Trang 1 PHẠM MẠNH NINHCLASS: CQ57/22.01CLGRADUATION THESISTOPIC:“IMPROVING THE AUDIT PROCESS OF CASH & CASHEQUIVALENTS IN FINANCIAL STATEMENTS AUDITPERFORMED BY DELOITTE VIETNAM AUDIT CO
General overview of account cash & cash equivalents
1.1.1 The concept of cash & cash equivalents
Cash is the currency on hand and cash in bank accounts.
Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value For example, treasury bills, money market funds.
Cash and cash equivalents are presented in the current assets on the statement of financial position.
According to VAS 24, cash & cash equivalents are defined:
- Cash comprises cash in funds, cash on transfer and demand deposits.
- Cash equivalents are short-term (not exceeding 3 months) investments, which can be easily converted into known amounts of cash and are subject to an insignificant risk of conversion into cash.
According to IAS 07-Statement of Cash Flows is defined:
- Cash comprises cash on hand and demand deposits.
- Cash equivalents are short - term, highly liquid investments that are readily cover amount of cash and which are subject to an insignificant risk of changes in value.
Component of cash & cash equivalents include:
Cash equivalents are held to meet short-term cash commitments rather than for investment or other purposes For an investment to qualify as a cash equivalent, it must be readily convertible to a known amount of cash and be subject to an insignificant risk of changes in value Therefore, an investment usually qualifies as a cash equivalent only when it has a short maturity of, say, three months or less from the date of acquisition Equity investments are excluded from cash equivalents unless they are, in substance, cash equivalents, for example, preferred shares acquired within a short period of their maturity and with a specified redemption date.
1.1.2 The characteristics and risk of account cash & cash equivalents affect the audit of financial statements
Firstly, they should be highly liquid This means that they should be easily sold in the market The buyers of these investments should be easily available.
Secondly, the investment should be short term They should mature in less than three months If they mature in more than three months they will be classified as other investments.
Thirdly, they should be convertible to known amounts of cash This means that their market price should be available, and this market price should not be subject to significant fluctuations.
Fourthly, they should not be too risky There should be very little risk of changes in their value This means that equity shares cannot be classified as cash equivalents But preferred shares purchased shortly before the redemption date can be classified as cash equivalents.
Risk associated with cash and cash equivalent accounts
In the audit of cash, there are some types of misstatements relating to a cash account These include: Failing to include a check that has not cleared the bank on the outstanding checklist, still it has been recorded in the cash disbursements journal; Record cash receipt by a customer in the current book while the amount received after the balance sheet date; Deposits recorded as cash receipts near the end of the year deposited in the bank in the same month and included in the bank reconciliation as a deposit in transit; Payments on notes payable debited directly to the bank balance by the bank but not entered in the client’s records These types of misstatements are normally discovered as a part of the tests of bank reconciliation.
In addition, there are some misstatements relating to cash transactions. These include: wrongly bill a customer; theft of cash by intercepting cash receipts from customers before they are recorded, with the account charged off as a bad debt; Duplicate payment of a vendor’s invoice; Incorrect payments of officers’ personal expenditures; Payment for goods or services that were not received; Payment to an employee for more hours than he or she worked; Payment of interest to a related party for an amount in excess of the going rate These misstatements can be discovered through tests of controls and substantive tests of transactions, and we discussed in the previous chapters Particularly, failure to bill a customer and embezzlement of cash by intercepting cash receipts from customers before they are recorded can be discovered as part of the audit of the sales and collection cycle while improper payments of officers’ personal expenditures can be discovered in the audit of the acquisition and payment cycle Improper payment to employees or third parties can be discovered in the tests of the payroll and personnel cycle and the capital acquisition and repayment cycle respectively
1.1.3 Internal control for cash & cash equivalents
The rules for cash accounting contain five main ideas:
(1) The accountant must keep records of revenues, expenses, dispatching or receiving of cash funds or foreign currencies in the Journals and then calculate the fund balance and every account in the bank at all times for verification.
(2) Deposits made by other enterprises or individuals in the enterprise shall be managed and recorded similarly to money of the enterprise.
(3) When obtaining revenues or paying for expenses, the receipt or payment slips with sufficient signatures are required as prescribed in regulations on accounting source documents.
(4) The accountant must keep records of cash according to currency in details when generating transactions in foreign currencies, the foreign currencies shall be converted into VND following rules below:
- Debit accounts shall apply actual exchange rates;
- Credit accounts shall apply weight average bookkeeping rates;
(5) When preparing financial statements as prescribed, the enterprise must re- evaluate balance of foreign currencies and monetary gold according to actual exchange rates.
Control objectives and control activities of cash & cash equivalents as follow:
Assertion Control objectives Control activities
To ensure that only cash payments are made.
-Separate responsibilities for the recording, payment and reconciliation of cash
- Supplier statements independently review and reconciled to trade payable record
- Monthly bank reconciliations prepared and reviewed
- Only authorized staff can make electronic cash payments and issue cheques
- Electronic cash payment and cheques prepared only after all source documents have been independently approved.
All payments that occurred are recorded…
- Supplier statements independently reviewed and reconciled to trade payable records
- Review of cash payments by manager before release
- Daily cash payments reconciled to posting to payable account
Cash payments recorded correctly in the general ledger.
- Reconciliation of daily payments report to electronic cash payment tranfers and cheques issued.
- Supplier statemetns statements reconciled to payable accounts regularly.
- Monthly bank reconciliation of bank statements to ledger account.
Cash payments posted to correct payable accounts and to the general ledger.
- Supplier statements reconciled to payable accounts regularly.
- Agreement of monthly cash payments journal to general ledger posting.
- Payable accounts reconciled to general ledger control account.
To ensure that - Reconciliation of electronic are recorded in the correct accounting period. issued with postings to cash payments journal and payable accounts.
Cash payments are charged to the correct accounts.
- Independent approval and review of general ledger account assignment.
Table 1.1 Control of cash disbursement
Overview of auditing account cash & cash equivalents in financial
1.2.1 Audit objectives for account cash & cash equivalents
According to the Vietnamese Auditing Standard No.200 “The overall objective of auditors and audit enterprises upon conducting audit according to the Vietnam audit standards”: “The objective of an audit of financial statement is to enable the auditor and the audit firm to express an opinion whether the financial statements are prepared, in all material respects, in accordance with the prevailing (or accepted) accounting standards and systems, where they comply with the applicable laws and whether they give a true and fair view.
Base on audit assertion, audit objectives of cash and equivalents can be classified below:
- Existence: Ensure cash balances, bank deposits and cash are transferred recorded on the ledger is present at the end of the accounting period
- Completeness: Ensure that cash balances, bank deposits and cash in transfer are recorded correctly and fully in the ledger at the end of the accounting period.
- Valuation: Ensure all foreign currency balances are converted at the appropriate exchange rate unite.
- Right and Obligation: Ensure the unit owns or has legal rights to all balances cash and bank deposits recorded on the ledger at the end of the accounting period All cash balances and bank deposits are not restrictions on use, ownership, or guaranteed rights otherwise, all restrictions on use rights, ownership or other guaranteed rights must be defined and theories transparency in the financial statements.
- Presentation and Disclosure: Ensure all necessary explanation regarding the balance of cash and cash equivalents are correct and this information presented and described accordingly in the financial statement.
1.2.2 Source of audit documents for account cash & cash equivalents
In order to carry out audits and make accurate assessments on the indicators related to cash and cash equivalents, the auditor should rely on following information:
- Policies of internal control system on cash and cash equivalents.
- Regulation on accounting of cash and cash equivalents
- Internal rules and regulations of the company on responsibilities, procedures for approval.
- Statement of Profit or Loss and Other comprehensive income
- Note to the financial statement
* Other documentations: receipts, remittance advices, deposit slips, cash receipt journal, cash disbursements journals, banks statement, bank reconciliation, bank confirmation, etc.
1.2.3 Common misstatements in auditing accounts cash & cash equivalents
In order to ensure the honesty and reasonableness of financial statements, including money and cash equivalents, auditor often has to make a preliminary assessment of the characteristics of each item, from which it is possible to create an audit plan accordingly The characteristics of this item are evaluated as follows:
There are usually not too many errors, because it is "money", besides there are many people who cross-control (in case the assignment is effective,separately keeping thefunctions of keeping money - registering – approving payment).
In addition, money is controlled by an independent third party, which is the bank Cash balances can be more accurately determined than most other account balances and are usually relatively easy to check Therefore, errors in recording money are often less common, if any will also be easy to detect.
In addition, money is controlled by an independent third party, which is the bank Cash balances can be more accurately determined than most other account balances and are usually relatively easy to check Therefore, errors in recording money are often less common, if any will also be easy to detect.
1.3 Audit process of account cash & cash equivalents in financial statements audit performed by independent audit
This is the first stage of an audit that is important, governing the overall quality and effectiveness of the entire audit The main job of this stage is to plan and design audit methods In particular, the; audit team will learn information about customers such as business activities, organizational structure, board of directors, human resources, internal control system From there, the audit team will assess the potential risks, control risks, thereby making predictions about the detected risk Finally, the audit team will rely on its analysis and judgment to set the key level of the overall strategy and design, the master plan, and the detailed audit program for the audit.
Adequate planning of the audit work helps to ensure that appropriate attention is devoted to important areas of the audit, that frauds, errors and potential problems are identified and that the work is completed expeditiously Planning also assists in proper assignment of work to assistants and in coordination of work done by other auditors and experts (VAS 300).
Understanding the entity and its environment
According to ISA 315, auditors are required to identify and assess the risks of material misstatement in the financial statements through an understanding of the entity and its environment, including the entity’s internal controls and risk assessment process The auditor should understand its industry factors, regulatory factors, external factors, nature of the entity, accounting treatment toward cash and cash equivalent of the client The auditor needs to evaluate whether the entity’s accounting policies relating to cash and cash equivalent are appropriate for its business and consistent with the applicable financial reporting framework and accounting policies used in the relevant industry; Auditor should also understand the entity’s objectives and strategies, and those related business risks that may result in risks of material misstatement.
Understanding the entity and its environment relating to cash and cash equivalent items will help the auditor to assess business risk and inherent risk of cash and cash equivalent.
Understanding preliminarily about internal control system
The auditor needs to understand preliminarily the internal control system of the audited entity relating to cash and cash equivalent items(including control environment, the risk assessment process, control activities, the information system relating to cash and cash equivalent items,and monitoring of controls) especially control activities Understanding the client's control activities will help the auditor design the test of control effectively.
The auditor should determine whether there is a proper authority in place to oversee the cash transactions that happen in the company and whether there is a segregation of duties and responsibilities being placed for cash controls The auditor also assesses whether the cash receipt journal is reconciled to accounts receivable daily Whether the cash receipts are pre- numbered and prepared chronologically.
Understanding preliminarily about internal control system relating to cash and cash equivalent will help auditor to assess control risk of cash and cash equivalent items If the internal controls over cash process are assessed to be effective, auditor could reduce test of detail volume and vice versa.
Implement the preliminarily analytical procedures
Analytical procedures consist of the analysis of significant ratios and trends including the resulting investigations of fluctuations and relationships that are inconsistent with other relevant information or which deviate from predictable amounts.
In this planning stage, analytical procedures are used to compares current client ratios to previous years to reveal unusual changes to help the auditor identify areas with increased risk of misstatements that require further attention during the audit and consider the going concern issues Analytical procedures relating to cash are described in detail in the following gathering evidence stage.
Assess risk of material misstatement
After implementing the above steps, the auditor could determine the level of inherent risk and control risk from that assessed the risk of material misstatement relating to cash and cash equivalent items could be high,medium, or low.
+ If the risk of material misstatement is low, the auditor will improve the control testing and decrease the test of detail.
+ If the risk of material misstatement is high, the auditor will reduce the control testing and increase the test of detail.
Overview of Deloitte Vietnam Auditing Co., Ltd
General information about Deloitte Vietnam Co., Ltd:
Sufficient name: Deloitte Vietnam Company Limited
34 Lang Ha, Dong Da District, Hanoi, Vietnam
Website: www.deloitte.com/vn
Deloitte Touche Tohmatsu Group is one of the world's top four auditing firms (often referred to as the Big Four) DTT was founded by the association of three reputable auditing firms in the world, Deloitte of the US (1849), Touch & Co of the UK (1900) and Tohmatsu & Co of Japan In 1960, the merger of Deloitte and Touche formed Deloitte & Touche & Co In 1990, Deloitte & Touche & Co added Tohmatsu & Co to form a transnational auditing group called Deloitte Touche Tohmatsu.
DTT is rated second in the world in terms of range with over 150 countries and the number of employees reaches more than 263,900 Deloitte provides services to about 1/5 of the world's largest corporations, large enterprises, organizations and companies that are in a period of strong growth With high-quality human resources plus the active support of the international standard audit process Engagement Management System (EMS), DTT is growing stronger and deserves to be one of the world's leading corporations.
Deloitte Vietnam is the 7th member of Deloitte Southeast Asia and also a member of Deloitte Asia Becoming an official member of Deloitte Global contributes to Deloitte Vietnam's strengthening of DTT's position in Southeast Asia in particular and Asia in general The image and achievements of VACO have been built over 16 years with the image of DTT in the world Contribute increase the ability to become the leading auditing firm of Deloitte Vietnam.
Deloitte Vietnam must meet certain conditions while fulfilling certain obligations of a full member and receiving certain benefits when becoming a member of Deloitte Global Deloitte Vietnam must ensure the quality of the audit and is subject to Deloitte Global oversight of the audit process to ensure the quality and reputation of DTT In addition, Deloitte Vietnam as well as other members of DTT must set aside a part of the profits considered as membership fees for Deloitte Global The benefit that Deloitte Vietnam receives is the transfer of audit techniques, management methods and other documents from Deloitte Global Deloitte Vietnam also has DTT training for employees on international accounting and auditing knowledge and methods using the Audit Method System (EMS) DTT always considers its strongest and most valuable resource not to be the EMS audit methodology system nor its own techniques but people, so DTT always focuses on developing human resources In 2008, DTT built a Deloitte training center modeled after aUniversity in Texas to encourage and facilitate the staff of all DTT members in other countries to study and enhance their understanding of auditing and other fields.
Deloitte Vietnam has invested considerable expenses to acquire high- quality human resources with the goal of "internationalizing Vietnamese staff" Deloitte Vietnam accepts to invest large sums of money to let employees participate in advanced training courses or send employees abroad to study and work or even invite foreign experts to teach The training content is very rich, be it technical training in accounting and consulting professions; management skills or in the laws of countries. Currently, Deloitte Vietnam's employees have more than 700 employees in two offices in Hanoi (about 500 employees) and Ho Chi Minh City (about
200 employees) Among the employees, there are many who have an international Master's degree in accounting, CPA certificate, ACCA, ; the members of the Board of Directors are all trained abroad and have adequate qualifications Number of Deloitte employees with auditor certifications () Vietnam's CPA accounts for a large proportion compared to other companies Currently, the certificate equivalent to CPA is ACCA being encouraged by Deloitte Vietnam to encourage employees to study with financial help along with the constraints of working time for the Company.
2.1.1 The formation and development of Deloitte Vietnam Auditing CO., LTD
The predecessor of Deloitte Vietnam Co., Ltd is Vietnam AuditingCompany (VACO) established under Decision No 165 TC/QD/TCCB dated13/05/1991 of the Minister of Finance and transformed into a one-member limited liability company under the Ministry of Finance under Decision No.1927/QD-BTC dated 30/06/2003 of the Minister of Finance Certificate of business registration of one-member limited liability company No.
0104000112 dated 19/01/2004 issued by Hanoi Department of Planning and Investment with charter capital at the time of establishment of the Company is 9,077,000,000 VND (Nine billion not hundred and seventy-seven million)
At the time of establishment, VACO was the first and largest auditing company in Vietnam in the field of providing specialized services to many clients of all economic sectors such as State-owned enterprises, joint ventures, 100% foreign-invested enterprises, domestic and international investment projects with many scales of enterprises and projects
Since 1992, VACO has had initial collaborations with Deloitte Touche Tohmatsu (DTT); and until April 1995, VACO Joint Venture Company – DTT was established under Decision No 1187/GP of the People's Committee.
On 01/10/1997, VACO acquired DTT's capital contribution in VACO – DTT joint venture under Decision No 697A/TC/QD/TCCB of the Ministry of Finance and with the representative of ISD International Service Department, VACO was officially recognized as a member of international auditing firm Deloitte Touche Tohmatsu This is an important turning point for the Company in particular and of the independent audit field in general when a Vietnamese auditing company first becomes a member of a leading auditing group in the world
On 07/05/2007, VACO completed the ownership transition from a one- member limited liability company under the Ministry of Finance to a limited liability company with two or more members in accordance with the State's regulations on independent audit by having some members of the company contribute to the acquisition of all state capital in VACO joint venture – DTT.From 01/11/2007, the company officially changed its name from "VietnamAuditing Company Limited" to "Deloitte Vietnam Co., Ltd." according to the
Department of Planning and Investment of Hanoi city on 18/10/2007 Since that time, Deloitte Vietnam has also officially been a full member of Deloitte Global.
2.1.2 Organizational characteristics of the management apparatus
Diagram 2.1 Organizational structure of Deloitte Vietnam
(Source: Human Resources Departments of Deloitte Vietnam)
The rights and responsibilities of the departments are as follows:
Majors Team Ho Chi Minh
Board of management Control Department
Board of Directo rrrrDiẻctorDirector Foreign Expert Team
(1) Board of Directors: including Company’s Director, Five Deputy
The company's director is the one who offers long-term business strategies for the company, the training and recruitment programs, has the right to decide, operate, organize and take responsibility for strategies as well as all issues related to the company, who are responsible for before the law and the Board of members for the company's operation.
The Deputy Director is an assistant to the Director in the management of the Company according to the assignment and authority of the Director and take responsibility to the Director for the assigned and authorized tasks. Each deputy director is assigned to be in charge of a specified service segment and is responsible for the maintenance and development of the Company's business according to the assigned service segment
The Deputy Director of the Company also undertakes customer relations to ensure the revenue and growth plan set by the Director for each year or each stage.
The Deputy Director has the right on behalf of the Company's Director in transactions with customers and related agencies and must be responsible for this.
The present personnel structure has also changed, the duties of the existing Deputy Directors have changed, and the job is progressively being distributed to more people in order to assure the quality of the work.Currently, Mr David Anderson is gradually being transferred from Chairman and Director Ha Thu Thanh The Deputy General Director includes Mr.
Thuy Ngoc, The Auditing Department and other Deputy Directors in other departments such as Tax (Bui Ngoc Tuan, Bui Tuan Minh, Dinh Mai Hanh), Consulting, Risk Management
The Branch Director is an assistant to the Company's Director in organizing and operating the branch's activities to ensure the consistency of development goals of the whole Company monthly or at the unusual requirements of the Board of Directors.
The current situation of the audit process of cash & cash equivalents in
in financial statements audit performed by Deloitte Vietnam Audit Co., Ltd
(*) The following section will detail the cash & cash equivalents audit performed by Deloitte Vietnam with an illustrative of the audit of the financial statements of ABC Limited Company for the financial year ended December 31, 2022 Because of some regulations on customer information, there will be hidden content to ensure as objective and confidential as possible.
General information about customer ABC Company Limited:
Before signing the contract, the auditor and auditing firm must conduct careful assessment and have certain knowledge about their customer The careful selection of customers will ensure that the contract signed will be provided audit service with the highest quality.
For the ABC Company Limited, Deloitte have run DRMS (DeloitteRisk Management Sytems) to collect information about financial performance, internal control system, related parties, the management team and other information about the Company After review carefully these information and have acceptance from SEA, Deloitte Vietnam accepted to audit ABC Company.
Before signing audit contract with a client, an auditor and audit firm will evaluate their client carefully to ensure the quality of the audit The assurance team should identify the reason why their client decide to conduct the audit.
For ABC Company, the objective of auditing is that providing opinion about honesty and faithfulness of financial statements which would be public for not only internal user but also external users to evaluate their financial performance Moreover, ABC Company want to received opinion and recommendations about their internal quality control & accounting sytems.
After signing the contract, the manager in charge will choose member for the audit base on their knowledge and experience Normally, an assurance team would include one manager in charge who takes responsibility to manage audit process and report to partner, one senior in charge who lead the team and directly conduct the audit process with two associates include associate 1&2 and one internee.
Step 1: Risk assessment for cash & cash equivalent
Understanding customer information right from the time received letter of invitation to the audit and signing the contract give the auditor a full view of the risks that may exist Therefore, at this stage, the audit team will conduct an overview of the customers information, as well as the relationship between the customer and the audit firm to make statements about audit risk.
In Deloitte, the audit team will send out the IRL (Information RequestList) to the customers to collect general information about customers and understanding of business and internal control of cash & cash equivalents
Besides, inherent risk base on auditor’s judgements After that, they decide whether inherent risk is higher or lower In ABC company, inherent risk for each assertion is lower Control risk also has 2 levels: rely on control which means that internal control system of client is good enough for auditor to rely and not rely on which means internal control system of client wasn’t qualified For ABC company, control risk was rely on controls After determining control risk and inherent risk, there will have assertions & combined risk assessment In term of cash & cash equivalents, inherent risk is lower and control risk is relying on control Therefore, combined risk assessment is minimal It means that the internal control system relating to cash & cash equivalent of ABC company works effectively.
Accounts Assertions Inherent risk Control
In theory, the estimate of materiality is base in part on the professional judgement of the technical If the criticality is estimated to be high, which mean that the accuracy of the financial statement’s data source is low, the amount of evidence to collect is larger and vice versa At Deloitte Co., Ltd the assessment of materiality is conducted by the support of audit software called EMS The auditor relies on the EMS Global estimation guide line to determine materiality for each specific customer
ABC company is a listed company therefore planning materiality setting for these companies is from 5 to 8 percent The proportion is the result based on previous years of auditing ABC companies as well as other listed companies have been audited in Deloitte Vietnam.
Setting tolerable error at either 50% or 75% of planning materiality based on various considerations including the history of misstatements, the ability to assess the likelihood of misstatements, the effectiveness of the control environment and other factors affecting the entity and its financial reporting The audit team decide to set tolerable error at 50% PM due to 2 reasons:
- The audit is designated as close monitoring in the client and engagement acceptable and continuance process.
- There is a higher likelihood that misstatements may occur within the financial statement.
We set our SAD nominal amount at an amount below which misstatements, whether individually or accumulated with other misstatements, would not have a material effect on the financial statements.
In other words, amounts below our SAD nominal amount, judged by size,nature or circumstances, are clearly trivial and, in the aggregate, are not considered in our overall evaluation of misstatements We exercise professional judgment in setting testing thresholds based on the combined risk assessment (CRA) of the relevant assertion, the nature of the procedure planned, and the composition of the balance tested, among other things TE is generally our starting point for identifying key items and setting testing thresholds.
PM - TE Setting (using earning base)
Summary of audit difference - SAD 5% PM 7,680,000,000
- Minutes of Board of Director, The shareholders’ meeting or Management board meeting
* Specific information relating to cash and cash equivalents - Statement of
- Statement of Profit or Loss and other comprehensive income.
- Internal transaction process document relating to cash and cash equivalents.
- Term deposit, Certificate of deposit.
The audit team leader will design a detailed audit program on the basis of the performed assessments.
The detailed audit program is based mostly on previous audit files. After making the general audit plan, the auditor enters into a detailed audit plan which builds the audit program for each item and assigns tasks to each member of the group The cash and cash equivalents audit program outline the entire work steps performed.
As design in planning stage, the auditor will follow the procedures At fieldwork, the auditors will present their tasks on working paper then attached in audit file.
The auditor who takes responsibility for auditing cash and cash equivalents will follow the specific procedures created in audit file.
In Delloite Vietnam, the implementation of test of control and the walkthrough tests usually applied as a basis for evaluating the effectiveness of internal control systems for each cycle and specific items in interim period.
However, because of the specific client, tests of control mostly are performed by IT department.
Assessing of current situation of the audit process of cash & cash
2.3.1 Achievements a) In the planning stage:
Step 1: Risk assessment procedure: Overall, Deloitte Vietnam has stable foundation of this procedure The DRMS system play an important role in mitigate risk in Deloitte, facilitate the condition to bring the highest quality of the service to client.
Step2: Designing an audit program: Audit program for cash and cash equivalent is designed fully, and suitable for each client with different business activities The software will run out audit program based on risk assessment and materiality base on the information gathered from the IRL (Information Request List) From this, auditors can reduce procedures for practical situation of the entity based on experience and understanding about client At the same time, the audit program was controlled directly by audit partner and audit manager during the audit to ensure the completeness and accuracy, effectiveness. b) Implementing stage:
Based on the designed audit program for specific client, in accordance with Vietnamese and International auditing Standards, auditors perform following procedures that are designed by the senior auditor Therefore,audit works usually are conducted effectively and avoid omitting important procedures The works are not overlapping and the Reviewer also is easier to check consistency and connection of the sections, it helps to clarify information, improve the efficiency and effectiveness of the audit.
Obtain sufficient audit evidence: The audit firm combines numerous audit procedures to obtain audit evidence This leads to high reliable and accurate audit evidence In each procedure evidence are gathered from various sources Besides, confirmation letter is considered as an effective audit evidence obtained by the auditor to ensure about the existence, valuation and right and obligation of the Cash account. c) Finalizing stage:
Audit quality control: It is always one of the outstanding strengths of audit service at Deloitte Vietnam There are always four levels of review in financial statement audit at Deloitte Vietnam to ensure effectiveness and efficiency of the audit and appropriateness and sufficiency of audit evidence obtained by auditors.
In-charge senior reviews all working papers of audit team members to ensure that procedures are completely implemented, and audited figures are correct in relation to the various cycles before submitting the report and working papers for review by the manager and partner.
Audit manager reviews working papers the second and make clearer procedures performed by staffs and solve pending issues The manager may visit the client's office to review the audit progress and have meeting with client on the first day and the last day of the fieldwork to summary and closing the audit
The partner has the ultimate responsibility for the performance of the audit The partner's knowledge of the client's business provides an informed basis for assessing risk, appraising the adequacy of audit procedures and the time and unify and bring out decision of issuing report Beside, quality control department will supervise these procedure to ensure the effectiveness and efficiency of the audit.
Preparation and issuance of audit report:
There is a compulsory procedure before audit report is issued at Deloitte Vietnam called “casting” This step is to check accuracy or mathematical errors of the figures on the report and check for grammatical errors, spelling errors presented (font, font size, format ) Although this last step is simple, it is extremely important and requires seriousness attitude and carefulness of auditors In Deloitte, these tasks are conducted by the audit and assurance support sector.
Audit file preservation: Related audit documents are scanned and then attached in audit software The firm also stores and maintains audit files after classifying by clients and year therefore it is easy to search the information needed All audit dossiers will be store at least ten years follow the principle.
Regardless of diverse strengths, Deloitte Vietnam still has several limitations while conducting the audit, which is necessary to find out solutions These limitations prevent firm from achieving the highest effectiveness and efficiency of the process of auditing cash & cash equivalents as well as financial audit in general. a) Planning stage:
Preparing an audit: There is only discussion between audit partner, audit manager and in - charge senior to capture major issues, scopes and key sectors that need to be focused It might cause limitation in understanding client and audit objectives of other members. b) Implementing stage:
Analytical procedure: The deep analysis has not been conducted carefully yet, so auditors might omit abnormal points for entities
At Deloitte Vietnam, analysis procedures have not been applied thoroughly for cash & cash equivalents, the auditors mainly perform analytical procedures with overall analysis However, the combination of tests of detail and analytical procedure will help auditors collect evidence, but it will take time and cost of the audit In some cases, it is not necessary for that combination.
Process of sending bank confirmations: Client send bank confirmation to banks rather than Deloitte Vietnam perform this task Even though this process is approved, the client does not allow sending bank confirmation because this would reduce independence and might increase risk due to collusion between banks and client.
Firstly, the State does not manage and control well audit activities and audit systems with a clear orientation for the development of audit firms.
The government has less cooperation with professional associations to manage auditing companies and auditors They do not have many training program or exchange program in short-term for auditors to learn from other local and international auditors The State do not identify the functions, tasks and establish the relationship between the audit system and the system of inspection and examination agencies.
Secondly, the professional association which is directly Vietnam
Necessity to improve the audit process of cash and cash equivalents in
in financial statements audit performed by Deloitte Vietnam Audit CO., LTD
The audit process is designed appropriately, the implementation process brings high results, reliable with low audit risk All work is planned specifically, thoughtfully with a clear assignment of responsibility Not only that, each stage of audit is carried out in a detailed, careful but equally flexible way.
With the advantage of being a multinational enterprise, with almost complete and comprehensive facilities with international quality and uniformity throughout the system globally, constantly improving and upgrading Currently, Deloitte Vietnam's database has moved from manual storage to electronic storage, all audit evidence, customer information and data related to audit contracts are updated to a system called EMS This greatly assists the audit team in keeping and tracing previous year's work records and assists members (especially first-time audit participants) in understanding customer company records.
However, Deloitte Vietnam also should improve this system more available to use Due to the number of new staffs increase single year and new policies from client and State updated yearly, the EMS system also should be updated and modernized This help company reduce cost and save time in this
3.2 Requirements and principles for improving the audit process of cash and cash equivalents in financial statements audit performed by Deloitte Vietnam Audit CO., LTD
From the analysis of the actual audit of cash and cash equivalents in the audit of financial statements at ABC company, improvement of the audit process of cash and cash equivalents at ABC company is an objective and urgent requirement Fundamental requirements to improve the audit process of account receivable are:
• Regarding to the legal framework: It is necessary to develop and establish a complete and strict legal system and a common process for the company to implement.
• Regarding to human resources: It is necessary to train, build and develop audit teams who are fully equipped with both professional expertise and professional ethics, achieving international and regional recognition.
• On the client side: Audited entity needs to provide all relevant books and documents in a timely manner and take responsibility for their provided data.
• On the social and economic side: Society really needs a way to properly understand the audit results, which does not consider the audit as just a necessary procedure.
In order to improve the process and method of auditing cash and cash equivalents with the highest efficiency, the company needs to adhere to the following principles:
- The improvement must be consistent with widely recognized international practices and integration trends;
- The improvement must conform to the regulations of the current legal system and the specific conditions of Vietnam;
- The improvement must be in accordance with management requirements of the State, which is directly the Ministry of Finance and the Vietnam Association of Certified Public Accountants for current auditing activities;
- The improvement must be consistent with the company's operating principles and ensure the development of the company;
- The improvement must be clear, specific, easy to implement, check and control and save costs.
Some solutions to improve the audit process of cash and cash equivalents
- Preparing an audit: It is compulsory to have a meeting between team members before fieldwork to meet the objective of understanding clients in the most effective way In the meeting, auditors should discuss about the most outstanding matters referring to specific audit segments of the clients This meeting may last in short time, but it will save time in the planning stage as well as the implementation stage and help auditors obtain sufficient view about the business activities and operation activities of clients. Furthermore, in planning stage, auditor should set specific objectives for each cycle rather than just set overall objective for audit.
- Allocation of maturity for items: This allocation is necessary because the audit evidence is collected by many items rather than the whole of financial statement With a reasonable allocation of materiality, auditor can determine the appropriate amount of evidence which are required to depends on each entity, but generally risk of this area is defined lower than other accounts as revenue, cost of goods sold So it should be allocated with a lower materiality level When there is a reasonable level of materiality, the amount of evidence is determined in the most effective way to ensure the efficiency of the audit and saving time, cost of the audit To implement this, auditors need to develop audit documents of the years, assess risk for each item of this year as the basis for calculating the allocation of materiality and misstatements can be reasonably accepted.
- Analytical procedures need to be more emphasized when designing substantive test and performed in the whole audit process To perform analytical procedure effectively, auditors should combine with professional judgement to analyze the movement of the items, determine the cause of the events or identify any significant changes that need to have more investigation Besides, for specific business activities, auditors should compare data from other companies that have the same business area and activities with client's data to improve analytical process more effectively.
Moreover, auditors should use both rate analysis and current trend analysis to have better overview of financial performance of client The advantage in analyzing financial situation through financial ratios is relative stability over periods Any changes in management policies, accounting policies can be recognized by analyzing the financial ratios.
Audit software security: All working papers prepared by audit team members and documents relating to the audit are uploaded in audit software. Therefore, security should be especially focused, avoiding data loss of theft by viruses, trojans,.ã In addition, the audit software should be upgraded often to overcome the limitations.
Bank confirmation should be prepared and sent by audit firm to ensure the accuracy Bank confirmations often provide reliable audit evidence therefore if client sends them, the level of reliable information would reduce.
The company should design the strict access system to computer program and audit files The authority to access the audit document should be written to the policy of company And the authority should be set up due to different levels With particular authority can read only the file or can take it(can copy or correct document).
Conditions for implementation of solutions
3.4.1 On the side of the State agency
The State needs to strengthen the management and control of the quality of audit activities, strengthen the management of the audit system, with a clear orientation for the development of auditing organizations.
Effective measures should be taken to control the quality of the audit and to limit negative competition in the provision of audit services Develop management regulations for internal audit of agencies, organizations managing and using state budget, money, and assets.
On the other hand, the accounting and auditing regimes are changed from day to day more appropriately, so the authorities need to present those changes in a flexible, scientific, understandable, and policy-based manner, help and train accountants and auditors on the content of the regime, current and newly issued standards.
The State should coordinate with professional associations to manage auditing companies and auditors Professional associations should strengthen the activities of professional audit guidance to take the initiative in examinations and issue certificates of independent auditors, giving the Effective measures to monitor the implementation of professional ethical standards as well as improve the quality of audits.
-The State should identify the functions, tasks and establish the relationship between the audit system and the system of inspection and examination agencies, to improve the efficiency of each system and avoid wasting public resources in these systems.
It is necessary to strengthen the relationship and coordination mechanism between the state audit, the Financial Inspector while conducting the Tax Audit and the Independent Auditor, especially the work of planning and information exchange to avoid overlapping in the process and process results Auditors need to use effectively inspection memo and examination results to reduce costs and improve audit quality.
3.4.2 On the side of the Professional Association
- The professional association which is directly Vietnam Association of Certified Public Accountants (VACPA) where the concentration of experienced and highly qualified auditors is the basis for accounting and auditing in the countries in which they operate.
In Vietnam, the Vietnam Association of Occupations since its inception has always been the place where experienced auditors gather, exchange knowledge and update new |documents and documents related to operations, accounting and auditing in and outside the country.
Professional association should continue to organize many training programs to improve the experiences and knowledge of auditors and organize exchanges so that domestic and internal auditors have opportunities to meet and exchange business experiences.
Especially when Vietnamese Accounting and Auditing Standards have many changes and will combine with some International Accounting and Auditing Standards, associations play an important role in helping companies to understand and comply with new standards.
3.4.3 On the side of Deloitte Vietnam Audit CO., LTD and Auditors
The quality of human resources in auditing companies is a decisive factor in auditing quality Therefore, in order to implement solutions to complete the financial statements audit process related to personnel, work assignment, audit timeline, the Company needs to develop a reasonable and scientific personnel policy The effectiveness of personnel policies depends on the recruitment process, remuneration policies and employee training policies of the Company.
Auditing firms support the coordination with the State and the Audit Association to develop an innovation program to improve the quality of audits, such as the development of a standardized and consistent model audit program General quality assessment for auditing business
Auditors need to cultivate their professional accounting and auditing skills and have certain knowledge about Vietnamese law in order to perform the audit as best they can Professional ethics for any profession is important but especially for the Audit profession, this issue is even more of a priority because the audit results will affect the decisions of many ordinary users believe A false result can lead to unpredictable consequences for businesses,suppliers, customers, banks, securities investors Therefore, the equipping the auditor's professional knowledge needs to go hand in hand with respect and practice professional ethics.
Enterprises should build up an effective accounting and internal control system to prevent frauds in the preparation of financial statements in general and salary and personnel in particular This also contributes to making the financial health of the business healthy.
The accounting department of the enterprise needs professional knowledge of the current accounting regime On the other hand, businesses need to actively cooperate with auditors, provide adequate receipt, documents and give true explanations when necessary.