(Tiểu luận) completing the audit of revenue from sales of goods and services in auditing financial statements at ui auditing co , ltd ha noi branch

OVERVIEW OF AUDIT OF REVENUE OF SALES OF GOODS & SERVICES IN THE AUDIT OF FINANCIAL STATEMENTS PERFORMED BY INDEPENDENT AUDIT.. AUDIT PROCESS OF SALES OF GOODS & SERVICES REVENUE IN AUDI

The significance of the thesis

Financial information is crucial for businesses, as it influences decision-making and effectiveness However, the financial statements of enterprises often fail to accurately represent their business activities and true condition To ensure the integrity and fairness of financial statements, it is essential to test and validate the information provided This need has led to the emergence of audit activities, which serve to verify and uphold the accuracy of financial reporting.

After completing my internship at U&I Auditing Co., Ltd - Hanoi branch, I recognized the critical role of revenue in the business processes of all types of companies The revenue reported on the income statement is essential for calculating key financial indicators Therefore, any misrepresentation of revenue from sales of goods and services can distort crucial metrics such as profit, profit margin, and turnover ratio.

Understanding the significance of financial statement audits, particularly for revenue items, is crucial during my internship at U&I Auditing Co., Ltd - Hanoi branch My goal is to gain insights into the auditing process for revenue generated from the sales of goods and services I aim to identify the challenges faced in the current auditing practices and propose improvements to enhance the audit of revenue in financial statements at U&I Auditing Company Limited Therefore, I have chosen the topic: "Enhancing the Revenue Audit Process for Sales of Goods and Services in Financial Statement Audits at U&I Auditing."

Co., Ltd-Ha Noi branch”.

Aims of the study

This study aims to examine the current audit process for revenue from the sales of goods and services in the financial statements at U&I Auditing Co., Ltd, Hanoi branch.

To begin with, to systematize the basic theories of the process of auditing sales of goods and servicesby independent auditors

This article examines the current state of the revenue audit process within the financial statement audits conducted by U&I Auditing Co., Ltd - Hanoi branch It highlights the strengths of the company's auditing practices while also identifying key limitations in the auditing of sales and service provision.

Thirdly, propose solutions to improve the process of auditing sales revenue and providing services in the audit of financial statements performed by U&I Auditing Co., Ltd - Hanoi branch.

Research object and the scope of the study

- Research object: Auditing revenue from sales of goods and services in auditing financial statements

- Research scope of the topic:

+ Space:Auditing Revenue from sale of goods and rendering services in the financial statement audit at U&I Auditing Co., Ltd., where the audit subjects are independent audit members

+ Time: For the audit start from 1 January to 31 March 2023 at clients st th whose accounting periods end at 31.12.2022

Methodology

The thesis employs a dialectical materialism methodology to analyze independent audit activities within the socio-economic context of Vietnam It involves comprehensive data collection through document review, interviews, observations, and thematic analysis The research focuses on the theoretical foundations of revenue from sales of goods and services, evaluates the current audit processes at U&I, and examines practices from leading international auditing firms in Vietnam Additionally, the thesis proposes directions and solutions for enhancing the auditing of revenue from sales and service rendering.

Design of the study

In addition to the introduction, the conclusion, the list of references and the list of diagrams and tables, the list of acronyms, the thesis consists of 3 chapters:

Chapter 1: Literature review on audit of revenue from sales of goods and services in audit of financial statements implemented by independent audit companies

Chapter 2: Actual situation of the audit of revenue from sales of goods and services in the audit of financial statements performed by U&I Auditing Co., Ltd - Hanoi branch

Chapter 3: Solutions to enhance the audit of revenue from sales of goods and services in the audit of financial statements performed by U&I Auditing Company Limited - Hanoi branch.

LITERATURE REVIEW ON AUDIT OF REVENUE

OVERVIEW OF REVENUE FROM SALES OF GOODS AND SERVICES

According to Vietnamese accounting standard No 14 (2002), “Revenue and other income”[6]:

Revenue represents the total economic benefits accrued by a business during a specific accounting period, resulting from its regular production and operational activities, ultimately enhancing the owner's equity.

Revenue from the sale of goods and services encompasses the total amount received or expected from transactions that generate income, including the sale of products and services provided to customers This revenue may also include any additional fees or charges beyond the base selling price.

1.1.2 The position and meaning of the Revenue from sales of goods & services

In today's competitive market, the rapid flow of information facilitates broader trading relationships among individuals and businesses This environment has led to an increase in both the size and quality of revenue generated from the sale of goods and services Revenue is a crucial element of the sales-collection cycle, interconnected with various financial indicators such as cash flow, expenses, inventory, and taxes It serves as the foundation for assessing key metrics like profits and corporate obligations to the state, while also reflecting the overall efficiency and effectiveness of the business process during a given period Consequently, an enterprise's operational capacity, competitiveness, and strategic direction are clearly revealed through its revenue performance.

Revenue targets serve various purposes across different contexts, often leading to discrepancies in their representation For instance, businesses may report increased revenue to attract investors and facilitate growth, while they might also underreport revenue to minimize tax liabilities Consequently, revenue generated from sales of goods and services carries significant risks that stakeholders must consider.

Revenue from the sale of goods and services is a crucial component of financial statements, significantly influencing other financial items Given the potential for fraud in this area, auditing sales revenue is essential and should be prioritized from the outset of the audit process During audit planning, it is important to assess the materiality of this revenue, and while conducting the audit, a thorough examination of sales transactions should be performed, potentially including a comprehensive review if warranted Auditors must maintain professional skepticism and exercise caution when forming conclusions related to this critical revenue item.

1.1.3 Organization of accounting work and internal control activities of sales of Goods & Services revenue

1.1.3.1 Principles of determining, time to recognize revenue

Revenue from sales of goods and services is a key indicator of business performance, reflecting the scale of operations and the enterprise's ability to generate capital To ensure accuracy and confidentiality in determining sales revenue, it is essential to follow several fundamental principles.

- Accrual basis: Revenue must be recognized at the time it is generated, regardless of whether it has been collected or not

- Matching concept: When revenue is recognized, an appropriate expense must be recognized

- Prudence concept: Revenue and income are recognized only when there is solid evidence and the possibility of obtaining economic benefits

Businesses need to assess the appropriate timing for transferring the majority of ownership risks and rewards to the buyer on a case-by-case basis Typically, this transfer aligns with the moment when the buyer gains legal title or control over the goods, ensuring that both risks and benefits are effectively shifted.

When an enterprise retains significant risks related to the ownership of goods, the transaction is classified as something other than a sale, and revenue is not recognized This includes various forms of risk associated with the ownership of goods that the enterprise must manage.

- The business is also responsible for ensuring that the property is in normal operation, which is not covered by the normal warranty terms

- When the payment for the sale of goods is uncertain because it depends on the buyer of such goods

- When the goods are delivered pending installation and the installation is an important part of the contract that the business has not completed

In situations where a buyer has the right to cancel a purchase as outlined in the sales contract, businesses often face uncertainty regarding the potential return of goods.

If the enterprise bears only a small fraction of the risks associated with title to the goods, the sale is determined and revenue recognized

Revenue from sales is recognized when it is likely that the economic benefits will be received by the enterprise If there are uncertainties regarding the economic benefits from a sale, revenue recognition will occur only after these uncertainties have been clarified.

Key documents utilized in accounting processes include VAT invoices, sales invoices, agent payment tables, stall cards, delivery notes for internal transportation and sales to agents, sales reports, contracts for the purchase and sale of goods and services, retail sale orders, payment documents, VAT declarations, and other relevant accounting records.

A comprehensive bookkeeping system for tracking revenue encompasses both general and detailed records, including detailed revenue account books, customer receivables ledgers, general ledgers, sales diaries, and general diaries.

▪ Acc 511: Revenue from selling goods and providing services

➢ Acc 5112: Sales of finished products

➢ Acc 5113: Revenue from rendering of services

➢ Acc 5117: Revenue from investment real estate business

▪ Acc 333 Taxes and other payables to the state budget –

▪ Acc 133 Deductible Value Added Tax –

▪ Acc 911 Determination of business results –

1.1.3.5 T - Account of Revenue from sales of goods and services

For sales of goods and services that is exxcluded to VAT is summarized by the following diagram: [5]

Figure 1 1 Accounting for Revenue from Sales of goods and services which not included VAT

For sales of goods and services that is included to VAT is summarized by the and services

Closing revenue from returned goods, trade discount, discount rate to 511

Revenue from sales of Goods

Revenue from returned good Trade discount, Return Goods,

Figure 1 2 Accounting for revenue from Sales of goods and services which included VAT and calculated by the deduction method

Accounting chart of revenue from sales of goods and services included export tax, special consumption, and environmental protection [5]:

Figure 1 3 Accounting chart of revenue from sales of goods and services included export tax, special consumption, and environmental protection and services

Transfer Revenue from returned goods, trade discount, discount rate to 511

Revenue from sales of Goods

Revenue from returned good Trade discount, Return Goods,

Closing entry and services export tax, special consumption, and environmental protection

Transfer Revenue from returned goods, trade discount, discount rate to 511

Export tax, special consumption, and environmental protection

Revenue from sales of Goods

Revenue from returned good Trade discount, Return Goods,

1.1.4 Internal control activities (control functions) for the Revenue from sales of goods and services

To maximize profits, businesses must establish an effective management and monitoring system tailored to their unique characteristics A well-constructed internal control system is crucial for enhancing inspection and control activities Since revenue-related transactions are fundamental in assessing business performance, each entity should implement and uphold a robust revenue control process to meet its control objectives.

Revenue recognition is based on delivery documents, approved customer orders

Sales invoices are numbered first, consecutively, are made in accordance with regulations and clearly state the quantity of goods, the selling price, etc., and the purpose of use

Monthly, send sales balance sheet to receive money to customers, have an independent department with accounting to receive feedback from customers All sales transactions are recorded in full

Delivery documents and sales invoices are numbered first, consecutively and clearly indicate the purpose of use

All sales transactions are authorized

The general approval and specific approval of each sales transaction need to go through the following methods:

-Approval of credit sales before shipping -Approve the transportation of goods

-Approve selling prices, including shipping and discounts

To enhance customer satisfaction, it is essential to establish a clear discount and return policy Additionally, sales transactions should be meticulously recorded, detailing the quantity and type of goods delivered, along with properly issued sales invoices.

To enhance operational efficiency, it is crucial to assign tasks that maintain independence between bookkeeping and delivery staff This separation ensures that the sales department can effectively manage order receipt while facilitating cross-checks between sales invoices and shipping documents, thereby improving accuracy in bookkeeping practices.

Build a system of detailed account diagrams for each type of business Review and check the recording of revenue into accounting accounts, notice unusual accounts

Sales transactions reflect the correct accounting period

Building the order of making vouchers and recording sales transactions on time

Regularly check internally on the preparation, rotation of documents and bookkeeping from time to time

Sales transactions are correctly recorded and accrued correctly

Separate the bookkeeper of sales and record the details of accounts receivable from customers Make monthly payment balance and send to customers

Internal reconciliation of sales collection –

Table 1 1: Internal control objectives and processes for revenue

1.2 OVERVIEW OF AUDIT OF REVENUE OF SALES OF GOODS & SERVICES IN THE AUDIT OF FINANCIAL STATEMENTS PERFORMED BY INDEPENDENT AUDIT

1.2.1 Objective of audit of Revenue of sales of goods and services

AUDIT PROCESS OF SALES OF GOODS & SERVICES

IN AUDIT OF FINANCIAL STATEMENTS IMPLEMENTED BY INDEPENDENT AUDIT

The process of auditing the revenue from sales of goods and services includes 3 stages:

- Implementing the audit of revenue from sales of goods and services

- Finalizing the audit of revenue from sales of goods and services

Planning an audit is a crucial initial step in the examination of sales for goods and services This phase aims to develop a scientific and effective audit strategy As outlined in Vietnamese Auditing Standard 300 (2012), paragraph 08 emphasizes that auditors must create a comprehensive audit plan to address all significant aspects, enabling the identification of fraud, risks, and potential issues while ensuring timely completion of the audit.

An effective audit requires a well-structured audit plan for each engagement Proper planning is essential for three key reasons: it enables auditors to gather sufficient and appropriate evidence, helps maintain reasonable audit costs, and minimizes the risk of disputes with clients.

Figure 1 4 Audit planning and audit methodology design

The process of gathering information about customers enables auditors to understand their needs, evaluate risks, and assess serviceability This includes considerations such as implementation timelines and audit fees If the terms are acceptable, the auditor will proceed to sign an audit contract or a letter of commitment with the client.

Prepared for the audit plan

Collect information about customers' legal obligations related to Goods and Services provided

Revenue Get basic information related to the revenue

Perform analytical procedures for Goods and

Planning the overall audit and designing the audit program for the Revenue of sales of goods and services

Understanding internal control systems and risk

Assessment of materiality and risks during the audit of sales and service provision

• In terms of new customers:

Auditors must first determine the purpose of their audit for potential clients and gather essential information regarding business operations and financial conditions It's crucial to enhance the volume of data collected, particularly for publicly traded joint stock companies and those with significant debt, as their financial statements are widely utilized Additionally, auditors should seek information from data banks, newspapers, and specialized literature, while also verifying details with related parties, including banks, legal advisors, and entities involved in financial transactions with the clients.

Auditors must gather information from various sources, including data banks, newspapers, and specialized literature, while also verifying related parties such as banks and legal advisors They should assess any financial and business relationships the client has, and may contact the previous auditor for insights, provided they have the client's consent.

Auditors must refuse an audit engagement if their independence is compromised or if they feel incapable of serving their clients effectively However, if they choose to accept the audit, they must ensure strict adherence to legal standards and professional ethics to avoid any violations.

After completing the annual audit, the auditor must update client information and evaluate any risks that could lead to the cessation of audit services Conflicts may arise between the auditor and the client regarding the audit's scope, the type of report to be issued, remuneration, or any ongoing lawsuits Based on the gathered information, the auditor will assess whether to continue providing audit services to the client.

Upon engaging with a client, auditors must determine the reasons for the audit, focusing on the users of the financial statements and their specific purposes This involves direct interviews with the client's management for new clients or leveraging insights from previous audits for returning clients Throughout the audit process, auditors gather additional information from various sources, including legal requirements and media outlets, to deepen their understanding of the client's audit motivations.

Collecting basic information related to client's revenue from sales of goods and services

The enterprise operates in diverse business lines and fields, characterized by a structured management apparatus that emphasizes decentralization This approach enhances decision-making efficiency and responsiveness to market dynamics Additionally, the company strategically analyzes its consumption activities, focusing on competitive pricing strategies, trade discount policies, and payment discount incentives to optimize market presence and customer satisfaction.

- The documents and regulations of the state on the revenue from sales of goods and services that enterprises are applying

- Information stated in the company's charter related to sales activities and revenue recognition

- Find out the results of the previous audit of sales of goods and rendering of services Revenue

To conduct a thorough audit, the auditor needs the accountant to supply essential documents, including the business registration certificate, company charter regulations, sales policy, and the previous year's audit report The findings will be documented in the audit plan section of the audit file Familiarity with these documents enables the auditor to accurately interpret audit evidence related to revenue from sales of goods and services and ensures that proper disclosures are reflected in the financial statements.

1.3.1.2 Audit contract and Arrangement Auditor

The final step in preparing the audit plan occurs after the audit firm accepts the client audit and addresses relevant considerations This step follows the mutual agreement between the audit firm and the client company regarding the execution of the audit and associated services.

After accepting the audit and reaching agreement on related issues, the two parties will sign an audit contract

Vietnamese Auditing Standard No 210 (2012) specifies in paragraph 06 that an audit contract must include general terms consistent with current regulations While these terms may be modified through mutual agreement, the contract must encompass essential elements as outlined by the standard.

• Number of documents, date, month and year of contract signing

• Names, addresses, account numbers and transaction banks of the parties

• The quality or specification of the work

In addition to the main elements mentioned above, the audit contract also has the following contents:

• Purpose, scope and content of the audit or other service

• Responsibilities of the director (or head) of the audited entity in the preparation and presentation of the financial statements

• Responsibility of the client in providing accounting documents, documents and other information related to the audit work

• Audit scope must be appropriate and compliant with laws and policies and must be assigned to professionally trained and qualified staff

• The form of an audit report or another form of an audit report…”

The auditor must specify in the contract that the nature of the audit report will be determined by the degree of accuracy and fairness, in alignment with prevailing accounting standards and regulations.

It is essential to clarify that the auditor is not accountable for identifying all instances of fraud and errors, as the responsibility lies primarily with the unit's director or head They are tasked with preventing, detecting, and addressing fraud and errors by establishing and maintaining a robust accounting and internal control system, as outlined in VSA 240 (2012) “Fraud and Error.”

After the two parties sign and have completed all necessary legal procedures, the auditing firm officially becomes its auditor

The success of an audit largely hinges on the qualifications, technical expertise, and experience of the auditor Ensuring high-quality services from independent auditing firms is crucial, making the proficiency of the audit team a primary concern Independent auditors are equipped with the necessary experience to fulfill the specific requirements of each job, particularly those set by the entities requesting the audit.

ACTUAL SITUATION OF THE AUDIT OF REVENUE

OVERVIEW OF U&I AUDITING CO., LTD HANOI BRANCH 47 – 1 History of company and the development

2.1.1 History of company and the development

U&I, standing for "You and I," is a concept established by entrepreneurs in Binh Duong, rooted in the belief that collaboration among Vietnamese individuals can lead to successful business ventures.

In the late 1990s, the rise of small and medium-sized enterprises, along with foreign-invested companies, heightened the demand for independent financial statement audits by state agencies and banks In response to this growing need and the trend of economic integration, the government has actively encouraged businesses across all sectors to engage in auditing This practical necessity led to the establishment of U&I Auditing Company Limited (UNIAUDIT).

U&I Auditing Company Limited, established on December 12, 2001, under Business License No 46000023567 by the Department of Planning and Investment of Binh Duong Province, operates as a limited liability company in accordance with the Enterprise Law The company is registered with Certificate of Business Registration and Tax Registration No 3700388908 and is headquartered at the U&I building in Thu Dau Mot city, Binh Duong province Additionally, U&I Auditing has two branches, including one located at FOSCO Building, 40 Ba Huyen Thanh Quan, District 3.

Ho Chi Minh City and one at Hapro Building, 11B Cat Linh, Ba Dinh District, Hanoi

Uniaudit has effectively addressed the accounting and auditing needs of both domestic and foreign-invested enterprises in Binh Duong and Ho Chi Minh City Since becoming a member of Baker Tilly International in 2005, Uniaudit has gained recognition as part of a prestigious global network, which includes 128 firms across 85 countries and generates $2.12 billion in sales In 2006, it was named one of Vietnam's "Top 50 Employers," reflecting its strong reputation in the industry Currently, Uniaudit leads among non-state-owned and foreign-owned audit firms in Vietnam, backed by a young and dynamic workforce educated at top universities The company prioritizes continuous professional development through regular training sessions, knowledge updates, and policies that encourage employees to enhance their expertise, supported by a network of esteemed collaborators from various educational and professional backgrounds.

2.1.2 Organizational characteristics of the management apparatus of U&I Auditing Co., Ltd - Hanoi branch

The Hanoi branch of U&I Auditing Co., Ltd features a streamlined management structure, with the Board of Directors overseeing the ACT-AUD (accounting and audit), ICA (internal control), and IBC (investment consulting) departments Each department's employees report directly to their respective department heads, ensuring efficient management and communication within the organization.

Figure 2.1 Organization of the management apparatus of U&I Auditing

Figure 2 1: Organization of the management apparatus of U&I Auditing

Board of Directors: Directing professional expertise of Hanoi branch, managing and supervising departments

Internal control department: deciding on the organization of personnel, protecting assets and providing logistics for the company

Investment consulting room: Investment consulting, valuation

Manager of accounting and auditing

Manager of Internal control deparment

Accountant, accounting consultant, tax consultant department Investment

- Accounting: monitoring and accounting for arising economic operations, making accounting reports, paying salaries, providing accounting services, tax consulting, etc

- Auditing: providing audit services, consulting and supporting customers on finance, accounting

2.1.3 Characteristics of organization of production and business activities, main rendering of services by the Company

Characteristics of rendering of services by the Company

The company provides auditing, accounting, tax and business consulting services, valuation for economic organizations of all economic sectors nationwide

Auditing financial statements is the core function of the company, which offers services to a diverse range of clients across various industries, having successfully completed over 2,000 audits.

At Hanoi branch, we mainly provide audit services of financial statements for FDI enterprises from Japan The proportion of audit revenue each year accounts for over 70% of revenue

In the coming years, the company is committed to delivering high-quality services characterized by honesty and objectivity, with a focus on diversifying offerings and enhancing consulting services The goal is to complete the audit program and improve service quality, aiming to become a leading Vietnamese provider of affordable goods and services To achieve these objectives, the company prioritizes human resources, actively recruiting personnel, including foreign auditors, to foster regional and international experience exchange Regular training sessions, updates on relevant legal documents, and opportunities for international knowledge acquisition are provided to employees Additionally, the company implements fair reward and treatment policies to motivate staff, adhering to the principle that "human resources are assets and the foundation of the company's growth," ensuring evaluations and rewards are both fair and accurate.

Characteristics of the Company's customers

UNIAUDIT, a fully owned Vietnamese company, serves over 500 foreign-invested and domestic small to medium enterprises across provinces such as Binh Duong, Ho Chi Minh City, Da Nang, Hanoi, Bac Giang, Bac Ninh, Hung Yen, and Hoa Binh This growing customer base reflects increasing trust in UNIAUDIT's auditing, accounting, consulting, and tax services Notably, the Hanoi branch primarily caters to Japanese-invested companies, which constitute approximately 90% of its clientele and contribute around 20% to the total revenue of accounting service firms in the region.

Operation motto of the Company

- Understanding, listening thoroughly to the needs and dedicated to serving customers;

- Maintain and improve the quality of services provided;

- Commitment to strictly comply with Vietnam's professional ethical standards;

- Based on the value received by the customer to calculate the service fee

Development policy and market share

The company actively nurtures and expands its portfolio of foreign-invested clients, focusing on a diverse range of customers, particularly targeting joint-stock companies listed on the stock exchange.

2.1.3 Organizational characteristics of audit work at U&I Auditing Co., Ltd

2.1.3.1 Characterist of the audit approach

In the audit process, U&I prioritizes collecting convincing evidence while safeguarding the legitimate interests of its clients The firm not only conducts audits but also provides information support and advice to enhance clients' accounting practices and internal control systems This commitment helps U&I retain existing clients and attract new ones U&I employs an item-by-item approach to auditing financial statements, allowing auditors to segment the audit into manageable parts by grouping related items Team members are assigned tasks based on cyclical relationships, ensuring that, for instance, the inventory auditor also handles related costs and payables, which maximizes audit efficiency.

2.1.3.2 Organizational characteristics of the audit team

The audit team of U&I Company is organized according to the model in the following figure below:

Figure 2 2: Organization of the audit team of U&I Auditing Co., Ltd

An audit team, comprising members from the board of directors, the audit leader, and three auditors, directly engages with the client to conduct the audit The board member overseeing the audit is responsible for signing the audit contract and report, while the head of the audit department ensures the quality of the audit process For larger clients, the audit team may expand to 4-5 members The main auditor, an experienced professional, leads the team and oversees critical audit activities.

Assistance Auditor 1 Assistance Auditor 2 assistance auditor directly perform the activities assigned by the team leader

2.1.3.3 Organizational characteristics of audit records

At U&I Company, the general audit file comprises essential documents such as investment certificates, long-term loan contracts, labor contracts, and tax registrations, providing crucial information about clients across multiple audits within a financial year These audit files are maintained in paper format The annual audit file includes the audit plan details, encompassing contracts, client information, materiality assessments, and evaluations of the internal control system and audit risk It also contains the auditor's working papers, which feature data summaries, detailed documentation for each audit section, and evidence supporting the audit findings, ensuring comprehensive records are kept throughout the auditing process.

Regulations on record keeping at the Company are as follows:

After the audit report is delivered to the client, the audit team leader must coordinate with the Accounting and Administration Department to ensure the report is archived The report must be recalled for storage within a maximum of 30 days from the delivery date.

Audit records should be simultaneously stored in the software and a physical binder It is essential to archive these records within three months of delivering the report to the client.

- Audit records stored on the cover after 2 years must be packed and stored in a locked cabinet and securely stored

- The minimum period of keeping audit records is 10 years

- Audit records must be fully preserved, safe and confidential in the working room, at the client's office or in the archive

The audit staff must ensure the preservation of audit files and are prohibited from taking these documents home or transferring them when changing jobs All employees in the audit department are required to refrain from removing audit files unless explicitly authorized by the Head of the Auditing Department.

- Dossier and documents in an orderly manner, labeled with the name of the file for easy management, easy submission, and easy lookup when using Naming audit file

The company has regulations on naming audit files for easy management and control during implementation and archiving

Appendix 2.1 Index of audit records

ACTUAL SITUATION OF THE AUDIT PROCESS OF REVENUE

2.2.1 Introduction about the audit of financial statements of XYZ clients performed by U&I Auditing Co., Ltd - Hanoi branch

The Company's clientele spans various sectors and production scales, showcasing its diverse operational reach To illustrate the auditing process, we examine a contract between U&I Auditing Company Limited and XYZ Company, a manufacturing enterprise and a previous client In late 2022, XYZ Company engaged U&I Auditing to conduct an audit of its financial statements for the fiscal year ending December 31, 2022.

XYZ Company, a 100% foreign-owned limited liability firm established in Vietnam, has been audited by U&I Auditing Co., Ltd for the third consecutive year in 2022 The company operates under investment certificate No 2500614302, issued by the Management Board of Hung Yen Industrial Park on August 4, 2010 Its primary investors include XYT Joint Stock Company from Japan, which holds a 94.82% stake with a capital contribution of VND 34,408,000,000, and Mr Akihiro X from Japan, who owns a 5.18% stake with a contribution of VND 1,878,000,000.

- Head office: Road B2, Zone B, Pho Noi A Industrial Park, Lac Hong Commune, Van Lam District, Hung Yen Province, Vietnam

- Accounting regime applied: Enterprise accounting system according to Decision 200/2021/TT-BTC dated 22/12/2021 and Decision 75/2022/TT-BTC dated 18/05/2022

- Accounting form applied: General journal

XYZ Co., Ltd specializes in constructing factories for lease and offering associated services This article introduces the process of conducting a financial statement audit at XYZ Co., Ltd., highlighting the key steps and methodologies involved to ensure accuracy and compliance.

Collected results will be saved in the audit plan (A310- Understanding customers and operating environment) in the audit file

Basic information about customer XYZ collected by auditor is shown in working papers WPs 2.1

Preliminary analysis of financial statements

After Company XYZ provides the financial statements, the auditor performs preliminary analysis procedures for the balance sheet and income statement

Apendix 2.4 Pre-audit financial statements

The audit objective is to provide the auditor with a comprehensive understanding of the entity's financial position and business performance, enabling the determination of the appropriate scope, scale, and detailed examination necessary for the audit process.

Auditing procedures involve a comprehensive review of all items on the Balance Sheet and Income Statement, focusing on a comparison of this year's figures with the audited data from the previous year Auditors apply professional judgment at a general level, and the use of Excel tools for working papers facilitates a swift, accurate, and convenient auditing process.

WPS 2 1 Gathering general information about customers (A310)

Clients: XYZ Co.,Ltd Name Date

Contents: Understanding the business Review NTX 10/01/2023

General information on legal elements includes, but is not limited to, the following:

(1) Accounting regime and accounting practices (if any) applicable to our business lines (including new accounting policies/regulations, ) :

In 2021, the accounting regime was applied according to Decree No 15/2006/QD-BTC, in 2022 the Circular 200/2021/TT-BTC was applied

The legal framework and regulations relevant to the specific industry of the enterprise significantly impact its operations Understanding enterprise law and specialized regulations is crucial for compliance and effective management.

3) Policies issued by the State currently affecting business activities of enterprises (such as regulations on currency, foreign exchange, incentives, Government financial support, tax barriers): None

(4) Tax regulations (VAT, CIT, other taxes): Circular 219/2013, Circular 92/2022, Circular 26/2022 on VAT;

(5) Environmental regulations affecting business lines and operations: None

General information about the field of operation of the enterprise includes, but is not limited to, the following information:

The company's revenue primarily stems from constructing factories for lease, along with offering associated services This includes a focus on both manufacturing and service sectors, utilizing various distribution channels such as wholesale, retail, and e-commerce The company continuously assesses its main product and service categories, adapting to market demands by introducing new offerings or discontinuing underperforming ones.

(2) Production stages and processes, activities affected by environmental risks: N/A

(3) Significant joint ventures, associates and outsourcing activities: None

(4) Geographical dispersion and market segmentation: For building factories and related services: Customers are mainly concentrated in Hung Yen city

(5) Production location, warehouse, office, quantity and location of inventory:

Address: Road B2, Zone B, Pho Noi A Industrial Park, Lac Hong Commune, Van Lam District, Hung

(6) Nittoku Viet Nam Co.,Ltd, Hashimoto Cloth Viet Nam, Tentac Ha Noi Co.,Ltd

(7) Important agreements with employees (life insurance, stock options, retirement benefits, other incentives ): None

(8) Activities, spending on research and development: None

Construction contract, Borrowing capital for production and business, compensation and other operating expenses

2.2 Ownership type and management apparatus

(1) Type of ownership: (Family company, joint stock company, State company, etc If it is a listed company, from what year, on which floor ): Limited company

The ownership structure of the company is comprised of XYT Joint Stock Company, a Japanese entity, which holds a significant 94.82% stake with a capital contribution of VND 34,408,000,000 Additionally, Mr Akihiro XYZ, also from Japan, contributes VND 1,878,000,000, representing 5.18% of the company's total capital.

The Board of Directors meets at least quarterly, with additional meetings convened by the Chairman as needed During these periodic meetings, various issues are discussed, and reports are presented to ensure effective governance and oversight.

Stakeholders encompass a range of organizations and individuals that are connected to the enterprise, including those that significantly impact or influence its operations This group includes lending banks involved in large transactions and entities such as XYT Joint Stock Company, which play a crucial role in the enterprise's financial ecosystem.

The organizational structure of the enterprise encompasses various departments, branches, representative offices, and member units, each playing a crucial role in the overall operations Additionally, the accounting regime and practices relevant to our business lines include adherence to new accounting policies and regulations, ensuring compliance and accuracy in financial reporting This comprehensive framework supports efficient management and transparency across the organization.

In 2021, the accounting regime will be applied according to Decision No 15/2006/QD-BTC, in 2022, the Circular 200/2021/TT-BTC will be applied

The legal framework and regulations relevant to the specific business type or industry significantly impact the enterprise's operations Understanding enterprise law and specialized regulations is crucial for ensuring compliance and optimizing business performance.

(3) Policies issued by the State currently affecting business activities of enterprises (such as regulations on currency, foreign exchange, incentives, Government financial support, tax barriers): None

(4) Tax regulations (VAT, CIT, other taxes): Circular 219/2013, Circular 92/2022, Circular 26/2022 on VAT; Circular 78/2021, Circular 96/2022 on CIT

(5) Environmental regulations affecting business lines and operations: None

Construction contract, Borrowing capital for production and business, compensation and other operating expenses

General information about applicable accounting policies includes, but is not limited to, the following: (1)Accounting policies applicable to significant transactions (revenue, inventory, cost of goods ): Principles of inventory recognition:

Inventories are recorded at cost, minus allowances for devaluation and provisions for obsolete or damaged items The inventory cost encompasses direct materials, direct labor, and any manufacturing overhead necessary to bring the inventory to its present location and condition.

Inventory valuation method: weighted average method Inventory accounting method: perpetual declaration method

To account for the devaluation of inventories, businesses must create a provision for obsolete, damaged, or inferior goods when their cost exceeds the net realizable value at the end of the year The net realizable value is calculated as the estimated selling price minus completion costs, along with any incurred selling and distribution expenses The allowance for devaluation represents the gap between the inventory's cost and its net realizable value.

Principles and methods of revenue recognition:

Revenue is recognized when it is likely that economic benefits will be received by the Company and can be measured accurately Additionally, specific conditions must be satisfied for revenue recognition to occur.

GENERAL ASSESSMENT OF THE AUDIT REVENUE FROM

OF GOODS AND SERVICESITEMS IN THE AUDIT OF FINANCIAL STATEMENTS AT U & I AUDITING CO., LTD - HANOI BRANCH 2.3.1 Strength

2.3.1.1 General comments on the financial statement audit process

To begin with, It’s about the audit team

The branch efficiently organizes its audit team by carefully selecting and allocating staff for each audit Its human resources are dynamic, enthusiastic, and hardworking, possessing high professional knowledge and a commitment to regularly updating current legal documents while maintaining a professional working style.

The Branch's success has greatly enhanced the audit team's organization, led by a highly qualified team leader with practical experience who efficiently oversees the entire audit process By assigning tasks based on individual strengths, the team saves time and costs while maintaining high audit quality Additionally, audit assistants collaborate across sections, fostering experience and solidarity within the Branch.

Effective assignment of tasks within the audit team enhances each member's understanding of their responsibilities By aligning work distribution with the auditors' and assistants' actual experience, audits can be conducted efficiently and within deadlines, while maintaining high-quality standards essential for seasonal audits.

Secondly, When it comes to the audit process

U&I Auditing- Hanoi branch flexibly applies the sample audit program issued by VACPA with the characteristics of each specific customer, and balances the audit time and audit fees

When auditing XYZ Co., Ltd., a long-term client, the auditor can bypass the initial step of familiarizing themselves with the business environment and operational characteristics, thus optimizing audit time The auditor's existing knowledge of the company's internal control system allows for a more efficient understanding of its performance through streamlined procedures during the audit implementation stage.

The audit process of U&I Auditing company - Hanoi branch is carried out according to the model audit program, strictly abides by Vietnam's accounting standards and regulations

With a team of highly qualified, experienced and responsible auditors, the audit performance is always the most effective and highly appreciated by customers

The audit ended within the time limit specified in the contract, the work results were evaluated as good

The quality review of an audit prioritizes maintaining its effectiveness and efficiency throughout the entire process By addressing issues as they arise, the audit ensures timely resolutions that uphold its overall quality.

In terms of keeping audit records

The records are meticulously designed to meet auditing standards, ensuring efficient record-keeping at the branch office This organization facilitates auditors in easily locating necessary documents during their work, particularly during the audit planning stage for upcoming audits.

The scientific way of filing the file makes it easy for auditors to find the information contained in the file, saving time in the working process

The branch enforces rigorous quality control throughout multiple stages, ensuring thorough oversight not only upon completion of the audit but also during the process, led by both the group leader and the audit leader.

2.3.1.2 Comment on the process of auditing the revenue from Goods and provide Services performed by U&I Auditing Co., Ltd - Hanoi Branch Audit planning stage

The revenue item audit program is tailored to meet current Vietnamese standards, with ongoing updates by U&I Auditing - Hanoi branch to accommodate diverse production and business characteristics This ensures compliance with both global and Vietnamese auditing and accounting standards Consequently, the auditing of revenue from sales of goods and services is adaptable and efficient, utilizing analytical procedures, detailed test procedures, or a combination of both, based on the auditor's discretion.

Prior to conducting the audit, the auditor gathered essential client information, including soft documents, and reviewed the previous year's audit records to gain an initial understanding of the client unit The audit team leader consistently reached out to the client to ensure a thorough preparation process.

The audit team leader proactively requested the client to supply soft documents and provisional data, particularly concerning revenue The audit process at the client's company is meticulously organized; for returning clients, the company assigns auditors who have previously worked with them, ensuring a deep understanding of the client's business activities This approach fosters an honest comprehension of the client's needs, ultimately saving time, effort, and costs during the audit.

The sales of goods and services revenue are crucial, prompting the involvement of experienced auditors to ensure high reliability in the audit conclusions.

U&I Auditing's Hanoi branch boasts a dynamic team of young auditors who bring both experience and professionalism, enhancing the company's competitive edge To foster employee dedication and long-term commitment, the branch has implemented a robust human resource policy that compensates staff based on their skills and capabilities, attracting new talent while retaining experienced employees Regular training and updates on new policies, along with opportunities for professional development such as CPA certification, are prioritized The company's charter clearly outlines the qualifications, duties, and powers associated with each position, promoting a culture of ambition and clearly defining departmental responsibilities.

Analytical procedures are performed by certified accountants who possess expertise in financial analysis and a deep understanding of their client's industry These flexible procedures utilize suitable methods and analytical criteria to assess the reasonableness of financial figures, aiding in the decision-making process for detailed inspections and potentially adjusting the extent of these procedures.

- The analysis of the customer's revenue is done on working papers, clearly stating the causes of the differences right on the working papers; simultaneously

The analysis integrates revenue data with production conditions and inventory levels of imports and exports to elucidate the fluctuations observed in the financial statements.

Tests of controls are conducted to evaluate the effectiveness of the internal control system, confirming the initial assessment of control risk This process helps determine whether the internal control system can be trusted, ultimately influencing the necessity for detailed testing procedures.

SOLUTIONS TO ENHANCE THE AUDIT PROCESS OF

REQUIREMENTS AND PRINCIPLES FOR COMPLETING THE

3.1.1 The requirements for completing an audit

The completion of the audit process for the item Sales of goods and servicesin the audit of financial statements is an indispensable requirement, stemming from three reasons:

The trend of globalization and integration is driving investors to recognize the significant potential of the Vietnamese market To attract international investment, Vietnam's economy must gradually adapt its mechanisms and regulations As a result, the diversity and complexity of enterprises are on the rise, leading to an increased demand for auditing services due to state regulations Companies are becoming more focused on the transparency of their financial information, which has intensified competition among independent auditing firms Consequently, these firms must evolve by specializing their operations and enhancing the quality of their audit services to stay aligned with global trends.

Revenue plays a crucial role in financial statements, significantly impacting various other items within them It serves as an essential indicator of a company's existence and growth, with strong revenue results reflecting optimism regarding the business's current and future financial position Conversely, low revenue results can signal stagnation and losses Therefore, it is imperative that the auditing of financial statements, particularly the revenue section, is conducted effectively to ensure accurate conclusions about its true and fair representation, ultimately influencing the overall outcomes of the financial audit and the guidance provided to the client.

The limitations identified in the audit process of sales revenue at U&I Auditing Co., Ltd - Hanoi Branch heighten the risk associated with the audit, potentially compromising the Auditor's opinion By enhancing the audit process for sales of goods and services, the detection risk can be minimized, thereby lowering overall audit risk and improving the quality of audits for clients This improvement will help maintain the reputation and market share of U&I Auditing - Hanoi Branch within the competitive audit industry.

Completing the audit process for Goods and Revenue at U&I Auditing's Hanoi branch is essential for enhancing service quality, expanding market reach, and strengthening the company's brand within the auditing community.

The completion of the audit process for sales of goods and services, as well as financial statements, is essential and guided by fundamental principles.

To enhance the effectiveness of the pre-designed auditing process, it is essential to supplement and innovate elements that may not align with current circumstances Additionally, fostering collaboration among domestic auditing firms while learning from the practices of global auditing firms can significantly improve overall performance and adaptability.

Conducting a revenue audit for the sales of goods and services in financial statement audits must adhere to the Vietnamese accounting and auditing standards, while also reflecting the latest legal reforms introduced by the State This process should be aligned with recent changes to effectively support international integration.

The principle is simple, economical but tight and effective:

To enhance the audit process, it is essential to consider feasibility, staff qualifications, technology, and funding While cost-saving remains a priority for audit firms, maintaining the rigor and effectiveness of audits is crucial Additionally, fostering a positive work environment through adequate rewards and treatment can motivate employees, while implementing discipline, constructive criticism, and self-reflection can help uphold the company's operational principles.

SOLUTIONS TO ENHANCE THE PROCESS OF AUDITING

OF GOODS AND SERVICESITEMS AT U&I AUDITING CO., LTD - HANOI BRANCH

3.2.1 Completing the financial statement audit process

To effectively gather essential customer information, auditors should engage in interviews with the client's accountant and board of directors, while also seeking insights from various departments within the client’s organization and external parties involved in transactions Utilizing mass media resources such as newspapers, radio, and the internet can further enhance understanding Observing the production and business processes provides a more objective perspective on the audited entity Additionally, audit managers should prioritize assigning experienced personnel to work with returning clients and facilitate brief meetings between last year’s audit team and the current auditors This collaborative approach allows for a focused discussion on key customer issues, ultimately saving time and ensuring a comprehensive understanding of the client's business operations during the audit process.

To enhance the analytical process of financial statement items, auditors must employ analytical procedures while applying their professional judgment It's crucial to identify the causes of fluctuations and recognize any unusual events Auditors gather comprehensive industry data to compare the client's financial metrics against those of similar entities and the industry average.

In addition to trend analysis, audits should incorporate various ratio analysis procedures to enhance financial statement evaluation Key ratio groups commonly utilized in auditing include current solvency ratios, profitability ratios, and financial structure ratios.

Following the completion of a customer audit, it is essential for the Company to enhance its quality control over the audit file Auditors must ensure that all working papers are finalized and properly referenced within the audit documentation Once the audit file has undergone group-level review, it should be promptly assessed by the Board of Directors to elevate audit quality and reduce audit risk.

3.2.2 Completing the process of auditing the revenue from sales of Goods and Services

To enhance the effectiveness of internal control assessments, auditors should gather comprehensive information about customers beforehand This proactive approach minimizes the risk of subjective interview questions leading to overlooked critical information and ensures a clear, thorough evaluation of the entire internal control system rather than just isolated components.

Develop and implement detailed control testing techniques tailored to the unique characteristics of each unit Utilize simple control procedures primarily through questionnaires regarding the internal control system and narrative tables For larger enterprises or corporations, enhance the approach by integrating flowchart diagrams with the questionnaires and narrative tables for a comprehensive assessment.

For example: + For small businesses, long-term customers of the Company, the Company can use the Questionnaire about the internal control system

For first-year audits, customers can utilize the narrative table, which, while time-consuming initially, will streamline the auditor's tasks in subsequent years.

+ For large corporations: it is possible to use a combination of narrative tables with flowcharts to facilitate monitoring

To enhance the audit program through innovative approaches like control testing, it is essential to conduct mentoring sessions for staff These sessions will facilitate agreement on the techniques, methods, and practices developed by the Company, ensuring a cohesive implementation of the new strategies.

To ensure a thorough audit process, companies must develop a scientific method for assessing potential and control risks, moving beyond reliance on the auditor's subjective experience Materiality should be determined for the entire financial statements and allocated appropriately to specific items This assessment requires collaboration among multiple experts using various approaches, including customer interactions and evaluations of the internal control system The audit risk assessment can be effectively modeled using a defined formula.

AR = IR*CR*DR or DR = AR / (CR*CR)

Where: AR: audit risk, IR: inherent risk, CR: control risk and DR: detection risk U&I Auditing HaNoi Branch may also use computer – software to calculate audit risk

To enhance efficiency in the audit planning process, it is essential for the Company to clearly outline the specific procedures within the general audit program that are applicable to various types of enterprises This targeted approach enables auditors to conduct revenue item audits swiftly and effectively.

In the preliminary analysis of goods and services sales, auditors must gather non-financial information, including state policies, industry competition, and market conditions, to accurately assess revenue fluctuations This process enhances the reliability of their evaluations and necessitates auditors to possess comprehensive knowledge of key industries, access to precise information, and an ongoing awareness of both domestic and international economic developments.

When conducting revenue item audits, it is essential for the audit program to develop a revenue forecasting model to ensure objective analysis rather than relying solely on experience Various methods exist for building these models, allowing auditors to select the most appropriate one based on the specific circumstances of each enterprise, the timing of the audit, and other relevant data The four commonly used forecasting methods provide a framework for effective revenue analysis.

The long-term average method utilizes the average forecast based on previous observations, effectively smoothing out random fluctuations This approach is ideal for models where consecutive increases and decreases are roughly equal in magnitude However, it requires a significant amount of computational resources.

The moving average method forecasts the tth period by calculating the average of prior observations This technique updates the forecast by discarding the oldest data point and incorporating the latest observation, ensuring a dynamic and responsive analysis of trends.

This method is also suitable for models where the absolute amount of continuous increase and decrease is approximately the same

Regression analysis is a statistical method that examines the relationship between a dependent variable and one or more independent variables to estimate or predict the mean value of the dependent variable based on the independent variable's values By constructing a regression model, auditors can estimate financial variables from operational data, allowing them to compare the predicted results with the entity's actual data Additionally, auditors can utilize Excel's regression analysis techniques for accurate predictions and forecasting.

- The method of comparing and analyzing the gross profit ratio this year compared to the previous year

The analysis of gross profit ratio helps to identify unusual and large fluctuations that need to be researched

Table 3 1 Calculating the gross profit ratio over 2 years of XYZ:

1 Gathering general information about customers (A310)

Clients: XYZ Co.,Ltd Name Date

Contents: Understanding the business Review NTX 10/01/2023

General information on legal elements includes, but is not limited to, the following:

(1) Accounting regime and accounting practices (if any) applicable to our business lines (including new accounting policies/regulations, ) :

In 2021, the accounting regime was applied according to Decree No 15/2006/QD-BTC, in 2022 the Circular 200/2021/TT-BTC was applied

The legal framework and regulations relevant to the specific industry of the enterprise significantly impact its operations This includes enterprise law and any specialized laws that may apply Understanding these legal requirements is crucial for ensuring compliance and fostering effective business practices.

3) Policies issued by the State currently affecting business activities of enterprises (such as regulations on currency, foreign exchange, incentives, Government financial support, tax barriers): None

(4) Tax regulations (VAT, CIT, other taxes): Circular 219/2013, Circular 92/2022, Circular 26/2022 on VAT;

(5) Environmental regulations affecting business lines and operations: None

General information about the field of operation of the enterprise includes, but is not limited to, the following information:

The company generates revenue primarily through the construction of factories for lease and the provision of associated services Its offerings encompass both manufacturing and services, utilizing various distribution channels including wholesale, retail, and e-commerce The company continually evaluates its product and service categories, adapting to market demands by introducing new offerings and discontinuing those that no longer meet customer needs.

(2) Production stages and processes, activities affected by environmental risks: N/A

(3) Significant joint ventures, associates and outsourcing activities: None

(4) Geographical dispersion and market segmentation: For building factories and related services: Customers are mainly concentrated in Hung Yen city

(5) Production location, warehouse, office, quantity and location of inventory:

Address: Road B2, Zone B, Pho Noi A Industrial Park, Lac Hong Commune, Van Lam District, Hung

(6) Nittoku Viet Nam Co.,Ltd, Hashimoto Cloth Viet Nam, Tentac Ha Noi Co.,Ltd

(7) Important agreements with employees (life insurance, stock options, retirement benefits, other incentives ): None

(8) Activities, spending on research and development: None

Construction contract, Borrowing capital for production and business, compensation and other operating expenses

2.2 Ownership type and management apparatus

(1) Type of ownership: (Family company, joint stock company, State company, etc If it is a listed company, from what year, on which floor ): Limited company

The ownership structure of the company reveals that XYT Joint Stock Company, established in Japan, holds a significant 94.82% stake with an investment of VND 34,408,000,000, while Mr Akihiro XYZ from Japan owns the remaining 5.18% with a contribution of VND 1,878,000,000.

The Board of Directors convenes periodic meetings, led by the Chairman, to address essential issues and review reports These meetings occur at least once every quarter, although the Chairman may call additional meetings as necessary.

Stakeholders encompass a diverse range of organizations and individuals connected to the enterprise, including those that significantly influence its operations Key stakeholders include lending banks involved in substantial transactions and notable entities like XYT Joint Stock Company, which play a critical role in shaping the enterprise's strategic direction and financial health.

The organizational structure of the enterprise encompasses various departments, branches, representative offices, and member units, illustrating a comprehensive framework for operations Additionally, the accounting regime and practices relevant to our business lines include adherence to updated accounting policies and regulations, ensuring compliance and accuracy in financial reporting.

In 2021, the accounting regime will be applied according to Decision No 15/2006/QD-BTC, in 2022, the Circular 200/2021/TT-BTC will be applied

The legal framework and regulations pertinent to the specific business type or industry significantly impact the enterprise's operations This includes enterprise law and any specialized laws that may apply, which can influence compliance, operational efficiency, and overall business strategy Understanding these legal requirements is essential for effective management and sustainable growth within the industry.

(3) Policies issued by the State currently affecting business activities of enterprises (such as regulations on currency, foreign exchange, incentives, Government financial support, tax barriers): None

(4) Tax regulations (VAT, CIT, other taxes): Circular 219/2013, Circular 92/2022, Circular 26/2022 on VAT; Circular 78/2021, Circular 96/2022 on CIT

(5) Environmental regulations affecting business lines and operations: None

Construction contract, Borrowing capital for production and business, compensation and other operating expenses

General information about applicable accounting policies includes, but is not limited to, the following: (1)Accounting policies applicable to significant transactions (revenue, inventory, cost of goods ): Principles of inventory recognition:

Inventories are reported at cost, minus allowances for devaluation and provisions for obsolete or damaged items The cost of inventory encompasses direct materials, direct labor, and any manufacturing overhead necessary to prepare the inventory for its current location and condition.

Inventory valuation method: weighted average method Inventory accounting method: perpetual declaration method

To account for inventory devaluation, a provision is established for obsolete, damaged, or inferior goods when their cost exceeds the net realizable value at year-end The net realizable value is calculated by deducting completion costs from the estimated selling price and adding any associated selling and distribution expenses The allowance for inventory devaluation represents the difference between the inventory's cost and its net realizable value.

Principles and methods of revenue recognition:

Revenue is recognized when it is likely that economic benefits will be received by the Company and can be measured accurately Specific conditions must be fulfilled for revenue recognition to occur.

Revenue from the sale of goods is recognized when five key conditions are met: first, the significant risks and rewards of ownership have transferred to the buyer; second, the seller no longer retains the rights to manage or control the goods; third, revenue can be measured reliably; fourth, the company has obtained or will receive economic benefits from the transaction; and fifth, the costs related to the sale can be determined.

(2) Types of accounting estimates (data sources, reasonableness of provisions for receivables, provision for inventory, depreciation, ):

Tangible fixed assets are depreciated on a straight-line basis over their estimated useful lives The estimated useful life for a specific asset class is as follows: 2022 (Year)

Long-term prepaid expenses include:

- Value of used small tools

- Cost of major repair of fixed assets

(3) Accounting for the fair value of assets, liabilities and foreign currency transactions; Accounting for unusual transactions: None

(4) Accounting policies for new/controversial issues (if any): None

(5) New or new accounting regulations (if any): None

(6) Changes in accounting policies (if any): None

4 Objectives, strategies and related business risks

Describe the goals and strategies set by the Board of Directors/Board of Management, the methods used by the Board of Directors to achieve the set goals:

(1)The development of a new industry, product or service: None

(5) Use of information technology: None

(6)Implement a strategy, especially influencing new accounting requirements: None

Describe the information used and how the board of directors measures and evaluates performance, including:

(1) Key performance indicators (financial and non-financial), key ratios, trends and performance statistics:

(2) Analysis of performance results in stages: N/A

The article highlights the absence of key financial documents, including plans, forecasts, and performance evaluations for various divisions It also notes the lack of criteria for assessing staff capabilities and the absence of a preferential salary policy Furthermore, there is no comparative analysis of the unit's performance against competitors, as relevant articles, specialized magazines, and credit rating reports are not available.

(1) Address of the enterprise and related units (if any)

Road B2, Zone B, Pho Noi A Industrial Park, Lac Hong Commune, Van Lam District, Hung Yen Province, Vietnam

(2) Information about the bank at which the enterprise opens an account

- Vietcombank – Hung Yen Branch; MIZUHO Bank – Hung Yen Branch;

(3) Information about the lawyer used by the enterprise: None

Through understanding the customer and the business environment, the auditor needs to preliminarily identify risks, impact accounts, and audit procedures for risks

1/ Risks of material misstatement at financial statement level and remedies

2/ Risk of material misstatement at database and procedural level

A significant risk in auditing refers to an identified and assessed material misstatement risk that requires heightened awareness, such as fraud risk and risks stemming from recent economic and accounting changes Auditors must pay special attention to the complexities of transactions, significant dealings with related parties, and the subjectivity involved in certain determinations.

Once a significant risks has been identified, the auditor should investigate the entity's controls involved

(2) These measures and procedures should be added to the audit program of the other parts

Understanding the customer's internal control system

In its third year of auditing, XYZ Co., Ltd has maintained its internal control information within the general audit file, eliminating the need for the auditor to re-examine this data.

During the audit planning stage, an evaluation of the internal control system at XYZ Co., Ltd was conducted by the auditor, focusing on its effectiveness and compliance This audit file excerpt outlines the key findings and observations related to the company's internal controls, highlighting areas of strength and potential weaknesses that may impact financial reporting and operational efficiency.

2 Determining the audit materiality of financial statements (A170) 70

At this stage, the KTV implements the following work steps:

Clients: XYZ Co.,Ltd Perform NDM 10/01/2023

Period: Từ 01/01/2022 đến 31/12/2022 Review NTX 10/01/2023

The determination of materiality, both planned and actual, is conducted in line with the Company's policy, ensuring that audit team members are informed of the planned materiality prior to the audit at the Customer Additionally, it is the responsibility of the audit team to establish the actual materiality at the conclusion of the audit, which is essential for assessing the adequacy of the audit engagements and procedures performed.

Criteria used to estimate materiality

When determining materiality, enterprises in Manufacturing, Trading, Services, and Construction prioritize revenue as the key criterion This focus on revenue reflects the stability and scale of their business operations over the years, making it the most relevant measure for assessing materiality.

- Total assets and total owner equity: 2%

Based on the above table, the auditor selects the materiality level to apply when implementing the audit

Selected Criteria This year Previous year Different

Negligible Error Threshold / Negligible Error 8,387,748 7,641,350 (746,398)

Before initiating the audit, the audit team, Board of Directors, and the company's accounting department convene to establish a comprehensive audit plan This meeting focuses on clarifying the audit's objectives, timeline, and the roles of all parties involved in the process.

To effectively implement an audit, the team leader assesses the arising balance data and determines the materiality of each item This allows for the strategic assignment of tasks based on each member's capabilities, ensuring optimal efficiency in the auditing process.

The audit team conducts their evaluations based on a structured audit program, addressing any violations by consulting with the team leader or fellow auditors Following this discussion, they summarize their findings and make necessary adjustments In the finalization meeting, the audit team presents the audit results to the Board of Directors of company XYZ, marking the completion of the reporting stage.

At XYZ Company, the review process after the cut-off date involves interviewing the Board of Directors and examining relevant documents, including minutes, books, and notices from third parties such as creditors, customers, banks, and tax authorities This thorough examination ensures that any material uncertainties impacting the company's annual financial statements are identified and disclosed in the audit report.

Evaluating audit conclusions: Was the initial audit objective achieved? The adequacy, legality, reasonableness and validity of the audit evidence

Comprehensive assessment of detected errors

Prepare audit report and management letter

Appendix 2.6 Financial statements after the audit

2.2.2 Actual situation of audit process of revenue from sales of goods and services items in the financial statements of XYZ Company audited by U&I Auditing Co., Ltd

The audit of Goods and Services revenue follows a structured three-stage process: audit planning, audit implementation, and finalizing the audit.

2.2.2.1 Planning audit a.Collecting information related to the item Revenue from sales and providing services

Company XYZ, a long-standing client of U&I Auditing's Hanoi branch, requires an update on its management structure and policies for the current financial year To achieve this, the auditor will conduct interviews with the chief accountant, the revenue accountant for goods and services, and other relevant staff members.

The audit process at U&I Auditing's Hanoi branch integrates both cycle and item audits, allowing for a comprehensive evaluation of the internal control system related to revenue This assessment focuses specifically on the "sales-collection" cycle, ensuring a thorough understanding of the system's effectiveness.

Performance results are shown on working papers WPs 2.3 Internal control of sales of goods and services (A410)

3 Internal control of sales of goods and services

Clients: XYZ Co.,Ltd Perform: NDM 10/01/2022

Contents: Sales, Receivable, and collection cycle Review NTX 10/01/2022 1.Are sales policies specified in writing? No

2 Is there a monthly, quarterly and yearly sales plan? Have

3 Are signed sales contracts properly archived and available when needed? Have

4 Does the company implement the numbering of contracts continuously in chronological order?

5 Is the information in the contract kept and confidential to avoid the intrusion of unauthorized people? Have

6 Are unused sales invoices assigned to an employee responsible for management? Have

7 Is the recording of sales invoices assigned to a single person? Have

8 Is the biller concurrently the delivery person? No

9 Can the canceled sales invoices be kept in full copies in the book? Have

10 Are quotations and invoices sent to customers approved by the Board of Directors before being sent to customers? Have

11 Is there a requirement to have customers' signatures on sales invoices? No

12 Is there a regulation that returned goods must be recorded in writing? There is no deduction

13 Can the cause of the return be re-examined for products of the same or at least the same lot? No revenue deductions

14 Are the detected causes and handling measures immediately reported to the Board of Directors for timely handling decisions? No revenue deductions

15 Do trade discounts and sales discounts have to be signed for approval before implementation?

16 Are trade discounts and sales rebates reported in writing and checked against Company regulations at least monthly? No sales deductions

17 Does the company have a track record of consignments sent for sale until the buyer's notification of acceptance is received? Have

18 Is sales revenue tracked in detail for each type of product, service, goods, and analyzed monthly increases and decreases? Have

19 Are the causes of revenue fluctuations (especially a decrease compared to the plan or the same period) immediately reported to the Board of Directors for timely corrective measures? Have

The internal control system is quite good

After conducting research, the auditor has made a preliminary assessment indicating that the Company has established regulations for sales control and revenue recognition processes These regulations are actively implemented and maintained throughout the company's operations Additionally, document and record management is strictly overseen by qualified personnel, significantly minimizing the risk associated with revenue recognition.

The auditor can conclude that the internal control system for sales of goods and services at Company XYZ is quite good

The auditor can rely on the entity's internal control system to narrow down the process of implementing detailed checks by business sampling methods b Preliminary assessment of revenue fluctuations

The auditor conducts analytical procedures and a preliminary review of client XYZ's financial statements to assess fluctuations across all items This process includes determining materiality and allocating it appropriately within the audit framework.

At U&I's Hanoi branch, the determination of materiality for financial statements is based on criteria such as profit before tax, revenue, and total assets, tailored to the client's business situation and audit objectives For client B, the auditor selected revenue as the materiality criterion, establishing overall materiality at 0.5% of revenue, which amounts to VND 465,986,012 Additionally, realized materiality was calculated at VND 279,591,607, with negligent misstatement identified at VND 8,387,748, reflecting the auditor's risk assessment and professional judgment for XYZ company.

For details see WPs 2.2 Excerpt from GTLV- Determine the audit materiality of the financial statements (A710) above

Table 2 1 The criteria used to determine materiality for the whole d The audit program

The auditor evaluates materiality and audit risk for the complete financial statements of Client B, utilizing a sample audit program They then customize this program by adjusting specific procedures to align with the unique circumstances of the client, particularly focusing on the Sales and Supply Service Level.

At customer XYZ, there are no deductions for revenue and unrealized revenues, so the auditor omits the audit procedures related to these amounts in the audit program

For customer XYZ, company U&I - Hanoi branch performs an audit of the item Sales of goods and services according to the following audit program:

Clients: XYZ Co.,Ltd Performer NDM 10/01/2023

Contents: Test the revenue Reviewer NTX 10/01/2023

To ensure that revenue from the sale of goods and services is genuine, it is essential to record it accurately, completely, and promptly Additionally, revenues must be classified and presented in accordance with the relevant financial reporting framework.

Risk of material misstatements Audit procedures

1 Check that the accounting policies applied are consistent with the previous year and are consistent with the applicable financial reporting framework

When reviewing accounting policies for sales revenue recognition, it is essential to assess the types of revenue generated by the enterprise, the payment methods utilized for exports, and the timing of revenue recognition Additionally, understanding the timing of invoice issuance and the document circulation process within the enterprise is crucial for ensuring compliance and accuracy in financial reporting.

Check accounting policies on recognition of trade discounts, sales discounts, sales returns

(Completeness, Cut-off): Collect the entity's regulations on trade discounts Consider whether the entity's regulations are consistent with the current accounting regime

Acquire the entity's procedures for sales reductions (approvals and procedures) and procedures for recording returns

To effectively analyze financial performance, prepare a summary table that compares current data with previous years This comparison should include insights from the General Data Sheet, Balance Sheet, Ledger, and detailed books, as well as any relevant working papers from prior audits.

Compare sales revenue and sales returns, the ratio of sales deductions to total sales between this year and the previous year, explain

This article examines the variations in total revenue and revenue by activity type between the current year and the previous year It highlights unusual fluctuations and provides an analysis of potential risks associated with material misstatement due to fraudulent activities.

(If checking sales by analysis procedures)

Build a sales revenue estimation model, based on independent data sources

May be based on the following:

- Revenue of the previous year,

- Gross profit to sales ratio,

- Fluctuations in the business environment change the quantity and the selling price

To develop an accurate estimated model and detailed decision tree (DT) classification, it is essential to disaggregate the data effectively This can be achieved by breaking it down by various dimensions, including time periods (quarterly, monthly, or weekly), account types, item categories, or a combination of these factors, as well as by department and sales location.

5 Calculate the allowable number of errors (threshold) NDM G142

To assess discrepancies, compare the estimated difference against the established threshold If the difference exceeds this threshold, it is essential to investigate the underlying causes, such as atypical trading fluctuations.

Collecting Summary of revenue by customer, group of goods and services provided by months of the year:

- Compare with relevant documents: Ledger, detailed book, Report of sales department, export department, etc on quantity, value and explain the difference (if any)

- Analysis of fluctuations by month, by the same period of the previous year, explaining the reasons for the fluctuations

Reconciling the accounting revenue with the revenue according to the VAT declaration in the year Explain the difference (if any) NDM E300

3 Scan the Ledger to identify unusual transactions (in terms of content, value, counterpart accounts ) Find out the cause and perform the corresponding check procedure (if necessary)

4 Select a sample of the revenues recognized during the year and check the relevant original documents NDM G144

In case the accounting method applies the corresponding cost of goods sold method for each revenue recognition transaction:

1 Reconciliation between actual delivery and receipt of goods and revenue recognition in the accounting books

2 Check if the unit price stated on the invoice is consistent with the price list set by the unit at that time or not NDM G145

3 Check Value Added Tax (if any) NDM G145

4.Reconcile the totals on the sales journal to the general ledger NDM G145

5 Reconcile the totals on the sales journal to the general ledger NDM G145

In case the accounting method applies the non-corresponding cost of goods sold method for each revenue recognition transaction:

To ensure accurate auditing, select sales transactions from a data source separate from accounting records, informed by the auditor's comprehension of the business's document flow and revenue recognition process, such as the Log Book provided by the Sales Department.

1.Reconciling the selected voucher with the revenue recognition in the books chi ti t ế NDM G146

2.Compare the selected voucher with the revenue recognition in the detailed book NDM G146

3 Check the value added (if any) NDM G146

4.Check whether the invoice issue date matches the delivery time Check whether the revenue is recognized on time or not

5.Reconcile the amount stated on the sales invoice to the sales journal NDM G146

6 Reconcile the totals on the sales journal to the general ledger NDM G146

7 Evaluation of test results NDM G146

Review original documents to identify significant sales deductions for the year and any revenue recognized from the previous year Ensure compliance with enterprise sales regulations and tax laws regarding these deductions.

To verify the accuracy of trade discount transactions, gather all relevant records for the period and assess the total amount Subsequently, compare this total with the corresponding figures in the ledger to ensure completeness, proper recording, and appropriate cut-off.

When evaluating trade discount transactions, it is essential to verify that the discounts are accurately calculated in accordance with the company's sales policy This can be achieved by comparing the discounts applied to the relevant documentation that justifies the discounts.

NDM G147 b Check that the trade discount transaction has been recorded in the correct period NDM G147

To ensure the accuracy of sales returns, it is essential to collect and compare all relevant documentation, such as working minutes, delivery and receipt records, and invoices related to the delivery and return of goods This verification process confirms the authenticity of the goods return service by matching it with the original sales and purchase transactions.

NDM G148 b Check that sales returns have been recorded in the correct period NDM G148

5 Accounting policy (G140-2)

Client: XYZ Co.,Ltd Perform NDM 10/01/2023

Content: Revenue and Revenue Deduction Review NTX 10/01/2023

Objective: Occurence, completeness, evaluate, presentation

Method: perform audit procedures specified in G130 C.I.III 9

1 Check that the applied accounting policy is consistent with the previous year and in accordance with the applicable financial reporting framework

A Policy on revenue recognition, trade discounts, sales discounts, sales returns this year: –

In a business, revenue can be categorized into various types, including product sales, service income, and subscription fees The circulation of sales documents typically involves generating invoices, sales orders, and receipts to track transactions effectively Revenue recognition is a crucial process that ensures income is recorded in the financial statements when it is earned, adhering to accounting standards Additionally, documents such as bills of sale, contracts, and delivery receipts serve as vital evidence of ownership transfer, solidifying the legitimacy of the transaction.

Sales revenue primarily derives from leasing factory spaces and offering related services The daily sales accounting process includes issuing invoices at the end of the day if customers do not collect them.

III Revenue from service providers –

Service revenue is recognized when it can be measured reliably and the following conditions are satisfied simultaneously:

Revenue recognition occurs when it can be measured reliably If a contract allows the buyer to return the purchased service under certain conditions, the Company will only recognize revenue once those conditions are no longer applicable and the buyer no longer has the right to return the service.

• It is likely that economic benefits will flow from the service transaction;

• The work completed at the balance sheet date can be determined; and

• Determine the costs incurred and the cost to complete the transaction providing the service

Interest is recognized on an accrual basis, determined on the principal balance and the actual interest rate each period

B - Differences in revenue recognition policy this year compared to last year: No difference

C Conclusion on this year's revenue recognition policy of the enterprise: –

• Accounting policies have been applied consistently with the previous year

• The applied accounting policy is consistent with the current accounting regime.

Step 2: Analyze and compare aggregated data

• Objectives: the auditor performs the analysis and synthesis of data in order to have an overview of the sales of goods and services

• Basis: General ledger of account 511, ledger of accounts for deduction of revenue (if any), audit report of the previous year

The auditor gathers data from the sales account ledger for both sales and service providers, along with detailed records for each revenue type and revenue deductions at the start and end of the period The opening figures are derived from the final numbers of the previous year's audit report, while the year-end data is sourced from the customer's 2022 income statement This information is then compared with the figures in the arising balance, general ledger, and detailed accounts to ensure accuracy and consistency.

In the current year, the enterprise has not experienced any revenue deductions and generates only one type of sales revenue, resulting in the summary table for customer XYZ reflecting a single item of sales revenue.

After analyzing the data, the auditor assesses the revenue target fluctuations If any changes are significantly large, they should be highlighted for further clarification in subsequent audit procedures.

In 2022, the auditor reported a revenue decline of VND 8,293,310,291, representing a 5% decrease compared to 2021 This reduction in revenue can be attributed to increased competition in the region, with a surge in the number of hotels and restaurants impacting hotel service revenue and overall business performance To gain a clearer understanding of this decline, the auditor is advised to conduct additional checks to investigate the underlying reasons for this volatility.

Working results are shown on WPs 2.6 Analyze and compare G110 synthetic data

6 Analyze and compare aggregated data (G110-1)

Client: XYZ Co.,Ltd Perform NDM 10/01/2023

Content: Testing revenue Review NTX 10/01/2023

Method: Carry out audit procedures specified in G130, C.I, III.9

Detail Current year Adjust This year Previous year Difference

Acc Explain document Before audit After audit Before audit Value Rate Note

511 Revenue from Goods and Services 93.197.202.381 - - 84.903.892.090 8.293.310.291 -9% {a}

333 VAT paid by direct method; SCT and export tax payable - - - - - -

Ratio of deductions Revenue/Revenue

- Ratio of Trade Discount/Sales Revenue 0 #DIV/0! #DIV/0! 0 - {g}

- Rate of Returned Goods/Sales Revenue 0 #DIV/0! #DIV/0! 0 - {h}

- Ratio of Sales Discount/Sales Revenue 0 #DIV/0! #DIV/0! 0 - {i}

{a} Difference increased due to: This year the company has more customers

Revenue from building factories for lease 93.197.202.381 84.903.892.090 8.293.310.291

Step 3: Analyze the fluctuation of revenue by each business activity

This article examines the changes in total revenue and revenue by activity type between the current and previous year, highlighting any unusual fluctuations It also assesses the potential risk of material misstatement due to fraudulent activities, providing insights into financial stability and integrity.

From the balance sheet of the account (soft copy provided by the accountant) in 2022 of company XYZ, the auditor collects data and then compares it with the account ledger

- Achieve audit objectives, refer to volatility analysis in WPs2.6 (G110) Working results are shown on WPs 2.7

7 Analysis of fluctuations in revenue by each business activity (G141)

Clients: XYZ Co.,Ltd Name Date

Contents: Revenue and Revenue deduction Review NTX 10/01/2023

Method: Perform audit procedures specified in G130

Sources: Revenue summary book, TB, GL, PY

I Revenue from Goods and Services

Acc Account name Current year Previous year Different

II The deduction from revenue

Acc Acc Name This year Previous year Different

: Matches the figures on this year's pre-audit income statement

: Matches the figures on the previous year's audit report

Monthly revenue analysis Identify fluctuations, identify the causes of abnormal fluctuations

- 2022 General Diary of XYZ company

- Report on business performance in 2022

In the year, the company did not have any revenue deductions, so it did not use accounts 521 (5211, 5212, 5213)

- From the general journal (the accountant providing the soft copy) in

In 2022, the auditor of company XYZ will systematically analyze the creditors of Account 511 and the debtors of Account 632 on a monthly basis, cross-referencing this information with the account ledger This process enables the audit team to gather monthly data on "sales revenue" and "cost of goods sold." Notably, since there are no deductions involved, the net sales will be equivalent to the total sales.

After analyzing the revenue and cost data over a 12-month period, the auditor compares the accumulated figures with those on the balance sheet This process ensures that the income statement accurately reflects the total amounts, confirming the correctness of the financial statements.

- From the aggregated data, the auditor calculates the volatility of the revenue target

Through the inspection, the auditor found that:

Starting in September, several factories upgraded their facilities and equipment, enhancing their appeal to customers Furthermore, from November, the rental prices for these factories were adjusted to a competitive level, reflecting the quality and amenities offered, which is expected to draw in more clients.

The results of the procedure are shown on WPs 2.8

8 Summary of revenue and analysis of monthly fluctuations (G143)88

Clients: XYZ Co.,Ltd Name Date

Contents: Revenue monthly Review NTX 10/01/2023

Content: Revenue summary, volatility analysis

Tasks: Perfor, audit procedures specified in G130

Sources:Summary of revenue of this year and previous year

This article presents a comprehensive summary table detailing monthly revenue generated by customers, categorized by various groups of goods and services It includes an analysis of revenue fluctuations for each month, comparing the current year's performance to the same period from the previous year.

Month Current year Previous year Value Rate

The revenue increases from September because XYZ improved their quality of buliding factories, and they also have the reasonable price for their customers

Conclusion: Abnormal fluctuations are reasonably explained >>ok

Step 5: Make a monthly revenue accounting table, compare it with the tax declaration

In order to detect the difference in revenue accounting period or signs of VAT evasion At the same time, capture the unusual fluctuations of revenue over the months

- General journal in 2022, Ledger Account 511

- Monthly VAT declaration, Output VAT invoice

- Auditor recognizes accounting revenue on a monthly basis

The Auditor compiles revenue data from the monthly VAT declaration, categorizing it by tax rates and month This declaration encompasses all sales of goods and services, providing a comprehensive summary of revenue recognition transactions Additionally, the accuracy of the data is ensured as the accountant relies on original invoices for the declaration.

- During the inspection, the audit pays attention to the continuity of the invoice number to ensure that all invoiced transactions are declared

- After having the aggregated data for each month for the revenue on the declaration, the auditor will compare with the recorded revenue data and clarify the difference (if any)

- Through data comparison, the recorded revenue matches the tax declaration

- There is no difference between the revenue between accounting and declaration

The auditor confirmed that the revenue remains consistent across months, as evidenced by the invoice review, which shows that revenue recognition aligns with the issuance date of the VAT invoice.

The audit results are shown on the accountant's WPs 2.9.

9 Compare accounting revenue and tax return (E345)

Clients: XYZ Co.,Ltd Name Date

Contents: Revenue monthly Review NTX 10/01/2023

Method : Perform audit procedures mentioned E330, C.III.5.4, 5.5

Sources: Number, detail book, VAT declaration, original documents

This article presents a summary table detailing monthly revenue generated by customers and various groups of goods and services It includes an analysis of fluctuations in revenue for each month, comparing the current year's performance to that of the previous year.

Month Revenue on the declaration Accounting revenue Different Tax rate 0% Tax rate 5% Tax rate 10%

Accounting revenue figures match ledger and balance incurred in 2022 (TB, CL)

Thus, there is no difference between the revenue between accounting and declaration between the months

The objective of this procedure is to provide auditors with a comprehensive overview of the unit's revenue, enabling them to identify unusual items and key operations for further investigation Additionally, this approach streamlines the audit process by allowing auditors to efficiently select test samples, focusing on anomalies and significant values, thereby saving valuable time.

- 2022 general diary of XYZ company

- Ledger, detailed book of revenue accounts 2022

- Report on business performance of company XYZ in 2022

- Auditor uses the general journal, in turn filtering the Debit side and the Credit side of Account 511 to summarize data and reciprocal accounts

- If there is an abnormal reciprocity, it is necessary to check the details of transactions related to that account in the following procedures

- In case the accounting method applies the corresponding cost of goods sold method for each revenue recognition transaction, the Auditor needs to perform part G145

- In case the accountant applies the non-corresponding cost of goods sold method for each revenue recognition transaction, the Auditor needs to perform part G146

- Revenue figures match the numbers on the report and the balance is incurred

- Proposing to adjust the revenue from space leasing, because this revenue is not in the list of business lines of the company according to the latest business registration

Performance results are shown on working papers WPs 2.10.

10 Reciprocal checking of accounts (G140)

Clients: XYZ Co.,Ltd Name Date

Method : Review some transactions arising on Revenue showing signs of abnomally

Num Date Code Discription Contra account Amount

1 22/02/2022 0000309 Construction and installation of warehouse furniture 2 -

2 10/02/2022 0000305 Equipment for KH Co., Ltd 1311 1,100,187,968

3 12/5/2022 0000010 Factory rent in June 2022 according to the expansion area according to the contract appendix CTRIDI-NTK-150701- APX3

4 14/01/2022 0000235 Factory lease contract fee for the expansion area according to the contract appendix CTRIDI-NTK- 150701-APX3

6 09/06/2022 0000004 Factory lease contract fee for the expansion area according to the contract appendix CTRIDI-NTK- 150701-APX3

7 30/08/2022 0000333 Installing power lines, moving gas pipes, cooling pipes for

1311 65,025,740 machines - Remaining value according to contract CTRIDI- MGPV-220804 as of August 19,

8 28/12/2022 0000613 Consulting and support to renew the Investment Registration Certificate

9 30/12/2022 0000622 Construction and installation of air pipes for factories and hot air pipes for compressors and dryers

10 18/12/2022 0000543 Lease for space to organize the events

-The revenue number 10 is not in the list of business lines of the company according to the lastest business registration

• Objective: to verify that revenue adjustments are recognized for the period in a complete, accurate, effective and reasonable manner

Check sales adjustments: excise tax, export tax, sales returns, sales discounts, trade discounts in the accounting books by:

- Reconcile the total number in the detailed book of tracking returned goods and sales discounts with the ledger, customer receivables book and on the income statement

To ensure accurate inventory management, review the returned sales in the detailed book to verify if the returned goods have been approved by an authorized individual Additionally, compare the quantity and type of goods listed on the delivery note with those on the warehouse receipt It is also essential to check if the unit has issued a reduced adjustment invoice for the returned items.

Company XYZ, as a service enterprise, does not require deductions for sales or revenue adjustments during this period, eliminating the need for such procedures It is essential to review the details of the sales of goods and services.

Step 8: Check the cut-off of revenue

-Consider whether the revenue is recorded in the correct period

- Sales invoices, bills of lading, ex-warehousing notes, contracts of goods sold before and after the date of the end of the accounting period

- Tax returns for the months after the end of the accounting period

To ensure accurate revenue recognition, it is essential to review sales invoices and shipment contracts both prior to and following the balance sheet date, as well as to examine tax returns for the subsequent months This process confirms that revenue is recorded in the appropriate accounting period.

Checking the reasonableness of returned shipments or sales reductions arising after the end of the accounting period, assessing the impact on the revenue recognized during the year

• Audit results: Show on WPs 2.11

11 Cut-off revenue

Clients: XYZ Co.,Ltd Name Date

Contents: Cut-off Review NTX 10/01/2023

Content: Checking the cut-off

Objective:Record is accuracy period

Method : Perform audit procedures mentioned E330, C.III.5.4, 5.5

Sources: Number, detail book, , original documents January 2023

Construction and installation hot air outlet for compressor and dryer 299,779,900 10% 622 30/12/2022 α

Additional rent in January 2023 according 364,090 10% 5 05/01/2023 β

Monthly rent for a part of the

1st floor area of the manager

Note: : Correctly recognized current year's revenue α

: Correctly record next year's revenue β

Conclusion: Revenue is recognized in the correct period

Step 9: For related party transactions

Review that balances and transactions with related parties are fully and accurately recorded

- Contract between company and partner

- Check the recording, approval, applicable selling price, corresponding cost price, profit (loss) of these transactions Note transactions occurring near the end of the accounting period

- Combine with related sections such as Accounts Receivable, Inventory, to carry out the procedure of sending confirmation letters to confirm transactions and information on contract terms, etc

• Audit results: Shown on WPs 2.12

12 Check transactions with related parties (G151)

Clients: XYZ Co.,Ltd Perform NDM 10/01/2023

Contents: Checking Revenue Review NTX 10/01/2023

Method: Perform audit procedures mentioned in G130, section CIII.8

Source: Detailed Book of Revenue,

1 1 Collecting information about sales to related parties arising in the period

Related parties NTK Co., Ltd Company Limited 20.888.868.540

2 Test of details of the terms of the sale price, payment conditions, nothing unusual compared to other ordinary customers

Terms of payment and selling price are uncompromising, refer to the construction contract in 2021

Step 10: For foreign currency revenues

• Objective: to see if the revenues arising from foreign names are assessed accurately and reasonably

• Base: detailed book of revenue, foreign exchange rate

-Audit learns accounting methods for foreign currency-related revenue, recalculates the difference of the ending balance at the current exchange rate with the accounting books, and evaluates the difference

XYZ Co.,Ltd, has no sales of goods and services in foreign currencies, so it does not carry out this procedure

The audit team leader consolidates and reassesses the gathered audit evidence to formulate conclusions Key responsibilities include reviewing working papers and summarizing the audit findings.

• Review of auditor's working papers

During the execution of the audit plan for customer XYZ's revenue from sales of goods and services, the audit team leader and quality control department thoroughly reviewed the working papers The audit confirmed that the objectives for the revenue from sales and services were successfully met, with no further points needing attention.

Upon concluding the revenue audit, the auditor provides a summary of the findings and records adjustment entries for any identified errors This process is crucial within the framework of the research topic.

I would like to quote a part of the audit conclusion related to the item Revenue from sales of goods and services

Following the review of the working papers, the auditor prepares an audit report to address issues and necessary adjustments related to identified irregularities with the client At the conclusion of the audit, if the client disputes any errors, the audit team leader evaluates the materiality of these errors and their effects on the financial statements, which serves as the foundation for forming an opinion in the audit report.

Extract the audit minutes for the revenue from sales of Goods and rendring of services as shown in table 2.2

XYZ Co.,Ltd Audit report

Address: Viet Yen-Bac Giang For the period ended 31/12/2022

6 Revenue from sales of goods and services

The business of leasing space for events is not on the list of business lines of the company according to the latest business registration (ref G140) Auditor's opinion

• Request the enterprise to adjust other revenue recognition entries

The enterprise accepts to adjust the data on the 2022 financial statements

Audit Leader Director of XYZ Co.,Ltd

Table 2 2 Excerpt from audit report

The audit results revealed that the revenue generated from leasing business premises is not included in the company's current list of business activities as per its latest registration.

The auditor's assessment, based on the conducted audit and gathered evidence, confirms that the revenue generated from the sale of goods and services is accurately and fairly represented in all significant aspects.

The auditor makes a summary table of the total revenue after the audit presented on WPs 2.12

13 Summary of revenue data after audit (G110-2)

Clients: XYZ Co.,Ltd Perform NDM 10/01/2023

Contents: Testing the revenue Review NTX 10/01/2023

Method: Carry out the audit procedures specified in G130, C.I, III.9

Acc Discribe Doc Before audit Before audit Value Rate Note

511 Revenue from goods and service 93,197,202,38 -40,290,000 93,156,912,381 84,903,892,090 (8,253,020,291) -8,86% {a}

Ratio of deductions Revenue/Revenue

- Ratio of Trade Discount/Sales Revenue 0 0 0 0 -

- Rate of Returned Goods/Sales Revenue 0 0 0 0 -

- Ratio of Sales Discount/Sales Revenue 0 0 0 0 -

2.3 GENERAL ASSESSMENT OF THE AUDIT REVENUE FROM SALES

OF GOODS AND SERVICESITEMS IN THE AUDIT OF FINANCIAL STATEMENTS AT U & I AUDITING CO., LTD - HANOI BRANCH 2.3.1 Strength

2.3.1.1 General comments on the financial statement audit process

To begin with, It’s about the audit team

The branch efficiently organizes its audit team by meticulously selecting and allocating staff for each audit Its human resources are characterized by dynamism, enthusiasm, and a strong work ethic, coupled with extensive professional knowledge The team consistently updates their understanding of current legal documents and maintains a high standard of professionalism in their work.

The Branch's success has greatly enhanced the audit team's organization and efficiency Led by a highly qualified team leader with practical experience, the audit process is thoroughly reviewed and effectively managed, allowing for optimal task delegation based on individual strengths This strategic assignment not only saves time and costs but also maintains high audit quality Furthermore, audit assistants collaborate across different areas, fostering both skill development and camaraderie within the Branch.

Assigning specific and scientific roles to each member of the audit team enhances their understanding of their responsibilities By dividing tasks based on the actual experience of auditors and assistant auditors, the audit process can be completed efficiently and on schedule, while maintaining high-quality standards—crucial for the seasonal auditing profession.

Secondly, When it comes to the audit process

U&I Auditing- Hanoi branch flexibly applies the sample audit program issued by VACPA with the characteristics of each specific customer, and balances the audit time and audit fees

For long-term clients like XYZ Co., Ltd, auditors can streamline the audit process by bypassing the initial phase of familiarizing themselves with the company's business environment and operational characteristics This approach not only saves valuable audit time but also allows auditors to assess the internal control system using simplified procedures, leveraging their existing knowledge of the entity's internal control performance.

The audit process of U&I Auditing company - Hanoi branch is carried out according to the model audit program, strictly abides by Vietnam's accounting standards and regulations

With a team of highly qualified, experienced and responsible auditors, the audit performance is always the most effective and highly appreciated by customers

The audit ended within the time limit specified in the contract, the work results were evaluated as good

The quality review of an audit is essential for maintaining its effectiveness and efficiency, occurring continuously throughout the audit process By promptly addressing issues identified during the audit, this review ensures the overall quality and integrity of the audit outcomes.

In terms of keeping audit records

The records are meticulously designed to meet auditing standards, ensuring efficient record-keeping at the branch office This organized approach facilitates auditors in easily locating necessary documents during their work, particularly during the audit planning stage for upcoming audits.

The scientific way of filing the file makes it easy for auditors to find the information contained in the file, saving time in the working process

The branch enforces rigorous quality control measures throughout multiple stages of the audit process, ensuring consistent oversight from both the group leader and the audit leader, not only at the conclusion of the audit but also during its progression.

2.3.1.2 Comment on the process of auditing the revenue from Goods and provide Services performed by U&I Auditing Co., Ltd - Hanoi Branch Audit planning stage

The revenue item audit program is tailored to meet current Vietnamese standards, with U&I Auditing's Hanoi branch continuously updating the audit process and databases to accommodate diverse production and business characteristics and sizes This approach aligns with both global and Vietnamese auditing and accounting standards, allowing for a flexible and efficient audit of revenue from goods and services Auditors may employ analytical procedures, detailed test procedures, or a combination of both, depending on their professional judgment.

Prior to conducting the audit, the auditor gathered essential client information, ensuring a thorough understanding of the client unit The audit team leader proactively reached out to the client to obtain preliminary documents and reviewed previous audit records, facilitating a comprehensive initial assessment.

The audit team leader proactively requested the client to supply soft documents and provisional data, particularly concerning revenue The audit process at the client's company is meticulously organized; for returning clients, the company assigns auditors who have previously worked with them This approach ensures a deep understanding of the client's business activities, facilitating a more efficient audit process that saves time, effort, and costs.

Given the critical role of revenue from goods and services in financial reporting, experienced auditors typically handle this aspect to ensure a high level of reliability in the audit conclusions.

U&I Auditing's Hanoi branch boasts a youthful yet experienced team of auditors known for their professionalism and customer-friendly demeanor, giving the company a competitive edge To foster long-term employee commitment, the branch has implemented a robust human resource policy that includes competitive pay based on individual capabilities, ongoing training, and professional development opportunities, such as CPA certification courses The company's charter clearly outlines the qualifications, duties, and responsibilities for each rank, promoting a culture of ambition and accountability among team members while ensuring effective departmental collaboration.

Analytical procedures are conducted by certified accountants who possess expertise in financial analysis and a deep understanding of their client's industry These procedures employ flexible methods and analytical criteria to assess the reasonableness of financial figures, aiding in the decision-making process for detailed inspections and potentially adjusting the scope of these procedures.

- The analysis of the customer's revenue is done on working papers, clearly stating the causes of the differences right on the working papers; simultaneously

The analysis integrates revenue data with production metrics and inventory levels related to imports and exports, providing a comprehensive understanding of the fluctuations observed in the financial statements.

Tests of controls are conducted to evaluate the effectiveness of the internal control system, confirming the initial assessment of control risk This assessment determines whether the internal control system can be relied upon, which in turn influences the extent of detailed testing procedures required.