COMPLETING THE AUDITING OF BUSINESS ADMINISTRATIVE EXPENSES IN AUDITING FINANCIAL STATEMENTS BY AUDITING AND INFORMATIC SERVICES COMPANY LIMITED OF HO CHI MINH CITY (AISC) DA NANG BRANCH FOR ABC JOINT[.]
THEORETICAL BASIS FOR AUDIT ADMINISTRATIVE EXPENSES
BASIC ISSUES RELATED TO ADMINISTRATIVE EXPENSE
Administration expenses are the monetary cost of labor waste spent by an enterprise to perform management tasks, including business management, administrative management, and other management
Administrative expenses include general management costs of the enterprise, including salary costs for employees of the enterprise management department (salaries, wages, allowances, ); social insurance, health insurance, trade union funds, unemployment insurance of the enterprise managers; stationery cost, labor tools, fixed asset depreciation for corporate management; land rent, license tax; the provision for bad debts; outside purchasing services (electricity, water, telephone, fax, property insurance, fire, ); Other costs (reception, customer conference, )
Administration expenses that are not considered business income tax- liable charge under the law on taxation but have sufficient invoices and documents and have been properly accounted for according to the accounting regime are not allowed to be recorded as a decrease in expenses Accounting fees that only adjust in the finalization of business income tax charge to increase business income tax charge payable
Account 642 is opened in detail for each expense item as prescribed Depending on the management requirements of each industry or enterprise, account 642 can be opened with second-level accounts to reflect the cost contents of administrative expenses At the end of the period, the accountant
5 transfers administrative expenses to the debit side of account 911 "Evaluation of business results"
1.1.1.2 Characteristics, role, and method of establishment of administrative expenses on the financial statements a Characteristics
Enterprise management fee is an expense that is often related to running enterprise-wide production and business Including costs of management materials, office supplies - a depreciation of fixed assets for the whole enterprise, taxes, management staff expenses, reception expenses, conferences, non-business fees In terms of nature, administration expenses are expenses for indirectly serving production and business activities It ensures that the production and business activities of the business are conducted in a normal way These are relatively stable costs
Through the above content along with the concept of administrative expenses, it can be seen that includes many different costs, those costs are indirectly contributing to participating in production activities for businesses but have a very large role because they participate in the process of consuming and manufacturing products as well as the management apparatus of the business
Basic accounting principles and requirements in recognizing the elements in the financial statements are truthful, reasonable, and legal For the accounting of administrative expenses, it is necessary to focus on the following principle:
- Consistency Principle: Principles and methods applied by the enterprise must be consistent within a fiscal year such as depreciation policy, amortization policy
- Conservatism Principle: Conservatism is the consideration, consideration, and judgment necessary to make accounting estimates in terms of uncertainty Thus, the accountant must immediately reflect the cost when
6 there is evidence of the possibility of the cost and not be reflected below or higher than the actual value of that expense
- Matching Principle: Recognition of revenue and expenses must match each other, that is when recognizing an amount of revenue, at the same time recording an expense related to the generation of that revenue
- Materiality Principle: Information is considered materiality if the lack of information or the inaccuracy of such information significantly falsifies the information presented in the financial statements, affecting the decisions of users of the information on the financial statements
- Accounting period Principle: Expenses incurred in any period, the business will account in that period
- Cost Principle: Administrative expenses are accounted for according to the actual expenses that the business spends, regardless of the market price, pay attention to the distribution of expenses between periods b Role
Administrative expenses are indirect costs that play a decisive role in the existence and impact of an enterprise Without a general and administrative department, the business will not be able to orient, not determine whether the products are really what the market needs, but it plays a role in accelerating production more quickly Thus, administrative expenses are a very important cost in the business So the cost to maintain the operation of this department is inevitable that businesses must bear
In addition, administrative expenses are influential in the evaluation of business results, corporate income tax payable on the income statement c Influence of administrative expenses in auditing financial statements
Auditing the administrative expenses is an important part of the audit of financial statements The administrative expenses have an important feature: they are indirect costs to the production process but are a direct indicator of taxable income Specifically:
- The cost items on the income statement are important indicators reflecting the overall business process of the business in the period Administrative expenses seriously affect the income statement Incorrectly reflected administrative expenses will change pre-tax profit, profit tax, and profit after tax seriously to the income statement, leading to data in the income statement not truthfully reflect the results of production and business activities of the enterprise All errors related to cost reflection have a direct impact on the evaluation of business results
- Administration expense also affects balance sheet items A big change in costs will change the balance of the profit account, tax payable
- Administrative expenses incurred are often related to short-term payables or payables that are factors with high fraud potential
- For the budget, the cost indicators are one of the bases for determining taxable income, so it always requires the accounting unit to comply with the regulations, which also requires auditors to be conservatism when auditing these items if they do not want their customers to have tax arrears because of unreasonable and valid cost accounting
- Administrative expenses are closely related to consumption in a business, it includes very sensitive costs, depending on the characteristics of production and business and management characteristics of each business Checking the correctness in the collection, classification, and recognition of corporate management costs not only helps the auditor to comment on consumption and management in the business, helping to advise the business to improve the administrative expenses but also as the basis for auditors to assess the reliability of financial statements of enterprises d How to set up the administrative expense on the financial statement
Administrative expenses: The data to be recorded in this item is the total amount incurred on the Credit side of Account 642 "Administrative Expenses", for the Debit side of Account 911 "of business results" in the reporting period
1.1.1.3 The structure and content of feedback of Account 642 - Administrative Expenses
Structure of Account 642 - Administrative Expenses
- The actual administrative expenses actually incurred in the period;
ADMINISTRATION EXPENSES ON AUDITING FINANCIAL STATEMENTS 11 1 Administrative expenses audit goal
According to Vietnam Standard on Auditing (VSA) No 200: “The objective of auditing financial statements is to help auditors and auditing companies to comment that the financial statements are prepared on the current accounting standards and regimes (or be accepted), do you comply with relevant laws and do you honestly and reasonably reflect the financial standing of the business in the materiality aspects?” For each particular auditor, this objective is classified into the overall audit objective and the specific audit objective
The overall audit objective is the overall review and evaluation of the amount recorded on the items based on a general commitment to the responsibility to truthfully and reasonably present information on the financial statements and to all information obtained through an actual survey of the object Administrative expenses audit general goal is that all administrative expenses in the financial statements are reflected honestly and reasonably in all material aspects?
- Check whether the expenses are recorded into administrative expenses to ensure there is a reasonable basis, calculate and evaluate correctly, and bookkeeping in a timely, complete, and correct item or not
- Check whether the calculation and allocation of administrative expenses for the cost subjects are correct, reasonable, and consistent or not
- Check that the accrual and accumulation of administrative expenses account items are accurate
- Check whether the presentation and disclosure of management costs on the financial statements are appropriate, accurate, or not
In addition, in the administrative expenses audit process, the auditor is also very interested in the compliance in the accounting of these cost items
For this purpose, the auditor must collect enough evidence to prove that the accounting of operating expenses at the enterprise is correct or incorrect under the government's regulations as well as the regulations set by the enterprise
1.2.2 Internal control for administrative expense
Enterprises establish and comply with management regulations as well as an internal control on sales activities and enterprise management:
- Build a reasonable organizational structure: a reasonable organizational structure contributes to a good cost control environment Establish management and control over all activities and sectors of the business so that there are no overlaps or vacancies, performing division of functions, ensuring relative independence between departments, creating the ability to test for mutual control in the fields
- Participation of the Board of Directors and the Supervisory Board: the Board of Directors should participate in the process of developing policies and regimes to control and prevent fraud To monitor compliance, and check supervision, detect fraud, in the enterprise should have the Supervisory Board However, in an organization, for the Supervisory Board to operate effectively, the members of the Board of Directors and the Supervisory Board must be independent from the organization
- Organize the implementation and implementation of the above mentioned internal control opinions: assignment organization, staffing arrangement; disseminating thoroughly about functions and duties; checks urge implementation of regulations in place…
1.2.3 Common risks and mistakes when auditing administrative expenses
The costs of all types and the subjects of work reflected in bookkeeping and reports still have confusion and are not true to reality
Example : Enterprises have mistakenly accounted for different costs such as financial costs, manufacturing costs, and some other costs
Costs reflected on reports and bookkeeping are lower than actual costs:
- The enterprise does not recognize expenses incurred from the previous period but are amortized over many periods
- Some actually spent, but because the documents were lost or lost, the enterprise did not have the necessary measures and processed to have valid documents, so these expenses were not accounted into expenses in the period
- Enterprise has not yet accounted into the administrative expenses of the consumed items in the period but must not pay for this period such as the cost of electricity, water, telephone, of December, until January of the following year, the supplier's notice will be available
Costs reflected on reports and bookkeeping are larger than actual costs:
- Mistakes in calculating, recording, thus making the expenses recorded in bookkeeping and reports increase compared to the number reflected on the accounting vouchers
- Accounting into administrative expenses unsubstantiated or documentary expenses but the original document are unreasonable, valid, and legal
- Accounting into expenses in the year actually spent but due to the content, nature, or magnitude of the expenses, these expenses should be specified under the provisions of these expenses due to many production and business periods
1.2.4 Administrative Expense audit process in Financial Statement
IMPLEMENTING ADMINISTRATIVE EXPENSE AUDIT UNDER VIETNAM
G320 Working paper for financial statement footnotes
G341 Summary table of detailed business performance results
1.3.2 Content audit administrative expenses items
End date of the accounting period:
Content: AUDITING PROGRAM - ADMINISTRATIVE EXPENSES
1 Make sure administration expenses are approved, accurately recorded, and classified appropriately
O, C, Cut-off, A, Classification/ Occurrence, Completeness, Cut-off, Accuracy, Classification
2 Ensuring that administration expenses do not include transactions that have not happened yet
Ensuring that administrative expenses incurred but not paid are recorded appropriately at the end date of the accounting period
Ensure that all necessary disclosures related to administrative expenses are accurately prepared and presented and described appropriately in the financial statements
II RISKS AT MANAGEMENT ASSERTION LEVEL
From the results of the planning section [refer to GLVs in section A800], determine the level of risk by each management assertions (details by the item's verified account) in the table below:
Accuracy Cut-off Classific- ation
Risks at management assertion level
III CONSIDERATION OF AUDITING HANDLING MEASURES
III.1 Risk of material misstatement of the item
The risk of material misstatement of the item and the proposed audit corrective action is taken from the working paper at section A800 If other risks of material misstatement are found during the audit, the auditor should update the working paper in section A800 and this table:
Risk of material misstatement Affected Management Assertion Record audit procedures (*)
(*) Note: For specific risks such as significant risks, fraud risks, etc The auditor must design appropriate procedures to handle these specific risks by modifying the procedures stated in section III.2 or add additional procedures in addition to the procedures stated in section III.2 (Auditors can refer to the library of additional audit procedures in the sample audit program - Financial Statements 2019)
III.2 Substantive procedures (Applicable to all groups of transactions, account balances, and materiality footnotes)
Note: For substantive procedures, consider the questions suggested below (including but unlimited) to design and select appropriate audit procedures when answering “Yes” Auditor will then consider selecting, modifying/ adding, or removing audit procedures corresponding to that step in the audit program
Is the value of the item material (the item's value is greater than the material realization) or is expected to be material at the end of the accounting period?
Is administrative expenses volatility consistent with business developments in the period?
Has there been any noncompliance with the financial statement preparation and presentation framework that was applied in previous periods?
Are there any changes in accounting policies during the period?
In my opinion, from planned procedures, adequate and appropriate audit evidence may be obtained to achieve the audit objectives
Substantive procedures (Applicable to all groups of transactions, account balances, and materiality footnotes)
Note: When choosing to perform steps B and C above, the auditor must perform specific procedures (If appropriate) stated in each corresponding step of the audit program
- Elimination of unnecessary audit procedures and addition of other audit procedures as may be required by the entity to address specific risks
Are you satisfied with the results?
Checking whether the accounting policies applied consistently with the previous year and in the applicable presentation of financial statements
In case of changing accounting policies, does the entity comply with the instructions of [Accounting standard No.29]?
Collect and classify administrative expense items on the income statement
1 Make a summary of the data based on the current period's administrative expense general ledger and the previous period's financial statements audited, in which details are under the item of administrative expenses
2 For each item, collect the detailed table and compare it with the summary table of data
3 Perform the following analytical procedures:
(a) Compare administrative expenses this year with the previous year, combine with understanding of business revenues and operations,
Are you satisfied with the results?
Signature and execution date explain major fluctuations (if any);
(b) Analysis of monthly administrative expenses based on combined with changes in the size of the business operations and explanation of major fluctuations (if any);
(c) Analyze the structure of expense items incurred in the year and compare with the previous year, explain unusual fluctuations (if any);
(d) Review items that are greater than performance material, or extraordinary items, find out the cause, and perform the inspection procedures (if necessary)
4 Consider whether there are specific risks identified from performing analytical procedures that result from the administrative expenses item in a material misstatement
1 Comparison of expenses recognized during the period with those of the previous period, with the estimates and projections, and with the entity's explanations
2 In addition to administrative expenses, enterprises are checked private for information disclosure purposes (such as salary, depreciation expenses, ), consider implementing the following
Are you satisfied with the results?
Signature and execution date procedures for administrative expenses other materiality:
(a) Select the template from the ledger and compare with the supplier's invoice or claim, the accompanying spreadsheets, and the bank payment voucher among other vouchers;
(b) Check that the charges have been properly approved by the authorized person;
(c) Check for suitability in the cost classification;
(d) Check the cut-off of expenses:
Compare to the audit part
“Short-term and long-term accrued expenses” (E500), the audit part “Prepaid expenses and other current and non-current assets”
Read a subsidiary ledger of administrative expenses, cash, deposit, and VAT declaration after the end of the accounting period, transactions not cut-off
Considering the costs of the previous period but were recognized the audit period, assess the likelihood of risk being repeatable
(e) For indirect costs related to both selling and administrative
Are you satisfied with the results?
Signature and execution date expenses, manufacturing cost:
Find out and evaluate the rationality of allocation criteria, cost aggregation;
(f) Comparing the checked cost items in the relevant audit sections: salary costs, raw materials costs, tools costs, depreciation expense, accrued expenses, prepaid expenses;
(g) For recurring expenses, less volatility or associated with a certain criterion (land rent, office, ): Develop an independent estimate and compare with the recorded bookkeeping, learn the big differences (if any);
(h) Combining the comparison with the payable provisions to consider criteria and documents as the basis for deducting provisions to pay back for corporate restructuring costs, large risk contract provisions, and other provisions
(i) For an audited entity with financial regulations, spending norms : Compare the provisions of internal documents on spending norms with actual expenditures at enterprises;
(j) For related transactions with stakeholders: Check the recording, approval, applicable
Are you satisfied with the results?
Signature and execution date price, Note the transactions occurring near the end of the accounting period;
(k) Incorporation with the relevant parts (Accounts Payable,
Internal payables,…) to send confirmation letters about transactions during the period; and
(l) Review and synthesize administrative expenses that are not eligible as deductible expenses for calculation of taxable profits [coordinate with audit process to the cycle
“Taxes and payable to the state budget” (E300)]
1 Ensure administrative expenses are properly disclosed on the financial statements according to the applicable financial reporting framework
2 Consider the need to complete checklist financial statement footnotes on this item to ensure proper presentation and disclosure
3 Ensure that sufficient appropriate audit evidence has been obtained in the audit files to support all disclosures
Yes No No Apply Idea
1 There are no exceptions to handling the risks identified in the working paper the A800
2 Work has been done according to plan, findings, and results are fully kept on file
3 No additional comments are included in the Explanation Letter (B440) or
Management Letter (B210) If applicable, the level of confidence in the planned internal control in this area is still relevant
If you choose "Yes", modify the working paper B440 or
4 All necessary information has been collected for presentation and disclosure in the financial statements
5 Identified mistakes (other than insignificant errors) were noted in working paper B360
6 The initial risk assessment does not need to be revised when considering the audit evidence obtained
If you choose "Yes", present at the working paper B410 and consider the impact on the rest of the auditor's work and the work done until the time of concluding
7 The evidence obtained is sufficient and appropriate as a basis for the achievement of the audit objectives
If you choose "No", present at working paper B410 and consider affecting audit opinion at working paper
8 Issues that need to be monitored in the next audit period
If you choose "Yes", present at working paper B410
AUDIT STATUS OF THE ADMINISTRATION EXPENSE IN THE
AN OVERVIEW OF BRANCH OF AUDITING & INFORMATICS SERVICES
2.1.1 History of formation and development
Company name: Auditing & Informatics Services Company Limited Abbreviations name: AISC
Website: www.aisc.com.vn
Email: info@aisc.com.vn
Headquarters: 389A Dien Bien Phu, Ward 4, District 3, Ho Chi Minh City
Da Nang Branch: 350 Hai Phong, Chinh Gian Ward, Thanh Khe District,
Ha Noi Branch: Floor 6, No.36 Ngo Hoa Binh 4, Minh Khai Ward, Hai
Can Tho Branch: P9019, A200 Nguyen Hien, An Khanh Ward, Ninh Kieu District, Can Tho City
Hai Phong Branch: No.18 Hoang Van Thu, Minh Khai Ward, Hong Bang District, Hai Phong
Contact method at Da Nang branch:
Auditing and Informatics Services Limited Company (“AISC” for short) is a legally independent auditing and advisory organization with a large scale of operation all over Vietnam
AISC has a head office in Ho Chi Minh City, Branches in Hanoi and Da Nang, Representative Offices in Can Tho and Hai Phong
Being incorporated since 1994, AISC has been one of the first auditing company operating in independent audit, accounting-finance advisory, and informatics industries under the permission of the State Securities Commission; Auditing securities trading and issuing organizations under Decision No.51/2000/QD-UBCK2 dated 19/06/2000 of the Chairman of the State Securities Commission In 2005, AISC became a member of the International Accounting - Auditing Organization "Impact Asia Pacific"
In November 2017, the People’s Committee of Ho Chi Minh City approved the plan to convert Auditing and Informatics Services Company into Auditing and Informatics Services Company Limited;
In June 2000, AISC was one of the first independent auditing companies being permitted to audit organizations issuing and trading stocks;
In 2008, AISC received the International Gold Star Award from BID Organization
From 2009 up to now, AISC has been a member of the Vietnam Association of Certified Public Accountants (VACPA);
Professional service quality always gives customers real values Currently, AISC has over 500 customers using all of the services provided by AISC
AISC is one of the first independent auditing companies authorized by the State Bank to audit credit institutions and commercial banks in Vietnam AISC's customers in almost all industries belong to many economic sectors AISC operates on the principles of independence, objectivity, integrity, protecting the interests and business secrets of customers as their own interests based on compliance with applicable laws
Auditors of AISC have high professional qualifications Principles of professional ethics, quality of services provided always strive to exceed customer expectations and the company's reputation are the top standards that every AISC employee always remembers and complies with
What really makes your company so different from the others has always been a concern for customers in choosing an auditing company and the following prominent features help them stand out:
- Professional services have brought to customer real value, so they, at the moment, has had more than 1000 customers
- Competitive price together with a high-quality audit is one of our advantages
- AISC has a team of nearly 200 professional staffs who have been graduated from universities and higher, both inside and outside the country in which 30 auditors have been granted auditor’s certificates by the Minister of Finance, highly experienced and systematically trained in Europe, USA… and throughout coordination training programs between AISC and world-leading auditing companies
- AISC is permitted to audit public companies listing in Vietnam Stock Exchange and big groups in various industries
- Bank audit is also one of our strengths of AISC
- AISC is one of the top ten auditing companies in Vietnam
- AISC is the only auditing company who has the honor to receive the
“International Star for Leadership in Quality Award” in France granted by BID (Business Initiative Directions)
Choosing AISC as your service provider is the optimal solution since it will bring you the highest efficiency in business administration Please do not hesitate and contact them right now to discuss your imperative needs
2.1.2.1 Audit and Assurance a Audit of the financial statements
Our financial statements audit departments provide assurance services on the operating results and financial position of enterprises More than that, they support the enterprises to improve the quality of the financial statements
26 provided to the outsiders and comply with the laws and regulations including the Vietnamese Accounting System, Vietnamese Accounting Standards, and International Financial Reporting Standards (IFRS) AISC also assist customers in providing non-financial information to outsiders and help improve the corporate management processes of our customers
The audit is based on the standard auditing process of the Certified Public Accountants Association of Vietnam (VACPA) and designed with a focus on significant risk areas, based on the particularity of customers’ business such as field of operation, competitive pressure, inherent risks, and culture AISC also conduct the audit of the consolidated financial statements for corporations, groups with large scale
AISC provides services related to an interim review of financial statements and past financial statements A review gives less assurance than an audit because the review procedure is limited primarily to inquiries of employees of enterprises and application of analytical procedures on the financial information Depending on the purpose of using the financial information, the review can bring in the assurance level as requested and above all help save costs and time in comparison with the audit
Audit of owners’ equity; Audit of profit-sharing spreadsheets; Audit of accounts receivable; Audit of the financial statements prepared under the regulation on tax to determine taxable income
Review on the basis of pre-agreed procedures:
At each point in time, enterprises need a professional company to perform some procedures to meet their needs or to assist them in decision- making AISC will discuss with the enterprises to understand their problems, needs and will design specific procedures to be performed After performing
27 these procedures, we will give enterprises a report on checking results specifying the details of detected problems b Audit of basic construction
Our Construction Audit Departments provide audit services for the settlement report of the project completed, check the completeness and appropriateness of the accounting work, check the accuracy of indices on assets, capital, and liabilities; the legality of the original documents, economic contracts, and hand-over minutes
Check and assess the legality of the Project and compliance with the order and procedures for the construction work:
- Gather, organize, categorize books and documents, check and compare lists, the content of legal documents of the whole project;
- Check the compliance with the State’s regulations on the order and procedures for the capital construction project;
- Check the compliance with the order and procedures for the selection of contractors under the provisions of the law on bidding;
- Check the legality of economic contracts between employer and contractors and other relevant units
Check capital of the project:
Reconcile work contents, quantity (number) in calculation sheet for final settlement of employers or contractors with work content, quantity (number) in hand-over minutes
Check the cost of project:
- Reconcile work contents, quantity (number) in calculation sheet for final settlement of employers or contractors with work content, quantity (number) in hand-over minutes;
- Reconcile the unit price in calculation sheet for final settlement of employers or contractors with the unit price in the approved cost estimates to ensure the consistency with the norms, the unit price of the State or under principles for establishing norms, unit price as prescribed by the State;
- Accordingly determine the finalized value of work or package conducted by project management or contractors
Check loss of investment value eliminated from the value of assets:
- Loss of investment value caused by natural disasters, enemy sabotage, and force majeure events not being covered;
- Investment value for the works being canceled as per the decision of the competent authorities
Check the value of assets formed by investment:
- Check the quantity and value of the assets by two categories: fixed assets and working assets; Original cost (unit price) of each group (category) of assets according to the actual expenses and the converted prices to the date of transferring assets and putting into production and use
- Comments and assessments on the compliance with the State’s regulations on investment management, construction, and bidding; Employer’s management of investment costs, investment properties; Responsibilities of each level for project costs management;
- Recommendations on the finalization value and treatment to related issues
Value can exist in various forms regardless of tangible assets or intangible assets of a business, an investment, or intellectual property assets
A SOLUTION TO COMPLETE THE ADMINISTRATIVE EXPENSES
GENERAL ASSESSMENT ON BRANCH OF AUDITING & INFORMATICS
AISC has built itself a foothold in this volatile and fiercely competitive economy To do that, AISC has the following advantages:
- AISC has created a professional and friendly working environment suitable for the job of auditors AISC provides a full range of facilities, creating conditions for employees to work and organize teamwork very effectively As a result, the auditors have increased understanding and learning from each other, improving the ability of each team to work
- Systematic trained staff with high professional qualifications, experience, dynamic, fully equipped with necessary knowledge and skills contribute to AISC's reputation AISC always creates conditions for auditors to be exposed to many different types of enterprises, thereby accumulating experience and improving audit quality In addition, the company also constantly updates and trains regularly on new decisions, policies, and documents for its employees to improve their night level to higher customer satisfaction
- When performing the audit, the team leader is always an important person Assign the work to the members that there is a correlation between the importance of the items and the members' competencies Checking the working paper, thereby increasing the efficiency and accuracy of the audit information
- The organization of document archiving and accounting vouchers of the company is implemented in a very logical and scientific way
- Carefully stored and preserved voucher That is a valuable source of information and reference material for future audits
- The working paper records and shows the entire audit process as well as the working results of the auditor and auditor in strict compliance with the principles of arrangement, numbering, and reference on working papers In addition, AISC also specifies symbols that are used uniformly in the working paper, thus saving time in recording and quickly receiving information
The weaknesses that AISC have are also the weaknesses that almost all of our country's auditing companies are facing:
- Limited staff force makes the audit difficult, especially the human resource issue during the audit seasons Also due to limited human resources and pressure on audit time and reporting deadline, the work was dispersed Most auditors work at a dense frequency and last for a long time, shortening the resting time, causing stress during the audit season to be able to promptly complete the reports sent to a customer This is also part of reducing the quality of the audit and leading to possible audit risks
- Our country advocates globalization, with the trend of economic integration and the requirements of the market, many auditing firms are born The market is fiercely competitive and the law of competition is the rule of eliminating the obsolete, the slow to develop, so always taking the role of managers and employees of AISC a great responsibility to not be dug discharged from the economic masonry and can stand up and develop more.
COMMENTS ON THE AUDITING OF ADMINISTRATIVE EXPENSES AT
The audit implementation of the administrative expenses at ABC Joint Stock Company has been conducted by AISC through 3 stages, including: Audit planning, Audit Performing, Audit Ending
AISC has signed an audit contract with ABC Joint Stock Company for many consecutive years, so AISC has a clear understanding of the operating environment as well as the policies and legal regimes that ABC Joint Stock Company is implementing
AISC continues to accept customers AISC identifies and delineates the risks that are likely to occur, and then plans an appropriate audit to ensure the benefits of the client company as well as of the AISC
During its operation and development, AISC has built itself a joint audit program However, this is just the basis for the audit, not a mandatory condition applicable to all audits For each audit, AISC's staff will base on the actual conditions at the entity to flexibly apply for the audit program accordingly Actual auditing at ABC Joint Stock Company has shown clearly
In fact, during the audit at ABC Joint Stock Company, planning is always done well and understanding of customers from preliminary to details is fully complied with This work helps the audit team to set up an audit program with appropriate audit procedures and methods and to determine the time required At the same time, this work also facilitates the organization to assign work to group members, assign work to auditors scientifically and reasonably Each individual is assigned work under his ability and function
At the beginning of the audit process, the audit team leader assigns specific tasks to audit assistants During the audit process, there are always exchanges and discussions to find out outstanding problems in the customer entity to find out solutions as well as advise the customer to overcome those shortcomings
Administrative expenses audit program is strictly built, completeness of administrative expenses objectives
Based on the general audit plan and the audit program that has been developed, the auditor conducts a detailed audit for each specific part in the order from the auditing of the balance at the beginning of the fiscal year to the procedures: control procedures, analytical procedures, and detailed inspection procedures These jobs are performed and the results are reflected on the working papers, systematically reference numbered
The audit process of items is arranged scientifically, usually, there is a step to check transactions with reciprocal costs so that unsuitable expenses will not be omitted
Collecting audit evidence related to the item is always interested by the auditor, the auditor often copies or scans this evidence to facilitate the inspection as well as document for the next annual audit if the customer has need
After conducting the audit, the team leader synthesizes the working papers of the team members and makes minutes of exchange or management letter The audit team leader together with the client company director will discuss the issues raised in the minutes This discussion helps AISC and the customer to have an initial agreement on the necessary adjustments in the customer's bookkeeping and reporting system Thereby, the auditor gives opinions to help customers improve the accounting apparatus and the internal control system more closely
Collection and storage of necessary documents related to the annual audit form the basis for the inspection of the working paper as well as the basis for the audits performed in the following year
Auditors make a list of adjusted and unadjusted entries as a basis for determining the mistakes for the items on the financial statements, and the preparation of the audit report in the future There is always a discussion between the audit team and the customer about the entries that need adjustment Issues that need to be noted and corrected by the entity create a high consensus between the audit team and the entity
Before issuing audit reports, with the approval of the Board of Supervisors, the general director of the company, who have long experience in the audit field, thus limiting the risks of errors of the company Provide an opinion for an audit report
In general, AISC's financial statements audit process is relatively strict complies with Vietnamese audit programs and internationally audit programs to accepted in Vietnam
During this period, in the process of learning about the internal monitoring system of the enterprise, the auditor used the questionnaire Yes/No, but did not specify the levels to have the best view of the internal control system of the customer In addition, auditors often use narrative methods, so they cannot have an accurate view of the customer's cycle, so they do not increase the independence and reliability of the internal control system
Auditors often ignore the test of control but go straight to the implementation of substantive procedures, the implementation of test of control to assess whether the company's internal control system is reliable or not to increase or decrease The substantive procedures are under the procedures in the auditing of financial statements according to the VACPA sample audit process, but the AISC auditors often do not do that
Besides there is a problem of sample selection, auditors when selecting samples often use manual sampling methods on excel combined with judgment, so it is only relative The auditor based on the predetermined formula on excel only checks and selects the samples for the transactions with large amounts of money in the sample distance and checks the samples according to the estimated number of any jump steps through transactions arising in small amounts This can lead to risks such as many mistakes with
64 small amounts or other large samples that are not selected by the auditor, which could lead to material misstatement
In addition, during the audit process, each auditor does different items such as 242, 334, 338 so for management costs, the auditor cannot check and collate all the audit practices other closely related For indirect costs related to management costs, it is necessary to find out and evaluate the reasonableness of the allocation criterion, the eligible costs
Example: Comparing with the audit part "Short-term and long-term payables" (E500), the audit part "Prepaid expenses and other current and non- current assets" (D600),
SOLUTIONS TO RECOMMEND TO COMPLETE THE AUDITING OF
3.3.1 Some solutions to complete the general situation of AISC
As the number of AISC customers is increasing, so does the workload Therefore, AISC needs to promote recruitment such as offering attractive policies on salary, bonus, working environment, However, it must be recruited strictly, candidates must meet specific conditions to To enter the company, the person in charge of recruitment must be fully experienced and knowledgeable To promptly and fully respond to the market's demand
AISC needs to update the sample audit program, especially compared to the old versions, the sample audit program, applied from January 1, 2020, has had many changes in objectives, general procedures, and analysis procedures, up to test of details procedures The new audit program mainly focuses on audit methods based on risk assessment
3.3.2 Some recommendations to complete the auditing Administrative Expenses
3.3.2.1 Completing the assessment of the internal control system of the customer
In the AISC audit process, there will be a section to learn and evaluate the client's internal control system However, in reality, auditors rarely care about this, understanding the internal control system helps the AISC improve the quality to serve in the audit process, saving maximum time and effort of auditors both physically and mentally Therefore, the investigation of the internal control system should be conducted more seriously and closely, it is necessary to interview customers and observe reality effectively Auditors should combine with questionnaires and flowcharts, narrative boards to learn the internal control system
AISC should approach customers through third parties, other companies in the same industry, in the same industry
Achieved results: This makes auditors more visible in assessing "areas" with a high risk of errors, to focus the tests to save time while ensuring audit quality
The following is a reference questionnaire for understanding the internal control system:
Table 3.1: Reference about research the internal control system
1 Whether is there an Internal Audit Department in the company's operations?
2 Whether has the entity taken all the necessary expenses the control steps?
3 Whether are there quota rules in the company?
4 Is the company's organizational structure as announced?
5 Whether are there specific regulations on the responsibilities of each accountant?
6 All release notes, check checks are approved by an authorized person or not?
7 Are previous documentary records made independently between
8 Are the transactions regularly checked & compared documents?
9 Whether have the Administrative Council & the Board of
Directors excessive benefits compared to normal?
10 Whether or not to build a system of accounts to account for administrative expenses?
11 Does the partner company fill out all information as well as signatures, certifications on invoices, or related documents??
12 Whether there exist any unusual or complex operations?
13 Are accounting policies and recognition consistent with accounting standards?
From the date of its establishment to the present time, AISC has had many customers with many types of businesses and different business characteristics, so that the audit quality is always guaranteed in the best way AISC should build a separate audit program, specifically for each customer audience
Achieved results: Limited time to think and apply audit procedures to suit the audited entity It is suitable for young auditors who are new to the profession who can perform the audit process easily and conveniently but still ensure audit quality Test results will be more accurate and practical
According to VACPA's 2019 sample audit program, there are some changes to administrative expenses in particular and all other items in general Particularly for administrative expenses, 2019 will be more improved The following are some of the updated procedures compared to the 2016 model VACPA auditing program:
Table 3.2: Comparison of old and new VACPA sample auditing programs (account 642)
Make a summary of the data based on the current period's administrative expense general ledger and the previous period's financial statements audited, in which details are under the item of administrative expenses
Review items that are greater than performance material level, or unusual items, find out the cause, and perform corresponding testing (if necessary)
Consider whether there are specific risks identified from performing analytical procedures that result in a material misstatement of the administrative expenses
III Test of details of balances
1 Check that the charges have been accuracy approved by the authorized person;
2 Check for compliance in the expenses classification;
Check the cut-off of expenses:
- Reference to the audit part “Short-term and long-term accrued expenses” (E500), the audit part “Prepaid expenses and other current and non-current assets” (D600) and audit part "Cash and cash equivalents" (D100);
- Read a subsidiary ledger of administrative expenses, cash, deposit, and VAT declaration after the balance sheet date, identify uncut-off transactions
For an entity with financial regulations, spending norms :
Compare regulations of internal documents on spending norms with actual expenses at enterprises;
Combine with relevant parts (Accounts Payable, Internal payables, ) to send confirmation letters about transactions in the period;
Review and synthesize administrative expenses that are not eligible as deductible expenses for profit tax [coordinated with the audit section “Taxes and payable to the state budget
At present, after uploading new working papers from Ho Chi Minh City and regulations, AISC gradually begins to apply for some clients, however, AISC has not yet applied all the new working paper templates that are still applying gradually to large enterprises Limited Company and Joint Stock Company still follow a common pattern Next time, it is necessary to apply a
68 new working paper to be able to examine more carefully to reduce the risk factor to the lowest level
Substantive procedures (Applicable to all groups of transactions, account balances, and materiality footnotes)
When choosing to perform steps B, C, D, E, F, G, H above, the auditor must follow specific procedures (if appropriate) outlined in each corresponding step of the audit program sheet Eliminate unnecessary audit procedures and supplement other audit procedures that are actually required by the entity to address specific risks
Table 3.3:New audit program form
Xử lý cơ sở dẫn liệu
Tham chiếu giấy làm việc
Có thỏa mãn với kết quả không?
Cut-off G450 Có TL/NT
Cut-off G450 Có TL/NT
Cut-off G450 Có TL/NT
Cut-off G450 Có TL/NT
Cut-off G450 Có TL/NT
Cut-off G450 Có TL/NT
Cut-off G450 Có TL/NT
Chi phí quản lý DN
Xem xét liệu có các rủi ro cụ thể được xác định từ việc thực hiện các thủ tục phân tích dẫn đến khoản mục chi phí quản lý DN chứa đựng sai sót trọng yếu không. Đối với mỗi khoản mục, thu thập biểu chi tiết và đối chiếu với bảng tổng hợp số liệu.
Kiểm tra sự phù hợp trong việc phân loại chi phí;
- Đối chiếu đến phần hành kiểm toán “Chi phí phải trả ngắn hạn, dài hạn” (E500), phần hành kiểm toán “Chi phí trả trước và các tài sản khác ngắn hạn, dài hạn” (D600) và phần hành kiểm toán “Tiền và các khoản tương đương tiền” (D100);
- Đọc sổ chi tiết chi phí quản lý DN, tiền mặt, tiền gửi và tờ khai thuế GTGT sau ngày kết thúc kỳ kế toán, xác định các giao dịch không đúng kỳ
So sánh các chi phí được ghi nhận trong kỳ với chi của kỳ trước, với dự toán và các dự kiến và kết hợp với các giải thích của đơn vị được kiểm toán.
Ngoài chi phí quản lý DN được kiểm tra riêng biệt cho mục đích thuyết minh thông tin (như tiền lương, chi phí khấu hao, ), xem xét thực hiện các thủ tục sau đây đối với các chi phí quản lý DN trọng yếu khác: