Complete the audit planning of financial statements audit

Dr Nguyễn Thị Mỹ Auditing Project TABLE OF CONTENTS INTRODUCTION 3 LIST OF DIAGRAMS 4 CHAPTER 1 THE THEORETICAL OF PLANNING THE AUDIT OF FINANCIAL STATEMENTS 5 1 1 Overview of financial audit 5 1 1 1[.]

Dr Nguyễn Thị Mỹ Auditing Project TABLE OF CONTENTS INTRODUCTION LIST OF DIAGRAMS .4 CHAPTER 1: THE THEORETICAL OF PLANNING THE AUDIT OF FINANCIAL STATEMENTS 1.1 Overview of financial audit 1.1.1 Concepts, common statement and objectives of financial statement audit 1.1.2 Audit methods in financial statement audit .6 1.1.3 The order in financial statement audit 1.2 Planning the audit in financial statement audit .8 1.2.1 Roles and the order of planning audit .8 1.2.2 Strategic planning 1.2.3 Overall planning 10 1.2.4 Establish the audit program 22 CHAPTER 2: ANALYZING CURRENT OF PLANNING OF FINANCIAL STATEMENT AUDIT 26 2.1 Overview of FSA in Vietnam 25 2.2 Current of planning the … 25 CHAPTER 3: SOLUTIONS TO IMPROVE THE QUALITY IN PLANNING OF FINANCIAL STATEMENT AUDIT 26 3.1 Overall assessments .26 3.1.1 Advantages 26 3.1.2 Disadvantages 27 3.2 Solution to improve the quality in planning of financial statement audit .28 3.2.1 The small audit firms should focus more on assessing customer acceptance and understanding of customers 28 3.2.2 Improving the quality of staffs 28 3.2.3 Completing the planning stages overall 28 3.2.4 Completing the analytical procedures 29 Trương Đức Huy High Quality Auditing 55 Page Dr Nguyễn Thị Mỹ Auditing Project CONCLUSIONS 32 REFERENCES 33 Trương Đức Huy High Quality Auditing 55 Page Dr Nguyễn Thị Mỹ Auditing Project INTRODUCTION Auditing activity is an independent operation, in the process of the audit, auditors should always respect the principles of honesty, objectivity, legal compliance and professional standards Therefore, all activities of the audit should be institutionalized promised by the legal documents or be legally recognized Any public audits are carried out according to unity procedures in which audit plan is the first step of the audit process Audit plan including job content audited by the method of audit in accordance with the cost of material, time and number of auditors needed Correct audit plan is the basis for auditor collecting evidence valuable contribution to make accurate comments on the status of audit activities, maintain and enhance the reputation audit company image for customers Therefore, the study of theoretical and practical understanding of planning the audit to find out the existing problems and offer ways to overcome is a necessity Foreseeing this problem, I chose the subject of the project was the subject: "Complete The audit planning of financial statements audit" In addition to the foreword and conclusion, the scheme consists of three chapters: Chapter 1: The theoretical of planning the audit of financial statements Chapter 2: Analyzing current of planning of financial statement audit Chapter 3: Solutions to improve the quality in planning of financial statement audit Trương Đức Huy High Quality Auditing 55 Page Dr Nguyễn Thị Mỹ Auditing Project LIST OF DIAGRAMS Diagram 1: The steps of the process of planning the audit of financial statements 11 Diagram 2: The relationship risk………………………………………….21 Trương Đức Huy High Quality Auditing 55 between audit Page Dr Nguyễn Thị Mỹ Auditing Project CHAPTER 1: THE THEORETICAL OF PLANNING THE AUDIT OF FINANCIAL STATEMENTS 1.1 Overview of financial audit 1.1.1 Concepts, common statement and objectives of financial statement audit Financial audit is the most characteristic activities of audit and audit system in general As defined by the International Federation of Accountants (IFAC) "Auditing is the independent auditors examine and present their opinion on the financial statements" And in view of modern auditing is wider: "Auditing is verified and expressed opinions on the status of activities to be audited by the system engineering method of auditing documents and auditing documents outside issued by the auditors have adequate professional qualifications made on the basis of the legal system in effect" Financial audits contained sufficient "shades audit" since its inception as well as in the development process The basic features of the financial audit is derived from the audited financial objects and relations from the subject - object auditing The financial audit is unique within the general statement of the audit objectives, functions, objects, methods to audit organizations According to the Wikipedia encyclopedia "The financial statements will provide information about the financial position, business performance and cash flows of the business to meet the demand for our users in making economic decisions "In addition, financial report table also includes the declaration of personal property, assets declaration in particular, the declaration at the request of investors, the balance sheet works The subject of the audit of the audited financial statements are audited state (SAV), an independent audit and internal audit Auditor's audit unit must have adequate professional capacity and professional ethics to conduct verification activities and express opinions about the truthfulness of the information reasonably presented on the financial disclosure table in terms of critical and compliance with rules and standards in the preparation of financial statements in order to achieve control objectives audit Objective of financial audit is to help auditors and audit firms express an opinion confirming that the financial statements have been prepared on the basis of standards and current accounting regime complies with relevant legislation and give a true and fair view, in all material respects or not The objective of the audit was to help finance unit audited obvious shortcomings and flaws to fix and improve the quality of financial information of the unit Trương Đức Huy High Quality Auditing 55 Page Dr Nguyễn Thị Mỹ Auditing Project The objective of the financial audit consists of two types of goals: goals and specific objectives The overall audit objective was divided into two categories namely general rationality and other targets The objective statement are determined on the basis of common objectives and statement of each item or part accompanied by tracking them reflected in the accounting system and internal control system According to a common goal to have at least one specific audit objectives 1.1.2 Audit methods in financial statement audit Financial audit is the most characteristic activities of the audit because it contains the full nuance "audit" since its inception as well as in the development process The basic features of the financial audit which is derived from the audited financial objects and relations from the subject - object auditing Like any other type of audit, to perform functional verification and express opinions, financial audit also use the audit methodology documents (audited balance, direct compare and comparison logic ) and external audit documentation (inventories, investigation, quizzes) However, because each type of audit have different specific functions, different specific objects and relations between subject and object should be different, so in the financial audit, the basic method also there are specific points Considering the general functions of audit, financial audit aims to express the opinion on the basis of the audit evidence, to obtain this evidence, financial audits need to implement the basic method in each particular situation, known as methods for collecting audit evidence From the perspective of the process of recording processing, control of economic transactions arising to reflect on the financial statements, divided into two kinds of auditing method that is basic auditing method and compliance auditing method  Basic auditing method (Substantive test): Basic test is pivotal trials and in all financial audits but we are not done with every item in every relationship In fact, the relationship makes it possible to minimize the basic test Furthermore, if the test shows the information on the financial statements are credible, then not required to perform a large number of basic tests  Compliance auditing method (Test of control): Test of control audit method is designed and used to collect evidence about the appropriateness and effectiveness of the internal control system The basic features of this approach is that all analytical testing, evaluation and inspection are based on the regulation of business internal control system Therefore, the conditions applicable to this method is internal control system must exist and be evaluated as effective operation Compliance audit methods include technical inspection system and testing details for Trương Đức Huy High Quality Auditing 55 Page Dr Nguyễn Thị Mỹ Auditing Project control In implementation process audit, the auditor always incorporates two methods When internal control system exists and is considered effective operation, the basic test in small quantities remain to be done In the opposite case, the system can audit internal control system customer does not exist or is considered invalid operation, the financial audit to audit compliance Meanwhile, the basic test will be enhanced with a large enough scale to ensure the reliability of the audit conclusions 1.1.3 The order in financial statement audit To ensure the efficiency, economy and effectiveness of each audit, as well as to collect sufficient audit evidence and valuable as a basis for conclusions of auditors about the truthfulness and reasonable data on the financial statements, the audit was conducted in accordance with a three-stage process  Phase 1: Planning and design auditing method: From invitations letter, auditors understand the customer for the purpose of forming a common plan or contract for audit Next, auditors collect information of customers, understanding and evaluation internal control system of audit object to build a specific plan and audit program for each part, and prepare the vehicle and force to assist the deployment plan and audit program was developed  Phase 2: Perform the audit plan: This is the process of using the test to verify the information forming and reflected on financial statement Sequence combines this test firstly depend on the results of the evaluation system in step If internal control system is considered not effective, then the tests will be carried out in large numbers Conversely, if the internal control system is considered effective, then firstly satisfactory test is used to determine the irregularities and that the strong test is applied to verify the error may have If the tests give satisfactory results internal control system is not available, the strong test will again in large numbers  Phase 3: Complete audited and published audit report: Results of these tests must be considered reasonable in relation to general and tested in relation to the anomaly, the transactions occurring after the date of the financial statement Only on this basis, the new offering is final and audit reports Trương Đức Huy High Quality Auditing 55 Page Dr Nguyễn Thị Mỹ Auditing Project 1.2 Planning the audit in financial statement audit 1.2.1 Roles and the order of planning audit 1.2.1.1 Concept Planning the audit is the first stage that the auditors should perform an audit of each to create the legal conditions as well as the conditions necessary for the audit Planning the audit not only from the requirements of the audit to prepare the basic conditions for the audit , but also the basic principles of audit work has been defined as the standard plays important role to govern the quality and overall effectiveness of the entire audit 1.2.1.2 The role of the audit plan Considering the importance of an audit in the economy may have noticed the biggest role of the audit plan is to help auditors collect sufficient audit evidence, in effect to draw conclusions about financial statements, from which auditors can help minimize errors, reduce liability, while also improving the efficiency of work and hold professional reputation with customers It can be seen , the audit plan also allows auditors to coordinate effectively with each other and related parts such as internal auditors , and external experts Also, through which auditors may conduct audits program was established in accordance with the cost and time at a reasonable level , strengthening the competitiveness of the company audit and keep credibility with the customer relationship is a long-term economic period fiercely competitive world , companies are audited more and reputation is key to strengthening the company's auditor Moreover, upon closer inspection, appropriate audit plan will be the basis for auditing company avoid disagreements with customers and is testament to assert audits were conducted with and effective management based audit plan was established auditors agreed with the customer for the content of the work performed, the time of the audit, as well as the responsibilities of each party In addition, based on the audit plan has been established auditors can control and assess the quality of audit work has been done to contribute to improving the quality and effectiveness of the audit On the other hand, the scope of the audit plan may vary depending on the size of the client , the complexity of the audit , the experience and the knowledge of the technicians of the unit and the unit's activities audited 1.2.1.3 These types of plans in financial audit Trương Đức Huy High Quality Auditing 55 Page Dr Nguyễn Thị Mỹ Auditing Project Audit plan consists of three parts: the Strategic Plan, the overall audit plan, audit program  Strategic Planning: The strategic plan must be set for the audits of large -scale, complexity, large area or audited financial statements for many years However , at the request of its management, auditing company can establish a strategic plan for the audit does not have the above statement The strategic plan must be made by the person in charge and establish an audit director or head of the company auditor approved  Overall Planning: The overall audit plan must be established for all audits, which describes the expected range and how to conduct the audit The overall audit plan to fully detail the basis for the audit program The form and content of the overall audit plan will vary according to the size of the client , the complexity of the audit, methods and techniques specific audit by auditors use  Design audit programs: Because each audit is located, different statement to the scope and type of audit also lead to different number and order of the steps from the beginning to the end of the audit and building audit process for each transaction The audit is expected to detail the audit to perform , completion time, the division of labor between the auditors as well as expected on the materials and information related to use and collect The focus of the audit program is the audit procedures to perform for each item or department audited 1.2.2 Strategic planning 1.2.2.1 Role of strategic planning Strategic planning is the first step that auditors and auditing company to perform the audits strategic plan includes the basic orientation, content focus and the general approach of the audit level by directing outlined based on knowledge about the business operations and business environment of the application audited It must be set for the audits of large scale, complexity, large area or audited financial statements for many years Strategic planning plays a fundamental role in the process of planning the audit Strategic planning can be a general understanding of the audited entity, as a basis for decision audit, then the audit team leader plans to perform specific audit, the allocation organization, group audit clearly facilitate the audit as well as directing the audit team leader Trương Đức Huy High Quality Auditing 55 Page Dr Nguyễn Thị Mỹ Auditing Project Through it, the task performance audit will be carried out as expected in an orderly and scope is defined, time-saving Furthermore, strategic planning methodology, audit techniques appropriate for each type of work has been planned in advance And finally, a strategic plan to help determine the timing and number of technicians to perform the entire audit 1.2.2.2 The contents of strategic planning Through synthetic materials can be roughly divided contents and working steps of the strategic plan include:  Step 1: Find out about its business customers ( aggregate information about areas of operation, type of business, type of ownership, production technology, organizational structure and management practices of units ), with special attention to the main content such as competitive dynamics, analysis of extremes business enterprises as well as the elements of the product, markets, pricing and operational support after sales support  Step 2: Identify the issues related to financial reporting, such as accounting regulations, applicable accounting standards, financial reporting requirements and powers established by the Company  Step 3: Identify the key risks of the business and its impact to the financial statements  Step 4: Evaluate system of internal control  Step 5: Determine the audit objectives focus and approach to auditing  Step 6: Determine the need for support from the experts : legal consultant, internal auditors, auditors and other professionals, such as civil engineers, agricultural engineers  Step 7: Expected leader and execution time  Step 8: Directors and announced a strategic plan for the group audit Based on the strategic plan has been approved, the audit team leader to plan the overall audit and audit program 1.2.3 Overall planning Trương Đức Huy High Quality Auditing 55 Page 10 Dr Nguyễn Thị Mỹ Auditing Project Step 4: Assess control risk Once you have identified the process control and the weaknesses of the system of internal control, auditor conducted risk assessment original control for each target control every economic transaction Technicians can assess the risk according to qualitative factors of low , medium or high or as a percentage Auditors often assess control risk at a high level for databases in the case of financial statements: The accounting system and the internal control system incomplete or accounting system and the system is not effective or auditors not provide sufficient basis to assess the adequacy and effectiveness of the accounting system and the internal control system of customer Auditors often assess control risk at low level for databases on the financial statements in the following cases: Firstly, auditors establishments to conclude the accounting system and the internal control system is designed can prevent , detect and correct the misstatement Secondly, auditor plans to perform tests of control as the basis for assessing the level of risk control  Risk detection (DR - Detection Risk): The risk of detection is the possibility of errors or fraud in the financial statements that were not prevented or detected by the internal control system and auditor is not discovered during the audit The level of detection risk is related directly to the audit methods of auditor Some risk detection occurs despite checking 100 % of the account balance and transactions by: First, auditor can choose and apply audit methods are not suitable Or maybe because auditor discovered evidence but are not aware of errors so often wrongly conclude that section, as well as financial statements Or auditor completely undetected errors due to collusion, agreed within the enterprise wrong policies and regimes proposed by the Board of Directors  The relationship between risks: Due to exist independently of the basic test should auditor inherent risks and control risk differences detection risks In other words whether or not to conduct audits, potential risks and risk control activities persist in the environment and business units as well as in the nature of the account balance, the kind business The level of detection risk inversely proportional to the degree of inherent risk and control risk In case the level of inherent risk is appreciated auditor and the level of risk control underestimate the level of detection risk can be assessed as medium in order to reduce audit risk to low acceptable level Conversely, if the inherent risks are underestimated and control risk is assessed as medium, it can determine the risk of detection is high but still must ensure low audit risk is acceptable are Trương Đức Huy High Quality Auditing 55 Page 20 ... improving the quality and effectiveness of the audit On the other hand, the scope of the audit plan may vary depending on the size of the client , the complexity of the audit , the experience and the. .. Planning the audit in financial statement audit 1.2.1 Roles and the order of planning audit 1.2.1.1 Concept Planning the audit is the first stage that the auditors should perform an audit of each... audit risk assessment Audit planning and drafting comprehensive audit program Diagram 1: The steps of the process of planning the audit of financial statements (Source: Curriculum financial audit