LITERATURE REVIEW OF SALES AND ACCOUNT
GENERAL OVERVIEW OF SALES AND ACCOUNT RECEIVABLES CYCLE
1.1.1 Concept, characteristics and of Sales and Account Receivables Cycle
Sales and Account Receivables Cycle includes the decisions and processes required to transfer ownership of goods and services to the customer when we are ready to sell. The cycle begins with a customer order and ends with the conversion of a material or service to an account receivables, and finally to cash (Finance, Circular 200/2014/TT- BTC, 2014)
Main functions of the sales and account receivable cycle
Most businesses, Sales and Account Receivables Cycle usually have functions such as: receiving and processing customer orders customer, approve credit, deliver goods, invoice customer and record revenue, process and book receivables, process and record returned and reduced sales prices, write off uncollectible receivables, provision for doubtful debts.
Receiving and processing customer order: this is the first stage of the cycle.
Customer requests an order and ready to buy it in a particular way As soon as the order is received, it is very important to check the order because it does not exclude the possibility that the order is fake or has a fraudulent item On the basis of the confirmed order, the order is moved to the processing stage to make a sales decision and apply a selling price to the order.
Approving the credit method: before transferring goods or services to the customer, the authorized person must agree with the method of sale on credit to the customer. The responsible person must consider the solvency and credit limit of the customer to minimize bad debts For most businesses, agreeing to ratify this method means agreeing to the transfer of goods.
Goods transfer: This function marks the transfer of assets and goods of the enterprise to the customer and the transfer of ownership to the customer and is the basis for recording revenue Shipping documents are made at the time of shipment and must match the actual quantity shipped and the quantity on the contract And these vouchers assist in keeping track of the business's inventory.
Send invoices to customers and record revenue: the accounting department is responsible for making and sending sales invoices to customers, recording revenue.Thereby, customers can know information about the amount owed toto of goods and payment limit And it is important that the invoice sent out matches the quantity of the goods sent and is correct with the price (including the price of the goods, freight,insurance and form of payment).
Managing and recording cash receipts: to ensure that accounts receivable are recorded accurately and on time If the customer pays by cash or bank deposit, the accountant records it in the cash receipts journal If the customer has not paid, it will be reflected in account 131 -Account Receivables, followed up on the debt details book for each customer.
Handling and recording sales returns and allowances or sales discounts: when receiving goods, customers find that the goods are defective or do not meet the requirements, sellers often tend to accept returned goods or give a refund discount In that case, sales from returned or discounted merchandise should be recorded accurately and promptly in the returned or discounted sales journal as well as in the subsidiary ledger.
Allowance for Doubtful Account Receivables: before closing the books and preparing financial statements, enterprises must estimate and make provisions for uncollectible amounts in the present and in the future (Arens, Auditing+ Assurance Services, 2019).
Under the allowance method, a company records an adjusting entry at the end of each accounting period for the amount of the losses it anticipates as the result of extending credit to its customers.
Provision level (Finance, Circular 48/2019/TT-BTC, 2019)
Pursuant to Article 6 of Circular 48/2019/TT-BTC dated 08/08/2019 stipulating: a) For overdue Account receivables, the level of provision is as follows:
30% Account receivables that are overdue from 6 months to less than 1 year 50% Account receivables that are overdue from 1 year to less than 2 years 70% Account receivables that are overdue from 2 year to less than 3 years 100% Account receivables from 3 years or more b) For telecommunications service businesses and goods retail businesses, the receivables from telecommunications, information technology, and postpaid television services and receivables from retail sales Deferred payment/installment payment of individual debtors overdue for payment of the provision is as follows:
30% Account receivables that are overdue from 3 to less than 6 months 50% Account receivables that are overdue from 6 to less than 9 months 70% Account receivables that are overdue from 9 to less than 12 months100% Account receivables from 12 months or more
1.1.1.1Concept and recognition principles of Sales
According to Article 78 of Circular200, Sales is the part of economic benefits obtained that increases the equity of the enterprise, excluding more contribution from shareholders Revenue is recognized as soon as the transaction takes place and it is certain that economic benefits will be generated In addition, revenue is also determined according to the fair value of the amounts entitled to receive, regardless of whether the money has been collected or not (Finance, Circular 200/2014/TT-BTC, 2014)
Circular 200/2014/TT-BTC in Article 78 stipulates accounting principles for account 511 –Service and Fee revenue (Finance, Circular 200/2014/TT-BTC, 2014)
Revenues and expenses that generate revenues are subject to the matching principle But sometimes the principle of concordance in accounting will be contradicted with the principle of prudence At this time, accounting needs to be based on the nature to be able to determine the most accurate and reasonable transactions.
Revenue profit or loss only undetermined When the enterprise is still responsible for the performance of future obligations (Except for the most basic warranty obligations) And certainly not yet reap the economic benefits The classification of losses or gains does not depend on whether cash flows have been incurred.
Revenue does not include third-party receipts:
- Types of indirect substitution (VAT, environmental protection tax, export tax, special consumption tax)
- Amount of money collected by the sales agent for the main owner
- Concessions outside the unit selling price are not entitled to or otherwise.
AUDITING ISSUES OF SALES AND ACCOUNT RECEIVABLES
1.2.1 Objective of Sales and Account Receivables Cycle Audit
General audit objective Audit objective of Sales
Occurrence Goods shipped to customers, services delivered to customers are real Completeness All sales transaction are recorded
Classification Sales transactions are properly classified
Accuracy Sales transactions are recorded in the appropriate detailed and general ledgers and must match in terms of data, exactly in the amount added
Valuation Goods shipped, services performed with sales invoices
1.2.1.2 Audit objective of Account Receivables
General audit objective Audit objective of Account receivables
Occurrence All receivables are recorded to reflect reality
Completeness All account receivables are recorded
Classification Receipts are properly classified
Accuracy The receivables are calculated correctly
Valuation The cash receivables are properly assessed (related transactions) to foreign currencies must be converted according to regulations)
1.2.2 Internal control system in Sales and Account Receivables Cycle Audit
1.2.2.1 Internal control system in Sales
Requires the accounting system from accounting vouchers, accounting books to the accounting summary sheet to have maximum control over transactions and therefore, accounting procedures must be in place before setting internal control objectives Each unit can choose accounting forms, different accounting methods lead to different specific accounting procedures Each entity needs to specify a specific sequence corresponding to the bookkeeping system that constitutes an effective control element.
Using pre-numbered vouchers in continuous order has the effect of preventing omission, concealment and duplication of sales transactions The pre-numbering of vouchers must have a clear purpose accompanied by a reasonable organization in a positive direction to achieve that purpose.
Normally, businesses make a summary and balance between goods sold and receivables, accounts receivable to control Sales and Account Receivables and send it to customers to confirm economic transactions born in the month and in the period.
To ensure objectivity in the confirmation, these balance sheets can be assigned to unrelated people (to Account Receivables, to book Sales and Account Receivables) to prepare and send by post to buyers easy to answer even if there are mistakes.
This is a common internal control and focuses on three main points:
Credit sales must be approved prior to the sale of goods.
Sale goods are only shipped after approval with sufficient evidence (account, seal, legal signature of the buyer).
The selling price must be approved including shipping costs, discounts and payment terms.
The first two controls are intended to prevent loss due to shipping to "ghost" buyers or buyers who are unable to pay or interfere in payment The price review aims to avoid loss of revenue, adequately stimulate revenue growth, and legally and effectively settle the relationship of interests between the parties in the purchase-sale relationship.
This is an important job in internal control to prevent mistakes in accounting in general and in the field of Sales and Account Receivables in particular.
❖ Independence of testers and controllers in the implementation of internal control
This is a key factor promoting the effectiveness of internal control, helping to control, process and record sales and collection transactions to ensure objectives. Normally, using internal auditors to control the processing and recording of sales and collection transactions will ensure quality control.
1.2.2.2 Internal control system in Account Receivables
Issuing credit policy for early payment
Pre-numbering receivables or cash statement
Prepare receivables balance sheet and send to buyers
Adequate separation of duties between book holders and money holders
- Supervising the implementation of internal control tasks
1.2.3 Risk of Sales and Account Receivables Cycle Audit
Risks Control procedures to prevent and detect risks
Customers with high credit risk, orders are still accepted
All documents related to the approval of new customers or customers who want to increase the limit must be transferred to the head of the credit approval department and the finance director for review.
Based on the financial situation and repayment history, the customer will be assessed for credit risk and granted an appropriate credit limit.
Goods have been shipped but not recorded
Revenue has been recognized while goods have not been delivered
Inventory must be periodic at the end of the year.
Every month, conduct an inventory of several items to ensure that each item is counted at least twice a year.
Determine the selling price without approval Check the changes in the commodity price list
Every week the sales department makes a report on all changes in the price list
It is the responsibility of the sales manager to check to make sure all changes in selling prices are approved All unusual cases are investigated and handled.
Revenue is not recorded in accordance with actual goods shipped
Incorrectly determining the selling price to calculate revenue
Check and compare invoices with related vouchers
The information on the invoice must be compared with relevant vouchers such as: delivery note, purchase order, contract, price list, If there is a deviation beyond the allowable limit, the invoice must be re-issued conducting investigation and handling before recording in accounting books
Money collected but not yet recorded
Check the debt age monitoring table, debt reconciliation
Every month, the accounts receivables accountant value of money received prints out a list of monthly transactions with each customer and sends it to the customer for debt reconciliation.
The sales supervision department prepares a debt age monitoring table based on the detailed book of account receivables Overdue account receivables must be urged to be recovered Update wrong data in
Reconcile the detailed book of Revenue, Account Receivables, with the Ledger
At the end of the month, accountants make a trial balance to compare the balance of Account Receivables on the detailed book with the balance on the Ledger
At the end of the month, the accountant makes a trial balance to compare the balance of bank deposits on the Number of Heads with those on the bank's sub-book
❖ In addition, there are many other mistakes
Stage in the cycle Fraudulent acts and related errors
Sales - Accountants intentionally misreported and closed the books for revenue
- Accounting wrongly accounts for revenue for many different products, external sales with internal sales
- Accountants do not record or mis-record deductions
- The accountant made the wrong allocation of unearned revenue
- Mistakes in approving credit and payment policies Account Receivables - Incorrect accounting for cash sales: For example, cash has been collected immediately but recorded as prepaid expense, not yet collected
- Make provision and write off receivables from wrong sales.
- Implement the offsetting of receivables and payables in the wrong regime
- Accounting for mistakes between AccountPayables and Account Receivables
AUDITING OF SALES AND ACCOUNT RECEIVABLES CYCLE
In order to ensure that the audit work is effective and on schedule, the audit planning phase must be conducted thoughtfully, the work steps in this phase are taken to design the audit program details, creating a basis for the audit in a scientific and reasonable manner.
Audit planning is the first stage that the auditor needs to perform in each audit to create the legal and other conditions necessary for the audit
In the Vietnamese Standard on Auditing 300 on "Auditing planning", clearly states:
"Auditors and audit firms must prepare an audit plan to ensure that the audit is conducted effectively." And: "The audit plan must be appropriately designed to ensure that material aspects of the audit are covered; detect fraud, risks and potential problems and ensure the audit is completed on time" To fulfill the above objective, an audit plan is usually formulated according to the following five work steps:
Planning and designing audit methods
1.3.1.1 Prepare for an auditing plan
Audit process is started when the auditor receives a client audit request from a certain company However, auditing is a highly competitive industry, so auditors are very cautious in deciding to approve customers so that the risk is lowest, because this is highly legal related industry Therefore, the auditing company must have a correct view when making a decision.
Auditors must evaluate whether accepting a new customer or continuing to audit with the old customer increases the risk of the auditor or harm the auditing company.
To do that, the auditor needs to consider:
- The independence of the auditing company
Prepare for an audit plan
Collecting information about the entity being
Preliminary assessment of the internal control
Materiality assessment and audit risk
- Integrity of the Board of Directors (Board of Directors) of the business being audited
The client's accounting system must provide sufficient evidence to prove the economic profession incurred
For new customers, first of all, the auditor needs to find out the reasons for the client's audit invitation, to collect information on aspects such as business areas, financial status, Auditors must increase the information needs to be collected when customers' financial statements will be widely used, especially for joint stock companies listed on the stock market, companies with a lot of debt need to collect information from data banks, newspapers, specialized books and newspapers,
In the case of an entity that already has a predecessor, the auditor should seek to obtain information that may be useful to the previous auditors, such as information about the integrity of the managers units, disagreements between the two parties (if any), reasons why they do not continue to collaborate with each other, … Auditors will have to be very cautious in the cases:
- Customer does not agree to contact with previous auditors.
- In the past, there were serious disagreements between the two parties, so the previous auditor's answers were limited and they could not provide the necessary information
- Through the opinion of the predecessor, the auditor has discovered some unusual and material problems With the collected information, the auditor researches and analyzes the entity's financial position, assessing and making a preliminary estimate of the materiality and potential risks of the client's business to decide whether to accept an audit or not If receiving, the auditor needs to confirm that it will not violate the law and professional ethics Auditors should not accept an audit whe the independence is not guaranteed or considered incompetent to serve customers
For old customers: Annually, after completing the audit, the auditor needs to update information to reevaluate existing customers to see if they should continue to audit for them or not, the auditor It is also necessary to study whether change the content of the audit engagement, www There are cases where the auditor needs to stop auditing for a client, for example when a dispute between a client and the auditor, or there has been a conflict about the audit scope between the parties, or there have been arguments abouts the audit procedures to be followed:
The auditors perform one of the two forms A110 (accepting new customers) and A120 (accepting and keeping old customers)
*Find out why to invite a client’s audit
The reasons for inviting the financial statement audit are: Meeting the annual financial disclosure requirements; serve for business managers; auditing for bank loans; Auditing according to the requirements of superiors or the law, so the auditing company needs to determine the audit reasons of the customer and based on production and business activities as well as the financial ability of the company to make reasonable decisions in contracting and designing audit methods.
*Selection of an audit team
After considering client acceptability, the firm needs to estimate the complexity of the audit, and then select the appropriate staff to perform the audit Depending on the capacity and characteristics of the client's company, the company selects the appropriate staff to perform the audit.
The audit team usually consists of 5 members, selected according to the experience, understanding of the auditor and the client's business line The number of auditors varies depending on the size of the client company, the complexity of the audit, etc. For an annual client, an audit firm usually chooses an audit team that has performed audits at the company customer company However, in the case of signing an audit contract with an auditing firm for three consecutive years or more, the auditing firm must change the practicing auditor and be responsible for signing the audit report.
After deciding to accept the audit for a client, the final step in the preparation phase of an audit plan that the auditor must perform is to sign the audit engagement Before signing the audit contract, the auditing company will have a preliminary discussion and discussion with the client on some key terms of the audit engagement such as: audit purpose and scope, responsibility Responsibilities of the Board of Directors of the client company and the auditor, form of notification of audit results, time of conducting the audit, bases for calculation of audit fees and forms of payment
If the client company and the auditor both agree to the terms of the audit engagement, the two parties will sign the audit contract This is a formal agreement between the auditing company and a client on the performance of the audit and other related services And at this time, the auditing company becomes the official audit subject of the client company
The auditor is presented in the working papers according to the A200 form
1.3.1.2 Collecting information about the entity being audited
After signing the audit engagement, the auditor begins to make a general audit plan. to ensure the quality of the audit and achieve the objectives set for the audit, the auditor must have a complete understanding of the customer on a very wide range The collection of customer information is the basis for evaluating the internal control system, from which the materiality of each item on the financial statements can be accurately determined In this stage, the customer information that KTV needs to collect is:
- Business lines of the client: based on the auditor's understanding of macroeconomic knowledge, characteristics of the business environment, business areas, changes in technology, business risks, adverse business conditions, etc of the client's company, the auditor will explain some unusual fluctuations in revenue, costs, profits and a number of other economic indicators.
- Customer's internal control system: control environment, evaluation
- risk, control activities, information and communication, monitoring.
- Related parties: subsidiaries, official owners, individuals or organizations that have the ability to control or exercise significant influence over the entity.
- Ownership form and legal obligations of customers
The auditor will review the client's standing audit file every year to capture information about the client's business, organizational structure, etc At the same time, the auditors re-read the audit results in the working paper of the previous year, based on those results to focus and re-evaluate the mistakes made by the client in the current audit.
Auditors proceeds according to the A310 form (research customers and operating environment) and A400 form (research accounting policy and business cycle)
METHODOLOGY OF SALES AND ACCOUNT RECEIVABLES
GENERAL OVERVIEW OF BUSINESS OPERATIONS OF THE AVN
2.1.1 History and development of the company AVN
AVN Vietnam Auditing Company Limited (referred to as “AVN Audit”), English name: AVN Viet Nam Auditing Limited Company, was established under Business Registration Certificate No 6001387738 of the Department of Planning and Investment of Dak Lak province
AVN Audit is a large-scale legal independent auditing and consulting organization that has been granted a Certificate of eligibility for independent audit service business in Vietnam by the Ministry of Finance of the Socialist Republic of Vietnam
AVN Audit is special with a team of highly qualified staff and consultants, systematically trained in Vietnam, UK, Australia, … and has many years of experience in the field of Auditing and Finance -Accounting, Informatics, Law and Business Administration AVN Audit operates on the principles of independence, objectivity, integrity, protecting the interests and business secrets of customers such as: their own interests on the basis of compliance with the law Professional ethics and service quality are always the guideline, the principles and top priorities, which AVN Audit always remembers and adheres to
Customers have been audited by us operating in almost all industries of the platform. economic such as: Banking – Commerce – Construction – Services – Posts and Telecommunications – Industry of many economic sectors
Head office in Buon Ma Thuot: No 36 Pham Hong Thai, Buon Ma Thuot city, Dak Lak province
Headquarter in Da Nang: 270 Xo Viet Nghe Tinh, Khue Trung, Cam Le, Da Nang City
Diagram 2- 1 Organizational structure of AVN Viet Nam Audit at Branch Đa Nang
Functional relationship Functional of each department:
-Branch manageris who representative for all of employee in branch and have responsibility with Board of director AVN Audit about all of activities of branch follow legal of Government and rules of company
-Administrative and accounting department advisory for director about checking control the financial transactions, manage equities and records all of occur transactions, summary data to setting financial statement follow rules, research the methods to improve efficiency of provided information for
-Enterprises auditing department provide accounting-auditing financial audit for companies have demand to ensure the honest and legal of data in department advised for Branch director about consolidate, improve and develop auditing.
-Construction auditing department will audit, estimate and finalization construction of investors follow technological processes follow rules of company
2.1.3 The main types services of company
Auditing is one of the basic elements making AVN Audit good will and one of strengths.
With skilled and professional auditors in multiple areas, the company have auditing contract for various corporates, projects sponsored by domestic and international organizations.
AVN Audit provides audit services to enhance the truthfulness and reliability of financial and information carried out by auditors and experienced in different areas. Benefit that company bring to customer by auditing service:
Enhance reliability of financial information;
Support clients overcome these exist outside the scope of financial information based on a deep understanding of the business activities;
Help clients improve accounting and internal control system, for getting the quality of financial management and administration of the organization with consulting services within audit engagement
-Financial audit for tax purposes;
-Revision of financial information based on pre-agreed procedures;
AVN Audit provides accounting services to diverse clients, supports client for converting financial statements in accordance to international policy, modern techniques and scientific approaches.
Highlight in accounting services is ability to evaluate the effectiveness and suitability of the existing accounting system then adjust or design new systems to meet customer structures.
Developing model of financial corporate;
Perfecting existing accounting -finance system;
Setting up accounting systems, bookkeeping updates and prepare financial; reports on a regular basis;
Preparing the consolidated financial statements;
Reviewing books and accounting reports, tax reports;
Book keeping and accounting service;
AVN Audit determines that the issues related to Vietnamese and international tax compliance is one of the great challenges of our customers We have a team of experienced tax consulting practice and theory offering comprehensive solutions for all current taxes.
Audit AVN help customers achieve effective application of tax regulations by understanding the concerns of the business tax, the tax policies and coherent relations with local tax authorities
Tax planning, declaration and settlement;
Support for updated information on tax
Consulting services of AVN Audit helps customers access reliable advises and in- depth experience to encounter business challenges with devotion and professional skills.
Accounting System in accordance tomanagement models;
Selection of computer software in accordance tooperating management.
2.1.4 Operating principles and target of company
AVN Audit operates under the principles of independence, objectivity, integrity, protecting the rights and confidentiality of clients as business interests on the basis of statutory compliance Professional ethics, quality of service and prestige of company are leading standards that have been compliance by all of staff.
Audit method of AVN Audit base on the guiding principles of auditor and Vietnam standards of accounting, auditing and international had applies appropriate with legal and rules of Vietnam Parliament.
AVN audit have help the company in all of economic sectors, update, cash the rules of legal in accounting, financial, tax areas and legal in business.
AVN Audit help for enterprise make good finance accounting follow the rules of legal of government and the principles of international standard; ensure the accounting data reflect the reality of business cycle and income of company, help the company timely detection and adjust the errors, risk prevention and damage can be happen in business.
Mandate of company is striving to become the consulting and auditing firm have serve for customer with quality of service is highest and effectiveness: "Your reliable companion”
THE REALITY OF THE AUDIT OF THE SALES AND COLLECTION
Sales and Account Receivables Cycle Audit objective
- Identify and understand transaction related significant business cycle.
- Evaluate design and implementation of key controls
- Provide decide whether to perform tests of controls.
- Design and perform substantive testing procedures that are appropriate and effective
Audit objective of Sales: to secure revenues from Sales and Fees revenue is available; are recorded accurately, completely and in a timely manner, classified and presented in accordance with the applicable financial reporting framework
Audit objective of Account Receivables: to ensure that all Account Receivables are present; owned by the enterprise; are recorded fully, accurately, in the correct accounting period and at the appropriate value; presented in the financial statements in accordance with the applicable financial reporting framework and presentation.
2.2.1.1 Considers to accept customer and valuation risk contract.
Before beginning an audit, AVN Audit always find out information of customer (for all new customers and old customer) to assess the level of contract risk.
For old customers, the auditor only needs to review the information saved in the previous year's audits and see the notes on the changes in the policies of company ABC applied in the audit year
For a new client, the head of the audit team is required to have a direct discussion with the chief accountant of the client company to initially generalize general information about the field, market, organizational structure, business performance, finance, assets
- liabilities, accounting system, internal control system through the questions on the available designed table.
For ABC Joint Stock Company, which is a old customer Through the new information gathered from interviews, searching for information on the website.
The auditors reviewed and found that ABC Joint Stock Company did not have large changes, still operating normally and stably, so the company decide to accept the audit.
Customer risk assessment: Answering questions as well as learning basic information to help auditors and auditing firms evaluate the risk level of the contract is high, low or medium For ABC company, after understanding the relevant issues, the auditor and the audit firm evaluate the risk level of the contract as average.
Customer acceptance review and contract risk assessment according to form A120 (Appdendix 1.1)
Auditing contract was signed after the company and the client to achieve an agreement on the process to work In the contract, the company has complied with Vietnamese Accounting Standard, whereby the contract of the company established the terms and conditions of the audit performed by the customer and the company The contract also expresses the objectives, scope of the audit, the rights and responsibilities of each party, the form of the audit report, the time of implementation and the term of fees, handling contract disputes.
Detail illustration on auditing contract of customer ABC is presented in working paper (Appdendix 2.1)
❖ Letter for customer about audit plan
Letter for customer about audit plan is setting by auditing company and sent to customers to announcement about audit plan Specific, company must be raise the human expected to join audit team, the time expected to perform audit, the time expected to issue the audit report and some works need support from customer companies.
❖ List of doccument required customers to provide
Sample A240 had setting by head of audit and sent to customer to require provide some document need for audit
The main document need customer provide include: Legal records of customer companies like: Establishment license, business registration certificate, Board of administration minutes, Supervisory board minute, Board of director minutes and shareholder's meeting minutes
Records, voucher, accounting book relative with cash item like: trial balanced of financial year, Ledger, subsidiary Ledger of cash account
After signing the contract, AVN Audit will conduct to assign the audit team members and tasks of each people.
❖ A measure to ensure the independence of the audit team members
In order to ensure compliance with the accounting and auditing professional ethics standards, the auditing team leader should take measures to ensure the independence of the audit team members and make conclusions Include the working papers:
Commitment to independent of audit team A260 Commitment to independent of audit team is important part in audit, it shows the requirement with auditors and auditing company This commitment had showed by work paper of auditors, with number to referenced is A260 (Appdendix 2.5)
❖ Revise the factors had affected to independent of auditor
Work paper revise the factors had affected to independent of auditor had setting follow Vietnam Association of Certified Public Accountants VACPA, number to reference is A270 With purpose is ensure don't exist materiality factor can be effect to independent and professional ethics of auditor join in audit team Content of check include: Relationship between auditing company of member of audit team with customer; Auditing company/Member of audit team have ability in the self-test case;
Ability to depend on customer in making decision; Auditing company/member of audit team have close relationship with customer.
❖ Tracking, rotation auditors in charge
Subscribe and timely rotation of key members of team audit Tracking, rotation auditors in charge should be monitored from the first year of service provided to the customer and updated annually, copied and brought to the audit year following
The audit seniors must disscuss the main contents of the scope and schedule of the audit according to the plan with the management of the audited
2.2.1.3 Find out customer and operating environment
Purpose of this work paper is collect the knowledge about customer and operating environment to understand the event, transaction and business information of customer have materiality effect in financial statement, through the help to identify risk have material misstatement by faud or mistake Content of this work paper include: Knowledge about operating environment and external factor effect to customer; Knowledge about customer; and another problem.
2.2.1.4 Learn the sales cycle, receivables, collection
Identify and understand significant business cycle related transactions and events. Evaluation of the design and implementation of the key control procedures of this business cycle Decide whether to test the system of internal control Design suitable substantive test procedures that are effective.
-At ABC Company, auditors learn about major business aspects related to purchases, payables and payments.
-Learn the accounting policies applied in purchases, payables, payments.
Revenue: Sales of goods are recognized when the following five conditions are satisfied:
The enterprise has transferred substantially all the risks and rewards of ownership of the product or goods to the buyer
The enterprise no longer holds the right to manage the goods as the owner of the goods or the right to control the goods
The revenue can be measured reliably
The enterprise has obtained economic benefits from the sale transaction
Determine the costs associated with the sale transaction
Recognition principles of Sales and Account Receivables
Accounting estimates and guesses related to Sales and Account Receivables
Overview of Sales and Account Receivables Cycle
Use narrative or diagrammatic methods to describe the sales cycle and collect money from the business When describing the cycle the auditor should note the following information.
The material types of the cycle, from the performance stage, to the recording of the transaction and the protection of related assets;
The main control procedures of the enterprise for this cycle;
Approval authority of departments, for stages in the cycle;
Key documents and reports used for control purposes in the cycle;
Note about the assignment of tasks in the cycle, ensure the recognition of one person in charge of many stages in a cycle (if any)
After learning about the cycle, the auditor will conduct a questionnaire to interview the Board of Directors or the accounting staff of ABC Company to assess whether the Company has actually achieved those control objectives or not:
- Efficiency: Recorded revenue and receivables are real.
- Completeness: Revenue, accounts receivable and cash received are fully recognized…
- Accuracy: Revenues, receivables and receipts are recorded accurately and to the right subjects.
SOLUTIONS TO COMPLETE THE AUDIT OF THE SALE AND
GENERAL ASSESSMENT OF THE AUDITING PROCESS SELLING AND
Although AVN Viet Nam Auditing Limited Company is a newly established company but quality of services provide for customer of compary always had been appreciated, getting good feedback from customers Since establishment until now, company had performed hundreds of audit service for many companies AVN audit had achieved this achievement because AVN Audit had applied their favorable and they now to overcome the difficulties encountered during their operation
Executive board have experience in the profession and have good professional ethics Have good manage ability not only gained trust from staff at company but also gained trust from customers They are the peoples have strategic vision about operational capabilities of company, and then they give plan and oriented for development of company
Management apparatus of AVN Audit had operated very lightweight, scientific and effective Each department has responsibility in one specific task to make higher specialization, and give high effective for their job
Board of directors of company always control closely audit process All of work have been setting plan attentive and task is divided very clear Before issue audit report for customer, board of directory had check carefully and closely
The company regularly updates the latest circulars, decrees and regimes on taxation, accounting and auditing Periodically, the company organizes seminars for auditors and auditors to update their knowledge, and at the same time the auditors exchange experience
AVN Audit have young staff, they had training follow system, have professional knowledge, they always quick update and fully all of relative financial information latest Auditors have creativity and dynamic, they flexible applied the theory into real, and arrangements to audit really scientific ❖ About audit method
Audit method of AVN Audit follow principles of Vietnam audit standard and company had applies form of audit programs, it make effective for audit of financial statement service at company
Work paper of saditors have been arranged really scientific, easy for lookup and check
Legal system have relative with accounting, aditing of Viet Nam isn't complete, synchronous and still have change, it make perform audit have inadequacies, timely update standard of accounting and auditing of auditors really difficult, especially is new auditors
Scale of audit current market is better but awareness about audit service is incommensurate While, competitive environment is very drastic, the main competitors are audit companies have large-scale, activities long time is industry
So, company must be improve quality of service provide for customer to competitive with other audit company
Legal system have relative with accounting isn't complete, it's make customer company have difficulties to update and perform follow current axounting standard
Besides that, in many customer companies, the organization accounting have many weak (typical for that is companies just have been enter in business, internal system is simple
Consciousness about audit of customer still low Have many case, customer don't do follow the recommendations and adjusting of auditor, it make difficult for noe audit report and difficult for next audit period
The maintenance old customer and attract new customer make workload is increased sharply in audit season So, harmonious combined between cost, time, human resource, risk and quality of audit is difficult problem with company.
COMPLETE SOLUTION OF SALES AND ACCOUNT RECEIVABLES
The advantage of analytical procedures is that they are low cost, time-saving, but still provide sufficient evidence and reasonableness of the data, and at the same time help the auditors not to be entangled in specific transactions However, these procedures are still rarely used by auditors, but instead are detailed examination procedures Therefore, the company should have a program to perform analytical procedures in a scientific way to bring about the effectiveness of the audit
❖ Methods that can be used when performing analytical procedures:
Trend analysis through the difference of this year and the previous year, using charts to easily detect large fluctuations Thereby, identifying the causes in order to gather enough evidence to support the audit
Analysis, make estimates to compare with book value to detect difference
❖ Compare, analysis gross profit ratio in this year with the previous year
Gross profit ratio is the ratio of gross profit to total sales, expressed as a percentage
This analysis helps to identify abnormal points, large fluctuations that need attention and find out the causes
In the calculation process, if the gross profit ratio this year is lower than the previous year, it means that the cost of goods sold has increased and operating expenses have decreased If this year's gross profit ratio is higher than previous year, the company may have a change in sales policy such as discount sales and spend more on business activities
If it is not due to one of the above reasons, the auditor should consider whether there are errors in the books and records, whether the company intentionally overstated revenue From there, strengthen the conduct of checking the truth and accuracy of the sales item
3.2.3 Analytical procedure of Account receivables
❖ Analyze changes in Account receivables during this year
Analyze changes in Account receivables month by month to consider unusual fluctuations The auditor must pay close attention to the months of large incured in order to perform detailed testing procedures suitable
❖ Compare Account receivables in this year with the previous year for each customer
Based on the detailed debt book The auditors summarize the opening balance credit arising, debt arising, and ending balance of each customer If there are unusual findings, the auditor will send a letter of confirmation of the debt and carry out other detailed examination procedures From there, it is clear that the abnormal causes may be due to over-declaration or under-declaration of Account receivables
CONCLUSION Currently, in Vietnam, the economy is making great progress, the market mechanism has brought into play its strength Therefore, economic information is more and more important, the demand for auditing is increasing Auditing helps businesses detect and correct errors and frauds in the application of the accounting regime in general and in the accounting work in particular The Sales and Account receivables cycle includes many items presented in the financial statements Therefore, auditing this cycle is of great interest to clients and users of information on financial statements Properly performed Sales and Account receivables cycle audits will contribute to an increase in the value of the financial statements The auditor's conclusion is based on understanding the internal control system, performing analytical procedures, and performing detailed test procedures appropriately, and also contributes to ensuring the quality of the audit AVN is aware of the important role of the Sales and Account receivables cycle, so it has paid great attention to assigning work, time and costs for the implementation of audit procedures As a result, the sales and collection cycle audits have produced significant results in each audit of financial statements conducted by AVN This thesis is all the knowledge that I have received about the Audit of Sales and Account Receivables Cycle performed by AVN during the planning stage to the end of the audit period The company has built a program Sales and Account Receivables Cycle Audit with full procedures However, when applied to the reality, due to time pressure, some unnecessary procedures were canceled Researching the topic helps me understand the work when performing audit, from which offering some specific solutions to completing the auditing process of Account Receivables in the financial statements With the enthusiastic support of the brothers and sisters in the company, and the instructor, but due to not much practical experience, my thesis inevitably makes mistakes Therefore, I am looking forward to receiving your suggestions to complete my thesis I would like to express my gratitude to the teachers of International School - Duy Tan University, especially instruction of Master,Lecturer Vo Thi Thuy Linh , brothers and sisters of the Auditing Department of AVNVietnam Auditing Co., Ltd helped me to finish my intership course and undergraduate thesis.
Finance, T M (2020) Sample audit program applicable to auditing financial statement.
Appendix 1 1: A120-Accept, maintain old customers and assess of contract’s risk. 48
Appendix 2 1- A210 Audit contract 52 Appendix 2 2: A230- Letter for customer about audit plan 56 Appendix 2 3: A240- List of doccument required customers to provide 58 Appendix 2 4: A250- Assigning audit team's task 63 Appendix 2 5: A260- A measure to ensure the independence of the audit team members 67 Appendix 2 6: A270- Revise the factors had affected to independent of auditor 68 Appendix 2 7: A271- Tracking, rotation auditors in charge 72 Appendix 2 8: A290- Exchange with the Customer 73 Appendix 3 1: A310- Find out customer and operating environment 76 Appendix 4 1: A410- Learn the sales cycle, receivables, collection 87 Appendix 5 1: A510- Preliminary analysis of financial statement 93
Appendix 6 1: A610- General valuation about internal control system of customer 96 Appendix 7 1: A710- Identify quantitative of materiality 101 Appendix 8 1: A910 - Summary the audit planning 104
Appendix 9 1: G140- General procedures and analysis procedures 107 Appendix 9 2: G141- Check the detailed summary of revenue by activity of the month of the year 108 Appendix 9 3G110- Sales and Service Provision Revenue Summary Table 109 Appendix 9 4: G162- Compare declarations 109 Appendix 9 5: G160- Check the business generating revenue 110 Appendix 9 6: G170- Check periodicality of revenue 111 Appendix 9 7: G190- Check presentation and demonstration 112
Appendix 10 1: D340- General procedures and analysis procedures 113 Appendix 10 2: D310- Summary table of short-term long-term customer receivables 114Appendix 10 3: D342- Check for abnormal operation 114Appendix 10 4: D350- Check debt confirmation 114Appendix 10 5:D370- Check details of exchange rate difference in payment 115
Appendix 10 6: D371 - Check the details of the exchange rate difference at the end of the period 115Appendix 10 7: D380 - Check classification and presentation 115
Appendix 1 1: A120-Accept, maintain old customers and assess of contract’s risk
Appendix 2 2 : A230- Letter for customer about audit plan
Appendix 2 3 : A240- List of doccument required customers to provide
Appendix 2 4 : A250- Assigning audit team's task
Appendix 2 5 : A260- A measure to ensure the independence of the audit team members
Appendix 2 6 : A270- Revise the factors had affected to independent of auditor
Appendix 2 7 : A271- Tracking, rotation auditors in charge
Appendix 2 8 : A290- Exchange with the Customer
Appendix 3 1 : A310- Find out customer and operating environment
Appendix 4 1 : A410- Learn the sales cycle, receivables, collection
Appendix 5 1: A510- Preliminary analysis of financial statement
Appendix 6 1 : A610- General valuation about internal control system of customer
Appendix 7 1 : A710- Identify quantitative of materiality
Appendix 8 1 : A910 - Summary the audit planning
Appendix 9 1: G140- General procedures and analysis procedures
Appendix 9 2: G141- Check the detailed summary of revenue by activity of the month of the year
Appendix 9 3G110- Sales and Service Provision Revenue Summary Table
Appendix 9 5: G160- Check the business generating revenue
Appendix 9 6: G170- Check periodicality of revenue
Appendix 9 7: G190- Check presentation and demonstration
Appendix 10 1: D340- General procedures and analysis procedures
Appendix 10 2: D310- Summary table of short-term long-term customer receivables
Appendix 10 3: D342- Check for abnormal operation
Appendix 10 5:D370- Check details of exchange rate difference in payment
Appendix 10 6: D371 - Check the details of the exchange rate difference at the end of the period
Appendix 10 7: D380 - Check classification and presentation