Completing the process of auditing the receivable items and revenue at TV audit and consulting company limited

SUMMARY Receivable and Revenue audit are indispensable activities of the business when auditing financial statements Because those items are spone to frauds and errors that can have a significant impact on the financial situation of enterprises During the internship at TV Audit and Consulting Company limited the writer recognized the importance of those items in Auditing Financial Statement Therefore, the writer has chosen the topic “Completing the process of auditing the receivable items and Revenue at TV Audit and Consulting Company limited” for the graduation thesis In this thesis, the writer will go from Chapter to introduce about TV Audit and Consulting Company limited Chapter Theoretical basis for receivables and Revenue auditing in auditing financial statements Chapter3 Receivables and Revenue audit process status at TV Audit And Consulting Company Limited Evidence of actual auditing at ABC Company Since then chapter Proposing a solution for completing the audit process of receivables and Revenue at TV Audit And Consulting Company Limited vi Contents LIST OF IMAGES x LIST OF DIAGRAMS xi LIST OF TABLES xii REFERENCES xiii PART 1: INTRODUCTION CHAPTER 1: INTRODUCTION ABOUT TV AUDIT AND CONSULTING COMPANY LIMITED 1.1 Introduction about TV Audit and Consulting Company limited 1.2 History and development of TV Audit and Consulting Company limited 1.3 Principles, objectives, operating directions of TV Audit and Consulting Company limited 1.3.1 Principles of operation of the company 1.3.2 TV's corporate goals 1.3.3 The direction of TV company 1.4 The services the company provides 1.4.1 Auditing service 1.4.2 Accounting services 1.4.3 Consulting service 1.5 Management organizational characteristics of the Company 1.5.1 Management apparatus diagram of the company 1.5.2 Functions and duties of each department 1.6 Organization of accounting at the company 1.6.1 Accounting apparatus structure of the company 1.6.2 Accounting bookkeeping form 1.6.3 Accounting method that the company use 1.6.4 Accounting standards 1.6.5 Accounting policies applied at the company vii 1.6.6 Advantages, disadvantages and direction of development 1.7 Auditing process at TV company 10 1.7.1 Prepare the audit 12 1.7.2 Conduct audits 16 CHAPTER THEORETICAL BASIS OF THE AUDITING PROCESS ON REVENUE AND CUSTOMERS RECEIVABLES 20 2.1 General revenue issues 20 2.1.1 Concept 20 2.1.2 Characteristics of Revenue 20 2.1.3 Revenue recognition principles 21 2.1.4 Audit Objectives of Revenue 22 2.1.5 Revenue accounting principles 22 2.1.6 Common risks in revenue audit 23 2.2 General problems about customer receivables 24 2.2.1 Concept 24 2.2.2 Characteristics and position of the receivable on the financial statements 24 2.2.3 Receivable accounting principles 24 2.2.4 Audit Objectives of receivable 26 2.3 Internal control with revenue and customer receivables 26 2.4 The process of auditing revenue and receivable items 29 2.4.1 Researching and evaluating the internal control system 29 2.4.2 Perform basic tests 32 CHAPTER AUDIT PROCESS ON SALES AND LIABILITIES ITEMS OF TV AUDIT AND CONSULTING COMPANY LIMITED AT CK&A CONSULTANCY INTERNATIONAL (VIETNAM) CO., LTD 39 3.1 General introduction about customers 39 3.1.1 The company's information 39 3.1.2 Accounting standards and accounting system 39 viii 3.2 Audit preparation period for CK&A Consultancy International (VietNam) Co.,LTD 45 3.2.1 Customer acceptance review 45 3.2.2 Understanding customers and operating environments 47 3.2.3 Understanding and evaluating the internal control system 47 3.2.4 Preliminary analysis of financial statements 48 3.2.5 3.3 Establish materiality 50 Company ABC audit implementation phase 51 3.3.1 Design and conduct control tests 51 3.3.2 Basic testing 53 3.3.2.2 Test details 55 3.4 Company ABC audit completion phase 58 CHAPTER PROPOSING A SOLUTION FOR COMPLETING THE AUDIT PROCESS OF Receivable And Revenue AT TV AUDIT AND CONSULTING COMPANY LIMITED 60 4.1 Comments 60 4.1.1 General comments about the company 60 4.1.2 Comment on the audit process of Accounts receivable and revenue items in financial statement 62 4.2 Recommendation 63 ix LIST OF IMAGES CONTENT No PAGE Image 3.1 Unaudited income statement for 2019 56 Image 3.2 Audited income statement for 2018 56 Procedure for comparing the balance of this year to the 57 Image 3.3 Image 3.4 Image 3.5 Image 3.6 previous year Changes in COGS by Month 59 Comparing the balance this year to the previous year of the 60 receivables Compare the revenue on the declaration with the revenue 60 bookkeeping Image 3.7 Checking revenue deduction 61 Image 3.8 Cut-off procedure 61 Image3.9 Summary table of customer debt 65 x LIST OF DIAGRAMS No Diagram1.1 Diagram1.2 CONTENT PAGE Management apparatus diagram of the company Auditing process of financial statements of the branch of the 11 company Diagram 2.1 511 account accounting diagrams 12 Diagram 2.2 113 account accounting diagrams 15 xi LIST OF TABLES No CONTENT PAGE Table 1.1 Risk matrix 15 Table 2.1 Questionnaire about the internal control system for 29 receivables Table 3.1 Matters to consider for contract risk assessment 45 Table 3.2 BALANCE SHEET of ABC Company 49 Table 3.3 Report on business results of company ABC 50 Table 3.4 Assessment of ABC company materiality 53 Table 3.5 Questionnaire of the control test interview at ABC Company 54 xii REFERENCES [1] Tài liệu “Những Chuẩn m c nguyên tắc ạo kiểm toán quốc tế”,1992 [2] Giáo trình “ Kiểm tốn tài chính”, 2006 – GS.TS Nguyễn Quang Quynh – TS Ngơ Trí Tuệ - Trường Đại học Kinh tế quốc dân [3] Giáo trình “Kiểm tốn tài chính”, 2012 – Trường Đại học Kinh tế thành phố Hồ Chí Minh [4] Chuẩn m c kiểm toán Việt Nam ban hành theo Quyết ịnh số 219/2000/QĐBTC ngày 29/12/2000 Bộ trưởng Bộ Tài [5] The Financial Statement of ABC Company xiii PART 1: INTRODUCTION Reason for researching Due to the development of the economy, the number of customers who come to auditing companies is increasingly diversified with different purposes: audit before equitization, audit before dissolution, bankruptcy, wax import makes the number of users of auditor’s financial reports greatly increased Audit reports have far-reaching effects on socio-economic life To issue an auditor's financial report, the auditor must perform an audit of many different cycles and items In which, the receivables and Revenue often arise in large volume, affecting many items on the financial Statement Revenue and receivables have a great influence on the financial statements, it determines the profit / loss of a business Receivables are often overlooked, causing money to be lost to businesses Therefore, a careful examination of accounts receivable is very important Recognizing the importance of receivables and Revenue items in the audit process, during the internship, I decided to choose the topic: “Completing the process of auditing the receivable items and Revenue at TV Audit and Consulting Company limited” for implementation and reporting during this final internship Research objectives - Researching about the Audit process of receivables and Revenue items of TV Audit and Consulting Company limited, evaluate the advantages and disadvantages, and contribute ideas to improvement and develop this process - Finding out how TV Audit and Consulting Company limited performs an audit of receivables and Revenue for clients - From the theoretical and practical knowledge learned, analyze the positives and unavoidable limitations of the receivables and Revenue audit process - Proposing some solutions to improve the process of auditing receivables and Revenue research subjects My research object is the theoretical and actual receivables and Revenue audit process that is being applied at TV Audit and Consulting Company limited Research scope - Space: Receivable and revenue - Time: Financial Statement of 2019 Research Methods - Interview method: The interviewee is the auditor at TV Audit and Consulting Company limited The contents of the interview are questions related to auditing financial statements in general and in detail, in detail about the methods of collecting audit evidence - Document research methods: Collect information on books, textbooks, dissertations, Internet, audit journals - Observation method: Going to the company, observing the working process, the process of performing a real audit of the auditors at the company Thesis structure This thesis consists of main parts - Part 1: HEADING In this section will present the reasons for choosing the topic and the goal that the topic wants to aim at, and at the same time present the methods used to complete the research as well as the scope of implementation of the research - Part 2: RESEARCH CONTENT AND RESULTS This section consists of chapters + Chapter1: Introduction About TV Audit And Consulting Company Limited + Chapter2: Theoretical basis for receivables and Revenue auditing in auditing financial statements + Chapter 3: Receivables and Revenue audit process status at TV Audit And Consulting Company Limited +Chapter 4: Proposing a solution for completing the audit process of receivables and Revenue at TV Audit And Consulting Company Limited - Part 3: CONCLUSIONS AND RECOMMENDATIONS Summarize and evaluate the points of the study that have been done and not yet done against the set objectives CHAPTER PROPOSING A SOLUTION FOR COMPLETING THE AUDIT PROCESS OF RECEIVABLE AND REVENUE AT TV AUDIT AND CONSULTING COMPANY LIMITED 4.1 Comments 4.1.1 General comments about the company  About company After learning about the Debt and Revenue audit process from the first steps such as getting to know customers until performing the audit and issuing audit reports, we have shown an overview of the work Auditing at an independent audit company From the knowledge I have learned and participated in the specific actual audit, I find that the real work saves a lot of time compared to the work if done according to theory, and still ensures reliability through rigorous analytical procedures and the auditors' experience and judgment TV audit and consulting company limited always promotes strengths and advantages to bring the company to solid development Besides, the company does not deny the remaining limitations in the company, the company has gradually overcome the limitations in order to increasingly provide customers with the best services TV audit and consulting company limited has developed a fairly rigorous, complete, and specific revenue reporting audit program The process has met the requirements for quality, determining the level of risk, materiality for the entire financial report and for each item Auditing work always complies with the current Vietnamese accounting standards and regimes The auditor performs parallel between control and basic testing in order to be flexible and proactive in adjusting sample size and scope of detailed testing Hence, save money, time and not have to gather too much unnecessary evidence  About the audit process The audit process is performed according to the sample audit program of the Vietnam Association of practicing auditors That is why the company's audit process is highly systematic and unified throughout the company It's easy to do, and it's good for 60 the superiors to see the work of their subordinates In the audit process for each individual customer, individual item, the auditor used flexibly, not necessarily comply with the program All work is completely done according to the sample audit program to help everyone in the company easily access and complete the work on time Besides, there still exist some points in the company's audit process and procedures The audit program designs many audit procedures However, due to the time and cost issues, most auditors not perform most of the procedures, so there are some risks And below are typical some outstanding points that need to be overcome to improve audit efficiency  Audit preparation stage: Learning the business lines of customers has not been fully implemented And finding out the macroeconomic issues that affect the business that we are checking is a lot of attention mainly based on each individual's understanding and then applying in practice without having documents chemical This will create a lot of risks in customer acceptance Almost all of the work done in this period is done mainly based on knowledge without a clear system for evaluation as well as a basis Although there are regulations in the company, in practice it has not been implemented completely Researching the internal control system has not been fully implemented due to time and cost issues for each customer Besides, the company has not designed an audit program for each specific customer group to facilitate working, but apply a common program for all customers  Implementation stage The selection of audit samples in the audit process is also based mainly on the professional judgment and experience of the auditor, so it can lead to the risk of choosing a sample that is not representative of the whole and is more emotional 61 Understanding the internal control system as a basis for the implementation of control tests in order to minimize the performance of the basic test with high efficiency has not been focused This is an issue that needs to be addressed not only At TV auditing firm, but the majority of small and medium auditing firms often skip this stage Due to the time issue and many other reasons besides that, the company often applies a common audit process for all customers without building an audit program for each specific customer This can sometimes take longer for idiosyncratic customers if we don't have a separate process 4.1.2 Comment on the audit process of Accounts receivable and revenue items in financial statement  Audit preparation stage: Advantage: TV alternately changes the audit group for old customers The synthesis process of the Debt and Revenue audit program is done quickly and completely Disadvantage: Units are cautious in disclosing information as well as coordinating with auditors Due to time limitations, the collection of information from third parties and the limited indexes with enterprises in the same industry Many preliminary checks can be omitted  Implementation stage Advantage: The procedure for comparing the current year's sales compared to the previous year helps the auditor to detect abnormal fluctuations and find out the cause List sales by return and compare accounting sales to find the difference quickly The comparison of revenue data between the ledger and the tax report helps auditors detect data deviations The detailed inspection of 100% of revenue helps the auditor to minimize the risk of detection Checking documents before and after the end date should help detect cases of incorrectly recording revenue 62 Disadvantage: Spend a lot of time checking in detail the 100% of the revenue generated Checking many documents leads to forgetting to pay attention to the validity information of the invoice  The final stage of the audit TV usually performs mid-year audits to check, limit the case of high year-end sales and record a decrease at the beginning of the next year 4.2 Recommendation Currently, Many Companies in Vietnam have established their Audit Program and applied them to different companies based on the sample audit program of the Ministry of Financial So, Companies should establish separate audit programs for companies depending on industry group, type of activity, size, or group of related sectors For example, a business in the trade and service industry, the proportion of fixed assets in total assets will be lower than enterprises operating in the manufacturing sector Because when we applied only one method for all customer it’s not completely correct The company needs to organize a process of evaluating and reviewing the results of the sampling work and the possible sampling risks to give auditors a chance to look back on what they have done to learn from experience and evaluate the costeffectiveness of the sampling method used to gain better understanding of that method By holding monthly meetings, coming up with limitations, shortcomings, and how to fix them The company should strengthen to learn and evaluate the internal control system: At familiar customers, the auditor should not only rely on the evaluation results from the audit last year, but should learn more about the internal control system by themselves customers because there may be important changes in the five customers that affect the internal control system For new customers, auditors need to visit, learn, and interview customer management to understand the internal control system When learning about the internal control systems of customers, the auditor needs to be aware that, no matter how perfectly designed, each internal control system cannot prevent or detect any possible mistakes, which are the inherent limitations of the internal control systems Therefore, before describing the internal control system for the sales 63 collection cycle, the company also needs to learn about the accounting policies applied in this cycle The company should update and organize training in the application of software to the audit The data processing by software will help the auditor to perform faster and with high accuracy, and improve the auditing profession Currently, on the market there are many good audit management softwares such as CAATTs, AS2, ALC, companies can refer and use it to improve quality as well as archive audit records 64 APPENDIX Appendix Y E S PART1 N O N / A The events of the current year Auditing firms have sufficient personnel with professional qualifications, experience and necessary resources to continue serving the Client Are there any doubts that arise in the working process regarding the integrity of the Board of Directors of enterprises? Does the audit report on the previous year's financial statements have "an audit opinion is not a fully accepted opinion"? Is there any indication that a repetition of the problem led to such an audit opinion this year? Are there any restrictions on the scope of the audit that lead to the exclusion / refusal of an opinion on this year's auditor's report? Are there big doubts about the ability of businesses to operate continuously? Are there adverse issues, lawsuits, unusual disputes, and significant risks to the business activities of the company? 65 Are there many important transactions with related parties? Is there any unusual transaction during the year or at the end of the year? Does the company have controversial accounting or professional issues, but the current accounting standards and regimes not have specific instructions? During the audit process of the previous year, did the audit find serious defects in the internal control system of the enterprise? There are signs that the internal control system of enterprises this year has serious defects affecting the compliance with the law, the fairness of the financial statements? Appendix CRITERIA Criteria estimate used to materiality Before auditing After Aditing Total net profit before tax: 5% - 10% 13,157,167,469 13,157,167,469 Last year 13,758,435,4 12 66 Revenue: 0,5% - 3% 26,261,800,000 26,261, 800,000 25,963,124,2 53 Total assets: 2% 41,126,996,199 40,268,412,1 25 41,126,996,199 Overall materiality level Selecti Before on rate auditing Total net profit before tax: 5% 10% Revenue : 0,5% - 3% After Auditing 7% 921,001,722 921,001,72 Materia lity level of 963,090,4 78 2% 525,236,00 525,236,000 Total assets &Equity: 2% Last year 519,262,4 85 2% 822,539,924 822,539,92 70% Before auditing After auditing 805,368,24 Last year 67 implementa tion Total net profit before tax: 644,701,2 05 5% 10% Revenue : 0,5% - 3% Total assets &Equity: 2% Smallest value in the criteria Materiality selected Total assets &Equity: 2% 644,701,205 is 674,163,33 367,665,200 367,665,200 363,483,739 575,777,946 575,777,946 563,757,769 367,665,200 367,665,200 363,483,739 Before Auditing After auditing Last year 575,777,946 575,777,946 563,757,769 68 Appendix Appendix 69 Appendix 70 CONSULTANCY INTERNATIONAL (VIETNAM) CO., LTD 31 Phan Boi Chau Street, Ward 14, Binh Thanh District, HCMC Audited Financial statements For the fiscal year ended as at 31/12/2019 REPORT OF THE BOARD OF MANAGEMENT The Board of Management of CK&A CONSULTANCY INTERNATIONAL (VIETNAM) CO., LTD (the “Company”) presents their reports and the Company's Audited Financial statements for the fiscal year ended as at 31/12/2019 I THE COMPANY Form of ownership CK&A Consultancy International (Vietnam) Co., Ltd is the company established in Vietnam in accordance with Investment Certificate No 411022000110, the first time dated 04 September 2007 and the sixth amended dated 10 July 2018 issued by The People's Committee of Ho Chi Minh City The company is located at 31 Phan Boi Chau Street, Ward 14, Binh Thanh District, HCM City, Vietnam The legal capital in Investment Lisence is 800,000,000 VND equivalent 50,000 USD Shareholders MR CHIN KAM MR MAI DUC BAO Total Value % 400,000,000 50 400,000,000 800,000,000 50 100 Business fields Architectural and Engineering Business lines - Principal activities of the Company are Engineering services (CPC 8672); Urban planning and landscape architectural services (CPC 8674) II OPERATING RESULTS Operating results of the Company and the financial situation at the date of 31/12/2019 are presented in the accompanying audited financial statements III EVENTS SINCE THE BALANCE SHEET DATE - IV THE BOARD OF MANAGEMENT AND GENERAL DIRECTOR, CHIEF ACCOUNTANT AND LEGAL REPRESENTATIVE Mr General 71 Mr V Director Vice General Director AUDITOR The auditors of TV - AICA Auditing and Consulting Company Limited take the audit of financial statements for the Company VI STATEMENT OF THE BOARD OF MANAGEMENT RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS Management is responsible for the financial statement of each financial year which give a true and fair view of the state of affairs of the Company and of its results and its cash flows for the fiscal year ended as at 31/12/2019 In preparing those financial statement, management is required to: - State whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; - Select suitable accounting policies and then apply them consistently; - Make judgments and estimates that are reasonable and prudent; - Prepare the financial statements on the basis of compliance with accounting standards and system and other related regulations; - Prepare the financial statements on going concern basis Management is responsible for ensuring that proper accounting records are kept which disclosed, with reasonable accuracy at any time, the financial position of Company and to ensure that the accounting records comply with the registered accounting system It is responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities We, the Board of Management, confirm that the financial statements for the fiscal year ended as at 31/12/2019, its operation results and cash flows in the for the fiscal year ended as at 31/12/2019 of Company accordance with the Vietnamese Accounting System and comply with relevant statutory requirements VII APPROVAL OF FINANCIAL STATEMENTS We, the Board of Management of CK&A CONSULTANCY INTERNATIONAL (VIETNAM) CO., LTD approve our Financial Statements for the fiscal year ended as at 31/12/2019 HCMC, 10 January 2020 Vice General Director 72 Mai Duc Bao (Delegation of Power No 01-QĐ/CK dated 04 September 2010) APPENDIX No : TC /2019/BCKT- INDEPENDENT AUDITOR’S REPORT To: The owner, Chairman and General Director of CK&A CONSULTANCY INTERNATIONAL (VIETNAM) CO., LTD We have audited the financial statement of CK&A CONSULTANCY INTERNATIONAL (VIETNAM) CO., LTD, prepared on 10/01/2020, as set out on pages 06 to 22, which comprise the Balance Sheet as at 31/12/2019, the Statement of Income, Cash Flows and Notes to Financial Statement for the fiscal year 2019, ended at 31/12/2019 Management’s responsibility Management is responsible for the preparation and fair presentation of these financial statements in accordance with Vietnamese Accounting Standards, Vietnamese Accounting System for Enterprises and the relevant statutory requirements applicable to financial reporting, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit We conducted our audit in accordance with Vietnamese Audit Standards Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statement are free from material misstakement An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion 73 Audit opinion In our opinion, the financial statements give a true and fair view, in all material respects, the financial position of CK&A CONSULTANCY INTERNATIONAL (VIETNAM) CO., LTD as at 31/12/2019, of its results and cash flows for the fiscal year 2018, ended as at 31/12/2019, in accordance with Vietnamese Accounting Standards, the Vietnamese Accounting System for Enterprise and the relevant statutory requirements applicable to financial reporting Ho Chi Minh City, 21 March 2020 TV - AICA Auditing and Consulting Co., Ltd Director Auditor Nguyen Van Hanh Vo Duy Linh Practising Auditor Registration Certificate no.: 0831-2018-187-1 Practising Auditor Registration Certificate no.: 0168-2018-187-1 74 ... ABOUT TV AUDIT AND CONSULTING COMPANY LIMITED 1.1 Introduction about TV Audit and Consulting Company limited Company? ??s name: TV AUDIT AND CONSULTING COMPANY LIMITED Abbreviation name: TV – AICA Auditing. .. Recognizing the importance of receivables and Revenue items in the audit process, during the internship, I decided to choose the topic: ? ?Completing the process of auditing the receivable items and Revenue. .. Completing the audit  Synthesize the audit results of the operations Based on the work steps performed, Auditor of TV synthesized the audit results Before finishing the audit at the client company office,