Subject and scope of the thesis- Research subject: The process of auditing NCA items in the audit offinancial statements.- Research scope: + Spatial range: The process of auditing NCA it
GENERAL OVERVIEWS OF NON-CURRENT ASSET ITEMS
1.1.1 Definition of Non-current assets
In order to conduct production and business activities, enterprises need to have all the inputs of the production process including: labor materials, labor objects and labor power Non-current asset is a major part of labor documentation, playing an important role in the business activities of enterprises However, not all labor materials at the unit are non-current assets, but the non-currents assets only include labor materials that mainly meet the regulations on value and time of use specified in the current financial management regime onion.
The most primitive definition of non-current asset was introduced in the
“Basic Principles of Marxism-Leninism” in the form of non-current capital as follows: “Non-current capital is a part of the production capital, which is used entirely in the production process, but its value is only transferred in parts into the production value products in multiple production cycles Non-current capital exists in the form of machines, equipment, factories, … In the course of its operation, non- current capital wears out.”
According to VAS 03 – Tangible non-current assets, to be recognized as tangible non-current assets, assets must meet simultaneously all the following four
(4) recognition criteria: a, Future economic benefits will surely be obtained; b, Their historical cost has been determined in a reliable way; c, Their useful life is estimated at more than one year; d, They meet all value criteria according to current regulations.
Besides, Article 3 of Circular No.45/2013/TT-BTC issued on 25 April 2013 –
Regulation on management of non-current assets of the Minister of Finance states that primary price of assets must be determined reliably, and is valued at 30,000,000 (thirty million) VND or more.
According to VAS 04 – Intangible non-current assets, intangible non-current assets mean assets which have no physical form but the value of which can be determined, and which are held and used by the enterprises in their production, business, service provision or leased to other subjects in conformity with the recognition criteria of intangible non-current assets.
After initial recognition, during their use process, non-current assets shall be determined according to their historical costs, accumulated depreciation and residual values Historical cost means all the costs incurred by the enterprises to acquire non-current assets as of the time of putting such assets into the ready for intended use The depreciable value of non-current assets shall be allocated systematically during their useful life Residual value means the historical cost of tangible non-current assets after subtracting the accumulated depreciation thereof.
According to Vietnamese Accounting Standard No 06, financial lease NCA are NCA that enterprises lease from financial leasing companies and units. Financial lease NCA are assets that satisfy the following conditions:
The lessor transfers the ownership of the property to the lessee upon the expiration of the lease term;
At the inception of the lease, the lessee has the option to buy back the asset at an estimate lower than the fair value at the end of the lease term;
The minimum lease term must account for the majority of the economic life of the asset, even if there is no right to transfer ownership.
At the inception of the lease, the present value of the minimum lease payments constitutes the majority of the fair value of the leased asset;
The leased property is of a specialized type that only the lessee can use without any major changes or repairs.
1.1.2 Classification of non-current assets
The classification of non-current assets must be done according to many different criteria in order to facilitate the administration and accounting of non- current assets, the most common of which is classification by nature and technical qualities As a result, non-current assets are divided into tangible non-current assets, intangible non-current assets and non-current assets of financial leasing.
Tangible non-current assets: these assets are means of labor primary in the physical forms and satisfy the criteria of tangible non-current assets, involved in many business cycles but remain original physical forms as buildings, structures, machinery, equipment, means of transportation…
Intangible non-current assets: these assets are not physical forms, represent a value of the investment and have to satisfy the criteria of an intangible asset, involved in many business cycles such as some costs directly related to land use; issuance right, patent, copyright and so on.
Non-current assets of financial leasing are the assets which enterprises lease from financial leasing companies At the end of the lease term, the lessee has the right to purchase the leased property or continue the lease under the terms agreed in the lease be at least equal to the value of that asset at the time of contract signing. All leased assets if not meeting the above-mentioned regulations are considered as the operating leased non-current assets [Article 2,3]
In addition to the classifications listed above, non-current assets can be classified in a variety of ways, including classification based on the asset’s economic use, classification based on the right of use, classification based on the source of asset formation, and so on.
1.1.3 Management for non-current asset
1.1.3.1 Management for non-current asset
The general requirement for the management of non-current assets in enterprises is to promptly reflect the current number and changes of each type and group of non-current assets in the whole enterprise as well as in each user; ensure safety in kind, exploit basic principles as follows:
A set of documents must be for all non-current assets in the enterprise, which includes: Minutes of handover of non-current assets, Contract, Invoice for purchase of non-current assets and relevant documents.
The audit process of auditing Non-current assets items in the audit
An effective and efficient audit relies on proper planning procedures The planning process is covered in general terms by ISA 300, Planning the audit of financial statements which states that the auditor shall plan the audit so that the engagement is performed in an effective manner This stage aims to help the auditor devote appropriate attention to important areas of the audit, identify and resolve potential problems on a timely basis, properly organize and manage the audit so it is performed in an effective manner, to assist in the selection of appropriate team members and assignment of work to them, facilitate the direction, supervision and review of work and to assist in coordination of work done by auditors of components and experts [11]
The auditor is required to formulate an overall audit strategy which is translated into a detailed audit plan for audit staff to follow
The main contents of the audit plan for NCA are:
Step 1: Understanding the entity and its environment relating to non- current assets
The auditor performs this step to identify and assess the risks of material misstatement in the financial statements, to enable the auditor to design and perform further audit procedures, and to provide a frame of reference for exercising audit judgement
According to Article 11 of ISA 315, Identifying and assessing the risks of material misstatement through understanding the entity and its environment the auditor must collect information on:
Industry, legal regulations, management and external factors, including the financial reporting framework used;
Characteristics of the entity, including areas of operation, ownership and management structure, and types of investments in which the entity is or will be involved, including investments in special-purpose entities, organizational structure, production and business and management of capital structure of the entity
The policies that the entity chooses to apply and the reasons for the change (if any) The auditor must evaluate whether the accounting policies applied by the entity are appropriate for the business activities of the entity, are consistent with the financial reporting framework and the accounting policies adopted by the entity in the same field of activity are applying or not;
The entity’s objectives and strategies, and those related business risks that may result in risks of material misstatement;
The measurement and review of the entity’s financial performance.[10]
For NCA specifically, when conducting an audit, the auditor should obtain following information:
The client's legal obligations: for NCA, the auditor needs to obtain legal documents related to NCA such as minutes of capital contribution, capital handover, documents related to the contribution capital in NCA,
The business situation of the client: for the NCA item, the auditor needs to pay attention to the business type of the enterprise, the main source of revenue that affects the characteristics and proportion of the NCA item on the financial statements and relevant risks; whether the activities of investment, capital contribution, and business association will affect the investment structure in NCA; the geographical allocation of factories and offices affects the preservation and management of NCA, or the business situation and business results of customers in the past year because this helps the auditors to make judgments about the amount of NCA owned by clients, the corresponding depreciation rate, or whether or not the NCA likely to have a material influence on the financial statements.
Organizational and management structure: understanding about the functions and duties of the departments, as well as the structure of the accounting department, for the NCA section, find out who is the accountant in charge.
Objectives, business strategies of the entity, and applicable accounting policies: new strategies may require enterprises to invest in new and modern equipment and technology, which may affect status of NCA of the enterprise.
External factors: In addition to the internal factors affecting the NCA portfolio of the entity such as business model, organizational structure, strategic goals of the unit, there are also external factors such as the development trend of the company's operating industry, business environment in which the enterprise operates, laws, fluctuations in interest rates, inflation.
Finally, after having the general understanding about the client’s business, the auditors began to focus on deeper understanding of the entity's situation such as understanding the reporting process and understanding the basic business cycles.
Step 2: Understanding the entity’s internal control system and control risk assessment
According to ISA 315, the auditor shall obtain information about the entity's internal control relevant to the audit of the NCA item.
When obtaining information about controls relevant to the audit of NCA, the auditor shall evaluate the design of the controls and determine whether they have been implemented in the entity by performing additional audit procedures in addition to interviewing the entity's employees.
The auditor shall obtain an understanding of the control environment relevant to NCA items by evaluating whether:
(i) Management, with the oversight of those charged with governance, has created and maintained a culture of honesty and ethical behavior;
(ii) The control environment provides an appropriate foundation for the other components of the entity’s system of internal control considering the nature and complexity of the entity; and
(iii) Control deficiencies identified in the control environment undermine the other components of the entity’s system of internal control [10]
The entity’s risk assessment process
The auditor shall obtain an understanding of the entity’s risk assessment process relevant to the preparation of NCA through evaluating whether or not the existence of the risk assessment process for NCA in the entity If internal control is good, the entity will define a process of risk identification and assessment associated with the work steps of controlling NCA Risk assessment process will be associated with control objectives and control procedures for NCA.
The entity’s process to monitor the system of internal control
The auditor shall obtain an understanding of the entity’s process for monitoring the system of internal control relevant to NCA through:
Identification of the relevance of internal audit to the audit by obtaining understanding of the responsibility and position of the internal audit in the organizational structure of the entity as well as activities that internal audit has and will perform
Understanding the sources of the information used in the entity’s process to monitor the system of internal control, and the basis upon which management considers the information to be sufficiently reliable for the purpose [10]
The information system and communication
The auditor shall obtain an understanding of the entity’s information system and communication relevant to the preparation of NCA through understanding the entity’s information system that records, processes and reflects information about NCA in accordance with the applicable financial reporting framework.
Besides, Understanding how the entity communicates significant matters and related reporting responsibilities related to NCA in the information system and other components of the system of internal control:
(i) Between people within the entity, including how financial reporting roles and responsibilities are communicated;
(ii) Between management and those charged with governance; and
(iii) With external parties, such as those with regulatory authorities; [10]
GENERAL INTRODUCTION ABOUT AUDIT AND
2.1.1 History of establishment and development of UHY Auditing and Consulting Co., Ltd
- Full name: UHY Auditing and Consulting Company Limited
- International trading name: UHY ACA Auditing and Consulting
- Type of enterprise: Limited liability company with two or more members
- Legal representatives: Mr Dao Xuan Dung and Mr Nguyen Tu Trung
- Email: uhy-info@uhyvietnam.com.vn
- Website: http://www.uhy.vn.com
Address: 5th Floor (Office Floor), Tower B2, Roman Plaza, To Huu Street, Nam Tu Liem District, Hanoi.
Address: 6th Floor, Tower B2, Roman Plaza Building, To Huu Street, Dai Mo Ward, Nam Tu Liem District, Hanoi.
Address: Room 1301, Petro Vietnam Twin Towers, No 7 Quang Trung Street, Vinh City, Nghe An
Address: 4th Floor, 63B Calmette, Nguyen Thai Binh Ward, District 1, Ho Chi Minh City
Address: Lot 118, Dang Hai 2 Industrial Park, Le Hong Phong Street, An Hai District, Hai Phong City
Address: Room 1905, 19th floor, Charmvit Building, 117 Tran Duy Hung, Cau Giay, Hanoi
UHY Auditing and Consulting Company Limited ("UHY Ltd") is one of the top 10 auditing and consulting companies in Vietnam with more than 15 years of experience (since 2001) and is one of the auditing companies approved by the StateSecurities Commission to audit listed companies and organizations UHY is proud to be the only member of UHY International in Vietnam – the world's leading auditing and consulting firm based in London, UK.
Currently, UHY has more than 300 professional employees, including about
40 employees who are certified as practicing auditors, with many years of experience working at major auditing companies in the world The company has a network of offices spanning provinces in Vietnam: Hanoi, Ho Chi Minh, Nghe An, Hai Phong,
With the commitment to providing customers with international standard quality services, promptly meeting the increasingly demanding needs of customers, UHY Vietnam quickly integrated into the service standard system of UHY International can now access a network of more than 7000 experts of auditing firms around the world
With the approval of Hanoi Department of Planning and Investment, since 09/08/2017 the company has changed its name to UHY Auditing and Consulting Company Limited, English name: UHY Auditing And Consulting Company Limited, abbreviated name UHY CO., LTD.
The development process of the Company from its establishment goes through
In 2006, IFC's top management (capital contribution board) decided to split the majority of IFC to join the members of UHY International, whose minutes of the members' meeting were agreed upon in the entire board of if on 10/8/2006 The split to join UHY International includes:
Company head office: 25A, Tran Duy Hung, Cau Giay, Hanoi.
7/12 members contributed capital (accounting for 55% of the total contributed capital).
1 Chairman of the Members' Council Deputy Director and 2 other Deputy Directors.
8/10 deputy heads, 40/52 employees, of which the total number of auditors with CPA certification is 9 people.
In 6/2007, Ban company leader decided to move the company's headquarters to: No 136 Hoang Quoc Viet, Cau Giay, Hanoi
In October 2012, the company continued to move its headquarters to the address: 9th Floor, HL Building, Lane 82, Duy Tan, Cau Giay, Hanoi.
In 2007, UHY was authorized by the State Securities Commission to audit listed companies and issuers This is a new development of the company.
During that time, the company's operating area was mainly the North and Central Realizing the great development potential in the Southern market, in June
2009 the company decided to open 1 representative office in Ho Chi Minh City.
In November 2014, UHY ACA was born as a result of the merger from Kreston ACA Vietnam Auditing Company Limited into UHY Consulting and Auditing Services Co., Ltd marking a major transformation of the Company.
From 09/08/2017 the company has changed its name to UHY Auditing and Consulting Company Limited (officially separated from UHY ACA and operates independently), English name UHY AUDITING AND CONSULTING COMPANY LIMITED, the name is written UHY CO., LTD
2.1.2 Organizational and management characteristics, operational structure of UHY Auditing and Consulting Co., Ltd
2.1.2.1 Organizational characteristics of business activities
Due to the unique characteristics of the auditing industry, UHY is a large company, with many branches spread across the North, Central and South, so the company has set up a distributed organization According to this model, each branch has its own management and accounting apparatus operating under the general management of the headquarters
2.1.2.2 Organizational characteristics of the management apparatus
UHY organizes the management apparatus in an online-functional style Headed by Mr Dao Xuan Dung - Chairman of the Board of Members of UHY VietnamAuditing and Consulting Services Co., Ltd Next is the General Director, Deputy
General Director, Director, Deputy Director, below are the functional departments and subordinate professional departments (detail at diagram 2.1).
The Board of Directors is responsible for directing, developing strategies, plans, business plans, choosing to change the organizational structure
Chairman of the Members' Council: Mr Dao Xuan Dung
The position of the head of the company, plays a decisive role in the big issues in the company
Managing Director: Mr Nguyen Tu Trung
He is the legal representative of the Company, directly manages all activities of the Company and is responsible to the Members' Council and before the law for all activities of the Company, ensuring the development of the Company in a comprehensive way such as:
Scale operations in both breadth and depth
Arrange the organizational structure in accordance with professional activities from time to time
Appointment of managers in accordance with the provisions of the charter of organization and operation
Ensure the internal control system operates regularly
Development of service activities: Auditing, consulting, training, quality control, avoiding professional risks
Maintaining and expanding customer network, foreign relations, domestic and domestic joint venture cooperation
Develop the company's professional qualifications
Training professional staff and managers
Equipping and renewing equipment, facilities, working conditions
Manage, use effectively, preserve and develop the capital, assets and financial capacity of the Company
Take care of and focus on improving the material and spiritual life of all employees working at the Company.
Diagram 2.1: Organizational structure of UHY Vietnam
Partners in charge of audit
Partners in charge of investment audit
Audit of civil construction investment
Investment Audit at Ho Chi Minh City office
Partners in charge of consulting
Tax consulting consulting - Ho Chi Minh City office
Partners in charge of administration and human resources
IT department and internal information management
Training, research, development and quality control department
As members of the Board of Directors responsible for managing each area of work, assigned tasks as assigned and authorized by the CEO Deputy General Directors may enter into contracts on behalf of the Company to the extent assigned or authorized, handling tasks under the jurisdiction of customers and partners on behalf of the Company Take responsibility before the Company and the Law in its decisions The company has a team of assistants and secretaries to help the Board of Directors in the management and management of the Company more and more completely.
Currently, UHY has 12 Deputy General Directors:
9 Mrs Dang Thi Quynh Trang
11 Mrs Nguyễn Thị Phương Thảo
Are members of the Board of Directors in charge of expertise in each specific field of operation of the Company such as: Audit Services, Tax Consulting, Financial Consulting, Management Consulting and Training Services At the same time, he is also an expert in each respective field.
Training, Research, Development and Quality Control Board
As a department directly operated by the CEO and in charge of researching technology transfer and training for professional departments within the Company and outside the Company, can be directly involved in providing services as a senior specialist, quality review organization for services provided to customers of specialized departments, especially for assurance services such as: Financial statement audit, investment settlement audit and other notary services, In case of need, the Research and Development and Quality Control Board can mobilize additional experts from other departments to perform more of its tasks to achieve the set goals.
The staff department specializes in providing audit and other assurance services. These departments are usually divided into rooms of 20 to 30 employees according to specialized areas.
Are professional staff members specializing in providing financial advisory services to clients and are divided into specific service segments.
Corporate financial management consulting includes the following stages: Planning long-term financial strategies, short-term financial planning, consulting on evaluating the effectiveness of investment projects, consulting on capital mobilization solutions for projects, consulting on corporate risk management and other financial services.
Consulting on enterprise valuation, valuation of assets for the purchase and sale of enterprises, determining enterprise value for equitization of state-owned enterprises, consulting on corporate restructuring and consulting on mergers and acquisitions,
ACTUAL SUTUATION OF THE AUDIT PROCESS OF NON-
In my graduation thesis, I would like to use an audit client as an illustrative example to clearly state the status of the audit process of NCA in the audit of financial statements conducted by UHY Auditing and Consulting Co., Ltd. However, to ensure professional confidentiality, I would like not to specify the name of the customer but take the general name of XYZ Joint Stock Company operating in the field related to seaports (being a former customer of UHY).
2.2.1 Overview of the audit of financial statements at XYZ Joint Stock Company
Customer acceptance review and contract risk assessment
XYZ Joint Stock Company (XYZ) has been a client of UHY Auditing andConsulting Co., Ltd since 2018, so auditors can reduce the work of reaching customers In this case, XYZ Joint Stock Company actively invited UHY to provide
Audit services through the Audit Invitation Letter Representatives of the two sides met to discuss and propose their requirements for this audit The agreement on the terms of the Audit Contract was also ignored because both parties of the Company did not have any other requirements for the audit compared to previous years Although it is a traditional customer, in order to ensure the rigor of the audit,UHY has approved its predecessors and the actual situation to conduct a contract risk assessment with a XYZ Joint Stock Company and give some preliminary assessments as follows:
Table 2.2: Acceptance, retention of old customers and evaluation of contract risks
UHY Auditing and Consulting Co., Ltd
Customer name: XYZ Joint Stock Company Name Date
End date of accounting period: 31/12/2022 Preparer BMĐ 15/12/2022 Subject: Accept, maintain second-hand goods and contract risk assessment Reviewer 1 NTTH 18/12/2022
1 Client name: XYZ Joint Stock Company
2 The first year of auditing financial statements:
3 Years Audit Firm has provided financial statement audit services to this customer: 02
4 Name and title of primary contact: Nguyen Van A
5 Address: No 3 Nguyen Tat Thanh, Ward 12, District 4, Ho Chi Minh City.
6 Changes from the previous year:
Certificate of Business Registration/Certificate of Business
Registration/Certificate of Business Registration
Main shareholders and members Increase
Contents of transactions with relate parties
Transactional banks (borrowing or financing)
Specific legal regulations related to the operation of enterprises
How to sell (instant sale, deferred payment, agent sale, sale wholesale, retail…)
The main goods, materials and services are often purchased
Methods of purchase (import, domestic…)
Main external links Reduce the number of external links Accounting standards and regimes applicable
External links used print accounting
Official processes/regulations on internal controls Tighter
Regulations on operation related big sales, purchase and production (manual/SOP)
Changes that have occurred from the time of the previous fiscal year or the customer’s intentions within the next 1 year (e.g., acquisitions, mergers import, list…)
7 Issues noted from the previous year’s audit
8 What are the requested services and reports and completion dates
(05) Set of Audit Reports accompanied by audited financial statements in Vietnamese;
(03) Set of Management Letters in Vietnamese (if any) and three (03) Managed Letters in English (if any)
II REVIEW OF PROFESSIONAL CAPACITY, ABILITY TO IMPLEMENT THE CONTRACT, INTERGRITY OF THE AUDITED EMTITY/CLIENT AND OTHER MATERIAL ISSUES
1 Professional capacity and ability to perform contracts
Auditing Company has a full range of qualified and experienced personnel and the resources needed to continue maintaining customer relationships and executing contracts?
2 Consider the independence and measures to ensure the independence of Audit Firm and key audit team members
(Reference to Form A270 – Review of factors affecting the independence and measures to ensure the independence of audit team members)
Note: During the review period of acceptance, maintaining customer relations and contracts, the questions/contents in schedule A270 need to be considered at the Audit Firm level and key members, other members are expected to participate in the meeting audit and must perform before making an acceptable decision receive customer relations and contracts or not.
3 Integrity of the audited entity and other material issues
Are there problems in identifying the real owner of the unit are not?
Are there member of the Board of Directors or the
Board of Directors who has the ability to influence matters related to audit risk?
Are there any information, situation or issue related to the serious non-compliance with the law by the owners, the Board of Directors of the entity?
Are there adverse events, litigation, unusual disputes, investigations or material risks involving the client’s Owners, Board of Directors,
Are there problems with the client’s way of doing business that casts doubt on its reputation and integrity?
Are there other situations or events arising in the course of work that lead to doubts about the integrity of the owners, the Board of Directors, the
Board of Directors of the unit (such as information disclosed negative; Members of the Board of
Directors are the management personnel of the professional organizations do not have a good reputation; Relationship close contact with individuals/businesses who are morally questionable ethics,…) or related to inappropriate use by the
Board of Directors Standard of Auditing and controlling the internal control environment?
The identities and information of the parties involved lead to suspicions doubts about the integrity of the owners, members Board of Directors or Management of the client?
There are indications that the client is involved in money laundering or criminal activities?
Is the client unduly concerned with keeping audit fees as low as possible?
Are there indications of an inappropriate restriction on the scope of work of Audit Firm or the Board of
Directors or the Board of Management of the audited entity has limited the scope of work of the auditor (such as the time limit for performing the audit is not feasible, not accept certain Audit Firm employees to perform work, deny access to a business, key personnel or related documents) which the auditor and Audit Firm consider to be such a limitation will result in the auditor's refusal to express an opinion on the financial statements?
Does the unit operate in a special legal environment, operating in a recession, with a sharp decrease in profits?
There is great doubt about the unit's ability to continue operating are not?
Is the customer part of a complex structured corporation?
Customers have sales or interests abroad are not?
Especially in countries/regions that belong to the group of “tax havens” or not?
The entity has many important transactions with related parties are not? Are these transactions peer- to-peer?
Did the entity have unusual transactions during or near the end of the year?
During the audit of the previous year, were there any serious deficiencies found in the entity's internal control system?
Are there indications that the entity's internal control system this year has serious deficiencies affecting compliance law, truthfulness, and reasonableness of financial statements?
Does the Audit Report on the previous year's financial statements have an "audit opinion that is not an unequivocal opinion"? If so, are there any indications of a repeat of the matter that led to such an audit opinion this year?
Conclusion: The appropriate procedures for accepting customer relations and before signing the contract have been implemented to have a reasonable assurance of the acceptance of customer relations and the contract in accordance with professional standards.
III ASSESS THE LEVEL OF CONTRACT RISK
Accept customer retention: High No
2.2.2 Actual solutions of the audit process of non-current assets in the independent audit of financial statements performed by UHY Auditing and Consulting Co., Ltd
After assessing the acceptability to continue providing audit services, UHY proceeds to enter into a contract with XYZ Joint Stock Company under the following contract.
After signing the audit contract, under the assignment of the Board of Directors, the responsible audit director has set up an audit team of 5 members to conduct an audit at this client
Ms NTPT Members of the Board of Directors in charge of the
Mr BMD Auditor – Team Leader
2023After the field audit if there are any additional problems, the audit team can contact the accounting department at the company
After surveying and accepting to provide financial statement audit services for XYZ Joint Stock Company, UHY makes a general audit plan This makes it possible to perform the audit efficiently, reduce costs and improve the quality of the audit.
Specifically, the work steps are carried out as follows: a, Find out customer information
Depending on the characteristics of each customer, auditor collects part or all of information about customers For the company's traditional customers, all information about the customer has been collected into previous audits and are stored in the previous year's audit records kept at the company Therefore, auditor only collects new information arising in the current audit year, especially changes in accounting policies for guests.
For the first audit, auditor must collect all information about that customer from the time of establishment to the audit of financial statements.
Since XYZ Join Stock Company is UHY's third year audit client, all information collected about XYZ Joint Stock Company has been stored in the audit file in section A of the previous year's audit file.
Table 2.3: Understanding customers and operating environments
End date of accounting period: 31/12/2022
Subject: Understanding customers and operating environment
Gain insights about customers and the operating environment to identify and understand customer events, transactions and business practices that have a material impact on financial statements, thereby helping to identify risks there are material errors due to fraud or mistake.
1 Understanding of the operating environment and external factors affecting businesses:
1.1 Issues about the industry in which the business does business and the trend of the industry
XYZ Joint Stock Company operates in the field of seaports The demand for this industry is increasing day by day However, in 2020, due to the impact of the COVID-19 epidemic,
19 should also affect the company's business
The company's competitiveness is high due to its modern machinery system and a team of technicians and skilled workers, but the company is also subject to competition from domestic and foreign companies.
(2) The company has a normal business cycle of 12 months
(3) Technology related to the product of the unit, changes in production technology (if any):
(4) Input sources for the industry and prices (main materials, services, labor):
General information on legal elements includes the following:
(1) Accounting regime and accounting practices (if any) applicable to business lines of enterprises:
The Company applies the corporate accounting system issued in accordance with the Circular No 200/2014/TT - BTC dated December 22, 2014 of the Minister of Finance.
GENERAL ASSESSMENT OF THE PROCESS OF AUDITING NON-CURRENT ASSET ITEMS
UHY is one of the most reputable and high-quality audit service providers worldwide and in Vietnam UHY is always proud to have been contributing great efforts in building a transparent investment and business environment for the Vietnamese economy
The success of UHY International in general and UHY Vietnam in particular is an achievement and also a testament to the outstanding advantages that only UHY has
The planning phase at UHY during the audit of NCA is meticulously carried out, specifically from finding out information about customers to designing appropriate audit procedures
- Find out customer information related to NCA
Information such as environment, industry, business sector, financial situation of customers are meticulously researched and considered the impact on possible risks to NCA in businesses This work is carried out by qualified, experienced auditor from which IR is best determined.
+ Understanding about customers' internal control system for real estate
The customer's real estate system with NCA is meticulously considered in all aspects: Are the policies and regulations on procurement, investment, and construction of real estate really complete and scientific? Is it done regularly and effectively? Are the applicable depreciation policies appropriate and consistent or not? Do the principles of control organization apply synchronously or not?
On the basis of the information collected in conjunction with the judgment of an experienced auditor, CR is determined in the most logical way
- Determining the level of materiality
The materiality level with NCA is determined based on the materiality level of the overall financial statements and the assessed IR and CR as well as the desired audit risk level.
The audit procedures for NCA are very diverse including: procedures for analysis, comparison and evaluation, inspection of operations to increase NCA, check the operations of reducing NCA, check the calculation of depreciation of NCA, check the classification of NCA Depending on the business, the number and scale of procedures may vary.
During the audit implementation phase
- Perform analysis procedures: Compare cost and depreciation between years in combination with assessing the reasonableness of fluctuations to get the best view of the volatility of this item.
- Check business details, balance: Using professional knowledge, formulas to choose the number of samples will be checked in detail the relevant documents from invoices, handover minutes for liquidation decisions
In the period of compiling the audit results
The adjusted entries are gathered, and the weaknesses of the internal control system, if any, will be discussed immediately with the client at the meeting before the end of the audit This ensures the completeness of the audit as well as the value that UHY brings to earliest customers to improve discovered restrictions.
In addition to the advantages of the audit work carried out by UHY, there are still some limitations and difficulties in the audit process in general and the audit of NCA in particular, specifically:
During the audit planning phase
Firstly, collecting grounds to draft an audit program still faces many difficulties.
In the process of drafting an audit program, the audit program that UHY uses is a common, available template, flexibly applied to each individual client unit. However, for each customer, collecting bases to be able to flexibly apply the program faces many difficulties The risks and weaknesses in the accounting and information management process of customers are often not immediately identified by auditor, and customers do not want to reveal those weaknesses to the audit With this difficulty, making auditor unable to deeply and clearly understand the risks of the unit, the audit program is designed to lack rigor and suitability for each individual unit.
Secondly, the study of ICS to evaluate CR has not been really effective.
The procedures for understanding ICS are not diverse and flexible to suit each type of customer The year-end audit still relies heavily on mid-year surveys, while the client's control system may change at the end of the year The implementation of year-end audits based on the CR assessed from the middle of the year makes it possible for auditor to miss errors or even material ones.
Third, the assignment of personnel is sometimes ineffective.
In setting up a special audit team at the end of the year audit season, due to the large number of clients and urgent audit time, UHY personnel do not enough to meet the workload, so the assignment of work is sometimes unreasonable The work is assigned on the system (retain) but in fact, due to the incurred and large workload, the rotation of the audit assistant from one group to another can also be disruptive and take time to understand the client's system, so the work will be inefficient as well as there is a certain discomfort on the part of the customer.
During the audit implementation phase
Firstly, in the process of auditing NCA, the Company has not used many opinions of experts.
Real estate is very diverse and complex in many different fields and with great value, including specialized areas where investors may have an incomplete understanding of the company's NCA Auditor may have erroneous judgments about NCA in the process of investment, procurement, management and use, thereby causing certain difficulties in the audit process and affecting the ability to detect errors and fraud.
Second, the process of performing the analysis procedure
The procedure for analyzing NCA at UHY is carried out in many aspects, but most of them are horizontal analysis, lacking vertical analysis such as proportional analysis, rate such as cost and loss analysis It is also only compared between this year and the previous year without much attention to considering ratios to the total or typical coefficients such as the average depreciation rate, This will result in auditor not having the clearest view of the volatility of the index objectives and have not fully defined the focus of the audit to serve the decision to expand or narrow the detailed inspection procedure
Third, the assignment of personnel throughout the entire audit process has not been consistent
This leads to, auditor does not take over the entire work of 1 part of the onion, will not be able to have the clearest view of that part of the onion, and loses more time and effort to consult, learn, gather opinions from other auditors For example, when auditing NCA at customer XYZ, the person in charge of carrying out the audit procedures for NCA is HNH, but the person conducting the inventory of NCA is NAD This makes NAD need to exchange the information to be noted when inventorying NCA so that HNH can carry out audit procedures that are suitable for the situation of the unit
In the period of compiling the audit results
The completion of audit and archival records is still limited (For example, after the end of the audit, the work papers are not completed immediately, resulting in possible loss or omission; When in the audit season, the time between 2 audits will often be very thick, resulting in documents scanned by auditor not being printed and saved, resulting in documents that may be lost; )
On the part of the state
Currently, the system of documents and regulations is still overlapping, not synchronous, making it difficult for users to combine documents and circulars to apply.
There are no specific guidelines on the use of new laws, decisions and circulars, so there is still controversy around whether laws, decisions, circulars or may be misunderstood the meaning of those legal documents when made
DEVELOPMENT ORIENTATION OF AUDIT AND
- Service motto: UHY always ensures to provide with high quality of service in all fields and the company's service motto is: " Bringing customers true values and outstanding service"
- Operating goal: To always maintain its position as one of the top ten auditing and consulting companies in Vietnam, always loved by customers and trusted by society, has a good working environment for employees and is a place to create success and happiness
- UHY always aims to help customers and interested people protect their legitimate rights; provide practical information and optimal solutions for business administration and operation Therefore, the Board of Directors of the company always strictly complies with regulations related to professional activities, as well as regulations on auditing standards, especially standards of professional ethics.From the above mottos and goals, UHY has set out its future development orientation: Maintaining and enhancing its reputation in Vietnam, affirming the trust of the public, especially investors; continuing to improve and standardize professional processes on auditing, counsel In addition, UHY also promotes international exchanges and cooperation, enhances experience learning and professional skills.
NECESSARY TO PERFECT THE NON-CURRENT ASSET
In the current economic landscape, competitiveness is an extremely necessary factor to survive and develop each business against a series of competitors And to have that competitiveness, the investment and commitment to long-term cooperation from stakeholders with businesses is an indispensable factor In order to gain trust from partners and investors, a transparent financial statement is something that any business needs to have, so the role of auditing financial statements becomes even more important when this service will bring high reliability to readers when they have audited financial statements that are the inevitable trend of the economy On the other hand, the audit of financial statements also needs to be more and more complete and renewed to best meet the needs and beliefs of society
With the NCA item, the need to complete the audit process of this item arises from the following reasons:
- The inevitable trend is to complete the audit process of financial statements in general and NCA as an item on financial statements.
- The importance of NCA in financial statements This is an item that has a great impact on financial statements, a small mistake of this item can affect the truthfulness and reasonableness of financial statements This comes from the very characteristics of NCA: these are assets of great value, often accounting for a large proportion of the assets of the enterprise, NCA often have a long period of use, the time to manage these assets at the enterprise is often large In the process of use, enterprises must depreciate these assets, the application of a reasonable depreciation policy greatly affects the progress On the other hand, in the process of using NCA can be upgraded and repaired it may also affect the information related to NCA on the Financial Statements Information related to NCA includes information about cost, wear and tear value… expenses related to NCA such as depreciation expenses in production and business expenses, thereby affecting profit expenditures. Expenses and business results are summarized in the annual financial statements of the enterprise This is an item that affects many other indicators on financial statements.
- The complexity and limitations of the audit process of the NCA performed by UHY As mentioned above, we realize that the audit process of this item performed by UHY still has certain limitations, which can easily cause risks in the audit process On the other hand, this item is relatively complex, requiring more complete audit procedures and processes to check and consider the most carefully,minimizing risks.
PRINCIPLES AND REQUIREMENTS FOR COMPETING THE NON-CURRENT ASSET AUDIT PROCESS
In order to ensure that the audit process of NCA in the audit of financial statements is feasible, the proposed contents must meet the following principles: Must be in accordance with the management requirements of the State, which is directly the Ministry of Finance for current audit activities.
Must be in accordance with the current policy and economic management regime of the State, promulgated accounting and auditing standards and common international accounting and auditing practices.
It must be in line with the current trend of strong integration, which requires auditing firms to have processes and methods to get close to foreign companies. Must be consistent with the characteristics of each audit firm and have a positive influence on improving the quality of audit services of companies.
Must be clear, easy to understand, easy to check and control
Must be economical, efficient, and practical.
In order for the contents of the audit of NCA in the audit of financial statements to be meaningful in both theory and practice, it is necessary to implement the principles on a synchronous way.
In addition to complying with the above principles, the completion of the audit process of NCA in the audit of financial statements conducted by UHY Auditing and Consulting Co., Ltd must meet the following requirements:
Firstly, solutions to complete the audit process of NCA need to be in accordance with the requirements and management level of UHY Auditing andConsulting Co., Ltd today and take into account the development in the trend of society.
Secondly, solutions to complete the audit process of NCA must be consistent with the characteristics of UHY Auditing and Consulting Co., Ltd.
Thirdly, the complete solutions for the audit process of NCA need to be easy to understand, implement and easy to implement at UHY Auditing and Consulting Co., Ltd.
Fourthly, complete solutions to the audit process of NCA need to ensure the conformity between the benefits and costs of the audit activity, or in other words, be effective.
SOME SOLUTIONS TO IMPROVE THE PROCESS AND
Firstly, ask for the client's help to be able to collect the full basis for setting up an audit program.
The audit program is designed in a more flexible way to suit a wide range of clients in different sectors Auditor can design its own audit program, suitable for each customer, but still must ensure the implementation of all necessary procedures based on UHY's standard audit program as a basis for giving audit opinions The provision of suitable directions for customers depends a lot on the support of customers, especially for first-year customers, when auditor does not have much information about the ICS, the common risks and limitations of the yoke, characteristics and environment of the business line, Even for old customers, auditor should not be too subjective to the audit results of the previous year, because during the year, customers may still incur new risks of wrongdoing, for example, when customers encroach on a new business line, there will be new risks needed noted In order to get better support in collecting the necessary bases, UHY needs to establish good relationships with customers, ensure the quality of audit services provided to customers, auditors must have a good professional attitude when working with customers.
With each audit, in addition to the verification opinion for the customer's financial statements is the main service that UHY brings, the comments to improve the management and accounting system of the customer in the management letter is the surplus value that an audit provides These comments will help clients operate more efficiently in the next year, so that they will see the importance of an audit and will also have a more cooperative attitude with the audit team Therefore, auditor should discuss with customers about this benefit of auditing so that customers have a more comfortable and friendly view in supporting auditor During the audit process, auditor should not only fulfill its responsibility to provide verification opinions for items, but also include go out opinions help the accounting of these items to be more efficient, actively communicate with customers and give valuable opinions.
Secondly, about the work of understanding the customer's ICS
Expanding the assessment framework of ICS and IR for real estate to meet more diverse characteristics of customers, especially when UHY has a lot of customers both at home and abroad with different sizes and characteristics.
The company should come up with specific criteria for evaluation, for example, giving a transcript for each question, and the scale will be divided according to the level: weak, average, good or good of the IC system
Not only based on the results of the mid-year survey, the increase in understanding of ICS will bring a better understanding of the customer's ICS with NCA as the basis for determining CR, designing procedures appropriate audit, appropriate audit scope and help auditor recognize the limitations if any of this system and offer complete solutions to help businesses.
Third, improve the assignment of personnel for audits
In fact, this is a rather difficult problem to solve and has existed for a long time at UHY Although the company always tries to allocate human resources in the most effective way, due to many characteristics of the industry, the season time is very affected much to this work Besides, it is also worth mentioning the shortage of manpower due to the large number of employees leaving before the busy season atUHY, possibly due to work pressure Large, although the number of trainees of the recruitment company has increased compared to the previous period, they are all new people who do not have work experience such as audit assistants who have worked for more than a year Therefore, the work is accumulated for audit assistants at UHY quite a lot, so it is difficult to allocate an effective implementation time according to the theoretical allocation time of the personnel side.
To overcome this, UHY needs to pay more attention to the aspirations of employees to help them have a more comfortable spirit during busy working time, have rewards and support worthy of their efforts employees out Increasing work morale, reducing work pressure will partly help reduce the company's severance rate In addition, the company also needs to have reasonable recruitment policies to maintain and ensure both the quantity and quality of auditor to perform the job effectively.
NCA is a special item with great value and long use time Therefore, the audit results of NCA not only affect one year of inspection but also many years during the useful life of the asset In order to audit accurately, auditor must have a deep understanding of the characteristics of NCA, the nature of NCA on financial statements With the rapid development of technology, equipment, machinery constantly changing, constantly improving and upgrading, the possibility of being outdated and devalued is very high
Therefore, the assessment of NCA is high-tech machinery, used in specific industries such as seaports, machinery and equipment related to seaports,construction, mining of minerals, or reserves of coal, ore, and fuel in underground,under the ocean, trademarks, trademarks, technology copyrights always causes a lot of difficulties for auditing This is not the category of knowledge of auditor, so if self-assessment will not be accurate and take a long time Therefore, such cases require the participation of leading experts Because only they have professional knowledge, thorough understanding to accurately evaluate and ensure the quality of the audit.
Depending on the characteristics of the client, it is necessary to be flexible in the level and nature of the specialist used For example, when auditing at XYZ Joint Stock Company, the company buys and builds a lot of machinery and equipment, it is necessary to have an expert department to assess the use status of machinery and equipment
It can be seen that the need for specialists is really necessary, in the planning stage, auditor needs to determine whether or not there is a need for specialists, qualifications, competencies and independence necessary for the audit.
Secondly, about conducting analytical procedures
According to Vietnamese Auditing Standard No 520: "Analysis process : The analysis process is carried out as a basic test When using these procedures, it is more effective than detailed inspection in reducing the risk of detection related to the data base of financial statements Therefore, the enhancement of analytical procedures is also a contributing factor to improving audit quality."
The analysis procedure includes vertical analysis and horizontal analysis.
In the audit of NCA conducted by UHY, auditor, in addition to horizontal analysis between periods, can also compare customer data with general data of the industry, or customer units in the same industry This work can be carried out simply through the website system of ministries and companies At the same time auditor can study the relationship between financial and non-financial information, auditor can base on the results of business activities of the unit, placed in relation to the company's reputation in the market, production and business development situation, location of the unit to check the reasonable credit of costs
In addition to horizontal analysis, auditor can use a vertical analysis system or rate analysis, which is an analysis based on comparing the correlation ratios of different indicators and items on financial statements UHY can hire software to help analyze the rate system With this system, auditor can reduce calculation time,improve the efficiency of analysis procedures in audits, and can reduce samples for items that results analyze useful shown is fair volatility For NCA, auditor can calculate a number of ratios such as self-financing rate, investment rate, average depreciation rate of NCA, ratio of constituent indicators to total NCA,
Self-financing ratio = Equity/NCA
Investment rate = (NCA + Long-term investment)/Total assets
For example: At XYZ Joint Stock Company, when carrying out the procedure of analyzing and comparing the ratio of architectural houses to the total tangible assets and NCA, we will have the following table:
Proportions of buildings and structures/Tangible NCA
Proportions of buildings and structures/NCA
CONDITIONS FOR IMPLEMENTING SOLUTIONS
3.5.1 On the side of State agencies
Any economy that wants to run smoothly, the first necessary basis is a full, unified legal corridor and in accordance with the current state of development of the economy The audit service industry is an integral component of every economy in the world in general and of Vietnam.
Professional associations are a collection of auditor team with theoretical qualifications and in-depth practical experience in accounting and auditing, who have high reputation and professional responsibility In order to complete the process of auditing financial statements and auditing NCA, professional associations need to:
- Actively and directly participate in the development and improvement of Vietnamese accounting and auditing standards.
- Actively and directly participate in the development and completion of regulations on quality control of accounting and auditing services in conjunction with state management agencies for supervision and inspection.
- Continue to improve and organize training sessions, guide the implementation of sample audit programs to auditing companies Understanding and collect opinions on the shortcomings of the sample audit program and make it more complete, facilitating the audit work to be carried out according to the general process, thereby facilitating the inspection and supervision, evaluate the quality of audit activities of auditing companies.
- Organizing the dissemination of legal documents on the profession to auditor individuals, consolidate professional departments to meet the legal requirements guiding professional activities.
3.5.3 On the side of UHY Auditing and Consulting Co., Ltd and auditor
On the part of UHY Auditing and Consulting Co., Ltd
The company needs to encourage and create conditions for employees in the company to participate in professional improvement courses such as graduate school, ACCA and CPA certificates, and learn foreign languages, create favorable conditions for communication, sign contracts with foreign partners In addition, it is necessary to urgently perfect its own audit method, recruit more employees to reduce the pressure of the workload and strengthen agreements with customers to get reasonable fees and audit time to make the audit smooth and smooth
The auditor is an important factor determining the effectiveness of an audit, a key factor in the development of the audit industry.
Therefore, in order to contribute to improving the quality of audit services, increasing competitiveness, architects need to:
- Constantly improving both professionally and ethically; regularly improve knowledge, update new knowledge, regulations and regulations in the field of accounting and auditing for NCA in particular and other regulations in general.
- In addition, architects need to constantly learn from the experiences of their predecessors to improve their qualifications and general vision, not only in auditing NCA in particular, but also in auditing NCA financial statements in general but also in other areas to serve auditing such as valuation, financial analysis Regularly exchange experiences with each other to be able to draw out limitations and inherit valuable experiences to constantly improve professional knowledge and professional behavior at work.
- Actively contribute ideas, research new solutions to increasingly improve the process of auditing NCA in financial statements.
3.5.4 On the side of the audited client
Enterprises need to organize labor structure, apparatus, accounting system, prepare financial statements scientific, reasonable and in accordance with the general standards related to the item of NCA.
Enterprises must be responsible for providing timely, complete, honest and transparent accounting information and documents to the audit unit in accordance with the provisions of law and must be responsible for fraud, errors and responsibility for the financial statements made, understand the meaning of the audit, create conditions for the audit team to perform audit work at their enterprises. Moreover, it is advisable to strengthen the audit not only for financial statements but also for operational audits and compliance audits The combination of audits, especially strengthening operational audits, both brings high efficiency in business management activities, increases competitiveness, and contributes to cleaning and strengthening the economy.
Through researching and researching both the theory and practice of the NCA audit process conducted by UHY Vietnam Auditing and Consulting Co., Ltd, I realized the importance of auditing in general and auditing fixed asset items in auditing financial statements in particular
In fact, the process of auditing NCA performed by UHY Auditing and Consulting Co., Ltd is relatively complete My recommendations in the dissertation are the result of research in the field of accounting and auditing during my studies at the school and my internship at UHY Auditing and Consulting Co., Ltd These are just small recommendations stemming from my own opinion to further improve the audit process at UHY Hopefully, in the near future, UHY will take corrective measures to improve the quality of its services, as a foundation for its development in the coming time.
Our country's economy is growing, the demand for audits, especially independent audits, is increasing Facing this opportunity along with the quality confirmed globally by advanced auditing methods, UHY's highly qualified staff has made solid progress in the field of accounting and auditing UHY is always proud to be one of the leading companies in many aspects in the field of accounting and auditing in Vietnam.
The internship opportunity at UHY Auditing and Consulting Co., Ltd has given me an understanding of the history of the company's formation and development, its organization, business activities and especially being exposed to and learn about the job and auditing skills – this is very useful knowledge to help me gain more experience, career understanding, fully prepared before graduation. Understanding the importance, complexity as well as limitations of the process and methods of auditing NCA at UHY, I chose this topic to study and hope to contribute useful opinions contribute to completing the audit process of this item in the audit of financial statements at UHY in particular and the audit of financial statements in general
However, due to the limitation of time and knowledge, although I have tried very hard, in the process of making the thesis, I am not immune to shortcomings. Therefore, I am looking forward to receiving the feedback of teachers and brothers and sisters in the company to make my graduation thesis more complete.
Once again, I would like to sincerely thank the board of directors of UHY Auditing and Consulting Co., Ltd for enabling me to participate in practical auditing, learn and experience in a very professional environment here At the same time, I would like to express my deep thanks to the instructor – Assoc Ph.D Thinh
Van Vinh and Ph.D Dang Thi Huong have dedicated herself to guiding me to complete this graduation thesis!
1 MSc Dau Ngoc Chau (ed.), Ph.D Nguyen Viet Loi (co-editor) (2011),
"Textbook of Auditing Financial Statements", Finance Publishing House.
2 Assoc., Ph.D Nguyen Trong Co, Associate Professor, Ph.D Thinh Van Vinh (co-editor) (2017), "Basic Auditing Curriculum", Finance Publishing House.
3 GS TS NGND Ngo The Chi (ed.), Prof., Dr Truong Thi Thuy (co-editor),
(2013), "Textbook of Financial Accounting", Finance Publishing House.
4 Assoc., Ph.D Luu Duc Tuyen, Associate Professor, Ph.D Pham Tien Hung (co-editor) (2012), "Auditing education of other financial information", Finance Publishing House.
5 Assoc., Ph.D Thinh Van Vinh, Associate Professor, Ph.D Giang Thi Xuyen (co-editor) (2012), "Curriculum for organizing the audit process of financial statements", Tai main publishing house.
6 Audit documents and records of UHY Auditing and Consulting Co., Ltd.
7 Circular No 45/2013/TT-BTC of the Ministry of Finance, issued on 25/04/2013 on guiding the regime of management, use and depreciation of NCA
8 Circular 200/2014/TT-BTC of the Ministry of Finance, issued on December
22, 2014 guiding the corporate accounting regime, takes effect from January 1, 2015.
9 Graduation thesis of students in the previous courses of the Academy of Finance and the National Economics University
10 International Accounting Standards Committee (2009) ANALYTICAL PROCEDURES London: IASC.
11 International Accounting Standards Committee (2009) PLANNING AN AUDIT OF FINANCIAL STATEMENTS London: IAS
13 Vietnam Accounting Standards System: Vietnam Accounting Standards
No 03, 04 (issued on 31/12/2001), Vietnam Accounting Standards No 06 (issued on 31/12/2002).