Audit of accounts receivable in financial auditing performed by kpmg vietnam company limited

BANKING ACADEMY ADVANCED PROGRAM -*** - BACHELOR THESIS Major: Auditing TOPIC: AUDIT OF ACCOUNTS RECEIVABLE IN FINANCIAL AUDITING PERFORMED BY KPMG VIETNAM COMPANY LIMITED Student : Doan Thi Thuy Student ID : 22A4050145 Class : K22CLCG Supervisor : Dr Nguyen Thi Phuong Thao Hanoi, 23 May 2023 Tai ngay!!! Ban co the xoa dong chu nay!!! 17014125834161000000 BANKING ACADEMY ADVANCED PROGRAM -*** - BACHELOR THESIS Major: Auditing TOPIC: AUDIT OF ACCOUNTS RECEIVABLE IN FINANCIAL AUDITING PERFORMED BY KPMG VIETNAM COMPANY LIMITED Student : Doan Thi Thuy Student ID : 22A4050145 Class : K22CLCG Supervisor : Dr Nguyen Thi Phuong Thao Hanoi, 23 May 2023 STATUTORY DECLARATION I herewith formally declare that I myself 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 clearly 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, 23/05/2023 Signature Doan Thi Thuy i ACKNOWLEDGEMENT In the process of completing this bachelor thesis, I have received a great deal of kindly support, guidance, and encouragement from dedicated lecturers throughout four years studying at Banking Academy, along with helpful advice of mentors and other colleagues during four-month internship at KPMG Vietnam Company Limited First of all, I would like to express my deepest thanks to my supervisor, Dr Nguyen Thi Phuong Thao, who gave me helpful suggestions on how to shape the study and helping me complete my essay easily and effectively on time She also gives me valuable advice, helpful comments as well as correction to my paper Secondly, I would like to express my gratitude to all lecturers in the School of Accounting and Auditing for their lectures of many courses that help me much in shaping a solid knowledge foundation of accounting and auditing for completing this thesis specifically Finally, I would like to thank my friends, my seniors who have always encouraged and helped me to complete this bachelor thesis Due to limited capacity and a lack of time to approach reality, my thesis cannot avoid certain errors I'm looking forward to hearing from lecturers about how to improve this topic Sincerely thank you! Hanoi, 23/05/2023 Signature Doan Thi Thuy ii TABLE OF CONTENT STATUTORY DECLARATION .i ACKNOWLEDGEMENT ii TABLE OF CONTENT iii LIST OF ABBREVIATIONS vi LIST OF DIAGRAMS vii LIST OF FIGURES AND TABLES Error! Reference source not found INTRODUCTION 1 The rationable Literature reviews Research objectives Research scope and research subject 5 Research questions 6 Research methodology Research structure CHAPTER 1: THEORETICAL BASIS FOR AUDIT OF ACCOUNTS RECEIVABLE IN THE FINANCIAL AUDITING 1.1 Characteristics of accounts receivable affecting the audit of financial statements 1.1.1 Definition and nature of accounts receivable 1.1.1.1 Definition 1.1.1.2 Nature of accounts receivable 1.1.2 Accounting for account receivable 1.1.2.1 Accounting principles of accounts receivable 1.1.2.2 Accounts used for receivables 11 1.1.2.3 Relevant slips and documents 11 1.1.3 Common mistatements in auditing accounts receivable 13 1.1.4 Internal controls over account receivable 14 1.2 The process of audit of accounts receivable in financial auditing 18 1.2.1 Objectives of audit of accounts receivable in the financial auditing process 18 1.2.2 Planning the audit 19 1.2.2.1 Assess the audit acceptability 19 1.2.2.2 Selecting the audit team and prepairing the audit engagement 19 iii 1.2.2.3 Understand the client and its environment 21 1.2.2.4 Performing analytical procedures 22 1.2.2.5 Internal control and risk assessment 23 1.2.2.6 Determination of materiality 25 1.2.3 Implementing the audit 26 1.2.4 Completing the audit 30 1.2.4.1 Synthesize and process audit results and post-audit issues and data 30 1.2.4.2 Summary of audit results 30 CHAPTER 2: AUDIT OF ACCOUNTS RECEIVABLE IN THE PROCESS OF AUDITING FINANCIAL STATEMENTS BY KPMG VIETNAM COMPANY LIMITED 33 2.1 Overview of KPMG Vietnam Company Limited 33 2.1.1 Company formation and development 33 2.1.2 Functions, duties, and main business lines 34 2.1.2.1 Audit and Assurance Services 35 2.1.2.2 Taxation Consultancy Service 35 2.1.2.3 Financial and business consulting services 36 2.1.3 Organization of Management Apparatus 37 2.1.4 The process of auditing general financial statements conducted by KPMG Vietnam Company Limited 39 2.1.4.1 The process of auditing general financial statements conducted by KPMG Vietnam Company Limited 39 2.1.4.2 Audit quality control system 41 2.2 Audit of Accounts Receivable in financial auditing performed by KPMG Vietnam Company Limited 42 2.2.1 Overview of Audit of Accounts Receivable of financial auditing performed by KPMG Vietnam Company Limited 42 2.2.1.1 Planing the audit 43 2.2.1.2 Implementing the audit 50 2.2.1.3 Completing the audit 55 iv 2.2.2 Audit of Accounts Receivable of financial auditing performed by KPMG Vietnam Company Limited at a specific client 57 2.2.2.1 Planning the audit 57 2.2.2.2 Implementing the audit plan 65 2.3 Assessment of audit of receivables in the financial auditing performed by KPMG Vietnam Company Limited 88 2.3.1 Advantages 88 2.3.1.1 In the planning the audit 88 2.3.1.2 In the implementing the audit 90 2.3.1.3 In the completing the audit 90 2.3.2 Limitations 92 2.3.2.1 Limitations in planning the audit 92 2.3.2.2 Limitations in the implementing the audit 92 2.3.2.3 Limitations in the completing the audit and issuing the audit report 94 CHAPTER 3: SUGGESTIONS TO IMPROVE THE AUDIT OF ACCOUNTS RECEIVABLE IN THE PROCESS OF AUDITING FINANCIAL STATEMENTS PERFORMED BY KPMG VIETNAM COMPANY LIMITED 95 3.1 Development direction of KPMG Vietnam Company Limited 95 3.2 The need for improving the audit of accounts receivable in the financial auditing performed by KPMG Vietnam Company Limited 96 3.3 Recommendations to improve the audit of accounts receivable in the financial auditing performed by KPMG Vietnam Company Limited 97 3.3.1 About planning the audit 97 3.3.2 About implementing the audit 98 3.3.3 About completing the audit and issuing the audit report 99 CONCLUSION 101 REFERENCES 102 APPENDIX 103 v LIST OF ABBREVIATIONS Co Company Ltd Limited Assoc Associate Dr Doctor No Number VAS Vietnamese Accounting Standard VAT Value added tax Acct Account KAEG KPMG Audit Execution Guide M Materiality PM Performance Materiality AMPT Audit Misstatement Posting Threshold Min Minimum SIC Senior in-charge WP Working paper vi LIST OF DIAGRAMS Diagram 1.1: Chart of accounts receivable 12 Diagram 2.1: Organization of Management Apparatus of KPMG Vietnam Company Limited 37 Diagram 2.2: Process of auditing general financial statements of KPMG 40 vii LIST OF FIGURES AND TABLES List of Figures Figure 2.1: WP 1600 – Preliminary analytical procedures for accounts receivable 62 Figure 2.2: WP 1829 – Determine the internal control for receivables 67 Figure 2.3: WP 5300 – Summary of client’s accounts receivable 70 Figure 2.4: WP 5300 – Summary of client’s accounts receivable 71 Figure 2.5: WP 5300 – Breakdown of client’s accounts receivable 73 Figure 2.6: Audit confirmation form for AR of ABC Company 78 Figure 2.7: WP 5300 – Aging report 80 Figure 2.8: WP 5300 – Selecting samples for the examination of aging report procedures 81 Figure 2.9: WP 5300 – Recalculation of provisions for doubtful debts 83 Figure 2.10: WP 5300 – Re-evaluation of exchange rate of accounts receivable 85 List of Tables Table 1.1: Audit objectives of accounts receivable 18 Table 1.2: Table of Estimated Materiality Thresholds 25 Table 1.3: Test of control 27 Table 2.1: Guide on determining materiality ratio according to KAEG 48 Table 2.2: Factors affecting materiality ratio 49 Table 2.3: Test of details for accounts receivable 51 Table 2.4: Audit team in the audit of client ABC 58 Table 3.1: Audit quality assessment questionnaire 99 vii