Auditing and Taxation - PDF

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University of Jahangir Nagar
Institute of Business Administration









BBA Programme 27thBatch
Auditing and Taxation
Lecture 3 & 4











Course Teacher:
Shish Haider Chowdhury
shish.1965@gmail.com
018 19225594







10 June 2020
1

History of Auditing Profession
For a logical analysis the history has been subdivided into certain specific periods and is
described below:
1: 1850-1882:The first Companies Act in the then British India was enacted in 1850.
One of the provisions included in the said Act was a half yearly audit and a report on the
accounts audited to be given by the auditor. In Indo-Pak subcontinent there were a few
British firms of accountants, but they were so busy that their services were not available to
thegeneralpublic.ThepubliccompaniesusedtoappointaEuropeanAuditorfor
safeguarding the interests of the Indian shareholders.

2: 1882- 1913:Then the Companies Act of 1882 was passed. Regulations 83-94 of Table ‘A’
contained in the first Schedule to the said Act provided for the audit of accounts of the
companies adopting that Table and for the appointment,remuneration and duties of the
auditors. It was not necessary for a company auditor in those times to be accountant
himself. Some companies in fact used to employ lawyers as their auditors.

3: 1913-1932:The Companies Act, 1913, was passed to be effective as from 1stApril, 1914.
No person could act as the Auditor of a public limited company unless he held an auditor’s
certificate granted by Government. The Provincial Governments were empowered to grant
Auditors’ Certificate but, at the same time the Central government also reserved the right to
recognize members of certain professional bodies as qualified to function in the capacity of
companyauditorswithoutobtainingAuditors’CertificatefromtheGovernment.
Consequently the members of English, Scottish and Irish Institutes of Chartered Accountants
and of the English Society of Incorporated Accountants and Auditors were recognized as
qualified auditors.

Section 181 of the Companies Act,1913 required that every company should cause to be
kept proper books of account with respect to:
(a)all sums of money received and expended by the company and the matters in
respect of which the receipt and expenditure take place;
(b)all sales and purchases of the goods by the company;
(c)the assets and liabilities of the company
(d)in case of a company pertaining to any class of companies engaged in production,
marketing, transportation , processing, manufacturing, milling, extracting and mining
activities, such particulars relating to utilization of material, labor and other items of
overhead cost.

Thus the broad outlines the maintenance of books of accounts was made mandatory under
the Company law.
2

For some years after 1913 the Provincial Government used to grant Auditors’ Certificate to
personswhopossessedsomeknowledgeofaccountancy.Atthat timetherewasno
provision of any kind of training and examination of the accountancy .In 1918, Provincial
Government of Bombay instituted the Government Diploma in Accountancy (Called GDA)
and made regulations for the examination and training of those who wanted to obtain that
Diploma and certificate to practice.
The action taken by the said government received the approval of other provincial and
central Governments. The result was that GDA Diploma becomes the requisite qualification
for the grant of Auditors’ Certificate throughout the then British India. An Accountancy
Board was set up by the Government and was attached to the Sydenham College of
Commerce and Economics, Bombay. This functioned till 1932
4. 1932- August 14, 1947:Till 1932 there was no centralized control over the profession of
accountancy, but the necessity for such control was increasingly being felt because of
changing requirements of the time and growing needs of the economy. Consequently the
Government framed Rules under Section 144, of the Companies Act ,1913, called “Auditors
Certificate Rules’ 1932”. The objectives of these rules were broadly as follows:
(a)Registering apprenticeships;
(b)Conducting examinations;
(c)Controlling and regulating the profession of auditing.

The Accountancy Profession was then being supervised and controlled by the Ministry of
Commerce of the Central Government. With a view to helping the Government, Indian
Accountancy Board was established. The board was only an advisory body . The Auditors
Certificate Rules 1932, required the passing of two examinations – Registered Accountants
first and final. It further laid down the tenure of prescribed training which was required to
be completed during the period of apprenticeship.

4. August 14, 1947- Dec. 15, 1971:Pakistan emerged as a sovereign state on August 15,
1947 and adapted the Auditors’ Certificate Rules, 1932. Amendments were made in 1950
and the affairs of the accounting profession were then administered under the Auditors’
Certificate Rules, 1950. A person who passed the Registered Accountants first and final
examination and who satisfied the Ministry of Commerce, Central Government of Pakistan
that he had completed the prescribed practical training could have his name placed on the
registeredmaintainedbythesaidMinistryandwasentitledtousethedesignation
Registered Accountant’ (RA).
In 1952, the Registered Accountants formed a private body known as “ Pakistan Institute of
Accountants” with the objects of looking after their own interest and taking up with
MinistryofCommerce,GovernmentofPakistan,mattersaffectingtheaccountancy
profession. The Government realized that the profession was rapidly growing in its stature
and importance and in June 1959, the Department of Accountancy was established in the
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