Welcome
Presentation on ‘Audit to Detect Fraud and
Corruption; Evaluation of the Fight Against
Corruption and Money Laundering’
Marcopolo Shenzhen Hotel , Shenzhen, China
11-13 December 2012
Presenter:
K M Serajul Munir, Director,Works Audit Directorate
Md. Zakir Hussain, Assistant CAG (Report)
Member, 10th ASOSAI Research Project
SAI Bangladesh
Background
Bangladesh is continuing its fight against corruption applying
different mechanism of which audit is the best common practice
showing visible progress.
Specifically Bangladesh does not have experience in the name of
Corruption audit /fraud audit or audit of money laundering but
in a passive way all these three areas are being covered under
audit activities over the years.
Background
SAI Bangladesh has been actively involved with regional and international
organizations linked to auditing activities. Bangladesh has been an active
member of Asian Organization of Supreme Audit Institutions (ASOSAI)
since its inception.
The office of the Comptroller and Auditor General (OCAG) is committed to
promote the goals and aspirations of ASOSAI. It has extended its full
support to ASOSAI for fulfillment of its noble cause through professionally
participating in its activities.
SAI Bangladesh has been an active member of the INTOSAI, an
organization which has a membership of 188 Supreme Audit Institutions
(SAIs).
It is assured from the part of SAI Bangladesh that the ongoing research
project on audit of fraud and money laundering will be treated with utmost
interest, care and efficiency.
Introduction to Bangladesh
Bangladesh emerged as an independent and sovereign
country in 1971 following a nine month war of liberation. It
is one of the largest deltas of the world with a total area of
147,570 sq. km. With a unique communal harmony,
Bangladesh has a population of about 152.51 million, making
it one of the densely populated countries of the world.
Introduction to Bangladesh:
Economy Overview
GDP total: $105.00 bn (at current prices 2010-11)
GDP per capita: $775 (at current prices 2010-11)
GDP growth rate (%): 6.32 (at constant prices 2011-12)
Total exports: $24.231 bn (July, 2011-June, 12)
Total imports: $30.93 bn (July, 2011-May, 2012)
Total FDI: $1.136 bn (2011)
Forex reserves: $9.953 bn (17th June, 2012)
Currency: BDT (1 BDT=$0.0125) (avg 2011-12)
Source: Bangladesh Economic Review-2012 , Export Promotion Bureau ,Ministry
of Finance, The People’s Republic of Bangladesh.
SAI Bangladesh
Supreme Audit Institution of Bangladesh is officially known
as Office of the Comptroller and Auditor General (OCAG).
OCAG, the SAI of Bangladesh led by the CAG was
established in 1973 as per provisions of the constitution of the
Republic.
Articles 127-132 of the Constitution provide for the
appointment, power, and functions of the CAG. Because of
its independent status guaranteed by the constitution and its
reporting relationship to Parliament, SAI can play an
effective role in enhancing financial discipline and promoting
accountability and transparency in the government.
SAI Bangladesh
Constitution of the People’s Republic of Bangladesh declares
that there shall be a Comptroller and Auditor-General of
Bangladesh (hereinafter referred to as the Auditor-General)
who shall be appointed by the President. As per Article 128 (1)
The public accounts of the Republic and of all courts of law
and all authorities and officers of the Government shall be
audited and reported on by the Auditor-General and for that
purpose he or any person authorized by him in that behalf
shall have access to all records, books, vouchers, documents,
cash, stamps, securities, stores or other government property
in the possession of any person in the service of the Republic.
Ethical standards
maintained in the organization
In reality the standards, code in some specific documents
published by either OCAG or other bodies are usually
followed as ethical standards indirectly which are followed
while performing audit of different types of entities.
These are•Generally Accepted Auditing Standards (GAAS);
•Bangladesh Standards on Auditing (BSA);
•Government Auditing Standards (GAS);
•Code of Ethics for the Government Auditors
SAI Bangladesh; Audit practices
SAI Bangladesh, having its legal basis of work on the
Constitution, does exercise its function applying different
guidelines and mechanisms of them most quotable are Audit
Code, Code of Ethics, Government Auditing Standards,
Governmant Accounting Standards, Bangladesh Standards on
Auditing, ASOAI and INTOSAI guidelines, and last but not
the least-ap;ication of ISSAIs.
The main three types of audit being done are1.Compliance audit;
2.Financial audit;
3.Regulatory audit.
SAI Bangladesh; Audit practices
10 audit directorates working under SAI Bangladesh covers the following
areas under audit perview1.Civil budget and accounts (Civil Audit Directorate);
2.Defence budget and accounts (DEfence Audit Directorate);
3.Railway budget and accounts (Railway Audit Directorate);
4.Comercial entities(Commercial Audit Directorate);
5.Revenue entities( Local and Revenue Audit Directorate);
6.Government and Foreign aided projects(Foreign Aided Projects Audit
Directorate);
7.Missions abroad(Mission Audit Directorate);
8.Performance audit in addition to special and issue-based audits(
Performance Audit Directorate);
9.Post and Telecomunication entities(PT&T Audit Directorate);
10. Different types of Public works(Works Audit Directorate)
SAI Bangladesh; activities against
Corruption, Fraud and Money Laundering:
Regarding the question of corruption, accountability has
to do with the fact that for proper observance of rules and
regulations , those administering the rules must be held
responsible and accountable for their actions. If this is can
be treated as a basis, on behalf of the principal [the
parliament] SAI Bangladesh is active in keeping the
budget receipients [Secretariates, Ministries] accountable
for spending public money. This function is done by SAI in
two ways-
•Pre auditing;
•Post auditing.
SAI Bangladesh; activities against
Corruption, Fraud and Money Laundering
In general the overall functions are somehow linked with
activities against corruption and to some extent fraud is
identified as a class/ type of corruption. There is no specific
audit in the name of Fraud audit or Audit of Money
Laundering. In these circumstances such particular audit
emphasis can be introduced in SAI Bangladesh.
Bangladesh in Corruption Perceptions Index:
Transparency International's Corruption Perceptions Index
(CPI) set scale goes from 10 (very clean) to 0 (highly corrupt).
In 2010, more than 75% of countries scored less than five,
indicating that the world has a major corruption problem.
The CPI is an aggregate indicator that combines different
sources of information about corruption, making it possible to
compare countries. It draws on different assessments and
business opinion surveys carried out by independent and
reputable institutions.
Bangladesh in Corruption Perceptions Index:
the surveys and assessments used to compile the index include
questions relating to bribery of public officials, kickbacks in
public procurement, embezzlement of public funds, and
questions that probe the strength and effectiveness of public
sector anti-corruption efforts. For a country or territory to be
included in the index a minimum of three of the sources that
TI uses must assess that country. Thus inclusion in the index
depends solely on the availability of information.
Perceptions are used because corruption whether frequency
or amount is to a great extent a hidden activity that is
difficult to measure. Over time, perceptions have proved to be
a reliable estimate of corruption.
.
Table: Bangladesh trend in CPI
Worldwide
Corruption
Perceptions
ranking
of
countries
published by Transparency International
Rank
Country
2011
Index
2011 2010 2009 2008 2007 2006 2005 2004 2003 2002
120
Banglades 2.7
h
2.4
2.1
2.0
2.0
1.7
1.5
1.3
1.2
Auditing Fraud; Bangladesh Scenario:
It is to be mentioned here that there does not exist any audit
practice particularly in the name of Fraud auditing. But,
while applying guidelines enacted by applicable codes and
standards, the instances of fraud, if anything exists those are
chalked out and brought under focus and included in the
audit reports. For example- in case of auditing the financial
institutions like bank, insurance, leasing some audit
objections are raised which shows indication of fraudulent
practices either in an active or a passive way. It can be taken
into consideration that if specifically Fraud is taken as an
issue, SAI Bangladesh can add value resulting in expected
attainments.
Auditing Fraud; Bangladesh Scenario:
As SAI Bangladesh is intended to apply ISSAIs in
performing audit, its expected that all possible areas and
issues will be covered in coming days. ISSAI 1240 enacts
the auditor’s responsibilities relating to fraud in an audit
of financial statements. In SAI Bangladesh replacing the
traditional vouching audit, SBA and Risk based auditing
are taking place in a speedy pace which ultimately ensures
the hope to strengthen audit of fraud in a institutional
approach.
Anti Money Laundering activities
in Bangladesh
Money Laundering Prevention Act, 2002 of Bangladesh
(Act No. 7 of 2002 ) has been published in the
Bangladesh Gazette (extra issue) on 7th April, 2002 with
the purpose of combating money laundering . As per
article 1(2) of the Act, the Government of the Peoples
Republic of Bangladesh has made this Act effective from
April 30, 2002 AD by an Official Notification in the
Gazette.
Money Laundering Prevention Act, 2002;
some important extracts:
1. Supremacy of the Act.2 . Responsibility of Bangladesh Bank in preventing Money
Laundering –
3.Power of enquiry, etc
4. Establishment of Money Laundering Court.
5. Jurisdiction of the Court.
Money Laundering Prevention Act, 2002;
some important extracts:
6. Acceptance of the crime for trial etc. (1)
Notwithstanding what is contained in
any other laws all crimes under this Act will be cognizable
for trial under this Act.
(2) All crimes under this Act will be Non-bailable.
7. Application of Code of Civil and Criminal Procedure,
etc.
8. Legal seizure of property
9. Freezing of the property
Money Laundering Prevention Act, 2002;
some important extracts:
10. Appeal
11. Punishment for Money Laundering
12. Punishment for violation of seizure order
13. Punishment for violation of the Freezing Order
Money Laundering Prevention Act, 2002;
some important extracts:
14. Punishment for divulgation of information.
15. Punishment for obstruction in enquiry.-
16. Agreement with the Foreign Country
17. Responsibility of the banks, financial institutions and
other institutions engaged in
financial activities in preventing and identifying money
laundering—
18. Crime committed by the Company etc
The Way forward
The recent trend of emergence of types of corruption and
fraudulent practice knocks the regularity bodies to be aware
more in handling malpractices on time with an efficient
manner.
Money laundering got attention of major regulatory bodies
including Bangladesh Bank-the central bank, Anti
Corruption Commission and SAI Bangladesh. It may be
expected that in short time Audit of Money Laundering will
be treated as one of the most priority area to be audited.
Thank You