The process of auditing fixed assets in financial audit of asean

TABLE OF CONTENT TABLE OF CONTENT ACKNOWLEDGEMENT Error! Bookmark not defined LIST OF ABBREVIATIONS .6 LIST OF FIGURES, TABLES INTRODUCTION Rationale for the research CHAPTER I 10 THEORETICAL FRAMEWORK ON AUDIT FIXED ASSETS IN FINANCIAL AUDITS BY AUDITING FIRMS 10 1.1 Features of Fixed assets cycle 10 1.1.1 Definition and classification of fixed assets 10 1.1.1.1 Classification of fixed assets .10 1.1.1.2 Features of fixed assets management 13 1.1.2 Accounting for fixed assets 14 1.1.3 Internal control over fixed assets in enterprises .21 1.2 Audit objectives in auditing fixed assets 26 1.2.1 Possible misstatements 26 1.2.2 Audit objectives 27 1.3 Sequence in auditing fixed assets in financial audits 28 1.3.1 Audit planning 28 1.3.1.1 Understand the client’s business and industry 29 1.3.1.2 Understanding internal control and assess control risk 31 1.3.1.3 Perform preliminary analytical procedures 31 1.3.1.4 Setting planning materiality 32 1.3.1.5 Developing an overall audit program 33 1.3.2 1.3.2.1 Audit implementation 33 Performing tests of controls in auditing fixed assets 33 1.3.2.2 Performing substantive tests in auditing fixed assets .35 1.3.3 Completing the audit 40 1.3.3.1 Reviewing of audit files and evaluation of misstatements 40 1.3.3.2 Final analytical procedures 41 1.3.3.3 Subsequent events and going concern procedures 42 1.3.3.5 Communicating with those charged with governance and issuing audit report ………………………………………………………………………………43 CHAPTER II .45 PRACTICE OF AUDIT OF FIXED ASSETS IN FINANCIAL AUDITS CONDUCTED BY ASEAN .45 2.1 Clients of ASEAN and the necessity to audit fixed assets in financial audits 45 2.1.1 Nature of operations .45 2.1.2 Accounting policy 46 2.1.2.1 ABC Company Limited 46 2.1.2.2 XYZ Company 48 2.1.3 The necessity to audit fixed assets in financial audits 50 2.2 Sequence in auditing fixed assets in financial audits conducted by ASEAN 51 2.2.1 Audit planning 51 2.2.1.1 Preplan the audit 51 2.2.1.2 Audit planning .52 2.2.1.3 Performing preliminary analytical procedures 61 2.2.1.4 Setting materiality .62 2.2.1.4 Designing audit program 64 2.2.2 Audit implemention 68 2.2.2.1 Tests of control 68 2.2.3 Completing the audit 78 2.2.4 Comparison sequence in auditing fixed assets between ABC Company and XYZ Company conducted by ASEAN Limited 80 CHAPTER III 83 ASSESSMENTS AND RECOMMENDATIONS TO IMPROVE AUDIT OF FIXED ASSETS IN FINANCIAL AUDITS CONDUCTED BY ASEAN 83 3.1 Assessments on audit of fixed assets in financial audits conducted by ASEAN 83 3.1.1 Strengths 83 3.1.1.1 Audit methodology and audit tools .83 3.1.1.2 Audit process 83 3.1.2 Weaknesses 87 3.1.3 Causes 90 3.2 Recommendations and solutions to improve the process of auditing fixed assets in financial audit at ASEAN 91 CONCLUSION 96 LIST OF REFERENCES 98 STATUTORY DECLARATION I herewith formally declare that I have written the submitted Bachelor Thesis independently I did not use any outside support except for the quoted literature, and other sources mentioned at the end of this paper I marked and separately listed all the literature and all other sources which I employed in producing this academic work, either literally or in content Hanoi, April 21, 2018 Pham Hoang Nhat Acknowledgments First and foremost, I would like to thank Master Trinh Tu Ky, the director of ASEAN Limited Company, for giving me the opportunity to intern in the company for two months For me, it helped me to understand much more about essential mindsets, and requirements to become a professional auditor, and to have a determined plan for my future career in this area Equally important, I hope to send my kindest thanks to Mr Trinh Quoc Huy, my “on-job” instructor at ASEAN Limited He shared my experiences, advice, and enthusiastic in not only works but also life Also, the friendliness and kindness of all team members, with whom I did the fieldwork, as well as people that worked in the office of ASEAN Limited, I have experienced great things on both works and friendship Finally, I would like to express my sincerest gratitude to Master Ha Hong Hanh, my respectable teacher in the School of Accounting and Auditing at National Economics University With her enthusiastic, patience, and extreme care, I have been motivated a lot to complete this report Hanoi, April 21, 2018 Pham Hoang Nhat LIST OF ABBREVIATIONS Acc Co., Ltd Account Company Limited DM GAAP Deminimus Materiality Generally Accepted Accounting Principles i.e id est IAS International Accounting Standards IFA Intangible Fixed Assets IT Information Technology SEC TE Securities and Exchange Commission Tolerable Error TFA Tangible Fixed Assets VAS Vietnamese Accounting Standards VAT Value Added Tax VND Vietnamese Dong VSA Vietnamese Standards on Auditing WPS (wps) Working Paper LIST OF FIGURES, TABLES Table 1-1: Document related to fixed asset transactions .15 Figure 1-2 Results of Tests of Controls Error! Bookmark not defined Table 1-3 Management Assertions and Substantive Procedures for Fixed Assets 35 Figure 2-1 Purchasing fixed assets process of the firm 59 Figure 2-2 Preliminary Analytical Procedures at ABC .61 Figure 2-3 Preliminary Analytical Procedures at XYZ .62 Table 2-4 Set materiality of ABC 63 Table 2-5 Set materiality of XYZ 63 Table 2-6 Procedures of Auditing Fixed Assets in Voyager 64 Figure 2-7 WP TFA00: Fixed Assets Memo 69 Figure 2-8 WP TFA01: Fixed Assets Schedule 71 Figure 2-9 WP TFA02: Fixed Assets Addition 72 Figure 2-10 WP TFA 07: Construction in progress 74 Figure 2-11 WP IFA05: Intangible Fixed Assets .76 Figure 2-12 WP TFA09: Cut-off Test 78 INTRODUCTION Rationale for the research In the development of market economies, auditing activity is one of the most crucial parts of business operations and enhancing management quality process of enterprises Business operations and financial situations of companies are great concern of not only authorities, domestic and foreign investors, employers, clients but also owners of corporations Although the purpose of each object is different but they have one similarity: comprehend financial circumstance, reality capacity in business operation of enterprises Relying on auditing results, financial statement users have a subjective point of view which leads to right judgment of business entities results and making judicious decisions Throughout audit, audit firms have delegation to give true and fair opinion on financial situation of clients Due to this, enhancing quality of supplied services and professional reputation, increasing the competitive with other audit firms are missions given for the audit company Fixed asset is basis of matter, is the crucial factor of companies particularly for the production units It reflects the existing production capacity and the level of scientific and technical applications in operations of enterprises Therefore, requirement of management and efficient use of fixed assets is always a top priority goal for enterprises, especially manufacturing companies Fixed asset always contains the risk of material influences to the information on the financial statements It is required that auditors need to have full understanding about the nature of business operation in general and fixed assets in detail for specific enterprises Based on theoretical knowledge had studied at National Economic university and practical experiences gathered at the internship period, I have been aware of the importance of fixed assets and decide to select and study the topic: “The process of auditing fixed assets in financial audit of ASEAN” Objectives of the research The first objective of the essay is to summarize and generalize theoretical framework on audit of fixed assets in the financial audit The next is to clarify the practice of audit process of fixed assets in Ltd ASEAN On this basis, the thesis provides proposals and recommendations to improve the audit of fixed assets in financial audit performed by ASEAN Methods of research Secondary data: With scientific research method, along with the knowledge from the university I have been equipped with the knowledge incorporated in the actual practice Basing on the working papers, audit files and undertaken audit work, I consider and learn about the application of audit procedures to audit fixed assets in auditing financial statements in the company Primary data: I used some common research techniques including comparing and contrast, assessing and evaluating, summarizing information and suggesting recommendations Due to my limited knowledge and experiences in ASEAN’s auditing system, this report cannot avoid errors and shortcomings Thus, I am extremely looking forward to receiving distribution advices from teachers to complete the internship report and collect precious knowledge in this segment The content of my report consists of three chapters: Chapter I: Theoretical framework on audit of fixed assets in financial audits by auditing firms Chapter II: Practice of audit of fixed assets in financial audits conducted by ASEAN Chapter III: Assessments and recommendations to improve audit of fixed assets in financial audits conducted by ASEAN 10 ... of the importance of fixed assets and decide to select and study the topic: ? ?The process of auditing fixed assets in financial audit of ASEAN? ?? Objectives of the research The first objective of. .. consists of three chapters: Chapter I: Theoretical framework on audit of fixed assets in financial audits by auditing firms Chapter II: Practice of audit of fixed assets in financial audits conducted... of the essay is to summarize and generalize theoretical framework on audit of fixed assets in the financial audit The next is to clarify the practice of audit process of fixed assets in Ltd ASEAN