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Tiêu đề Audit Procedures For Inventory By PwC Vietnam At ABC Company
Tác giả Vu Thi Hong Minh
Người hướng dẫn Ms. Truong Thi Hanh Dung
Trường học University of Economics and Law
Chuyên ngành Accounting and Auditing
Thể loại Graduation Thesis
Năm xuất bản 2022
Thành phố Ho Chi Minh City
Định dạng
Số trang 96
Dung lượng 9,89 MB

Cấu trúc

  • 1. The necessity of the thesis (17)
  • 2. Thesis objectives (17)
  • 3. Thesis method (17)
  • 4. Subject and the scope of the thesis (17)
  • 5. Structure of the thesis (17)
  • 6. Limit of the thesis (18)
  • CHAPTER 1: INTRODUCTION TO PWC VIETNAM (19)
    • 1. Introduction to PwC Vietnam (19)
    • 2. Organizational Structure of PwC Vietnam (22)
  • CHAPTER 2: COMPARING VIETNAMESE ACCOUNTING STANDARD (VAS) (25)
    • 2.1. General introduction to Accounting Standard “Inventories” (25)
    • 2.2. Comparing International Accounting Standard IAS 2 and Vietnamese (25)
  • CHAPTER 3: THE AUDIT PROCEDURE FOR INVENTORY AT PWC VIETNAM (30)
    • 3.1 Financial statements audit procedure at PwC Vietnam (30)
    • 3.2 Audit procedures for inventory at PwC Vietnam (33)
      • 3.2.1 Key areas of fraud risk when auditing inventory (33)
      • 3.2.2 Illustrating Audit procedures for inventory at PwC Vietnam (34)
        • 3.2.2.1 Identify and assess risks (34)
        • 3.2.2.2 Establish material (42)
        • 3.2.2.3 Audit performed (44)
      • 3.2.3 Evaluation of audit results (77)
  • CHAPTER 4: COMMENTARY AND RECOMMENDATION (78)
    • 4.1 General commentary on PwC’s audit procedure (78)
      • 4.1.1 Advantages (78)
      • 4.1.2 Difficulties (79)
    • 4.2 Commentary on PwC’s Inventory audit procedure (79)
      • 4.2.1 Advantages (79)
      • 4.2.2 Disadvantages (80)
    • 4.3 General recommendation on PwC’s audit procedure (80)
    • 4.4 Recommendation on PwC’s Inventory audit procedure (81)

Nội dung

Chưa có sự liên hệ giữa mục tiêu kiểm toán, các thủ tục thực hiện và kết quả thực hiện lý thuyết đã trình bày nhưng còn thiếu logic ở một vài điểm.. Trình bày đầy đủ các thủ tục kiểm

The necessity of the thesis

Effective inventory management and auditing are crucial for the success of manufacturing companies and the overall economy, significantly influencing financial statement audits Given the associated risks, it is essential to focus on inventory audits to enhance audit quality and ensure accurate audit opinions This thesis will explore the "Audit Procedure for Inventory by PwC at ABC Company," highlighting the importance of proper inventory presentation.

Thesis objectives

• Describe audit procedures at PwC Vietnam

• Describe inventory audit procedures at ABC Company

• Analyzing and assessing the audit procedure for inventory at PwC Vietnam.

Thesis method

• Apply the knowledge learned in university

• Collect related data through textbooks, current accounting/auditing standards, and the internet

• Collect information from customers audited in PwC’s data

• Consult auditors in charge and instructors.

Subject and the scope of the thesis

• Subject: the process of auditing inventory in client ABC

• Scope: ABC’s financial statements for the year ended 31/12/2021 audited by PwC.

Structure of the thesis

The report will be included 4 chapters:

• Overview chapter: The necessity of the thesis, thesis objectives, report method, subject and the scope of the report

• Chapter 1: Introduction to PwC Vietnam

• Chapter 2: Comparing Vietnam Accounting Standard (VAS) and International Accounting Standard (IAS) for Inventory

• Chapter 3: The audit procedure for inventory

Limit of the thesis

To ensure confidentiality, the subject's name in this report has been altered for illustrative purposes Inventory poses significant risks in audits, and the author's limited personal experience restricts the ability to conduct comprehensive research for a convincing analysis Additionally, due to time constraints, the author has not fully experienced all stages of a financial statement audit, leading to unavoidable shortcomings.

INTRODUCTION TO PWC VIETNAM

Introduction to PwC Vietnam

PwC Vietnam, founded in 1994, operates offices in Hanoi and Ho Chi Minh City With a team of over 1,000 skilled local and expatriate professionals, PwC leverages extensive industry knowledge and resources to effectively tackle critical issues for clients across various business sectors.

Ho Chi Minh Office Ha Noi Office Address 29 Le Duan Street, Ben Nghe

Ho Chi Minh City, Vietnam

16th Floor, Keangnam Hanoi Landmark Tower, Lot E6, Cau Giay Urban Area, Me Tri Commune, Nam Tu Liem District, Hanoi, Vietnam

Table 1: Information about PwC Vietnam (source: PwC Vietnam)

• History and development of PwC Global:

The predecessor of PwC Global was founded in 1984 under the name William Cooper After 7 name changes, this business operates mainly in the business field with the name Cooper Brothers

In 1998, the tax audit industry experienced its largest merger, combining the three major firms Price, Holyland, and Waterhouse into PriceWaterHouseCoopers, commonly known as PwC, to support the expansion of its commercial operations.

• History of development of PwC Vietnam:

PwC Vietnam is a limited liability company operating under Vietnamese law and is part of a global network of PwC firms across 157 countries, employing over 276,000 professionals The firm specializes in delivering audit services, tax and legal advice, as well as high-quality financial and management consulting Each member company within the PwC network operates as an independent legal entity, bearing legal responsibility for its own operations.

In 1994, PwC appeared in Vietnam On May 30 2017, PricewaterhouseCoopers Vietnam Co., Ltd was changed to PwC (Vietnam) Co., Ltd

PwC is dedicated to building trust in society and addressing significant challenges by delivering differentiated value through a network of technology-driven innovators Their commitment spans from strategy to execution, enhancing the transparency, trust, and integrity of business practices To achieve this purpose and provide impactful support to clients, PwC adheres to five core values, starting with acting with integrity.

Speak up for what is right, especially when it feels difficult

Expect and deliver the highest quality outcomes

Make decisions and act as if personal reputations were at stake o Make a difference:

Stay informed and ask questions about the future of the world we live in

Create impact with colleagues, clients and society through actions

Respond with agility to the everchanging environment in which operating o Care:

Make the effort to understand every individual and what matters to them

Recognize the value that each person contributes

Support others to grow and work in the ways that bring out their best o Work together:

Collaborate and share relationships, ideas and knowledge beyond boundaries

Seek and integrate a diverse range of perspectives, people and ideas

Give and ask for feedback to improve ourselves and others o Reimagine the possible:

Dare to challenge the status quo and try new things

Innovate, test and learn from failure

Have an open mind to the possibilities in every idea

• Some services of PwC Vietnam:

Organizational Structure of PwC Vietnam

PwC Co., Ltd has developed a well-defined organizational chart that clearly delineates its functional departments for effective operations At the top of this structure is the General Director of the Company, as illustrated in the accompanying image.

Table 2:Organizational Structure of PwC Vietnam (source: PwC Vietnam)

• Assurance Department in Ho Chi Minh:

Table 3: Organizational structure of Assurance Department

In an audit team, the composition typically includes 1-2 Seniors and 2-3 staff members, which may consist of randomly selected Interns and Associates Interns, who join during the audit process, are assigned various tasks primarily focused on working papers related to cash, accounts receivable, accounts payable, operating expenses, and equity Additionally, they may assist Seniors in verifying accounting documents, backing up files, and ensuring the accuracy of financial statements, particularly in basic calculations such as cash footings.

Associates will work closely with customers, namely accountants, chief accountants, and departments such as sales, purchasing, warehouse, and human resources to carry out audit procedures

Seniors will lead an audit team comprising Interns and Staff, overseeing all aspects of financial statements They are responsible for guiding and reviewing the work of their team members, directly reporting to the Manager or Senior Manager Additionally, they will explain the procedures conducted during the audit and collaborate with clients to ensure the audit work is thorough and compliant.

This section offers expert tax advice to clients, helping them establish an efficient tax strategy while ensuring compliance with current legal regulations Additionally, it provides support to various departments on tax-related issues, including tax counseling and assessment.

Like the other departments in the organization, the Legal department advises customers on Labor law, Investment legislation, Securities law, and other regulations and laws

Perform staff recruiting, assessment, event organization, and timekeeping in the firm

The accounting department is responsible for documenting financial transactions and transferring this data into financial statements to evaluate profit and loss during specific operational periods Additionally, it plays a crucial role in revenue and expense planning, collaborating with other departments to align with the company’s overall strategic objectives.

Interns will be in charge of low risky operations such as cash, bank deposits, operating expenses, receivables from customers, payables to sellers, equity…

COMPARING VIETNAMESE ACCOUNTING STANDARD (VAS)

General introduction to Accounting Standard “Inventories”

Accounting standards are regulations and guidelines on accounting principles and methods that form the basis for accounting records and financial statements

Standard "Inventories" were established to outline the principles and methods for inventory accounting, ensuring that financial statements accurately and reasonably represent the accounts.

International Accounting Standard No 2 (IAS 2), which focuses on "Inventories," was established and published in 1975 In Vietnam, the Ministry of Finance has developed the Accounting Standard for "Inventories" (VAS) by adapting international standards to align with the country's specific conditions.

Comparing International Accounting Standard IAS 2 and Vietnamese

This article compares VAS 02 and IAS 2 by examining key aspects such as the definition of inventory, inventory costs, the purpose of inventory, net realizable value and impairment, provisions, cost methods, accounting methods, calculations, and presentation.

- Goods for sale such as: Goods purchased by an agent for sale or land and other property held for sale

- Finished goods in stock or work in progress

- Raw materials, materials, tools and supplies in stock for production, business or service provision

VAS does not refer to the case where inventories including land and other assets are held for sale (according to IAS 2.10 and VAS 02.3)

- Cost of inventory includes: purchasing, processing and other directly attributable costs incurred to bring the inventory to an effective location and condition (IAS 2.10 and VAS 02.3)

The total cost of acquiring inventory encompasses the purchase price, non-refundable taxes, transportation costs, handling fees, and storage expenses incurred during the purchase, along with any direct costs associated with acquiring the inventory It is important to note that trade discounts and rebates for items that do not meet quality standards are subtracted from the overall purchasing costs (IAS 2.11, VAS 02.6).

- Processing costs: Inventory processing costs include costs that are directly related to manufactured products, such as direct labor costs, fixed manufacturing overhead, and

According to IAS 2, borrowing costs may be included in inventory valuation as per IAS 23 When inventory is purchased using deferred payment, any excess cost over normal debt terms is recorded as a financial expense during the deferred payment period In contrast, VAS 02 does not address this issue.

According to IAS 2, the allocation of variable costs to finished goods includes the amortization of machinery based on its realizable value, which is an approximation In contrast, VAS 02 stipulates that this amortization should be allocated according to the actual variable manufacturing overhead associated with the production process, reflecting changes that occur when converting raw materials into finished products.

Fixed production overheads are indirect costs that remain constant regardless of the volume of products manufactured These include expenses such as depreciation on machinery, maintenance costs for factory equipment, and administrative fees associated with production facilities.

Variable manufacturing overhead refers to indirect production costs that fluctuate in direct relation to the quantity of output produced These costs include expenses such as raw materials, indirect materials, and indirect labor.

- Finished goods in stock or work in progress

- Raw materials, materials, tools and supplies in stock for the production process

Under IAS 2, inventories of agricultural products, minerals, and those held by commercial brokers are excluded from its scope, as detailed in IAS 41 Additionally, VAS 02 does not provide specific regulations that would render these inventories inapplicable.

4 Net realizable value and impairment

The IAS and VAS guidelines require that the net realizable value of inventories be assessed at cost This value represents the estimated selling price of the inventories once they are produced.

Where the net realizable value is lower (or higher) than the original:

Under IAS 2, inventories are measured at net realizable value, which is determined by taking the estimated selling price during the production or business period and subtracting the estimated costs to complete the products and the costs necessary for their sale This estimate must be based on reliable evidence available at the time of assessment.

When the net realizable value of inventories falls below their original cost, it is essential to create a provision for inventory devaluation This provision is calculated as the difference between the inventory's cost and its net realizable value.

According to IAS, provisions primarily relate to inventories intended for sale Inventories utilized in production are only recognized when the market demand for finished products declines The valuation for finished goods is determined by the difference between their realizable value and book value, while for production inventories, it is based on the difference between replacement cost and book price.

According to VAS, inventory encompasses all materials, products, and goods on hand, highlighting the distinction between the book price and the actual buying or selling price It is essential to maintain these values to ensure the business does not incur losses.

According to IAS 2 and VAS 02, the methods of inventory valuation are as follows: First-in, first-out (FIFO), Weighted Average

The last-in, first-out (LIFO) method is now no longer used under IAS 02 But still used under VAS 02.13

- The accounting policies used in the valuation of inventories, including the inventory valuation method

- The original cost of the total inventory and the original cost of each type of inventory are classified in accordance with the business

- Provision for devaluation of inventory

- Reversal value of provision for devaluation of inventory

- Circumstances or events leading to the making or reversal of provision for devaluation of inventories

- Carrying value of inventory (Original cost – provision for devaluation of inventory) used as collateral or security for payables

Regulations for enterprises applying LIFO method (last in, first out):

- According to IAS: no longer applicable

Financial statements must accurately reflect the discrepancy between the inventory value shown on the balance sheet and the ending inventory value calculated using methods such as First In First Out (FIFO), Weighted Average Costing, Last In First Out (LIFO), or the current price as of the financial statement date Furthermore, the presentation of inventory costs on the balance sheet should be categorized by function to ensure clarity and compliance with VAS regulations.

Table 4:Comparing International Accounting Standard IAS 2 and Vietnamese Accounting

PwC’s responsibility is to express an opinion on the financial statement based on their audit They conducted their audit in accordance with Vietnam Accounting Standard and

PwC's auditors apply International Accounting Standards to their audit engagements, effectively addressing differences in language and procedures to express their opinions on the financial statements.

THE AUDIT PROCEDURE FOR INVENTORY AT PWC VIETNAM

Financial statements audit procedure at PwC Vietnam

Overall, the audit procedure can be summarized in stages: Planning; Risk assessment; Audit Strategy and plan; Gathering evidence, and Finalisation

Table 5:Financial statements audit procedure at PwC Vietnam

Initial planning activities for an audit involve formally accepting the client, ensuring compliance with independence requirements, assembling the audit team, and conducting procedures to establish the nature, timing, and extent of the audit activities necessary for an effective audit.

Auditors leverage their extensive knowledge of the business environment and industry dynamics to identify and assess risks that may result in material misstatements in financial statements These risks often involve significant judgment and necessitate the auditor's expertise, particularly in large and complex engagements A deep understanding of the business and associated risks, typically acquired through years of experience in an audit firm, is essential Additionally, auditors must remain highly aware of industry trends and developments to effectively navigate these challenges.

Manager/ Senior broader information about the environment in which the company operates, addition with its competitors, customers, suppliers if relevant

After assessing the risks of material misstatement in the financial statements, the auditor formulates a comprehensive strategy and detailed plan to mitigate these risks This plan encompasses designing approaches for various financial statement items, determining reliance on the company's internal controls, and establishing a timetable along with task assignments for the audit team The audit strategy and plan are continuously re-evaluated and adjusted in response to new information about the business and its environment throughout the audit process.

Auditors exercise skepticism and judgment while gathering and assessing evidence by testing the company's internal controls, tracing financial statement amounts to supporting documents, and obtaining third-party confirmations This process includes documenting management's representations and the assumptions used in preparing financial statements Additionally, independence confirmations can be sought for certain account balances, such as cash.

In the finalization stage, auditors utilize their professional judgment to reach an overall conclusion based on the tests conducted, evidence gathered, and additional work performed This conclusion serves as the foundation for the audit opinion, reflecting the auditors' interactions with the company throughout the process.

Engagement Team during all the phases of the audit process listed above

Ongoing discussions and meetings will take place with management at both operational and senior executive levels, as well as with governance officials Auditors will apply their professional skepticism and judgment to critically evaluate management's claims concerning the figures and disclosures presented in the financial statements.

As businesses grow more complex and labor costs increase, the adoption of automated systems and procedures has surged Effective companies implement robust systems and controls to enhance operational efficiency, safeguard assets, and ensure accurate financial reporting Auditors assess the effectiveness of these controls to mitigate the risk of material misstatements, adjusting their testing approach based on the controls' reliability If auditors confirm that these controls are effective and consistently operational throughout the year, they may reduce the level of substantive testing required.

Effective evaluation and testing of controls throughout the year can reduce the amount of substantive audit evidence needed for forming an opinion However, regardless of the reliability of these controls, some level of substantive audit evidence will always be necessary.

Audit procedures for inventory at PwC Vietnam

3.2.1 Key areas of fraud risk when auditing inventory:

The major risks of the inventory balances in the financial statements being misstated are due to:

Inventory that actually belongs to third parties being included in the financial statements

Inventory that does not exist being included in the financial statements E – Existence

Not all inventory that exists being included in the financial statements C – Completeness

Inventory being included in the financial statements at full value when it is obsolete or damaged V – Valuation

Incorrect inventory valuation in financial statements can arise from miscalculating costs or using cost figures when the net realizable value is lower This discrepancy can significantly impact the accuracy of financial reporting and decision-making.

Inventory which has actually been sold is included in the financial statements CO – Cut off

Table 6:Key areas of fraud risk when auditing inventory

Auditors must recognize potential risks to implement initial configurations that reduce errors and risks during an audit, ensuring a neutral and realistic opinion on the enterprise's financial statements.

3.2.2 Illustrating Audit procedures for inventory at PwC Vietnam:

The auditor evaluates the risks of material misstatement by gaining a comprehensive understanding of ABC Company, including its business nature, operational environment, and the specific risks it encounters.

ABC Limited is a key player in the non-paper packaging food and beverage industry, specializing in the production of aluminum cans sold directly to food and beverage companies The beverage can, known for its iconic design and the globally recognized "Pschittt" sound upon opening, offers numerous benefits that often go unnoticed despite its widespread popularity.

• The company was set up in 2008 and was acquired by Group in June 2009 The company started commercial operation in October 2009

Pursuant to Investment Licence, the business of the company is to manufacture packages for foods and beverages

• Legal capital: increase to 23 Mil USD (426,512 Mil VND)

• Production scale: 1.2 Bill items/year

• Fiscal year: from 1 January to 31 December

• Registered investment capital: 64 Mil USD (1,186,816 Mil VND)

The Group's accounting principles are outlined in the Accounting Manual, which adheres to the Group reporting package, Vietnamese Accounting Standards, and the Vietnamese Accounting System, ensuring compliance with local statutory regulations in Vietnam.

Revenue from goods sales 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 potential returns of goods, no revenue is recognized.

• No fair value was used for this client

The financial statements have been prepared in compliance with Vietnamese Accounting Standards and the Vietnamese Corporate Accounting System, following applicable regulations for their preparation and presentation They are based on the historical cost convention.

The financial statements provided are not designed to reflect the financial position, operational results, or cash flows in accordance with accounting principles accepted outside of Vietnam It's important to note that the accounting principles and practices used in Vietnam may differ significantly from those recognized in other countries and jurisdictions.

The official statutory financial statements of the Company are presented in Vietnamese, while the English version is a translation of the original Vietnamese documents.

The financial statements are presented in United States Dollars (USD), which serves as the Company's accounting currency This determination is based on the currency primarily utilized in sales, significantly influencing selling prices, as well as in purchases of goods and services, impacting labor, materials, and other production costs Additionally, the currency commonly used for payment of these costs is also considered.

In addition, the Company also uses this currency to raise financial resources

Transactions in foreign currencies are translated at an exchange rate that closely reflects the average transfer rates used by commercial banks with which the Company regularly engages The Company maintains a limit on the exchange rate disparity to within +/- 1% of the average transfer rate, ensuring that it does not materially affect its financial position or operational results throughout the fiscal year This average transfer exchange rate is calculated monthly, based on the average of daily buying and selling transfer rates from commercial banks Any foreign exchange differences resulting from these translations are recorded in the income statement.

Inventories are recorded at the lower of cost or net realizable value, with cost determined using the weighted average method This cost encompasses all purchase costs, conversion expenses, and additional costs necessary to prepare the inventories for sale For manufactured goods, it includes direct expenditures and production overheads at standard operating levels Net realizable value represents the expected selling price during regular business operations, minus estimated completion and selling costs.

The Company applies the perpetual system for inventories

Provisions are established for obsolete, slow-moving, and defective inventory items when necessary, with any variance from the previous period's provision impacting the cost of goods sold for the year Additionally, it is crucial to understand and evaluate the internal control system associated with inventory management.

Understanding the internal control system and assessing control risk are vital components of the audit process By evaluating the strengths and weaknesses of the internal control system, auditors can identify areas that require more in-depth examination, ultimately streamlining the audit timeline while meeting objectives This assessment enables auditors to better visualize their workload and effectively plan the direction, scope, procedures, expected timeframes, and personnel needed for the audit.

At PwC, we integrate a comprehensive assessment of the entity's internal control system with customer interviews to understand their accounting and evaluation methods, rather than conducting a separate inventory assessment In Vietnam, the majority of enterprises are small to medium-sized, with only a few large organizations, such as banks and corporations, possessing robust internal control systems Consequently, PwC auditors do not rely solely on control test results; they also conduct substantive tests During these substantive tests, auditors utilize evidence from control tests to enhance and validate the internal control system's effectiveness.

COMMENTARY AND RECOMMENDATION

General commentary on PwC’s audit procedure

PwC Vietnam, as part of the global PwC network, adheres to international standards and policies, ensuring that its audit quality meets both Vietnamese and global benchmarks In contrast, domestic auditing firms must develop their own standards, which may not align with international practices This commitment to global compliance distinguishes PwC Vietnam from local competitors.

PwC leverages its unique audit policies, procedures, and methodologies, developed by highly qualified professionals, to implement a comprehensive and detailed audit program This meticulous approach sets PwC apart, especially in a landscape where many domestic auditing firms struggle due to a lack of specific guidance from the Ministry of Finance.

The global network of PwC facilitates a highly respected training program and peer review system among its members, ensuring consistent audit quality across all regions This uniformity in standards provides PwC with a significant advantage that domestic companies cannot replicate.

All staff at PwC undergo a rigorous recruitment process that mandates professional qualifications and proficiency in languages such as English and Chinese With a people-centric development strategy, PwC prioritizes creating optimal conditions for employee growth The company regularly offers training courses for new hires and supports staff in pursuing ACCA and CPA certifications, ensuring they possess the expertise and knowledge necessary to deliver exceptional value to clients.

In an audit, responsibility is clearly defined, with audit assistants conducting evaluations of operational components, while auditors review their work to quickly identify any deficiencies or necessary additions.

Before the year-end audit, PwC conducts a mid-year audit known as the interim around September This interim audit plays a crucial role in the final audit process, providing a comprehensive overview of their clients' systems Consequently, it enables PwC to establish a more precise basis for determining materiality.

The growing customer base is outpacing the unstable staffing levels, particularly the shortage of experienced auditors, as many transition to less stressful professions This imbalance results in heightened time constraints and work pressure, ultimately compromising the quality of audits and the professional judgment of auditors.

The review of audit files and the signing of working papers are typically conducted by senior associates and then scrutinized by higher-level personnel, such as managers and partners However, due to excessive workloads, this review often occurs long after the client's audit is completed If issues arise during this review, an audit team is assigned to address them, leading to significant time and financial waste, as well as disruptions for the client This complexity can result in the oversight of critical issues that should be addressed according to proper procedures, ultimately compromising the quality of the audit, especially before the year-end audit of the company's financials.

The interim audit is crucial for the year-end audit, yet it is often underestimated by audit assistants, and the principal auditor's reviews tend to lack thoroughness Additionally, the ineffective personnel arrangement results in different individuals handling the interim and year-end audits This disconnect poses challenges during the final audit, as the absence of interim staff complicates the process for final auditors and forces clients to duplicate efforts by resubmitting documents requested by the audit team.

Commentary on PwC’s Inventory audit procedure

The inventory section of an audit presents significant challenges, necessitating that auditors assigned to this area possess extensive experience and professional knowledge Senior auditors play a crucial role in this process, providing timely support to audit assistants to ensure effective testing and evaluation of inventory.

PwC has developed a comprehensive inventory audit process that aligns with both Vietnam Accounting Standards and International Accounting Standards Given the susceptibility of inventory to fraud, embezzlement, and theft, this area is particularly challenging Therefore, all audit assistants undergo thorough training to ensure the highest quality in this critical aspect of auditing.

Inventory plays a crucial role in financial statements, leading auditors to dedicate significant time to its evaluation However, due to time constraints and the need to complete all audit procedures, many methods used to assess inventory may prove ineffective.

Inventories vary significantly across different industries, making it challenging to implement a tailored audit process for each enterprise The effectiveness of audits largely depends on the auditor's experience and understanding of specific business sectors Inexperienced auditors may apply standardized testing methods that do not align with the unique characteristics of the audit firm, resulting in inefficient analyses that fail to meet audit objectives.

Auditors typically prioritize substantive procedures over control testing, leading to an increased volume of substantive testing due to the absence of control assessments This shift results in a more time-consuming implementation process for the audit.

General recommendation on PwC’s audit procedure

PwC is facing significant challenges due to excessive workloads placed on auditors and associates, leading to heightened pressure during the audit season This overwhelming demand can result in inefficiencies and may drive auditors to consider leaving the profession To address this issue, it is essential for PwC to implement strategies not only focused on training and coaching employees but also on retaining experienced staff and attracting new talent to enhance overall performance and job satisfaction.

To enhance audit efficiency and minimize time wastage, it is crucial to implement a more strategic personnel allocation policy I recommend that the company assigns individuals who participated in the interim audit or last year's audit to oversee the year-end audit This continuity not only streamlines the process but also leverages their prior knowledge and experience for improved outcomes.

Recommendation on PwC’s Inventory audit procedure

During the inventory audit at ABC, despite the main auditor's dedicated assistance and thorough adherence to the established procedures, the writer suggests incorporating additional recommendations for improvement.

PwC should develop tailored inventory audit processes for various business types, including manufacturing, trading, construction, and services, to eliminate unnecessary procedures specific to each sector This optimization will reduce errors made by inexperienced auditors and ensure that audits align with the unique needs of each business type Additionally, PwC must create detailed guidelines for businesses with specialized processes, such as construction firms, focusing on revenue recognition based on completion progress These guidelines should cover methods for progress assessment, cost recognition, and procedures for verifying the completeness and appropriateness of these processes, potentially incorporating expert opinions for enhanced accuracy.

When selecting test samples, it's crucial to note that the chosen samples represent 80% of the total balance However, due to time constraints, auditors often only conduct a preliminary examination of a few samples with balance and apply those findings to the rest It is advisable to thoroughly check all selected samples, as even small balances can accumulate to a significant total.

Vietnam's robust economic growth has significantly advanced the audit industry, with PwC Vietnam enhancing its quality and solidifying its market reputation.

During my internship at PwC, I gained valuable insights into the company's history, organizational structure, core business sectors, and marketing strategies My exposure to the auditing process allowed me to join the audit team, where I completed essential audit procedures and acquired critical information and soft skills from experienced team members This experience has provided me with a valuable foundation to prepare for my future career.

During the internship at PwC, the author developed a comprehensive understanding of the inventory auditing process within financial statements This experience allowed for a practical comparison between the theoretical knowledge acquired in university and real-world applications observed during audits of client companies, as well as insights gained from the audit practices of other major firms.

Once again, I would like to sincerely thank Ms Truong Thi Hanh Dung and my colleagues at PwC Vietnam during the past internship period, for their enthusiastic help and guidance

1 Ministry of Finance, Vietnam Auditing Standards System, Finance Publishing House, Hanoi

2 Ministry of Finance (2014), Circular No.200/2014/TT-BTC, Guidance on corporate accounting regime, Hanoi

3 The Institute of Chartered Accountants in England and Wales (2021) Management Information London: United Kingdom

7 Website: knowledge.sapp.edu.vn

8 Ho Chi Minh City National University - Department of accounting and auditing

(2008), Thực hành kiểm toán, Vietnam National University Publishing House, HCMC

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