
Institution that has been recognized by the government or may be recognized by the Council.
A member of the Institute shall be guilty of professional and other misconduct, if he allows his/her
name to be inserted in any directory either in the main section or in classified list, whether, printed
or not, so as to appear in leaded type or in any manner which could be regarded as of an
advertising character.
The Cost Auditor must be, therefore, careful in expressing his/her interest in conducting Cost Audit
of any company. If a profile is to be submitted, it must be simple with the official seal of the Cost
Auditor. The pro-forma may be as follows:
1. Name of the Cost Audit firm:

2. Mailing Address:
3. Name of Principal with Qualification:
4. Name of Partners (if it is a Partnership) with Qualification:
5. Name of Associations with Qualification Provided They are Members of ICMAB:
6. Number of Assistants with Qualification, if Possible:
Members can not quote fees for any Cost Audit or other practicing job. They can however quote
hourly rates of fees of principal and others for the job. The fees will be fixed by the company in
accordance with the decision to be given by ICMAB from time to time.
Member will, however, give his/her written consent to conduct Cost Audit if he or she of their firm
is appointed. In case it is required to furnish information in accordance with any advertisement for
Audit/Investigation, it may be done stating the credential, justifying fitness and complying with the
requirements.
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LEGISLATION RELEVANT TO COST AUDIT
Companies Act: There are only few words about Cost Audit on the Companies Act 1994.
These are summarized below:
(1) Where in the opinion of the government, it is necessary to do in relation to any company
required under clause (d) of sub-section (1) of Section 181 to include in its books of accounts the
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particulars referred to therein, the government may, by order, direct that an audit of cost accounts
of the company shall be conducted in such manner as may be specified in the order by an auditor
who shall be a cost and management accountant within the meaning of the Cost and Management
Accountants Ordinance, 1977.
(2) An audit conducted by an auditor under this section shall be in addition to an audit
conducted by an auditor appointed under Section 210.
(3) The provisions relating to audit of a company specified in this Act, mutatis mutandis, and so
far as they are applicable, apply to an audit conducted under this section.
Cost Audit (Report) Rules, 1997: Notification dated 29-03-2001 of the Ministry of
Commerce of Government of the People’s Republic of Bangladesh was published in Bangladesh
Gazette of 17-04-2001. It is reproduced below:
S.R.O No. 73-Law/2001 – In exercise of the powers conferred by Rule 13 of Cost Audit (Report) Rules, 1997,
the government is pleased to publish the following English version of the same, namely-
(1) Short title – These rules may be called the “Cost Audit (Report) Rules, 1997”.
(2) Definitions –
(I) Unless there is anything repugnant to the subject or context, in these rules –
(a) “Act” means the Companies Act, 1994 (Act No. XVIII of 1994);
(b) “Employee” means all the employees including the officers;
(c) “Cost Auditor” means “Cost and Management Accountant” as defined in the Cost and
Management Accountants Ordinance, 1977 (Ordinance No. LIII of 1977), herein after called
the “said Ordinance” and any Cost Audit firm also included in it;
(d) “Company” means a company engaged in production, distribution, marketing,
transportation, processing, manufacturing, milling or extraction and mining activities;
(e) “Section” means any section of the Companies Act, 1994 (Act No. XVIII of 1994).
(II) All other words in these rules but not defined shall have the same meaning as assigned to them in
the Companies Act, 1994 (Act No. XVIII of 1994).
(3) Maintenance of Books of Accounts on Certain Matters:

(I) Companies engaged in production, distribution, marketing, transportation, processing,
manufacturing, milling or extraction and mining activities shall maintain cost accounting books with
such particulars relating to utilization of materials, labor and other items of overhead costs.
(4) Audit of Account by Cost Auditor:

Each Company shall have its Cost Accounting books audited every year by a Cost Auditor and such audit
shall be in addition to audit of accounts under Section 210.
(5) Appointment of Cost Auditors:

(I) The Board of Directors of a Company ordered to have its books of accounts audited as such by the
government under Section 220(1), shall appoint a cost auditor fixing his remuneration within a period
of 30 days from the end of its each financial year;
Provided that, a person cannot be appointed or re-appointed as cost auditor without his or her written
consent.
(II) The person appointed as cost auditor of a company under sub-rule (I) shall intimate the matter to
the government within a period of 15 days.
(6) Qualifications and Disqualifications of a Cost Auditor:

(I) A person cannot be appointed as a cost auditor unless he/she is a Cost and Management
Accountant as defined in the said Ordinance:
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Provided that a Cost and Management Accountant cannot be appointed as a Cost and Auditor unless
he/she deserves a certificate of practice issued by the Institute of Cost and Management Accountants
of Bangladesh established under the said Ordinance;
Provided further that a firm whereof all the partners practicing in Bangladesh are qualified for
appointment as aforesaid may be appointed by its firm name to be Cost Auditor of a Company in
which case any of the partners may act in the name of the firm.
(II) None of the following person shall be qualified for appointment as Cost Auditor of a company,
namely:
(a) an employee of company under audit;
(b) a person who is a partner or served under an employee of the Company under audit;
(c) a person who is indebted to the company for an amount exceeding one thousand taka, or
who has given any guarantee or provided any security in connection with the indebtness of
any third person to the company for an amount exceeding one thousand taka;
(d) a person who is a director or member of a private company, or partner of a firm, which is
managing agent of the company;
(e) a person who is a director, or the holder of shares exceeding five percent in nominal value of
the subsequent capital, of any body corporate which is the managing agent of the company;
Provided that where any shares held by a person as nominee or trustee for any third person
and in which the holder has no beneficial interest, such shares shall be excluded in computing
the extent of the subscribed capital for the purpose of this clause;
(f) appointed as an auditor of the company according to Section 210.
(III) A person shall not be qualified for appointment as a Cost Auditor of a company, if –
(a) he/she, according to sub-rule (II), is disqualified for appointment as Cost Auditor of any other
body corporate which is subsidiary of that company or holding company or a subsidiary of that
company’s holding company;
(b) he would be disqualified for such appointment, had the said body corporate been a company.
(IV) if a Cost Auditor becomes subject, after his/her appointment to any of the disqualification’s
specified in sub rules (II) and (III), he shall be deemed to have vacated his/her office as such.
(7) Supplying Cost Accounting Records, etc.

The company ordered to have its accounts audited under Section 220 shall make available to the Cost Auditor
within 75 days from the end of the financial year of Company Cost Accounting records maintained under
Section 181(I)(d) and such other cost statements books and papers as may be prescribed by the concerned
cost audit order that would be required for conducting the Cost Audit, and shall render necessary assistance
to the Cost Auditor so as to enable him to conduct and complete the Cost Audit smoothly.
(8) Submission of Report:

(1) Every cost auditor shall prepare cost audit report (in duplicate) of the company under audit and in
accordance with the procedures as laid down in the schedule of these rules and submit within a
maximum period of 150 days from the end of the financial year, a report on the performance to of its
function for that very year.
(2) The cost auditor shall submit the report prepared by him to the board of directors of the company
and a copy of the same shall be sent to the government.
(3) Cost auditor shall give clarification, if any, required by government, on the cost audit report
submitted by him/her within the time, if the government thinks fit.
(9) Presentation of Cost Audit Report:

(1) The chief executive of the company shall present the cost audit report to the board of directors
within 30 days from the date of submission of the same by the auditor.
(2) The cost audit report shall not ordinarily be open for inspection by the members or shall not be
submitted to the annual general meeting of the company.
Provided that if the government considers it necessary for the interest of the general members, may
issue written order recording the reasons for the same to present the whole or part of the report in the
next annual general meeting of the company and in such case the subject shall be presented in the
annual general meeting as directed by the government.
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(10) Additional Matters:

The government may, by general or special order, direct that in the case of such class of description of
companies as may be specified in the order, the cost auditor’s report shall also include a statement on such
matters as may be specified therein.
(11) Authentication of Cost Accounting Statements, etc.:

The cost accounting statements, if any, shall be signed jointly by the chief executive of the company and chief
of accounts department (by whatever name called) and if any one or both of them for the time being are
outside Bangladesh, the person or persons holding charge of them shall sign the documents.
(12) Penalties for Contravention of Rules:

If any cost auditor or any officer of a concerned company contravenes the provisions of these rules, he/she or
they, as the case may be, shall be punished with fine which may extend to one thousand taka.
(13) Publication of Authentic English Text:

After commencement of these Rules, the government shall, by notification in the official gazette, publish a
Text of transaction in English of these Rules which shall be called as Authentic English Text;
Provided that in the event of conflict between the Rules and the English Text, the Rules shall prevail.
SCHEDULE
Cost Audit Report
CMA Ordinance, 1977: The CMA Ordinance, 1977 are copied below:
Cost and Management Accountants Ordinance, 1977

CONTENTS
1. Short title
2. Definitions
3. Incorporation of the Institute
4. Entry of names in the Register
5. Disabilities
6. Associates and fellows
7. Certificate of practice
8. Members to be known as Cost and Management Accountants
9. Constitution and composition of the Council
10. Election of the Council
11. Honorary office-bearers of the Council
12. Resignation of membership and casual vacancies
13. Duration and dissolution of Council
14. Functions of the Council
15. Appointment of officers and employees, etc.
16. Committees of the Council
17. Branch Councils
18. Finance of the Council
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19. Register
20. Removal of name from the Register
21. Penalty for falsely claiming to be a member of the Institute, etc.
22. Penalty for using the name of the Council, etc.
23. Companies not to engage in cost and management accounting in Bangladesh
24. Unqualified persons not to sign documents
25. Offences by companies
26. Sanction to prosecute
27. Alternation in the Register and cancellation of certificate
28. Indemnity
29. Maintenance of branch offices
30. Reciprocity
31. Power to make regulations
32. Power to give directions for making regulations, etc.
33. Repeal and savings
GOVERNMENT OF THE PEOPLE'S REPUBLIC OF BANGLADESH

MINISTRY OF LAW AND PARLIAMENTARY AFFAIRS
NOTIFICATION
Dhaka, the 14th November, 1977*
No. 888-Pub. - The following Ordinance made by the President of the People's Republic of Bangladesh, on
the 8th November, 1977 is hereby published for general information :-
THE COST AND MANAGEMENT ACCOUNTANTS ORDINANCE, 1977

Ordinance No. LIII of 1977
AN
ORDINANCE
to constitute an Institute of Cost and Management Accountants of Bangladesh for the purpose of
regulating the profession of cost and management accountants.
WHEREAS it is expedient to constitute an Institute of Cost and Management Accountants in Bangladesh

for the purpose of regulating the profession of cost and management accountants and for matters connected
therewith.
Now, THEREFORE, in pursuance of the proclamations of the 20th August, 1975, and the 8th November,
1975, and in exercise of all powers enabling him in that behalf, the President is pleased to make and
promulgate the following Ordinance:-
1. Short title  The Ordinance may be called the Cost and Management Accountants Ordinance, 1977.
2. Definitions  (1) In this Ordinance, unless there is anything repugnant in the subject or context:-
(a) "associate" means an associate member of the Institute;
(b) "cost and management accountant" means a person who is an associate or a fellow of the Institute;
(c) "Council" means the Council of the Institute;
(d) "dissolved Institute" means the Institute as defined in the Cost and Industrial Accountants Act, 1966
(XIV of 1966);
(e) "fellow" means a fellow member of the Institute;
(f) "Institute" means the Institute of Cost and Management Accountants of Bangladesh constituted under
this Ordinance;
(g) "prescribed" means prescribed by regulations made under this Ordinance;
(h) "President" means the President of the Council;
(i) "Register" means the Register of members of the Institute maintained under this Ordinance;
(j) "Vice-President" means the Vice-President of the Council.
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(2) Save as otherwise provided in this Ordinance, a member of the Institute shall be deemed "to
be in practice" when, individually or in partnership with one or more members of the Institute in practice,
he, in consideration of the remuneration received or to be received:-
(a) engages himself in the practice of cost and management accounting; or

(b) offers to perform services involving the costing or pricing of goods or services, or the preparation,
verification or certification of cost accounting and related statements, or holds himself out to the public
as a cost and management accountant; or
(c) renders professional service or assistance in or about matters of principles or detail relating to the cost
and management accounting procedures, or the recording, presentation or certification of costing
facts or data; or
(d) renders such other services as, in the opinion of the Council, are or may be rendered by a cost and
management accountants in practice; and the words "to be in practice", with its grammatical variations
and cognate expressions, shall be construed accordingly.
Explanation- An associate or fellow who is a whole time salaried employee of any person shall not be
deemed "to be in practice" within the meaning of this sub-section.
3. Incorporation of the Institute  (1) All persons whose names are entered in the Register at the
commencement of this Ordinance and all persons who may thereafter have their names entered in the
Register under the provisions of this Ordinance, so long as they continue to have their names borne on the
Register, are hereby constituted a body corporate by the name of the Institute of Cost and Management
Accountants of Bangladesh and all such persons shall be known as members of the Institute.
(2) The Institute shall have perpetual succession and a common seal and shall have power to
acquire, hold and dispose of property, both movable and immovable, and to contract, and shall by its
name sue or be used.
4. Entry of names in the Register  (1) The following persons shall be entitled to have their names
entered in the register, namely:-
(a) any person who was, immediately before the commencement of this Ordinance, a fellow or associate
of the dissolved Institute;
(b) any person who has passed such examination and completed such training as may be prescribed by
the Council for membership of the Institute;
(c) any person who has passed such other examination and completed such other training outside
Bangladesh of such Institute of Cost and Management Accountancy and admitted as member of that
Institute as may be recognized by the Council as being equivalent to the examination and training
prescribed for the members of the Institute:
Provided that, in the case of any such person who is not a citizen of Bangladesh, or permanently
residing in Bangladesh, he shall fulfill such further conditions as the Council may deem fit to impose;
(d) any person being a citizen of Bangladesh, who at the commencements of this Ordinance, has passed
such other examination and completed such other training outside Bangladesh of such Institute of
Cost and Management Accountancy and admitted as member of that Institute:
Provided that any such examination or training of such Institute of Cost and Management
Accountancy was recognized, before the commencements of this Ordinance, for the purpose of
conferring the right to be registered as a member of the dissolved Institute;
(e) any person, being a citizen of Bangladesh, who at the commencement of this Ordinance,-
(i) is studying for any foreign examination and is, at the same time, undergoing training, whether
within or outside Bangladesh, of such Institute of Cost and Management Accountancy, and
passes such examination and completes such training, or
(ii) having passed such foreign examination of such Institute of Cost and Management Accountancy,
is undergoing training whether within or outside Bangladesh and completes such training:
Provided that any such examination or training of such Institute of Cost and Management
Accountancy was recognized, before the commencement of the Ordinance, for the purpose of
conferring the right to be registered as a member of the dissolved Institute.
(2) The Council shall, as early as possible, take such steps as may be necessary for having the
names of all such persons as are mentioned in clause (a) of sub section (1) entered in the Register without
any application being made in that behalf or the payment of any fee and the name of every such person so
entered shall be deemed to have been entered at the commencement of this Ordinance for the purpose of
sub-section (1) of section 3.
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(3) Every person belonging to any of the clauses mentioned in clauses (b), (c), (d) and (e) of sub-
section (1) may have his name entered in the Register on an application made to, and granted by, the Council
in the prescribed manner and on payment of the prescribed fee.
5. Disabilities  Notwithstanding anything contained in section 4, a person shall not be entitled to have
his name entered in or borne on the Register if he:-
(a) has not attained the age of twenty-one years at the time of his applications for the entry of his name in
the Register; or
(b) is of unsound mind and stands so adjudged by a competent court; or
(c) is an undercharged insolvent; or
(d) having been discharged of insolvency, has not obtained from the court a certificate stating that his
insolvency was caused by misfortune without any misconduct on his part, or
(e) has been convicted by a competent court, whether within or without Bangladesh, of an offence
involving moral turpitude punishable with transportation or imprisonment, or of and offence, not of a
technical nature, committed by him in his professional capacity unless in respect of the offence
committed he has either been granted a pardon, or, on an application made by him in this behalf, the
Government has, by an order in writing, removed the disability; or
(f) has been removed from the membership of the Institute on being found on enquiry to have been guilty
of such professional or other misconduct as may be prescribed:
Provided that a person who has been removed from membership of the Institute for a specified period
shall not be entitled to have his name entered in the Register until the expiry of such period.
6. Associates and fellows  (1) Save as otherwise provided in this Ordinance, the members of the
Institute shall be of two classes designated as fellows and associates.
(2) A person, other than a person mentioned in sub-section (3), shall, on his name being entered in
the Register, be an associate and so long as his name remains so entered, shall be entitled to use the letters
ACMA after his name to indicate that he is an associate member of the Institute.
(3) A person who was, immediately before the commencement of this Ordinance a fellow of the
dissolved Institute shall be entered in the Register as a fellow of the Institute; and such person, so long as his
name remains so entered, shall be entitled to use the letters FCMA after his name to indicate that he is a
fellow member of the Institute.
(4) A person who has been as associate for a continuous period of not less than five years and who
possesses such qualifications as the Council may prescribe, may apply to the Council for admission as a
fellow; and if the Council grants his application his name shall be entered in the Register as a fellow.
Explanation-- In computing the continuous period during which a person has been an associate of the
Institute, there shall be included any continuous period during which he has been an associate of the
dissolved Institute immediately before he became an associate of the Institute.
(5) The decision of the Council on an application made under sub-section (4) shall be final.
7. Certificate of practice  (1) No member of the Institute shall be entitled to practice within Bangladesh
unless he holds a certificate of practice granted by the Council.
(2) The Council may, subject to such conditions as it may deem fit to impose, grant a certificate of
practice to a member of the Institute who applies in the prescribed form and pays the prescribed annual fee
for such certificate.
(3) Every member holding a certificate of practice shall pay the annual fee which shall be due on the
first day of July in each financial year.
(4) A certificate of practice shall be liable to be cancelled for default in payment of the annual fee for
any financial year.
8. Members to be known as Cost and Management Accountants  Every member of the Institute in
practice shall, and any other member may, use the designation of Cost and Management Accountant and no
member using such designation shall use any other designation, whether in addition thereto or in substitution
therefore:
Page
Provided that nothing contained in this section shall be deemed to prohibit any such member from adding
any other description or designator letters to his name, if entitled thereto, to indicate membership of such
other institute of accountancy, whether in Bangladesh or elsewhere, as may be recognized in this behalf by
the Council, or any other qualification that he may possess, or to prohibit a firm, all the partners of which are
members of the Institute and in practice, from being known by its firm name as Cost and Management
Accountants.
9. Constitution and Composition of the Council  (1) There shall be a Council of the Institute for the
management of the affairs of the Institute and for discharging the functions assigned to it under this
Ordinance.
(2) The Council shall be composed of the following persons, namely:
(a) 1twelve persons to be elected by the members of the Institute from amongst the fellows; and
(b) four persons to be nominated by the Government.

2
(3) An officer or employee of the Institute shall not be eligible for election or nomination as a member of
the Council.
10. Election of the Council  (1) Election of the members of the Council mentioned in clause (a) of sub-
section (2) of section 9 shall be held at the annual general meeting of the institute in such manner as may be
prescribed.
(2) Where any dispute arises regarding any such election, it shall be referred by the Council to a
Tribunal appointed by the Government in this behalf and the decision of such Tribunal shall be final:
Provided that no such reference shall be made except on an application made, within thirty days from
the date of the declaration of the result of the election to the Council by an aggrieved party supported by
at least five members of the Institute who had attended the election.
(3) The expenses of Tribunal shall be borne by the Institute or by the aggrieved party as may be
ordered by the Tribunal.
(4) If the members of the Institute fail to elect any of the members of Council mentioned in clause (a)
of sub-section (2) of the section 9, the Government may nominate any person duly qualified for the purpose to
fill the vacancy, and the person so nominated shall be deemed to have been duly elected under that clause.
11. Honorary office-bearers of the Council  (1) The Council shall, at a meeting specially called for
3
the purpose, elect from amongst its member the following honorary office-bearers, namely:-
(a) a President;
(b) two Vice-Presidents;
(c) a Secretary;
(d) a Treasurer.
(2) If the Council fails to elect any of the office-bearers within one month of the election of its
members mentioned in clause (a) of sub-section (2) of section 9 or, as the case may be within one month
of expiry of the term of an office-bearer, the government may appoint any of the members of the Council
to fill in the vacancy, and the office-bearer so appointed shall be deemed to have been duly elected by the
date of such appointment.
(3) The president shall be the Chief Executive of the Council.
(4) Save as provided in sub-section (5), an office bearer shall, subject to his being a member of the
Council, hold his office for a period of one year from the date on which he is elected or deemed to
have been elected.
11
The word 'twelve' was substituted for the word 'eight' by Act XXXIX of 1990.
22
The sub-section (3) was added by Act XXXIX of 1990.
33
The Section 11 was substituted of the original Section 11 by Act XXXXIX of 1990.
Page
(5) Notwithstanding the expiry of the term of his office under sub-section (4), an office- bearer shall
continue to perform his function until his successor is elected or deemed to have been elected.
(6) Where a vacancy occurs in the office of an office bearer because of his resignation or ceasing to
be a member of the Council, the Council shall elect another office-bearer to fill the vacancy within one
month from the date the vacancy occurs.
(7) If the Council fails to elect a new office-bearer as provided in sub-section (6), the Government
may appoint any of the members of the Council to fill the vacancy, and the office bearer so appointed
shall be deemed to have been duly elected by the Council on the date of such appointment.
12. Resignation of membership and casual vacancies  (1) Any member of the Council may, at any
time, resign his membership by writing under his hand addressed to the President, and the office of such
member shall be deemed to have fallen vacant from the date of acceptance of his resignation by the
President.
(2) The President may, at any time, resign his office by writing under his hand addressed to the
Government and the office of the President including his membership of the Council shall be deemed to have
fallen vacant from the date of acceptance of his resignation by the Government.
(3) A member of the Council shall be deemed to have vacated his seat if he absents himself, without
sufficient excuse, from three consecutive meetings of the Council, or if his name is, for any cause, removed
from the Register under section 20, or remains out of Bangladesh for a continuous period exceeding one year.
(4) A casual vacancy in the Council shall be filled by election, or by nomination, as the case may be,
and the person elected or nominated to fill the vacancy shall hold office for the remaining period of the
duration of the Council:
Provided that no election shall be held or no nomination shall be made to fill a casual vacancy
occurring within six months prior to the date of the expiry of the duration of the Council, but such a
vacancy may be filled by co-option by the Council.
(5) No act done by the Council shall be called in question on the ground merely of the existence of
any vacancy in, or defect in the constitution of, the Council.
13. Duration and dissolution of Council  (1) The duration of the Council shall be three years from the
date of its first meeting on the expiry of which a new Council shall be constituted in accordance with the
provisions of this Ordinance.
(2) Notwithstanding the expiry of the duration of the Council under sub-section (1), it shall continue to
function until a new Council is constituted in accordance with the provisions of this Ordinance, and upon such
constitution, the Council so functioning shall stand dissolved.
14. Functions of the Council  (1) The Council shall exercise such powers and perform such functions
as may be necessary to carry out the purposes of this Ordinance.
(2) In particular, and without prejudice to the generality of the foregoing provision, the powers and
functions of the Council shall include:-
(a) the examination of candidates for membership of the Institute and the prescribing of fees for such
examination;
(b) the registration and training of students;
(c) the prescribing of qualifications for entry of persons as members of the Institute;
(d) the recognition of foreign qualifications and training or experience for purposes of membership of the
Institute;
(e) the granting, refusal and cancellation of certificates of practice;
(f) the maintenance of the Register and publication of the list of members of the Institute and also the
names of the members who hold certificates of practice;
(g) the levy and collection of fees from members, students and examiners;
(h) the removal of names from the Register and restoration to the Register of names which have been
removed;
(i) the regulation and maintenance of the status and standard of professional qualifications of the
members of the Institute;
Page
(j) the carrying out, by giving financial assistance to persons other than members of the Council or in any
other manner, of research in cost and management accounting;
4
(jj)the rendering of professional expertise service in the field of Cost and Management Accounting and in
such other related fields;
(k) the maintenance of libraries and publication of books and periodicals relating to cost and
management accounting and allied subjects;
(l) the exercise of such disciplinary powers over the members, officers and employees of the Institute as
may be prescribed;
(m) the exercise of such other powers and the performance of such other functions as are required to be,
or may be, exercised or performed by the Council under this Ordinance or the regulations made there
under
.
15. Appointment of officers and employees, etc.  For the efficient performance or its function, the
Council may:-
(a) appoint such officers and employees as it may consider necessary;

(b) require and take from officers and employees of the Institute such security for the due performance of
their duties as it may consider necessary; and
(c) fix the salaries, fees, allowances and other conditions of service of the officers and employees of the
Institute.
16. Committees of the Council  (1) The Council shall constitute from amongst its members the
following standing Committees, namely:-
(a) an Executive Committee;

(b) an Education Committee;
(c) an Examination Committee;
5
(cc) a Research and Development Committee;
(e) a Disciplinary Committee.
(2) The Council may also constitute such other Committees from amongst its members as it deems
necessary for the purpose of carrying out the provisions of this Ordinance.
(3) The Executive Committee shall consist of the President, 6one of the Vice-Presidents nominated
by the Council and three members nominated by the Council from amongst its members.
(4) The Education Committee shall consist of 7one of the Vice-Presidents nominated by the Council
and four other members as may be nominated by the Council from amongst its members.
(5) The Examination Committee shall consist of 8one of the Vice-Presidents nominated by the
Council and four members as may be nominated by the Council members.
(6) The Disciplinary Committee shall consist of the President, 9Secretary and two other members
nominated by the Council from amongst its members.
10
(6A) The Research and Development Committee shall consist of the President one of the Vice-
Presidents nominated by the Council and four members nominated by the Council from amongst its members.
(7) Every other Committee constituted under sub-section (2) shall consists of such members as the
Council may decide.
44
The clause (jj) was inserted by Act XXXIX of 1990.
5 5
The clause (cc) was inserted by Act XXXIX of 1990.
6 6
The words "one of the Vice-Presidents nominated by Council and three" were substituted for the words "the Vice-
President and three other" by Act XXXIX of 1990.
7 7
The words "one of the Vice-Presidents nominated by Council and four" were substituted for the words "the
President and such" by Act XXXIX of 1990.
8 8
The words "one of the Vice-Presidents nominated by Council and four" were substituted for the words "the
President, or the Vice-President, as the Council may decide and such other" by Act XXXIX of 1990.
9 9
The word 'Secretary' was inserted by Act XXXIX of 1990.
10 10
The sub-section (6A) was inserted by Act XXXIX of 1990.
Page
(8) The President shall be the Chairman of every Committee of which he is a member and in his
absence, the Vice-President, if he is a member of the Committee, shall be the Chairman.
(9) The Standing Committee shall perform such functions as may be prescribed and the other
Committees shall perform such function as the Council may direct.
17. Branch Councils  (1) For the purpose of advising and assisting it in the discharge of its functions,
the Council may constitute such Branch Councils as and when it deems necessary.
(2) A Branch Council shall be constituted in such manner and perform such function as may be
prescribed.
(3) The Council may, at any time, dissolve any Branch Council constituted under sub-section(1).
18. Finance of the Council  (1) There shall be established a fund under the management and control of
the Council into which shall be paid all moneys received by the Council and out of which shall be met all
expenses and liabilities properly incurred by the Council.
(2) The Council may invest any money for the time being standing to the credit of the fund in any
Government security or in any other security approved by the Council.
(3) The Council shall cause maintenance of proper accounts of the funds distinguishing capital from
revenue.
(4) The annual accounts of the Institute shall be subject to audit by a chartered accountant within the
meaning of the Bangladesh Chartered Accountants Order, 1973 (P.O. No. 2 of 1973):
Provided that no member of the Council or a person who is in partnership with such member shall be
eligible for appointment as auditor under this sub-section.
(5) As soon as may be practicable after the close of each financial year, but not later than the thirtieth
day of November next following the Council shall cause to be published a copy of the audited accounts and
report of the Council for that financial year and copies of the said Accounts and Report shall be forwarded to
the Government and to all the members of the Institute.
19. Register  (1) The Council shall maintain in the prescribed manner a Register of the members of the
Institute.
(2) The Register shall include the following particulars about every member of the Institute, namely:-
(a) his full name, date of birth, domicile, residential and professional addresses;
(b) the date on which his name is entered in the Register;
(c) his qualifications;
(d) whether he holds a certificate of practice; and
(e) such other particulars as may be prescribed.
(3) The Council shall cause to be published, in such manner as may be prescribed, a list of members
of the Institute as on the first day of July of each year, and a copy of the list shall be sent to every member of
the Institute.
(4) Every member of the Institute shall, on his name being entered in the Register, pay such annual
membership fee as may be prescribed and different fees may be prescribed for associates and for fellows.
20. Removal of name from the Register  (1) The Council may remove from the Register the name of
any member of the Institute:-
(a) who is dead; or

(b) from whom a request has been received to that effect; or
11
(c) who has not paid any prescribed fee payable by him for a period of three years from the date it fell
due;
(d) who is found to have been subject at the time when his name was entered in the Register, or who, at
1111
The clause (c) was substituted for the original clause (c) by Act XXXIX of 1990.
Page
any time thereafter, has become subject to any of the disabilities mentioned in section 5, or who, for
any other reason, has ceased to be entitled to have his name borne on the Register.
(2) The Council shall remove from the Register the name of any member who is not entitled to remain
a member under this Ordinance.
21. Penalty for falsely claiming to be a member of the Institute, etc.  A person shall, without
prejudice to any other proceedings which may be taken against him, be punishable, on first conviction, with
fine which may extend to one thousand taka and on any subsequent conviction, with imprisonment which
may extend to six months, or with fine which may extend to five thousand taka or with both, if he:-
(a) not being a member of the Institute, represents that he is a member of the Institute, or uses the
designation of Cost and Management Accountant, or Cost Accountant, Management Accountant,
Industrial Accountant or Works Accountant, or any abbreviation thereof in a manner as to impress that
he is a Cost and Management Accountant, or uses the letters ACMA or FCMA; or
(b) being a member of the Institute, but not having a certificate of practice, represents that he is in
practice or practices as cost accountant, management accountant, industrial accountant or works
accountant or in some similar profession in the field of cost and management accounting.
22. Penalty for using the name of the Council, etc.  (1) Save as otherwise provided in this Ordinance,
no person shall:-
(a) use any name or common seal which is identical with the name or the common seal of the Institute or
so nearly resembles it as to deceive or as be likely to deceive the public; or
(b) grant or confer any degree, diploma certificate or designation which indicates or purports to indicate
the profession or attainment of any qualification or competence in cost and management accounting
similar to that of a member of the institute.
(2) Any person contravening the provisions of sub-section (1) shall, without prejudice to any other
proceedings which may be taken against him, be punishable, on first conviction, with fine which may extend to
one thousand taka and on any subsequent conviction, with imprisonment which may extent to six months, or
with fine which may extend to five thousand taka, or with both.
(3) Nothing contained in this section shall apply to any University established by law or to any
institution affiliated thereto.
(4) If the Government is satisfied that any diploma, certificate or designation granted or conferred by
any person other than the Institute, which purports to be a qualification in cost and management accounting
but which, in the opinion of the Government, falls short of the standard of qualifications prescribed for cost and
management accountants and does not in fact indicate or purport to indicate the profession or attainment of
any qualifications or competence in cost and management accounting similar to that of a member of the
Institute, it may, by Notification in the official Gazette and subject to such conditions as think fit to impose,
declare that this section shall not apply to such diploma, certificate or designation.
23. Companies not to engage in cost and management accounting in Bangladesh  (1) No
company, whether incorporated in Bangladesh or elsewhere, shall practice as cost and management
accountant in Bangladesh.
(2) If any company contravenes the provisions of sub-section (1), then, without prejudice to any other
proceedings which may be taken against the company, every director, manager, secretary and other officer of
such company who is knowingly a party to such contravention, shall be punishable, on first conviction, with
fine which may extend to one thousand taka and on any subsequent conviction, to five thousand taka.
24. Unqualified persons not to sign documents  (1) No person, other than a member of the Institute,
shall sign any document on behalf of a cost and management accountant, industrial accountant, management
accountant or works accountant, or a firm of industrial, cost or management accountants in his or its
professional capacity.
(2) Any person contravening the provisions of sub-section (1) shall be punishable, on first conviction,
with fine which may extend to one thousand taka, and on any subsequent conviction, to five thousand taka.
25. Offences by companies  (1) If the person committing an offence under this Ordinance is a
company, the company, as well as every person in-charge of, and responsible to, the company for the
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conduct of its business at the time of the commission of the offence shall be deemed to be guilty of the
offence and shall be liable to be proceeded and punished accordingly:
Provided that nothing contained in this sub-section shall render any such person liable to any
punishment if he proves that the offence was committed without his knowledge or that he exercised all
due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where an offence under this Ordinance
has been committed by a company and it is proved that the offence has been committed with the consent or
connivance of, or that the commission of the offence is attributable to any neglect on the part of, any director,
manager, secretary or other officer of the company, such director, manager, secretary or other officer shall
also be deemed to be guilty of the offence and shall be liable to be proceeded against and punished
accordingly.
Explanation.-For the purposes of this section:-
(a) "company", with respect to an offence under section 21 or section 24, means any body corporate and
includes a firm or other association of individuals and with respect to an offence under section 23, a
body corporate; and
(b) "director", in relation to a firm, means a partner in the firm.
26. Sanction to prosecute  No person shall be prosecuted under this Ordinance except on a complaint
made by or under the order of, the Council or of the Government.
27. Alternation in the Register and cancellation of certificate  (l) Where an order is made under this
Ordinance reprimanding a member of the Institute a record of the punishment shall be entered against his
name in the Register.
(2) Where the name of any member is removed from the Register, the certificate of membership and
the certificate of practice, if any, granted to him shall be recalled and cancelled.
28. Indemnity  No suit, prosecution or other legal proceeding shall lie against the Government,
Council or any Committee thereof, or any officer or employee of the Council in respect of any thing which is in
good faith done or intended to be done under this Ordinance or of any regulation or order made there under.
29. Maintenance of branch offices  (1) Where a cost and management accountant or a firm of such
accountants has more than one office in Bangladesh, each one of such office shall be in the separate charge
of a member of the Institute:
Provided that the Council may, in suitable cases, exempt any cost and management accountant or a firm
of such accountants from the operation of this sub-section.
(2) Every cost and management accountant in practice or a firm of such accountants maintaining
more than one office shall send to the Council a list of offices together with names of the persons in charge
thereof and shall keep the Council informed of any change in relation thereto.
30. Reciprocity  (1) Where any country prevents persons Bangladesh domicile from becoming members
of any institution similar to the Institute, or from practicing the profession of cost and management
accountancy, or subjects them to unfair discrimination in the country, no person of any such country shall be
entitled to become a member of the Institute or to practice the profession of cost and management
accountancy in Bangladesh.
(2) Subject to the provisions of sub-section (1), the Council may prescribe the conditions, if any,
subject to which foreign qualifications relating to cost and management accounting shall be recognized for the
purpose of entry in the Register of members.
(3) Nothing contained in sub-sections (1) and (2) shall apply to a person whose services as a cost and
management accountant have been obtained by the Government.
31. Power to make regulations  (1) The Council may, by notification in the official Gazette make
regulation for carrying out the purposes of this Ordinance.
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(2) In particular, and without prejudice to generality of the foregoing power, such regulations may
provide for all or any of the following matters, namely :-
(a) the standard and conduct of examination under this Ordinance;

(b) the qualifications for entry of the name of any person in the Register as a member of the Institute;
(c) the qualification for the purpose of sub-section (4) of section 6;
(d) the conditions under which any examination or training may be treated as equivalent to the
examination or training prescribed for the membership of the Institute;
(e) the conditions under which any foreign qualifications may be recognized;
(f) the manner in which and conditions, subject to which, applications for entry in the Register may be
made;
(g) the fees payable for membership of the Institute and the annual fees payable for certificate of practice;
(h) the manner in which elections to the Council and Branch Councils may be held;
(i) the particulars to be entered in the Register;
(j) the functions of the Branch Councils;
(k) the regulation and maintenance of the status and standard of professional qualifications of members
of the Institute;
(l) the carrying out of research in cost and management accounting;
(m) the maintenance of libraries and publication of books and periodicals relating to cost and
management accounting and allied subject;
(n) the management of the property of the Institute and the maintenance and audit of its accounts;
(o) the summoning and holding of meetings of the Council and Committees thereof, the times and places
of such meeting, the procedure to be followed thereat and the number of members necessary to form
a quorum;
(p) recording and certifying minutes of meetings of the Council and the annual general meeting and
extraordinary meetings;
(q) appointment and removal of auditors of the Institute;
(r) the manner in which the annual list of members of the Institute shall be published;
(s) the powers, duties and functions of the President, Vice-Presidents, Secretary and Treasurer of the
Council and honorarium to be paid to the honorary office bearers and other members of the Council
and its Committees;
(t) the functions of the Standing Committees and other Committees and the conditions subject to which
functions shall be discharged;
(u) the powers, duties and functions of the officers and other employees of the Council;
(v) rules of professional and other conduct and the exercise of disciplinary powers in relation thereto;
(w) the terms and conditions of service of the officers and employees of the Institute;
(x) the registration of students and the fees to be charged for such registration; and
(y) any other matter which is required to be; or may be, prescribed under this Ordinance.
(3) All regulation, made by the Council under this Ordinance shall be subject to the condition of
previous publication and to the approval of the Government.
(4) The Council shall, as soon as practicable, send a copy of any regulation made by it to every
member of the Institute.
32. Power to give directions for making regulations, etc.  (1) Where the Government considers it
expedient so to do, it may, by order in writing, direct the Council to make any regulation, or to amend or
rescind any regulation already make within such period as it may specify in this behalf.
(2) If the Council fails or neglects to comply with such direction within the specified period, the
Government may make or amend, with or without modifications, or rescinded, any regulation directed to be
made, amended or rescinded; and any regulation so made, amended or rescinded by the Government shall
by deemed to have been made, amended or rescinded by the Council and shall have effect accordingly.
33. Repeal and savings  (1) Upon the constitution of the Institute under section 3, the Cost and
Industrial Accountants Act, 1966 (XIV of 1966), hereinafter referred to as the said Act, shall stand repealed.
(2) Upon the Repeal of the said Act:-
(a) the dissolved Institute and the Council of the dissolved institute constituted under the said Act shall
stand dissolved:
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Provided that persons who were honorary office bearers and other members of the Council of the
dissolved Institute and functioning immediately before the repeal of the said Act shall, until such time
as the Council is constituted under section 9, be the honorary office bearers and other members and
perform the functions of, and be deemed to be, the Council constituted under this Ordinance;
(b) all assets, rights, powers, authorities and privileges and all properties, both movable and immovable,
cash and bank balances, funds of the dissolved Institute and all other interests and right in, or arising
out of, such property shall stand transferred to, and vested in, the Institute;
(c) all debts, liabilities and obligations of whatever kind of the dissolved Institute subsisting immediately
before its dissolution shall, unless the Government otherwise directs, be the debts, liabilities and
obligations of the Institute;
(d) all suits and other legal proceedings instituted by or against the dissolved Institute before its
dissolution shall be deemed to have been instituted by or against the Institute;
(e) services of all officers and employees of the dissolved Institute shall, notwithstanding anything
contained in any contract or agreement or in the terms and conditions of service, stand transferred to
the Institute and they shall be deemed to be officers and employees of the Institute appointed by it on
the same terms and conditions of service as were applicable to them in the dissolved Institute unless
such terms and conditions are altered, not being to their disadvantage, by the Institute;
(f) any certificate of practice or other document granted or made under the said Act and in force
immediately before the commencement of this Ordinance shall be deemed to have been granted or
made under the corresponding provisions of this Ordinance.
Dhaka ZIAUR RAHMAN

The 8th November, 1977
Major General, B.U.
President
A. K. Talukdar
Deputy Secretary
CMA Regulations, 1980: CMA Regulations, 1980 are copied below:
COST AND MANAGEMENT ACCOUNTANTS REGULATIONS, 1980
CONTENTS
CHAPTER I
Preliminary
1. Short title
2. Definitions
3. Forms
4. Notice to members
CHAPTER II
Members of the Institute
5. Register
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6. Admission of members
7. Certificate of practice
9. Fees
10. Particulars to be supplied by members
CHAPTER III
Election to the Council
11. Date of election
12. Members entitled to vote
12.A. Election Commission
12.B. Appointment of Returning Officer
13. Procedure for election
13.A. List of the nominated Candidate
14. Scrutiny
14.A. Publication of list of validly nominated candidates
15. Withdrawal
15.A. Uncontested Election
15.B. Publication of list of Contesting Candidates
16. Death or cessation of membership before election
17. Election
17.A. Counting of Votes
18. Determination and declaration of election results
19. Nominations
20. Casual vacancies
21. Notification of election results
22. Disputes
23. Disciplinary action against members in relation to elections
CHAPTER IV
Meetings and Proceedings of the Council
24. Meetings of the Council
25. Notice of meeting
26. Special meetings
27. Presiding over meetings
28. Quorum at meeting
29. Adjournment of meeting
30. Procedure of transaction of business
31. Passing of resolutions at meetings
32. Records of minutes
33. Absence of members of the Council from Bangladesh
CHAPTER V
Meetings and Proceedings of the Institute
34. Annual general meeting
35. Special meeting
37. Notice of motion to be given
38. Presiding over meetings
40 Adjournment of meeting
41. Voting at meeting and demand for poll
42. Appointment of Commission
43. Procedure when poll demanded
44. Result of poll
45. Demand for poll not to prevent other business
46. Minutes of meeting
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CHAPTER VI
Standing and other committees
47. Constitution of Committees other than standing committees
48. Functions of Executive Committee
49. Education Committee
50. Examination Committee
51. Disciplinary Committee
52. Council to have power of review
53. Chairman of the Committees
54. Term of office of members of the Committees
55. Meetings of the Committee
58. Procedure of transaction of business
59. Casting vote
60. Secretary of the Standing Committee
61. Minutes
CHAPTER VII
Branch Councils
62. Constitutions of Branch Councils
63. Admission and removal from Branch Register
64. Resignation from the Branch Council and casual vacancies
65. Date of election
66. Election to the Branch Council
67. Duties and functions of a Branch Council
68. Office bearers in the Branch Council
69. Meetings of the Branch Council
70. Duration of the Branch Council
71. Finance and accounts
72. Dissolution of the Branch Council
CHAPTER VIII
Registered students
73. Eligibility to take examinations
74. Conditions for registration
75. Fee and subscription
76. Refund of fee
77. Non-payment of annual subscription
78. Position of registered students
79. Membership of students' association
80. Examination rules
81. Suspension and cancellation of registration
82. Termination of registration
83. Register to be maintained
CHAPTER IX
Examination and Training
84. Conditions for becoming a member of the Institute
85. Times and places of examinations
86. Subjects of the examinations
87. Application for admission to an examination
88. Admission fees for examinations
89. Refund of candidates fees
90. Candidates to be supplied with admission cards
91. Examination results
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92. Failure of candidates at examinations

93. Examination certificates
94. Exemption for examination
95. Admission to Parts III, IV and V Examinations
96. Examinations under the old syllabus
97. Admission as fellows
98. Matter to be laid before Disciplinary Committee
99. Duties of the Disciplinary Committee
100. Duties of the Council
101. Publication of findings and decisions
102. Return of certificates in the event of suspension or removal
CHAPTER X
Suspension, Exclusion and Restoration
103. Restoration to membership
104. Professional and other misconduct defined
CHAPTER X
Miscellaneous
105. Finances
106. Audit of accounts of the Institute
107. Powers and duties of the President & Vice-President
108. Powers and duties of the Secretary
109. Indemnity
110. Headquarters of the Council
111. Administration of the Institute
112. Custody and use of seal
113. Interpretation
114. Publication of list of members
115. Members to supply information
116. Particulars of offices and firms
117. Particulars of nationality
118. Place of business in Bangladesh
119. Method of payment of fees
120. Issue of duplicate certificate
121. Cost and management accountant to practice in their individual names
122. Cost and management accountant in practice not to engage in any other business or occupation.
123. Other functions of cost and management accountants
124. Constitution of students' association
125. Repeal and savings
SCHEDULE I
Form A (see the regulation 5)

Register of Members
Form B (See sub-regulation (1) of regulation 6 and regulation 97)
Application for Admission as member of the Institute
Form C (See sub-regulation (1) of regulation 7)
Certificate of Membership
Form D (See sub-regulation (1) of regulation 8)
Application for the issue of certificate of practice
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Form E (See sub-regulation (1) of regulation 8)

Certificate of practice
Form F (See sub-regulation (1) of regulation 8)
Renewal of certificate of practice
Form G (See sub-regulation (2) of regulation 13)
From for nomination of fellow for election to the council
From H (See regulation 74)
Student Registration Application
From I (See regulation 83)
Register of students (for new course)
Form J (See sub-regulation (2) of regulation 87)
Application for Examinations
Form K (See regulation 93)
Examination Certificate
Form L (See sub-regulation (4) of regulation 94)
Application for exemption from Examination
Form M (See regulation 116)
Particulars of office and Forms of Cost and Management Accountant
SCHEDULE II AND SCHEDULE IIII - (Abolished)
SCHEDULE IV
(See regulation 104)
A member of the Institute shall be guilty of professional and
other misconduct, if he
COST AND MANAGEMENT ACCOUNTANTS REGULATIONS, 1980
AMENDED BY:
1. No. S. R. O. 231 - L/81/ICMA/Ex-10/65/81, dated 15th June, 1981 published in Bangladesh Gazette on
2nd July, 1981.
2. No. S. R. O. 172--Law/87, dated 19th August, 1987 published in Bangladesh Gazette on 19th August,
1987.
3. No. S. R. O. 166--Law/89, dated 25th May, 1989 published in Bangladesh Gazette on 25th May, 1989.
4. No. S. R. O. 316--Law/89, dated 10th Sept. 1989 published in Bangladesh Gazette on 19th Sept. 1989.
5. No. S.R.O. 57-Law/97, dated 1st March, 1997 Published in Bangladesh Gazette on 19th March, 1997.
6. No. S.R.O. 208-Law/97/ICMA/Admn./C-1/1250, dated 8 th September, 1997 Published in the Bangladesh
Gazette on 5th October, 1997.
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THE INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH
NOTIFICATION
Dhaka, the 27th February, 1980*
No. S.R.O. 63-L/80:- In exercise of the powers conferred by section 31 of the Cost and Management
Accountants Ordinance, 1977 (LIII of 1977), the Council of the Institute of Cost and Management Accountants
of Bangladesh, with the approval of the Government, is pleased to make the following Regulations, the same
having been previously published as required by sub-section (3) of the said section, namely "Power to make
regulations".
THE COST AND MANAGEMENT ACCOUNTANTS REGULATIONS, 1980
CHAPTER I
PRELIMINARY
1. Short title:- These regulations may be called the Cost and Management Accountants Regulations,
1980.
2. Definitions:- In these regulations, unless there is anything repugnant in the subject or context:-
(a) "annual meeting" means the annual general meeting of the members of the Institute;
(b) "certificate of practice" means a certificate granted under these regulations entitling the holder to
practice as a cost and management accountant;
(c) "Form" means a Form set out in Schedule 1;
(d) "Ordinance" means the Cost and Management Accountants Ordinance, 1977 (LIII of 1977);
(e) "Principal place of business" means the place of business registered by a member of the Institute or
where more than one place of business is registered by him, the place of business indicated by him
as being his principal place of business;
(f) "registered address" means, in the case of a member of the Institute in practice, his principal place of
business and in the case of a member of the Institute not in practiced, the address last notified by him
to the Secretary as his address for communication;
(g) "registered student" means a person registered as a student under these regulations and includes a
student registered as such with the dissolved Institute prior to the commencement of the ordinance;
(h) "Schedule" means a Schedule annexed to these regulations;
(i) "Seal" means the seal of the Institute;
(j) "Secretary" means the Secretary of the Council elected under section 11; and
(k) "section" means a section of the Ordinance.
3. Forms:- The Forms shall be used in matters to which they purport to relate and all notes and
directions contained in the Forms shall be observed accordingly.
4. Notice to member:- (1) All notices required by the Ordinance and these regulation to be posted or
sent to members shall be sent by registered post to the registered address of each member and for proving
that such notice has been posted or sent; it shall be sufficient to prove that such notice was properly
addressed and posted.
(2) The non-receipt of any such notice shall not invalidate any such notice or any resolution passed, or
proceeding or action taken, at any meeting.
CHAPTER II
**
Published in the Bangladesh Gazette, Extraordinary, Friday, April, 1980.
Page
MEMBERS OF THE INSTITUTE

5. Register:- The Register of members of the Institute shall be maintained in Form A.
6. Admission of members:- (1) Every applicant for admission as an associate or a fellow shall satisfy
the Council of his having fulfilled the conditions specified in the Ordinance and these Regulations in such
manner as the Council may deem necessary and the Council, being so satisfied, shall admit him on payment
of the fees prescribed in these regulations. The application for membership of the Institute shall be in Form B
and shall be submitted to the Secretary.
(2) Every person before becoming a member of the Institute shall undertake to be bound by the
Ordinance and the regulations in force at the time of his admission or which may thereafter, form time to time,
and be made.
7. Certificate of membership:- (1) if an application for membership of the Institute is accepted by the
Council, the applicant’s name shall be entered in the Register as an associate or fellow, as the case may be,
and a certificate of membership in Form C under seal shall issued to him.
(2) An associate or a fellow, referred to in sub-sections (2) and (3) of section 6, may obtain a new
certificate from the Institute after returning the old certificate:
Provided that the old certificate need to be returned if the Institute becomes satisfied that the same
has been lost or destroyed or otherwise is not available.
(3) In the event of the name of a member of the Institute being removed from the Register under the
provisions of the Ordinance, the certificate of membership together with the certificate of practice, if
any, shall be forthwith returned to the Secretary.
8. Certificate of practice:- (1) A member of the Institute may apply to the Council, in Form D, for a
certificate of practice entitling him to practice as a cost and management accountant throughout Bangladesh.
The application shall be addressed to the Secretary and shall be accompanied by the requisite fee. If the
application is granted by the Council, the certificate under seal shall be issued in Form E. Subject to the
payment of the annual fee the validity of the certificate shall be extended from year to year by a certificate in
writing by the Secretary in Form F.
(2) A member of the Institute in practice, on ceasing to be in practice shall inform the Secretary
immediately of the fact of his having done so, but in any case not later than one month from the date he
ceases to be in practice.
9. Fees:- (1) The admission fee and annual membership fee of Associate and Fellows and annual fee
for certificate of practice shall be such as the Council may decide from time to time.
(2) All kinds of annual fees shall be payable by the first day of July each year.
10. Particulars to be supplied by members:- Every member of the Institute shall inform the Secretary of
any change of address or place or places of business or employment and shall also supply the Council with
any other information relating to his practice or employment which the Council may reasonably require for
carrying out the provisions of the Ordinance and these regulations.
CHAPTER III
ELECTION TO THE COUNCIL
11. Date of election:- The date fixed for the annual meeting of the Institute under these regulations in a
year which election to the Council is due shall also be the date of election of members to the Council under
sub-section (1) of section 10.
12. Members entitled to vote:- (1) A member of the Institute whose name stands entered in the Register
one hundred days before the date of election to the Council shall be entitled to vote in such election and his
name shall be included in the voter list prepared for the said election:
Provided that such a member shall not be so entitled if 
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(a) the fees payable by him under regulation 9 has not been cleared up to date;
(b) his name stands removed from the Register for any reason whatsoever before the date of election.
12A. Election Commission:- (1) There shall be an Election Commission, hereafter referred to as
commission, consisting of a chairman and two other members to be appointed by the Council for the conduct
of election to the Council under these regulations.
(2) The Chairman and members of the commission shall be appointed from amongst the fellows.
(4) Notwithstanding anything contained in the Ordinance or these regulations, the Chairman and the
members of the commission shall not be candidate for election to the Council nor shall any of them be
proposer or secondary of any candidate in such election.
(5)
12B. Appointment of Returning 0fficer:- (1) The Commission shall for the purpose of election of the
Council appoint a Returning Officer who is not a member of the Institute.
(2) The Commission may appoint any person not being a member of the Institute, to assist the Returning
Officer in the performance of its functions.
13. Procedure for election:- (1) The date of election, as determined by the Council, shall be notified to
the members of the Institute and a list of members entitled to vote, together with a notice stating the number of
seats in the Council to be filled shall be circulated by the Commission among all the members at least sixty
days before the date of election.
(2) Within thirty days of the issue of the notice under sub-regulation (1) nomination of the candidates for
election to the Council shall be sent in Form G to the Election Commission, duly proposed by one member of
the Institute and seconded by two other members of the Institute along with an undertaking in writing by each
member proposed as to his willingness to be the candidate for election and to serve the Institute in the event
of his election.
13A. List of nominated candidates:- The Commission shall, within five days from the last day of
receiving nominations, because to be affixed at such place as it may decide a list of candidates on whose
favor nominations have been received stating their particulars and particulars of their proposers and
seconders.
14. Scrutiny:- (1) The Returning Officer shall examine the nomination papers in the presence of any
person attending the scrutiny under sub-regulation (2) and decide any objection raised by any such person to
any nomination.
(2) The candidate, their proposers and seconders and any other person, not exceeding two, authorized in
this behalf by each candidate may attend the scrutiny of the nominations and the returning Officer shall give
them reasonable opportunity for examining the nomination papers.
(3) The Returning Officer may, either of his own motion or upon any objection, conduct such enquiry as he
may think fit and reject any nomination paper if he is satisfied that:-
(a) the candidate is not qualified to be elected to the Council;
(b) the proposer or the seconder is not entitled to vote;
(c) any provision of the Ordinance or these regulations has not been complied with;
(d) the signature of the proposer or the seconder is not genuine or has been obtained by force or fraud:
Provided that 
(i) the rejection of a nomination paper shall not invalidate the nomination of a candidate by any other
valid nomination paper;
(ii) the Returning Officer shall not reject nomination paper on the ground of any defect which is not a
substantial nature and may allow such defect to be remedied forthwith;
(iii) the Returning Officer shall not inquire into the correctness or validity of any entry in the voter list.
(4) The Returning Officer shall endorse on every nomination paper his decision, accepting or rejecting it,
and shall, in the case of rejection, record a brief statement or reasons; therefore;
Page
(5) Where the nomination of a candidate has been rejected by the Returning Officer, an appeal shall lie
within a period of three days from the date of such rejection to the Commission and any order passed by the
Commission on such appeal shall be final.
14A. Publication of list of validly nominated candidates:- After the scrutiny of the nominations under
regulation 14, the Commission shall, within three days from the date of such scrutiny, prepare and publish a
list of validly nominated candidates in the election to the Council showing their membership number and full
address.
15. Withdrawal:- (1) A candidate whose nomination has been accepted as valid may by notice in writing
signed by him and delivered within seven days of the date of scrutiny to the Commission withdraw his
candidature.
(2) A notice of withdrawal under sub-regulation (1) shall, in no circumstances, be open to cancellation.
15A. Uncontested election:- If the number of validly nominated candidates for election to the Council be
equal or less to the number of seats in the Council to the filled in, the Returning Officer shall make a return to
the Commission and there shall, not be any further proceeding of election.
15B. Publication of list of contesting candidates:- If the number of validly nominated candidates for
election is more than the number of seats in the Council, the Commission shall within five days from date of
withdrawal day, for which the Commission shall fix a date, prepare and publish a final list of contesting
candidates in this election to the Council.
16. Death or cessation of membership before election:- If a candidate whose nomination has been
accepted as valid dies or otherwise ceases to be a member of the Institute before the date of election, the
election shall be conducted among the remaining candidates only.
17. Election:- (1) At least thirty days before the days fixes for the election, the commission shall send to
each member entitled to vote by following namely:-
(a) a ballot paper in such Form as the Commission may specify in this behalf with its common seal for
recording vote;
(b) one small envelope bearing the words "ballot paper" on the top of the envelope;
(c) a big size envelope for returning the ballot paper by the member to the Commission;
(d) a specimen forwarding letters for returning the ballot paper by the voters; and
(e) instructions to the members, if any.
(2) The ballot paper shall contain the names of all the contesting candidates and there shall be a vacant
space, against each such name for marking vote by a cross () mark.
(3) The member entitled to vote shall mark the cross () mark against the names of such contesting
candidates as he may consider fit for election to the Council.
(4) The ballot paper marked under sub-regulation (3) shall be put in the small envelope, which along with
the forwarding letter duly filled in and signed shall later be put in the big size envelope referred to the clauses
(b) and (c) respectively of sub-regulation (1) for sending it to the Commission.
(5) A ballot paper shall, in the manner as provided in sub-regulation (4), be sent to the Commission by
registered post with acknowledgment due so as to reach the Commission at the latest by 10-00 a.m. on the
election date or it may personally be delivered to the Commission before 10-00 a.m. on the election date
against a receipt issued by it.
(6) All the ballot papers received under sub-regulation (5) shall then and there be put in the election box
kept at ICMA Bhaban, Nilkhet, Dhaka and no ballot paper received after 10-00 a.m. of the election date fixed
by the Commission in this behalf shall be put on the election box and shall be counted for determining the
election result.
(7) A member entitled to vote shall put a cross (x) mark in the vacant space of the ballot paper against
the names of as many candidates as there are seats in the Council to be filled in.
(8) If a ballot paper or any other document sent, to the member under sub-regulation (1) has been lost or
has become unusable the Commission may, on the application of the member concerned, re-issue the ballot
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paper or, as the case may be, other document referred to above if it is satisfied that the ballot paper or the
document has been lost or damaged for reason for which the member is not responsible.
(9) A ballot paper shall be invalid if 

(a) it does not bear the common seal of the Commission;
(b) it does not bear cross (x) mark on its blank space;
(c) the member has not put cross (x) mark in the blank space against such member of candidates as
there are seats to be filled in;
(d) the member has put cross (x) mark in the blank space against the name of more candidates than the
number of seats to be filled in;
(e) the member has put more than one cross (x) mark in the blank space against one candidate or has
put any other mark than the cross (x) mark in the blank space against any candidate;
(f) the member has written such words or given such signs on the ballot paper whereby he can be
identified;
(g) it is received after 10-00 a.m. of the election date.
17A. Counting of votes:- (1) As soon as the agenda of election is taken up in the annual general
meeting the commission shall 
(a) open the election box or boxes and arrange the envelopes containing the ballot paper;
(b) open the envelopes and count the valid votes cast in favor of each candidate;
(c) prepare a statement showing the number of votes cast in favor of each contesting candidate and the
number of invalid votes;
(2) The Chairman and members of the Commission shall authenticate the Statement by putting their
signature and thereafter hand it over to the President of the annual general meeting for declaration of result.
18. Determination and declaration of election results:- (1) Such number of candidates as there are
vacancies to be filled receiving the highest number of votes shall be declared elected by the President and in
the event to an equality of votes between two or more candidates for the last vacancy, lots shall be drawn by
the President in the presence of the Commission and the candidate in whose favor lot is drawn shall be
declared elected by the President.
(2) The members who are elected under regulation 15A shall also be declared elected by the President.
19. Nominations:- Six weeks before the date of election, the Secretary shall request the Government to
nominate members under clause (b) of sub-section (2) of section 9.
20. Casual vacancies:- Subject to the provisions of sub-section (4) of section 12, any casual vacancy
shall be field, within ninety days from the date of its occurrence in the same manner as the seat was originally
filled.
21. Notification of election results:- (1) The Secretary shall send a list of successful candidates to all
members of the Institute within one week of the date of election.
(2) The names of persons elected to the Council and also the names of persons nominated to the Council
by the Government shall be published in the official Gazette.
22. Disputes:- (1) The aggrieved party referred to in the proviso to sub-section (2) of section 10 shall
address the application to the Council and shall send it to the Secretary by registered post. applications not
dispatched within the time limit prescribed in the said proviso shall be summarily dismissed and the aggrieved
party shall be informed accordingly.
(2) If the Tribunal orders its expenses to be borne by the Institute, it shall pay to the Government or to the
Tribunal, as may be directed by the Government in the order appointing the Tribunal, such expenses as have
been assessed by the Tribunal.
23. Disciplinary action against members in relation to elections:- A member of the Institute shall be
liable for disciplinary action by the Council if he adopts one or more of the following practices directly and
indirectly with regard to the election to the Council, namely 
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(1) bribery, that is to say, any gift, offer or promise by a candidate or by any other person with the
connivance of a candidate of any gratification to a person whomsoever, with the object, directly or
indirectly, of inducing
(a) a member to stand or not to stand as or to withdraw from being a candidate at an election; or
(b) a member to vote or refrain from voting at an election, or as a reward to-
(i) a member for having so stood or not stood, or for having withdrawn his candidature;
or
(ii) a member for having voted or refrained from voting at an election;
Explanation- For the purpose of this clause, the term "gratification" is not restricted to pecuniary
gratifications or gratifications estimable in money, but includes all forms of entertainment and all forms of
employment for reward; but it does not include the payment of any expenses bonafide incurred at, or for the
purpose of, any election;
(IA) issuing manifesto or circulars in the nature of manifestos; or
(IB) organizing parties to entertain voters;
(2) undue influence, that is to say, any direct or indirect interference or attempt to interfere, on the part of
a candidate or of any other person with the connivance of the candidate, with the free exercise of any right
relating to an election:
Provided that a declaration of policy or a promise of a particular action of the mere exercise of a legal right
without intention to interfere with any such right shall not be deemed to be interference within the meaning of
this clause.
(3) the publication by a candidate or by any other person with the connivance of the candidate of any
statement of fact which is false and which he either believes to be false or does not believe to be true, in
relation to the personal character or conduct of any candidate, or in relation to the candidature or withdrawal
of any candidate, being a statement reasonably calculated to prejudice the prospects of that candidate's
election;
(4) the obtaining or procuring or abetting or attempting to obtain or procure by a candidate or by any other
person with the connivance of a candidate, any assistance for the furtherance of the prospects of the
candidate's election from any person serving under the Government other than the giving of vote by such
person, if he is a member of the Institute entitled to vote;
(5) any Act specified in clauses (1) to (4) when done by a member of the Institute who is not a candidate
or by a member of the Institute acting with the connivance of a candidate;
(6) the receipt of, or agreement to receive, any gratification whether as a motive, or a reward- (a) by a
member for standing or not standing as, or withdrawing from being, a candidate;
or
(b) by any member, for himself or any other person for voting or refraining from voting, or for inducing or
attempting to induce any elector to vote or refrain from voting, or any candidate to withdraw his
candidature; and
(7) contravention or misuse of any of the provisions of this Chapter or making of any false statement
knowing it to be false or without knowing it to be true while complying with any of the provisions of this
chapter.
CHAPTER IV
MEETINGS AND PROCEEDINGS OF THE COUNCIL
24. Meetings of the Council:- The first meeting of a Council shall be held within one month of the date of
its being constituted and thereafter the Council shall meet at least once in every three months at such time
and place as the President may determine.
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25. Notice of meeting:- Notice of the time and place of the intended meeting of the Council shall be sent
to the registered address of every member of the Council not less than ten days before such meeting and
such notice shall, so far as practicable, contain a statement of the business to be transacted at such meeting:
Provided that, in cases of urgency, a meeting may be summoned to meet at any time by the President
who shall inform the members of the subject matter to be considered at the meeting and the reasons for which
he considers the matter to be urgent.
26. Special meetings:- On a requisition, in writing, by at least one-third of the members of the Council for
the time being, the President shall call a special meeting within three weeks of the receipt of such requisition.
27. Presiding over meetings:- All meetings of the Council shall be presided over by the President, and in
his absence, by the Vice-President and in the absence of both the President and the Vice-President, by the
person elected by the members of the Council present from amongst themselves.
28. Quorum at meeting:- Five members present in person shall constitute a quorum for a meeting of the
council. If a quorum is not available within half an hour from the time appointed for the meeting, the meeting
shall stand adjourned to such future time and date as the person presiding may appoint:
Provided that, where a meeting has been adjourned for want of a quorum, any business which was
intended to be transacted at the original meeting may be transacted at such adjourned meeting
notwithstanding that there is no quorum.
29. Adjournment of meeting:- Subject to the provisions of these regulations, the person presiding over a
meeting of the Council may, with the consent of the majority of members of the Council present, adjourn the
meeting from time to time and from place to place, but no business shall be transacted at any adjourned
meeting other than the business left unfinished at the previous meeting. No notice shall be necessary for
holding an adjourned meeting unless it is so decided by the Council at the time of adjourning the meeting.
30. Procedure for transaction of business:- The business of the Council shall be transacted at a
meeting of the Council.
31. Passing of resolutions at meetings:- At all meetings of the Council, in the event of difference of
opinion, the vote of the majority shall prevail unless otherwise required by the Ordinance or these regulations
and in event of equality of votes, the presiding officer shall have and exercise a second or casting vote.
32. Records of minutes:- Proper minutes shall be kept of all proceedings of the meetings of the Council
and shall contain every resolution passed and decision taken by the meeting. The minutes shall be signed by
the person presiding over the meeting or the meeting held next thereafter and the minutes so signed shall be
sufficient evidence on the matters stated therein.
33. Absence of members of the Council from Bangladesh:- (l) Before a member of the Council leaves
Bangladesh for a period exceeding sixty days he shall intimate to the Council the date of his departure from
and the date of his expected return to, Bangladesh and shall either tender his resignation or apply to the
Council for leave of absence. On receipt of such application the Council may, in its discretion, grant leave of
absence or, if it considers necessary, treat the application as the member's resignation.
(2) If any member of the Council, leaves Bangladesh for a period exceeding sixty days without taking
either of the courses mentioned in sub-regulation (1), and his absence from Bangladesh results in his
absence from three consecutive meetings of the Council, he shall be deemed under sub-section.
(3) of section 12 to have been absent without sufficient excuse from such meetings.
CHAPTER V
MEETINGS AND PROCEEDINGS OF THE INSTITUTE
34. Annual general meeting:- (1) The annual general meeting of the Institute shall be held in Dhaka or
elsewhere in Bangladesh on or before 31st day of December each year or on such other days as the Council
may from time to time, decide:
Provided that there shall not be more than fifteen months lapse for holding the annual general meeting
after the holding of the last annual general meeting.
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(2) The following business shall be transacted in the annual general meeting, namely:-
(a) the election of members of the Council when due;
(b) appointment of auditors;
(c) consideration of the annual report of the Council and the annual accounts of the Institute with the
auditors reports thereon;
(d) other business as may be determined by the Council or as may be allowed by the Chair.
35. Special meeting:- The Council may, whenever it things fit, convene a special meeting of the Institute
and shall do so within four weeks from the receipt by the Secretary of a requisition, in writing, signed by not
less than one fifth of the total number of members of the Institute and stating the object of the proposed
meeting.
36. Notice of meeting:- The Secretary shall, not less than thirty days before any annual or special
meeting of the Institute, send to each member of the Institute a notice giving the day, hour and place of the
meeting and the business to be transacted thereat. In the case of the annual meeting, the Secretary shall
send to each member of the Institute with such notice a copy of the annual report of the Council and a copy of
the accountants of the Institute with the auditors' report thereon and particulars of all motions to be brought
before the meeting under the next following regulations. The non-receipt by any member of the Institute of
such notice or of any of the aforesaid documents shall not invalidate the proceedings of any meeting.
37. Notice of motion to be given:- A member of the Institute wishing to bring before the annual meeting
a motion relating to any matter affecting the Institute or the profession of cost and management accounting
but not relating to the ordinary annual business of the Institute may
do so if he has given or sent to the Secretary a notice, in writing, of the proposed motion duly endorsed by five
other members entitled to vote at the meeting not later than five weeks before the date of the annual meeting.
If, after any such notice has been given, the annual meeting is called for a date less than five weeks
after the date of receipt by the Secretary of such notice, the notice shall be deemed to have been given more
than five weeks before the date of such meeting.
38. Presiding over meetings:- All meetings of the Institute shall be presided over by the President or, in
his absence, by the Vice-President or, in the absence of both, by the person elected by the members from
amongst the members of the Council present or, in the absence of all of them, from amongst the members
present.
39. Quorum at meeting:- One-tenth of the total number of the members present in person shall
constitute a quorum for a meeting of the Institute. If a quorum is not available within half an hour from the time
appointed for the meeting, the meeting shall stand adjourned to such future time and date as the person
presiding may appoint.
40. Adjournment of meeting:- Subject to the provisions of these regulations the person presiding over a
meeting of the Institute may, with the consent of the majority of members present, adjourn the meeting from
time to time and from place to place, but no business shall be transacted at any adjourned meeting other than
the business left unfinished at the previous meeting. No notice shall be necessary for holding an adjourned
meeting unless it is decided in the meeting at the time adjournment.
41. Voting at meeting and demand for poll:- Subject to the fulfillment of regulations contained in
Chapter III in so far as elections to the Council are concerned, every resolution and amendment proposed and
seconded at a meeting of the Institute shall be put to the meeting by the person presiding over the meeting
and decided by majority of members present and entitled to vote by a show of hands and in the event of an
equality of votes, the person presiding shall have and exercise a second or casting vote. The declaration of
the person presiding as to the decision of the meeting shall be final. On such a declaration being made a poll
of all members may be demanded in writing, by at least four members present in person and entitled to vote at
the meeting:
Provided always that no poll may be demanded as to the election of the President, the appointment of
Honorary Commission or the adjournment of a meeting.
42. Appointment of Commission:- At every meeting of the Institute at which poll is demanded, the
meeting shall appoint two members as Honorary Commission.
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43. Procedure when poll demanded:- On a poll being so demanded the person presiding shall forthwith,
or as soon as may reasonably be practicable after the conclusion of the meeting at which the poll is
demanded, state the resolution or amendment in the form of propositions which in his opinion will be most
suitable to ascertain the sense of the members upon the substance of such resolution or amendment and
upon the manner of so stating the resolution or amendment, the decision of the person presiding shall be final.
The voting paper setting out the propositions so stated, together with an envelope and all necessary
directions, shall, within fourteen days after the meeting, be issued by the Secretary to all members entitled to
vote at the meeting at which the poll was demanded. The members shall send the said voting papers duly
completed to the Secretary sealed in the envelopes provided for such purpose so as to reach him on or before
the twenty-first day after the day on which the said voting papers were sent to the members. The Secretary
shall hand over the sealed envelopes to the Honorary Commission.
44. Result of poll:- (1) The Honorary Commission shall, within forty-eight hours from the last date fixed
for the return of the voting papers, submit a report to the person presiding over the meeting at which the poll
was demanded detailing 
(a) the result of the voting; and
(b) the votes rejected and the reason for such rejection.
(2) The person presiding shall send a copy of the report to each member as soon as practicable and in
the event of an equality of votes, he shall exercise a second or casting vote and convey to the members the
manner in which his casting vote has been exercised. The report of the Honorary Commission as to the result
of the voting, along with the casting vote if any, shall be conclusive.
45. Demand for poll not to prevent other business:- The demand for a poll at a meeting shall not
prevent the transaction of any business other than that on which the poll has been demanded or any business
directly dependent thereon.
46. Minutes of meeting:- Proper minutes shall be kept of all proceedings of the meetings of the Institute
and shall contain results of election to the Council, every resolution passed and decision taken at the meeting.
The minutes shall be signed by the person presiding over the meeting or the meeting held next thereafter and
the minutes so signed shall be sufficient evidence on matters stated therein.
CHAPTER VI
STANDING AND OTHER COMMITTEES
47. Constitution of Committees other than Standing Committees:- The Council may constitute such
Committees, other than the standing committees under sub-section (1) of section 16, from among its
members as it deems necessary for the purpose of carrying out the provisions of the Ordinance and these
regulations, and any such Committee may, with the sanction of the Council, co-opt such other members of the
Institute, not exceeding two-thirds of the members of the committee, as the committee thinks fit and any
member so co-opted shall be entitled to exercise all the rights of a member of the committee.
48. Functions of Executive Committee:- The Executive Committee shall perform the following functions,
namely 
(a) maintenance of the office of the Council;
(b) employment, suspension and discharge of the necessary personnel on such terms and conditions
as it may deem fit;
(c) recommendation in respect of honorarium or remuneration for services rendered by the honorary
office bearers of the Council;
(d) maintenance of true and correct accounts of all receipts and payments on behalf of the Council
and the matter in respect of which such receipts and payments take place and of all the property,
securities, debts, funds and liabilities of the Institute;
(e) maintenance of the Register;
(f) custody of the property, assets and funds of the Institute;
(g) investment of the spare funds of the Institute in securities approved by the Council;
(h) disbursement from the funds of the Institute on account of expenditure from the income or the
capital in accordance with the estimates previously sanctioned by the Council:
Provided that in emergent cases expenditure in excess of the estimates may be incurred by the
Committee but such excess expenditure shall be brought to the notice of the Council at its next
meeting;
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(i) entry, removal and restoration of names of members, cancellation of certificates of practice, issue of
certificates of membership, publication of list of members and issue of journal; and
(j) any other function delegated to it by the Council:
Provided, however, that the Council may, by a resolution, lay down restrictions of any form on the
Executive Committee's authority to incur expenditure or remit revenue and may, in a like manner, delegate
specific financial powers to the honorary office bearers or the employees of the Institute.
49. Education Committee:- (1) The Council shall nominate not more than six of its members to constitute
the Education Committee under sub-section (4) of section 16.
(2) The Education Committee shall perform the following functions, namely 
(a) registration of students;
(b) maintenance of the Register of students and such other registers as may be considered
necessary;
(c) provision of facilities to registered students to obtain coaching in the subjects in which they are to
be examined by the Council;
(d) according recognition to coaching institutions for preparation of candidates for the examinations of
the Institute subject to such conditions as it may deem fit;
(e) arrangements for the training of candidates sent by the Department of the Government, Chamber
of Commerce or any other public or private organization and to do all things in connection
therewith;
(f) prescription of books for the guidance of the candidate;
(g) purchase of books, magazines, equipments and the like for the library of the Institute and
arranging for its proper running and maintenance;
(h) suggestion to the Council, from time to time, of modifications to the existing syllabi for the
qualifying examinations of the Institute and recommending suitable books for the guidance of
candidate; and
(i) any other function delegated to it by the Council.
50. Examination Committee:- (1) The Council shall nominate not more than four of its members to
constitute the Examination Committee under sub-section (5) of section 16.
(2) The Examination Committee shall perform the following functions, namely:-
(a) all the functions of the Council in regard to holding of the examinations, admission thereto,
appointment and selection of examiners, fixing the remuneration of the examiners, assistant
examiners, superintendents of examinations and others and dealing with other matters arising out
of the holding of examination, including the declaration of results;
(b) maintenance of proper standard of conduct at the examinations; and
(c) any other function delegated to it by the Council.
51. Disciplinary Committee:- The Disciplinary Committee shall perform the functions assigned to it
under these regulations and any other function delegated to it by the Council.
52. Council to have power of review:- Notwithstanding anything contained in this chapter, the Council
shall have the power to review any decision of any standing or other Committee.
53. Chairman of the Committees:- In the absence of the person who shall be the Chairman of the
Committee under sub-section (8) of section 16, a member of the Committee elected by it shall be the
Chairman.
54. Term of office of members of the Committees:- A nominated member of a Standing Committee
shall hold office for one year from the date of his nomination and except in the case of Education Committee,
he shall be eligible for re-nomination.
55. Meetings of the Committee:- The Chairman of a Standing Committee may, at any time, and shall, on
requisition by any two members of the Committee call a meeting of the Committee.
56. Notice of meeting:- Notice of a meeting of a Standing Committee shall be served in the manner
prescribed for the meeting of the Council in these regulations.
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57. Quorum at meeting:- The provisions of these regulations relating to quorum at a meeting of the
Council shall apply to a meeting of a Committee, subject to the modification that three members present in
person shall constitute a quorum for a meeting of the committee.
58. Procedure for transaction of business:- The business of the Standing Committees shall be
transacted in the manner laid down for the transaction of the business of the Council in these regulations.
59. Casting vote:- All questions before a Standing Committee shall be decided by a majority of votes and
in the event of equality of votes, the person presiding shall have and exercise a second or casting vote.
60. Secretary of the Standing Committee:- Every Standing Committee shall appoint a person from
amongst its members or an employee of the Institute to be the Secretary of the Committee.
61. Minutes:- The Secretary of a Committee shall maintain a record of all business transacted by the
Committee.
CHAPTER VII
BRANCH COUNCILS
62. Constitution of Branch Councils:- (1) The Council may, by notification in the journal of the Institute
constitute a Branch Council for any region which shall be known by such name as may be specified in such
notification.
(2) The Branch Council shall consist of 

(a) Abolished;
(b) not less than three or not more than ten members elected from amongst such members of the Institute
stationed in that region as may be specified by the Council; and
(c) not more than two persons nominated by the Council.
(3) Notwithstanding anything contained in sub-regulations (1) and (2), the first Branch Council constituted
under the Ordinance shall consist of such members as may be nominated by the Council.
63. Maintenance of Register of members:- (1) The Branch Council shall maintain a Branch Register
and shall enter therein the names of all members of the Institute in the region.
(2) Where the names of a members is removed from the Register maintained by the Council, it shall
automatically stand removed also from the Branch Register and if the member is a member of the Branch
Council, he shall also cease to be such member.
64. Resignation from the Branch Council and Casual vacancies:- (1) Any member of the Branch
Council may, at any time, resign his membership by writing under his hand addressed to the Chairman of the
Branch Council concerned and the seat of such member shall become vacant when such resignation is
accepted by the Branch Council.
(2) A member of the Branch Council shall be deemed to have vacated his seat if he is declared by the
Branch Council to have been absent without sufficient excuse from three consecutive meetings of the Branch
Council.
(3) Any casual vacancy in the Branch Council shall be filled by nomination by the Council and the person
so nominated shall hold office until a new Branch Council is constituted:
Provided that no casual vacancy shall be filled up this occurs within six months prior to the date of the
expiry of the duration of the Branch Council.
(4) No act done by the Branch Council shall be called in question on the ground merely of the existence
of any vacancy in or defect in the constitution of the Branch Council.
65. A meeting of the members of the Institute located in the region for which a Branch Council is
constituted shall, for the purpose of electing members to the Branch Council, be held each year in the
month of December.
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66. Election to the Branch Council:- (1) Every fellow and associate stationed in the region shall be
eligible to be a candidate and to propose or second another member for election to Branch Council.
(2) The Council shall nominate a Presiding Officer to conduct the election to a Branch Council and shall
also nominate a Polling Officer to assist the Presiding Officer in conducting such election.
(3) The Presiding Officer shall issue notice of the election to all fellows and associates whose names
appear in the Branch Register at least 21 days before the date of the meeting to be held for the purpose of the
election, specifying the number of the members required to be elected and inviting written nomination for
electing such members and requesting them to participate in the election and such notice shall accompany
the voter list and nomination form.
(4) Any fellow or associate eligible to vote may submit nomination in favor of as many candidates as are
required to be elected as members of the Branch Council. Each such nomination shall be seconded by
another fellow or associate eligible to vote and shall bear the consent of the nominee. The nomination shall be
in form 'N' and shall be submitted to the Presiding Officer at least 7 days before the election meeting.
(5) The Presiding Officer shall, after the scrutiny of all the nomination papers received by him, announce
the names of the nominees whose nominations have been found in order and a list thereof shall be affixed to
the notice board of the Branch Council at least 3 days before the election meeting. Any nominee whose
nomination has been found in order may withdraw his candidature at least 2 days before the election meeting.
(6) If the number of valid nominations is less than or equal to the number of member required to be
elected, the Presiding Officer shall declare the nominees as elected, and if the number of valid nominations is
more than the number of the members required to be elected, the Presiding Officer shall, with the assistance
of the Polling Officer, conduct the election through secret ballot system wherein a voter, present in the election
meeting, may cast one vote in favor of each of the total number of nominees to be elected as members.
(7) The nominees shall be declared elected in order of the number of votes secured by them:
Provided that in the event of equality of votes secured by two or more nominees in respect of seats of the
members which could not be filled in order of the number of votes secured, the Presiding Officer shall draw
lots and shall declare elected to such seats the nominees in whose favor the lots are drawn.
(8) The Presiding Officer shall send a report on the election to the President of the Council with a copy to
the Chairman of the Branch Council within three days of the election.
(9) Any fellow or associate who is eligible to vote and was present in the election meeting may submit a
petition to the Council challenging the rejection of any nomination or election of any member within seven
days of the election and the decision of the Council on such petition shall be final.
67. Duties and functions of a Branch Council:- (1) The Branch Council shall, at all times, function
subject to the control, supervision and direction of the Council and its Standing Committees.
(2) Subject to sub-regulation (1) the duties of a Branch Council shall include:
(a) to advise the Council on all matters referred to it by the Council and to offer such other help as
may be required of it by the Council;
(b) to make, suggestion to the Council in connection with matters of professional and business
interest in the region and for raising the standard and status of the profession and for
improvement of the law apply to it;
(c) to provide necessary information to members and to the prospective registered students;
(d) to arrange, if found practicable by the Council, for the coaching of candidates for the Institute's
examinations in the various centers of the region and to appoint local instructors for this purpose;
(e) to maintain an up-to-date and well equipped library and reading room for the use of members and
students;
(f) to promote membership and public relations in the region and the holding of local public or
members meetings, technical addresses, seminars and similar gatherings;
(g) to engage local office personnel with the previous permission of the Council;
(h) to organize a student section for the benefit to the registered students; and
(i) to perform such other functions as may be entrusted to it from time to time, by the Council.
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68. Office bearers in the Branch Council:- (1) The office bearers of the Branch Council shall be a
Chairman, a Vice-Chairman, a Secretary and a Treasurer.
(2) The Branch Council shall elect the office bearers from its members at its first meeting to be held within
one month of its constitution.
(3) The office bearers shall hold office for the period of one year from the date on which they are elected
and subject to their being a members of the Branch Council at the relevant time, they shall be eligible for re-
election.
(4) Notwithstanding the expiration of their term of office, the office bearers of a Branch Council, including
the office bearers of the first Branch Council constituted under regulation 62(3), shall continue to hold office
until new office bearers of the Branch Council are elected in accordance with these regulation.
(5) The Chairman of the Branch Council shall be the chief executive of the Branch Council.
69. Meetings of the Branch Council:- (1) The meetings of the Branch Council shall be held and
conducted in the manner prescribed for the meetings of the Council and all provisions applying to the
meetings of the Council shall apply to the meetings of the Branch Council:
Provided that the quorum at a meeting of the Branch Council shall be three members present in
person.
(2) Proper minutes shall be kept of all proceedings of a meeting of the Branch Council and shall contain
every resolution passed and decision taken by the meeting. The minutes shall be signed by the person
presiding over the meeting or the meeting held next thereafter and the minutes so signed shall be sufficient
evidence on the matters stated therein. A copy of the minutes shall be forwarded to the Council.
70. Term of a Branch Council:- The term of a Branch Council shall be one year from the date of its
constitution on the expiry of which it shall stand dissolved :
Provided that the first Branch Council of a region constituted under regulation 62(3) shall stand dissolved
on the constitution of a Branch Council for that region in accordance with the provisions of regulations 65 and
66 :
Provided further that a Branch Council shall continue to function until a new Branch Council is constituted
in accordance with the provisions of these regulations.
71. Finance and accounts:- (1) Each Branch shall be financed by the funds provided by the Council and
may borrow or obtain credit with the previous sanction of the Council.
(2) The funds of the Branch Council shall be utilized for such purposes as may, from time to time, are
determined by the Council 
Provided that no such funds shall be applied, either directly or indirectly for payment to the member of
the Branch Council except for reimbursing them for any expenses incurred by them in connection with
the business of the Branch Council.
(3) The Secretary and the Treasurer of the Branch Council shall be jointly responsible for the maintenance
of its accounts.
(4) A current account in a local bank specified by the Council shall be opened and maintained by the
Branch Council. All cheques, drafts, notes, orders for payment of money and all similar documents shall be
signed by two of the officers who shall be appointed by a resolution of the Branch Council. All amounts
received shall be deposited in the bank account of the Branch Council.
(5) Each month, or more frequently if necessary, the Branch Council shall forward to the Secretary a
signed statement of its each receipts, disbursements and balances in the manner laid down by the Council.
(6) In addition to the monthly financial statements, the Branch Council shall, at the end of each year, as
soon after the 30th June as possible, forward to the Secretary the following signed statements in such form as
the Council may direct; namely 
(a) a statement of income and expenditure for the year with sufficient details thereof and reconciliation
with the total of the monthly financial statements;
(b) a statement of assets and liabilities, as on the 30th June including all amounts not collected or paid;
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(c) an inventory of text and other books on hand or on loan, text books in the hands of students or
instructors should be repossessed or signed confirmations obtained as of that date that such books
are held and are accountable to the Institute, the totals of such signed documents should reconcile
with the total of text books on loan as maintained by the Branch Council.
(7) The account of the Branch Council shall be audited, on the close of the financial year or from time to
time as the Council may determine, by auditors appointed by the Council.
(8) The funds and property of the Institute, located in the region for which Branch Council is constituted,
shall be applied solely to the promotion of the objects of the Institute. All rights in, and titles to the assets of
the Institute so located shall remain vested in the Institute.
72. Dissolution of the Branch Council:- (1) Notwithstanding anything contained in these regulations the
Branch Council shall stand dissolved if 
(a) a resolution for its dissolution is passed in a general meeting of members residing in the region by a
three-fourth majority; or
(b) after giving proper hearing to the Branch Council the Council decides to dissolve the Branch Council.
(2) On the dissolution of a Branch Council, the Council may nominate a new Branch Council till such time
as a new Branch Council is constituted.
CHAPTER VIII
REGISTERED STUDENTS
73. Eligibility to take examinations:- Admission to any examinations of the Institute shall be restricted to
registered students, who shall be required to undergo such theoretical and practical training as the Council
may arrange or approve and pay such fees for the same as the Council may determine.
74. Conditions for registration:- Ever person applying to become a registered student shall be required
to apply in Form H and produce evidence to the satisfaction of the Council that he 
(a) is not less than eighteen years of age on the date of his application; and
(b) hold a Bachelor degree of a University recognized by the Government or an equivalent qualification
recognized by the Institute or has passed the Intermediate or Final Examination of the Institute of
Chartered Accountants of Bangladesh or the Institute of Chartered Accountants of England and
Wales, Scotland or Ireland, or of the Society of Incorporated Accountants, London, or of the Institute
of Cost and Management Accountants, London, or of the Institute of Cost and Management
Accountants, Pakistan, or of the Society of Cost and Management Accountants of Canada:
Provided that persons registered as students with the dissolved Institute immediately before the
commencement of the Ordinance shall, on payment of any arrears of annual subscription due from
them, be registered as students under this regulation without the payment of any registration fee.
75. Fee and subscription:- (1) Every person applying for registration shall pay a student registration fee
of "such amount as may be determined by the Council from time to time".
(2) Every registered student shall pay an annual subscription "of such amount as may be determined by
the Council from time to time, and this subscription" shall be due and payable on the 1st July in each year:
Provided that half the amount of the annual subscription shall be payable for the first year by student
admitted on or after the 1st January and before the 1st July next following:
Provided further that the annual subscription paid to the dissolved Institute by a student shall be set off
against the annual subscription payable under this regulation and only the balance shall be payable by
him.
76. Refund of fee:- A candidate whose application for registration is not accepted by the Council shall be
entitled to the refund of the student registration fee and the first annual subscription and any other money paid
by him.
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77. Non-payment of annual subscription:- The non-payment of annual subscription within three months
from the date on which it becomes due shall render the defaulter liable to the cancellation of his registration.
78. Position of registered students:- The registration of any student shall not confer any membership
rights nor entitle a person so registered to claim any form of membership of the Institute. He may, however,
borrow books from the library subject to such conditions as the Council may, from time to time, specify and
participate in such activities of the Institute as the Council may determine.
79. Membership of students association:- Every registered student stationed in a region for which a
students' association is constituted under regulation 124 shall become a member of that association.
80. Examination rules:- Registered students shall be required to comply with the rules relating to the
examinations which are in force at the time of applying for admission to, or appearing in, the examinations.
81. Suspension and cancellation of registration:- In the event of any misconduct or breach of any
regulation by any registered student, the Council may, if it is satisfied, after such investigation as it may deem
necessary and after giving him an opportunity of being heard, suspend or cancel the registration of the
student.
82. Termination of registration:- The registration of a student shall terminate after he has passed the
qualifying examinations of the Institute:
Provided that if he is not eligible for membership of the Institute at the time passing the Final
Examination he may continue as a registered student on payment of the requisite annual subscription
for a period not exceeding five years.
83. Register to be maintained:- The Council shall maintain a Register of students in form 'I' and enter
therein names of the registered students.
CHAPTER IX
EXAMINATION AND TRAINING
84. Conditions for becoming a member of the Institute:- Except where otherwise provided for in the
Ordinance or these regulations, a person shall not be eligible to have his name entered in the Register of the
Institute unless 
(a) he has passed the necessary examinations of the Institute or obtained exemptions from such
examinations as may be specified under these regulations:
Provided that a person who has passed the Primary, Intermediate and Final Examinations of the
dissolved Institute or obtained exemptions from individual subjects under the rules of that Institute
shall not be required to pass in the corresponding subjects of the examinations of the Institute;
(b) he has at least three years' practical experience in such industrial accounting or cost and
management accounting as may be approved by the Council;
(bb)he is a teacher of a University established by Law for the time being in force and has passed the
course of the Institute of Cost and Management Accountants of Bangladesh and has also at least
three years teaching experience in accounting subject; and
(c) he fulfills such other conditions as are prescribed in the Ordinance and these regulations.
85. Times and places of examinations:- (1) Subject to the provisions of sub-regulation (2), all
examinations shall be held twice a year at such times as the Council may, from time to time, direct and at
such place or places as the Examination Committee shall, from time to time, appoint.
(2) Notwithstanding anything contained in sub-regulation (1), the Council may decide to hold special
examination during the year to provide more opportunity to the students to appear in the examinations.
(3) The dates and places of the examinations and other particulars shall be notified by the Council in the
official Gazette at least one month before the dates of the examinations.
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86. Syllabi and subjects of examination:- The examinations shall be conducted in such subjects and
syllabi and in such manner and subject to such conditions as may be determined by the Council from time to
time.
87. Application for admission to an examination:- (1) No person shall be admitted to an examination
of the Institute unless he is a registered student of the Institute.
(2) Application for admission to an examination shall be submitted in such form along with such fee and
papers as may be determined by the Council from time to time. Application form will be available from the
office of the Secretary and also from the offices of the Branch Councils.
(3) The Education Committee may, on receipt or being in possession of any information against any
candidate, decline to admit him to any examination after giving him an opportunity to explain his conduct.
(4) The Council may specify a method of training as a condition for admission to an examination.
88. Admission fees for examinations:- Every candidate for admission to any examination conducted by
the Institute shall pay such fees as may be determined by the Council from time to time.
89. Refund of candidates fees:- The fee paid by a candidate who has been admitted to an examination
shall not be refunded or carried over for any subsequent examination.
90. Candidates to be supplied with admission cards:- An admission card stating the place, dates and
times at which the candidate will be required to present him for examination shall be sent to each candidate at
the address given by him in his application so as to reach him less than fourteen days before the
commencement of the examination.
91. Examination results:- The Examination Committee shall consider the reports of the examiners on
each examination and may accept them or reject them or may accept them subject to any modification or
alteration which may seem desirable. The Examination Committee shall then report to the Council the result of
each examination and upon the adoption by the Council of the report of the Examination Committee, a list of
successful candidates shall be published in the official Gazette in such manner as the Council may deem
necessary.
92. Failure of candidates at examinations:- Any candidate who has failed to pass an examination to the
satisfaction of the Examination Committee may offer himself again on any subsequent occasion provided he
passes all the examinations of the Institute within a period of ten years from the date of his registration as a
student or such extended period as the Council may in individual cases decide. Failure to pass all the
examinations within the said period of then years or the extended period shall entail cancellation of
registration unless otherwise decided by the Council.
93. Examination certificates:- Every candidate passing or obtaining exemption from the examinations
required to pass or obtain exemption under these regulations shall be furnished with a certificate to that effect
in Form K duly signed by the President and the Secretary.
94. Exemptions from examination:- (1) The Council may, from time to time and on such condition as it
may deem necessary, allow, in individual cases or as a policy, exemptions from any examination or from any
subject in any examination. Exemptions granted may be withdrawn or the policy reviewed and changed by the
Council at any time and without assigning any reason.
(4) Any person who is eligible under sub-regulation (1) for exemption from any examination or from any
subject in any examination, may, on his applying in Form L along with such documentary evidence as may be
required by the Council and paying the fees payable for such examination or for an examination in such
subject, be exempted by the Council.
{Abolished clause (2), (3), (5) and (6) of sub-regulation 94}
95. Abolished.
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“FORM B1.”
[See sub-regulation (1) of regulation 6 and regulation 97].
THE INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS

OF
BANGLADESH
ICMA BHABAN, NILKHET, DHAKA.
APPLICATION FOR ADMISSION AS ASSOCIATE/FELLOW MEMBER
OF THE INSTITUTE.
For office use only.

Date Received Application No. Membership No.
THE SECRETARY,
The Institute of Cost and Management Accountants of Bangladesh, Dhaka.
DEAR SIR,
I beg to apply for admission as an Associate/a Fellow member of the Institute of Cost and
Management Accountants of Bangladesh.
PART-A
1. Name in full (block capitals) .................................................................................................

2. Surname, if any (block capitals) ...........................................................................................
4. Father’s Name .....................................................................................................................
*4. Address (any change in address to be promptly notified to the Institute).
(a) Permanent .....................................................................................................................
..............................................................................................................................................
(b) Present ...........................................................................................................................
..............................................................................................................................................
(c) Professional ....................................................................................................................
**5. Date of birth ..................................................................................Present age ..................

6. Nationality ......................................................................................................................
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96. Abolished.
97. Admission as fellows:- A person who has been associate member of the Institute for a period of not
less than five years may, on application in Form B and subject to the fulfillment of other conditions prescribed
in the Ordinance and these regulations, be admitted as a fellow if he has, for a period of five years
immediately prior to the date of application, held a position as Chief Accountant, Chief Management or Cost or
Industrial Accountant, or an equivalent appointment by whatever name designated in an organization
approved for the purpose by the Council, or been in practice to a similar period as an Industrial Accountant or
Cost Accountant or Management Accountant or Cost and Management Accountant.
CHAPTER X
SUSPENSION, EXCLUSION AND RESTORATION
98. Matter to be laid before Disciplinary Committee:- (1) It shall be the duty of the Secretary and the
right of any member or of any aggrieved person to lay before the Disciplinary Committee any fact indicating
that a member has become liable to exclusion, suspension or reprimand under any provision of the Ordinance
or these regulations or has been guilty or misconduct.
(2) Where a complaint has been received by the Institute or the Council or the Secretary that any
member has become liable as aforesaid, the complaint shall forthwith be laid before the Disciplinary
Committee.
99. Duties of the Disciplinary Committee:- (1) It shall be duty of the Disciplinary Committee to consider
the facts or complaint laid before it under the provisions of regulation 98 and where it is of the opinion that the
facts or complaint require investigation it shall forthwith give to the member notice of its intention to consider
the complaint. The Disciplinary Committee shall give such member an opportunity of being heard and shall, if
the member so desires, permit such member to the represented before it by a counsel or solicitor or another
member of the Institute. The Disciplinary Committee shall thereafter report the result of its inquiry to the
Council.
(2) The Disciplinary Committee may, at the request of any member, advise such member in regard to any
matter of professional conduct.
100. Duties of the Council:- (1) If the Council, on receipt of report under sub-regulation (1) of regulation
99, finds that a formal complaint has not been proved, it shall record its finding accordingly and direct that the
proceedings shall be filed or the complaint shall be dismissed, as the case may be.
(2) If the Council, on receipt of the said report, finds that a formal complaint has been proved, it shall
record its finding to that effect and shall afford to the member, either personally or through a counsel or
solicitor or another member of the Institute, an opportunity of being heard before orders are passed against
him on the case and may thereafter make any of the following orders, namely 
(a) reprimand the member; or
(b) suspend the member from membership for such period not exceeding five years, as the Council may
think fit; or
(c) exclude the member from membership.
(3) Notice of the finding and decision of the Council shall forthwith be given to the member concerned and
the decision shall thereupon take effect.
101. Publication of findings and decisions:- When the Council finds that a formal complaint has been
proved it shall, in the case of suspension or exclusion of a member from the Register, cause its finding and
decision to be published in the official Gazette and in such journal as it may think desirable and as soon as
practicable after such findings and decision are pronounced. The publication shall, in all cases, include the
name of the member concerned unless, in a particular case, the Council considers that there exist special
circumstances which justify the omission of the name from such publication.
102. Return of certificates in the event of suspension or removal.-In the event of the suspension or
exclusion of a member, every certificate of membership or fellowship or practice then held by him shall be
deemed to be cancelled from the date on which and during the period for which the name of its holder is
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excluded from the Register and shall be delivered up by the member to the Secretary, in the case of
suspension, to be retained by him during the period of suspension or in the case of exclusion, to be cancelled.
103. Restoration to membership:- (l) The Council may, on an application received in this behalf from a
person whose name has been permanently or temporarily removed from the Register under section 20,
restore his name if he is otherwise eligible to such membership:
Provided he shall have paid before such restoration the annual fee or fees for the year during which
his name is restored and all arrears on account of annual membership fee, subject to a maximum of
five years' annual membership fee, according to the scale applicable to him.
(2) The restoration of a name to the Register shall be notified in the official Gazette and in such journal as
the Council may think desirable and shall also be communicated in writing to the person concerned.
104. Professional and other misconduct defined:- For the purpose of the Ordinance and these
regulations, the expression "professional and other misconduct" shall be deemed to include any act or
omission specified in Schedule IV but nothing in this regulation shall be construed to limit or abridge in any
way the power conferred or duty imposed on the Council or the Disciplinary Committee under these
regulations to inquire into the conduct of any member in any other circumstances.
CHAPTER XI
MISCELLANEOUS
105. Finances:- (1) All moneys received by the Institute shall be paid into an account of the Institute at its
bankers and cheques drawn upon its bankers shall be signed "by such persons of the Council and of the
Institute as may be authorized by the Council in this behalf".
(2) The funds of the Institute shall be employed for such purposes as may from time to time, be
sanctioned by the Council and all funds not needed immediately for the ordinary purposes of the Institute may
be invested by the Council in any Government security or in any other security approved by the Council.
(3) The Council may, from time to time, borrow from a scheduled bank or from the Government any
money required for meeting its liabilities on capital account or for the purpose of meeting current liabilities
pending the receipt of income.
(4) The Council shall keep proper accounts of all income and expenditure and have the annual accounts
duly audited. A copy of the audited accounts and the report of the Council for that year shall be forwarded to
the Government and every member of the Institute as soon as practicable after its adoption at the annual
meeting of the Institute.
106. Audit of accounts of the Institute:- (l) The members at each annual general meeting shall appoint
a chartered accountant in practice within the meaning of the Bangladesh Chartered Accountants Order, 1973
(P.O. No. 2 of 1973), to act as an auditor at such remuneration, if any, as the meeting shall determine. In the
event of any vacancy occurring in the office of auditor between two annual general meetings or in the event of
a vacancy not being filled at an annual general meeting, the said vacancy may be filled by the Council at a
meeting summoned for the purpose.
(2) The auditor shall retire at the next annual general meeting after his appointment, but shall be eligible
for re-appointment.
(3) The auditor shall be nominated by two members of the Institute and such nomination shall be signed
by the members nominating and by the candidate and must reach the office of the Institute at least three
weeks before the annual general meeting. The auditor who is in office shall be deemed to be nominated at
each annual general meeting unless he has intimated to the Secretary his desire not be re-elected. Notice
shall be given to members and to the retiring auditor of the names of all other persons nominated for
appointment.
(4) The Council shall, not less than two months before the date of each annual general meeting, deliver to
the auditor the accounts of the last year and the auditor shall examine such accounts and report thereon, not
less than one month before the meeting. The auditor shall be entitled to ask for any information or explanation
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regarding the accounts from the Secretary and such information or explanation shall be supplied to him in so
far as may be available at the time.
107. Powers and duties of the President and Vice-President:- (l) The President shall exercise such
powers and discharge such duties as are conferred or imposed upon him by the Ordinance and these
regulations and as may be specified by the Council or a Standing Committee.
(2) The President may direct any business to be brought before the Council or a Standing Committee for
consideration.
(3) If the office of the President is vacant or if the President for any reasons unable to exercise the powers
or perform the duties of his office the Vice-President shall act in his place and shall exercise the powers and
discharge the duties of the President.
108. Powers and duties of the Secretary:- (l) Subject to the provisions of the Ordinance and these
regulations and under the general supervision and direction of the President and the Standing Committees
concerned, the Secretary shall exercise and discharge the following powers and duties, namely:-
(a) being in charge of the office of the Institute as its administrative head, managing it and attending to all
correspondence and other matters relating to it;
(b) entry and restoration of names of associates and fellows, removal of name from Register owing to
death, issuing notifications therefore and the signing of any notification on behalf of the Council,
subject to the approval of the President;
(c) sanctioning, renewing and canceling certificates of practice;
(d) maintenance of all the registers, documents and forms as required by the Ordinance or these
regulations;
(e) being in charge of all the property of the Institute;
(f) incurring revenue and capital expenditure within the limits sanctioned by the Council or the President
or any Committee, receiving moneys due to the Council and issuing receipts therefore, paying staff
salaries and allowances, maintaining or causing to be maintained proper accounts and delivering the
books of accounts, information, etc., to the Institute's auditor;
(g) exercising disciplinary control over the staff except dismissal which should have the sanction of the
President;
(h) admitting candidates to the examinations held under these regulations, and making all necessary
arrangements for the conduct of examinations;
(i) registering students;
(j) appointing solicitors or advocates and filing papers in Courts, etc. on behalf of the Council, subject
to the approval of the President; and
(k) discharging and performing such other duties and functions as are incidental and ancillary to and may
be required for the discharge and performance of the above duties and functions and exercising such
other powers as may be delegated by the Council, the Committees or the President from time to time.
(2) The powers and duties enumerated in sub-regulation (1 ) may be assigned by the Council to the
Treasurer or an employee of the institute to such extent as may be deemed necessary by the Council or the
President.
109. Indemnity:- (1)The members of the Council, office-bearers and auditors shall be indemnified by the
Institute from all losses and expenses incurred by them in or about the discharge of their respective duties,
except such as are done to their own respective willful default or, in the case of an auditor, his own
negligence or willful default or that of any partner or employee of such auditor.
(2) No member of the Council, office-bearer or auditor shall be liable for the act or omission of any other
member of the Council, office-bearer or auditor, or for signing any receipt or document, or for any loss or
expense happening to the Institute, unless the same happens from his own willful default or in the case of an
auditors from his own negligence or willful default or that of any partner or employee of such auditor.
110. Headquarters of the Council:- The headquarters of the Council shall be located at Dhaka.
111. Administration of the Institute:- The Council shall be in charge of the administration of the Institute
and its branches.
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112. Custody and use of seal:- (1) The seal shall be kept in such custody as the Council may, from time
to time, determine.
(2) The seal shall not be affixed to any instrument except by the order of the Council and in the presence
of the President or two members of the Council and every such instrument shall be signed by the President or
members in whose presence the seal is affixed and by the Secretary.
113. Interpretation:- The decision of the Council on the interpretation of these regulations shall be final.
114. Publication of list of members:- The Council shall publish the list of members required under sub-
section (3) of section 19 in any manner it thinks fit and may distinguish between the associates and fellows in
practice and between the associates and fellows not in practice . The list so published shall be supplied to
members and others gratuitously or at such price as the Council may, from time to time, determine.
115. Members to supply information:- For the purpose of publication of the list referred to in regulation
114, the Council may require the member to supply any information regarding their present address, place of
business, partners, whether practicing or not and the like. If the members fail to supply the information in time,
the list may be drawn up on such information as the Council may possess.
116. Particulars of offices and firms:- Every cost and management accountant in practice and every
firm of such accountants shall submit to the Council in Form M the particulars of his office, or as the case may
be, of the firm within three months from the date of commencement of the Ordinance or the commencement of
practice or formation of the firm, as the case may be, whichever is later. Any subsequent change in the
particulars submitted should be sent so as to reach the Council within thirty days after the change was
effected. A register of offices and firms shall be maintained by the Council.
117. Particulars of nationality:- Every member of the Institute shall submit to the Council particulars
regarding his nationality and shall also intimate to the Council any subsequent change in such particulars not
later than thirty days from the date of such change.
118. Place of business in Bangladesh:- Every member in practice shall have a place of business in
Bangladesh in his own charge or in charge of another member. Particulars of such place of business shall be
supplied by the member to the Council initially and whenever there is a change of such place of business:
Provided that in the case of a member who is a salaried employee of cost and management
accountant or a firm of such accountants, the place of business of his employer shall be deemed to be
his place of business for the purposes of regulation 115.
119. Method of payment of fees:- All fees payable under these regulations shall be paid to the Secretary
in such manner as the Council may direct.
120. Issue of duplicate certificate:- (l) In the event of the loss by the holder of a certificate issued under
the Ordinance or these regulations, the Council may, on application made in this behalf, duly supported by an
affidavit of the applicant to the effect that he was in possession of such a certificate and had lost it, issue a
duplicate copy thereof to him on payment of such fee as may be determined by the Council.
(2) Where any such certificate is damaged or mutilated, the Council may, on application made in this
behalf, issue a duplicate copy thereof on receipt of such fee as it may determine and on return of the
damaged certificate.
121. Cost and Management accountant to practice in their individual names:- No cost and
management accountant who is not a member of a firm of cost and management accountants shall practice
under any name or style other than his own name.
122. Cost and management accountant in practice not to engage in any other business or
occupation:- A cost and management accountant in practice shall not engage in any business or occupation
other than the profession of cost and management accounting unless it is permitted by a general or specific
resolution of the Council.
123. Other functions of cost and management accountants:- Without prejudice to the discretion
vested in the Council in this behalf, a cost and management accountant in practice may act as liquidator,
trustee, executor, administrator, arbitrator, receiver, adviser or as representative for costing financial matters,
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company law and taxation matters or may take up an appointment that may be made by the Government or a
court of law or any other authority established under any law, or may act as the Secretary of a company in
his professional capacity not being a whole-time employees.
124. Constitution of students' association:- (1) The Council may constitute students' association at
various places in Bangladesh as and when it deems fit and such association shall perform such functions as
may be specified by the Council.
(2) The associations shall be managed by a Committee which shall be set up by the Council and shall
function subject to the control, supervision and direction of the Council through the Branch Councils.
(3) Any person who applies for registration as a student shall forward a such sum as may be determined
by the Council from time to time along with his application for registration. The amount so collected shall be
transferred by the Council to the students' association concerned.
(4) The Council may, in addition to amounts transferred under sub-regulation (3), give such financial
grants to the students' associations as may be decided by it from time to time.
125. Repeal and savings:- (1) The Cost and Industrial Accountants Regulations, 1966, hereinafter
referred to as the said Regulations, are hereby repealed .
(2) Upon the repeal of the said Regulations, any appointment, notification, order, election, examination,
result of an examination made, issued, held, declared, rendered or any other thing done under the said
Regulations, shall, so far as it is not inconsistent with the provisions of these regulations, be deemed to have
been made, issued, held, declared, rendered or done under the provisions of these regulations unless and
until it is superseded by action taken in accordance with these regulations.
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SCHEDULE I
FORM A
[See regulation 5]
REGISTER OF MEMBERS
Date of entry Enrolment No. under Enrolment Name in full Date of Domicile.
in the the Cost and No. under birth
Register Industrial the
Accountants Act, Ordinance Surname Other
1966 name(s)
1 2 3 4(a) 4(b) 5 6
Registered Residential and Qualification Whether holding a Date of admission

address Professional Certificate of as fellow
address. Practice.
7 8 9 10 11
Whether practicing independently, in Whether holding a salaried

Remarks
partnership or employed in a firm Cost and employment, if not in practice.
Management Accountants in practice.
12 13 14
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FORM B
[See sub-regulation (i) of regulation 6 and regulation 97]
APPLICATION FOR ADMISSION AS MEMBER OF THE INSTITUTE

THE SECRETARY,
Institute of Cost and Management Accountants of Bangladesh, Dhaka.
I beg to offer myself for admission as an associate/a fellow member of the Institute of Cost and
I undertake to observe the provisions of the Cost and Management Accountants Ordinance, 1977 (Llll of
1977) and the regulations made there under for the time being in force.
1. Name in full...............................................................................................................................
(in block letters)
2. Address.....................................................................................................................................
3. Date of birth and age (on the date of signing) .........................................................................
4. Nationality....................................................................
5. Official designation of present occupation ..............................................................................
..................................................................................................................................................
If in the employment of a Firm or Company, etc., state-
(a) whether in complete charge and authority of the whole costing
work..................................................................................................................................
(b) Your relative position to that of your chief .......................................................................
6. Date of appointment to the present post..................................................................................
7. Name and address of the present employer ...........................................................................
..................................................................................................................................................
8. Nature of their business ..........................................................................................................
9. Number of employees engaged:
(a) in factory..............................................................................................................................
(b) in costing work ................................................................................................................
10. Names and address of three persons to whom reference may be made; at least two of them should
preferably be members of the Institute.
Name Address Grade in Institute or Business
Designation
(1)
(2)
(3)
11. Statement of costing experience with the present employer, showing also concisely the work upon which
the candidate is at present engaged and the degree of personal responsibility involved therein.
N.B.-If the candidate so desires, this statement may be given on a separate sheet of paper.
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12. Particulars of past experience:

This statement should give particulars of work upon which the candidate was engaged prior to that given
in the preceding statement, also particulars of any technical knowledge and workshop experience.
N.B.-lf the candidate so desires, the statement may be given on a separate sheet of paper.
13. Particulars of general education, examinations passed and Degrees or Diplomas held.
14. Membership of other societies or of this Institute, with dates of election
I.....................................................the undersigned, certify that the above statements are correct and do
hereby agree that in the event of my admission as a member of the Institute, I will be governed by the Cost
and Management Accountants Ordinance, 1977 (LII of 1977) and the regulations made there under for the
time being in force, that I will advance the objects of the Institute as far as shall be in my power and will attend
the meetings there of as often as I conveniently can, provided that whenever, I shall signify in writing to the
Secretary that I am desirous of withdrawing from the Institute, I shall ( after the payment of any arrears which
may be due by me at that date and after the return of my certificate of membership) be free from this
obligation.
Date ............................................. Signature of candidate .......................................
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FORM B1.
[See sub-regulation (1) of regulation 6 and regulation 97].
OF BANGLADESH, ICMA BHABAN,NILKHET, DHAKA.
APPLICATION FOR ADMISSION AS ASSOCIATE/FELLOW MEMBER OF
THE INSTITUTE.
For Office use only.

Date Received Application No. Membership No.
THE SECRETARY,
The Institute of Cost and Management Accountants of Bangladesh, Dhaka.
DEAR SIR,
I beg to apply for admission as an Associate/a Fellow member of the Institute of Cost and
PART-A
1. Name in full (block letters)....................................................................................................

2. Surname, if any (block letters)..............................................................................................
3. Father's Name.....................................................................................................................
*4. Address ( any change in address to be promptly notified to the Institute).
(a) Permanent ......................................................................................................................
.............................................................................................................................................
(b) Present ............................................................................................................................
..............................................................................................................................................
(c) Professional ....................................................................................................................
**5. Date of birth................................................................................... Present age ................
6. Nationality.............................................................................................................................
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***7. Academic Qualifications:

Sl. Examination Institution Division/Class Year of passing
No.
(Copy of certificates to be submitted)

8. Professional Qualification:
Name of the Institute Name of the Examination Roll No. Month & Year of passing
(Copy of Certificate to be submitted)
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PART-B.
9. Present service status :
(a) Name of the employer ..............................................................................................
(b) Address ............................ ........................................................................................
..................................................................................................................................
(c) Designation ..............................................................................................................
(d) Nature of the organization (Govt./Autonomous/Corporation/Authority/Private/ Multinational/NGO/Any
other (please
specify) ........................................................ ............................................................................................
..................................................................................................................................................................
......
(e) No. of employees in the organization.......................................................................
(f) No. of employees under applicant’s supervision.......................................................
(g) Relative position to that of applicant’s chief ............................................................
(h) Date of appointment .................................................................................................
(i) Date of promotion to the existing post ......................................................................
10. Service experience:
Sl. Name of Applicant’s Total No. of No. of Year Brief detail of

No. Organization position employees employees Period and area of
responsible Month experience
From To
to applicant
11. Name and address of three persons to whom reference may be made at least two of whom should be
members of the Institute:
Sl. No. Name and Address Membership No. Grade in the Institute or Designation
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12. Membership with other Professional Institution:

Sl. No. Name of the Institute Membership Grade Date of Membership
(Certificates in support to be submitted).
13. Association with ICMA Bangladesh:

(i) As student:
(a) Registration Number .................... Date .....................
(b) Last Examination Passed ................. Roll No. ..................
(c) Institute prizes won (if any) ....................................
(ii) As Member:
(a) Previous Membership Number ............................................................................
(b) Date of Membership ............................................................................................
14. Any other particular/information that the candidate may like to furnish:
______________________________________________________________________________
______________________________________________________________________________
15. I enclose a Bank Draft/Crossed Cheque for a sum of Taka ........................................................

( ....................................................................................................) as:
(a) Admission Fee .................................................................... Tk. .................................................
(b) Annual Membership Fee .................................................... Tk. .................................................
Total Tk. ..................................................
PART-D
16. Declaration:
I, .................................................................................... the undersigned do hereby declare that :
(1) The above statements are correct.
(2) In the event of my admission as Member of the Institute, I will be governed by the Cost and
Management Accountants Ordinance, 1977 (LIII of 1977) and the regulations made there under
for the time being in force.
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(3) I will advance the objectives of the Institute to the best of ability and will attend the meeting thereof
as often as I conveniently can during tenure of my Membership.
I further declare that :-
(1 ) I am not and was never an insolvent.
(3) I have not been convicted by any court of law of any offence involving moral turpitude or an
offence committed by me in my professional capacity.
Yours faithfully,
Date .......................................... ........................................................

Signature of the applicant.
N.B.- *Please indicate which one is to be treated as Registered Address.

**Matriculation/S.S.C. certificate together with a copy is to be produced in evidence of age.
*** Original certificates together with copies in proof of qualifications are to be submitted.
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FORM C
[See sub-regulation (1) of regulation 7]
INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH
CERTIFICATE OF MEMBERSHIP
No. ...........................................
THIS IS TO CERTIFY THAT

.....................................................................................................................................................
was admitted as a/an ..................................................... of the Institute on the ..................... day
of ..................................................................... 200................................
Given under the seal of the Institute at Dhaka this ............................................................... day
of .................................... 200 .........................................
...............................President.
......... Member of the Council.
...............................Secretary.
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FORM D
APPLICATION FOR THE ISSUE OF CERTIFICATE OF PRACTICE
To
THE SECRETARY,
Institute of Cost and Management Accountants of Bangladesh, Dhaka.
Sir,
I hereby apply for the grant of a certificate of practice under section 7 of the Cost and Management
Accountants Ordinance, 1977 CLIII of 1977)
I undertake to furnish such information as may be required by the Council in proof of my being in
practice as a cost and management accountant.
As and when I cease to be in practice I shall duly inform the Council of having done so as required
under the Institute's regulations.
I enclose a Bank draft/crossed cheque No. ..........................................................................
dated..................................................... for the sum of Taka ................................................being the
application fee.
Yours faithfully,
Signature...............................
Name ....................................
(in block letters)
Place................ Membership No.......................
Date.................
Name and address of the firm.
................................................
................................................
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FORM E
No........................................

CERTIFICATE OF PRACTICE
This is to certify that ........................................................................................................
of .....................................................................................a................................................member, of the
Institute is entitled to practice as a cost and management accountant within the meaning of section 7 of the
Cost and Management Accountants Ordinance, 1977 (Llll of 1977), throughout Bangladesh. This certificate is
valid from the.............................................................................day of .............................................................
200.................. to the 30th day of June, 200.................
Given under the hand of the President and the seal of the Institute at Dhaka this day
of ................................................................................................... 200 .................................................
....................................................... President.
..................................Member of the Council.
........................................................Secretary.
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FORM F
No.........................
OF BANGLADESH
RENEWAL OF CERTIFICATE OF PRACTICE

The certificate of practice No............................................................................. granted
on ............................................to...................................of.....................................for the period
from ................................to......................................is hereby renewed for the period
from .................... ...................................................................... to ......................................................
Given under the hand of the President and the seal of the Institute at Dhaka,
this ....................................day of ....................................................................200..................................
.................................President.
.......... Member of the Council.
.................................Secretary.
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FORM G
FORM FOR NOMINATION OF FELLOW FOR ELECTION TO THE COUNCIL

To
The Secretary,
Institute of Cost and Management
Accountants of Bangladesh
Dhaka.
SIR,
I hereby propose and nominate Mr. ......... ...... ....... ........... ........... ....... ....... .......... ..... ..... ....... . fellow of the
INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH, for election as a member
to the Council
Signature...........................
Name..................................
(in block letters)
Membership No.................
Place......................
Date........................
We hereby second the proposal and nominate Mr. ..................................................... fellow of the
INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH, for election as a member
to the Council.
Names of seconders. Signatures with date Membership No.
(At least two members will sign the secondment).
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FORM H
[See regulation 74]
STUDENT REGISTRATION APPLICATION
I hereby apply for registration as a student of the Institute and if admitted agree to abide by the
regulation of the Institute.
Name in full ......................................................................................
(block letters)
Date of birth......................................................................................................................................
Address ......................... ............................................................................................................... .......................
................................. .............................................................. Phone......................
Name of present employer and
address ......................... ........ ........................................................ .....................................................................
.................................................... Phone...................... Present
Position....................................... ............................. ..Date started........................... Educational
Qualifications..........................Year.......................... Division .............................. ....................University/Board.
Please attach certificates in original together with a Photostat copy.

(1)...........................................................................................................................................
(2)...........................................................................................................................................
(3)...........................................................................................................................................
(4)...........................................................................................................................................
If employed please complete the following and attach employers' certificates in original.
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PREVIOUS BUSINESS EXPERIENCE:
Employers Position From To
Month Year Month Year
(1) ....................................................................................................................................
(2) ....................................................................................................................................
(3) ....................................................................................................................................
I enclose Taka ......................................... as Registration Fee and Taka ........................... as Annual

Subscription (Total Taka .......................................................................................)
Dated..................................... Signature of the Applicant .............................
FOR OFFICE USE ONLY
Branch seal
Documents in order...............................................................................................................
Assistant Director
Admission granted...............................................................................................................
Director
Registration.....................................................Date....................................................................
Amount received Taka...............................................Receipt No...............................................
and date..................................................
Cashier
Student’s Card prepared................................................................................................

Address plate prepared................................................................................................
Student advised on...................................................................
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FORM I
[See regulation 83]
Register of students (for new Course)
Registration No.
Name Year
FORM J (Abolished)
FORM JJ (Abolished)
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FORM K
[See regulation 93]
EXAMINATION CERTIFICATE
This is to certify
that .......................................................................................................... .............................................................
............................ son of ................................................... has passed the Final Level-IV Examination held by
the INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH in the month
of ...................... 200.... dated the ................................ day of .............................................................................
200............
......................... President.
............................ Secretary.
Roll No. ...........................................
Student’s Registration No. .....................
FORM L
Registration No.
APPLICATION FOR EXEMPTION FROM EXAMINATION
DEAR SIR,
I hereby apply for exemption from the Institute’s examination in subjects listed below:
Name in full .........................................................................................................................
(block letters)
Address ............................................................................. Phone ............................................
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Educational Qualifications:
(Attach original certificates with a Photostat copy)
Institution Division Degree Year
EXEMPTIONS APPLIED FOR

Subjects
Basis for request
(Equivalent course passed/for details please see prospectus)
1.
2.
3.
4.
5.
6.
I enclose Taka ............................................................ being the exemption fee.
Dated .................................... Student’s Signature ..........................
FOR OFFICE USE ONLY.
Documents in order ......................................................................................................Branch Seal
Exemption granted in .......................................................................................................................

Exemption Fee Received Taka ............................................. Receipt No. and Date ........................
...........................................................................................................................................................
Entered in student’s card by ..................................................................... Date................................
Entry checks by ........................................................................................ Date................................
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Student advice letter No. .......................................................................................................... ........
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FORM M
[See regulation 116]
PARTICULARS OF OFFICES AND FIRMS OF COST AND MANAGEMENT ACCOUNTANTS
1. Name of office or firm and addresses (where there are branches, also give address of branches).
2. Name of the partners and their addresses.
3. Date from which the partnership was entered into and enclose certified copy of the partnership deed
signed by all the partners (relevant portion only).
4. Name of the member in charge of each office.
6. Names of the members of the Institute who are working as paid assistants in the firm.
Signatures of the Partners,
1.
2.
3.
Place:
Date:
(i) Separate proforma may be completed for each firm.
(ii) A fresh form is required to be submitted whenever any change in partnership takes place.
Information should be furnished within one month of change.
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FORM 'N'
FORM FOR NOMINATION OF MEMBER FOR ELECTION TO THE BRANCH

COUNCIL
To
The Presiding Officer
Branch Council Election
ICMA Bangladesh.
.................................................
.................................................
.................................................
Dear Sir,
I hereby propose and nominate Mr. ................................................................................................. a member of

the Institute of Cost and Management Accountants of Bangladesh, for election as a member to
the ............................................................................................... Branch Council.
Signature : .....................................
Name : ..........................................
(In block letters)
Membership No. ...........................
Place : .................................................
Date : ..................................................
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I hereby second the proposal and nominate Mr. .............................................................................. a member of

the Institute of Cost and Management Accountants of Bangladesh, for election as a member to
the ..........................................................................................Branch Council.
Signature : .....................................
Name : ..........................................
(In block letters)
Membership No. ...........................
Place : .................................................
Date : ..................................................
I hereby give my consent to the above mentioned proposal.

Signature : .....................................
Name : ..........................................
(In block letters)
Membership No. ...........................

Place : .................................................
Date : ..................................................
FORM NO 'O'
(Abolished)
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SCHEDULE II & III - Abolished
SCHEDULE IV
[See Regulation 104]
A member of the Institute shall be guilty of professional and other misconduct, if he-
(1) places his professional service at the disposal of or enters into partnership with, an unqualified person or
persons in a position to obtain business of the nature in which cost and management accountants,
engage by means which are not open to be a member of the Institute;
(2) allows any person to practice in his name as a cost and management accountant in practice unless such
person is also a cost and management accountant and is in partnership with or employed by him;
(3) pays or allows or agrees to pay or allow directly or indirectly a share commission or brokerage in the fees
or profits of his professional, business to any person other than a member of the Institute or a partner or a
retired partner or the legal representative or widow of a deceased partner;
(4) accepts or agrees to accept any part of the profits of the professional work of a lawyer, income-tax
practitioner, auctioneer, broker or other agent or any other person other than a member of the Institute;
(5) accepts a position as a cost and management accountant in practice previously held by some other
members without first communicating with him in writing;
(6) accepts an appointment as a cost and management accountant with a concern without first ascertaining
from it whether the legal requirements, if any, have been duly complied with;
(7) accepts a position as a cost and management accountant in practice previously held by some other
member in such conditions as constitute under-cutting;
(8) publishes or sanctions the publication of expressions of thanks or appreciation by clients or promotes in
any way laudatory notices with regard to professional matters;
(9) solicits clients or professional work either directly or indirectly by circular advertisement personal
communication or interview or by any other means partaking of the nature of advertisement;
(10) advertises his professional attainments or services or uses any designation or expressions other than
cost and management accountant on professional documents, visiting cards, letter heads or sign boards
unless it be a degree of a University established by law in Bangladesh or recognized by the Government
or a title indicating membership of the Institute of Cost and Management Accountant or any other
Institution that has been recognized by the Government or may be recognized by the Council;
(11) allows his name to be inserted in any directory either in the main section or in classified list, whether,
printed or not, so as to appear in leaded type or in any manner which could be regarded as of an
advertising character;
(12) certifies or submits in his name or in the name of his firm a report of an examination of cost accounting
and related statements, unless the examination of such statements has been made by him or by a partner
or any employee in his firm or by another cost and management accountant in practice;
(13) permits his name or the name of his firm to be used in connection with an estimate of cost or earnings
contingent upon future transactions in a manner which may lead to the belief that he vouches for the
accuracy of the forecast;
(14) charges or offers to charge, accepts or offers to accept in respect of any professional employment fees
which are based on a percentage of profits or which are contingent upon the findings or results of such
employment;
(15) engages in any activities including publication of leaflets, booklets, brochures, papers etc., either signed
or unsigned or banami which may be considered as affecting the Institute or the profession of Cost and
Management Accountants;
(16) allows a person not being a member of the Institute or a member not being his partner to sign on his
behalf or on behalf of his firm any report or cost or pricing statement or any other document required by
his client;
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(17) discloses information acquired in the course of his professional engagement to any person other than his
clients without the consent of his client or otherwise than as required by any law for the time being in
force;
(18) express his opinion on cost or pricing statement of any business or any enterprise in the which he, his
firm or a partner in his firm has a substantial interest unless he discloses interest also in this report;
(19) fails to disclose a material fact known to him which is not disclosed in a cost or pricing statement but
disclosure of which is necessary to make such statement not misleading;
(20) fails to report a material mis-statement known to him to appear in a financial statement with which he is
concerned in professional capacity; or fails to invite attention to any material departure from the generally
accepted procedures of costing and pricing applicable to the circumstances;
(21) is grossly negligent in the conduct of his professional duties;
(22) fails to obtain sufficient information to warrant the expression of an opinion or his qualifications are
sufficiently material to negate the expression of an opinion;
(23) fails to keep moneys of his client in a separate banking account or to use such moneys for purposes for
which they are intended;
(24) has been guilty of any act or default discreditable to a member of the Institute;
(25) contravenes any of the provisions of the Ordinance of the regulations made there under;
(26) is guilty of such other act or omission as may be specified by the Council in this behalf, by notification in
the official Gazette;
(27) not being a fellow styles himself as a fellow;
(28) does not supply the information called for by, or does not comply with the directions of, the Council or any
of, the Council or any of its Committees;
(29) includes in any statement, return or form to be submitted to the Council any particulars knowing them to
be false;
(30) does not pay any money he is ordered to pay by the Tribunal appointed under section 10;
(31) adopts one or more of the practices specified in regulation 23.
RUHULQUDDUS
President
Institute of Cost and Management

Accountants of Bangladesh
Meaning: Cost Audit
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Meaning: Cost Audit
Meaning: Cost Audit
Meaning: Cost Audit
Meaning: Cost Audit
Meaning: Cost Audit
Meaning: Cost Audit
Meaning: Cost Audit
INTRODUCTION TO
MANAGEMENT AUDIT
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Meaning: According to the CIMA, Management Audit is an objective and independent

appraisal of the effectiveness of managers and effectiveness of the corporate structure in the
achievement of company objectives and policies. Its aims are to identify existing and potential
management weaknesses within an organization and to recommend ways to rectify these
weaknesses.
So, Management audit is an appraisal by a public accountant or other professional person of

management performance. Management audit is an investigation of a business from the highest
level downwards in order to ascertain whether sound management prevails throughout, thus
facilitating the most effective relationship with the outside world and the most efficient
organization and smooth running of internal organizations. It is a comprehensive and constructive
examination of an organizational structure of a company, institution or branch of Government, or
of any component thereof, such as a division or department, and its plans and objectives, its means
of operations, and its use of human and physical facilities.
Objectives of Management Audit: The objectives of management audit are as follows:

a) To examine and evaluate the quality of management functions and performances.
b) To check whether actual performances are in line with objectives and plans.
c) To ascertain the defects of the objectives and plans adopted by the management.
d) To review the organization structure and identify its weaknesses.
e) To check whether the management policies, rules and procedures are being duly followed at
different levels of management and identify their weaknesses.
f) To examine different control systems in vogue in the organization and judge their
effectiveness.
g) To determine the overall standard of management performance.
h) To identify the weaknesses and inefficiencies in different functional areas like purchase,
production, sales, inventory control, cost control, finance, etc.
i) To look out ways of removing the weaknesses or deficiencies which are existing at different
management areas and levels for improving management efficiency?
j) To search for ways of production at lesser cost and improving production and selling
efficiency.
k) To determine the best ways of improving management efficiency and performance among
several alternatives available.
l) To submit a report to the management indicating the present problems and deficiencies in
the process and functions of management and giving the solutions for removing them and
increasing the efficacy of management.
Nature and Scope: The natures of management audit are summarized below:
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- Management audit is a comprehensive and constructive examination of the efficiency of

management at all levels throughout an organization.
- It makes an evaluation of the efficiency of management at different levels and different
areas.
- It is concerned with not only the present deficiencies or loopholes but also the ways for
future improvement.
- It is not required every year. The beneficial effect of one management audit lasts for
several years.
- Management audit is performed by a team of experts, consisting of management
experts, professional accountants, engineers, etc.
The scope of management audit is decided by each organization on its own needs. It has no
limitations. It generally extends over all the resources deployed and commercial activities of the
organization including:
- Director and their functions.

- Managers, supervisors and their functions.
- Organizational structure.
- Methods and systems.
- Security of information.
- Resources utilization, their adequacy and efficiency.
- Planning and control etc.
The scope of management audit extends over all the functions of an organization viz. management,
personnel, administration, material administration, marketing, personnel, finance, etc. wherever
the effectiveness of management needs to be examined.
Accordingly, the scope of management audit may include:
- The suitability, practicability and present compliance or otherwise of the

organization with its desired objectives and aims.
- The current image of the organization among customers, general public within its
own particular industrial or commercial field.
- Efficient utilization of resources of the organization.
- The rate of return on investors’ capital – whether poor, adequate or above average.
- Relationship of the business with its own shareholders and the investing public in
general.
- Employee relations.
- The aims and effectiveness of management at its various levels such as top level,
middle level and operational level.
- Financial policies and control relating to production, sales and distribution and in
other functions of the organization.
An organization is accountable not only to its internal owners like shareholders but also socially
accountable to creditors, Government, taxpayers and consumers. Management audit extends to
examination of accountability between the management and others at large. Audit mechanism
ensures this accountability. Since the right to exercise control lies entirely with different set of
people away from the owners, the examination of accountability and ensuring shareholders’ and
other participants’ welfare becomes important.
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Organizational Needs for Management Audit: Every country want to achieved the desired
economic development as planned. Regional and social imbalances have continued over the years
on the developing countries leads to social unrest in different parts of the country. In the industrial
field there is an alarming growth of sickness of industries which has led to the enactment of Sick
and Weak Industrial Law & Regulations. Large amount of resources of Banks and Financial
Institutions are involved in the rehabilitation of sick industries. Other hand, the performance of the
public sector enterprises is also dismal in spite of state protection in respect of product monopoly,
administered prices etc. Public sector also employs a large number of people. A major cause of
sickness is managerial weakness besides other causes like falling market demand, non-availability of
raw materials, shortage of working capital, labor unrest etc.
The main cause of all these economic and social problems can be attributed to managerial
ineffectiveness, which in turn causes other problems. It is therefore, imminent that an appraisal of
managerial effectiveness is undertaken to monitor and remedy weaknesses wherever exist. This is
the function of management audit.
Management audit is now becoming more popular everywhere. Almost all progressive
organizations undertake voluntary management audit due to its benefits as under:
- It helps management in framing basic policies for the organization and to define objectives.
- In pursuance of the objectives of the organization, management audit helps in preparing a
viable and achievable plan for the organization.
- It helps in setting up an organizational frame-work to implement the plans.
- It assists in designing systems and procedures for smooth operation of the organization.
- It helps in designing and reviewing management information system (MIS) for decision
making to help in co-ordination, motivation and control of the operations.
- It assists analyzing SWOT (strength, weakness, opportunities and threats) of the
organization and assists in making the organization stronger.
- It can help in analyzing social-cost-benefit analyses for public projects like dams, power
houses, national highways etc.
- It is essential whenever a unit is planned to be taken-over or an amalgamation or merger
with other unit is proposed.
- Growing number of professional managers, the continuing separation of ownership from
management, and the wider distribution of stockholders, increasing competition and sickness
in industry will sooner or later make certified management audit compulsory just a financial
audit has been statutory.
Coverage of Management Audit: Management audit has a wide range of working. Unlike
other audits, management audit does not have any specific areas for conducting audit. It covers the
entire arena of management operations including organization, personnel, administration,
manufacturing, marketing, finance, research and development and other areas. The audit is
expected to cover every activity of the organization undertaken in pursuance of organizational
objectives or policies decided by the Board of Directors from time to time. It is left to the creativity
of the auditor to lay down for himself the areas to be taken up for audit. In the result, management
audit covers examination of efficient performance of the activities of the organization.
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Advantages of Management Audit: The advantages of management audit are described as

under:
- The information provided by the management auditor helps management to construct and
review its basic policy frame-work.
- The management auditor helps management in establishing an orderly planning system,
assists in allocating responsibility for planning, review progress of the planning and evaluates its
effectiveness.
- The management auditor helps management in goal – setting and strategy including
reviewing the decision – making machinery.
- The management auditor helps management in designing and maintaining an adequate
position and authority structure.
- The management auditor helps management to improve the entire communication system.
- The management auditor pin-points key functions in the profit-making process and
establishes better criteria for measuring results.
Management Auditor: A management auditor is the person who conduct the management
audit. He/she should be well acquainted with organizational structure of the business for which
audit is conducted. He must have sufficient knowledge and experience required for assessing the
organizational structure, policies, planning, procedures and accounting system.
He/she must have received special training in management audit and must have sufficient
experience in observing and interviewing persons at work. He/she must have knowledge of auditing
theory and techniques and the ability to apply these techniques to the accounting situation under
review. A management auditor must have technical ability in the field of accounting so that he may
be able to sort out various accounting matters more effectively. He/she must have tact to obtain
willing co-operation from other executives of the organization. The most important quality is the
auditor’s ability to think like a manager. After he/she has accumulated his/her information and
analyzed it, he/she must then weigh the results as a manager would and suggest improvements.
A management auditor is distinct on feature of activities and qualities from a financial auditor.
These distinctions between management auditor and financial auditor are summarized below:
Management Auditor Financial Auditor

He/she is responsible to management. He/she is responsible to shareholders.
He/she evaluates the efficiency of all He/she does not evaluate efficiency of
activities of the business. the business.
He/she examines the financial records as He/she examined only the financial
well as operating areas of the records of the organization.
organization.
His/her work covers the critical His/her work covers only the financial
examination of planning, policies, aspect of the business and corporate
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procedures and organizational structure. laws.

His/her report discloses the facts relating His/her report discloses/recommends
to the efficiency of the management and points to meet the shortcomings of the
includes proposals and methods to business. It also discloses the facts
achieve the future targets. relating to the financial position of the
organization.
AREAS OF MANAGEMENT AUDIT
Specific Areas of Management Audit: In order to carry out his/her task more effectively,
the management auditor should cover the following areas for the purpose of audit:
- Appraisal of objectives
- Appraisal of planning
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- Appraisal of organizing
- Appraisal of control
- Appraisal of system and procedures
- Appraisal of purchase management
- Appraisal of inventory management
- Appraisal of production management
- Appraisal of personnel management
- Appraisal of marketing management
- Appraisal of financial management
- Appraisal of research and development management
- Appraisal of Plant & Equipment Management.
Operational Audit & Review of Internal Control: The operational audit concentrates on
seeking out aspects of operations in which waste, inefficiency and excessive costs would be subject
to reduction by the introduction of improvement of operating controls. Thus, operational in the
sense in which it is used, i.e. appraisal of middle and supervisory levels of management could also
be called Management Audit, but all management audits are not operational audit.
The term operational audit conveys the impression that such audits are confined to operating levels
only. Operational audit may be defined as a comprehensive and constructive review of
organizational structure or components thereof that is the method of operation and use of physical
facilities. In other words, it examines whether the operations are performed in accordance with the
established policies and towards the achievement of the goals set. It is also known as an audit
which results in a statement of opinion by an auditor with regard to the performance of
management functions.
The purpose of operational audit is to inform the management whether or not the policies are
being accomplished and whether there is scope for effective accomplishment of the policies,
objectives or goals.
Internal control is a process, affected by the entity’s board of directors, management, and other
personnel, designed to provide reasonable assurance regarding the achievement of objectives in
the following categories: (a) reliability of financial reporting; (b) effectiveness and efficiency of
operations; and (c) compliance with applicable laws and regulations. Internal control varies
significantly from one organization to the next, depending on such factors as their size, nature of
operations, and objectives. Internal control of an organization includes five components: (1) the
control environment; (2) risk assessment; (3) the (accounting) information and communication
system; (4) control activities; and (5) monitoring.
Other hand, the main features of operational audit are: Operational audit is a specialized
management information tool; Operational audit is mainly a verification and problem identifying
tool; Operational audit is based on evidence. Operational audit makes a review of the
organizational structure of the company, department or unit and the related job description. It also
reviews the procedure, and the internal control flow chart for each job. Then it determines whether
the procedures and controls are adequate and efficient.
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Thus, operational audit is a management tool designed to improve the effectiveness of the
functional roles of managers by identifying problem areas and evaluating the adequacy and
effectiveness of internal controls and checks for maximizing the benefits to the company.
Purchasing Operations: It is said that the effectiveness of purchasing does not spring from
formalization of procedures or consolidation of the purchasing organization. A large purchasing
organization involving purchases of several items making up a large value of purchases may need to
elaborate organizational procedures, whereas a small purchasing department engaged in bulk
purchases of a small number of items of a total amounts equal to the same value will be able to
work effectively with a small purchase organization. Thus, whether to have a centralized buying
department or whether purchasing authority is to be decentralized by delegation of authority will
depend, by and large on the type of organization, the number of purchases, nature of items to be
purchased etc.
The most important factors associated with the purchasing efficiency in an organization are cost
and time. An efficient set up for purchasing is therefore one which is able to procure the materials
at the right price at the right time. The first consideration of a management auditor in auditing the
purchase function should be to see whether a system of collecting information required for such an
analysis exist in the organization. The auditor should then proceed to examine the documentation
which triggers the purchase activity.
The purchasing procedure broadly consists of the following activities: i) verification of purchase
requisition, (ii) inviting quotations, tenders, etc. (iii) negotiation of price, (iv) selection of source of
supply, (v) settlement of delivery date, mode of dispatch, payment terms, etc. (vi) follow-up of
delivery, (vii) securing evidence of receipt of materials/services, (viii) negotiating adjustments with
suppliers, (ix) checking invoices, (x) acting as an information source to user departments., (xi)
maintenance of register of suppliers, vendor files including vendor rating..
The management auditor might like to comment whether the purchasing department had an
innovative role to play in the organization. This can be assessed by evaluating how systematic is the
purchase department in searching for new ideas, products or ways of manufacture. The purchasing
department should keep its information file up-to-date to be able to provide any information on
the materials/services required by the user departments.
The effectiveness of a purchase department can be further measured by: (i) comparing the cost of
purchasing with that of companies of similar size, (ii) volume of paper work involved, and (iii) by
working out a ratio between the cost of purchasing and the value of purchase made.
However, an effective purchase organization is one which is able to satisfy the following functions:
(i) maintenance of continuity of supply in support of the production schedule, (ii) minimum
investment in materials, (iii) maintenance of standards of quality of materials or services, (iv)
implementation of cost reduction programs like value analysis, (v) procurement of
materials/services at lowest cost, (vi) keeping the top management and user departments informed
about the market development, availability of substitutes, alternative sources of supply, etc.
A dynamic purchase management can aim at these objectives by: (i) negotiation of price, (ii) vendor
rating and vendor change, (iii) value analysis and value engineering leading to change in
specification of materials, and (iv) improvements in internal management by using such techniques
as ABC analysis, etc.
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The management auditor should not only check the controls on the receipts and quantity of the
goods ordered but also the quality of the goods by making an investigation into the system of
approving/rejecting the goods and the procedure for return of the rejected goods to the suppliers.
The auditor should also examine the way in which purchase budgets are developed and used as
control tools.
Manufacturing Operations: Production management is concerned with getting things

done. Production management tells the factory four things: (a) what to make, (b) how many, (c)
when and (d) how. The first three give the factory ‘producing’ authority to go ahead and make
product. The fourth gives the factory processing authority. Producing authority tells the authority
(a) to assemble parts into finished products, (b) make individual piece products (c) to make
individual piece parts, or (d) to process bulk materials. There are two functions of production
management:
(i) Technical function (ii) Administrative function
The former is primarily concerned with material things, designs, processes and machines and the
latter is concerned with facts and figures. In this connection the management auditor should
ascertain whether:
1) Master production schedules have been prepared.

2) Plans for the men needed to meet schedules have been made.
3) Orders to manufacture products have been received.
4) The raw materials requirements have been determined.
5) The raw materials stocks are maintained satisfactorily.
6) Schedules for the performance of operations and use of machines have been made up.
7) Jobs have been assigned to particular men and machines.
8) The reports of work done have been received.
9) The reasons for delays in production have been recorded.
10) The finished products stock room is properly operated.
11) The stock of finished products is properly controlled.
12) Cost estimates for prospective new orders are properly made.
The auditor should ascertain the utilized production capacities of the concern. If production
capacities are being utilized below the normal capacities, then he/she should ascertain the reasons
for not attaining the full capacities. He/she should examine the effectiveness of the system of
monitoring progress of jobs with relatively long production cycle. Unless such system exists and
functions effectively the industries with a long production cycle, will fail to complete the scheduled
quantities by due dates with the consequential losses in terms of customer dissatisfaction, positive
penalties, etc.
He/she should check whether the production is matched with sales. In this connection, he/she
should examine whether the previous sales budget, production budget, raw materials budget,
labor, and factory overhead budget, inventories budget have correlation with each other. He/she
check the complaints received from customers for delay in delivery of finished goods. This will
indicates lack of correlation between production department and sales department.
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The auditor should see the adequacy of power supply to production department. He/she also see
whether adequate lighting system exists in the production department according to its
requirements. The auditor should visit the factory building and see whether the production
department has a good outlay. An auditor should see the labor performance and efficient use of
machineries. Also he/she should check the overall quality of the production process.
Selling and Distribution Process: Selling and distribution process is mainly the functions of
marketing department. The marketing department is generally responsible to: (i) develop the
selling strategy, (ii) plan the product development, (iii) promote the sales, (iv) channelize the sales,
(v) provide after sales service. The marketing department is said to be successful, only when the
above activities have been carried out properly. The management auditor is therefore, primarily
concerned with accountability for products sold and collection made for cash and credit sales. Later
on he must examine the extent of compliance with marketing policies and procedures and the
efficiency of related administrative operations and control.
His/her considerations in different areas of marketing include the following:
selling strategies
- Does the existing strategy appear to be sound?

- How adequate is the provision for periodic re-appraisal of the strategy?
- How often are strategies and performance reviewed against goals?
- Is the strategy in writing?
- Are strategies and objectives stated in a form?
- Are strategies and criteria established by the organization itself?
- Are strategies and objectives communicated to staff by way of instruction manuals?
Production Development
- Is there room for improvement in the organization of product planning and

development?
- Is there co-ordination between the product planning and development group, research,
sales, finance, production and market research?
- Are there suitable arrangements for supervision in the conduct of product planning and
development?
Product Management
- Are internal procedures for product management adequate?

- Are instructions to staff clear and adequate?
- Are personnel properly qualified?
- Is supervision adequate?
- Is there a suitable reporting system?
Sales Promotion
- Does the organization provide for the co-ordination of sales promotion activities?
- Are sales promotion objectives analyzed?
- Are budgets used for sales control?
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Sales Distribution
- Are sales personnel organized in relation to: physical location, extent of product
specialization, level of authority.
- Are sale personnel recruited and trained having regard to: adequacy of qualifications,
form of remuneration, motivation.
Customer Support
Some aspects of customer support are:

- Availability of preliminary information about products.
- Is the publicity information adequate?
- Are customer complaints reviewed and responded?
- Are there adequate arrangements for service?
Personnel Policies: Personnel department is generally considered to be an important

department of any organization. It normally carries out the following functions:
1. Research and standards: 2. Employment:

- Job analysis
- Job descriptions
- Job specification - Recruitment
- Job evaluation - Interviewing
- Job grading - Testing
- Wage analysis - Introducing
- Labor market survey - Placement
- Organizational planning - Changes of Status
- Designing of records and - Merit rating
reports - Counseling
- Manuals and forms - Employment records
- Personnel audit
3. Medical: 4. Safety:
- Maintaining health standards
- Controlling sanitation - Safety Standards
- Physical examinations - Safety Inspections
- Personal hygiene - Mechanical Safeguards
- Professional medical services - Safety Engineering
- Organizing First Aid Rooms and - Accident Investigations
Hospitals, etc. - Safety Rules
5. Employee Services: 6. Training:

- Recreation Plans - Establishing Training Standard
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- Organizing libraries and reading

- Group Insurance
rooms
- Pension
- Establishing company school
- Profit Sharing
- Making Training Plans for lower
- Employees Association
staff, supervisors and executives
- Providing Cafeteria facilities
- Providing training materials.
- Legal Assistance
7. Employee Services:
- Collective bargaining
- Wage and salary administration
- Grievance and suggestion systems
- Union relations
- Works conditions
- Integration of group interests
The above functions of the personnel department help in smooth running of the business. It is,
therefore, the success of the business mainly depends upon the effective control of this
department. In view of this the management auditor must give more emphasis on the assessment
of men required, job plans, job description, job specifications, remuneration plans, training scheme,
recruitment plans, etc. a comprehensive study of these functions will enable him to ascertain
whether the human resources have been planned systematically and methodically to keep in step
with other ultimate objectives.
Systems and Procedures: Management audit comprises three basic steps: (1) Examination,
(2) Reporting defects and irregularities and (3) Presenting suggestions for improvements. These
basic steps can further be broken down into the following elemental steps: (i) Study of the
elements, (ii) Detailed diagnosis, (iii) Determination of purposes and relationship, (iv) Looking for
deficiencies, (v) Analytical balance, (vi) Testing for effectiveness, (vii) Searching for problems, (viii)
Ascertainment of solutions, (ix) Determination of alternatives and (x) Seeking out methods for
improvement. Management auditors start their work with discussions with the executives and staff;
then, they note their findings and make out rough recommendations on the basis of those findings.
They submit their final report of recommendations to the management later on.
Management audit procedures should be tailored to the specific needs of each situation examined.
The general approach in a management audit may be outlined as follows:
1. Make a preliminary survey to the specific needs of each situation examined. The general and
other working information for use in conducting the audit.
2. Study the basic charter or assignment of responsibility for the activity under audit to
ascertain the authorized purposes and related authorities of the activity and any applicable
restrictions or limitations.
3. Review pertinent parts of the system of management control by studying the policies
established to govern the activities under audit, testing the effectiveness of specific
operating and administrative procedures and practices followed, and fully exploring all
significant weaknesses encountered.
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4. Report on the findings of the audit work performed to those responsible for receiving or
acting them together with the recommendations for improvement.
Techniques by which the auditor can identify problem areas warranting detailed examination and
source of his/her information are as follows:
(1) Identification of possible control weakness by survey: During the preliminary survey work
through which practical working information is obtained on how the activity is supposed to function
and on how control procedures are supposed to work, key features or aspects can usually be
identified which appear to be difficult to control effectively or to be susceptible to abuse. In a
purchasing organization, for example, the key points in the purchasing process may well be -
a. the determination made of the quantities and the quality of materials to be purchased.
b. the procedures followed in obtaining the best prices, and
c. the methods for determining whether the correct quantities and quality are actually
received.
If, in relation to the total purchasing operation, the auditor concludes that these processes are the
most critical from the standpoint of the need for good performance, he would be justified in
concentrating his testing work on them.
(2) Review of management reports: The auditor’s review of internal reports which the
management itself regularly uses to obtain information on progress, status, or accomplishment of
work can be valuable sources of information on possible problems areas suggesting audit attention.
(3) Review of internal audit or inspection reports: These reports can also be a valuable source of
information on problem areas. Of particular interest to the management auditor are those reports
which bring to light significant findings on which the management has taken no action. Inquiry into
the reasons and justification for inaction in such cases should be made, since these circumstances
could throw light on weaknesses in management system that have not previously been referred to
the management for resolution.
(4) Physical inspection: Physical inspection of the organization’s activities and resources can be
useful way of identifying possible inefficiencies. Examples are apparently excess accumulations of
material, idle or little used equipments, employee idleness, rejections of product by inspectors (or
customers), extensive rework operations, or disposal of apparently useful materials or equipment.
(5) Test examination of transactions: A very useful way to obtain a practical working insight into
the efficacy of procedures is to pursue a number of transactions pertaining to the organization’s
operations from initiation to final disposition. This kind of testing will provide the auditor with
valuable information on the organization’s business is actually transacted, on the usefulness (or
pertinence) of prescribed procedures, on the capabilities of personal involved in the various
operating phases, and on possible weakness in procedures or practices which could represent an
unnecessary drain on the organization’s resources.
(6) Discussions with officials and employees: The management auditor can obtain valuable
information on problem areas warranting audit attention through discussions with responsible
officials in the organization and other employees concerned. The degree of success in obtaining
useful information in this way is, in large part, dependent on the auditor’s reputation for
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independent and constructive inquiry. If he/she is regarded with fear because of overly critical
reporting in the past, this source of information may not be productive.
Testing procedures and practices first requires some preliminary review work to obtain information
on how they actually work and an insight into their effectiveness and usefulness. On the basis of
such review, specific matters may be identified as problem areas on weaknesses needing further
probing. The general factors to be considered by the auditor in his preliminary review work on
management controls are:
- Whether the policies of the organization comply with its basic charter or grant of
authority.
- Whether the system of procedures and management controls is designed to carry out
those policies and result in activities being conducted as desired by the top management,
those policies and result in activities being conducted as desired by the top management,
and in an efficient and economical manner.
- Whether the system of management controls provides adequate control over the
organization’s resources, revenues, costs, and expenditures.
Specific factors which may well be considered by the auditor in assessing the management control
system and identifying problem areas warranting more detailed audit include –
The use by management standards or goals in judging accomplishment, productivity, efficiency in

the use of goods or services.
Lack of clarity in written procedures, misunderstandings or inconsistent interpretation in the

organization may affect –
- capabilities of personnel
- failures to accept responsibility
- duplication of effort
- improper or imprudent use of funds
- cumbersome or extravagant organizational patters
- ineffective or wasteful use of employees and physical resources
This listing is indicative of the kinds of factors that an alert management auditor must keep in mind
in all his/her work. The knowledge gained in preliminary review that is conducted in recognition of
these kinds of factors provides a solid basis for more detailed examination work that can lead to
constructive improvements in the management system.
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AUDITING PROCESS AND SYSTEMS
Techniques of Management Audit: Techniques employed by a management auditor in

effectively carrying out his/her audit are:
(1) Accounting or economic techniques:
(a) Break-even analysis.
(b) Budgetary control including flexible budget system.
(c) Cost management techniques indicating how an organization’s assets should be
allocated over competing projects or to decide whether it is worth proceeding with
the investment, keeping in view proportionate value of expenditure on such
projects.
(d) Discounted cash flow and net present value methods.
(e) Cost-benefit analysis.
(f) Standard costing and marginal costing.
(g) Activity based costing to test relevance of costs to activities.
(h) Quality analysis of company transactions.
(2) Scientific techniques:

(a) Computer Models: There are many types of problems which can be solved on a
computer e.g. decision on material mix, product mix, make or buy etc.
(b) Net work analysis: To analyze strings of tasks to arrange them in sequential r parallel
order to complete the project in shortest possible time.
(c) Mathematical programming: Mathematical programming solving by heuristic (trial
and error) technique to determine the best material mix, best use of organization’s
transport fleet, the best mix of products to obtain, to maximize profits, and optimum
use of labor, finance, equipment etc. Linear programming is usually effective when
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relationship vary in linear order whereas quadratic programming may be used when
the variations are in the order of square root of some other factor.
(3) Statistical techniques:

(a) Activity sampling: It is one of the many ways in which the present workloads can be
measured to obtain optimum controls to be exercised by management.
(b) Monte Carlo simulation: In this a number of variables are drawn from large statistical
population which have equal choice of being selected and obtain the best sample
possible.
(c) Exponential smoothing.
(d) Inter-firm comparison.
(4) Personnel techniques:

(a) Attitude survey.
(b) Ergonomics (Man-machine relationship)
(c) Training methods
(d) Profitability and productivity measurement.
(5) General techniques:

(a) Situational theory of management is an attempt to emphasis what should be
practical approach to a problem by –
- Analyzing the problem to establish the basic difficulties and factors involved.
- Establish management by objectives.
- Identifying the likely ways of tackling the problems in the light of objectives to develop a
solution.
- Determine the key factors affecting management decision-making.
- Evaluating alternative courses of action
- Evaluating each alternative in terms of economy, efficiency and best fit.
- Specifying the action required to exploit the situation to the best advantage of the
organization.
(b) Brain storming.
(c) Transfer pricing.
(d) Management by objectives.
(e) Management by exception.
(f) Corporate planning.
(g) Information theory.
Management Audit Team: A management auditor handling a large organization on a

continuous basis of a number audits at the same time has to build up a competent team of people,
who possess the qualifications attributed to a management auditor.
As management auditor concerns with all aspects of the business and the organization, ranging
from manufacture, to marketing and finance, the management audit team should be
multidisciplinary to make multidimensional approach to audit function.
A competent management audit team, internal to an organization, could effectively be represented

by the heads of various departments viz. production, materials, management, maintenance,
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personnel, marketing, finance, industrial engineering, quality control etc. Such a team can
competently lead and direct the audit to attain the organizational objectives.
Management Auditor: A management auditor is expected to offer special skill and

experience to his/her clients. He/she therefore, has a special responsibility to exercise special care
in the performance of his duties to ensure positive response to his/her opinion to motivate action
thereon.
A management auditor should be competent in the exercise of his/her audit function and
formulation of his/her opinion based on such audit. He/she should be a man of independent
thinking, who can maintain an unbiased view, without any influence, either financial, sentimental or
otherwise. He/she should be technically competent in the discharge of his/her duties, having had
education, training and experience all round. The management auditor should be supported by a
good organization i.e. a team of people who can competently execute his/her audit.
Prime qualification of a management auditor is to possess broad business experience in allied

profession such as accountancy, statistics, engineering, marketing or administration. The essential
qualities of a management auditor are summarized below:
- Ability to grasp the business problems.

- General understanding of the nature, purposes, and objects of the organization e.g.
nationalized or government control organization, etc.
- Ability to determine or assist the progress of the organization.
- Knowledge of the principles of delegation of authority and control and the preparation of
different budgets viz. cash budget, production budget, master budget, etc.
- Power of grasping and understanding different internal control devices viz. flow chart,
flow of work, analysis of work scheduling, use of computer, etc.
- Sufficient knowledge about engineering, statistical techniques, cost and management
accounting, general financial accounting, production planning and control etc.
- General understanding of different laws viz. Company Act, Income Tax Ordinance, VAT
and Custom Act etc.
- Sufficient knowledge and experience in preparing various reports for submission to
different levels of management including the top management.
Management Audit Program (MAP): Management audit program is an essential

perquisite to conducting the audit. It is a plan of action drawn in advance of taking up the audit,
and to help the auditor to cover the entire arena of his function thoroughly.
He/she should lay down for him/her-self a proper procedure to be followed to complete the work
in time, giving thorough coverage to all aspects. An efficient management audit program shall
comprise the following:
(1) Review of the organizational objectives and plans,

(2) Study of the policies and practices of the management,
(3) A critical review of the organization structure,
(4) Study of the systems and procedures,
(5) Evaluation of operations,
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(6) Study of the efficiency of the use of physical resources available,

(7) Exercise of proper management control,
(8) Maintain a suitable monitoring system through management information system (MIS).
(9) Check on adherence to the statutory obligation, and
(10) Above all, review the efficiency of manpower handling, which ultimately results in the
organization’s success.
A management auditor shall shrewdly assess weak and risk areas in the organization and deal with
such areas in more detail. He has to lay down a programs by making a list of such weak and risk
areas and follow them up in his audit. An audit program is laying down the path in its required
details before conducting it.
Management Audit Evidence: Unlike financial audit or other audits there can be no fixed
items of evidence to be checked by a management auditor. A management auditor has to rely more
on his experience and acumen to identify areas of review and study, particularly areas of weakness
to be overcome, strengths to be exploited and risk to be properly covered.
The auditor’s evidence comes from his discussions with the people concerned in the organization,
the survey and review of various reports of the organization, including internal audit reports,
inspection reports or any investigation reports, physical inspection, test examination of various
transactions, inspection of important departmental files, monthly performance review statements,
board minutes and notes and above all personal observations.
Evidence can be gathered either by sampling techniques or by going into full details depending
upon what the samples reveal. The evidence should be such that an auditor can draw valid
conclusions, duly verifying the same with the people concerned. It should be understood that a
management auditor does not rely on a voucher as evidence, but shall fall back on various records,
including vouchers as evidence for his audit, if the samples demand so. There is no area of
restrictions for obtaining evidence.
Audit of the Management Process and Functions: A management auditor handling a large
organization on a continuous basis or a number audits at the same time has to build up a
competent team of people, who possess the qualifications attributed to a management auditor. As
management auditor concerns with all aspects of the business and the organization, ranging from
manufacture, to marketing and finance, the management audit team should be multidisciplinary to
make multidimensional approach to audit function.
A management auditor shall normally maintain an audit checklist to ensure that he has not omitted
any areas that require to be audited. The organizational areas covered full under the broad
categories of:
- Planning - Directing
- Organizing - Motivating
- Staffing - Controlling, and
- Coordinating - Innovating
- Communicating
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In these areas an auditor should look for any weaknesses which may affect efficiency of the
organization. His checklist can be made area wise and may be overlapping or complementary
between different areas. The weaknesses that management auditor may look for and check
normally fall under the following categories:
- Directorial weaknesses,
- Managerial weaknesses,
- Organizational weakness,
- Financial weaknesses,
- Systems weaknesses,
- Procedural weaknesses,
- Functional weaknesses,
- Operational weaknesses,
- Marketing weaknesses,
- Industrial relations weaknesses,
- Weaknesses in meeting social responsibilities, and
- Security lapses etc.
Management Audit Report (MAR): It is of very important to prepare a good MAR. A good
MAR can motivate the management and get the required results, whereas a bad MAR can defeat
the very purpose of audit. It may create an adverse reaction and result in the report being thrown
out. MAR is report on the managerial effectiveness. Report carefully and tactfully prepared could
motivate the management to get remedial action on all areas of weakness.
Characteristics of a good management audit report can be summarized below:
- Pertinence - Timeliness
- Comprehensiveness - Motivating
- Brevity - Formatting
The top policy executive is generally interested in four factors in operating statements – facts,
person responsible, deviations in actual performance from standards and the effect of the result on
financial or physical status of the organization. The report must allow management to study
comparisons, to review organization, and to appraise the effectiveness of the executives.
Departmental weakness can be quickly seen by the management, if the report is properly prepared.
Management audit report should create awareness among the management of prudent
management practices that can the organization come alive. It is a very important function of
management audit to help change of management mind-set. A management audit should also be
discussed with the people concerned in various areas before reporting. Every point that is raised in
the report should have the acceptance of the people involved in the concerned function. A report
that indicates suggestions that had come from the people themselves would have a better effect
than coming as a suggestion from auditor.
The report should be drafted and structured so that it makes a logical presentation to the
management and makes it easily readable. The report should contain not only the problems and
defects in the working but also should come out with solutions as if given by the operational people
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themselves so that it gains immediate acceptance for implementation. A management audit report
relies heavily on accepted managerial practices and feasible solutions.
Audit Checks of Different Management Functions: A management and administration

auditor operating the following series of checks must remember that many of them are
complementary. A correct picture of the effectiveness of any single function may not be completely
obtainable from a review of checks in that area alone. Each function must be seen as a balanced
part of a whole organization. Here we discuss about the audit of top management functions:
1. Directorial Checks:
- What routine reports are considered as directors’ meetings and do these prima facie
provide information for effective and efficient control of the business?
- Do the directors receive projected information covering the various functions of the
business, in addition to any figures which they receive to enable them to review the
present performance of the business?
- Is there evidence that directors established their control primarily on such projections
and secondarily on past records?
- What is the directors’ policy for ensuring that the right kind of senior managers are
engaged?
- What interest do directors take in R&D? In particular, if formal R&D facilities are
available, what significant efforts are made to relate these to market research?
- Have the directors set out the objects of the organization in writing?
- Are all activities of the organization within the scope of its objectives?
- What control do directors exercise on the cash flow?
- What is the method of determining budgets and the reporting system in connection
therewith?
- What steps have the directors taken to see that the objectives of the business are
effectively communicated to their managers?
- Have the directors defined the responsibilities of their various senior managers?
- What control do directors exercise over senior management training?
- Are special efforts made to control the management of technical and administrative
services, as well as the management of operating departments?
- Are the directors following and done their routine job on the right way to achieving the
objectives of the organization.
2. Managerial Checks:
- Are all levels of managers competent in their functions?
- What evidence is there that managers are up-to-date in their particular function?
- Do all managers sufficiently and efficiently delegate their functions?
- Are there adequately defined communication procedures?
- Is it possible to identify the management styles of the senior managers and assess their
effectiveness?
- Is there adequate definition of staff responsibilities?
- Is there a precise organizational structure?
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- Is there a system of management by objectives?

- Are job specifications available for each or the majority of positions?
- Are job specification/staff responsibilities revised as circumstances change?
- Are methods of work defined, or partly defined, in writing?
- Whether or not they are in writing, how are they communicated to the staff?
- What arrangements are there for keeping such instructions up-to-date?
- Is there evidence of the enforcement of any authorizations required by such instructions,
for example, for transactions that only transactions so authorized are allowed?
- What training facilities or arrangements are there for: Managers? Staff generally? Newly
joined staff? Trainees?
- Are career paths developed wherever possible?
- Who is responsible for training?
- Are the training tailored to the differing needs of the staff?
- Have the possibilities of the various tutorial devices been investigated or exploited?
- Are there efficient arrangements for the recoupment of Training Board levies for all
training carried out?
- What means of measurement of staff performance exists?
- How do managers plan the staff work load and control its flow?
- Is there evidence that the generally recognized management techniques are used as
appropriate?
- Is there evidence of coordinated planning?
- How effective are managers in their use of computer facilities? Is there evidence of action
other than the passive receipt of computer processed statistics?
- How effective are managers generally?
- Do managers use their time effectively?
3. Organizational Checks:
- How effective is the co-ordination and integration of the various departments?
- Is there any evidence of duplication of function as between one department and
another?
- What is the management information system and who is responsible for it?
- Is the information supplied well and logically presented in the various reports?
- What strengths and weakness of the organization are revealed by the scrutiny of the
special reports?
- Do special reports in general give evidence of critical appraisal?
- How is the budget structure related to operational responsibilities and how are
expenditures controlled within the budget and remedial actions taken?
- How is inflation catered for in budgets?
- Is reporting based the exception principle, or what other methods are used to highlight
information areas requiring investigation?
- Has each managers defined the responsibilities of his/her staff?
- What form do such definitions take? Are they available to other members of the staff so
that they can see their relationship to each other?
- Are common data files established for the use of several departments, particularly if the
data processing is by computer?
- What checks are there on the accuracy of the information in such files? Are there strict
controls on their amendments?
- Who has authority to amend such file information?
- What security controls are there on the various levels of management information?
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- Is there evidence of good vertical information flow?

- Is there also evidence of satisfactory lateral information flow?
- Does the typical manager consult his/her subordinates as well as superiors?
- What opportunities do subordinates have for bringing their knowledge of detail to bear
upon their superiors problems?
- Is there evidence of as external communication policy?
- Who has responsibilities for market communication? What are the principal policies and
types in this respect?
- What is the quality of trade communication? Does this extent to inter-firm comparisons?
- Has management, generally a good credibility rating?
- How is the business controlled in general?
- Who is responsible for cash flow control? Is such control obviously effective?
- Especially in a vertically structured organization what kind of planning takes places to
synchronize the timings and capacities of the various units?
- In horizontally structured organizations is sufficient advantage taken of comparative
statistics and the promotion of healthy being made to standardize procedure in the same
type of unit?
- In a conglomerate organization, what financial controls are employed, in addition to
those usual in other organization, to take account of the diverse production controls and
market conditions?
- What degree interchangeability of staff is possible? Do interchanges take place where
economically viable?
- In case of a centralized organization, is the response time to stimulate from the units
adequate?
- Is operational control of the various units largely decentralized? If so, what degree of
central control is there and how is it organized?
- Is the central control adequate?
- Is the reporting structure from the operating units good?
- In a largely decentralized business, are services which would otherwise be
uneconomically duplicated, provided at the centre?
ENVIRONMENTAL AUDIT
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Environment includes entire biological, physical and social milieu in which man and other organisms
are placed and no organizations however simple or complex can survive on their removal from the
environment. In order to make progress man has produced destructive, hazardous and often
irreversible changes in the environment on which he/she is totally dependent. With a view to
improving living and nutritional standards, man has interfered with practically every sphere in
natural eco-system. The man-made pollutants that greatly influence the quality of environment are
– metals, petroleum products, volatile industrial chemicals, heat and exhausts generated due to the
burning of fossil fuels, radio-active species from reactors and nuclear reactors, organic and
domestic wasters – as most of these are discharged untreated into the environment. Pollution is
thus a kind of interference to the environment degradation. The problems of such environmental
degradation – air, water, noise pollution, solid wastes, radiation hazards, thermal pollution, threats
to wildlife, depletion and destruction of natural resources, etc. are all environmental crisis and
threats affecting the delicate balance in the natural ecosystem.
Pollution can be described in the following ranges –
1) Pollution as any alteration of the environment.

2) Pollution as the right of the territorial sovereign.
3) Pollution as damage to man and to the environment.
4) Pollution as interference with other uses of the environment.
5) Pollution as exceeding the assimilative capacity of the environment.
The level of pollution varies directly with the density of population and per capita income and
inversely with the extent of recycling, technology and waste treatment. The different types, causes
and effects of environmental pollution may be as follows –
1. Air pollution: Burning coal or crude oil like naptha in power stations, smoke from factories,
exhaust fumes from automobiles, solvent losses and agricultural chemicals, etc. Air pollution
leads to increase in respiratory diseases in human organisms.
2. Water pollution: Effluents from breweries and tanneries, coal washeries, chemical plants,
discharge of coolants form unclear power plants, pesticides and agricultural chemicals.
Water pollution affects public health and safety, causes damage to property and leads to
many economic losses.
3. Noise pollution: Noise due to running of heavy and aircraft-drilling machines, etc. Noise
pollution may lead to loss of efficiency at work, loss of hearing and causes psychological
disorders, even insanity.
4. Smell pollution: Discharge of industrial waste products, unclear garbage dumps, open
sewers, etc. It affects physical well-being and even causes psychological disorders.
5. Thermal pollution: Radiation of heat generated by plants in industries. Thermal pollution
affects ecological balance and thereby the inhabitants.
6. Visual pollution: Effluents from chemical plants and washeries discharged into the
waterways causing reduced visibility. Industrial fumes and dust causing loss of landscape
attractiveness, and strain to vision of pedestrians and motorists. Visual pollution may cause
more road accidents and traffic deaths.
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7. Climate pollution: Radiation of heat in highly industrial centers leading to micro-climate

zones causing deforestation, shortening plants growth and affecting surroundings. It affects
ecological balance and causes damage to plant and surroundings.
8. Radiation pollution: Radioactive fall-outs, and leakage from nuclear reactors, prolonged
exposures to small doses of radiation results in a bio-accumulative process will cause a
significant chronic effect by increasing the rate of genetic mutation.
9. Soil/land pollution: Indiscriminate use of fertilizers and pesticides, pollution of soil with man-
made chemicals, indiscriminate disposal of solid use, etc.
Due to pollution the quality of soil deteriorates to the extent that they fail to support vegetation. It
affects the global climate also.
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AUDITING MIS
Evaluation of Management Information and Control System: Cost Audit Audit
Auditing E-business: Cost Audit Audit
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AUDITING CSR & CORPORATE GOVERNANCE SYSTEMS
Concept of Corporate and Corporate Governance: Corporate governance is about who controls
corporations and why. In the world business, the legal ‘‘who’’ is the owners of the corporation’s
common stock—the shareholders. However, the reality—even the legal reality—is much more
complicated, and the ‘‘why’’ is to be found in historic American concerns about the connections
between owner-ship, social responsibility, economic progress, and the role of markets in fostering a
stable pluralistic democracy. Initially, these concerns were focused on the role and responsibilities
of the owners of business firms because the owners managed the firms themselves. However, with
the emergence of large corporations, perhaps symbolized by the Standard Oil Trust in the late
nineteenth century, Americans focused their attention on a new group of individuals: professional
managers. Prior to the emergence of these corporations, managers and owners had been the same
people, but now things were changing. Now wealthy and often absentee owners were hiring
managers to run large, powerful companies, leading to a new set of questions. Among them were:
- Who were the managers to represent and why?
- What were the managers’ connections to the owners, and what, if any, were the social
responsibilities of the managers and owners?
- Could the managers be trusted to carry out whatever economic and social objectives
were entrusted to them?
- How could they be held accountable for their actions? And,
- How could they be controlled? In short, what was this beast that came to be called the
modern corporation, who should control it, and how should it be controlled?
The modern Corporation: The modern corporation, a term coined by Adolf Berle and Gardiner
Means, is a limited liability company (limited liability means that the owners are not personally
liable for the debts or any other legal obligations of the firm) in which management is separated
from ownership and corporate control falls into the hands of the managers. This separation of
ownership from management and the resulting loss of direct owner involvement in the firm forced
many people to rethink the conventional wisdom about the role of markets and the need for
private ownership of capital in shaping the citizens’ sense of civic responsibility, preserving liberty,
and ensuring economic progress.
Corporate Governance: Corporate governance can be simply defined as “the system by which
companies are directed and controlled” which focuses on the “hygiene” and “housekeeping”
aspects of running a business. The Organization for Economic Co-operation and Development
(OECD) extends the definition by stating that corporate governance involves “a set of relationships
between a company’s management, its board, its shareholders and other stakeholders [that
provides] a structure through which the objectives of the company are set and the means of
attaining those objectives and monitoring performance are determined”.
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An organization can be viewed as consisting of corporate governance processes on the one hand (a
so called framework of accountability) and value-creating activities such as strategic
decision-making on the other. Both elements are necessary, since focusing on performance without
having adequate checks and balances is like building on sand. But recently we may have overlooked
the need for firms to ensure that corporate governance does not become an end in itself – i.e., a set
of rules that actually constrains the value-creating activities of the business.
It has often been assumed that there is no direct causal relationship between an organization’s
corporate governance and its economic success – in the sense that the former does not guarantee
the latter; it merely facilitates it. But recent research has shown that good governance can in fact
create value itself, and surveys by the McKinsey Quarterly have found that major institutional
investors are increasingly willing to pay a premium for it.
The inclusion of the word “relationships” in the OECD’s definition points to the fact that corporate
governance is not simply about complying with the regulations. While there is clearly a need for
structures and processes, there is no way of legislating for people’s behavior. However strict the
controls may be, there is always a danger that willful personalities or skewed incentives can
override them.
Enron was a case in point. It has been described as a systemic failure of governance, despite the
fact that all the right boxes had been ticked. The spirit of good governance – which must begin with
directors and managers acting in the best interests of the business and its owners – simply didn’t
exist.
The worldwide attention to corporate governance is a result of the Enron Collapse in 2001, followed
by additional scandals and corporate failures in the USA. After several corporate scandals, focus on
corporate governance has increased rapidly and led to implementations of “codes of best
practices” in many country of the world. In February, 2006, Security and Exchange Commission
(SEC) imposed some conditions for the compliance by the companies listed with any stock exchange
in Bangladesh in order to enhance corporate governance in the interest of investors and the capital
market.
Corporate Development and Management Audit: In a private or public corporate

enterprise the variations in forms and form-related topicalities’ are very much complex in nature.
The scenario can be looked into from two broad aspects –
1. External environment: This is in relation to economic, political, technological and socio-
cultural and may be national as well as international.
2. Internal environment: This is in relation to internal management of resources like men,
materials, machinery, money etc., whether a corporate enterprise is equipped to
revamp their operations with a view to meeting the challenges and threats posed by one
or more of external environment forces.
Corporate development audit is a comprehensive task to assist the corporate management in

various aspects of development through a process of systematic reviews and evaluation of long
term strategies of the company. Such corporate development audit assures that –
- The various factors and forces constituting a corporate enterprise are the right kind and
quality.
- Communication remains the key to the functioning of an enterprise.
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- The pattern of departmentalization in an enterprise adopted in the past and proposed for
the future for dealing with multi-directional responsibilities is fully responsive to
circumstances.
- The personnel problems are handled appropriately considering the overall objectives of
development of the corporate enterprise.
- The responsibilities of planning, coordination, motivation and control at functional
management levels are discharged in proper spirit.
In the broadest sense of the term essential functions involved in corporate development audit are
regular and systematic check, review and appraisal. A corporate enterprise is conceived of as a
going concern and a corporate development audit is a continuous exercise based on continuous
evaluation and monitoring of the external and internal business environment. A corporate
development audit is best performed by a team consisting of different experts of different
disciplines as it requires multi-disciplinary approach.
Large scale corporate enterprise offer opportunities to the conduct of corporate development
audit. Contrary to other forms of audit – statutory or non-statutory (viz. financial audit, cost audit,
efficiency audit, propriety audit etc.) corporate development audit plays a vital role to tie up the
loose ends, but also to forge a link in the knowledge that emanates from different quarters and on
the basis of different types of experiences in dealing with varied types of problems.
A corporate development audit indicates that there is a close relationship between the corporate
development plans as well as total industry plans and there is also a connection between the
corporate development plans and the national development plans. As the corporate development
audit is more of an introspective nature, necessary initiation and support should come from a firm
decision taken by the Board of Directors and its chairman. As this audit highlights the corporate
strengths and weaknesses, especially failures, inefficiencies and bottlenecks, it should be
undertaken by a high powered team with the cooperation and acceptability of all those concerned
with it.
Checklist in some areas of Corporate Development: Checklists on various areas of corporate

development may be helpful in appraising the structural aspect of a corporation, detailed below:
A) Check list on corporate planning:
1) Whether SWOT analysis has been made?

2) What are the corporate strengths and weaknesses in relation to price, product, quality,
market share, distribution network, after sales services, technology improvement,
corporate structure and qualities of its members?
3) What are the opportunities and threats in relation to rivalry among existing firms,
threat of new entrants, threat or opportunity of technical know-how, strategy of
suppliers?
4) How are the threats overcome and opportunities availed of in the past?
5) Whether the ‘corporate image’ is going to improve in near future?
6) What specific techniques are applied by the management for corporate planning, long
and short term exercise?
7) Whether the corporate objectives and goals are clearly defined and qualified?
8) Whether the corporate planning premises and plans drawn up based on adequate
information?
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B) Check list on corporate objectives:
1) Whether the corporate objectives are clear and explicit?

2) Whether the different elements of the enterprise have separate objectives?
3) How are these objectives defined?
4) Are the objectives in writing?
5) Is there sufficient flexibility in the organizational design in the form of the
responsiveness to changes taking place from time to time?
C) Check list on delegation of a authority:
1) Whether there are clear lines of authority from top to bottom in the corporate
enterprise?
2) Whether accountability has been properly coupled with corresponding authority?
3) Whether responsibility and authority in each position clearly defined in writing?
4) Whether the number of levels of authority kept minimum?
5) Whether duties assigned to the subordinates indicative as to what activities are
expected from them?
6) Whether responsibility via delegation of authority created among the subordinates to
complete the given task?
7) Whether the methods of delegation compatible the organization structure?
D) Check list span of control and management:
1) Whether span of control has been recognized in the organization?

2) Whether everybody in department report only to one superior?
3) Whether the accountability of higher authority for the acts of its subordinates in
according to current practices?
4) Whether the corporate management recognizes the following factors that affect span
of control?
(a) Degree of interaction between the units or personnel being supervised?
(b) The incidence of new problems in his department?
(c) The extent of standard procedures adopted?
(d) The extent of non-managerial responsibilities?
5) Whether the different activities and functions are grouped together in order to-
(a) obtain the most effective use of men and facilities?
(b) meet the objective in the best way?
(c) to run the most and economical operation?
6) Whether responsibilities are gripped, whether possible, so that the overall control of a
function can be established so as to hold the superior manager accountable?
Evaluation of Personnel Development: Personnel development, a vital aspect of corporate

development calls for special assessment. It is the systematic training of managers and specialists to
fill present and future needs of the company, to provide further individual growth and to facilitate
corporate growth and expansion. The concept of personnel development is essentially long-range
in nature. It is essentially one of development of efficient, loyal and hard-working employees. Since
all the activities in an organization are accomplished by the people, for the people and with the
people, the aspect of personnel management gains significance. Evaluation of personnel
development may include the following criteria –
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1. Preplanning as an essential feature of human resource development.

2. Ascertaining manpower needs for appropriate education, training and development.
3. Ascertaining the difference between future needs and existing talent i.e. gap or
imbalance.
4. Adoption of a suitable program of recruitment, selection, training and development to
close the gap or imbalance.
5. Adequate manpower planning with an appropriate blending of manpower management
policies and manpower management program.
Scope of personnel function: The functional areas along with the scope of human resources
management and development indicated below may be identified as the component of personnel
function –
1. Organization review and analysis: Continuous review and analysis of organization’s

operations is necessary in order to determine and develop appropriate work structure, roles
and responsibilities, inter and intra-relationship, and levels of authority.
2. Manpower planning, recruitment and selection: Forecasting and planning is essential to
meet the present and future needs of an organization for a sufficient number of qualified
personnel for manning its operations.
3. Manpower training and development: Appropriate methods and techniques of training and
development may be adopted. Proper facilities and opportunities are to be provided for
personnel to acquire necessary skills and knowledge to perform their jobs for which they are
employed.
4. Performance appraisal: There should be proper measuring, rating and evaluating
performance of personnel, guiding employee development and promoting motivation,
communication and equity.
5. Employee remuneration: This function includes developing and administering appropriate
system of remuneration including job evaluation, wage and salary structure, incentive
payments, fringe benefits and non-financial rewards.
6. Employee services: There should be satisfactory services relating to the safety, health and
welfare of all employees, including social security plans and community development
programs.
7. Administration and records: This includes designing, implementing and controlling of
adequate records and administrative procedures to provide useful and pertinent
information for planning purposes and for the documentation of all personnel in service.
8. Industrial relations: It includes establishing appropriate procedures for the resolution of
personnel and institutional differences by means of appropriate measures and machinery,
e.g., standing orders, grievance procedures, conciliation, collective bargaining, and joint
consultation.
9. Auditing and research in manpower management: These are the responsibilities of
personnel management, which call for the attention of a management auditor.
Consumer Service Audit: The primary responsibility of business enterprises towards consumers is
to make available the products of the right qualities at the right time, in right quantity, at the place
and price. The consumer services audit critically examines and apprises management on these
aspects of services. It is therefore an audit of public responsibility of business enterprise in relation
to its customers and is a part of social audit. The audit is based on the philosophy that the role of
business should be conductive to raising the quality of the life through its contribution in terms of
better product-quality and services.
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A management auditor while examining the consumer services policies and practices in an
organization may use the following questionnaire –
A) Products related policies and practices:

1) Do the products manufactured meet the needs of the customers of different classes,
different tastes and different purchasing power?
2) Whether the prices are reasonable and consistent with the quality variations,
efficiency variations?
3) Whether the prices include reasonable profit?
4) Whether the prices have been fixed under competitive market or monopolistic
conditions subject to Government restriction?
5) Whether detailed information regarding the product, service, company profile and
policies etc. are adequately disseminated in order to ensure that the communication
made to the customers regarding price, quality, services, etc. are truthful?
6) Whether after-sales service, spare parts facility, etc. enable customers to derive
maximum satisfaction?
7) Whether the company undertakes adequate research in regard to products and
customer behavior so as to make their products more satisfactory to the consumers?
8) Whether constant efforts are made for improvement of the product and use its value
as well esteem value?
9) Whether the management assumes responsibility of product development function
as a continuous exercise in relation to society in general and the consumers in
particular?
10) Whether the product development program considers the factors of standardization,
simplification and specialization?
11) Whether such program is undertaken to meet only the short-term demand or long-
term requirements?
12) Whether the company policies and practices, relating to the distribution of products
among different sections of customers, fair and equitable?
B) Customer Relationship:
1) Whether the customers complain is handled promptly and efficiently?
2) Whether the company responds quickly to the customers’ enquiries relating to
product or services?
3) Whether the labels of the products contain adequate information to help the
consumers to appreciate quality and other characteristics of the products?
4) Whether the company co-operate with the groups and associations representing
customers?
5) Whether the company provides useful suggestions and renders necessary assistance
to consumer co-operatives for distribution of quality goods at a reasonable price?
C) General Consideration:
1) Whether safety norms relating to products are maintained as per the accepted
standards lay down by statutory bodies, such as ISI, BSS, etc.?
2) Whether performance guarantees are explicitly stated?
3) How do the merits of the company’s own products match the advantages to the
consumers, if mentioned in the advertisements?
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4) Whether the technical data given in the sales promotional media specific and not
ambiguous?
5) How does the company ensure proper remedy against customer complaints when
products are made available to the consuming public through a large net work of
distributors as well as retail outlets?
6) Whether the policies and practices of the company are adequate to combat artificial
scarcities?
7) Whether all warranties are explicitly stated? Is the procedure for invocation of
warranty stated in unambiguous terms?
8) Whether the fundamental aspect of serving responsibility to consumer recognized
by the enterprise as a policy measure?
9) Whether there are instances of relaxation of policy norms in respect of
responsibilities to customers even when the distribution of goods is made through
middlemen?
Corporate Governance and Board Audit Committee Functions: Cost Audit Audit
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Students hand note for ICMAB’s Students COST & MANAGEMENT AUDIT

INTRODUCTION TO COST AUDIT

Purpose: A lot of concessions and facilities were given to entrepreneurs to establish

- To verify the accuracy of Cost Accounting data.

- Checking the correctness of cost accounting records.

To the Cost Accountant:

Disadvantages of Cost Audit: Cost audit also have some disadvantages:

Concept of Efficiency Audit: Efficiency Audit being an independent assessment to judge

Distinction between Financial Audit & Cost Audit

Financial Audit Cost Audit

Performance Audit: Performance audit means a critical examination or evaluation of

Performance Audit Cost Audit

Social Audit: Social audit may be defined as an assessment of the performance of an

Internal Social Responsibility includes:

External Social Responsibility includes:

(i) To make an assessment of social performance of an enterprise.

The objectives of management audit are as follows:

- Study of the elements.

Financial Audit Management Audit

- Whether there is a revenue leakage.

Advantages of Propriety Audit: Propriety audit has the following advantages:

Traditional Audit Propriety Audit

statements prepared at the end of the year

FUNDAMENTALS OF COST AUDIT

Principles of Cost Audit: Principles of Cost Audit are discussed below:

5. Confidentiality: A cost and management accountant should respect the confidentiality of

9. Professional Code of Ethics: A distinguishing mark of a profession is its acceptance of

Planning Cost Audit:

Performing Cost Audit:

Background Knowledge and Audit Procedures

Important Elements of Cost

vii) total employees cost (total of items (i) to (iv) above)

7.2 Allocation of Overheads: The basis of allocation/apportionment of overhead cost to cost

LEGAL STATUS & POSITION OF COST AUDITOR

Qualification, Disqualification, Resignation and Removal: Any person can be appointed

- An employee of company under audit.

- No company, whether incorporated in Bangladesh or elsewhere, can practice as Cost and

- There are many case decisions that disqualify a CMA in practice.

AUDIT PLANNING, CONTROL & REPORTING

More specifically the records normally relates to:

(vii) The total number of machines in operation.

(1) Records of raw materials and other goods,

All these items are discussed below:

Records of Raw Materials and Other Goods:

Records relating to Labor:

(2) Raw materials stores etc.:

(3) Utilities (Steam, power & water):

(4) Wages and Salaries:

(b) Overhead absorption details.

(6) Repairs and Maintenance:

(7) Work-in-progress and finished goods:

(8) Cost accounts, records and statements:

Management Information System: Management Information System or MIS is an

Preparation of Cost Audit Report: see on CARR 1997.

CODE OF CONDUCTS AND ETHICS

The CMA Rules also state in regulation No. 121-123 as follows:

Liabilities under law of contract are stated below:

1. Name of the Cost Audit firm:

LEGISLATION RELEVANT TO COST AUDIT