COMPLETION STAGE OF THE FINANCIAL STATEMENTS AUDITS IN AUDITING INFORMATICS SERVICES HO CHI MINH CITY LIMITED COMPANY (AISC) DA NANG BRANCH

COMPLETION STAGE OF THE FINANCIAL STATEMENTS AUDITS IN AUDITING & INFORMATICS SERVICES HO CHI MINH CITY LIMITED COMPANY (AISC) - DA NANG BRANCH INTRODUCTION INDEX APPENDIX REFERENCES Vietnamese Accounting Standard no.18 Provision, Contingent Assets and Liabilities Alvin A Arens, Randal J Elder, Mark S Beasley, Auditing and assurance services (14th edition), 2012 Cornelie Crous, Jana Lamprecht, Aasmund Eilifsen, William Messier, Steven Glover, Douglas Prawitt, Auditing and Assurance Services (1st South African Edition), 2012 International Accounting Standard Vietnamese Standards on Auditing AU Section 341 The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern VAS 23 - Events after balance sheet date (Issued in pursuance of the Minister of Finance Decision No 12/2005/QD-BTC dated 15 February 2005) VAS 18 VSA 230 - Audit Documentation 10 VSA 260 – Communications of audit matters with those charged with governance 11 VSA 560: Events after balance sheet date 12 VSA 570:Going concern 13 VSA 580 14 VSA 700 (Vietnamese Standard on Auditing no.700) 15 VSA 705 – audit opinion that is not opinion accepted wholly Part I: Principles of audit work in completion stage of the financial statement audits An overview of an audit of financial statement 1.1 Definition an audit of financial statements Auditing refers to a systematic and independent examination of books, accounts, documents and vouchers of an organization to ascertain how far the financial statements present a true and fair view of the concern It also attempts to ensure that the books of accounts are properly maintained by the concern as required by law So an audit of financial statement is collecting and evaluating auditor’s audit evidences in order to verify the truth and fairness of the financial statements 1.2 Characteristics of financial statement audits Financial statement is a direct and major object in audit process It has an important role for external user and internal user because it is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions International accounting standard and Vietnamese accounting standard requires that all of enterprise operating in Vietnam must declare financial statement at the balance sheet date The basic financial statements of an enterprise include the balance sheet, income statement, cash flow statement, and footnote However, financial statement is not unique object of auditing To verify and express an opinion, the auditor also gather audit evidences to ensure the trueness and the fairness of accounting information by comparing data with documents (nominal legal, journal,…), voucher (payment order, receipt voucher,…) Subjects of an audit of financial statement are independent auditors, internal auditors or government auditor In reality, independent auditor is the most regular subject participating in the audit Because auditing financial statement is their service and they are normally sufficiently independent to conduct audits that can be relied on by benefits of stakeholder Objects of an audit of financial statement are enterprises, organizations, entities with financial statement, states, private account Based legislation to conduct an audit is Vietnamese standards on auditing and audit rules In addition, there are accounting standards, accounting policy and other documents related to audit Although every audit project is unique, the audit process is similar for most engagements and normally consists of three stages: Planning, Implement, Completion In implementing phase, the auditors will check from generality to details It means they will check following order: financial statement  general  journal  voucher The final phase in the audit process is to evaluate the results of the audit evidence and choose the appropriate audit opinion to issue The auditor’s report is the main product of the audit The audit report communicates the auditor’s findings to the users of the financial statements The audit process 2.1 Planning phase Auditing standards require the auditors must have a plan before performing the audit This is to ensure that the auditors conduct the audit by an effective and efficient manner The plan can help the auditors give suitable attention to important areas of audit, identify and resolve problems in timely manner or facilitate auditor to direct, supervise and review the work of team member… Some procedures performed in this procedure are accepting a new client or confirming the continuance of a current client, understanding the entity and its environment, obtaining an understanding of internal control, assessing the risk of material misstatement, calculating planning materiality, developing a response to assessed risk After performing all these procedures, the auditor can develop the overall audit strategy and the detailed audit plan So the result of the auditor’s planning process is a written plan that sets forth the overall audit strategy and the nature, extent, and timing of the audit If the audit is not properly planned, the auditor may conduct an inefficient audit or issue an incorrect audit report (Crous et al, 2012) 2.2 Implementing phase After the auditor has planned the audit, the auditor needs to accumulate sufficient appropriate evidence to support the opinion issued The auditor gathers evidences by performing audit procedures such as examination of documents, inspection of tangible assets, recalculation, observation, confirmation, inquiry, reperformance, analytical procedures These audit procedures consists of test of controls and substantive procedures Test of controls are performed to test the system because the auditor wants to consider whether controls can be reliable or not If it does, the auditor can rely on it to gather persuasive evidence to support opinion If it does not, the auditor needs to perform substantive procedures to obtain sufficient and appropriate audit evidence to express an audit opinion When performing these procedures, the auditor can perform either manual tests and/or use computer-assisted audit techniques (CAATs) 2.3 Completing phase After completely gather evidence, the audit enters the completion phase In this phase, the auditor evaluates sufficiency and appropriateness of the evidence gathered The next stage is to determine the final materiality figure and to evaluate all misstatements identified The list of identified misstatements is discussed with the client, and the client is given the opportunity to correct some or all of the identified misstatements should they wish to so During the completion phase the auditor also carries out an overall evaluation of the financial statements, an assessment the appropriateness of preparing the financial statements on a going-concern basis as well as identifying possible subsequent events which have not been correctly disclosed in the financial statements, reviewing for contingent liabilities After performing all these procedures, the auditor needs to make a conclusion and formulate an audit opinion Procedures at completion stage of auditing financial statement 3.1 Overview of completing audit process After performing test of control and substantive test, gathering appropriate sufficient evidence, the auditors have base to give opinion about the entity’s financial statement The senior auditor will collects all working paper and audit evidences from member However, to have more evidence to improve and support conclusion of financial statement, the auditor commonly review some contents such as: contingent liabilities and commitments, subsequent events, going concern assumption Then the senior auditor evaluates overall audit results, prepares audit report draft, discusses with client and issues the audit report based on result collected during the audit process Figure 1: Steps of the completion phase 3.2 Audit works in completion phase 3.2.1 Preparing for completion audit a Review for contingent liabilities and commitments  Definition and cause Accounting to Vietnamese Accounting Standard 18 (VAS 18), “A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise; or a present obligation that arises from past events but is not recognized because: It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or the amount of the obligation cannot be measured with sufficient reliability.” In general, enterprise only recognizes a contingent liability if an outflow of resources embodying economic benefits has occurred In case it has occurred, an enterprise shall disclose for each class of contingent liability at the balance sheet date the following: an estimate of contingent liability's financial effect; a sign of the uncertainties relating to the amount or timing of any outflow; and the possibility of any reimbursement If present obligation exists surely and an enterprise can reliably estimate amount, it must recognize a provision at the balance sheet date However if there is uncertainty about present obligation’s existence and amount can not be estimated reliably, the enterprise discloses a contingent liability at the balance sheet date on footnote because it can influence to investor’s economic decision and whether it really exists, it will significantly effect on the enterprise’s financial reality If obligation liability’s likelihood is very low, the enterprise must not disclose it on footnote  Audit procedures: During this last phase of the audit, auditors carry out audit procedures related to contingent liabilities The auditor must judge to evaluate the client‘s appropriate treatment applied because contingent liabilities are potential liabilities that must be disclosed in the client’s footnotes So the auditor must make sure that the disclosure is complete and accurate There are some audit procedures commonly used in order to search for contingent liabilities: • Inquire of management (orally and in writing) about the possibility of unrecorded contingencies Because the management can miss a contingency or does not understand fully about requirement of disclosure contingent liabilities on footnotes so the auditor must be particular in describing the different kinds of • • • • contingencies At the completion of the audit, auditors typically ask management to make a written statement as a part of the letter of representation that it is aware of no undisclosed contingent liabilities Naturally, Intentional failure to contingency’s disclosure can not be detected by inquire of management Review the minutes of directors’ and stockholders’ meetings for evidence of lawsuits or other contingent liabilities or examine audit documentation for any information that may indicate a potential contingency Analyze legal expense for the period under audit and examine invoices and statements from legal counsel for signs of contingent liabilities, especially lawsuits and pending tax assessments Send a letter to each major attorney performing legal services for the client in order to collect information about the status of pending litigation or other contingent liabilities Examine letters of credit in force as of the balance sheet date and obtain a confirmation of the used and unused balances This procedure is examined in more depth shortly Examine letters of credit in force as of the balance sheet date and obtain a confirmation of the used and unused balances After collecting evidence through performing audit procedures, the auditors evaluate which case must be disclosed about contingent liabilities on the footnotes contingent liabilities Contingent liabilities surely exist and The likelihood of contingent Contingent liabilities not surely amount can be reliably estimated liabilities is low exist and amount can not be measured Recognize a provision Non-disclosure the footnote Disclosure on footnote Figure 2: Review of contingent liabilities b Review for subsequent events  Definition Some events and transaction occurred after the balance sheet date and they are called subsequent events They can affect on the fair presentation or disclosure of the current period statement So the auditor must review for subsequent events to detect this effect From beginning with the balance sheet date to ending with the date of the auditor’s report, the auditor is in charge of reviewing for subsequent events Because the date of the auditor’s report is similar to the completion of the important auditing procedures in the client’s office, the subsequent events review should be completed near the end of the audit According to Vietnamese Accounting Standard 23 (VAS 23)-“Events after the balance sheet date are those events, both favourable or unfavourable, that occur between the balance sheet date and the date when the financial statements are authorized for issue.”  Types of subsequent events : There are two types of events according to VAS 23: the first is adjusting events after the balance sheet date: those events that provide evidence of conditions that existed at the balance sheet date and the second is non-adjusting events after the balance sheet date: those events that are indicative of conditions that arose after the balance sheet date Figure 4: review for subsequent events after the balance sheet date Ajusting events Subsequent events Disclosure on footnote Non-adjusting events Non-disclosure on footnote • Subsequent events have a direct effect on the financial statements and require adjustment of the current year’s financial statement amounts Adjusting events: these are events providing additional evidence relating to conditions existing at the balance sheet date: they require adjustments in the financial statement provided that it is material According to Vietnamese Standards on Auditing number 560: events after the balance sheet date (VAS 560), the following are examples of adjusting events after the balance sheet date that require an enterprise to adjust the amounts recognized in its financial statements, or to recognize items that were not previously recognized: - - - The resolution after the balance sheet date of a court case which, because it confirms that an enterprise already had a present obligation at the balance sheet date, requires the enterprise to adjust a provision already recognized, or to recognize a new provision or recognize new receivables or payables; The receipt of information after the balance sheet date indicating that an asset was impaired at the balance sheet date, or that the amount of a previously recognized impairment loss for that asset needs to be adjusted The determination after the balance sheet date of the cost of assets purchased, or the proceeds from assets sold before the balance sheet date; The discovery of fraud or errors that show that the financial statements were incorrect • Subsequent events have no direct effect on the financial statement amounts but for disclosure is required Non adjusting events: are events concerning conditions which arose after the balance sheet date, but which may be of such materiality that their disclosure is required to ensure that the financial statements are not misleading Financial statements are not adjusted with non adjusting events An enterprise does not adjust the amounts recognized in its financial statements for the investments If non-adjusting events after the balance sheet date are material, non-disclosure could influence the economic decisions of users taken on the basis of the financial statements Accordingly, an enterprise should disclose the following information for each material category of nonadjusting event after the balance sheet date: the nature and amount of the event and an estimate of its financial effect, or a statement that such an estimate cannot be made An example of a non-adjusting event after the balance sheet date is: a decline in market value of investments such as capital contributions in join ventures and Investments in Associates between the balance sheet date and the date when the financial statements are authorized for issue; the fall in market value does not normally relate to the condition of the investments at the balance sheet date, but reflects circumstances that have arisen in the following period  Audit procedures: Vietnamese standards on auditing 560 (VSA 560) establishes standards and provides guidance on auditors’ responsibility regarding “subsequent events” occurring: Auditors' responsibility regards "subsequent events" occurring: - Between the period end and the date of the auditor's report - Between the date of the auditors' report and the issue of the financial statements -After the financial statements have been issued To determine whether subsequent events require adjustment in financial statements, the auditor carries out the following audit procedures: Events occurring between the Date of the Financial Statements and the Date of the Auditor’s Report The auditor shall perform audit procedures designed to obtain sufficient appropriate audit evidence that all events occurring between the date of the financial statements and the date of the auditor’s report that require adjustment of, or disclosure in, the financial statements have been identified However the auditor is not expected to perform additional audit procedures on matters to which previously applied audit procedures have provided satisfactory conclusions The procedures to identify subsequent events which may require adjustment of, or disclosure in, the financial statements are performed as near as practicable to the date of the auditor’s report and generally include some or all of the following: - - - - Certain specific procedures are applied to transactions occurring after the balance-sheet date such as the examination of data to assure that proper cutoffs have been made and the examination of data which provide information to aid the auditor in his evaluation of the assets and liabilities as of the balance-sheet date Enquiring and considering the effectiveness of the procedures management has established to ensure that subsequent events are identified Reading minutes of the meetings of members, the board of directors and audit and executive committees held after period end and enquiring about matters discussed at meetings for which minutes are not yet available Reviewing relevant accounting records and reading the entity’s latest available financial information, such as interim financial statements, budgets, cash flow forecasts and other related management reports Making enquires of management as to whether any subsequent events have occurred which might affect the financial statements After performing audit procedure, the audit shall determine whether each such event is appropriately reflect in those financial statements in accordance with the applicable financial report framework The auditor shall request management to provide a written representation in accordance with VSA that all events occurring subsequent to the date of the financial statements and for which the applicable financial reporting framework requires adjustment or disclosure have been adjusted or disclosed Facts which become known to the auditor after the date of the auditor’s report but before the date the financial statements are issued The auditor has no obligation to perform any audit procedures regarding the financial statements after the date of the auditor’s report However, if, after the date of the auditor’s report but before the date the financial statements are issued, a fact productivity, working paper, documentation again after the audit Then they can improve skill and have more experience in the audit Reality audit works in completion stage of the financial statement audits at Auditing & Informatics Services Ho Chi Minh City Limited Company - Da Nang branch To more understand about audit works performed in the Auditing & Informatics Services Ho Chi Minh City Limited Company - Da Nang branch, I will present procedures that branch uses during the completion stage at ABC tourist limited company – old client ABC limited company is as a business system Vietnam Trade Union Tourism Co., Ltd Head offices is on 02 Ong Ich Khiem Street, Hai Chau District, Da Nang city ABC limited company is an old customer of AISC – Da Nang branch Its industry is tourism, hotel, restaurant, hall and other related services XYZ urban environment limited company is in Quang Tri province XYZ company is a new customer of AISC- Da Nang branch XYZ is capable and has enough means of transportation, machines and equipment to meet customers’ requirements and to make contribution to environmental protection and sustainable development 2.1 Preparing for completion audit AISC, Da Nang branch uses the Sample Audit Program (SAP) under decision No 1089/QD-VACPA dated October 2010 of VACPA Chairman to perform an audit The SAP was developed based on Vietnam auditing standards, audit practice experience of international and big audit firms in Vietnam, detailed guidance of VACPA and experience and international and local audit experts This helps branch improve quality of their work and perform efficiently and effectively the audit 2.1.1 Review for contingent liabilities - Audit procedure The auditor performs audit procedures to evaluate whether contingent liabilities require disclosure on the financial statements These procedures are conducted adhering to sample audit program –VACPA so they are the following audit works: Firstly, the auditor inquires management orally and in writing about the possibility of unrecorded contingencies Auditors are especially concerned about certain contingent liabilities: pending litigation for patent infringement, product liability, or other actions; income tax disputes; product warranties; notes receivable discounted; guarantees of obligations of others; unused balances of outstanding letters of credit… Then the auditor will describe the different types of contingencies that may require disclosure to remind management because they can overlook or not understand clearly Then, auditor requires management to make a written statement that it is aware of no undisclosed contingent liabilities After inquiring management, the auditor reviews current and previous years’ internal revenue agent reports for income tax settlements The reports may indicate areas or years in which there are unsettled disagreements If a review has been in progress for a long time, there is an increased likelihood of a tax dispute Additionally, the audit also reviews the minutes of directors’ and stockholders’ meetings for signs of lawsuits or other contingencies and reviews audit documentation for any information that may lead to a potential contingency Then, the auditor will analyze legal expense for the period under audit and review invoices and statements from legal counsel for indications of contingent liabilities The audit also obtains a letter from each major attorney performing legal services for the client as to the status of pending litigation or other contingent liabilities or examine letters of credit in force as of the balance sheet date and obtain a confirmation of the used and unused balances This procedure is examined in more depth shortly These procedures are applied for ABC limited company and other clients They are showed at appendix 1- reviewing for contingent liabilities - Comment In types of audit procedures for reviewing contingent liabilities, the auditor just performs inquiry of management There is no working paper related to other procedures to be saved in audit documentation Although audit works based on the Sample Audit Program, the auditor does not conduct steps showed in working paper at appendix 2.1.2 Review for subsequent events - Audit procedure The auditor performs audit procedures to consider the effect of subsequent events on the financial statements and the auditing reports This is prescribed in Vietnamese Standards on Auditing – VSA 560 – “events after the balance sheet date” To reviewing for subsequent events, the company will use cut-off technique then choose sample of transaction occurred before the balance sheet date and after the balance sheet date to examine cut-off of transaction The branch performs this technique for every client However, depending on the client’s size and auditor’s judgement, the auditor will perform cut-off technique for some items such as the sale and collection cycle, revenue, payment…To illustrate this procedure, the writer will show related working paper of XYZ company, ABC company Cut-off technique for inventory is performed at XYZ company AISC CƠNG TY TNHH XYZ Ngày khóa sổ: 31/12/2014 Nội dung: Cut-off HTK D 152 Ngày 27/2/2015 Tên A Người thực Người soát xét1 Người soát xét Mục tiêu: Đạt đảm bảo hợp lý việc thu, chi tiền ghi nhận kỳ (CSDL: Sự đầy đủ xác) Nguồn gốc số liệu: - Bảng nhập xuất tồn - Hóa đơn bán hàng, biên kiểm kê,… Công việc thực hiện: - Kiểm tra chi tiết xuất kho NVL, thành phẩm trước sau ngày kết thúc niên độ sau: Số phiếu nhập Ngày Diễn giải Số tiền ĐV T Số lượng 527 26/12/20 14 Bông 5,741,394,0 48 KG 72,000 528 28/12/20 14 Sợi 1,579,686,0 80 KG 20,000 529 31/12/20 14 Sợi 1,579,686,0 80 KG 20,000 KG KG 20,000 Chứng từ nhập Loại chứng từ Hóa đơn Tờ khai NK, B/L Tờ khai NK, B/L Ngày chứng từ Ngày thực nhận hàng 26/12/10 26/12/10 26/12/10 28/12/10 28/12/10 31/12/10 01/03/20 11 01/03/20 11 01/03/2011 01/04/2011 Ngày cut-off: 31/12/2010 530 531 03/01/20 15 04/01/20 15 Bơng Sợi 1,579,686,0 80 1,579,686,0 20,000 Hóa đơn Tờ khai NK, B/L 80 532 05/01/20 15 Bông 9,971,105,7 60 KG 132,00 Hóa đơn 01/05/20 11 01/05/2011 The auditor concludes that inventory has been recorded in the correct accounting period and correct dates after choosing sample of transaction and vouching it to invoices and bill of lading Cut-off technique for cash is performed at ABC company The auditor concludes that cash payment, cash collection has been recorded in the correct accounting period and correct dates after choosing sample of transaction and vouching it to vouchers In completion phase, the auditor reviews documents, conclusion of working papers performed cut-off technique Besides, the auditor also inquire of management to consider the effectiveness of the procedures management has established to ensure whether subsequent events have influence to financial statements In addition, the audit combines with other procedures such as reading minutes of the meetings of members, the board of directors and audit and executive committees held after period end and enquiring about matters discussed at meetings for which minutes are not yet available Appendix - Comment: Reviewing for events after balance sheet date is done carefully by the auditor of branch Working paper related to cut-off technique is detailed and complete However, the auditor does not perform other procedures to detect subsequent event in more depth shortly except to inquiring management 2.1.3 Evaluate going concern assumption The auditor of branch evaluates going concern assumption of the entity at least one year after period end When planning and performing audit procedures and in evaluating the results thereof, the auditor and the audit firm should consider the appropriateness of the going concern assumption underlying the preparation of the financial statements The auditor will read VII-“Going concern assumption” on the client’s financial statements Then, the auditor reviews liquidity ratio, key performance indicator, return on asset, return on equity, debt service coverage ratio…to analyze overall on going concern assumption of the entity So the auditor can consider whether there are events or conditions which may cast significant doubt on the entity’s ability to continue as a going concern During the auditing process, the auditor remains alert for evidence of events or conditions which lead to doubt on the entity’s ability to continue as a going concern Then the auditor has discussion with management about these doubt events In the completion phase, the auditor reviews ratio again in analyzing finally financial statement step In ABC company, the auditor conduct to analyze ratio: liquidity ratio, key performance indicator, return on asset, return on equity, debt service coverage ratio and inquiry of management Then the auditor concludes that substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time remains Conclusion for The XYZ company is similar to Appendix Comment Although the auditor analyzes financial ratio and inquiry of management to evaluate going concern, he/she does not have expertise techniques to detect in more depth Contents related to inquiry of management are not showed in audit documentation 2.2 Summary of audit results and communicate with management 2.2.1 Gather audit results of members a Organize working paper of members Based on work assignment established in the planning phase, every auditor will perform their works In general, senior auditor is in charge of work having the most material misstatements and high risk This work helps to divide responsibilities for each member in the audit, to facilitate in checking and monitoring the situation, and avoid duplication in auditing process After auditing accounts and working papers completely, the auditors aggregate their working papers as well as related audit evidence then organize them by appropriate groups It means all documentations of cash and equivalent cash are gathered in one group, inventory account and other accounts are also done like that…In the other way, documentation organization is complied with the Sample Audit Program – VACPA Because the audit firm applies to the Sample Audit Program so working paper of every company is the same Example for documentation organization at ABC company D710 – bảng tổng hợp số liệu tài sản cố định hữu hình, vơ hình, xây dung dở dang D720 – Thơng tin phục vụ thuyết minh báo cáo tài D730 – Chương trình kiểm tốn tài sản cố định, bất động sản đầu tư xây dựng dở dang D742 – Xem xét nguyên tắc, sách kế tốn áp dụng D743 – Kiểm tra phân tích biến động D744 – Kiểm tra đối chiếu bảng tổng hợp loại tài sản cố định, bất động sản đầu tư D745 – Kiểm tra tăng/giảm tài sản cố định, bất động sản đầu tư D746 – Quan sát thực tế kiểm tra tài sản cố định, bất động sản đầu tư xây dựng dở dang D747 – Kiểm tra phương pháp tính khấu hao D748 – Xác định cỡ mẫu chọn tài sản cố định chi phí xây dựng dở dang D749 – Kiểm tra việc ghi nhận chi phí xây dựng dở dang D750 – Rà soát chữ T tổng hợp D75… - Relating audit evidence Comment: Working papers is organized clearly, logically and understandably Working papers mention clearly audit works in detail, name of performed auditors and supervisors, date, name of client, audit firm’s name and conclusion b Evaluate sufficient appropriate evidences In this final evaluation step, senior auditor will review the audit documentation for the entire audit to determine whether all material classes of transactions, accounts and disclosures have been adequately tested in all circumstances of the audit The senior auditor will compare actual audit work with all parts of the audit program, set up in the planning phase, to make sure that the audit work is done accurately completed and documented, and meet to all audit objectives The senior auditor concludes that sufficient appropriate evidence has been accumulated if audit work meets to the audit program and considered problems are identified completely during the auditing process If auditors conclude that sufficient evidence has not been obtained to decide whether the financial statements are fairly presented, the auditor will accumulate additional evidence by performing some audit procedure such as inquiry of management, auditing account, transaction that is doubted or material In case if the auditors perform additional procedures they can not collect more evidence then the auditors will collect management representation letter states that all of the information submitted is accurate, and that all material information has been disclosed to the auditors They use this letter as part of their audit evidence At the ABC company, the auditor concludes that sufficient evidence has obtained to verify the financial statements are fairly presented However, at the XYZ company, in during auditing account, the auditor can not obtain confirmation letter to verify debt of the client’s big customer So the senior auditor mentioned this in manager representation letter Comment: AISC, Da Nang branch is very careful to collect audit evidence during auditing process The audit evidences are saved carefully, completely, logically and understandably However, the evaluation sufficient appropriate evidence is not showed in any documentation c Review audit documentation After completing the audit, the auditor, who is assigned a task of checking documentation, reviews all working paper of the others Because of limiting time, the auditor and the audit firm must this to make sure that all audit works are done completely and accurately Firstly, the auditor will compare account’s working papers to balance sheet to detect whether accounts are missed Then all documentation will be reviewed again by senior auditor At ABC company and XYZ company, the auditors will arrange documentation in group Every auditor will print his/her working papers and audit evidence by himself/herself before saving them in audit file Name of the auditor who performed the auditing account will be showed in related working papers so when comparing to the balance sheet, the auditor can detect whether account is missed Comment: The review audit documentation is an important step so the auditors of AISC – Da Nang branch have performed it thoroughly It helps senior auditor to make more accuracy opinion and conclusion in the audit 2.2.2 Chief of auditor reviews and summarizes audit results During the audit, senior auditor has an important responsibility He/she manages and directs daily activities of more junior auditors assigned to assist the supervising, applies risk and control concepts to scenarios encountered, identifies any potential issues then communicates identified issues with management to ensure any potential concerns are addressed in a timely and effective manner In completion phase, the senior auditor aggregates and examines working papers of junior auditors He/she considers the appropriateness of these documents in aspect such as content, persuasive evidence, source of information, target, relating assertion If he/she found some inappropriate mistakes, the auditor senior will have discussion with the related auditor or request that auditor performs addition audit procedures Then the senior aggregates detectable misstatement, considers extent of misstatement and cause After totaling misstatement, the senior auditor will discuss these problems and solutions with clients At ABC company and XYZ, the senior auditor aggregated and reviewed sufficient appropriate audit evidence After having discussion about misstatements with management, the senior auditor showed them on working paper B410 – aggregation audit results – Appendix Comment: This is an important step and the auditor of the branch has performed audit work thoroughly and clearly 2.2.3 Communication with management During the auditing, the auditors will communicate errors, illegal acts, company policies…with client’s chief account when having question, problems with account This helps the auditor to more understand about method, policies, formula applied in company’s accounting Then the auditor should consider significant matters and communicate them with those charged with governance about the audit result and the fact that an audit of financial statements is not designed to identify all matters that may be relevant to those charged with governance This communication helps management to take appropriate and prompt action The auditor’s communications with management may be made orally or in writing The auditor decide whether to communicate orally or in writing is affected by factors such as the following: the size, operating structure, legal structure, and communications processes of the entity being audited; the nature, sensitivity and significance of the audit matters of governance interest to be communicated; the arrangements made with respect to periodic meetings or reporting of audit matters of governance interest; and the amount of on-going contact and dialogue the auditor has with those charged with governance When audit matters of governance interest are communicated orally, the auditor documents in the working papers the matters communicated and any responses to those matters Steps mentioned above paragraph are also performed at the client’s ABC and XYZ company during the auditing In audit work period at client’s office, the auditors communicate with chief accountant and other accountants about policy, accounting method, unclear and unusual transaction The client’s explanation is understandable and clear or accountant will agree to adjust errors according to the auditor’s opinion In addition, ABC company also sent management representation letter to the branch – Appendix Comment: This step is always performed for every client It is very important because matters communicated need to be unified between the auditors and the management It is basis to give a final conclusion about the audit 2.2.4 Adjusting entries and classification Based on communicating with management, the auditor conducts to set up overall adjusting entries table The data showed on table is accepted by the auditor and the management This is evidence for the auditor to reconcile to the financial statement before issuing an audit report At ABC company, there are some adjusting entries It will be showed at appendix At XYZ company, there is no adjustment 2.2.5 Perform analytical procedure The auditor uses analytical procedures to take a final objective look at the financial statements When performing analytical procedures during the final review stage, the auditor reads balance sheet, cash flow, income statement again and considers unusual or unexpected account balances or relationships that were not previously identified Then the auditor uses ratio to analyze fluctuation of account, revenue, expense…and finds causes and have solutions for the client At both ABC company and XYZ company, the auditor performed analytical procedures to detect unusual account balance, material misstatements by analyzing liquidity ratio, key performance indicator, return on asset, return on equity, debt service coverage ratio…Based on analysis, there is no fraud or misstatement in the financial statement of two company Comment: The AISC – Da Nang branch use analytical procedure as analyzing overall financial statement It is a final assurance to help the auditor to give appropriate opinion 2.3 Issue an audit report 2.3.1 Prepare a trial balance sheet, financial statements and audit report After adjusting entries, the auditor sets up new trial balance sheet Then the senior auditor will prepare financial statements and audit report A balance sheet and income statement are based on adjusted entries, data A cash flow statement is set up direct method or indirect method A footnote is used to provide additional information for several of the account balances, income statement, cash flow statement When audit report and financial statement are done completely, the auditor will review again then send it to the senior auditor The senior auditor checks thoroughly the client’s information, adjusted misstatement, conclusion, opinion If the senior auditor does not detect unusual matter, he/she will send it to the board of directors of AISC The director will review that audit report and requests the senior auditor if he/she determines some maters to be suitable or doubtful The draft of audit report will be sent to the client if the director satisfies with this audit report However, if the director does not confirm this draft, the auditors must gather more evidence and repair the draft and send to the director again Later, the auditor sends a draft of audit report to the client to make sure that the client agrees to information presented in this The client will look over, reconcile with data, examine matters, the financial statements If the client accepts to that audit report, the auditor will issue a formal audit report It the client does not accept and has some matters with information, the auditor and management will discuss together to lead to final conclusion However, the second case rarely occurs At ABC company and XYZ company, working papers and evidence are collect sufficiently and appropriately so drafts of audit report of these companies are confirmed Comment These steps are always performed for every client Because it can be influence to the reputation of the branch and auditor so the auditor is very careful in these steps 2.3.2 Issue audit report After receiving client’s confirmation letter, AISC – Da Nang branch will prepare an audit report An audit report comprises - Cover Index Management letter Audit report A balance sheet An income statement A cash flow statement A footnote An audit report is sent to the client on signed date in engagement Audit repost has as least reports At ABC company and XYZ company, the auditor issues audit report with an unqualified opinion (Appendix 10) 2.4 Store audit file Audit documentation is the record of audit procedures performed, relevant audit evidence obtained, and conclusions the auditor reached It is also called working papers Audit file is one or more folders or other storage media, in physical or electronic form, containing the records that comprise the audit documentation for a specific engagement Permanent audit files include documents and materials containing general information on audit client, serving one or more audits concerning a number of fiscal years of the clients Current audit files include documents and materials containing specific information on an audit client, serving the audit of a single fiscal year The auditor prepares a n d arranges working papers on respective clients and engagements according to the conditions and requirements of the auditor and the audit firm The use of standardized working papers (checklists, specimen letters, standard organization of working papers etc.) may improve the efficiency with which such working papers are prepared and reviewed They facilitate the delegation of work and control over quality The auditor maintains the confidentiality and safe custody of the working papers The auditor retains working papers for a period sufficient to meet the needs of practice and in accordance with legal requirements of records retention and those established by the branch Working papers are arranged and filed in proper and orderly fashion to facilitate the accessibility and reference and gathered at the branch’s archive Audit file are saved to the following order: - Part A – Audit plan Part B – Aggregation, Conclusion and Issue A Audit Report Part C – Test of internal control system Part D – Substantive test of asset Part E – Substantive test of liability Part F – Substantive test of equity and balance sheet accounts Part G – Substantive test of income statement Part H – Test others Every client’s documentations are saved and organized to above order Part III: Evaluation and some ideas to improve the audit in completion stage of the financial statement audits in Auditing & Informatics Services Ho Chi Minh City Limited Company – Da Nang branch Evaluation overall Auditing & Informatics Services Ho Chi Minh City Limited Company – Da Nang branch 1.1 Advantages  Staff  Audit works 1.2 Disadvantages - Staff - Audit works Evaluate audit works in completion stage of the financial statements audit in Auditing & Informatics Services Ho Chi Minh City Limited Company – Da Nang branch 2.1 Advantages 2.2 Disadvantages Some ideas to improve the audit in completion stage of the financial statements audits in Auditing & Informatics Services Ho Chi Minh City Limited Company – Da Nang branch CONCLUSION ... stage of the financial statement audits at Auditing & Informatics Services Ho Chi Minh City Limited Company - Da Nang branch Introduction about Auditing & Informatics Services Ho Chi Minh City Limited. .. improve the audit in completion stage of the financial statement audits in Auditing & Informatics Services Ho Chi Minh City Limited Company – Da Nang branch Evaluation overall Auditing & Informatics. .. Minh City Limited Company - Da Nang branch (AISC) 1.1 Overview of Auditing & Informatics Services Ho Chi Minh City Limited Company (AISC) Auditing and informatics Service Company Limited, abbreviation