Audit of selling expenses in auditing financial statements conducted by ey vietnam co ltd

NATIONAL ECONOMICS UNIVERSITY EXCELLENT EDUCATIONAL PROGRAMS  BACHELOR THESIS OF SPECIALIZED INTERNSHIP Topic: Audit of selling expenses in auditing financial statements conducted by EY Vietnam Co., Ltd Name Class Student ID Instructor : NGUYEN THI PHUONG LINH : Audit 57A : 11152559 : Assoc Prof, PhD PHAN TRUNG KIEN Hanoi, 2019 Table of Contents LIST OF TABLES INTRODUCTION .2 CHAPTER 1: THE PROCESS OF AUDITING SELLING EXPENSE IN AUDITING FINANCIAL STATEMENTS 1.1 General overview of the selling expense recognition 1.1.1 Classification of selling expense recognition 1.1.2 Method of accounting for several major transactions 1.2 Common misstatement and control relating to selling expenses 1.2.1 Audit objectives of auditing selling expense 1.2.2 Common errors in auditing selling expenses 11 1.3 Auditing selling expenses in auditing financial statement 15 1.3.1 Designing audit program 15 1.3.2 Implementing audit program 26 1.3.3 Completing audit program .30 CHAPTER 2: AUDITING SELLING EXPENSES IN AUDIT OF LPN LIMITED COMPANY’S FINANCIAL STATEMENTS CONDUCTED BY EY VIETNAM LIMITED COMPANY .33 2.1 Designing the audit program of selling expense in the audit of LPN Co., Ltd.’s financial statement 33 2.1.1 Understand client business and obtain information 33 2.1.2 Identify and assess risks 34 2.1.3 Audit plan 38 2.2 Conducting audit program for auditing selling expense in audting LPN’s financial statement 41 2.2.1 Test of control 41 2.2.2 Primary substantive procedures .42 2.3 Completing the audit 54 CHAPTER 3: ASSESSMENTS AND RECOMMENDATION TO COMPLETE THE APPLICATION OF THE SELLING EXPENSES AUDIT PROCESS IN AUDITING FINANCIAL STATEMENTS BY EY VIETNAM CO., LTD .58 3.1 Comment and assessment on current situation of the selling expense audit process at EY Co., Ltd 58 3.1.1 Strengths 58 3.1.2 Weaknesses 62 3.2 Recommendation to complete the application of the selling expense audit process at EY Co., Ltd 64 3.2.1 Designing audit process 64 3.2.2 Conduct an audit .64 3.2.3 Completing an audit 65 3.2.4 Other recommendations 66 CONCLUSION 68 REFERRENCES .70 LIST OF TABLES Table 1.1 Accounting system of selling expense Table 1.2 Combine risk assessments of inherent and control risks into one CRA Table 1.3 The extent of work to be performed at -scope components by category Table 1.4 Audit sampling tools Table 2.1 LPN’s information Table 2.2 Determination of significant Table 2.3 PM-TE setting Table 2.4 Time phases and related due dates Table 2.5 Lead sheet of selling expense section – VC.101 Table 2.6 OARP of selling expense Table 2.7 Reconciliation of books for VCA01 working papers Table 2.8 Determine the approach for each item Table 2.9 Test of unusual selling expense account Table 2.10 Adjusted entries Table 2.11 Effects of uncorrected misstatement to financial statement Table 2.12 LPN’ s Income Statement Diagram 1.1 Overall accounting diagram of selling expense Diagram 1.2 The combination of tests of controls and substantive procedures Diagram 1.3 Group audit strategy Diagram 1.4 Identify risks of material misstatement due to fraud Diagram 1.5 The hierarchy of substantive audit evidence Diagram 2.1 The hierarchy of substantive audit evidence INTRODUCTION The urgency of the topic On the path of integrating national economic, the competition become increasingly fierce in finding markets, seeking clients and providing products and services Facing the current economic situation with many risks, auditing was born and developed as an indispensable objective This is a service activity that creates trust for those interested in the financial information of businesses, making economic decisions, contributing to guiding the accounting profession, improving the quality of management through the process of consulting and completing the internal control system Nowadays, as audit services grow increasingly strong, auditing companies are constantly expanding in scale and diversifying the services provided One of the leading services that auditing companies provide to clients must include financial statement audit services Although selling expenses are only indirect costs for the production process, they are the components that constitute the cost of products, goods and services, which are directly and often generated The risk of determining a taxable income on the income statement of the business Therefore, selling expenses plays a very important role and has certain influence on the audit of financial statements, requiring attention when conducting this item During the internship at EY Vietnam Co., Ltd, I had a chance to learn about the audit process in enterprises, from which I was aware of the importance of selling expense audit in an auditing financial statement After a period of researching, I have completed the graduation thesis with the topic: "Audit of selling expenses in auditing financial statements conducted by EY Vietnam Co., Ltd." 2 Research purpose of the essay The purpose of the research is: • Learn about the status of the applying selling expense audit process in auditing financial statement at EY Vietnam Co., Ltd • Approving the theory and status of the process to provide some solutions to improve and complete quality and efficiency of auditing selling expense in auditing financial statements at EY Vietnam Co., Ltd Subject and scope of the research • Research subjects: Auditing process of selling expense in auditing financial statements • Scope of research: Auditing process of selling expenses in auditing financial statements at EY Vietnam Co., Ltd Structure of the essay In addition to the Introduction, Conclusion, List of abbreviations, List of diagrams, Tables, Appendices and Table of Contents, the content of the thesis consists of three chapters: Chapter 1: The process of auditing selling expense in auditing financial statements at EY Vietnam Co., Ltd Chapter 2: Auditing selling expenses in audit of LPN Co., Ltd.’s financial statements conducted by EY Vietnam Co., Ltd Chapter 3: Assessments and recommendation to complete the audit process of selling expenses in auditing financial statements at EY Vietnam Co., Ltd In the process of researching this topic, I have received the guidance and enthusiastic guidance of the instructor - Associate Professor, Doctor Phan Trung Kien I would like to thank the teacher and would also like to thank the Board of Directors and staff of EY Viet Nam Co., Ltd for facilitating me in the process of practicing and completing this thesis But with limited knowledge, my essay will inevitably be inadequate I look forward to receiving comments from respected teachers to make the essay more complete Thank you sincerely! Student Nguyen Thi Phuong Linh CHAPTER 1: THE PROCESS OF AUDITING SELLING EXPENSE IN AUDITING FINANCIAL STATEMENTS 1.1 General overview of the selling expense recognition 1.1.1 Classification of selling expense recognition According to Cir.200/2014/TT-BTC: “Selling expenses are expenses that actually incurred in process of selling products, goods, providing services, including publicity expenses, demonstration expenses, advertising expenses, sale commission, warranty charges of goods and products (excluding construction activity), maintenance charges, cost of packing, transportation Costs that are not considered as business income tax expense under the provisions of the tax Law but have full invoices and have accounted in accordance with accounting policy shall not be recorded a decrease in accounting costs but only adjusted in final business income tax declaration to increase the business income tax payable Account 641 is opened in detail suitable to contents of expenses, such as pay roll expenses, costs of materials, package, tools, supplies, fixed assets depreciation, characteristic, management demand of every industry, every business that account 641 can have additional items of expenses At end of period, transferring selling expenses to Dr 911 - Income Summary”i Selling expenses have types: “- Payroll expenses: recording accounts payables to sales personnel, package personnel, transportation and maintenance personnel of products, goods, including salaries, intershift meal expenses, wages and appropriation of social insurance, medical insurance and labor union fees, unemployment insurance - Costs of materials, package: recording costs of materials and package delivered for protection, consumption of products, goods, services, such as costs of package materials of products, goods, costs of materials, fuels used for protecting, loading, transporting products, goods used for repairing, maintenance of fixed assets, used for sales department - Costs of tools, supplies: recording instruments, tools served for consumption process of products, goods, such as measurement tools, computing devices, working facilities - Depreciation cost of Fixed assets: recording depreciation expenses of fixed assets in maintenance department, sales department, such as warehouse, stores, quays, loading and transportation facilities, computing and measurement tools, quality verification, - Costs of warranty: used to record cost of product and goods warranty Especially, repairing and warranty expenses of construction work are recorded at account 627 Factory Overhead Expenses, and not recorded at this account - Costs of outsourcing services: recording costs of outsourcing services for selling products, such as outsourcing costs for repairing fixed assets used directly for selling department, warehouse rent, quay rent, loading and transportation expenses for sales, commission for sales agency, for exporting consignee - Other cash expenses: recording other cash expenses incurred is sales operation in addition to above mentioned expenses, such as expenses of entertainment in sales department, demonstration expenses of products and goods, offering expenses, expenses of client conference.”ii 1.1.2 Method of accounting for several major transactions ❖ Accounting system: Under the current accounting regime, account 641 is divided into the following subaccounts: Table 1.1: Accounting system of selling expense Account 641 6411 6412 6413 6414 6415 6417 6418 Name Selling expenses Payroll expenses Costs of material, package Costs of tools, supplies Depreciation costs of Fixed assets Costs of warranty Costs of outsourcing services Other cast expenses ❖ Accounting voucher - Vouchers related to money: Receipts, payment vouchers, debit notices, credit notices, written certifications, accompanying decisions - Documents related to prepaid expense allocation: Cost allocation policy, spreadsheet spread sheet, other vouchers related to cost formation - Vouchers related to inventory: Import-export bills, purchase lists - Documents related to fixed assets: Documents and procurement decisions related to the formation of fixed assets, spreadsheet of depreciation allocation, handover minutes, records of liquidation of fixed assets - Documents related to employee salaries: timesheets, payroll tables and salary deductions, ... efficiency of auditing selling expense in auditing financial statements at EY Vietnam Co. , Ltd Subject and scope of the research • Research subjects: Auditing process of selling expense in auditing financial. .. expense in auditing financial statements at EY Vietnam Co. , Ltd Chapter 2: Auditing selling expenses in audit of LPN Co. , Ltd. ’s financial statements conducted by EY Vietnam Co. , Ltd Chapter 3:... and control relating to selling expenses 1.2.1 Audit objectives of auditing selling expense 1.2.2 Common errors in auditing selling expenses 11 1.3 Auditing selling expenses