LETTER OF DECLARATION I hereby declare that the Graduation thesis titled: "Enhancing the Process of Auditing Fixed Assets in Auditing Financial Statements Implemented by SCS Global Audi
The rationale
The demand for transparent and reliable financial information has surged, with audited financial statements from independent audit firms being the preferred source This trend highlights the growing recognition of audit work, which benefits not only investors but also regulatory bodies like the State Securities Commission, investment funds, and foreign parent companies Additionally, companies undergoing audits seek these services to enhance their internal controls As a result, the clientele of audit firms has expanded beyond public companies to include various businesses that require financial statement audits and those with specific needs While the auditing profession may seem familiar, there are many intriguing aspects that warrant further exploration.
The primary objective of an audit is to provide an opinion on the accuracy and fairness of the financial statements of the audited entities The audit report serves as a clear summary of the business's operational outcomes, enabling users to mitigate economic risks effectively.
Fixed assets are crucial for manufacturing enterprises, representing a significant portion of total assets These tangible assets not only generate future economic benefits but also play a vital role in various economic cycles within the business Moreover, fixed assets are essential for fostering long-term and sustainable growth, making them indispensable for the overall development of enterprises.
Transactions involving fixed assets may be infrequent within an accounting period, yet their substantial value necessitates significant investments and introduces financial risks Consequently, these assets play a crucial role in an enterprise's financial landscape.
2 statements, this indicator is always considered as an important part and any errors relating to it, even the smallest, can seriously affect the business
The audit of fixed assets requires significant improvements due to various shortcomings, primarily stemming from an incomplete environment for the audit process Enhancing and consolidating this environment is essential to elevate the quality of fixed asset audits.
Recognizing the significance of fixed assets for businesses, my graduate thesis focuses on "Enhancing the Process of Auditing Fixed Assets," inspired by my three-month internship at SCS Global Audit Company Limited.
Auditing Financial Statements Implemented by SCS Global Audit Company Limited".
Literature review
In the wake of significant economic losses from the Covid-19 pandemic, the world is experiencing rapid and complex changes characterized by increased strategic competition among major nations While peace, cooperation, and development remain essential trends, global economic growth is expected to slow, with heightened risks in international financial and currency markets The ongoing Russian-Ukrainian conflict poses significant challenges, impacting various aspects of global life Amid these macroeconomic fluctuations, the U.S.-Russia rivalry is particularly concerning, exerting a profound influence on global economics, finance, and politics, with Vietnam also feeling the repercussions.
Auditors evaluate the accuracy of financial statement information across all material aspects to provide users with a comprehensive understanding of the business's financial position, facilitating informed recommendations and financial decisions A key indicator significantly influenced by the current economic climate is "Fixed assets," which serve as a crucial target for the company's financial health.
Many companies face significant challenges each year due to tough economic conditions, leading them to pledge, liquidate, or mortgage their fixed assets to sustain operations This situation can impact the going concern principles of these companies, ultimately affecting the broader economy and users of accounting information.
Numerous domestic and international studies have highlighted the significance of fixed asset auditing, with a notable 2017 research by Klychova G., Zakirova A., and Mukhamedzyanov K focusing on enhancing the audit system for fixed assets to boost corporate performance Their work emphasized the collection of audit evidence and metrics that influence business operations, while also recognizing the need for analytical procedures in auditing SCS Global Audit Company Limited has implemented these analytical audits for fixed assets, underscoring the importance of integrating such methodologies in future research to improve fixed asset performance audits.
In Vietnam, the audit of fixed assets has become a widely discussed topic, frequently featured in various research papers As a student at the Banking Academy, I find it easy to access theses and studies focused on fixed assets.
Recent studies highlight the importance of improving the audit of tangible fixed assets within financial statement audits Notable works include Chu Thi Hoa's 2018 thesis on enhancing audit processes at An Viet Auditing Co., Ltd., Nguyen Ha Phương's 2021 research focusing on the same topic at Dai Viet Valuation and Auditing Company Limited (VinAudit), and a study by Grant that emphasizes the need for refining fixed asset audit processes These contributions underscore the critical role of effective auditing in ensuring accurate financial reporting and compliance.
In their 2022 studies, Nguyen Ngoc Trong and Nguyen Thi Quynh examined the auditing processes of fixed assets within financial statements at AASC Auditing Firm Co., Ltd Their research highlighted the theoretical foundations of fixed assets, analyzed the current auditing practices of various companies, and provided recommendations for improvement Overall, the theses share a common focus on enhancing the effectiveness of fixed asset audits.
The thesis titled "Solutions to Enhance Accounting of Tangible Fixed Assets in Vietnam to Meet the Needs of International Integration" by Ha Mai Linh (2020) addresses an important and relevant topic for audit firms It builds on foundational knowledge from courses like General Principles and Accounting for Tangible Fixed Assets while offering a comparative analysis of VAS 03 and IAS 16 This study highlights the developmental direction of the Vietnamese accounting system in the context of international standards.
The audit of fixed assets in financial statements is a well-explored topic globally and in Vietnam; however, the specific focus on "Enhancing the Process of Auditing Fixed Assets in Financial Statements Implemented by SCS Global Audit Company Limited" remains unexamined Previous research has identified both advantages and areas needing improvement in fixed asset audits, along with factors influencing audit quality and suggestions for enhancing efficiency Through my internship experience, I observed several shortcomings in the company's audit process This graduation thesis will outline the current audit process for fixed assets, highlight its strengths and weaknesses, and provide targeted recommendations for improvement.
Research objectives
First , summarizing the theoretical basis of the fixed assets items, as well as the process of auditing fixed assets in the financial statement audit
Second, surveying and evaluating the current status of auditing fixed assets in the financial statements audit implemented by SCS Global Audit Company Limited
Third , proposing solutions to enhance the audit of fixed assets in the audit of financial statements implemented by SCS Global Audit Company Limited.
Research subject and scope
Research subject
The research subject of this thesis is auditing procedures of fixed assets performed by SCS Global Audit Company Limited.
Research scope
SCS Global Audit Company Limited enhances the auditing process of fixed assets in financial statement audits by identifying and analyzing the strengths and weaknesses in their current audit procedures, ultimately providing effective solutions for improvement.
The data used in the thesis was collected and analyzed from the information belonging to SCSA and PAV
This essay was taken from December 12th 2022 to March 31st 2023 (during the internship time).
Research questions
The thesis was built based on three main questions:
• What is the theoretical basis for auditing fixed assets?
• What is the current status of the audit of fixed assets in the audit of financial statements implemented by SCSA?
• What are strengths and weaknesses and the causes of fixed assets auditing procedures and the recommendations to improve the audit procedures performed by SCSA?
Research methodology
Practical research methods encompass scientific observation, which involves the direct observation of the auditing process for fixed asset items as designed and implemented by SCSA Additionally, the analytical method is utilized to draw valuable conclusions based on previous studies.
Theoretical research methods encompass both theoretical analysis and synthesis, which involve the collection of secondary and original data during the auditing of fixed assets in financial statement audits designed by SCSA This process is particularly focused on key elements such as audit standards, audit files, audit documentation, and working papers (WPs).
• Field research: Directly perform audit fixed assets at clients’ companies.
Research structure
In addition to the Introduction and the Conclusion, the content of the thesis consists of 3 main parts:
Chapter I: Theoretical basis of the audit process of fixed assets in auditing financial statements
Chapter II: Auditing fixed assets in auditing financial statements implemented by SCS Global Audit Company Limited
Chapter III: Recommendations to enhance audit process of fixed assets in auditing financial statements implemented by SCS Global Audit Company Limited
THEORETICAL BASIS OF THE AUDIT PROCESS OF
An overview of fixed assets in auditing financial statements
The definition of fixed assets:
In Vietnamese Accounting Standard 03 and 04, fixed assets are divided into two main groups including tangible fixed assets and intangible fixed assets:
Tangible fixed assets are physical entities or systems composed of interconnected components designed to fulfill specific functions, while intangible assets lack physical form and are developed through operational processes or investments made by organizations and enterprises Both asset types meet the criteria outlined in Circular 45/2013/TT-BTC.
• It is certain that future economic benefits will be obtained from the use of the property;
• The property has a useful life of one year or more;
• The property has a historical cost of VND 30,000,000 (thirty million VND) or more
To be recognized as tangible fixed assets, assets must meet simultaneously all the following four recognition criteria due to the VAS 03:
• Future economic benefits will surely be obtained;
• Their historical cost has been determined in a reliable way;
• Their useful life is estimated at more than one year;
• They meet all value criteria according to current regulations
The nature of fixed assets:
Fixed assets play a crucial role in an entity's daily operations, undergoing gradual wear and tear that affects their value through accumulated depreciation, which is reflected in business expenses Their value remains stable unless they are dismantled, damaged, or upgraded with new equipment One of the key challenges in managing fixed assets is accurately determining their value and differentiating between financial and operating leases.
Fixed assets encompass various types and forms, each serving different investment purposes and usage scenarios To streamline the management and accounting of these assets, it is essential to categorize them based on specific characteristics Each classification significantly impacts the accounting processes and overall management of fixed assets.
Fixed assets in enterprises are categorized into tangible and intangible assets According to Section 6 (1) (a) of Circular 45/2013 from the Ministry of Finance, as amended by Section 1 (2) of Circular 147/2016, the classification of fixed assets is determined by their intended use within the enterprise.
Type 1: Buildings and architectonic model: are fixed assets of the enterprise formed after the construction process, such as offices, warehouses, fences, water towers, yards, roads, bridges, railways, airport runways, piers, wharfs, embankments, decoration works for houses
Type 2: Equipment and machines: are used in business activities of the enterprise such as specialized machinery, working equipment, drilling rigs in the oil and gas field, cranes, technology lines, etc
Type 3: Transportation and transmit instruments: railways, waterways, roads, airways, pipelines and transmission equipment such as information systems, electrical systems, water pipes, conveyors
Type 4: Instrument and tools for management: are equipment and tools used in the management of business activities of enterprises such as computers for management, electronic devices, measurement and quality control equipment and tools, dehumidifier, vacuum cleaner, anti-termite, etc
Type 5: Long term trees, working and killed animals: are perennial gardens such as coffee gardens, tea gardens, rubber gardens, etc; working animals and or for products such as horses, buffaloes, cows, etc
Type 6: Other fixed assets: are all other fixed assets not listed in the above five categories such as pictures and artworks
According to VAS 03, Tangible asset accounting is classified by groups of assets of the same nature and use purposes in the enterprises’ production and business operations, including:
• Instrument and tools for management;
• Long term trees, working and killed animals;
+ Intangible fixed assets: Land using right, Establishment and productive right, Patent and creations, Trademark, Software, License and concession license, phonograms, video recordings, broadcast programs, industrial designs, etc
Under VAS 03, enterprises frequently invest in intangible assets, including land use rights for a specified duration, computer software, patents, copyrights, and permits for aquatic resource exploitation, as well as export and import quotas.
10 quota, right concession permit, business relations with customers or suppliers, customers’ loyalty, market shares, the marketing right, etc
• Features of the fixed asset item that affect the audit of financial statements
Fixed assets hold significant value for enterprises, and their acquisition and equipment processes are infrequent and irregular With a long useful life, these assets require extended management periods During their usage, businesses must account for depreciation, and implementing a sound depreciation policy is crucial for ensuring the accuracy of financial information related to fixed assets, particularly on the Balance Sheet.
Upgrading and repairing fixed assets can significantly impact financial statements, as they include critical information such as historical cost, accumulated depreciation, and related expenses Changes in the value of fixed assets directly influence profit targets, overall costs, and the outcomes of business production.
Accurate accounting of fixed assets and proper deduction of depreciation expenses are crucial, as these assets typically represent a significant portion of the balance sheet and influence various financial indicators Consequently, any inaccuracies in this area can substantially impact the financial statements.
Fixed assets are categorized into tangible and intangible assets, as outlined in Section 1.1.1 The Ministry of Finance has provided specific guidelines for recognizing these assets in Circular 200/2014.
1.1.2.1 System of documents and accounting books
Effective document organization involves structuring the initial accounting workload through a systematic and legal framework for document rotation Key accounting documents for fixed assets include purchasing agreements, purchase orders, sales invoices, asset handover minutes, liquidation minutes, work acceptance records, asset inspection minutes, settlement agreements, and fixed asset depreciation tables.
To effectively monitor fixed assets, businesses frequently implement a bookkeeping system that includes tools such as fixed asset cards for tangible assets, a detailed fixed asset book, and a general ledger encompassing accounts 211, 213, and 214.
1.1.2.2 Historical cost of fixed assets
The process of auditing fixed assets in auditing financial statement
Fixed assets are crucial components of an enterprise's total assets, often representing a significant value, making their audit a complex and essential task in financial statement audits Whether employing a systems-based or risk-based approach, auditors must exercise caution during the audit of fixed assets The auditing process can be divided into three key stages: Audit Planning, Audit Implementation, and Audit Completion.
1.2.1 Objectives and assertions for auditing fixed asset items
The primary goals of a fixed assets audit are to gather sufficient evidence to validate the accuracy of financial information in the financial statements, including costs, depreciation, expenses, and profits Additionally, the audit aims to supply pertinent information and documentation to support assertions during other periodic audits.
The specific audit objectives of an audit of fixed assets:
- Verifying assertions on the process of accounting for fixed assets:
• Occurrence: All fixed asset transactions recorded in the period are actually incurred, there is no overwriting transaction
• Accuracy: Fixed asset transactions are determined in accordance with current accounting principles and regimes and are correctly calculated without errors
• Completeness: Transactions of fixed assets arising in the period are fully reflected and monitored in the accounting books
All fixed asset transactions during the period are accurately classified in accordance with relevant accounting standards and the specific regulations of the enterprise, ensuring that these transactions are recorded in the correct order and using the appropriate accounting methods.
• Presentation: transactions and events are appropriately aggregated or disaggregated and clearly described, and related disclosures are relevant and
21 understandable in the context of the requirements of the applicable financial reporting framework
• Cut-off: Fixed asset transactions are recorded in the correct period according to the accrual accounting principle
- Verifying assertions of fixed asset balance:
All fixed assets reported by the enterprise in financial statements must be verifiably present at the time of reporting, ensuring that the reported figures align with the actual inventory data of the business.
All reported fixed assets must be owned by the enterprise, and for financial lease fixed assets, they must be under the long-term control of the enterprise as stipulated in the signed lease contract.
• Correctness: the balance of the fixed asset account is assessed in accordance with the standards, accounting regime and specific regulations of the enterprise
• Accuracy, valuation and allocation: determining the balance of fixed assets is correct without errors
- Verifying assertions for presentation to financial statements:
• Sufficient: all fixed assets are fully presented in the financial statements (no omissions or omissions)
• Classification: Fixed assets are properly classified for presentation in the financial statements
Accurate accumulation of data is essential for fixed asset management, ensuring that information from detailed accounting books is correctly transferred to general accounting books and ledgers without any errors.
• Reporting and Presentation: Indicators related to fixed assets in the financial statements are determined in accordance with the provisions of accounting standards and regimes
To make comments on the items related to fixed assets in the financial statements, the auditors must base on the following information and documents:
• The internal rules and regulations of the unit related to the procurement, management, liquidation and sale of fixed assets;
• The legal assertions for transactions of increase, decrease, purchase, sale and repair of fixed assets such as investment decisions, purchase and sale contracts, contract liquidation, etc;
The documentation involved in the transportation, installation, and repair of fixed assets includes essential payment documents such as payment slips, debt notices, and minutes related to the liquidation and sale of these assets.
• General ledger and detailed accounting books of related accounts such as: General ledger of related accounts, Detailed book of fixed assets, Table of depreciation of fixed assets, etc;
• General and detailed accounting reports of related accounts such as reports on increase and decrease of fixed assets, repair reports, payment reports, etc;
• The major sources of accounting treatment documentation provide evidence directly related to the assertions of the financial information presented in the audited financial statements;
• Circulars of The Ministry of Finance and Vietnamese Accounting Standard
As science and technology continue to advance, the integration of machines into daily tasks and workflows significantly lowers costs, saves time, and enhances productivity and quality This trend is also evident in the auditing sector, where automation is transforming traditional practices.
A recent survey reveals that auditing firms primarily rely on manual processes for their audit work, lacking specialized audit software This reliance leads to prolonged audit durations and increased susceptibility to errors Additionally, client information and auditors' work records are stored solely on paper, making it inconvenient for information review and updates, while also posing a risk of loss.
Regarding internal control system assessment:
Collecting information about the client enables auditors to conduct an initial assessment of audit risk and identify preliminary risks that could impact the overall audit, as well as specific risks associated with individual items.
Audit team leaders play a crucial role in evaluating clients, as their professional judgment is essential for identifying key issues and developing tailored audit plans Typically, the assessment of the internal control system for fixed assets is conducted through interviews or questionnaires, which can expedite the audit process However, this approach often compromises the quality and consistency of the evaluation.
Regarding the determination of materiality:
The final stage of audit planning involves determining materiality, typically assessed using metrics such as accounting profit before tax, sales, or total assets Auditors select criteria based on the specific audit context, but the establishment of materiality often relies on the auditor's experience and subjective judgment This can result in varying materiality outcomes among auditors, potentially impacting audit conclusions.
Regarding detailed audit planning for fixed assets:
In any audit, six potential errors are commonly identified, including transaction-related issues such as completeness, occurrence, classification, and cut-off, as well as financial statement preparation errors like accuracy and presentation Effective audit planning aims to detect these misstatements Specifically, during the audit cycle of fixed assets, verifying the accuracy of prices and the presentation of related transactions is crucial for ensuring correct recognition and valuation.
To ensure accuracy and completeness, auditors must verify that the actual fixed assets align with the recorded information in the books A well-structured audit plan for fixed assets is essential to meet audit objectives During the audit process, auditors should adapt their procedures as necessary and may implement alternative methods if the initial audit program procedures prove impractical.
Auditing firms are increasingly advocating for auditors to utilize analytical procedures instead of substantive tests In the context of fixed assets, horizontal analysis is employed to compare the historical cost, accumulated depreciation, and carrying amount of fixed assets between the current and previous periods to identify any unusual fluctuations Additionally, vertical analysis is conducted by assessing the rate of return on total fixed assets and the historical cost relative to total assets across different periods During these comparisons, auditors must investigate and clarify the factors contributing to natural fluctuations in fixed assets while also addressing potential errors that may arise.
Introduction about SCS Global Audit Company Limited
2.1.1 The process of formation and development
SCS Global Audit Company Limited (SCSA) is a multi-member limited liability company established in Vietnam, registered under Enterprise Registration Certificate number 0106087882 The company was initially incorporated on January 17, 2013, with its most recent amendment occurring on October 13, 2022.
International name: SCS Global Audit Company Limited
Short name: SCSA CO., LTD
Company’s type: Non-state limited liability company with 2 or more members
Address: 3rd floor, GP Invest building, 170 La Thanh Street, O Cho Dua Ward, Dong Da District, Hanoi, Vietnam
Established in 2013, SCS Global Audit Company Limited was founded by a team of seasoned auditors and consultants with extensive experience from Big4 firms, large consulting companies, banks, and financial institutions.
In its early years, SCS Global Audit Co., Ltd prioritized the creation of a skilled workforce while delivering auditing, accounting, and tax services to foreign-invested enterprises in Vietnam Once a solid customer base was established, the company broadened its offerings to include consulting services, such as strategy development, business management information systems setup, and specialized support for financial information review and business valuation in mergers and acquisitions.
To ensure stability and foster growth in its core operations, the company has joined SCS Invictus, Vietnam's exclusive official global network This partnership has enabled the company to integrate with global standards and improve the professional skills of its workforce SCSA aims to establish itself as a leading financial consulting and auditing firm in Vietnam by delivering valuable services to clients through collaboration with experts and leveraging scientific research and deep insights into contemporary business sectors.
The company's primary service is financial auditing, catering to a diverse customer base across crucial economic sectors, including software production, electronic components manufacturing and trading, industrial machinery and equipment, and food technology.
• Auditing and reviewing statutory financial statements;
• Auditing financial statements for tax purposes;
• Checking financial information on the basis of pre-agreed procedures;
• Reviewing and converting FS in accordance with Vietnamese Accounting Standards (VAS) into International Accounting Standards;
- Non-assurance services: a Accounting and consulting services - outstanding services of the company
• Guiding of programming and management accounting papers;
• Guiding of preparing and recording accounting books;
• Guiding of preparing financial statements;
• Consulting on building and organizing an accounting system;
• Consulting on building an appropriate management reporting system;
• Consulting on building accounting software;
• Providing bookkeeping services, preparing financial statements, preparing tax reports, etc
• Consulting on current tax laws, assessing tax compliance;
• Tax registration and declaration service;
• Tax assessment and compliance filing;
• Review of tax returns prepared by clients;
• Assessment of taxes impact on economic contracts or decisions;
• Assessment of taxes impact on accounting measures;
• Tax complaint service, tax refund ensurement the interests of businesses in the tax field and respects the law promulgated by the State;
• Comprehensive tax consulting services c Other services
• Training and guiding the current Vietnamese and international corporate accounting regime;
• Training on current tax regulations in Vietnam;
• Practical guiding to corporate management accounting;
• Practical guiding to corporate financial management;
• Practical guiding on corporate internal control system and internal audit;
• Developing HR plan based on client's business development plan;
• Developing a reasonable remuneration policy for employees in order to maximize the potential of employees;
• Supporting clients in the process of interviewing and recruiting personnel in the fields of finance, accounting and corporate governance
The department features a straightforward organizational structure that effectively encompasses all essential functions to support its objectives and business activities It consists of two partners and three managers, all of whom maintain updated annual practice registrations.
30 certificates and also many experienced staff in the fields of auditing, accounting, tax consulting, etc along with the interns working at the company
The most responsible are the two Partners at SCSA:
Mr Nguyen Manh Hien - Partner & Legal representative of the Company
Mr Phan Le Thanh Long - Partner
In addition, at each office in Hanoi and Ho Chi Minh, there are Managers responsible for supervising and assigning work directly at the specific office including:
Mr Nguyen Van Hoang & Ms Nguyen Thi Hong Nhung - Manager of Hanoi office
Mr Nguyen Duy Thinh - Manager of Ho Chi Minh office
The management apparatus of the company is organized according to the management hierarchy, functions and tasks as follows:
Figure 2.1: Organizational and management structure at SCSA
(Source: Human Resources Department of SCS Global Audit Co., Ltd)
The SCSA structure comprises four key components: Partner, Manager, Administrative Department, and Business Department The Partner holds the highest position, overseeing all company activities and directly managing the Hanoi office while indirectly supervising the Ho Chi Minh office through the Director Collaborating with Managers, the Partner plays a crucial role in formulating both short-term and long-term strategies for the company.
Managers serve as representatives of the Partner, overseeing and taking responsibility for the company's offices Their primary role involves managing office operations, driving the execution of strategic plans established by the Board of Directors (BOD), and providing regular updates on the company's performance.
The Board of Directors (BOD) plays a crucial role in evaluating audit risk and client assessments, making key decisions, and representing the company in client contracts Additionally, they conduct final reviews of audit files and are responsible for signing audit reports and management letters.
Next, the system of departments directly performs professional tasks:
The Administrative department consists of the Accounting department, Information technology department, Human resources department and
• Accounting department: Managing and monitoring financial situations, implementing the process of cost and revenue accounting, and promptly informing the BOD of the Company's financial issues
The Information Technology department plays a crucial role in equipping employees with essential hardware and software tools to enhance their productivity Additionally, it is tasked with developing and maintaining the company's internal network system, ensuring seamless communication and efficient operations across the organization.
The Administration Department is responsible for managing and supplying document files and stationery to employees as needed Additionally, it includes a driver department that facilitates necessary travel for job-related tasks, ensuring smooth workflow and operational efficiency.
• Human resources department: Ensuring the welfare and working environment of employees, organizing training sessions to improve and develop professional skills, and also looking for suitable candidates for recruitment
However, the Auditing department, Financial consulting department and Tax consulting department directly bring the most revenue for the company
Audit teams can be organized flexibly based on the specific needs of each audit, typically consisting of three levels: Intern, Assistant, and Senior, with Seniors acting as leaders These leaders facilitate knowledge sharing among team members to ensure effective task execution Each audit is overseen by a Manager, who brings extensive experience and is responsible for organizing the workflow, assigning tasks, and supporting the team in overcoming challenges.
• Accounting and financial consulting department:
The company offers consulting services in finance, corporate governance, and corporate risk management Notably, its business management consulting services equip clients with effective solutions for resource and information technology management, enhancing their overall business operations.
The SCSA's tax department specializes in both Vietnamese and international tax laws, offering expert tax services that enhance clients' tax management and ultimately improve their financial well-being.
The organizational structure of SCSA comprises various interrelated departments, each with specific responsibilities and authority These specialized units are systematically arranged at different levels to effectively carry out management functions and support the company's overarching goals.
Figure 2.2: Management organization of SCS Global Audit Co., Ltd
(Source: Human Resources Department of SCS Global Audit Co., Ltd)
General audit procedures implemented by SCSA
Effective audit preparation is crucial for achieving set objectives and optimizing time and financial resources At SCS Global Audit Co., Ltd, this essential process is typically overseen by the Partner and Managers in charge, and it can be systematically divided into specific steps to ensure thoroughness and efficiency.
2.2.1.1 Preparation of an audit job a Reviewing the client's needs and conducting an assessment of agreement
Each client presents a unique preparation workload, especially when dealing with new clients under time constraints, which can pose challenges for auditors Upon receiving an audit invitation, SCSA collaborates closely with the client to assess their operational circumstances and review their financial statements.
The Partner or Manager will assess client needs before assigning another team member to survey and discuss relevant issues with the client The company's decision will be based on the client's capacity, the integrity of their Bill of Materials (BOM), and insights from previous auditors If the audit invitation is accepted, the submitted reports must evaluate the complexity of the client's profile and the anticipated duration of the job For clients previously worked with by SCSA, it is crucial to update their information prior to the audit Additionally, a report letter will be sent to the client.
In case of new customers, the content of the report letter will include:
• Brief summary of the customer's requirements for consistency;
• The working reports that the auditing company will send to the clients;
• Requirements for working cooperation during the audit;
For returning clients, the auditor will assess the previous years' work to forecast changes in complexity and workload for the current year Following this analysis, a report will be submitted to the Board of Directors, outlining a new pricing proposal along with a list of necessary tasks to be completed Subsequently, an audit contract will be established.
Clients will communicate their response to the Audit agreement via phone or email, after which the decision will be relayed to the Director Following the signed agreement sent to the client, the Administrative department will prepare and send a contract to the clients.
Based on client requirements, audit objectives, and budgetary constraints, the Partner will allocate tasks to the audit teams while ensuring that auditor rotation is considered to maintain independence and objectivity Team leaders are responsible for reviewing the audit plan, examining audit files, and overseeing the draft of the financial statements, as well as supervising and managing the overall audit process.
The audit team leader designates particular responsibilities to auditors and audit assistants, ensuring effective task management This structured approach allows for streamlined reporting to the Manager, facilitating oversight and guidance as needed.
The audit team leader is responsible for tailoring the audit program to each client, particularly for those deemed complex and significant This involves incorporating additional working papers and addressing specific issues within the sample audit program A crucial aspect of this process is gaining a comprehensive understanding of the clients and their business environments.
The audit team's collected information encompasses their operational environment and business sectors, including client characteristics, accounting practices, and relevant legal regulations This data is essential for assessing accounting estimates, evaluating accounting policies, and reviewing audit evidence.
There are documents about the client's business situation which auditors have to collect such as:
• Meeting minutes of the BOD, the General Meeting of Shareholders;
• The audited financial statements of the client;
• Enterprise Registration Certificate, Investment Registration Certificate;
• The previous year's audit reports;
• Rules, policies and other relevant documents
- Unit observation: Visiting the unit helps auditors to understand the client's operations, thereby making a preliminary assessment of internal control to provide critical analysis in the audit
- Interview: In order to get a preliminary understanding of the capacity and quality of the staff of the unit, the auditors will conduct a direct conversation
Preliminary analysis of financial statements is a crucial step in the audit process, utilized at various stages to assess relationships, compare data, and identify trends During audit planning, this analysis helps in determining materiality and evaluating audit risk effectively.
After collecting and preliminarily analyzing the collected information, auditors use professional judgment to make an initial assessment of audit risk audit materiality
• Performing audit risk assessment (AR): Audit risk includes the Risk of Material Misstatement (RMM) and Detection risk (DR)
RMM, or Risk of Material Misstatement, was present before the financial statement audit, and it is categorized into two levels: the overall level of the financial statements and the assertions level concerning individual account balances.
• For the level of FS, it is possible to mention the typical internal control defects that exist in the control environment of the entity; risk of fraud; etc
• For the assertion level, it is detailed information about opening and closing balances, transactions The risks are Inherent Risk (IR) and Control Risk (CR)
Thus, in order to measure the level of audit risk, it is necessary to assess three types of risks: inherent risk, control risk, and detection risk Specifically:
• Inherent risk: Judgments based on item level here may focus on revenue on item sensitivity, item complexity, etc
• Control risk: This risk is determined by considering the ineffectiveness of audit procedures or weak control environment
• Detection risk: The auditors affect this risk It may be due to inappropriate audit scope, incorrect application of audit procedures, etc
We have: AR = IR x CR x DR or DR = AR / (IR x CR)
Figure 2.3: Audit risk assessment process at SCS Global Audit Co., Ltd
(Source: SCS Global Audit Co., Ltd)
Information is deemed material when its absence or inaccuracy affects the decision-making of financial statement users Consequently, auditors can determine the audit scope and assess the risk of material misstatement.
At SCSA, the setup process is usually carried out as follows:
• Step 1: Selecting the assertion for estimating materiality levels
• Step 2: Determining the appropriate estimated ratios
• Step 3: Calculating Overall materiality: Overall materiality = Indicators x
• Step 4: Calculating Performance materiality: Performance materiality is defined in the range of 50% to 75% of Planning materiality
• Step 5: Calculating Tolerable error: Tolerable error is defined in the range of
Table 2.1: Estimated appropriate materiality ratio
Net Revenue 0.5 – 3% Apply to enterprises having growing revenue but unstable profits and large accumulated losses
Equity 1 - 2% Apply to enterprises with unstable revenue and pre- tax profit or Manufacturing enterprises
5 - 10% Apply to enterprises with stable Profit or loss statement
(Source: SCS Global Audit Co., Ltd) c Making audit program in details
The audit team leader collects crucial information regarding internal controls, financial statements, and risk and materiality levels to effectively delegate evidence collection tasks and audit procedures Additionally, it is essential to establish the timeline for completing the audit report, organize the structure of the assistants, and address any financial considerations throughout the auditing process.
SCSA conducts audits based on risk assessment, implementing a structured audit program to gather sufficient evidence The specific tests employed are determined by the client's evaluation of their internal control systems.
Audit procedures are conducted for clients with effective internal control systems to reaffirm their reliability The evidence gathered during these procedures serves to validate the strength of the internal controls in place.
• Control activities are implemented in accordance with the requirements in practice
There are some common techniques for applying control:
• Inspection: Field observation and checking on accounting documents or reports including signatures Field observation is a method of direct witnessing by the examiner on the scene
• Interview: Asking questions and collecting answers from employees at the audited unit When conducting the interview, the questions posed must be easy to understand, clear, flexible, and uniformly understood
• Re-performance: Re-implementing a process or an activity that has taken place to confirm the level of performance and responsibility of the individuals involved with the assigned tasks
Audit procedures for auditing fixed assets implemented by SCSA
2.3.1 Audit planning a Understanding the business and its environment relating to fixed assets
- Gathering information about the fixed assets cycle, the client’s objectives and strategies of fixed assets, and the measurement and review of fixed assets;
- Understanding the regulations and policies related to fixed assets;
- Obtaining data of the industry and other enterprises in the same field with the client, such as fixed assets turnover ratio b Accounting system
- Accounting department: For fixed assets sections, auditors should focus on accounts: Tangible assets, intangible assets, and Accumulated depreciation;
- Accounting documents and policies related to fixed assets c Implementing preliminary analysis procedures
Preliminary analysis enables auditors to gain insights into fixed assets and identify any unusual transactions or fluctuations in comparison to the prior financial year Additionally, this process involves assessing internal controls and pinpointing potential risks.
Auditors utilize a questionnaire table focused on internal control for fixed assets and conduct inquiries to evaluate the client's internal control risk related to these assets The responses gathered allow them to assess both the control risk and inherent risk of the enterprise Additionally, they establish the materiality threshold for fixed assets.
- Determining the benchmark and its range;
- Determining materiality for related accounts based on the RMM f Audit program
The audit programme for fixed assets is designed by the Manager and team leader of the audit job The program is built based on the framework of SCSA
Create a summary table that details tangible fixed assets, comparing data from the current and previous periods Ensure to verify the arithmetic of the data summary and analyze the opening balance in relation to the financial statements from the prior financial year.
To effectively track the growth of tangible fixed assets over the period, it is essential to compile a comprehensive list that includes classifications, purchase dates, historical costs, and other pertinent details Additionally, a thorough comparison between the fixed asset registration book and the summary data table will ensure accuracy and clarity in asset management.
Create a comprehensive inventory of all tangible fixed assets available for sale, detailing their historical cost, accumulated depreciation, and residual value as of the transfer date Additionally, outline the process and calculations involved in determining the profit or loss from the liquidation of these assets.
(4) When auditors use books or documents created for auditing purposes, the auditor must follow procedures to guarantee that the books or other documents are accurate
(5) Analytical procedures should be performed are:
(a) Comparing the account balance for the current period with the prior period by examining the increase / decrease in tangible fixed assets, and the depreciation;
(b) Reviewing items that are larger than Performance materiality or unusual items Finding causes and carrying out the tests;
(c) Evaluating average depreciation rates for various asset types in comparison to the prior period, and enquiring about the variations
(6) Looking up the ledger for unusual items and transactions, determining the reasons, and carrying out the corresponding audit procedure (if required)
(7) Considering any risks from conducting analytical procedures that could lead to a material misstatement of tangible fixed assets
51 b Observation and checking fixed assets ownership
In the current financial year, the sample size for fixed tangible assets has increased, with auditors selecting samples based on historical costs to assess the inventory of these assets Utilizing their professional judgment, auditors determine appropriate samples tailored to the specific circumstances, focusing on the increase, decrease, and existence of tangible fixed assets.
- Checking tangible fixed assets increase and assets with large decrease in the period with supporting documents from the client company;
- Checking the existence of tangible fixed assets;
- Checking the transaction of buying/selling fixed assets with related parties;
- Interviewing employees who are responsible or regularly in charge of tangible fixed assets d Depreciation check
- Checking the reasonableness of determining the useful life of fixed assets;
- Comparing the depreciation rate with other companies;
- Reviewing the depreciation methods and policies;
- Confirming all tangible fixed assets are depreciated in accordance with the accounting policies;
- Checking the calculation and the reasonableness of the depreciation expense;
- Ensuring the depreciation expense has been properly classified into expense accounts;
- Ensuring fixed assets are depreciated at a lower rate than their residual value e Buildings, structures and land using rights held for lease check
When evaluating a rental property that encompasses both land use rights and the structure on that land, auditors must determine if the land and building should be classified separately This assessment hinges on whether the entity has assumed all associated risks and income from ownership.
- Ensuring tangible fixed assets are appropriately presented in the financial statements in accordance with the financial statement preparation and presentation framework;
- Considering the need to complete the financial statements disclosure checklist for the item to ensure appropriate presentation and demonstrating;
- Ensuring sufficient appropriate audit evidence has been obtained in the audit files to support the performance of all Notes.
Audit procedures for auditing fixed assets of PAV Company
SCSA employs a risk-based approach to tailor audit procedures according to the risk assessment conducted during the planning phase Given that PAV has been a long-term client and SCSA audited them in the previous financial year, the team leader decided to forgo many audit procedures in this year's audit.
2.4.1.1 Preparing engagement and selecting audit team
Upon accepting the audit assignment for PAV Company, the Partner drafted an audit contract and forwarded it to the client The contract stipulated that the audit would be performed in two phases: an interim audit covering the first 10 months and a final audit at the end of the year 2022.
The audit team and timeline were established based on the previous year's audit engagement and documentation, with the audit scheduled from January 9 to January 12, 2023 Mr Nguyen Manh Hien serves as the Partner in charge, overseeing and reviewing the audit process directly.
As PAV used the audit service of SCSA for years, the audit team consisted of some members participating in the audit of PAV the previous year
Table 2.2: Audit team of PAV engagement
Nguyen Manh Hien Partner-In-Charge Director Reviewer Nguyen Van Hoang Manager-In-Charge Auditor Reviewer
Do Viet Linh Senior-In-Charge Leader
Cao Van Thang Assistant 2 Member
Doan Tien Dat Assistant 1 Member Reporter
Nguyen Huy Dinh Intern Member
2.4.1.2 Understanding the business and its environment
Being a client of SCSA for a long time, all the information of PAV has been stored in the permanent audit files The team saved a lot of time gathering information
The audit team leader has provided crucial insights into the client's internal control and operating environment, which, while not explicitly addressing fixed asset issues, are essential for the entire audit team to comprehend It is vital for the individual responsible for fixed asset management to grasp the client’s business strategy, including the products manufactured and the lessors of certain fixed assets This understanding is directly linked to decisions regarding new asset acquisitions, asset liquidation, proper classification, and appropriate expense allocation.
Table 2.3: Understanding about the client and its business environment
The goal is to gain insights into the client and their operating environment to identify key events, transactions, and business practices that significantly impact the financial statements This understanding is crucial for recognizing risks of material misstatement arising from fraud or error.
1 Understanding the operating environment and external factors
1.1 Issues about the operating industry and the general trend
Business field The company operates in the field of manufacturing components and parts for machinery and equipment with a variety of categories From accessories of printers, refrigerators, televisions, etc
The output market consists of components and accessories provided to renowned brands like Canon, LG, and Honda While there is competition among suppliers, PAV's unique technical characteristics for each product position its components and accessories as unmatched in the market, indicating a lack of obvious competitors.
Characteristics of business goods or services
Commodities serve components, which are characterized by rapid obsolescence and products that are manufactured according to customer requirements Therefore, there is a risk of overproduction for one-off shipments
Input sources for the industry (main materials, services, labor)
Input supplies are plastic materials, steel, etc., which are mainly imported from suppliers designated by customers to ensure the quality of raw materials
Accounting regime and accounting practices applicable to the business lines of the enterprise
Accounting regime for Vietnamese enterprises promulgated in Circular No 200/TT-BTC dated December 22, 2014 of the Minister of Finance
Other legal documents with material influence
N/A The company currently has no tax incentives Just been inspected, tax finalization until the end of 2020, but no official conclusion yet
2 Understanding the characteristics of the business
Selling Input sources come from customers such as LG, Honda
Rates vary from last year as items are uncertain about being permanent over many years
Buying Purchasing suppliers are objects specified by the customer
Production location, warehouse, office, quantity and location of inventory
The manufacturer operates two distinct factories: one dedicated to finishing and the other focused on cutting and separating chemicals To optimize storage, inventories are maintained in substantial quantities and organized using high-rise pallets based on their specific locations.
2.2 Ownership type and management apparatus
Type of business Company Limited
Proper Plastic Factory Co., Ltd accounting for 90% equity, Proper Plastic Factory (Samoa) Co., Ltd account for 10%
Describe the information used and how the board of directors measures and evaluates performance, including:
Salary and bonus policy with the Board of
N/A The company does not have this policy
Criteria for evaluating employee capacity and preferential salary policy
N/A The company does not have this policy
Compare the performance of the unit with competitors
N/A The company does not have this policy
(Source: SCS Global Audit Company Limited
Figure 2.5: Illustration of Balance sheet general analysis as at December 31, 2022 PAV Co., Ltd implemented by SCSA
(Source: SCS Global Audit Company Limit)
The excerpt from the WPs provides a preliminary analysis of fixed assets, aimed at assessing business performance and identifying any abnormal fluctuations in fixed assets compared to the previous year.
Through the preliminary analysis of PAV’s fixed assets, auditors discovered:
- PPE in 2022 decreased by 2,951,187,271 VND, equivalent to 9% the amount;
- “Construction in progress and prepayments for equipment” decreased 100% as its closing balance this financial year is zero;
- The Right-of-use assets decreased slightly;
- Deferred income tax assets increased sharply with the amount of 773,752,833 VND, equivalent to 53%
2.4.1.4 Internal control and risk assessment
The team leader conducted a detailed analysis of fixed assets, providing risk assessments for each indicator alongside descriptions of associated risks and key audit procedures The risk assessment categorized into eight types: Valuation, Accuracy, Rights & Obligations, Detail Tie-in, Existence, Completeness, Cut-off, and Classification Additionally, items were classified into low, medium, and high-risk categories to facilitate a thorough examination of potential risk cases.
Based on the variance and the risks from the previous audit, the team leader determined the risk level According to the risk assessment presented in Figure 2.5:
• The variance of PPE was above the PM;
• The risk assessment of Valuation and Right & obligations were considered Medium;
• The risk assessment of other types of assertions were Low
The variance for "Construction in progress and prepayments for equipment" and "Deferred income tax assets" exceeded the performance metrics, while "Right-of-use Assets" and "Intangible assets" fell below expectations However, the risk assessment for all these items remains categorized as Low.
According to Table 2.1, the SCSA established the percentage range for materiality, which was determined using information and data from the financial statements prior to the audit.
Table 2.4: Determination of planned and implemented materiality for the audit
Estimated materiality indicators Revenue Revenue
Sources determine materiality FS before audit FS after audit
Reasons for choosing the indicator to determine materiality
The criteria investors are most interested in to evaluate the Company's performance and operations
Estimated ratios for Performance materiality (50% - 70%)
Ratios used to estimate threshold of insignificant error (0% - 4%)
According to ISA 320, auditors must adjust materiality if new information arises during the audit that may affect the previously established materiality level It is essential for auditors to thoroughly document the rationale behind any changes made to ensure transparency and accountability in the audit process.
59 the change in materiality This must be approved by the member of the BOD in charge of the overall audit work
When the overall materiality applied is lower than the previous level, auditors must assess whether a revision of the performance materiality is necessary Additionally, they should evaluate the nature, timing, and extent of audit procedures to ensure that the subsequent audit actions remain suitable.
Based on the above table, the auditors choose the materiality level to apply when performing the audit:
Selection criteria Symbol This year Previous year
(Source: SCS Global Audit Company Limit)
The performer established a sample size for fixed assets based on a materiality level of 1,424,500,000 and a risk factor (R) of 2, resulting in a sample distance of 712,250,000 calculated as TE/R.
The audit program is developed by the responsible Manager and the audit team leader, following a predefined framework However, auditors have the flexibility to adjust the program by adding or removing procedures based on their risk assessment.
Assessment of fixed assets audit procedures implemented by SCSA
Accepting an engagement is a meticulous process that applies to both new and existing clients, ensuring that all legal requirements are met As partners are accountable for the tasks undertaken, it is essential to follow proper procedures when formalizing these engagements.
SCSA utilized the VACPA form to guide its audit procedures for fixed assets, ensuring a comprehensive and logical audit program that enhances the auditor's effectiveness in performing tasks.
SCSA has developed a targeted questionnaire designed to effectively assess a client's internal control systems This carefully crafted tool emphasizes key details, aiding auditors in making precise and informed decisions.
The audit tasks have been delegated to team members with expertise in the client's data and relevant experience The previous year's audit team continues to gather customer information and refine effective auditing methods Experienced auditors will handle material and high-risk areas, with assignments made based on individual competencies.
To streamline the auditing process, a single auditor will handle the task and all associated accounts SCSA has established guidelines for determining materiality for each account balance and the overall financial statements, ensuring a thorough and efficient audit implementation.
Control tests are essential for auditors to obtain client information, assess risks, and gather evidence related to fixed assets This foundational data enables the auditor responsible for fixed assets to conduct appropriate substantive tests, considering the timing, nature, and extent of the audit.
To accurately assess fixed assets, auditors utilize various substantive tests such as observation, interviews, analytical procedures, and tests of detail These tests help confirm multiple audit assertions, ensuring the reliability of the audit process Following the execution of control tests, auditors can confidently validate their findings regarding fixed assets.
• Occurrence, Classification and Presentation of fixed assets transactions;
• Existence, Correctness and Allocation of fixed assets items;
The presentation of fixed assets in financial statements requires careful classification and accumulation Throughout the audit process, the team leader and the responsible manager consistently monitored the work, ensuring that any issues encountered were promptly reported.
The Partner conducts a thorough review of the audit results to ensure the process is accurate and compliant with regulations The audit opinion on fixed assets is determined following a review by both the Manager and the Partner in charge A key strength identified during the audit process is the emphasis on quality control.
All audit-related documents have been meticulously recorded in both hard and soft copies The digital versions of the completed work will be uploaded to the client's permanent audit file for future reference This file also serves as a valuable resource for review procedures.
Before the audit, SCSA gathered sufficient information and developed a foundational understanding of PAV, a long-time client However, this knowledge was primarily derived from the documents stored in the permanent audit files.
Customer information gathering was inadequate, failing to utilize available resources effectively and neglecting to collect operational data relevant to businesses This lack of comprehensive information hampers the ability to objectively assess the financial standing of companies within the same industry.
The evaluation of the internal control system by SCSA relies solely on a questionnaire, primarily surveying first-year audit clients For annual audit clients, auditors review the previous year's audit files for assessment While this approach can save time when there are no changes in the internal control system, it poses risks and restricts the auditor's perspective on the client's internal control effectiveness.
The auditor responsible for fixed assets did not mandate the implementation of all necessary procedures During the planning phase, the risk assessment indicated that higher-risk areas would receive more thorough scrutiny However, this approach left potential risks unaddressed in other areas.
The auditor faced challenges in observing the inventory of all tangible fixed assets due to the substantial number of assets involved, which posed risks that could significantly impact the audit's outcome.
- Audit documents gathering: Due to the limitation of time, all supporting documents cannot be collected In some cases, the auditor cannot find the documents for the transactions needed
RECOMMENDATIONS TO IMPROVE THE FIXED ASSETS
Development orientation of SCSA
SCS Global Audit Company Limited has established itself as a leading auditing firm with a positive working environment, while actively expanding its international operations The company prioritizes the enhancement of its audit team’s quality through rigorous recruitment processes that seek candidates with strong professional knowledge and ethical standards SCSA supports employee development by offering opportunities for obtaining professional certifications, covering tuition fees, and providing dedicated training sessions to keep staff updated with industry knowledge Additionally, SCSA emphasizes creating a comfortable and happy workplace, recognizing that alignment with the company’s culture is essential for achieving optimal work efficiency.
In today's unstable economy, the necessity of financial statement audits for businesses is undeniable SCSA recognizes the trust placed in them by clients and is committed to enhancing the quality of its audit services To achieve this, SCSA must leverage its strengths while addressing weaknesses in its auditing processes, particularly in the area of fixed asset audits.
SCS Global Audit Company Limited is committed to continuous improvement, aiming to enhance its development and solidify its prominent position in the global auditing industry.
3.2 Requirements for improving the audit of fixed assets item in the audit of financial statements implemented by the SCSA
The most feasible requirements that need to be implemented to ensure the completion of the audit of fixed assets in the audit of financial statements are:
SCS Global Audit Company Limited ensures compliance with current accounting standards and legal regulations governing auditing Serving both domestic and international clients, the firm adapts to the laws relevant to the audit's location, which helps minimize potential confusion during the auditing process.
To align with the company's business characteristics and resources, it is essential to ensure that the approach is easy to understand, use, and deploy This strategy will foster positive development in the quality of service that SCSA aims to achieve.
Third, ensuring reasonable economics between implementation costs and budget sources for operations
Fourth, ensuring auditors to be more proactive and willing to learn in the audit process
The need for improving the fixed assets audit procedures of SCSA
Vietnam is advancing across various sectors, embracing innovation and integration to address emerging challenges, with the auditing industry playing a crucial role in this progress Audit opinions on financial statements enhance the transparency of financial information, aiding investors in their decision-making processes Consequently, it is vital to reinforce fixed asset audit procedures and overall auditing practices to support this development effectively.
As economic development accelerates, the demand for reliable financial information has surged, necessitating an evolution within the auditing profession However, the Vietnamese audit industry has struggled to keep up with these societal demands With the increasing complexity of the economy, financial data has become riskier and less trustworthy, highlighting the need for greater transparency To effectively address society's information needs, there is a pressing requirement to enhance auditing methods.
- The compete in the audit field
The auditing industry is rapidly expanding due to the rise of numerous audit firms, driven by economic integration and development that enhance competition For Vietnamese audit firms to thrive domestically and successfully expand internationally, it is essential to boost their competitiveness.
To enhance competitiveness and meet client demands, audit firms must prioritize service quality, diversify their offerings, and invest in human resources, technology, and management talent This commitment drives SCSA to consistently improve auditing processes and elevate auditor competency.
- Adherence to changes on standards of accounting and auditing
Audit firms implement their audit programs based on evolving accounting standards and policies These standards are frequently updated to align with global developments, particularly in accordance with the IFRS roadmap Consequently, audit companies must consistently adapt to changes in accounting and auditing standards.
- Challenges in the realm of nature audits
Due to the ongoing expansion of SCSA's audit and assurance activities, the necessary facilities, equipment, and human resources for the audit are not fully met This often leads to a shortage of auditors or requires them to work overtime, particularly during peak seasons.
Requirements for improving fixed assets audit procedures at SCSA
- The requirements for improving the fixed assets audit procedures are:
Audit procedures for fixed assets must be tailored to the specific circumstances of the audit, the auditor's expertise, and the evolving trends within the auditing profession.
Secondly, the audit procedures should be compatible with SCSA's operational features;
Thirdly, the audit procedures should be simple to use, implement, and control in the company;
Lastly, the audit procedures should be able to guarantee that each audit's costs and benefits are compatible In other words, these suggestions must guarantee the audit's effectiveness
- The principles for improving the fixed assets audit procedures are:
First and foremost, recommendations for enhancing fixed assets audit procedures must adhere to all applicable legal requirements;
Secondly, recommendations for enhancing fixed assets audit procedures must center on the efficacy, economy, and efficiency of the audit activity
Thirdly, consistency must be guaranteed in recommendations for enhancing the fixed assets audit processes
In addition, recommendations for improving fixed assets audit procedures are both theoretical and practical
Lastly, recommendations for improving fixed assets audit procedures at must guarantee completeness and comprehensiveness
Recommendations to improve fixed assets audit procedures at SCSA 89
Based on the limitations and their causes presented above, some recommendations for improving the fixed assets audit procedures at SCSA were listed below:
• Enhancing internal control illustration techniques
Auditors utilize various techniques to gather information on internal controls, with three popular methods available for documenting their understanding of a client's business, tailored to the specific type of client.
Narrative notes provide a textual description of a system, outlining the actions and controls at each stage While they serve as useful background information for simple systems, their effectiveness diminishes when applied to more complex systems.
- Checklists and questionnaires: A question list One of the best methods is the "Yes / No" format Although they are easy to create and can be used to expose flaws
But standard lists cannot be applied to all company kinds and may leave out special controls
Flowcharts are valuable tools for auditors to illustrate controls through lines and symbols While they provide a comprehensive method for documenting and analyzing systems, creating them can be time-consuming, and making modifications can be difficult.
The company should apply all techniques above flexibly based on the client to get information timely and effectively:
- Narrative notes: SCSA should specify the narrative notes' presentational order
To enhance clarity, information should be organized according to internal control components, especially when dealing with a straightforward client system This structured approach facilitates better understanding and effective communication.
To effectively evaluate internal control components, SCSA must develop a comprehensive and tailored questionnaire that aligns with each client's specific characteristics It is essential for the company to customize the questionnaire by adding or removing questions based on the unique nature of each manufacturing or trading organization.
When dealing with a complex system, auditors should utilize flowcharts to enhance understanding A thorough knowledge of the client's control points and document transfer methods is essential for effective auditing SCSA should establish standardized norms and symbols to facilitate the auditor's ability to access and verify the information gathered.
• Adjusting the time frame of the audit
Audit jobs typically follow a standardized time frame of one day for inventory and three days at the client's location; however, this approach is inadequate as each audit presents a unique workload that necessitates a more tailored schedule.
Before initiating an audit, it's essential for the team leader or knowledgeable auditors to update the Partner on the client's workload and the estimated time required for a thorough audit This information enables the Partner to allocate adequate time for each task, ultimately enhancing audit performance For instance, in the PAV job, a better-informed approach would have ensured a more thorough examination of tangible fixed assets and a comprehensive collection of supporting documents by the audit team.
• Improving the evaluation model of internal control
To enhance the quality of audits, SCSA must adopt a multifaceted approach to understanding each client's internal control systems This involves proactively gathering insights into the client's unique characteristics and employing open-ended questions alongside traditional questionnaires By ensuring comprehensive information collection on internal controls for all clients, SCSA can maintain high audit standards across its entire clientele.
• Improving the understanding of basic information and information about fixed assets
To effectively gather information during audits, whether for new or existing clients, auditors must consistently reference essential details This practice enhances their understanding of the audited client, leading to clearer insights throughout the auditing process.
Auditors should enhance their information collection by diversifying sources, including insights from experts and peer businesses within the same industry It's essential to design and regularly update the information-gathering process to align with the specific characteristics and needs of each enterprise, ensuring comprehensive coverage of relevant issues while maintaining high objectivity.
The demands, requirements, and guiding principles for enhancing fixed assets audit procedures were presented in Chapter 3 together with the oriented development of SCSA
In chapter 3, the thesis offered some recommendations for each limitation based on the causes mentioned in chapter 2 Additionally, this chapter includes some additional suggestions for SCSA
In the era of global economic integration, SCS Global Audit Company Limited is establishing a strong foothold in the auditing industry, enhancing its service quality and bolstering its reputation.
My internship at SCSA and my research on "Completing the Process of Auditing Fixed Assets in Financial Statements" at SCS Global Audit Company Limited have deepened my understanding of the significance of auditing activities, especially concerning fixed assets My thesis focuses on three key issues related to this crucial aspect of financial auditing.
Firstly , the thesis has outlined the basic theory of fixed assets in the audit of corporate financial statements, thereby seeing its influence on the audit work of financial statements
The thesis evaluates the current state of fixed asset auditing in financial statements conducted by SCS Global Audit Company Limited in Vietnam, highlighting both its significant advantages and existing limitations.
In conclusion, this thesis analyzes the theoretical framework and current practices surrounding fixed asset audits in corporate financial statements, offering strategic recommendations to enhance the auditing process for fixed assets, specifically tailored for SCS Global Audit Company Limited.