Trình bày tương đối đầy đủ các thủ tục kiểm toán, có sự liên hệ với mục tiêu kiểm toán và các nội dung lý thuyết đã trình bày nhưng còn thiếu logic ở một vài điểm.. Trình bày đầy đủ các
OVERVIEW ABOUT DFK VIETNAM AUDITING COMPANY
Overview of DFK Auditing Vietnam Company Limited
1.1.1 The process development of DFK auditing company
DFK International Auditing Group, a multinational company based in London, UK, boasts over 10,000 professionals and offers consulting and audit services across 84 countries Established on April 9, 2003, DFK Vietnam Auditing Company Limited is an independent member of this global network, operating with a charter capital of 6 billion VND.
DFK Vietnam Auditing Company Limited was established on April 9, 2003, is an independent member of DFK International Auditing Group in Vietnam With a charter capital of 6 billion
Prior to September 17, 2010, the company operated under the name CA&A Auditing and Consulting Company Limited On September 8, 2010, it officially rebranded to DFK Vietnam Auditing Company Limited, as documented in the 9th amendment to its Business Registration Certificate (Number 0302909063) issued by the Department of Planning and Investment of Ho Chi Minh City.
Since 2007, DFK Vietnam has been licensed by the State Securities Commission of Vietnam to offer audit services to securities issuers, listers, and traders Additionally, the firm has been chosen as a supporting audit partner to assist the Ministry of Finance in the study and update of Vietnamese audit standards.
DFK Vietnam boasts a team of over 100 specialists, comprising both Vietnamese and international professionals, operating from offices in Ho Chi Minh City and Hanoi Our staff members are highly qualified, holding degrees from reputable universities and possessing extensive experience with leading audit firms such as KPMG, Arthur Andersen, and Ernst & Young Key personnel have received training from esteemed institutions, including Swinburne University (Australia), Bradford University (UK), University of Utah (USA), and University of Rotterdam (Netherlands), as well as recognized professional organizations like ACCA.
- DFK Vietnam provides professional quality services according to international standards: participating in, organizing international training programs, expanding services abroad and many other attached conditions
DFK's head office is located in London, UK
- The company's headquarters in Vietnam:
+ Head office at 45 Bach Dang Street, Ward 2, Tan Binh District, Ho Chi Minh City
+ Hanoi Branch at 01 Nguyen Huy Tuong Street, Thanh Xuan Trung Ward, Thanh Xuan District, Hanoi
+ Binh Duong branch at 127 Huynh Van Lu, Thu Dau Mot, Binh Duong
1.1.2 Principles, operational objectives and development orientation of the company
DFK Vietnam is dedicated to delivering high-quality services across all client interactions, consistently upholding the principles of objective independence and confidentiality in line with Vietnamese auditing standards and internationally recognized practices The company prioritizes ethical standards, service quality, and its reputation, ensuring that every employee adheres to these core values.
DFK Vietnam is dedicated to delivering high-quality professional audit and consulting services in Vietnam Leveraging its extensive experience, the company focuses on offering practical solutions that assist clients in effectively establishing, implementing, and managing their businesses By understanding each client's unique requirements, DFK Vietnam aims to provide tailored service delivery solutions that maximize cost savings and enhance value, ultimately supporting clients in seizing development opportunities.
To enhance revenue and market share while bolstering the company's reputation, we focus on selectively serving clients and implementing strategies to stabilize our client base Our commitment to improving service quality is matched by our dedication to the continuous training and development of high-quality staff.
- DFK Vietnam's financial statements audit service has been recognized by the Ministry of Finance to be qualified to audit financial statements since 2003, including:
+ Auditing according to pre-agreed procedures
- With a team of auditors and technical experts with many years of experience in providing basic construction audit services, the Company provides clients with services including:
+ Basic construction auditing and settlement
+ Consult to complete basic construction finalization documents
+ Consultancy and supervision of basic construction works
Our experienced team of tax consultants offers comprehensive tax management services, ensuring compliance with the latest policy changes while effectively minimizing tax costs for our clients.
+ Assessment of tax obligations compliance
+ Advice on compliance with tax obligations
+ Support clients with tax finalization
+ Regularly consulting about tax issues
- DFK Vietnam assists clients in performing accounting tasks in accordance with current regulations and provides timely financial information for corporate governance requirements, services include:
+ Update accounting books and prepare periodic financial statements according to regulations
+ Update financial information about corporate governance
+ Make periodic tax reports according to regulations
+ Review accounting books and reports
+ Setting up the accounting system
- DFK Vietnam is providing consulting services to support most Vietnamese companies currently listed on the US stock market, including:
+ Establishment of business activities in foreign countries
+ Advisory services for Vietnamese businesses listed on foreign stock markets
- DFK Vietnam provides on-demand training services on the Vietnamese accounting standards system and international accounting standards, updating tax policies related to corporate operations, including:
+ Training procedures at the end of the accounting period
+ Training in making financial reports according to international standards + Convert financial statements to other recognized accounting principles
- DFK Vietnam provides enterprise valuation services in accordance with Decree
No 109/2007 / Government Decree dated June 26, 2007 of the Government on transforming 100% state-owned enterprises into joint stock companies Part includes:
+ Set up internal control system
1.1.4.1 Organizational structure of the management apparatus
DFK, as the head of the company, is responsible for overseeing its operations in compliance with state laws, signing audit reports, managing transactions, and executing contracts with clients.
- The Deputy Director is responsible for directing management and operation of all departments of the company, and is responsible for planning operational development policies in accordance with the law
- Professional audit department: human resource structure includes audit head, auditors and audit assistants, responsible for the auditing services of the financial statements provided by the company
The Basic Construction Auditing Department is structured with a dedicated audit manager who also serves as a construction engineer, supported by assistants This team is responsible for conducting audit services on completed basic construction projects and facilitating discussions regarding project delivery.
The Accounting Department is structured with a head and administrative staff responsible for researching and disseminating the latest circulars and decisions from the Government and the Ministry of Finance This department plays a crucial role in monitoring and controlling the company's financial activities and business performance over time Additionally, it is tasked with maintaining and storing audited client records and managing the company's human resources effectively.
- Consulting Department: includes the chief consultant, the consultant, is responsible for providing consulting services to clients
1.1.4.2 Internal and inter-room relationship
Effective internal relations within the department are essential for success Team members should adhere to the direct guidance of the department head and maintain close collaboration with other departments By optimizing all internal resources, staff can ensure that work is completed on time while meeting both volume and quality standards.
Departments must adhere to corporate policies and relevant regulations while fostering active communication and collaboration It is essential for departments to engage directly with one another when addressing tasks, ensuring that all relevant parties are involved in the problem-solving process Additionally, when consulted or asked for support, departments are responsible for fulfilling these requests and maintaining progress in alignment with their designated functions and duties.
1.1.5 Some achievements of the company
DFK Vietnam adopts a client-centered approach, focusing on gathering information and understanding each client's unique needs This enables the company to develop tailored service delivery solutions that not only reduce costs but also enhance the value provided to clients.
DFK Vietnam is widely recognized for its capacity and professionalism among local businesses, socio-economic organizations, and foreign-invested enterprises This reputation has established credibility and prestige with over 300 existing clients, driving the company to continuously enhance the quality of its client services.
General auditing auditing procedure at DFK Vietnam audit company
Table 2 General audit process at DFK auditing company limited
- Members of the Board of Directors or authorized Chiefs of Operations are responsible for approaching clients through direct surveys at the client's office wishing to perform services
When a unit has a predecessor auditor, the current auditor reaches out to gather valuable insights from them, but must adhere to confidentiality principles, requiring the entity's official consent to discuss any matters Auditors should exercise caution if the client is unwilling to allow contact with the predecessor, as this may indicate significant disagreements between the two parties.
To effectively assess clients, auditors must gather essential information, including a general overview of the client, an initial evaluation of their financial position and business performance, as well as the purpose, scope, and specific requirements of the services to be rendered.
- All information is detailed notes and presented in the working paper "Accepting new clients and assessing contract risks"
After completing the annual audit, the auditor must update client information to assess whether to continue providing auditing services or to terminate the relationship Additionally, this process helps determine if any changes to the audit contract are necessary.
- Auditors need to make detailed notes and present information in the working paper "Accepting, maintaining familiar clients and assessing contract risks"
1.2.1.2 Offer letter (or quote letter) to the client
- On the basis of a survey, a member of the Board of Directors will consider, consider and write a proposal to the client
When drafting a request letter to a client, it is essential to include several key elements: a clear understanding of the client's needs, the purpose and requirements of their request, details on how the company plans to implement specific services, an introduction to the key personnel involved in the service delivery, proposed service charges, and an estimated timeline for execution and completion.
A proposal letter to clients can be sent via fax, email, postal service, or delivered in person, and it must include the authorized seal and signatures of the Board of Directors' members to ensure its validity.
- After sending mail, members in charge must follow up regularly by contacting clients to get feedback on information
- A member of the Board of Directors will draft a contract to send the draft and then send it officially to the client
- The signing of the contract will be performed by the Director or an authorized Deputy Director
The drafted contract must adhere to current state regulations and relevant standards, ensuring that it accurately reflects legal commitments and agreements between the Company and the client, as outlined in the "Audit Contract" working paper.
- A member of the Board of Directors or authorized Chiefs of Operations are responsible for planning the service and sending it to clients
Following the reorganization of personnel within the department, the Chief of the Drafting Department prepares the "Assignment of Audit Team Tasks" and the "Commitment to the Independence of Audit Team Members" for submission to the Board of Directors for approval.
- The staff assigned to prepare the audit documents, relevant references for the service implementation
- Team leader performs paper drafting service "List of documents to be provided by clients" and sends to clients to save time and perform services quickly
1.2.2.1 Performing audits directly at clients
- Auditors and assistants assigned to perform the audit are responsible for performing work at the client's office
- The task of this personnel is to collect sufficient and appropriate evidence, to perform the work according to the audit plan outlined
Every employee in a team is responsible for completing their assigned tasks first, and then supporting their colleagues to ensure the overall success of the group’s objectives.
1.2.2.2 Complete working papers at the Company
- After working directly with the client, the entire audit team is responsible for completing working papers at the Company, arranging, and keeping in the audit file
- The team leader, after checking and reviewing the audit dossier, is responsible for drafting the working paper "Adjusted and reclassified entries" and the working paper
"The unadjusted entries" and submitting it to the head of the department approval After that, the team leader will exchange these entries with the client
1.2.3 Completion phase of the audit
Before drafting an audit report on financial statements, the team leader must thoroughly assess assets, contingent liabilities, and commitments It's essential to evaluate events that transpired after the balance sheet date, ensure the assumption of going concern, and consider any changes in accounting policies, estimates, and errors.
Prior to releasing the official audit report, the team leader compiles the working paper titled "Synthesize the Audit Results" along with the document "Issues to be Resolved Before Issuing the Audit Report" for submission to the Board for approval.
- Members of the Board of Directors are in charge of reviewing all audit dossiers, reviewing and settling, agreeing on audit opinions, signing and approving the draft audit report
- After the Board of Directors approves the issue of the audit report and Management Letter, the auditor issues the official audit report and sends it to the client
Personnel designated by the group leader or higher must engage in discussions and document essential client-related matters for the upcoming audit period, ensuring these issues are noted in the current audit year's records This process facilitates a focused, swift, and efficient approach to managing client-related concerns for the next audit cycle.
INVENTORY AUDIT PROCESS OF AUDITING FIRM DFK
Theoretical basis
- Regulations of inventory accounting are accounting standard No 2 (VAS 02) and Circular letter 200/2014 dated December 22, 2014
This Standard outlines the definition of inventories, the determination of inventory costs, and the methods for calculating their value It also addresses the establishment of provisions, recognition of expenses, and the presentation of inventories in financial statements.
- According to Vietnamese accounting standards, inventories are assets:
+ Held for sale during the normal production or business period
+ Selling in the process of unfinished production and business
+ Raw materials, materials, tools, tools for use in the process manufacturing, trading or providing services
The inventory of goods for sale includes items currently in stock, those in transit, products dispatched for sale, goods sent for processing, finished products held in inventory, and completed items that have been sent out for sale.
+ Unfinished products: Unfinished products and finished products have not finished product warehouse procedures
+ Raw materials, materials, tools, tools in stock, dispatched for processing, and purchased are on the way
+ Cost of services in progress
Inventories represent a substantial portion of a company's short-term assets, both in volume and value Consequently, any errors in inventory management can significantly impact the accuracy and reliability of financial statements.
- Inventory is an item sensitive to fraud such as embezzlement, theft and carries many risks, loss, damage, loss, obsolete, error-prone when conducting the physical inspection
- There is a direct and close relationship between inventory and cost of goods sold Because of this relationship, errors related to inventory will affect cost of goods sold
- Inventory accounting standards have many costing methods, so there is a risk that: Units apply inconsistent inventory accounting methods, adjust inventory values and business results as desired
Inventory serves as a crucial intermediary in converting an entity's resources into tangible business outcomes Specifically, specialized inventory is intricately linked to the sales-collection cycle and the purchase-payment cycle.
Large-scale production units that engage in the manufacturing and trading of multiple items often face significant challenges due to their extensive circulating inventory With a wide variety of inventory types stored across various locations, monitoring and tracking inventory-related documents and data flow can become complex and cumbersome.
2.1.1.3 Determine the original cost of inventories
According to accounting standard No 2 (VAS 02) on "Inventory," inventory accounting must adhere to the historical cost principle In cases where the net realizable value is less than the original cost, the net realizable value should be assessed.
- Net realizable value is the estimated selling price of inventories in a normal business period minus the estimated costs to complete the products and the estimated costs of consuming them
Acquisition costs encompass all expenses directly associated with purchasing inventory, including the purchase price, non-refundable taxes, transportation, handling, and related fees, while trade and purchase discounts are subtracted from these costs Conversely, conversion costs refer to the expenses incurred in manufacturing products, which include direct labor, fixed overheads, and variable production overheads that arise during the transformation of raw materials into finished goods.
Effective inventory accounting requires meticulous tracking of both the value and type of each item, categorized by management and usage location It is essential to maintain alignment between actual inventory and accounting records, ensuring consistency in both value and physical inventory.
2.1.2 Provision for devaluation of inventories
The provision for inventory devaluation is an advance estimate that accounts for the reduction in value of inventories below their original cost, impacting the cost of goods sold This provision aims to offset actual losses incurred from the devaluation of raw materials, tools, and supplies held in stock.
To accurately represent the net realizable value of inventories in year-end financial statements, it is essential to establish an allowance reflected in account 159, "Allowance for Inventories." This account adjusts the actual inventory value, ensuring a true depiction of the company's financial position.
The allowance for inventory devaluation is determined by the difference between the inventory cost and its net realizable value This provision is established at the end of the accounting year, before preparing the annual financial statements It is essential that the provision adheres to the current regulations of the corporate finance framework.
2.1.3 Inventory Item with Audit Issue
An inventory audit involves the systematic verification of inventory's operational status through technical methods conducted by qualified auditors This process aims to gather sufficient valid evidence regarding various assertions of inventory, ensuring compliance with an effective legal framework.
Inventory audits play a crucial role in the overall auditing of financial statements, serving both the audited enterprises and the auditing units These audits significantly influence the balance sheet and business results, impacting the company's financial health and sustainable development Properly executed inventory audit procedures are essential for ensuring accurate financial reporting and long-term success.
- Ensure that all securities recorded on the ledger are present at the balance sheet date
- Ensure that all stocks at the balance sheet date are correctly recorded in the ledger
- Ensure Inventory is evaluated accurately, consistently and in accordance with the unit's accounting policy Inventory purchased in foreign currency is converted at the appropriate exchange rate
- Allowance has been made to provide sufficient provision for discounts for damaged, outdated or delayed chains
It is essential for the entity to confirm ownership or legal rights to the inventory, which must be accurately reflected in the ledger as of the balance sheet date Additionally, all unrestricted rights, titles, or guaranteed interests should be clearly identified, while any restrictions or limitations on use rights and titles must be disclosed in the financial statements.
- Ensure all necessary disclosures related to securities market are accurately prepared and these information are presented and described appropriately in the financial statements.
Inventory audit process at DFK Viet Nam auditing company
Table 3 Inventory audit process at DFK Viet Nam auditing company
2.2.1 Evaluation of the internal control system for Inventories
The assessment of the internal control system and control risk is crucial for the audit process at DFK auditing company By evaluating the strengths and weaknesses of the internal controls, auditors can effectively tailor their approach, focusing on critical areas while ensuring that audit objectives are met This comprehensive evaluation allows auditors to better visualize their workload, define the direction and scope of testing, and design appropriate procedures, ultimately optimizing the time and personnel needed for the audit.
Understanding the internal control system is crucial for the audit process; however, most enterprises are small to medium-sized, which often leads to changes in operating policies and the control environment Consequently, the assessment of the internal control system primarily occurs during the client inquiry phase, with the annual audit serving mainly to document any changes made to the internal control system.
DFK does not specifically assess the audit system for inventory items; instead, it integrates the overall evaluation of the unit's internal control system with client interviews and an examination of accounting practices, journal entries, and inventory assessments.
In Vietnam, the business landscape is predominantly composed of small and medium enterprises, with only a few large organizations, such as banks and major corporations, having robust internal control systems Consequently, DFK's auditors often do not fully depend on control test results and instead conduct basic tests Nonetheless, while performing detailed tests, auditors leverage the evidence gathered to validate the existence of the enterprise's internal control system.
At DFK Company, auditors employ analytical procedures during audits to assess relationships and gather evidence regarding the reasonableness of the data being examined This process helps identify material discrepancies, prompting auditors to implement additional procedures for further investigation in the event of unexpected changes The primary focus of these analytical procedures is to compare value variations between the current year and the previous year, ensuring a thorough evaluation of the financial information.
- Collect analysis of inventory and compare with the ledger:
The summary of the financial data should include a comparison of the current balance sheet with the audited figures from the previous period, highlighting key metrics and relevant details from the stock exchange and other pertinent items.
To ensure accuracy in inventory management, compile a comprehensive inventory list detailing quantities and carrying values, then compare the total inventory value with the figures presented on the summary sheet It is essential that the inventory lists are organized in a manner consistent with the balance sheet entries for effective analysis.
To ensure accuracy in inventory management, it is essential to compile client collation tables that compare the inventory details listed in the ledger with those in the inventory system or final inventory Additionally, auditors must verify the relevance of items and critical matching documents present in their working papers.
+ When the auditor's use of checklists or records prepared by management for audit purposes, the auditor shall perform procedures to ensure that the checklists are accurate and complete
Perform analytical procedures a) Compare the inventory balance (including the contingency balance) and the inventory structure this year against the previous year, explaining unusual fluctuations
To conduct an effective audit, it is essential to categorize inventory into primary groups such as main materials, auxiliary materials, tools, supplies, and finished goods Auditors should then compare the expense balances of each group for the current period with those from the previous year, allowing them to assess inventory trends By integrating these fluctuations with relevant market data, auditors can pinpoint any unusual variations, enhancing their analysis and ensuring a comprehensive overview of inventory dynamics.
• Difference = Inventory value in the current year - Inventory value of the previous year
To analyze inventory performance, calculate the percentage difference by dividing the difference in inventory by the previous year's inventory value Next, assess the current year's inventory proportion relative to total short-term assets and compare it to the previous year to evaluate any significant fluctuations Additionally, analyze inventory turnover against last year's figures and the planned targets, identifying any causes for fluctuations and determining if provisioning is necessary.
• For Raw Materials Number of turnover = Purchase / Average Inventory
• For Finish Goods ( Inventory Turnover) Number of turnover = COS /Average Inventory
Inside : Average Inventory = (opening balance inventory
Analyzing the inventory turnover cycle and the average number of inventory days enables auditors to identify and scrutinize unusual fluctuations in these metrics Such variations warrant thorough investigation to ensure accurate assessment and reporting.
Several factors can contribute to inventory issues, including devaluation of goods, slow turnover rates, poor quality, and obsolescence Excessive material storage and inaccurate inventory figures, often resulting from changes in pricing calculation methods, can exacerbate these problems It is essential to compare the cost structure—encompassing raw materials, labor, and production—between this year and the last to evaluate the reasonableness of any fluctuations Additionally, analyzing unit costs for the current period against previous periods, as well as comparing actual figures with planned budgets and monthly variations, can help clarify any unusual discrepancies.
Trial number 1: Participate in witnessing inventory of artefacts at the end of the accounting period
Identify all the warehouses (of businesses or rental), consignment , the value of inventory and risk assessment of each stock to determine where technicians will attend to witness the inventory
Participate in inventory under the Inventory Program
Observe inventory tallying and complete tallying procedures
Conduct thorough inventory checks for clients by comparing stock levels with tally records, ensuring to document at least the tally If needed, perform sampling tests on high-value items to verify accuracy and meticulously track any discrepancies observed.
For rented warehouses: Send a confirmation letter to request the warehouse keeper to confirm the quantity of goods sent (if material)
Trial number 2: Check and compare detailed inventory data o Trial number 2.1 : Collect general account of input – output – inventory of all types of inventory (monthly and yearly/period):
Compare data with relevant documents (Ledger, detailed book, balance sheet, financial statements) Explain the difference (if any)
Regularly analyze monthly import and export reports and assess year-end inventory balances to pinpoint any anomalies, such as significant balances, negative figures, substantial fluctuations during the period, or long-term stock issues Conduct the necessary tests to verify these findings.
(See appendix D544) o Trial number 2.2: Collect a summary of inventory results of the unit:
Ensure all inventory records are included in this checklist
When analyzing the inventory data, it is essential to compare it with relevant documents such as the enterprise's goods count sheets, auditor observation results, and any third-party certifications available This comparison helps identify and explain any discrepancies that may exist.
Applying inventory audit program for client Toa Mi
This article aims to shed light on the inventory audit process at the auditing firm DFK by examining a client in the commercial production sector For confidentiality reasons, the client's name has been changed to ABC Industry Company Limited.
2.3.1 Introduction of Toa Mi Company
Toa Mi Company Limited, established in 2014, is a Japanese joint venture formed through a capital contribution partnership between Toa Mi Corporation and SMC Company Limited.
- Charter capital: 3,000,000 USD (Three million USD) in which SMC contributes 750,000 USD, accounting for 25% of charter capital, equal to the value of fixed assets
- Main business activities of The company is manufacturing and processing welded wire mesh products, importing, exporting and distributing steel products
The company's accounting system adheres to Circular 200/2014 issued by the Ministry of Finance on December 22, 2014, as well as the Vietnamese Accounting Standards (VAS) and corporate accounting regulations The company is committed to developing strategies that effectively respond to industrial influences, regulatory changes, and other external factors.
✓ Products: Quality to meet client needs, delivery on time
✓ Business operations: increase the selling price, reduce costs and the rate of damage
2.3.2 Inventory accounting characteristics in the enterprise
Toa Mi Company employs a perpetual inventory accounting method, utilizing the weighted average method for inventory pricing Each month, the warehouse keeper and plant manager collaborate to prepare the Inventory and Inventory Record, ensuring adjustments are made in the general log The warehouse keeper generates a detailed inventory report on inputs and outputs, which is then submitted to the Chief Accountant, who calculates the cost for each product.
- The factory is located in Phu My 1 Industrial Park, Phu My Ward, Phu My Town, Ba Ria-Vung Tau Province, Vietnam
Toa Mi Company utilizes a regular declaration inventory accounting method, calculating inventory prices using the weighted average method Each month, the warehouse keeper and plant manager collaborate to prepare the Inventory and Inventory Record for reconciliation with the general ledger The warehouse keeper generates an inventory report detailing inputs and outputs, which is then submitted to the Chief Accountant for cost calculation of each product.
The inventory devaluation allowance method involves creating an allowance for inventories when their net realizable value falls below the original cost Net realizable value is calculated as the estimated selling price minus the costs required to complete the product and the anticipated selling expenses This allowance represents the difference between the inventory cost and its net realizable value, and it is applied to each inventory item where the original cost exceeds the net realizable value.
- Inventory recognition principle: Inventories are recognized at cost (-) minus allowance for devaluation and provision for obsolete, loss-of-quality inventories
- The historical cost of inventories is determined as follows:
+ Raw materials, materials, goods: includes the purchase price, shipping costs and other directly related costs incurred in order to obtain inventory at the current location and status
Finished products encompass the costs of raw materials, direct labor, and associated overheads, which are allocated based on the cost of primary raw materials, the level of normal operations, land use rights expenses, and general costs related to real estate construction investments.
+ Production in progress: including cost of main materials, direct labor and production overheads incurred in the process of construction and installation of construction in progress
2.3.3 Inventory audit process at Toa Mi company
2.3.3.1 Evaluate the effectiveness of the internal control system for inventory of Toa Mi industry company limited
At DFK company, auditors assess the internal control system for inventory items during the client inquiry phase of the initial audit, rather than conducting this evaluation beforehand.
In 2020, DFK company continued its auditing services for client Toa Mi, building on prior experience The auditor focused on discussions with the inventory accountant to gather updated information, opting not to conduct control tests this year Instead, the auditor will proceed with alternative assessment methods to ensure a thorough review.
Walkthrough test for the inventory in parallel with the base test, as the basis for the internal control system evaluation and changes in real year current audit
- How to perform the basic tests will be presented on a working paper These work sheets will display the actual variety shown at DFK including reference marking, notes, a Alytical procedures
Auditors analyze inventory balances by categorizing them into materials, tools, and work in progress, comparing these figures with those from 2019 In that year, Toa Mi Company experienced a notable inventory fluctuation, with a total value of VND 8,705,389,139, reflecting a 22.91% change compared to 2019 The most significant decrease was observed in purchased goods in transit, which dropped by VND 20,348,818,490 This decline in inventory levels compared to the previous year can be attributed to reduced raw material stock and an increase in business demand.
- Compare inventory turnover this year with the previous year: This year's inventory turnover index increased by 1.33 times compared to the previous year, showing that in
2020, inventories turn around faster than the previous year due to increased production demand and faster sales volume
When comparing the stock-to-short-term assets ratio for this year and the previous year, the proportion of inventory to current assets as of December 31, 2018, remained relatively stable, showing minimal change from the same period last year.
Result : See appendix D543 b Test details
- The detailed tests were performed based on the DFK company's sample audit program For TOA MI limited liability company the auditor performed the following tests:
Trial number 1: Participate in witnessing inventory of artifacts at the end of the accounting period
On December 30, 2020, the auditor performed comprehensive inventory observations with assistance from warehouse staff, utilizing an efficient scientific stock arrangement As a result, the auditors successfully verified 100% of the inventory, finding no material discrepancies.
Witness inventory of inventory as at 31/12/2020 Working paper D533
Trial number 2: Check and compare detailed inventory data o Trial number 2.1 : Collect general account of input – output – inventory of all types of inventory (monthly and yearly/period):
Collect General account of input-output-inventory of all types of inventory
Compare data with relevant documents (Ledger, detailed book, balance sheet, financial statements)
Regularly analyze monthly import and export reports and assess year-end inventory balances to pinpoint any anomalies, such as significant balances, negative figures, substantial fluctuations during the period, or long-term stock issues Conduct the necessary tests to evaluate these findings.
Result: See appendix D544, 544.1 o Trial number 2.2: Collect a summary of inventory results of the unit:
Check the balance of inventory between balance sheet and general account of input-outout-inventory
Compare data with related documents (Subsidiary ledger, General ledger, Balance Sheet,Financial Report )
Review monthly general account of input output inventory report, review ending balance of inventor
Trial number 3 involves conducting an inventory count either before or after the accounting period concludes This optional procedure is tailored based on the client's specific characteristics, the realities of the audit, and the auditor's observations.
The auditor witnesses inventory right on the balance sheet date so the audit progresses to the next trial test and skips this one
Trial number 4 Skimming the General Ledger to identify unusual transactions (about content, value, reciprocal accounts )
Scaning the general ledger and check for unusual operations
Trial number 5 Procedures for opening balance audit:
Ensure that all inventory records are accurately reflected in the Summary Sheet, aligning with the goods counting sheets of the enterprise, auditor observations, and any third-party confirmations.
COMMENTS AND RECOMMENDATIONS
Comments
3.1.1 My comment about the internship at DFK Auditing Company Limited 3.1.1.1 Strong points
- During my three-month internship as an audit assistant at DFK auditing company,
I have accumulated a lot of experience and expertise in the field of accounting and auditing for myself
During my internship at DFK Auditing Company, I gained valuable expertise by engaging with financial statements and accounting records from client companies I received training from experienced auditors on the audit process and learned how to enter, process, and present working papers according to the audit program My responsibilities included conducting basic tests on various items such as cash, fixed assets, prepayments, trade accounts receivable, other receivables, labor payables, seller payables, and costs Throughout this experience, I faced challenges that enhanced my practical understanding of auditing.
Through my journey of learning, I have gained substantial professional knowledge and developed a deeper understanding of my subject Additionally, I have accumulated significant practical experience, enhancing my expertise in the field.
Over the past three months, my exposure to various clients has significantly enhanced my communication skills within the workplace By observing how auditors interact with clients, I have gained valuable insights that have contributed to my improvement in communication Furthermore, I have also refined my interactions with the auditors in the company, leading to better overall behavior and communication in a professional setting.
During my internship, I significantly enhanced my Excel skills, mastering various formulas for calculating depreciation of fixed assets and allocating upfront costs I also learned essential shortcuts to expedite the auditing process while maintaining quality assurance Additionally, I became proficient in using tools like Pivot Tables for analyzing reciprocal accounts and identifying anomalies in accounting I utilized filters to streamline the audit process and gained experience in organizing audit records, finalizing reports, and operating printers, copiers, and binding machines.
During my internship from December 2020 to March 2021, coinciding with the busy audit season, I experienced a high-pressure work environment filled with dense schedules This intensity led to unavoidable errors and mistakes in my work However, with the invaluable support and guidance from the auditors, I was able to learn from my mistakes and successfully complete my assigned tasks.
3.1.2 Comments on the audit organization at DFK Auditing Company
The managers at DFK Auditing Company ensure that all employees stay informed about the latest regulations, guidelines, and circulars issued by the Ministry of Finance, enabling them to quickly adapt to any new changes.
DFK Auditing Company Limited utilizes an audit program based on the VACPA (Association of Auditors Practicing Vietnam) standard, ensuring ease of access and a user-friendly experience for new staff, preventing them from feeling overwhelmed.
DFK Auditing Company prioritizes the strategic organization and allocation of its audit team, ensuring an optimal team size for effective workload distribution This approach facilitates the efficient identification of errors and problem detection, enhancing the overall auditing process.
- The Chief of Operations Department regularly checks, reviews, auditors, evaluates and requires more complete working papers so that auditors and audit assistants can draw more experience
Before being delivered to clients, audit reports undergo a comprehensive review process involving both the auditor and the management team or Board of Directors This meticulous inspection ensures that the reports are prepared with honesty and accuracy, reflecting a reliable assessment of the audited entity.
DFK Auditing Company meticulously preserves all auditing records, including financial statements, board reports, working papers, and audit evidence These records are organized systematically, from a comprehensive overview to detailed operational data within the audit program By employing logical symbols and references, DFK enhances the searchability and review process, ultimately improving audit quality and providing valuable reference material for future audits.
During the busy audit season, the influx of clients often results in a manpower shortage for the company, significantly increasing the workload and pressure on auditors and audit assistants This heightened stress can lead to subjective decision-making among auditors, who may rely on familiar processes and overlook strict controls Consequently, this may result in the inability to identify all non-material errors due to the reduction of unnecessary procedures.
3.1.3 Comments about inventory process audit procedure of DFK auditing company
Inventory is particularly vulnerable to fraud, embezzlement, and theft, making it a challenging area for auditors Typically, experienced technicians are assigned to conduct inventory tests, while senior auditors closely monitor this aspect, providing timely support to audit assistants to meet objectives As a result, most audit assistants receive specialized training in inventory audits, ensuring a high quality of evaluation in this critical section.
The inventory process audit procedure, crafted by company management, is designed to be both effective and efficient, enabling resource and cost savings This approach allows auditors to manage their time effectively while still delivering optimal performance.
The Chief of Operations introduced the inventory working papers in accordance with the VACPA (Vietnam Association of Auditors Practicing) standard audit program, facilitating a more streamlined audit process for both auditors and audit assistants regarding fixed assets.
Inventories across various business sectors exhibit distinct characteristics, making it challenging to implement an effective audit process tailored to each specific enterprise The auditor's experience and understanding of different business lines play a crucial role in this complexity Inexperienced auditors may resort to mechanical testing methods that do not align with the profession's standards or the unique traits of the audit firm, resulting in inefficiencies and wasted time while failing to secure inventory objectives effectively.
Recommendations
3.3.1 Recommendations on the audit at DFK Auditing Company
DFK is facing a significant challenge as auditors are overwhelmed with an increasing workload, leading to pressure on audit teams during the busy season and resulting in inefficiencies This stressful environment has caused senior auditors to leave for other professions To address this issue, a trainee has proposed that alongside training and coaching for DFK employees, the company should implement strategies to retain experienced staff and attract new talent.
To enhance audit efficiency and minimize time wastage, it is recommended that the company implement a more strategic personnel allocation policy This involves assigning employees who have previously participated in mid-year audits or last year's audits to conduct end-of-year audits, ensuring a more coherent and effective auditing process.
DFK auditing company should create tailored audit programs for various business sectors, including production, trade, service, and construction, as each sector possesses unique characteristics and management styles By developing specific audit programs for each type of business, auditors and their assistants can quickly understand their tasks, reduce working time, and ensure more comprehensive evidence collection for accurate accounting.
3.3.2 Recommendations on Inventory process auditing procedure at DFK Auditing Company
DFK Auditing Company offers a comprehensive audit program with essential procedures tailored for auditors and audit assistants, facilitating efficient performance However, it is crucial for DFK Auditing Company to enhance these programs by incorporating specific auditing processes tailored to various types of enterprises.
To enhance audit efficiency, it is recommended that a stronger collaboration be established between the inventory operator and the accounts payable or cost management teams, potentially by having the same individual handle both responsibilities.
In today's technology-driven landscape, companies increasingly rely on accounting software for their financial operations, necessitating a robust internal control system for inventory management To effectively assess this system, it is essential to utilize targeted questionnaires that explore key aspects such as operational controls, software updates, division of responsibilities, access control, and data management By focusing on these areas, auditors can gain a comprehensive understanding of the internal controls in place for inventory in a computerized environment, ultimately leading to more accurate and effective inventory oversight.
1 Are the Goods delivery note, Goods received note before being imported into the system have been pre-approved? x Interview with the accounting department
2 Is the system in use at your unit capable of checking and reporting incorrect and invalid Goods delivery note and Goods received note? x Interview with the accounting department
3 Can the software rely on a general accounting of input-output-inventory to trace back the invoices to check arising transactions? x Interview with the accounting department
4 Is the inventory code building system appropriate? Is there a guarantee for all inventory items to be included in the inventory listing? x Interview with the accounting department
5 Is there decentralization in the entry of inventory, out of stock, and in access of inventory records? x Access to data is limited by the use of passwords
6 Is there a procedure for controlling access to the inventory database? x The security system stores user access codes for anyone who has access to the record as evidence of fraudulent activity
7 Is each type of inventory attached with bar code to automatically input data by scanner when making transactions? x Interview with the accounting department
8 Do periodic inventory reports print out which inventory items are assessed that are obsolete? x Interview with the accounting department
9 Have inventory reports been collated and adjusted in line with the actual inventory? x
Analytical procedures are highly effective audit methods that enable auditors to save time and money while highlighting the intrinsic relationships within financial report balances At DFK Auditing Company, auditors primarily utilize basic analytical procedures, such as comparing inventory fluctuations at the beginning and end of the period, without delving into more comprehensive ratio analyses Moving forward, auditors will focus on employing ratio analysis and trend analysis as powerful tools to identify potential issues like delayed inventory turnover, quality deterioration, and signs of misreported costs.
- Develop an audit sampling method:
Many auditing firms have developed specialized software for selecting audit samples, which enhances efficiency by saving time and reducing errors in the sampling process While software improves accuracy in calculations, it is crucial to combine this technology with the auditor's expertise for optimal results Additionally, companies should invest in short-term professional training courses to update employees' knowledge and enhance their qualifications Participation in training organized by the Vietnam Auditing Association (VACPA) and classes on new tax regulations is essential for auditors to stay informed and effectively apply new information in their work.
During the inventory audit at TOA MI Company, the main auditor demonstrated dedication and followed all procedural steps; however, the writer recommends incorporating a few additional points for improvement.
In the auditing process, the auditor initially selects samples representing the majority of the total balance for detailed testing However, due to time constraints, only a few high-balance samples are pre-checked, leaving the remaining samples unchecked It is essential to review all selected samples, regardless of their smaller balances, as they can collectively contribute to a significant total.
The inventory turnover analysis procedures require a detailed classification of each inventory group to accurately identify the causes of fluctuations in the ending balance By understanding which inventory categories significantly impact these changes, auditors can develop more targeted and effective testing strategies.
Inventory is highly susceptible to fraud, including embezzlement and theft, and poses various risks such as loss, damage, obsolescence, and errors during physical inspections Consequently, auditors must possess a strong understanding of inventory auditing techniques and adhere to essential testing procedures to avoid mistakes that could significantly impact financial statements.
During my internship at DFK Auditing Company, I aimed to contribute valuable insights to the audit process by researching and learning about the auditing of financial statements, with a particular focus on the company's inventory cycle audit In this article, I connect local auditing practices with analytical reasoning to provide comments and opinions on the effectiveness of the inventory cycle audit.
Limited time and awareness result in a small client base, leading to incomplete research cycles and subjective feedback Consequently, the proposed solutions lack depth and effectiveness I welcome insights from educators to enhance my understanding and refine my writing skills.
I would like to sincerely thanks my teachers and the officers of DFK Auditing Company Limited for their support so that I can smoothly complete the graduation thesis
3 Website company DFK : https://dfkvietnam.vn/
5 Circular No 200/2014/QD-BTC Regulating the corporate accounting regime, Ministry of Finance, issued on December 22, 2014
6 Võ Đặng Việt Đan (2019), Inventory audit process on Financial Statements at Ernst