Table of Contents

Serial No. 01 02 03 04 05 06 07 08 09 10 11 12 13 Contents Executive Summary Problem Statement Research Objectives Literature Review Benefits of the Research Methodology Data Collection Data Management Data Analysis Time Scale Budget Limitations Appendix Page No. 02 03 04 04 05 06 06 06 06 07 07 08 09

Executive Summary:
Principal is owner and agent is management. Principals delegate authorization to the agents to lead the company. Principals and agents can have different objectives; both agents and principals can try to maximize their personal profits. Thus, strategies are to be developed in order to coordinate principals and agents interests by control systems, 1

incentive systems, etc. To remove the agency problem, internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization to accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Internal Auditing has gained so much importance that conducting it has been made mandatory by regulators for listed and other specified companies. Internal Audit began in modest manner during the Second World War when organizations found it difficult to maintain operational efficiency and control. Companies appointed special staff (i.e. present day internal auditors) to review operations and report to them .The task assigned to internal auditors varied from routine check on finance and operations to appraisal of financial & operational activities. Earlier, internal audit was largely voluntary, management appointed internal auditors when they felt the need. With increased complexities in business, frauds and scams internal audit has become essential for most organizations. Now-a-days, regulators are prescribing mandatory internal audits all over the world. The range of activities undertaken by internal audit teams has increased. They cover a whole gamut of operations ranging from review of finance & operations to providing assurance and consulting services. In Bangladesh, the practice of internal audit is not properly made. There are many examples of biasness in internal audit of the companies. But the regulatory authorities are trying to detect the problem and take proper steps against that. Accounts of enterprises under sector corporations are audited at three levels - corporations' internal audit departments, independent professional audit firms, and the Comptroller and Auditor General (C&AG) of Bangladesh. Internal audit, sometimes similar to an investigation, and often termed as management audit, is conducted by the employees of a corporation on special issues. The purpose of this audit is to check whether the corporation's rules and regulations are being properly followed at the time of execution of any policy. This research will find out the compliance of the practices of internal audit with its standards.

Problem Statement:
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Its the responsibility of the Board to ensure that risks are managed and controlled. This task is delegated to the executive management which Determines the risk appetite of the organization Establishes the risk management framework Identifies potential threats and assesses risks Decides on response to risks like implementation of control Monitors and coordinates the risk management processes and the outcomes, Provides assurance on the effectiveness of risk management processes This assurance from the management is fundamental. There is a need for additional assurance from a different source. Internal audit can be the key source providing objective assurance that all the significant risks have been identified, risk management process is working effectively and efficiently, risks are being reported and controls are effective. As part of this work, the internal audit activity will provide advice, coaching and facilitation services to assist executive management in carrying out their responsibilities. This survey will provide an understanding of the internal audit practices and operational effectiveness among different companies in Bangladesh, and will show in which aspects of internal audit are considered to be most important by the companies. This research is also useful because it will provide critical information regarding the extent to which the firms in Bangladesh currently confirm to the International Standards for the Professional Practice of Internal Auditing for the listed firms.

Research objectives:
The primary objective of this research is to confirm the degree of compliance of internal audit practice in the banking sector of Bangladesh. The additional objectives are: To know about the standards of internal audit 3

 To realize the internal auditing practices of various companies To detect the problem faced by the management in the implementation of internal audit in the companies and resolve them on the situation basis. To provide permanent solution for the bias free practice of internal audit of the companies. What kinds of safeguards need to be built to ensure that internal auditing will meet its external governance responsibilities.

Literature Review:
To date, there have only been a limited number of prior reviews of the internal audit literature. Bailey, Gramling and Ramamoorti (2003) edited a monograph published by the IIA Research Foundation on research opportunities in internal auditing. There were two key objectives of this monograph. It was intended, first, to inspire academic research on topics of relevance to internal auditing and, second, to bridge the gap between academics and practitioners. As such, it is a blend of theory and practice, designed to familiarize academic researchers with internal audit practice (Editorial Preface, xi xii). Each chapter of the monograph raises a series of research questions related to a specific topic in internal auditing and we refer to these where relevant. Gramling, Maletta, Schneider and Church (2004) examined the literature and future research opportunities relating to the role of the internal audit function in corporate governance. These authors focused on the relationship between internal audit and the other cornerstones of governance (i.e. external auditors, the audit committee and management). They also evaluated the literature on internal audit quality (including objectivity and independence). However, much of the research cited relates to external auditors evaluations of internal audit quality and on external auditors reliance on the work of internal audit. The authors provide an excellent synthesis of the literature in this area, largely from a North American perspective. Hence, in this paper, we concentrate on research relating directly to internal auditors and the internal audit function, particularly focusing on studies from other parts of the world.

In 2006, the IIA commissioned the 2006 Global Common Body of Knowledge study, engaging researchers from around the world to better understand the expanding scope of internal audit practice (Cooper, Leung and Wong, 2006). An initial phase of this study has resulted in three related literature reviews. Cooper et al. (2006) examined the internal auditing literature in the Asia Pacific region, Hass, Abdolmohammadi and Burnaby (2006) studied the literature from the Americas, while Allegrini, DOnza, Paape, Melville and Sarens (2006) performed a similar review of the European literature. The purpose of these reviews was to document changes in internal audit as a result of shifts in global business practices. Where relevant, we draw on aspects of these studies that relate to internal audit objectivity.

Benefits of the Research:

Internal auditing is a profession and activity involved in helping organizations achieve their stated objectives. It does this by using a systematic methodology for analyzing business processes, procedures and activities with the goal of highlighting organizational problems and recommending solutions. But we dont know about the biasness in the practices of internal audit in our country. This research will help us to understand the true picture of the situation. However, this research will help us to know about the various standards of the internal audit. It will enrich our knowledge about the situation of internal auditing in Bangladesh. At last, this research will help the management of various companies to solve their internal audit related problems which is a large contribution in the corporate world.

Methodology:
There are thirteen categories of listed firms in Bangladesh & these are Banks, Investment, Engineering, and Food and Allied, Fuel and Power, Jute, Textiles, 5

Pharmaceuticals and chemicals, Paper and Packaging, Services, Miscellaneous, Insurance and Debentures. Here, we consider the banking sector as the target population. The firms are selected from the population on the basis of random sampling techniques. The annual reports and various publications of these selected firms shall be examined for understanding the compliance status of the practice of internal audit. We will also take the help of online information.

Data collection:
This research is based on both primary and secondary data. Primary data will be obtained along with a structured questionnaire. The questionnaire will be prepared for the shareholders and CEOs of the firms to collect primary data related to the research topic. Secondary source of data included review of scholarly journals, different websites, text books, working papers etc.

Data Management:
All questionnaires will be manually edited. After collecting the required data from the primary and secondary sources, data will be computerized.

Data Analysis:
The responses to the structured close-ended questions will be rated in percentages. The percentage of respondents for each alternative will be given and analyzed. From the answer papers of the questionnaire, the current status of the practices of internal audit in the company and problems of implementation should be identified. Annual reports and other publications will be also used to find out the rate of compliance.

Timescale:
Activities 1. Planning work Required Days 1 6

2. 3. 4. 5. 6. 7. 8. 9.

Literature review Preparation and finalization of the questionnaire Field interviewing and collection of secondary data Data editing, cleaning and entry Data processing Data analysis Preparation of draft report for key result Finalization of the report

2 1 4 2 1 2 2 1

Budget:
The budget for the preparation of the research paper is made on the basis of current market price. It can be fluctuated or not. But relevance and materiality are maintained in this case. Cost items A. Materials, supplies and computer service: 1. Questionnaire printing 2. Project proposal preparation and printing 2. Paper, pencil, pen and eraser 3. Internet service 4. Report printing 5. Report binding Sub-total B. Conveyance: Sub-total C. Data collection costs: 1. Photocopy 2. Annual report collection costs 3. Literature review Sub-total D. Miscellaneous Sub-total Total estimated costs Amount required (BDT) 100 50 100 100 100 50 500 1000 1000 200 500 300 1000 1200 1200 3700

Limitations:
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There are some limitations in the preparation of this paper. Time constraint is one of the most significant. Besides, we are also in experienced in this type of work. We may also face some formality problem such as the authorities of the companies may not give us their internal information, they may also disagree to respond to our questions. Also not muck work may be done before on this topic.

Appendix:
A: Bibliography
1. The Institute of Internal Auditors (the IIA). (2007), International Standards for the Professional Practice of Internal Auditing. 2. Kagermann, Henning and Kinney, William and Kting, Karlheinz and Weber, Claus-Peter (August 2007), The Internal Auditing Handbook. 3. Staub, Walter A., Auditing Developments During the Present Century(Massachusetts: Harvard University Press, (1942), p.15, 17, 26, 29 4. www.dsebd.org 5. www.scribd.com 6. www.theiia.org