Improving audit planning in financial audit conducted by deloitte vietnam

NATIONAL ECONOMICS UNIVERSITY SCHOOL OF ACCOUNTING AND AUDITING *** BACHELOR THESIS Major: Auditing TOPIC: IMPROVING AUDIT PLANNING IN FINANCIAL AUDIT CONDUCTED BY DELOITTE VIETNAM VU TIEN DAT Hanoi, 2020 TABLE OF CONTENTS Table of contents i Abbreviation iii List of Figures .iv List of Tables v List of illustration vi Introduction CHAPTER 1: CHARACTERISTICS OF AUDIT PLANNING IN FINANCIAL AUDIT CONDUCTED BY DELOITTE VIETNAM .3 1.1 Overview of audit planning in financial audit conducted by DELOITTE VIETNAM .3 1.1.1 Process of financial statements audit 1.1.2 Organization of audit planning .5 1.1.3 The role of audit planning 1.2 Order of planning and designing audit methods in the audit of financial statements at Deloitte 1.2.1 Prepare audit plan and establish overall audit strategy 1.2.2 Establish detailed audit plan 31 CHAPTER 2: PRACTICE OF AUDIT PLANNING IN FINANCIAL AUDIT CONDUCTED BY DELOITTE VIETNAM – AT ABC joint stock company 34 2.1 Introduction of the ABC Joint Stock Company 34 2.2 Prepare audit plan and establish overall audit strategy 35 2.2.1 Assess and respond to risks, decide to accept and continue audit contract 35 2.2.2 Select the engagement team and agree on terms in the audit contract .44 2.2.3.Collect customer information about business operations and the accounting cycle .47 2.2.4 Understand internal control .56 2.2.5 Determine materiality 62 2.2.6 Studying audit reports, inspection results of previous years, considering the use of expert opinions 65 2.2.7 Risk assessments of balances, transactions and disclosures in the financial statements 68 2.2.8 Present an overall audit strategy .75 2.3 Establish detailed audit plan 77 2.3.1 Planning test of controls 78 2.3.2 Planning substantive tests 82 CHAPTER 3: ASSESSMENTS AND RECOMMENDATIONS TO IMPROVE AUDIT PLANNING IN FINANCIAL AUDIT CONDUCTED BY DELOITTE VIETNAM 85 3.1.Assessments on the audit planning in financial audit conducted by Deloitte Vietnam 85 3.1.1 Strengths 85 3.1.2 Limitations and causes 89 3.2 .Recommendations to improve the audit planning in financial audit process conducted by Deloitte Vietnam 91 Conclusion 93 ABBREVIATION CTT Clearly Trivial Threshold DRMS Deloitte Risk Management System D&I Design and Implementation EM Estimating Misstatements EMS Engagement management system EQCR Engagement Quality Control ISA International Standards on Auditing IT Information technology JSC Joint Stock Company M Materiality MEMO Memorandum OE Operational Effectiveness PM Performance Materiality RAWC Risk associated with the control ROMM Risk of material misstatements VSA Vietnamese Standards on Auditing LIST OF FIGURES Figure 1.1: Organizing the audit of financial statements at Deloitte .5 Figure 1.2: Risks classification before signing audit contracts 12 Figure 1.3: List of members participating in the audit contract 13 Figure 2.1: Summary of risks when accepting an ABC JSC audit and how to respond to risks .41 Figure 2.2: Letter to previous year auditor 42 Figure 2.3: Response letter from previous year auditor 43 Figure 2.4: Decision to accept the ABC JSC 2019 audit contract 43 Figure 2.5: Calculation of audit fees ABC JSC 2019 .45 Figure 2.6: Preliminary analytical procedure of items on the financial statements 69 Figure 2.7: Criteria to assess the risk level of material misstatement 70 Figure 2.8: Scale table of sample selection applied for Significant RoMMs 78 Figure 2.9: Example of OE test for sales .81 Figure 3.1: Deloitte Vietnam's audit approach and subphase entries in the audit files 90 LIST OF TABLES Table 1.1 Factors determining risks of audit contracts Table 2.1: Multiple-choice questionnaire about risks of conflicts of interest and information security affecting the independence of auditors 38 Table 2.2: List of members participating in the audit contract ABC JSC 44 Table 2.3: Understanding the internal control environment ABC JSC 57 Table 2.4: Understanding internal control monitoring activities ABC JSC 59 Table 2.5: Calculation of materiality, performance materiality, and clearly trivial threshold .64 Table 2.6: Questionnaire for review audit files 65 Table 2.7: Detail Questions 67 Table 2.8: Annotation of criteria to assess the risk level of material misstatement 71 Table 2.9: Assessing the risk of material misstatement of certain audit sections .72 Table 2.10: Planning of operational effetiveness revenue section 80 Table 2.11: Substantive test planning 83 LIST OF ILLUSTRATION Illustration 2.1: Excerpt of working papers "Assessing the risk of audit contracts at ABC customers for the 2019 audit year" 35 Illustration 2.2: Excerpt of working papers "ABC JSC audit contract for the year of audit 2019" 46 Illustration 2.3: Excerpt of working papers "Understanding the entity and its environment external factors affecting the entity" 48 Illustration 2.4: Excerpts of working papers "Understanding the entity and its environment internal factors affecting the entity" .49 Illustration 2.6: Excerpt of working papers “Accounting policies currently in use at ABC JSC” .53 Illustration 2.7: Excerpt of working papers "Process of revenue cycle at ABC JSC" 56 Illustration 2.8: Excerpt of working papers "Understanding of the entity’s risk assessment process" .58 Illustration 2.9: Excerpts of working papers "Overview of the financial reporting process at ABC JSC" 60 Illustration 2.10: Excerpt of Working Paper “Determining materiality for the financial statements of ABC JSC” 63 Illustration 2.11: Excerpt of working papers “overall audit strategy - Summary content at ABC JSC customers" 75 INTRODUCTION The technological change is taking place at an unprecedented and almost instantaneous scale, which results in a growing focus on data, structured and unstructured, created inside or outside the business This new and huge source of data has led to such dramatic changes in the accounting industry, auditing that auditors increasingly need to adapt to the changing demands of users of audit information on data interpretations In order to successfully complete the task and provide the best professional services, the auditing firms pay attention to the audit planning step - the decisive step to the success of financial auditing reports in particular and other types of audits in general In order to meet the quality needs of the financial reporting audit in the digital age, the planning stage has also made timely changes At Deloitte Vietnam Co., Ltd (hereinafter referred to as "Deloitte Vietnam") - one of the world's leading auditing brands, always captures the trend and pioneers in adapting to all auditing environment changes, thereby developing the most comprehensive and preeminent audit planning method However, the rigor of elements of the audit method at Deloitte Global (hereinafter referred to as "Deloitte") will sometimes be a challenge for specific audits of regional Deloitte companies, because specific audits will need separate and flexible planning methods Within the scope of this internship, I will delve into the most complete analysis of the steps in the financial statement audit planning being applied at Deloitte Vietnam At the same time, from the internship experience at the client company, I would like to make comments and comparisons between the audit planning method agreed on the same at Deloitte Vietnam and the jobs that the auditor at Deloitte Vietnam proceeds in practice Thesis: Improving audit planning in financial audit conducted by Deloitte Vietnam includes three chapters: Chapter 1: Characteristics of audit planning financial audit conducted by Deloitte Vietnam Chapter 2: Practice of audit planning in financial audit conducted by Deloitte Vietnam – at ABC Joint Stock Company Chapter 3: Assessments and recommendations to improve audit planning in financial audit conducted by Deloitte Vietnam I would like to sincerely thank all my colleagues at Deloitte Vietnam, and my instructor PhD Nguyen Thi Lan Anh has accompanied and commented on me to complete this thesis I hope to receive constructive comments from experts and readers Sincerely thank you Hanoi, May 18, 2020 Students, Vu Tien Dat ... vi Introduction CHAPTER 1: CHARACTERISTICS OF AUDIT PLANNING IN FINANCIAL AUDIT CONDUCTED BY DELOITTE VIETNAM .3 1.1 Overview of audit planning in financial audit conducted by DELOITTE. .. conducted by Deloitte Vietnam includes three chapters: Chapter 1: Characteristics of audit planning financial audit conducted by Deloitte Vietnam Chapter 2: Practice of audit planning in financial audit. .. the audit planning method agreed on the same at Deloitte Vietnam and the jobs that the auditor at Deloitte Vietnam proceeds in practice Thesis: Improving audit planning in financial audit conducted