The audit of financial statements r nfor abc co ,

The completion of the A&C assessment helps the engagement leader and team members identify professional risks associated with the client and the engagement and may also help identify aud

INTRODUCTION OF PRICEWATERHOUSECOOPERS VIETNAM LIMITED

History and Development

PricewaterhouseCoopers (PwC) is a leading global professional services firm specializing in assurance, advisory, taxation, and legal services The firm was formed through the merger of PricewaterHouse Ltd and Coopers & Lybrand Ltd in London, marking its public debut.

- PricewaterHouse Ltd has been founded by Mr Samuel Lowell Price - an accountant - in 1849

- Meanwhile, Coopers & Lybrand Co., Ltd was the result of another merger of Coopers Brothers & Co and Lybrand, Ross Bros & Montgomery

At the present, PwC network comprises the Head Office at London and more than

740 other offices spreading over 157 countries with approximately 223,000 employees Due to the requirements for a professional firm, each of the office over each country is one separate entity

1.1.2 PwC on local scale (Vietnam)

PwC Vietnam is a single-member limited company authorized by the National Committee for Investment Cooperation to deliver independent auditing and consultancy services It is fully owned by PwC Indochina Holdings Inc., which was founded in 1992 in the British Virgin Islands.

- October 1993: Coopers & Lybrand registered to open the very first representative office in Hanoi

- February 1994: Pricewaterhouse has officially entered the professional auditing market in Vietnam

- In 1998: Pricewaterhouse and Cooper & Lybrand merged worldwide, as a result, PricewaterhouseCoopers Vietnam was officially launched

PwC Vietnam's history dates back to 1998, marking its establishment as a key member of PricewaterhouseCoopers Southeast Asia Peninsula (PwC SEAPEN) This regional community encompasses PwC entities across Malaysia, Thailand, Laos, and Cambodia, highlighting the interconnectedness of its operations in Southeast Asia.

Vietnam, with more than 3,800 people In Vietnam only, there are slightly 800 local and expatriate staff and two offices (HCM and Hanoi)

PwC Legal Vietnam, a foreign law firm founded in 2000, is licensed by the Ministry of Justice in Vietnam The firm operates its head office in Ho Chi Minh City and has a branch office located in Hanoi.

Field of operation and operational objectives

1.2.1 Services provided by PwC Vietnam

PwC Vietnam delivers high-quality, industry-focused services by fostering strong interpersonal relationships to gain a deep understanding of clients' businesses and needs The firm is recognized for its major services that enhance its reputation in the market.

Auditing and assurance services provide reliable evaluations that ensure a true and fair representation of clients' financial positions, operational results, and cash flows, while also enhancing the overall quality of financial statements.

Advisory Services provide clients with a comprehensive suite of skills and resources, categorized into two primary areas: Deals and Consulting The Deals segment focuses on mergers and acquisitions (M&A), guiding clients throughout the entire deal cycle, from strategy formulation to post-deal integration, and encompassing financial, tax, legal, market, and operational due diligence, as well as capital market access and deal structuring Meanwhile, the Consulting arm aims to enhance client performance by optimizing key business processes for greater efficiency and effectiveness Additionally, Tax Services offer a complete range of compliance and advisory support regarding Vietnamese tax laws, ensuring clients are informed about the latest developments, effective operational structuring, and emerging risks Lastly, Legal Services provide comprehensive legal advisory support in conjunction with the assurance, tax, and advisory services from PwC offices.

At PwC, our mission is to foster trust in society while addressing significant challenges We are dedicated to supporting our clients in reaching their objectives, leveraging a team of skilled professionals with in-depth knowledge of critical business sectors across our global network This enables us to deliver comprehensive services to clients worldwide.

PwC, recognized for its world-class business practices, is committed to maintaining trust and enhancing service quality for both existing and new clients To achieve these objectives, the company has established key operational goals focused on delivering exceptional results.

- Always reviewing and selectively choosing clients;

- Constantly improving the quality of service delivery, ensuring customer satisfaction.;

- Paying attention to training and improving the level of staff as PwC believe that humans are the key to the success of the company

PwC aims to be a catalyst for positive societal change by integrating social, environmental, and economic integrity into its core values and decision-making processes This commitment not only enhances its external contributions but also fosters a strong internal community, where diverse individuals work collaboratively towards a common goal of making a greater impact.

PwC, short for PricewaterhouseCoopers, represents a global network of member firms that deliver professional services under PricewaterhouseCoopers International Limited The term "PwC" can refer to individual firms within this extensive network or collectively to all of them Each firm is either a member of or has connections to PwCIL, reinforcing the collaborative nature of the PwC network.

The organizational structure of PwC is divided into several levels, each of which plays a different role in keeping PwC's organization running smoothly and efficiently

PwC fosters a collaborative environment where employees can study, work, and support one another to achieve shared goals Like other professional firms, PwC organizes its structure into two distinct categories.

The delegation of responsibilities within an audit engagement is influenced by the complexity of the circumstances, with the signer retaining overall accountability The Engagement Leader holds ultimate responsibility for the audit's execution and the issuance of the audit report In certain instances, the partner or director may delegate the Engagement Leader role to a senior or experienced manager while still maintaining overall responsibility The Team Manager, under the guidance of the Engagement Leader, plays a crucial role in designing the audit strategy and coordinating its daily implementation Additionally, the Senior in Charge oversees key sections of the audit, providing support to other team members, while the Staff consists of less experienced individuals contributing to the engagement.

In a company, job positions are typically fixed but can change based on performance in engagements and other competencies outlined in the PwC manual The key roles include Partner, Manager, Supervisor, Senior Associate, and Associate, each representing a distinct level of responsibility and expertise within the organization.

PwC categorizes its services into three primary groups: Manufacturing, Distribution and Services (MDS), System Process Assurance (SPA), and Financial Services (FS) For additional details, please consult "Appendix 1 - Organizational Structure at PwC Vietnam."

THE AUDIT OF FINANCIAL STATEMENTS OF A.B.C CO., LTD

Initial Engagement Procedures

Independence is essential in audit engagements, defined as the ability to act with integrity and objectivity It is crucial for both the engagement team and the firm to identify any issues that could compromise our independence, ensuring we maintain independence in both appearance and mindset when expressing conclusions.

2.1.1.1 Independence of the engagement team

The firm and its staff adhere to professional standards and relevant legal and regulatory requirements, ensuring a high-quality audit process The composition and role assignments within the engagement team are crucial for conducting an effective audit Recognizing that each entity is unique, the engagement team is tailored to address the specific needs and circumstances of the client.

All PwC employees are required to sign an Annual Independence Confirmation During the kick-off meeting, the entire team was informed that no independence threats were identified during the planning stage Individual independence will be continuously assessed throughout the duration of the engagement.

Table 1 Rotation of engagement team

Number of years of involvement in this role

Maximum length of involvement, if applicable

Engagement leader (*) Bee Han Theng 1 (from 2016) Should not exceed 10 years Team manager Do Thanh Nhan 1 (from 2016) No requirement

Left Signer (**) Bee Han Theng 1 (from 2016) Max of 3 continuous years Right Signer (**) Do Thanh Nhan 1 (from 2016) Max of 3 continuous years

The client is classified as a non-PIE, and according to Matrisk 21.02.330, the audit engagement partner or QRP's tenure should not typically exceed 10 years for clients that are neither PIE nor HPC Mr Bee Han Theng began his role as the engagement leader in the fiscal year 2016, and his participation adheres to the rotation policy applicable to non-PIE clients.

(**) Left signer and right signer rotation:

According to Decree 17, the left/right signer for the audit of a non-PIE client must rotate after three years Bee Han Theng has served as the left signer for the engagement since the first year of the audit, which concluded on December 31, 2016.

On December 31, 2016, Nhan participated in the engagement for the first time, and it is noteworthy that there were no violations found for either the left or right signers for the fiscal year ending on that date.

- No QRP was assigned to this engagement as there is no requirement

2.1.1.2 Independence of the firm and network

PwC has conducted a self-review to assess any potential relationships with clients that could compromise our independence, both in perception and reality This includes evaluating financial interests, loans, joint business relationships, pending litigation related to audit or non-audit services, overdue fees, reliance on fees, commissions, referrals, and indemnity liabilities According to our findings, no issues or matters have been identified For additional details, please refer to "Appendix 2 Independence."

Use of A&C Software to Evaluate Information

To enhance engagement teams' structure and ensure consistent procedures for engagement acceptance and continuity, we have implemented a software tool called A&C Software to effectively evaluate information.

- Within A&C, the engagement team is required to answer a series of questions about the entity

The A&C assessment completion enables the engagement leader and team members to identify professional and audit risks related to the client and engagement By evaluating the information used in the assessment, we apply judgment to discern significant risks for our audit planning Recognizing these significant risks is a crucial task for the engagement leader, and, when necessary, Risk Management, during the approval process of the A&C assessment.

In the form, the Client information has been stated:

ABC Co is an active audit client and a subsidiary of a listed entity, specializing in the manufacture of various beverages for consumption in Vietnam Operating within the non-HPC PIE practice segment, the company plays a significant role in the local beverage industry.

- Audit regulation data: o GAAS requirement: Local GAAS (VAS) o Financial Reporting Standards: Local GAAP

- Engagement Information: o Engagement Name: ABC Co 31.12.2016 o Engagement Record Manager: Mr Do Thanh Nhan o Engagement period end: 31 December 2016

- Line of Service: o Service Line: Assurance o Service: GAAS / Statutory & Other Recurring Audits o Engagement Type: Audit - requiring annual Continuance reassessment

- Industry: o Industry Group: CIPS - Consumer & Industrial Products & Services o Industry Sector: Retail & Consumer – Consumer o Industry Segment: Drinks production

Next, Mr Do Thanh Nhan will have to answer about the continuance of ABC Co

- General information o Approval structure: the audit will be conducted in Vietnam territory o Independence

The client's structure, circumstances, ownership, and management remain unchanged, indicating no new factors that could compromise independence.

▪ Shareholders' Equity (Book Value): K’VND6,301,810,691

As of March 3, 2016, the net income reported was K’VND978,969,995, based on the unaudited financial statements for the year 2015, as the audited report for ABC had not yet been finalized For further details, please refer to Appendix 3, which contains the unaudited financial statements and additional fee information.

▪ The Ultimate auditor of ABC is Deloitte

▪ The Client Identification Check has been issued and Mr Nhan has confirmed that the engagement has not involved in any Money

• The source for engagement fee from customer is reliable and could be tracked

• Services expected to provide, related parties, third parties do not indicate any type of Money Laundering

The article categorizes risk questions into six key areas: Business Issues, Management and Governance, Ethics and Integrity, Accounting and Controls, Financing and Going Concern, and Auditing Issues Business Issues focus on profitability, products and services, competitive positioning, and the pressures of rapid growth or downsizing, with a noted low risk for intentional misstatements in financial reporting Management and Governance emphasize the governance and oversight of management, past performance, and the experience and skill of management, also reflecting a low risk Ethics and Integrity assess the integrity and ethical standards of management, indicating a low risk of intentional misstatements in financial reporting Accounting and Controls cover accounting controls, monitoring of operating units, revenue recognition, and past audit adjustments, all categorized as low risk Lastly, Financing and Going Concern address the financial stability and sustainability of the entity.

▪ Bank credit facilities of US$39,000,000 can be drawn to meet its liabilities to carry on the next twelve months

▪ Current liabilities exceed current assets by K’VND311,933,407 o Auditing Issues: Reliability of accounting estimates, Company’s characteristics: Low risk

The detailed answers with has been documented in the (“Appendix 4 Risk questions”)

Approval requirements: The requirement for approval from the engagement leader, and in certain circumstances, the approval has been delegated to the engagement leader – Bee Han Theng

In conclusion, the PwC Audit Guide indicates that the A&C Score varies from 11 (lowest risk) to 55 (highest risk), with scores of 42 or above representing a higher risk level According to Mr Nhan's assessment, ABC has achieved a score of 26, placing it within the moderate risk range.

11 and 42 Thus, ABC has been accepted as a continuance without further investigation.

Understand the Entity and Its Environment

2.2.1 Understand the Entity and its Environment 1 (Regulatory, Industry, etc.)

According to the PwC Audit Guide (PAG), professionals at PwC must cultivate a comprehensive understanding of the business and its associated risks This involves forming an independent perspective on these risks through thorough research and analysis of the entity, considering factors such as the industry, regulatory environment, accounting policies, objectives, strategies, and financial performance.

An independent perspective is cultivated through thorough research that evaluates the company against its industry and competitors, along with insights gathered from discussions with personnel We prioritize forming our own viewpoint rather than solely relying on management’s opinions, which allows us to critically assess their business outlook and risk management practices By applying professional skepticism, we juxtapose management's perspectives with our findings For a deeper understanding of the entity and its environment, please refer to Appendix 5, which covers regulatory and industry insights.

2.2.2 Understand and Evaluate Internal Control and Identify Relevant Controls

According to ISA 315, we have assessed internal control system and whether we need to perform any test of control to reduce work of substantive test or not

PwC assessed ABC Co.'s control environment based on several key criteria: management effectively sets a strong 'tone at the top,' an appropriate code of conduct is established and communicated to all employees, a whistle-blowing mechanism, like an ethics hotline, is in place, management demonstrates a positive attitude towards financial reporting, and those charged with governance fulfill their roles appropriately.

The overall business environment encompasses various factors such as the industry dynamics, legal frameworks, political influences, and regulatory conditions It is essential that assessments are conducted by individuals who possess the necessary experience, competence, and independence from management to ensure objectivity and reliability.

For further information about the result, please refer to (“Appendix 6 Control environment”)

Management establishes strategic and operational objectives which are appropriate to the size and complexity of the entity

At the start of each calendar year, the Board of Management (BOM) will collectively determine whether to create a new three-year strategic plan for the business in the territory or to review and update the previously approved strategic plan, incorporating a revised outlook for the next three years.

- By April of each year, ExCom must prepare and submit to BOM for approval the Strategic Plan

The Strategic Plan should outline detailed annual objectives for the Strategic Plan Period, including innovation and category strategies, the introduction of new products, and marketplace investments such as advertising and marketing equipment It must also encompass financial statements that cover sales volume, net revenue, gross margin, EBITDA, EBIT, tax obligations, and capital expenditures, alongside an assessment of financial capacity and any additional relevant information.

- BOD must approve the Strategic Plan by end of May each year

By September 30, the Executive Committee (ExCom) is required to prepare and submit a high-level profit and loss statement along with a full-year forecast for the upcoming fiscal year for the Vietnamese subsidiary to the Board of Management (BOM) In October each year, ExCom must also present a draft Annual Operating Plan (AOP) for the Vietnamese subsidiary for approval by BOM This AOP should comprehensively outline the operational objectives for the business in the following year.

The Vietnam subsidiary's strategic and financial objectives for the fiscal year encompass a comprehensive marketing plan featuring key initiatives, brand and packaging strategies, channel approaches, pricing, and volume targets Additionally, the management plan includes the selection of leadership, training programs, and operational and human resource initiatives Advertising strategies for beverage products will also be outlined, alongside other pertinent information to ensure alignment with overall business goals.

The financial plan for the Vietnam subsidiary outlines its consolidated financial capacity, including projected Profit and Loss, Cash Flow, and Balance Sheet items, as well as capitalization plans, capital expenditures, debt levels, and financing methods The Board of Management (BOM) is required to consider and vote on the initial Annual Operating Plan by the end of October, which is 90 days prior to the start of the fiscal year, and must finalize this plan by the end of November, at least 30 days before the fiscal year begins Additionally, management has established a process for identifying, evaluating, and responding to risks that may impact the achievement of the subsidiary's objectives.

The RMC department, along with the heads of each department, is tasked with conducting risk assessments and supporting the Board of Directors (BOD) in managing identified risks The company has established robust internal control guidelines based on COSO and ABC global standards, encompassing ten key processes The RMC department conducts quarterly tests of these controls to identify any failures or new risks that may arise Results of the risk assessments and internal control tests are reported to the BOD and BOM quarterly, prompting timely actions that are documented and monitored by the RMC.

During our initial meeting with management, it was determined that the overall business risk is low, primarily due to the nature of their operations The only significant risk identified is currency risk, which they have effectively addressed with a suitable hedging policy.

Management identifies and analyzes changes in the business that could have a significant impact on financial reporting

The formal budget building process was established to align the annual budget with the Company's strategic goals and shareholder expectations for growth By involving all relevant departments, the process ensured that the budget was realistic, while the planning department provided a critical review of the assumptions made, ensuring they were both challenging and appropriate Our analysis of the 2015 budget, in conjunction with the Company's historical performance, confirmed that the budget was set realistically and was achievable, alleviating undue pressure on management and staff.

In 2015, performance expectations were adjusted downward compared to 2016 due to the elimination of certain one-off procedures and a consideration of the current business environment We have reviewed relevant supporting documents to verify the effectiveness of the controls implemented.

ABC Co has performed control activities for those business cycle

For those controls implemented, please refer to (“Appendix 6 Control Activities”)

ABC Co has applied some of the information and communication to adapt one of the factors of Internal control – Information and Communication

- Processes are in place for gathering key financial information to support the financial

An effective IT environment is bolstered by a supportive IT structure and culture, which is reflected in demonstrated behaviors, the allocation of appropriate IT resources, and both formal and informal policies, especially concerning data processing and security.

- Senior financial officers, accounting, finance, IT, and other functional managers communicate clearly about important matters concerning financial reporting and

- Financial information is communicated timely and clearly to external stakeholders

Please refer to (“Appendix 8 Information and Communication”) for further information

Afterward, the information and communication at ABC Co has been assessed as normal and there is no exception that required our attention

The entity has an ongoing process for monitoring internal controls

The Head Office's internal audit function at ABC conducted evaluations every two years, with the last assessment in 2011 Following Suntory's acquisition of 51% in April 2013, the company underwent a transformation program As part of this initiative, Suntory Foods and Beverage Asia surveyed and assessed ABC Co.'s internal control system, concluding that it was more robust and advanced than Suntory's, resulting in no significant changes required to the internal control system through 2016.

An internal audit (or equivalent) function is used to monitor the effectiveness of internal control

Risk and Response

2.3.1.1 Conduct Initial Risk Assessment Analytics

The auditor must conduct risk assessment procedures to identify and evaluate the risks of material misstatement at both the financial statement and assertion levels However, these procedures alone do not yield enough appropriate audit evidence to form a solid audit opinion.

An independent expectation was built, from which any variance that differences from the expectation would be explained reasonably We used the data as at 31 December

2015 and 30 June 2016 for the preliminary analytics

3 Analytical procedures are used throughout the audit process and are divided into:

Following discussions with management and a review of the monthly management report, our analysis of the client and its industry indicates an anticipated sales increase of 15% to 20% compared to last year This growth is primarily driven by a rise in sales volume, aligning favorably with budget expectations Additionally, we expect a corresponding impact on sales-related accounts, including Cost of Goods Sold (COGS), sales deductions, and selling expenses.

AR expected to move in line with sales o Capital injection makes capital balance increase by US$10mil o Other remaining accounts expected to remain unchanged

As of 30 June 2016, the figures in the statement of financial position (Balance Sheet) and the income statement for the period from 1 January to 30 June 2016 (Profit & Loss) underwent a half-year review by PwC, making them suitable for Pre-AR purposes.

As of December 31, 2015, the financial data, including the balance sheet and profit and loss statements, was sourced from PwC's audited accounts, while the profit and loss information for the first half of 2015 was derived from PwC's reviewed accounts, all prepared in accordance with IFRS standards.

Define threshold(s) for what would be unusual or unexpected

- Any variance above PM will be investigated

Significant fluctuations have been observed in certain Financial Statement Line Items (FSLI), including Cash and Cash Equivalents (86%), Sales (15%), and Financial Income (-27%) These variations have been thoroughly investigated and documented For additional testing results, please refer to “Appendix 9 – Conduct Initial Analytical Procedure.”

We have discussed with Internal Audit which work they have done during 9 months 2016: on quarterly basis, Internal audit does the testing on 10 processes at ABC Co as normal

Request for Internal Audit Reports to review the quarterly control reporting reports Discuss actions taken on the findings of Internal Audit Report: Per discussion with

The process for addressing findings from the internal control report remained unchanged from the year-end audit of 2015 Initially, the findings were communicated to the responsible individuals and the Board of Directors (BOD), who were tasked with implementing remedial actions These actions were documented in the report, including specific timelines for resolution The Internal Audit team will follow up on the BOD's actions and report the outcomes in the subsequent quarter.

Inquire if Internal Auditor became aware of any fraud cases

- Internal audit’s views about fraud risks in the entity: Ms Hanh said that as ABC

The company maintains robust internal controls with clearly defined control activities documented across ten processes The Risk Management and Compliance (RMC) department conducts quarterly reviews and tests of these processes, revealing no instances of fraud to date Consequently, the Risk Manager assesses the fraud risk within the organization as low.

According to the internal audit's perspective, the risk of error at ABC Co is considered low due to the implementation of Oracle, a robust ERP system that automates most transactions and includes multiple review levels Additionally, manual transactions are subject to strict authorization under the Sarbanes-Oxley Act (SOA), requiring extensive review for significant transactions, further minimizing the risk of errors.

ABC Co boasts a dedicated team of experienced key staff members who have been with the company for an extended period, resulting in a low risk of errors.

The internal audit has conducted procedures to identify or detect fraud throughout the year, integrating these efforts into the quarterly review of internal controls, which encompasses ten processes The Risk Management and Compliance (RMC) department is responsible for reporting the findings related to internal control and any identified fraud risks to the Board of Directors (BOD) for their evaluation and response.

- Whether internal audit has knowledge of any fraud, alleged fraud, or suspected fraud affecting the entity: some small cases but at staff level ABC Co was addressed them accordingly

- Whether internal audit is aware of instances of management override of controls and the nature and circumstances of such overrides: None noted

Internal auditors should investigate any instances of non-compliance with laws and regulations Ms Hanh highlighted that there have been cases of non-compliance with tax regulations in previous years, resulting in penalties from the tax authority However, she confirmed that there were no tax audits or penalties during the first nine months of 2016.

The RMC department confirmed that there have been no changes to the accounting system and IT General Controls (ITGCs) compared to last year's audit, as discussed with Ms Hanh.

At the end of each quarter, the internal control department compiles an internal control report During the planning phase, three reports were reviewed, revealing deficiencies identified through testing conducted over the year Notably, these internal control weaknesses primarily affect business operations rather than financial reporting.

In the first half of the year, our audit plan may be affected by key issues in the P2P process, including early payments to suppliers without proper authorization and bank transfers made to individual accounts rather than the company account; however, no significant losses have been reported Additionally, the I2C process, which relies entirely on manual controls, has experienced instances where warehouse and production staff bypassed certain control procedures.

There were no loss cases reported, resulting in no significant impact on our audit Last year, master data management, which included suppliers, customers, and inventory, was handled manually by IT staff at the location, with updates made only when changes occurred.

Execute

2.4.1 Accruals, provision and other liabilities

Firstly, we obtained the detailed listing for accruals at the year ended 31 December

In 2016, we reconciled the trial balance amount with the detailed listing of accruals provided by the client to ensure its completeness The discrepancy identified was approximately VND 5 million; however, due to its immaterial nature, we opted not to pursue further investigation.

The trial balance accounts related to FSLI Accruals have been categorized into distinct groups, such as Other Non-Trade Payables, Payroll and Bonus, and Repair and Maintenance, according to their specific nature For a detailed listing of these accrual accounts, refer to Appendix 10.

Subsequently, an overview on the trend for each category has been analyzed:

In 2016, the Company experienced a 9% decrease in advertising and marketing (A&M) expenses, amounting to VND 18.5 billion, primarily due to a reduced A&M budget This strategic shift involved reallocating part of the A&M budget to distribution and administration (D&A) to enhance sales from existing customers rather than acquiring new ones Additionally, the limited launch of new products, with only the Tea plus Matcha introduced in March 2016, contributed to the decline in A&M expenses, as the unfavorable market conditions led to the decision to discontinue the product later that year Consequently, fewer A&M initiatives were executed in December 2016.

- Travel and entertainment: Air-tickets for employees to travel and expenses for year-end party are included in this category

- Rent: Rental fee comprises accruals for warehouse and office rental at many branches

ABC Co has experienced a significant reduction in freight charges, decreasing by 21% and totaling VND 35 billion This decrease can be attributed to various factors impacting transportation costs among the company's locations and to distributors.

▪ Decrease in Sale volume in December 2016 of 9%, leading to the less transportation fees for delivery of FGs

▪ Since 2015, ABC Co has maintained contracts with 2 – 3 main distributors only who offered the most reasonable prices Hence, less transportation cost incurred

▪ Last but not least, thanks to better arrangement of Warehouse network, better logistic strategies by renting warehouse closer to customers also contributed to the reduction of transportation cost in 2016

D&A accruals, which encompass discounts and allowances, have seen a significant decline this year, dropping by 27% to VND 47 billion This decrease is primarily attributed to a 10% reduction in sales volume, which fell short of the anticipated 20% increase Consequently, the budget for D&A has been adjusted downward, leading to fewer promotional projects compared to the previous year This reduction in promotional activities has further contributed to the decrease in D&A expenses and year-end accruals.

S&D accruals encompass the expenses related to transportation support for distributors and the DCR incentives provided to the employees of these distributors These employees, who are not part of ABC's staff, receive a fixed monthly payment—2 million in urban areas and 1.5 million in rural areas—to motivate them to enhance sales, along with additional incentives based on sales volume.

In 2016, the company experienced a significant 68% decrease in repair and maintenance (R&M) accruals, totaling VND 26.4 billion This decline aligns with a reduction in R&M expenses and corresponds with the acquisition of new fixed assets, particularly in the fourth quarter The company invested in new production lines to replace outdated assets, resulting in lower R&M costs for the older equipment.

In the context of payroll and bonuses, key components include the 13th month salary, 10-day salary, sales incentives, bonuses, and MIP, along with PRC accruals Notably, a VND 14 billion increase in accrued bonuses and payroll has offset previous decreases, primarily driven by salary increases and a rise in headcount throughout the year Additionally, there has been a modest increase of VND 11 billion in office administrative expenses, reflecting the company’s business expansion during this period.

- Professional services: This was the accrual for outside professional services such as recruitment

- Office administration: Mostly comprise of IT service fee (Oracle system, Legal system, PR/PO system), etc

- Consulting fee: Tax and other consulting fee

- Auditing fee: Audit fee charged from PwC

ABC has established contracts with several co-packers, including Pham Asset, San Miguel, Stim, and Kian Joo, located in Da Nang and Hanoi, to produce and package its products These co-packers receive raw materials from ABC, process them, and return the finished goods to ABC.

- Permanence provision: Daily miscellaneous incurred expenses

- CDA accruals: Accruals for CDA

- General reserves: Mainly includes loading/unloading fee, cleaning service fee, etc at warehouses

- Legal fees: Legal consulting fee

- Royalty: Royalty paid to Interco

- Other Non-Trade Payables: Other accruals

Accrued Capex refers to the balance for unbilled capital expenditures, which decreased by VND 117 billion compared to the end of 2015 The significant decrease is attributed to the completion of the Dien Ngoc Plant's construction, which was ongoing in 2015 Previously, the Accrued Capex balance was primarily related to construction in progress and machinery purchases for this plant By the end of 2016, with the construction completed and transferred to Property, Plant, and Equipment (PPE), there were no substantial additions to Capital Expenditures (CIP) or outstanding construction At year-end, approximately VND 315 billion of accrued Capex represented the purchase of fixed assets valued at VND 766.3 billion, which remained unbilled as of December 31, 2016, while the billed amount was recorded as other payables totaling VND 450.6 billion According to Circular 200/2015/TT-BTC, these amounts should be classified as trade payables, necessitating adjustments to reclassify the other payables and reverse the accruals for unbilled amounts, as highlighted by our audit team.

Dr Short-term accrued CAPEX 315,737,324,827

Next, an audit approach has been developed based on the breakdown above as follows:

Table 3 Audit approach for Accruals

Advertising and marketing ToD - A&P expenses 195,046,700,857

D&A accruals (discount and allowances) ToD - A&P expenses 113,137,594,940

Other Non-Trade Payables imm 1,299,260,663

Accrued Capex Link to Other payables 315,737,324,827

The payroll and bonus figures were thoroughly audited within the payroll expenses section, revealing no exceptions Since all identified misstatements were below the established threshold, we concluded that no further investigation was necessary.

For the completeness of CDA accruals, we obtained list of CDA customers extracted from CDA system

All scanned copies of CDAs are managed and monitored by Ms Son, the sales planner, ensuring the integrity of the data We have verified that the report extracted from the system by Ms Son was unaltered, providing us with confidence in its accuracy Subsequently, we conducted accept-reject testing to confirm that the customers listed are accurately represented in the CDA calculation sheet prepared by ABC.

The testing results indicate that all selected customers were incorporated into the CDA calculation, thereby confirming the completeness assertion for this report.

Table 4 CDA accruals testing template

Customer discounts and allowances are detailed in each signed contract between the parties The Client's calculation sheet was used to verify these contracts against the terms for calculations The accrual calculations varied based on the specific terms outlined in each contract, including standard sales volume, item value, and TOT promotion rates While the calculations themselves are confidential, the procedures have been summarized, and the results of the testing are presented below.

VND VND VND (Yes/No)

>> agreed to total population imm >> pass

As the difference is far below SUM, we suggest that it should be passed without any further investigation

We would define the number of tested items: 4 items

1 DHL-Freight accrued expenses-TOT/POSM T12/16

3 Third party _transportation DC QN – Energy

4 Freight expenses accrued in advance for March 2016

Freight charges are determined by delivery distance, weight, and contract pricing We extracted key data from the contract and conducted a reasonableness test to establish an independent expectation for comparison with the accrued amount from the client, highlighting any discrepancies (refer to "Appendix 11 Freight Charge").

VND VND VND (Yes/No)

3rd Party Transportation - Pallet 10,666,958 10,666,958 - No

Third party _transportation DC QN -

Freight expenses accrued in advance for March 2016 3,082,360 3,082,360 - No

As the difference is far below SUM, we suggest that it should be passed without any further investigation

We would define the number of tested items of one item with unit of testing is each transaction on detailed listing

- Description: Accruals for performing DMS 2016

- Amount accrued at 31 December 2016: VND1,599,720,470

- Checked to sequential invoice from FPT Ho Chi Minh for DMS software in December 2016

- Although the invoice date is 21 December 2016, up to the balance sheets date, ABC has not received the invoice billed by FPT, thus the Company recorded as Accrued expenses

- Supporting document examined: Subsequent Invoice

- Amount in supporting document: VND1,518,554,402

- Exception noted: No, variance is immaterial

Per PwC's assessment, the Company's practice is appropriate

We would define the number of tested items of 1 item

- Description: Accruals for fixed office administration in Hooc Mon in December

- Amount accrued at 31 December 2016: VND2,050,140,549

- Checked to subsequent invoice from YCH for Warehouse management service

- Although the invoice date is 21 December 2016, up to the balance sheets date, ABC has not received the invoice billed by DHL, thus the Company has recorded as Accrued expenses

- Supporting document examined: Subsequent Invoice

- Amount in supporting document: VND2,050,196,880

Exception noted: No, variance is immaterial

Per PwC's assessment, the Company's practice is appropriate

We would define the number of tested items of one item

- Description: Additional fixed cost for 03/2015-11/2015 as increasing Base Volume (Management fee cost)

- Amount accrued at 31 December 2016: VND3,314,778,579

- Checked to Termination of contract No 8060.2014.99-TL dated 15 December

2016 for the Warehouse management fees rendered by DHL

Completion

2.5.1 Update Preliminary Assessments, Changes to Plan and Subsequent Events

Assess the revising of materiality

The use of profit before tax as a benchmark for calculating materiality can lead to fluctuations in materiality levels, particularly when adjustments to the income statement occur, thereby altering the benchmark itself.

To enhance efficiency, we will update materiality weekly following the adjustments of the week At PwC, our auditors utilize a system that simplifies the calculation of materiality by allowing us to adjust the benchmark value, which automatically updates the overall performance materiality and SUM For ABC Co., we calculated materiality using unaudited profit before tax and the audited figures after incorporating customer corrections.

Materiality for financial statements may need adjustment due to changes in circumstances during the audit, such as a decision to sell a significant portion of the business, new information, or an evolving understanding of the entity's operations If the auditor discovers that actual financial results are likely to differ significantly from the initially anticipated results used to set materiality, they must revise the materiality level accordingly.

After discussion among team members, we decided not to revise materiality (OM,

PM and SUM) as the number of variance is immaterial (only 4%) compared to SUM

2.5.1.1 Conclude on Possibility of Fraud or Illegal Acts

ISA 330 mandates that auditors must assess whether their evaluations of the risks of material misstatement at the assertion level are still valid, based on the audit procedures conducted and the evidence gathered during the audit process.

During the clearance meeting, we reviewed the summary of adjustments, both corrected and uncorrected, and engaged in a thorough discussion among team members regarding the nature of each adjustment This evaluation aimed to identify any potential indications of management fraud within the company.

The adjustments identified in this section primarily stem from the professional judgment of auditors, focusing on reclassifications and unusual transactions that have not been updated in accordance with the new regulations (Cir 200/2015/TT-BTC) These adjustments do not suggest any fraudulent activity or management override at ABC Co., but rather reflect errors arising from misunderstandings among accountants.

As a result, there is no need to perform additional or different audit procedures

2.5.1.2 Conclude on Entity’s Ability to Continue as a Going Concern

ABC Co has been a leading competitor in the market for years, holding nearly a quarter of the market share However, concerns regarding its ability to continue operations for the next 12 months were raised during Mr Sieu's inquiry at the start of the audit To support PwC's assessment of this going concern issue, we conducted a thorough analysis as detailed in “Appendix 21: Conclude on Entity’s Ability to Continue as a Going Concern.”

To verify events impacting the financial statements for the year ended December 31, 2016, we undertook two key steps: first, we reviewed subsequent financial statements post-year-end, and second, we inquired with management to identify any subsequent events relevant to the fiscal year.

Sales are anticipated to rise significantly in January 2017 as retailers prepare for the Tet holiday season, resulting in an upward trend for the first two months of the year This increase in sales is expected to contribute to exceptionally high extrapolated figures for the entire year of 2017.

- COSs could experience the same trend as sale (with slightly the same proportion)

- As ABC and a very strong competitor in the market, they must spend quickly on selling expenses for their domination of market proportion It would jump quicker than sales increase

- Cash and cash equivalent should reduce as the spending of production for orders from Tet holiday

ABC Co., as a wholesaler, typically sells goods on credit during the Tet holiday, leading to a significant increase in accounts receivable and payable This surge is primarily dependent on customer payments following the holiday.

Please refer to (“Appendix 23 Subsequent Analytical Procedure”)

In analyzing the data from just one month, it is evident that working capital will experience significant fluctuations due to the peak production season, while other assets, liabilities, and financial statement line items (FSLI) in the income statement are expected to remain relatively stable compared to the previous year-end.

31 December 2016 And there is no exception coming up The subsequent financial statements have no problems and do not indicate any issues in financial statement for the year ended 31 December 2016

(ii) Inquiry of management of subsequent knowledge

On January 31, 2017, the senior reached out to Mr Sieu via email to inquire about any issues that arose at ABC after December 31, 2016 The details of this communication are recorded in "Appendix 24: Subsequent Event Email."

Mr Sieu has confirmed via email that no events will interfere with the issuance of the report Additionally, the responses to inquiries regarding analytical relationships align consistently with other audit evidence.

We would conduct the VAS completion checklist for verify that notes on the financial statement has been agreed with Vietnam Accounting Standard or not

At PwC Vietnam, a comprehensive macro-enabled file consolidates essential disclosures from the Vietnamese Accounting Standards, enabling senior management to determine the appropriate financial statement lines for reporting each Financial Statement Line Item (FSLI) based on its value.

Overall conclusion analytical procedures aim to synthesize audit findings rather than gather additional evidence for significant accounts, which means they can be conducted with less intensity than substantive analytical procedures.

To be similar with other procedure, we perform the test with 4 clearly steps as follows:

OVERALL COMMENTS

Overall comments over audit procedures carried out by PwC at A.B.C Co

The restructuring of audit procedures, moving away from strict adherence to Vietnamese Accounting Standards, has enhanced the systematic nature of audit engagements, making them easier to follow and review This streamlined approach allows team members to effectively monitor the workflow and meet client deadlines, ultimately improving engagement quality Additionally, the implementation of the Oracle system has enabled PwC to manage a vast number of transactions efficiently Consequently, PwC has successfully integrated control tests with substantive tests, reducing the need for detailed testing while simultaneously enhancing the overall quality of their work.

PwC employs systematic methodologies throughout the engagement process, from planning to completion After analyzing the total amounts of each Financial Statement Line Item (FSLI) in the lead schedule, values are categorized into subcategories Depending on the Project Manager (PM) or Summary (SUM), decisions are made to either include or exclude these categories For similar categories based on their nature, a consistent audit approach is applied, resulting in significant time savings.

PwC effectively employed analytical procedures throughout the audit process During the planning phase, analytics helped identify red flags, which informed the development of the audit plan based on identified risks In each section, auditors utilized analytical procedures for their analyses and conducted the audit accordingly Finally, in the completion phase, analytics were used to review subsequent financial statements for unusual trends that could indicate fraud, ensuring that the final analytical reviews of the current and comparative figures confirmed the overall understanding of the audit and highlighted any anomalies in the financial statements.

At the outset of the audit, the evaluation of ABC's going concern was conducted rather carelessly, relying solely on management inquiries and financial indicators such as total assets, total liabilities, and net working capital These factors do not adequately assure the company's operational continuity for the upcoming year.

Notions for improving the procedures

To address the identified issues and align with the strategy of our foreign parent company, we require a written confirmation from management affirming their commitment to support ABC Co for another year This assurance is essential to mitigate concerns regarding the company's ongoing viability, especially given the significant profits contrasted with the assessed weakness in working capital.

Upon completing the thesis, the article outlines the audit engagement procedures and provides readers with a foundational understanding of utilizing the PwC Audit Guide for practical clients After thorough evaluation, it is concluded that sufficient and appropriate evidence has been gathered to support the unqualified opinion expressed on the financial statements The author asserts that the audit procedures conducted by PwC have upheld the overall quality of the audit.

Organizational structure at PwC Vietnam

Appendix 1 Organizational structure at PwC Vietnam

Updated CES for all entities as required and verified that information, including deliverables, remains appropriate Relevant changes in group structure that may impact independence requirements

Independence breaches and/or any matters identified by the Global Breaches Reporting Database, the independence team or otherwise

No issues or matters identified, or Potential issues or matters identified

Engagement management and engagement team responsibilities

Considered each of the following matters to the extent applicable to the entity and related entities:

Members of the engagement team or chain of command, including officers, directors, or employees in influential positions, may be assessed or compensated for selling non-audit services, which raises potential conflicts of interest.

Former PwC partners and practice staff, particularly those who were part of engagement teams, may have transitioned into roles such as directors, officers, or employees within the entity These individuals are in positions that allow them to exert significant influence over the entity's accounting records and financial statements, or they may have been promoted into such influential positions.

Members of the engagement team who have given notice of potential employment with the entity during the course of the engagement

No issues or matters identified, or Potential issues or matters identified

Please refer to A&C and the CES of ABC

Independence of the engagement team and chain of command

Considered each of the following matters to the extent applicable to the entity and related entities:

Independence of the members of the engagement team (including any specialists, auditor's internal experts and service delivery center personnel) and the chain of command

Requirement for individual independence confirmations

Role Name Number of years of involvement in this role

Maximum length of involvement, if applicable

Engagement leader Bee Han Theng 1 (from 2016) Should not exceed 10 years

All PwC staff are signed to a Annual Independence Confirmation

In addition, we have already confirmed with the whole team in the KO meeting and noted that there is no any independence threats are noted during planning stage

The individual independence will be continously accessed until the end of the engagement

Please refer to KO meeting minute for details of independence confirmation

Territory rotation tracking database, or 'Rotation' table below

Right Signer Do Thanh Nhan 1 (from 2016) Max of 3 continuous years

Based on rotation procedures performed:

No issues or matters identified, or

Team manager Do Thanh Nhan 1 (from 2016) No requirement

Left Signer Bee Han Theng 1 (from 2016) Max of 3 continuous years

Potential issues or matters identified

Litigation (threatened or pending) in relation to audit or non-audit services Overdue fees and undue reliance on fees

Commissions, referrals or contingent fees Situations where the entity has become liable to a PwC firm under an indemnity

No issues or matters identified, or Potential issues or matters identified

The client is classified as a non-Public Interest Entity (non-PIE), and according to Matrisk 21.02.330, audit engagement partners or Quality Review Partners (QRP) for clients that are neither PIE nor HPC should typically not serve for more than 10 years Mr Bee Han Theng commenced his role as Engagement Leader (EL) in the year-end 2016, marking the first year of his involvement His participation adheres to the rotation policy applicable to non-PIE clients.

Left signer and right signer rotation:

The audit for the non-PIE client adheres to Decree 17, which mandates that the left and right signers rotate every three years Mr Bee served as the left signer for the engagement for the year ending December 31, 2016, marking his first year in this role, while Nhan also began her involvement in the engagement during the same period It has been confirmed that there were no violations concerning the left and right signers for the fiscal year ending December 31, 2016.

No QRP was assigned to this engagement as there is no requirement

Independence of the firm and network

Considered each of the following matters to the extent applicable to the entity and related entities:

Financial interests, loans or similar arrangements Joint or other business relationships

We have performed RC without exception noted

Independence

Considered each of the following matters to the extent applicable to the entity and related entities:

Compliance with obtaining pre-approval(s) from the entity’s audit committee (or equivalent) for non-audit services

Changes in group structure or independence requirements that would impact the on-going permissibility of a non-audit service

Breaches or any matters relating to non-audit services that were identified by the Global Breaches Reporting Database, the independence team or otherwise

Identified and reviewed all non-audit services through the AFS/other communication procedures.

Not applicable - no non-audit services, or

Non-audit services identified and reviewed in EGA 'Update initial assessment of independence' (tab 'Threats & safeguards') or provided link

No issues or matters identified, or

Potential issues or matters identified

Additional independence requirements for PIEs - where applicable (unchecked for non-PIEs)

Unaudited Financial Statements

Short-term trade accounts receivable 394,519,915 77,732,035

Short-term prepayments to suppliers 52,350,611 62,427,753

Other short-term receivables 226,499,304 237,750,178 Provision for doubtful debts – short term (8,769,950) (5,296,271)

Provision for decline in value of inventories (27,501,623) (3,714,740)

Short-term prepaid expenses 34,404,394 17,659,476 Value Added Tax to be reclaimed 120,148,244 108,555,273

Long-term assets in progress 869,532,295 376,954,070

Long-term prepaid expenses 930,357,732 776,786,889 Deferred income tax assets 69,658,374 135,906,586

Short-term trade accounts payable 1,020,815,555 2,036,170,684 Short-term advances from customers 7,395,761 35,288,462

Taxes and other payables to the

Short-term borrowings and finance lease liabilities - -

Provision for short-term liabilities - -

Provision for long-term liabilities 91,515,181 90,480,242

- Ordinary shares with voting rights 5,597,429,084 5,373,929,084

- Undistributed post-tax profits accumulated by the end of the previous period 700,244,028 (52,541,567)

- Undistributed post-tax profits of the current period 1,241,883,542 1,004,914,934

Risk questions

- During the year, the entity has neither expectation to make an initial public offering of its securities nor sale/issue of its securities outside its home country jurisdiction

- Profitability: Low risk - The entity is consistently profitable, but profit margins fluctuate over the business cycle

The entity offers low-risk products and services that are highly differentiated, facing minimal competition from substitutes With strong brand loyalty, the market size and the entity's market share are both predictable and stable.

- Competitive position: Low risk - The entity has a strong competitive advantage but it could be duplicated by competitors

The Company maintains full compliance with regulations and licenses, facing no significant challenges related to core business issues like shrinking margins, declining sales, or intense competition Additionally, it has not encountered one-off losses from the restructuring of distressed divisions or substantial uninsured cash outflows The Company is also well-positioned to adapt to new accounting, statutory, or regulatory requirements that could affect its financial stability or profitability Furthermore, it exhibits low vulnerability to rapid changes, including advancements in technology, product obsolescence, or rising interest rates.

- ABC’s management has faced no stress on rapid growth or downsizing of the entity

- Incentive for intentional misstatements in financial reporting: Low risk - incentive compensation system is balanced between financial and non-financial measures Management's performance goals are high but achievable

Effective governance and oversight of management are ensured by an independent board with strong expertise and experience, which receives timely information to monitor management performance Additionally, a well-qualified audit committee provides essential oversight of financial matters, contributing to a low-risk environment.

- Past Performance: Low risk - The entity has been successful in accomplishing its goals and seems able to adapt to changing circumstances

- Management's experience and skill: Low risk - The management team has good experience and is skilled in all key functions

- Management department: Low risk - Good management department at all key positions and comprehensive succession planning

- No key members of management have very arrogant or autocratic personalities

- Integrity and ethics: Low risk - Management has a good reputation for integrity and ethics

- Management inclination to intentionally misstate financial reporting: Low risk

- Management makes a reasonable effort to achieve fair and accurate financial statement presentation

Effective accounting control involves low risk through monitored and standardized controls, which are periodically tested to ensure their design and operation are effective The accounting systems in place demonstrate high competency, allowing the department to meet the company's internal financial reporting requirements Accounting personnel are well-equipped to address arising issues, resulting in timely and reliable financial reports.

- Monitoring of operating units: Low risk - Head office has good information about operating units and uses it to monitor operating unit management and performance

- Revenue recognition: Low risk - Significant non-standard revenue transactions occur occasionally but the entity is proactive in discussing with the auditors the transactions and their revenue recognition attributes

- Past audit adjustments: Low risk - Audit adjustments are unusual and the entity takes action where required to prevent a recurrence

Over the past two years, the entity has experienced a net cash outflow, with a similar trend anticipated for the current year due to cash flows from operating activities and debt service requirements As of December 31, 2015, the company's total current liabilities exceeded its total current assets by K’VND311,933,407 (unaudited) Nonetheless, the company has adequate financing sources, including a US$10,000,000 capital contribution from the parent company and US$39,000,000 in available bank credit facilities, ensuring it can meet its liabilities and sustain operations for the next twelve months.

- We are able to determine the organization or individual that owns and/or controls the entity or to obtain access to them

- The Company has following characteristics: o Unnecessarily complex structure o Significant operations, subsidiaries or bank accounts in non-home country jurisdictions that do not appear to have any clear commercial purpose

The Company maintains a professional approach towards auditors by avoiding unreasonable demands, such as rejecting fair fees, imposing overly tight audit schedules, delaying information provision that hinders evaluation, and attempting to limit the audit's scope.

In [year], ABC Co engaged in significant transactions that were complex and unusual, posing challenges for accurate accounting evaluation Additionally, these transactions occurred near the end of the accounting period, further complicating the assessment process.

The reliability of accounting estimates is considered low risk, as they have generally been reasonable The audit relationship also reflects a low risk, characterized by proactive discussions initiated by management on accounting issues as they emerge Our communications with the board and audit committee are both structured and substantive, although management occasionally questions our audit scope Additionally, discussions may be required before accessing certain personnel and information, but management ultimately accepts our audit findings.

Understand the Entity and its Environment (Regulatory, Industry, etc.)

- Legal and operating structure o ABC Co ("the Company") was incorporated as a 100% foreign-owned company in Vietnam The total investment capital and legal capital of the Company are USD131,000,000

The company's primary focus is on the manufacturing, trading, importing, and exporting of beverages and food products Utilizing the original formula from its parent company in the U.S., the beverages are crafted with concentrate sourced from U.P ABC Additionally, the company has successfully marketed its tea products for nearly nine years.

In 2009, Lipton Honey faced challenges in the Southern Vietnam market, leading to its discontinuation The company sources potatoes for its snack products through contracts with farmers in Da Lat, Lam Dong The primary consumers of these snacks are teenagers and young adults, with ABC representing the largest demographic group in Vietnam, acting as agents, distributors, and wholesalers.

The beverage market in Vietnam is dominated by two major players, ABC Co and another well-established company, both of which benefit from robust global networks and substantial advertising investments amounting to billions of USD.

• ABC Co has been slower in entering the snack food segment than other food specialized companies i.e Kinh

Do, Bibica, Nutriway…This segment is also a high-profit field which giants have launched their products for many years

• Target consumers of snack products are youth segment who prefers catchy packaging and advertising o Others

The Company collaborates with numerous local suppliers for essential raw materials like sugar, cans, glass, caps, labels, and cartons To mitigate price fluctuations and ensure a steady supply for production, the Company typically enters into long-term contracts with key suppliers, particularly for sugar and cans Given the competitive landscape, the bargaining power of these local suppliers remains low.

Ireland ABC supplies 100% of the concentrates, benefiting from a strong, long-term relationship that ensures high quality As a related party, the bargaining power of this supplier is relatively low, which mitigates the risk of transfer pricing issues.

• Not significant to the Company as its end-customers are individuals and there are no key customers that would have a significant impact on the Company's operations

Coke, along with its main competitor ABC, dominates the Vietnamese soft drink market, with both companies operating production facilities across the country—in the North, Central region, and Ho Chi Minh City Despite the presence of local brands, they struggle to compete with the significant market presence of ABC and Coke, making them the largest suppliers in Vietnam.

In Vietnam's competitive beverage market, several local and foreign companies are emerging as significant players Notably, Ben Thanh Beverages has captured market share with its popular energy drink, Number 1, and Green Tea Zero Degree Delta, a local manufacturer, utilizes advanced equipment from a foreign investor to produce a variety of fruit juices, including orange, pineapple, guava, papaya, and soya-bean, with an investment of USD 11 million In the bottled-water segment, La Vie poses a strong challenge to Aquafina Additionally, Tan Hiep Phat has established itself as a formidable competitor in the industry.

In Vietnam, the absence of specific legislation for the industry means that companies must navigate existing laws and regulations that influence their business operations To avoid violations and penalties, strict compliance and monitoring practices are essential Like other industries, various government laws directly impact the client's business activities.

▪ Tax regulation: CIT, PIT, WHT, Import-Export and VAT

• VAT o Amended CIT Law 71/2014/QH13 o Decree 12/2015/ND-CP dated 12 February 2015 o Circular 26/2015/TT-BTC dated 27 February 2015

• PIT o Circular 119 dated 25 August 2014 o Decree 91 dated 1 October 2014 o Circular 151 dated 10 October 2014 o Law no.71 dated 26 November 2014 o Decree 12 dated 12 February 2015 o Circular 92 dated 15 June 2015

• WHT o Circular 103/2014/TT-BTC dated 06 August 2014

• CIT o Amended CIT Law 71/2014/QH13 o Decree 12/2015/ND-CP dated 12 February 2015 o Circular 96/2015/TT-BTC dated 22 June 2015

• Provision o Circular 228/2009/TT-BTC o Amended circular 89/2013/TT-BTC

• Other o Circular 45/2013/TT-BTC for the useful life and recognition of fixed assets

▪ Law on Environment Protection tax

• For group report is applied to group instruction from group auditor

• For local statutory report is applied to Vietnamese Accounting Standards, Vietnamese Accounting Systems and applicable regulations in Vietnam (Circular 200/2014/TT-BTC)

Effective governance structures and ownership are essential for organizational success, with clearly defined roles and responsibilities for the Board of Management (BOM) and Board of Directors (BOD) A straightforward organizational chart facilitates communication and decision-making processes The governance policy and charter provide essential guidance for all members Adequate communication is maintained through monthly and quarterly meetings, with additional ad-hoc meetings as needed A biannual review of governance issues ensures ongoing effectiveness Additionally, an Internal Audit and compliance department have been established to monitor and implement appropriate control processes throughout each business cycle.

Quang Nam Plant, part of ABC Company, operates three sales offices located in Da Nang, Hanoi, and Ho Chi Minh City, facilitating the storage and distribution of products across central and southern Vietnam The company also has manufacturing facilities in Can Tho, Dong Nai, Ho Chi Minh City, Bac Ninh, and Quang Nam, ensuring a robust supply chain and regional coverage.

- Business operations o Financial reporting - VAS Report: The Company applied VAS and Circular 200/2015/TT-BTC in preparing financial statements o Revenue recognition

Revenue from the sale of goods is recorded in the income statement once the significant risks and rewards of ownership have been transferred to the buyer If there are substantial uncertainties about the collection of payment or the potential return of goods, no revenue is recognized Additionally, revenue is reported at the net amount after deducting any sales discounts indicated on the invoice.

Revenue from services is recorded in the income statement based on the completion stage of the transaction as of the balance sheet date, which is determined through a survey of work performed If there are significant uncertainties about the collection of the payment, no revenue will be recognized.

▪ Transactions arising in foreign currencies are translated at exchange rates ruling at the transaction dates Foreign exchange differences arising from these transactions are recognized in the income statement

At the balance sheet date, monetary assets and liabilities in foreign currencies are translated using the buying and selling exchange rates of the bank where the Company regularly conducts transactions Additionally, foreign currencies held in bank accounts are translated at the bank's buying exchange rate Any foreign exchange differences resulting from these translations are recorded in the income statement.

❖ The entity’s accounting policies are appropriate for its business and consistent with the applicable financial reporting framework and accounting policies used in the relevant industry

The company prioritizes a young workforce and effective management to drive growth, implementing a continuous recruitment strategy aimed at attracting top talent, particularly for management positions By maintaining a competitive salary policy, the organization ensures low staff turnover and fosters employee retention Additionally, the company emphasizes employee care, focusing on their well-being and professional development to create a supportive work environment.

▪ Salaries are based upon job evaluation and description Employees' salaries and benefits remain competitive with the labor market

▪ Good working conditions: safety and hygiene in work place

▪ Training and development: regularly organized and paid for internal and external training courses

- Financial performance: o Overall sales and profit in 2016 increased compared to 2015 o The margin remained stable and the current ration also improved

Table 29 Brief on financial indices

Control Environment

Management establishes an appropriate 'tone at the top' of the entity:

Management sets a strong "tone at the top" by providing clear moral guidance on right and wrong, ensuring effective communication of integrity and ethics throughout the organization By embodying these values in both actions and words, management serves as a respected role model for employees, promoting adherence to company policies and disciplines Additionally, management proactively addresses any potential issues that may arise, reinforcing a culture of accountability and ethical behavior.

The "tone at the top" is observed during our planning and interim visits through management's daily operations and their approach to staff consultations and approvals For instance, management mandates formal consultation and email approval for any sensitive data before it can be shared with external parties, such as auditors.

An appropriate code of conduct (or similar) exists and has been communicated to all employees:

Codes of conduct outline essential do's and don'ts for all employees, officers, and directors, ensuring clarity and compliance Upon joining the Company, every employee acknowledges these codes, retaining a personal copy for reference Additionally, the code is regularly communicated both verbally and in written materials during daily activities and staff meetings, reinforcing its importance in the workplace.

We have thoroughly reviewed the Code of Conduct (CoC), which outlines essential do's and don'ts, including whistleblowing, integrity, public contributions, corporate assets, and financial integrity The CoC is designed to be clear and easily understandable, ensuring that all employees can absorb its guidelines effectively It is provided to employees upon their entry into the company and is readily accessible to all staff through the internal network.

The management underscored the significance of integrity and ethical behavior in daily operations, as highlighted by the mandatory application of the Code of Conduct (CoC) for all employees A review of the attached CoC confirms this requirement without exception Furthermore, top management has communicated to all staff via email, emphasizing the serious consequences of non-compliance as indicated by the Risk Management Committee (RMC) department's findings.

We examined the organizational chart, which clearly outlines the reporting and communication structure Discussions with department heads revealed that they will provide direct moral guidance to their employees, in addition to the overall communication from the General Director.

The entity has implemented a "whistle-blowing" mechanism (or equivalent), such as an ethics hotline:

ABC Co employs a speak-up system to effectively identify, report, and manage fraud cases, as shared by Ms Hanh, the RMC manager Each month, Ms Loan and other members of the CEC receive a comprehensive report from Deloitte detailing all speak-up points raised It is imperative that all reported cases are resolved Notably, Ms Loan highlighted that there were no significant fraud incidents reported during the year 2016.

ABC Co has implemented a speak-up regime for third parties alongside its internal speak-up system Each year, the company sends a Code of Conduct (COC) acknowledgment to its customers, providing them with a channel to voice concerns Additionally, PwC has requested updates on fraud cases identified in the previous year According to Ms Loan's report this year, there have been no significant instances of asset misappropriation or collusion noted thus far.

Management's attitudes and actions toward financial reporting do not result in conservative or aggressive selection of accounting principles or accounting estimates:

The company's accounting policies and principles prioritize a conservative approach, with management ensuring clear communication to all accounting staff These principles are consistently applied across various branches, following recommendations from the Head Office Chief Accountant, undergoing review by the CFO, and receiving final approval from the president Management actively enforces the application of these accounting standards.

Experienced professionals manage the estimation process, adhering to conservative guidelines that are regularly reviewed and updated to ensure more accurate and reasonable estimates.

Management believes that the accounting function is crucial for understanding and controlling the enterprise, utilizing conservative accounting principles in financial statements Operating management is responsible for approving reported results, while unit accounting personnel report to central financial officers The organization safeguards valuable assets, including intellectual property and information, from unauthorized access Furthermore, management prioritizes long-term performance over short-term results and remains vigilant against inappropriate reporting practices aimed at meeting targets.

During our audit, we noted that all key positions, including the Board of Directors and directors overseeing various business areas such as operations, accounting, sales, marketing, production, and supply chain, have remained consistent since before the P.ABC acquisition, with tenure ranging from 5 to 10 years Following the acquisition of Suntory, new senior management personnel were appointed from Suntory, further emphasizing the continuity and experience within the leadership team.

We examined the attached JV agreement and observed that there is a stipulation between P.ABC and ABC prohibiting the dismissal of any key management personnel during the first year following the acquisition.

During our review, we noted that senior managers frequently visit branches and factories to assess divisional operations Divisional management engages in regular discussions through various means, including formal meetings, informal visits, and communication via phone, fax, or email There are robust controls in place for financial reporting, which are thoroughly documented and evaluated Additionally, control manuals and policies are written, communicated to all relevant departments, and centrally stored by the RMC department.

The role of those charged with governance is undertaken by persons with appropriate experience, competence and independence from management

We conducted a review of the Joint Venture (JV) agreement and the Company's charter regarding its governance structure, roles, and responsibilities The JV agreement remains unchanged from the previous year Additionally, while the charter included an annex in 2014 that was thoroughly reviewed and approved, there is no annex for the fiscal year 2016.

Control Activities xxii Appendix 8 Information and Communication cvi Appendix 9 Conduct Initial Analytical Procedure cxi Appendix 10 Detailed listing of Accruals Account cxxii Appendix 11 Freight Charge cxxvi Appendix 12 Advertising and Marketing cxxix Appendix 13 Discount and allowances accruals cxxxii Appendix 14 PwC’s Calculation of VPC cxxxix Appendix 15 PwC's Calculation of VMC and FMC cxli Appendix 16 General Provision cxlvi Appendix 17 Detailed listing of Specific provision cxlvii Appendix 18 Sales by Products Breakdown cxlix Appendix 19 Sales by Seasons Breakdown cli Appendix 20 Sale Deductions Breakdown clii Appendix 21 Breakdown of CDA and D&A Year End clv Appendix 22 Conclude on Entity’s Ability to Continue as a Going Concern clviii

- Policies: o Credit policy o Cash and Settlement Policy (for cash sales) o Bottle and Cases policy o AR adjustment Policy

- Sub processes o Master file process: Owned by Finance Manager in each distribution centre, Planning Director, consider to change to IT manager due to new upgrade in Oracles

The process of assessing and approving credit limits and loan cases begins after sales contracts are finalized, with the salesperson completing customer validation and the Customer Registration Form (CRF) for review by the Sales Manager or Sales Director The Finance Manager then verifies the CRF, while the Distributor or Customer Representative collects the Credit Application Form (CAF) and prepares the Approval for Credit Limit (AFCL) and Request for Credit Over Limit (RFCOL), which are reviewed according to the Schedule of Authority (SOA) Customers exceeding their credit limits or COL are system-blocked, and sales releases are contingent upon entity policy Management conducts credit limit and COL reviews three times a year, specifically from February to May, June to September, and October to January ABC Co adjusts credit limits and COL based on the type of enterprise and updates sales discounts and pricing in response to any operational changes within its customer base, ensuring the Schedule of Authority is also updated and approved accordingly.

▪ Sales contract initiation and information maintenance

• Sale admin and sale planner prepare the Sale Contract and Appendix for Credit and Bottles & Cases (if credit/COL Cases on Loan customer)

• Finance Manager reviews Sale Contract and Addendum for Distributor/Agent/KA/AA customers

• Management signs off the sale contracts including AFCL, RFCOL per SOA/Credit/B&C policy

The IT Executive establishes the customer master file upon receiving a signed contract from the customer, subsequently updating essential information including credit limits, payment terms, order types, price lists, and warehouse details based on approved criteria.

• IT personal reviews & signs off monthly on the system the changes to customer master file to ensure it has been appropriately authorised and applied correctly

Since 2015, ABC Co has upgraded to Oracle V12, resulting in enhanced management of customer codes, including the ability to change customer codes and create parent codes for multiple locations.

• All information about customers will be reflected in customer master data file (basic information, credit limit, case on loans), which are managed by R&R module in Oracle

• Sales Planner (SP) prepares Promotion Scheme Proposal (PSP) and has it approved by Vice President Sales

• Planning Director reviews & verifies on PSP via email

• Management reviews and approves corresponding with Authorization matrix via email

• IT staff will update in Oracle system

• Planning Manager validates the price on Discount and Promotion list from system with PSP/PCR in form of soft copy

• FM double checks Promotion List, Discount List before applying for invoicing

• CDA is approved in accordance with Approval Matrix

• MT Executive, KA executive/Account Development Rep follow up CDA and request Accounting for setting up in system

• IT Supervisor updates in Oracle system

• FM validates the price on Discount and Promotion list from system with PSP/PCR by soft copy or hard copy for KA/MT

• Senior Sales Planner (SSP) prepares Price Change Request (PCR) and has it approved by VPS

• Planning Director reviews & verifies on PCR via email

• Management reviews & approves in accordance with Authorization matrix

• If PCR is not applied for Key Account, Planning Analyst will inform Locations and IT staff will update in Oracle system for new price

• Planning Manager validates the price on Price List from system in form of soft copy

• FM double checks Pricing List before applying for invoicing

• If PCR is applied for Key Account, CDA is reviewed and approved in accordance with Approval Matrix

• KA Executive/Account Development Rep follows up CDA and requests Accounting for setting up in system

• IT Supervisor updates in Oracle system

• FM validates the price on Price list from system with PSP/PCR in form of soft copy o Order and Delivery process

• Cash sales for Direct Route are controlled by Territories Coordinator, Order Entry Clerk and Credit Accountant

• Territories Coordinators coordinates with Sales Coordinator to verify stock

• CR/Territories Coordinators prepares the Load requests (LR) for Routes and then sends to Accounting department

• Order Entry Clerk (OEC) summaries all LRs and prepares the General Sales Order (SO); or uses LR same as SO for each route

• Settlement is completed with cash receipt

• Dispatcher prints out DND from SOC system (outside of Oracle) based on LR

• Pick list/Delivery for Direct route is not generated in the SOC for the next day if the settlement is not completed (Credit acct approve)

The Sales Coordinator is responsible for verifying stock levels and communicating this information to the Territories Coordinators The Territories Coordinators then gather Sales Orders (SOs) from customers and submit them to the Order Entry Center (OEC), where the SOs are processed in the Oracle system This procedure was in place prior to August 2013, as illustrated in the accompanying chart.

2013, Sale man will use SOC (sale order central system) to create SO (please see SOC tool as link besides) and then,

The sales order (SO) will be saved in an Excel file and sent to the accountant for uploading to the Oracle System After the upload, it is essential to verify the status of the uploaded SO The OEC will review the unit price and promotions while selecting the appropriate warehouse, especially if the customer is loading products at a different location.

After the Oracle upgrade, the SOC tool extracts an Excel file for uploading to the Sales Order Form in the Sales module The system automatically verifies credit limits, COL, and payment terms If a Sales Order does not meet these requirements, it will be placed on hold by the Oracle system To release a held Sales Order, accountants must obtain direct approval from the FM through the Oracle system, following the new SOA guidelines.

System Oracles restricts customers with balances exceeding their credit limit and outstanding loan cases, with sales releases being contingent on current policy The Credit Accountant manually verifies and approves the release of sales orders (SO) that surpass loan cases, credit limits, or payment terms Alternatively, SOs are released upon receiving approvals as per the Statement of Account (SOA) outside the system Following this process, the accountant updates the status of the SO accordingly.

• SO is booked if obtain credit/Cases on loan conditions if not, SO is returned to Territories Coordinators

 Credit Accountant/Order Entry Clerk inform Order Listing to Dispatcher for shipping or faxes if shipped in other Location

 Dispatcher check truck & inventory available, then print out Load out Sheet (LOS) for loading

 Warehouse Keeper issue FG base on LOS

 Dispatcher issue VAT invoice after loading done by WHK & drivers and by press "shift" button in Oracle system, sales transaction had been recorded

 The entry for booking revenue and receivables is also automatically posted by system right after the invoice is printed out

• Gate Security checks LOS & Invoice/GDN/DND before release the truck outside the location

• Physical count twice a month by Gate Security

Third-party logistics manage external warehouses, utilizing a standardized procedure for accessing Oracle's system for invoicing and the Letter of Shipment (LOS) process The truck driver signs the LOS to confirm the receipt of goods during transportation, while the customer signs the invoice, which is then returned to ABC Co for collection.

Customers can settle their outstanding balances by depositing funds into ABC Co.'s account at Citibank, submitting payments at the cashier desk, or having cash submitted directly to the cashier by a customer representative Citibank then collects these payments from the cashier desk located at ABC Co.'s various locations.

▪ FM/Accounting Sup gets information from Citibank daily

▪ Accountant/IT Executive inputs receipt amount to each customer based on Citibank Report or Receipt Voucher

▪ Accountant/IT Executive matches invoice for deducting AR by 2 ways:

▪ Invoices cannot by modified by Receivable Accountant when apply cash receipt Receipts are matched to invoice properly Receipt could not be applied to the invoices which are fully paid

Since 2015, Oracle's upgrade for the TT channel has enabled automatic matching of bank statement payment transactions with customer accounts receivable invoices, processing from the oldest to the newest order However, for the MT and KA channels, ABC Co continues to utilize manual matching of payments on bank statements with invoices.

▪ Accountant/IT Executive reviews accounts to verify the amount

Daily reconciliation of bank accounts with the general ledger is essential for accurate financial reporting The GL accountant must obtain the general ledger balances and compare them with bank receipts, addressing any discrepancies before submitting the reconciliation for review by the finance department and accounting team This process is crucial for accounts receivable adjustments and month-end activities.

• AR adjustment apply when ABC want to changes AR balance for customer as result of mistake, reconciliation, and promotion (net off AR)

• CA prepares AR Adjustment form and gets approval in accordance with AR adjustment policy/SOA

• Settlement Sup/Accountant makes AR adjustment transaction in system based on approved AR Adjustment form

• Settlement Sup/Accountant selects Location (source), Adjustment type, Class: Credit memo if decrease AR and invoice if increase AR

• Settlement Sup/Accountant views account number and adjusts (if any wrong account) in distribution

• Accounting runs OM Order line or AR transaction detail to get data in system on daily basis

• FM/Accounting Sup sends volume report to Sales Department

• Accountant gets data in system and prepares the Aging report

• FM/Accounting Sup sends Aging report to Sales Department

• Accountant updates data to the system and in COL (“Cases on Loan”) report for tracking COL

• Aging report is generated directly from Oracle system at month end (use standard report called 7 bucket report)

• Financial Manager reviews generated aging reports for all customers on a monthly basis Bad debt provision is calculated accordingly

• Then, the calculation is sent to Sales Department and HO Accountant

• Accountant prepares the Confirmation letters based on AR Invoice Summary and COL tracking

• FM signs off and then HR stamps on it

• Finance sends out and receives account confirmation from customers, and investigates difference if any (Monthly for dist./quarterly for KA/MT)

Notes : Frequency to send out Confirmation letter

ABC Co stipulates that beverage distributors or agents must confirm their accounts receivable (AR) balance monthly If the distributor fails to respond, the confirmed balance will be solely recognized by ABC Co., and no additional sales will be permitted after 15 days from the confirmation date Without confirmation of the AR balance, further sales from ABC Co will not be granted.

For KA/MT/AA customers, it is mandatory to confirm their account balance at least once a year ABC Co will assess the customer's credit limit and any overdue payments during this review Sales will be restricted for all customers who have reached their credit limit.

 Twice per year: SG Coop signs off confirmation

- Sale channels: o Direct route (Cash sales) o Credit sales:

▪ TT (Traditional trade or Distributor): 85% revenue but only 30% number of customers

▪ MT (Modern Trade or Supermarket)

▪ KA (Key account) included of CDA (Customer Development Agreement) - a special agreement with some Key Accounts 4

- Credit Management o TT (Traditional trade or Distributor): Credit limit and credit term are stated clearly in contract to manage the period of receivable amount

▪ Since the nature of sale transactions are incurring daily with TT channel, hence, Receivables cannot be managed on each invoice, but by strictly a credit limit

▪ Whenever distributors request for an order, their credit limit must be below an acceptable amount, or they must have to make payment until they are below that amount

4 Key Accounts are defined as large eateries such as coffee shop, restaurants, KFC, night club and canteen…

ABC Co mandates monthly balance confirmations from customers for this channel The credit limits and terms for clients MT and KA are explicitly outlined in their contracts and are strictly enforced Receivables are managed through invoices, as the majority of these customers are companies and organizations that also handle their payables via invoicing.

▪ For this channel, ABC Co required a quarterly balance confirmation from customers on a regularly basis

Access to the system is strictly controlled, allowing only specific roles to perform certain actions Order entry clerks have the ability to view and edit sales orders, while dispatchers and warehouse keepers can only view them Only accounts receivable (AR) staff are authorized to post sales and AR from the AR module to the general ledger (GL) and manage the status of sales order releases and AR clearances Users are prohibited from modifying the aging report, and access to the pricing and discount database is restricted solely to the planning department Additionally, only IT executives have the authority to access customer master data.

- Physical controls for inventory o All shipments are checked by security guards when passing the gate They will compare the actual quantity against the Load out sheet and invoices