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Accounting Practice in Bangladesh

Course Title: Developments in AccountingCourse code: AIS-2

Date of Submission-December 2, 2010

Submitted to-Mr. Md. Masud Rana

Senior LecturerDepartment of Business Administration,

Metropolitan University, Sylhet

Submitted By-Md.Bazlur Rahman Khan

Id no: 073-116-020BBA 13th Batch

Department of Business Administration,Metropolitan University, Sylhet

Accounting Practice in Bangladesh

IntroductionFrom very ancient period people living their life by doing various professions. Among those some are eternal and some are prestigious. The Accountancy profession is now accepted as one of the most prestigious profession. After industrialization it was accepted as a profession in worldwide. There are a number of different national and international institutes of accountants to control and develop the profession. At present world the accountancy profession indicates two types of certified accountants- one is “Chartered Accountants” and another one is “Cost & Management Accountants”. In Bangladesh there are two different institutes for the accountants- “The Institute of Chartered Accountants of Bangladesh” (ICAB) and “The Institute of Cost & Management Accountants of Bangladesh” (ICMAB). It is been compulsory to audit the accounts for different codified companies in Bangladesh and only the Chartered Accountants can perform this task. In the “Section 220 of Companies Act 1994”, it is been compulsory to audit the manufacturing costs for a number of specific organizations and the accountants passed from the ICMAB can perform this task.

Definition of ProfessionProfession is calling in which one professes to have acquired specialized knowledge which is used either in instructing guiding or advising others. The tasks performed by doctors, engineers, accountants, teachers, lawyers etc. are examples of profession. The characteristics of profession are-

1. It is used to give advice.2. It is used to provide training.3. There must have an institute for the professionals.4. There must have some rules and regulations.

Accounting as a Profession

Auditing & Chartered Accountancy-The term “Auditing” comes from the word “Audire”. In 1854 accounting

profession achieves royal acceptance by establishing world’s first “Chartered Accountants Institute” in England. It was developed so quickly as a profession in British Empire after founding “London Institute of Accounts” in 1880. Although accounting profession starts from Britain, later it was developed by the Americans. In 1882, “Institute of Accounts” was established in New-York city and in 1887, “American Association of Public Accountants” (AAPA) was founded. In late 1957, it was changed to “American Institute of Certified Public Accounts”. In Bangladesh, according to “Company Law 1994” only the Chartered Accountants can audit the accounts for organizations.

Audit for manufacturing costs & CMA Profession-It was not accepted as a profession before 1919. Cost and Management

Accountants profession achieves organizational foundations after establishing “The Institute of Cost and Management Accountants” in Britain at 1919. In the same year, there established “Institute of Management Accountants” in America to bringing up and develop this profession. To provide practical lesson and training, there also established another institute under “IMA” named “Certified Management Accounting”. According to “Company Law 1994” in Bangladesh, a number of cost and management accountants who have passed and got license from ICMAB can audit the accounts and manufacturing costs for some specialized organizations. From given power into the Section 226(4) of Companies Act, to fulfill the purpose of the law Bangladesh government passed some rules for cost audit report in 1997. And by passing those rules, cost auditing gets its base in Bangladesh.

History of Accounting Profession in Bangladesh

The history of accounting profession in Bangladesh can be describe under two section-A. Pre-Independence HistoryB. Post-Independence History

A. Pre-Independence History-1. 1850-1914: The accounting profession was legally accepted in Indian

Subcontinent by bringing company law into force in 1850. According to the law, it was been compulsory to audit the accounts of the organizations on half-yearly basis. And to do so there needs expert auditor. In that period, the companies select European and Indian auditors to maintain the interest of the European and Indian shareholders. As there were no rules to assess the eligibility of Indian auditors, the lawyers act as an auditor in that period.

2. 1914-1947: It was made compulsory to audit the accounts of a company by an expert and independent auditor in the Company Act 1913 which was effective from 1st March, 1914. From the due date, any person who was not certified by government can’t perform the tasks of an auditor and for that reason, the lawyers and other auditors’ loss their eligibility. In 1918, Mumbai Govt. starts a test of “Government Diploma in Accountancy” to bring out professional accountants. This test was then accepted by other provincial and central government. There was no central control upon accounting profession until the “Auditors Certificate Rule” passed in 1932. Persons who get certificate in pursuance of this law were known as ‘Registered Accountants’ (R.A.).

3. 1947-1972: After separation of Indian sub-continent, the Government of Pakistan accepted the “Companies Act 1913” and the “Auditors Certificate Rule” of 1932. In 1950, the Government of Pakistan made some corrections on Auditors Certificate Rule and changed it to “Auditors Certificate Rule, 1950”. According to this law, the Ministry of Commerce preserves a list for accountants and the persons who were in that list got the authority to use ‘Registered Accountants’. Later the registered accountants established “Pakistan Institute of Accountant” to preserve their interest and for development of the profession. This institute tried to make it understand to the government that there need to establish a separate association to authorize and control the accounting profession. After that the government realizes the importance of the profession and set up “Council of Accountancy”- an advisory board. Later on 1st of July 1961 the government declared an ordinance- “Institute of Chartered Accountant of Pakistan” in accordance with the recommendation of the advisory board. And then on 1st July 1961 “Institute of Chartered Accountant of Pakistan” was

established as an autonomous association. This association controls all about the accountancy profession.

B. Post-Independence History-After liberation war in 1971, Bangladesh which was formerly known as East Pakistan was separated from Pakistan and appeared as an independent country. After independence, Bangladesh faces lots of problems and difficulties because of a little number of Bengali accountants. For that reason, the government of Bangladesh set up an “Add-hock” committee which appoints 18 chartered accountants to solve the problems. On 6th January 1972, the government passed a law “The Bangladesh Chartered Accountant Order” and then established “Institute of Chartered Accountants of Bangladesh” as of the following order. And now this association controls the accountancy profession in Bangladesh. There has another autonomous association “ICMAB” which is also working for the development of this profession. This institute is related with the cost and management accountancy profession. Incidentally, The Parliament of Bangladesh made some additions and alterations of the “Companies Act 1913” and passed the “Companies Act 1994”.

Role of Accounting Profession in the Economic Development of BangladeshThe economic and commercial development is closely related each other. Accountancy profession has its importance to record the business transactions and to verify its accuracy. This profession is also take part into the fastest economic development of Bangladesh by accomplishing the following tasks-1. Proper maintenance of financial institution- Bank, Insurance Company and other

financial institutions are supplying capital to carry on their business, for which economic position is developing. The financial tasks of banks and insurance companies are influenced by accounting information and so that it is necessary to keep record of the accounts of these financial institutions.

2. Preparing budget- It is necessary to prepare a budget into the business organizations for economic development. On the basis of past experience an organization prepares cash budget, manufacturing overhead budget, sales budget, master budget etc. to ascertain the development. And there need accounting information to prepare a budget.

3. Reducing corruption by auditing accounts- It is possible to reveal the frauds and forgery of a company by accounting profession and for that it is been possible to reduce the corruption and make sure the proper use of the funds of the company.

4. Determination of national income- There has special contribution of accountancy profession to determine national and international income of financial activities and preparing the balance sheet.

5. Statistical work- In accordance of government rules and regulations, accounting profession helps into statistical works by providing necessary information that is collected and recorded from the business transactions of different parties.

6. Employment- This profession helps in the economic development by employment of lots of people.

In the economic development of a country there needs different information. The accountancy profession helps to successful operation of a business by providing this information. And in this way accounting helps to the economic development by the development of businesses and employment.

Activities undertaken or performed by Professional Accountants of BangladeshActivities that are performed by the professional accountants in Bangladesh are as follows-1. Audit Accounts- Maximum professional accountants in our country is engaged with

auditing accounts. One or more accountants establish a firm for this purpose and conduct the audit under the firm. Their task is to justify the accuracy of the accounts of different firms and give their opinion from the view point of laws.

2. Keeping Accounts- Professional accountants are appointed in the accounting department of different business & social organizations; government, non-government and autonomous organizations; and they records & prepares the accounts.

3. Tax Advice- Many professional and certified accountants works as tax advisor and plead for their clients about tax related case. Their work includes- preparing tax description, identifying tax liabilities and providing tax related advices.

4. Formation of Company- When establishing a company there appointed professional accountants for preparing all necessary documents. In this case, they prepare the memorandum and articles of association, statements or reports and other legal documents.

5. As a liquidator- Professional accountants can be appointed as a liquidator in the period of liquidation of a company.

6. Investigation- Professional accountants are appointed to accomplish the investigation where they inquire the final accounts of a business or company.

7. Implementation of Management Accounts- Sometimes professional accountants are appointed to help the management. Here they prepare financial plans and budgets, financial report and manufacturing expenses report, compare and analyze the actual results with standards.

Problems of Accounting ProfessionThe problems of accounting profession in Bangladesh can be describe under two section-

A. Problems relating to students &B. Problems relating to profession

A. Problems relating to students-1. Language- Chartered Accountancy is internationally accepted as a profession.

Maximum number of student, even the students of Masters Level studied in Bangla medium. But they have to study in English medium after joining the accounting profession. As a result, the students who have passed from Bangla medium faces problems while studying this course. ICAB and ICMAB started foundation courses for the interested students of C.A. and CMA to solve their problems.

2. Below Standard- Even only graduate students can take admission in C.A course as articled student, generally intelligent students didn’t have eagerness to come to this profession. Most of the people think that the standard of this education is below from previous time for which students faces difficulties to follow the specific curriculum.

3. Lack of professional teachers- Students faces problems because of the lack of experienced and trained teachers and on the other hand, the professional accountants were very much busy.

4. Opportunity to Learning- The students under C.A. firms are engaged with the firm’s tasks for long time for which they can’t get enough time for study. In addition to this, training facilities are not sufficient and the trainee students didn’t get sufficient allowances on regular basis.

B. Problems relating to profession-1. Remuneration- The fees for audit of accounts is not so attractive if we consider

the ruin of currency. The audit fee is short amount in Bangladesh then other South-Asian countries.

2. Importance- The accounting profession doesn’t treat cordially like as other professions. Moreover, the accountants who trained from foreign country get importance then who trained in the country.

3. Absence of proper social environment- The social environment of Bangladesh is not satisfactory for the professional accountants to perform their tasks independently. It can’t be possible to work independently and impartially because of getting pressure from different groups.

4. Opportunity of employment- Chartered accountants are not being employed for desired post into the government and autonomous organizations. The slow movement of industrial development is an obstacle to the development of accounting profession.

5. Competition- The dignity and development of accounting profession is badly affected because of increased C.A firms and competition among them.

6. Financial problem- The accounting profession in Bangladesh is not getting enough financial support from the government which is a great problem for the development of the profession.

Formation, Management and Functions of the Institute of Chartered Accountants of Bangladesh (ICAB)

Formation: The “Institute of Chartered Accountants of Bangladesh” is established as an autonomous association in accordance with the “Bangladesh Chartered Accountants Order, 1973” to control and develop the accounting profession. The association has long standing existence and operated with its own seal which is the symbol of its existence. The association can occupy, buy and sell movables and immovables properties.

Membership: Peoples who were registered before the declaration of Chartered Accountant Order on 1973 and those who were registered later by following the order will be treated as the member of the association until their name were registered. Persons who can be the member of this association are-1. Any citizen of Bangladesh who were engaged with accounting profession when the

order was effective.2. Person who have passed the authorized tests and completed authorized training.3. Person who have passed from any foreign “Institute of Accountancy” and

accomplished the training accurately. But condition is that, he should be accepted by the ICA council of Bangladesh and the test and training should also be accepted by

the institute. The council can apply more conditions if the person is not a citizen of Bangladesh.

4. (a) Any Bangladeshi citizen who passed the tests and accomplished the training from any foreign “Institute of Accountancy” and achieves the membership of that institute before the “Bangladesh Chartered Accountants Order, 1973” takes into action.(b) Any Bangladeshi citizen who was studying to take part in the examination of any foreign “Institute of Accountancy” before the declaration of the order and at the same time, s/he was on training either in native country or abroad; or s/he was on training after passed from any foreign “Institute of Accountancy” before declaration of “Bangladesh Chartered Accountancy Order, 1973”.

5. Any Bangladeshi citizen who passed the exam before 25th of March, 1975 under “Auditor Rules, 1950” and “Chartered Accountants Rules, 1961”.

Types of Membership: There are two types of member of the association- “Associate” and “Fellow”. A member is called an associate if he is listed in the register of the association and can use “A.C.A” after his name. And if an associate engaged with accounting profession for 5 years, then he can be listed as a fellow member after applying and made payment of the fee and should be approved by the council. After that he can use “F.C.A” with his name.

Disqualified for Registration: Following people will not be the member of the association, if-1. S/he is under 21 years of age in the period of application.2. S/he is mentally disordered.3. S/he is an insolvent.4. His membership is forbidden by the institute because of professional or any other

misbehavior.If the membership of any one is forbidden for a specific period, than he can be registered again after end of the period.

Management: The management system of “Institute of Chartered Accountants of Bangladesh” is as follows-1. There have 20 members in the management. Among them 17 members are elected

from professional accountants and other 3 are selected by the government as representative of Ministry of Finance, Commerce and Industries.

2. The life time of the management council is 3 years.

3. There should be elected a chairman, one or more vice-chairman among the members of the council. The chairman will be act as the chief host of the council.

4. There will be a treasury to operate the activities of the association.

Functions of ICAB: The functions of the association are-1. The code of conduct for the accountants should be prepared on the basis of

“Chartered Accountants Order, 1973”.2. Takes necessary action if any member doesn’t maintain their code of conduct.3. Keep a list of professional accountants.4. Set up a standard for foreign certified accountants to work as a professional in

Bangladesh.5. Arrangement of professional examination.6. Set up sub-committees if needed, to solve the problems related to the profession.

Institute of Cost and Management Accountants of Bangladesh (ICMAB)

In 1966, “Pakistan Institute of Industrial Accountants Act” was passed to control the activities of cost and management accountants. Then “Bangladesh Institute of Industrial Accountants” was established after independence of Bangladesh. This institute keeps contribution into the financial management of Banks, Insurance Companies and other organizations. Later in 1977, government of Bangladesh declared “Cost and Management Accountants Ordinance” to control the manufacturing costs and the profession of management accountants. “Institute of Cost and Management Accountants of Bangladesh” was then established in accordance with the ordinance.

Management and Functions of ICMAB: People who were registered before this ordinance or who were registered later by following the rules and regulations of the ordinance, they will be considered as member of the “Institute of Cost and Management Accountants of Bangladesh” until their name exist in the register. [Section 3(1)]The Association will have permanent right of succession and a general seal. It can also occupy, buy and sell movables and immovables properties.

Membership: Persons who can be the member of this association are-1. The Associate or Fellow member of any institute which became extinct.2. Persons who have passed the exam and completed training that arranged by the

council.

3. Persons who have passed the exam and completed training from any foreign “Institute of Cost and Management Accountant” and became the member of that institute. In this case, they should be accepted by I.C.M.A.B and the exam & training should also be accepted by the institute. The council can apply conditions if they are not the citizen of Bangladesh.

4. Any Bangladeshi citizen who passed the tests and accomplished the training from any foreign Institute and achieves the membership of that institute before declaration of “Cost and Management Accountants Ordinance”.

5. Any Bangladeshi citizen who was studying to take part in the examination of any foreign “Institute of Cost and Management Accountant” before the declaration of the order and at the same time, s/he was on training either in Bangladesh or abroad; And passed the exam and completed training.

Types of Members: There are two types of member of the association- “Associate” and “Fellow”. A member is called an associate if he is listed in the register of the association and can use “A.C.M.A” after his name. And if a member engaged as an associate for 5 years, then he can be listed as a fellow member after applying and made payment of the fee and should be approved by the council [Section 6(4)]. After that he can use “F.C.M.A” with his name. People who were the fellow member of an abolished institute before declaration of the ordinance can use F.C.M.A after their name until they are registered.

Disqualified for Registration: Following people will not be the member of the association, if-1. S/he is under 21 years of age in the period of application.2. S/he is mentally disordered.3. S/he is an insolvent.4. S/he is convicted by the court because of lewdness.5. His membership is forbidden by the institute because of professional or any other

misbehavior. If the membership of any one is forbidden for a specific period, than he can be registered again after end of the period.

Management: There will have a council to manage and accomplish the activities of the institute [Section 9(9)]. Council will be formed with the combination of following persons-1. Members of the institute will elect 12 persons from the fellow members.2. 4 persons will be selected by the government [Section 9(2)]. Here nobody from the

institute will be nominated as a member of the council.

3. Members of the council will select chairman, two vice-chairman, secretary and treasurer.

Functions of Council: The functions is as follows-1. The Council can apply necessary power to achieve the objectives of the ordinance

and to accomplish the functions.2. Organize the examination for those who are seeking membership of the institute.3. Student registration and organize training.4. Set up standards for achievement of membership.5. Acceptance of foreign competence and training to provide membership.6. Provide or cancel certificates for training.7. Keep records of registered members and publish the list of the members and

practitioners.8. Set up and receive fees from examinee, students and members.9. Retract names from register and re-register the names.10. Maintain honour and dignity of professional competence of the members of the

institute.11. Conduct research work on cost and management accounting by providing financial

support or any other way to the members of council.12. Provides professional service in case of cost and management accounting.13. Manage the library and publish books and journals on cost and management

accounting.14. Apply rules and regulations upon members, officers and employees of the institute.

Council will set up the following standing committees to successfully accomplish the functions-

- Executive committee- Education committee- Examination committee- Research & Development committee- System development committee

Cost and Management accountants’ regulation was prepared in accordance with the order in 1980. The rules and regulations to operate the institute and code of conducts for members are included in the order.

Role of ICAB & ICMAB in development of Accounting Profession in BangladeshRoles of ICAB is as follows-1. The code of conduct for the accountants should be prepared on the basis of

“Chartered Accountants Order, 1973”.2. Takes necessary action if any member doesn’t maintain their code of conduct.3. Keep a list of professional accountants.4. Set up a standard for foreign certified accountants to work as a professional in

Bangladesh.5. Arrangement of professional examination.6. Set up sub-committees if needed, to solve the problems related to the profession.7. Maintenance of international standards.8. Help government to prepare rules and regulations for accounting profession.

Roles of ICMAB is as follows-1. Organize the examination for those who are seeking membership of the institute.2. Student registration and organize training.3. Set up standards for achievement of membership.4. Acceptance of foreign competence and training to provide membership.5. Maintain honour and dignity of professional competence of the members of the

institute.6. Conduct research work on cost and management accounting by providing financial

support or any other way to the members of council.7. Provides professional service in case of cost and management accounting.8. Manage the library and publish books and journals on cost and management

accounting.9. Apply rules and regulations upon members, officers and employees of the institute.

Future of Accounting as profession in BangladeshAs there are lots of problem of accounting profession, it has also a bright future. The accountants of Bangladesh have good reputation in Africa, Middle-East and South Asian countries. The demand for certified accountants from Bangladesh is increasing day-by-day in abroad and there have also chance of getting employed. There need to develop the standard of students to get the chance. In Bangladesh, accounting profession is limited into auditing the accounts of corporate sector. This is because of slow economic development and improper use of the skills of certified accountants. In recent years many industries were established and the government is trying to establish more for quick industrial development. Many N.G.Os and non-trading organizations are working

in Bangladesh and there need to prepare financial rules, keep records and audit of accounts and control the expenditures. Certified and professional accountants can keep their contribution to prepare national economic plan. The precaution of economic development is to make sure the accountability of every sector and so that the development of accounting profession is important. Government and Accounting institutes can contribute for the development and expansion of this profession.

Traditional book-keeping system of BangladeshThe book-keeping system of Bangladesh can be divided into three parts-

A. Sole proprietorship & Partnership firmsB. Accounting system of companiesC. State & Statutory accounting system

A. Sole proprietorship & Partnership firms- The book-keeping system of sole proprietorship and partnership firms is described below:1. Objects- The main objective of book-keeping in sole proprietorship & partnership

firm is to provide actual information to owners, so as they can make decisions for the company. In this system, interest of any other parties is not considered rather than the owners.

2. Book-keeping in single entry system- where the rules of double entry system are not followed, that is known as single entry book-keeping. In this system, to calculate profit and loss amount, at first need to calculate capital amount by deducting liabilities from assets. In that case, we calculate opening capital by deducting opening liabilities from opening assets and calculate ending capital by deducting ending liabilities from ending assets. When following single entry system, profit and loss amount is calculated in the way of adding the ending capital, raised interest, other undistributed incomes and deducting the opening capital, extra capital, interest on capital, unadjusted expenses. At the end of the year a statement of assets and liabilities is prepared and there have possibilities of mistakes and frauds as it not follows double entry system.

3. Uses of accounting policy and standard- Accounts of a firm don’t get completeness without having accounting policy and standards. But sole proprietorship and partnership firm don’t follow the standards and policies for which it is not accepted by others but accepted by the owners.

4. Audit- Audit of account animates an organization. There have possibilities of mistakes and frauds in the account if auditing is not done. Audit of account for

sole proprietorship and partnership firm depends on the willingness of the owners, and here it is not compulsory to audit the account.

B. Accounting system of companies- 1. Unlimited Liabilities Companies- Here liabilities of shareholders are unlimited.

The employees of unlimited liabilities companies are personally liable for their activities.

2. Limited Liabilities Companies- Here liabilities of shareholders are limited and they bear liabilities of a certain amount. Public limited company is known as registered company because it has to register in the stock exchange. And shares of Private limited company are not under the control of share market.

The book-keeping system of companies is described below- i. Legal obligations: According to the “Section 2 (1) (d) of Company Act, 1994”-

Company means any company established and registered or any company existed with following this Act. These companies record the account by following double entry system. So there have chance to audit the account and it can be accepted to all parties of business.

ii. Double entry system of book-keeping: In this system all financial transactions are recorded into two side- debit and credit side of the account. As following the rules of double entry system, accounting is done into different steps such as- Journal, Ledger, and Trial Balance and then the final step is preparing the financial statement by making necessary adjustments with the trial balance.

iii. To follow accounting policy and standard: Any account can’t be completed if it not follows accounting policy and standards. In case of Companies, policy and standard is judged accurately, because all parties of business are deliberated here.

iv. Audit: Audit of account is compulsory for Public limited company as it brings accuracy into the accounting system of a company.

v. Cost Accounting: Manufacturing companies prepares their account by following the cost accounting system.

C. State and Statutory accounting system- This type of company is establish in accordance with the special order of the President or National Council of Law and Justice.

i. Use of accounting policy and standard- These organizations keep records of account and prepare financial statements by following double-entry book-

keeping system. In double-entry system, accounting policy and standard is maintained.

ii. Audit- Audit is compulsory for these organizations, because if there have no rule of audit than the possibility of mistakes and fraud is exists.

To develop the accounting system of Bangladesh, every organization should follow the double-entry system and also should follow the International Accounting Standards issued by FASB.

Limitations of Current Accounting Practice of BangladeshAccounting system in Bangladesh is divided into following two sections on the basis of the nature of organizations-

A. Accounting system for unregistered firmsB. Accounting system for registered firms

A. Limitations of unregistered firms1. Legal base- There has no any legal base to record account for unregistered firms

in Bangladesh. This task is done on the willingness of the manager or owner.2. Limited goals- Account is recorded to calculate profit and loss and financial

condition of the firm and maintained in such a way so that the owner can know the actual financial condition.

3. Applying single entry system- Maximum unregistered firm of Bangladesh keep record of accounts by applying single entry system. In this system there is a possibility of mistakes and frauds. Here total and net profit cannot be calculated accurately.

4. To follow accounting policy and procedure- Accounting policy and procedures are not follows accurately in the unregistered firm. Accounting procedure cannot be applied accurately because of following single entry system.

5. Lack of experienced accountants- Account is recorded by inexperienced accountants for whom it is not possible to justify the accuracy of the account.

6. Absence of audit- Audit of account is not performed in these organizations. As a result, the report is not published by justifying accuracy.

7. Lack of technology- As these organizations are small in size, there have no used the technology.

B. Accounting system for registered firmsLimitations of registered firms are as follows-1. Lack of proper use of accounting policy and procedure- Among registered firms,

Private limited companies don’t apply the accounting policy and procedures accurately. As a result, number of problem faced while preparing financial statements.

2. Complexity in inter firm comparison- Registered firms follows different accounting policy to prepare financial statement for which there have complexity in inter firm comparison.

3. Weakness of legal base- Nationalized industries is controlled under “Bangladesh Industrial Acts, 1972”. In this Act, there have rules for preparing account but have no any rules for preparing financial statement. As a result financial statement are failed to fulfill the need of users.

4. Qualitative value of accounting data- many organizations didn’t follow the international standards while recording accounting information. For this reason user of accounting data faces many problems.

5. Weak accounting system- There has lack of experienced employees in the accounts section of many registered firms for which accounting system cannot be maintained properly. So it is necessary to appoint available experienced people for performing accounting activities.

6. Lack of comparative information- According to the “Section 185 of Companies Act, 1994”, it is compulsory to show the accounting information of previous year while presenting data of current year.

Ways to Overcome the limitationsThe limitations of current accounting practice can be overcome by following a number of ways-A. Unregistered firm

1. Applying of double entry system- Unregistered firms should also follow the double entry system of book-keeping. If they do so, they will be able to prepare and maintain the account accurately.

2. To follow accounting policy and procedure- Accounting policy and procedures should be followed by unregistered firms and the authority should be aware of that.

3. Appoint of efficient accountant- It is necessary to appoint experienced and efficient accountant to accurately maintain the transaction of an organization.

4. Impose auditing system- It is possible to make corrections of accounts in the way of imposing audit system. Auditing helps to justify the accuracy of account.

B. Registered firm1. Proper use of accounting policy and procedure- Registered firms should also

follow accounting rules and procedures while preparing financial statements. Only then it will be possible to maintain accuracy of account.

2. Inter-firm comparison- Financial statements should be prepared in such a way that it can help to make inter-firm comparison.

3. Proper uses of law and create new law- It should ascertain to proper use of laws which are for registered companies and create new law if necessary.

4. Prepare financial report in time- The financial report must be prepare at the end of a period and should be submitted in the Annual General Meeting (AGM).

5. Developed in accounting system- Accounting system of maximum registered firm is in very bad position. It is possible to develop this situation by appointment of experienced accountants.

Professional MisconductA chartered accountant performs his tasks by following the rules of “Chartered Accountants Act, 1973”. In accordance with the act- It is expected that, he will not do any behavior for which the profession is dignified. The code of conducts for the chartered accountants is specified into the “Chartered Accountants Act, 1973”. If anyone break the rules he will be liable for professional misconduct. When a member is prosecuted because of professional misconduct than the institute can investigate the complaint in accordance with the “Chartered Accountants Act”.