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.. Không giải thích được
INTRODUCTION OF ERNST & YOUNG VIETNAM LIMITED
Introduction to Ernst & Young Vietnam
Company’s name: ERNST & YOUNG VIETNAM LIMITED
- Ho Chi Minh City: Bitexco Finacial Tower, 20 th Floor, 02 Hai Trieu, Ben Nghe, District 1, Ho Chi Minh
- Ha Noi City: CornerStone Building, 8 th Floor, 16 Phan Chu Trinh, Hoan Kiem District, Hanoi
Legal representative: Tran Dinh Cuong
Type of business: Limited Liability Company with two or more members
1.1.2 Historical and development of Ernst & Young
Ernst & Young Global Limited, commonly known as EY, is a leading multinational professional services partnership based in London, UK Formed in 1989 through the merger of Ernst & Whinney and Arthur Young & Co, EY became the largest accounting firm globally at that time It is recognized as one of the "Big Four" accounting firms, alongside Deloitte, KPMG, and PricewaterhouseCoopers (PWC) Additionally, EY operates in Vietnam as Ernst & Young Vietnam Limited.
Ernst & Young Vietnam Limited (EY Vietnam), established on March 11, 1992, as the first 100% foreign-invested accounting and advisory firm in Vietnam, is a member of
EY Vietnam, with offices in Ho Chi Minh City and Hanoi, employs nearly 2,000 local and expatriate professionals committed to delivering the high standard of service that EY clients globally expect The firm is set to celebrate its achievements in the region.
30 years of "Delivering the Better" as a leading professional service provider in Vietnam in
To ensure a high-quality audit, EY has met the following basic requirements:
- Ensured the provision of high-quality audit services in an independent, objective working manner and adherence to professional ethical standards
- Developed initiatives to improve objectivity, independence, and professional skepticism
- The audit team is required to have full qualifications, professional competence, in- depth knowledge, and experience in all industries
- Maintained and enhanced the quality of the risk management process
Ernst & Young Vietnam's management is dedicated to upholding independence and objectivity by adhering to the Code of Ethics set by the International Ethics Standards Board for Accountants (IESBA) under the International Federation of Accountants (IFAC), as well as the Vietnam Standards of Professional Ethics for Accountants and Auditors This commitment ensures the delivery of top-quality assurance services year-round.
Organization structure and business characteristics of Ernst & Young Limited
Ernst & Young Vietnam features a clearly decentralized management structure, with each department head accountable for their department's operations while fostering mutual support across departments According to EY, the company's organizational structure encompasses several key departments.
The AABS Department specializes in comprehensive audit services, encompassing various audit groups It primarily consists of two main divisions: Core Assurance (CORE), which focuses on auditing corporate entities, and the Financial Services Office (FSO), dedicated to auditing financial and credit institutions.
• TAX Department: Specialized in providing clients with tax services to improve the tax management level of the business so that customers can promote their financial situation
• TAS Department: Specializing in providing consulting services on corporate governance
• ITRA Department: Specializes in providing information system audit services
• ADMIN Department: Perform internal work in the unit, including human resources, office, accounting and information technology (IT)
The AABS, TAX, ITRA, and TAS departments collaborate and leverage their expertise to support the audit team, ensuring the successful completion of audit tasks based on specific work requirements.
The organizational structure of personnel at EY Vietnam is illustrated by the following diagram:
Figure 1: Hierarchical organization of EY Vietnam
Over the years, the company's revenue has steadily increased Thanks to the high quality of its services and the increased demand for audits and consulting, the valuable client numbers
13 are increasing now than ever In terms of revenue and client base, EY led the audit industry in 2022
Figure 2: Financial Information EY Vietnam 2022
(Source: Transparency Report 2022 – EY Vietnam) 1.2.2.2 EY Purpose
Ernst & Young Vietnam Limited is dedicated to "Building a better working world" by delivering high-quality professional services that foster client trust and enhance public confidence in global capital markets Committed to cultivating a professional work environment, EY empowers employees to excel, adapt to change, and provide exceptional services Ultimately, EY is instrumental in generating long-term value for clients, individuals, and society as a whole.
According to the EY website, EY supports clients in meeting regulatory obligations, ensuring investor transparency, and creating long-term value for stakeholders With four key service lines—Assurance, Consulting, Strategy and Transactions, and Tax—EY empowers clients to seize transformative opportunities and enhance their growth and operations.
EY Assurance services encompass four key departments: Audit, Financial Accounting Advisory Services (FAAS), and Forensic & Integrity Services These departments are dedicated to managing risk and complexity, while also uncovering opportunities that enhance public confidence in capital markets.
Core assurance (Audit) teams safeguard the public's interests by conducting high-quality, data-driven audits with independence, integrity, objectivity, and professional skepticism
FAAS and Forensic & Integrity Services teams play a crucial role in safeguarding and restoring enterprise and financial reputations They offer strategic advice to enhance decision-making and operational efficiency within the finance function Additionally, these teams assist in navigating the risks and opportunities related to environmental and sustainability challenges.
EY's consulting services are dedicated to creating a better working world by leveraging the strengths of people, technology, and innovation to transform businesses By uncovering hidden performance drivers in both traditional and nontraditional data, EY assists clients in enhancing performance management, anticipating financial risks, and improving risk and internal audit processes.
EY aims to transform businesses into intelligent, information-driven organizations by integrating fact-based decision-making into their daily operations, ultimately enhancing their ability to deliver superior products and services.
EY tax accounting professionals deliver exceptional service tailored to your specific requirements across the entire tax life cycle, including planning, provision, compliance, and interaction with tax authorities By utilizing EY’s extensive global network and advanced tools like the Mandatory Disclosure Regime (MDR), EY assists clients in identifying and managing cross-border reporting obligations effectively.
- Strategy and Transactions services (SaT)
SaT service empowers clients to transform their portfolios for a brighter future, while EY enhances corporate strategy, capital allocation, and transaction advisory to accelerate value creation By facilitating cross-border capital flow, EY aids in launching new products and innovations Additionally, EY provides crucial support for clients facing crises, helping them stabilize their businesses in the short term.
Ernst & Young Global Audit Methodology – EY GAM
EY GAM is a global audit methodology designed to ensure consistent application by EY auditors in all financial statement audits Developed by senior managers at EY worldwide, this methodology is regularly updated to align with current market conditions EY GAM serves as the software tool for interpreting and applying both international and domestic audit standards relevant to the jurisdictions in which EY operates.
EY GAM is designed to integrate auditing standards and related guidance, enabling auditors to customize their methodology for various audit types, including group audits and individual non-complex entity audits This topic-based GAM adheres to all International Standards on Auditing (ISAs) and incorporates additional standards from the Public Company Accounting Oversight Board (PCAOB).
EY GAM is structured around audit topics that outline the requirements and guidance for EY's activities It is divided into four key stages: initial planning, identifying and assessing risks, designing and executing responses to those risks, and concluding and communicating the findings.
Figure 4: EY Global Audit Methodology Roadmap
(Source: EY Atlas) Stage 1: Initial planning
EY's audit teams assess service requirements by consulting with governance and management to grasp their expectations and needs They assemble a team of experts, including tax and IT professionals, along with valuation specialists, to ensure a comprehensive approach to auditing.
Stage 2: Identify and assess risks
The audit teams at EY determine the risks of material misstatement, understand the entity, including the nature of the business, its surroundings, and the risks that the companies are
Auditors evaluate significant accounts and disclosures to identify material aspects, focusing on significant classes of transactions (SCOTs) and disclosure processes They also consider the financial statement close process (FSCP) and the impact of IT on financial statements Based on this understanding, auditors develop preliminary combined risk assessments (CRAs) and proceed to design and implement responses to identified risks.
In response to identified risks of material misstatement, MIC formulates a comprehensive audit strategy and plan by assessing the nature, timing, and extent of control tests and substantive procedures The audit team may also conduct specific procedures related to related party transactions, relevant laws and regulations affecting the client, the application of the going concern basis of accounting, and any ongoing legal disputes involving the entity.
Audit teams conduct engagement by verifying their understanding of Significant Classes of Transactions (SCOTs), essential disclosure processes, and internal controls They then carry out planned control tests, substantive procedures, and additional specific procedures to ensure thorough auditing.
EY audit teams conduct thorough audits and communicate key findings to governance and management Auditors assess whether adequate and appropriate evidence has been gathered to ensure that the financial statements are free from material misstatements, whether arising from fraud or error.
During the audit, when teams receive new or updated information from client, auditors must review and revise the audit processes
The following chart lists all the EY GAM topics with their identifier name, and where in the audit the topic is relevant
Initial planning Design and execute responses to risks Identify and assess risks
EY GAM Topic Identifier Audit phase
Services requirement; scope of service & engagement agreement
Establish team, roles and responsibilities
Evaluate compliance with ethical requirements, including independence
Sufficiency and appropriateness of audit evidence
AUDIT EVIDENCE Information produced by entity IPE
Supervision and review SUP-RVW
Risk assessment procedures audit strategy and CRA
Components of the system of internal control at the entity level
Identify and assess the fraud risk FRAUD-RISK
Executive discussion and approval points
Significant accounts and disclosure and relevant assertions
PM, TE, SAD Nominal amount PMTE
Significant classes of transactions SCOTS
Management procedures (small business only)
Using the work of specialists SPECIALIST
Effect of an entity’s use of IT IT
The FSCP and significant disclosures
Controls over SCOTs and significant disclosures processes
Respond to fraud risks FRAUD-
Computer-Assisted Audit Techniques (CAATs) at Ernst & Young Limited
EY Canvas is a powerful tool that connects EY’s audit professionals with clients from the outset of the audit process, utilizing the EY private cloud This technology allows auditors to focus on identifying risks and developing solutions, reducing the time spent on administrative tasks and enhancing their attention on critical audit elements Additionally, EY Canvas facilitates effective communication of a centralized audit plan among global teams and enables daily tracking and management of audit activities With improved transparency, EY auditors can promptly capture, flag, and discuss global audit findings as they arise.
- EY Smart Sampling: is the software that supports the sampling procedure based on sample values and key items
EY Atlas serves as a comprehensive platform for research on global financial and accounting reporting, enabling EY teams to access the most current and pertinent information on accounting, auditing, and industry trends Its integration with EY Canvas enhances the availability of crucial resources, ensuring that professionals stay informed and equipped with the latest insights in the field.
AUDIT PROCESS OF FIXED ASSETS AND DEPRECIATION
Theoretical basis
2.1.1 Assess characterictics of fixed assets
Fixed assets are essential for businesses as they support the production of goods and services, directly contributing to revenue generation through items like machinery and vehicles These high-value assets enhance a company's overall valuation, making it more attractive to investors and potential partners in mergers and acquisitions Additionally, fixed assets can serve as collateral for loans, allowing businesses to explore new opportunities and address cash flow challenges through asset-based lending.
According to Article 2, Circular 45/2013/TT-BTC and Clause 2, Article 1, Circular 147/2016/TT-BTC, based on the purpose of use, enterprises classify fixed assets as follows:
Tangible fixed assets are physical means of labor that play a crucial role in economic cycles, maintaining their original forms These assets include buildings, structures, machinery, equipment, and vehicles, all of which are essential for production and operational processes.
Intangible fixed assets are non-physical investments that hold significant value for a business These assets play a crucial role in various business cycles and include costs associated with land use, as well as rights such as patents and copyrights.
Financial leasing involves enterprises leasing assets from financial leasing companies, with the option to purchase the leased property or extend the lease at the end of the term The total lease amount specified in the financial leasing contract must be at least equal to the asset's value at the time the contract is executed.
According to Article 3, Circular 45/2013/TT-BTC, enterprise’s assets must be recorded as fixed assets if they meet all three of the following requirements:
- There is a certainty of future economic benefit from the use of such asset;
- The asset has been put to use for more than one year;
- The cost of assets is VND 30,000,000 or above and must be determined reliably 2.1.1.2 Characteristic of depreciation expenses
According to Article 2 of Circular 45/2013/TT-BTC, depreciation is the process of recognizing the declining value of fixed assets over time due to wear and tear or technological advancements This systematic valuation and allocation of an asset's value is included in production expenses during its use and is converted into the value of products produced by the enterprise As a non-cash expense recorded on the income statement, depreciation reduces the company's net income or profit.
To calculate the depreciation of fixed assets, enterprises need to determine the following two issues:
- Whether the fixed asset has been used or purchased new;
- Time to calculate the depreciation of fixed assets (the time when the fixed asset is officially put into production)
Enterprises have the autonomy to determine the depreciation period for fixed assets, but this must align with the guidelines set by the Ministry of Finance Additionally, it is essential for businesses to inform their directly managing tax agency regarding the status and timeline of their fixed asset depreciation calculations.
According to Circular No 45/2013/TT-BTC issued by the Ministry of Finance on April 25, 2013, the time frame for depreciating fixed assets is clearly defined, outlining specific depreciation periods for each type of fixed asset.
Figure 5: TIME FRAME OF DEPRECIATION OF TYPES OF FIXED ASSETS
(Source: Circular No 45/2013/TT-BTC dated April 25, 2013 of the Ministry of Finance)
Enterprises can choose the most appropriate depreciation method for each type of fixed asset, depending on their ability to meet the specific conditions outlined for each method As stated in Article 13 of Circular No 45/2013/TT-BTC, there are three recognized methods of depreciation available for fixed assets.
- Method of depreciation based on volume
Accumulated depreciation is a contra asset account on a company's balance sheet, reflecting a reduction in the reported gross amount of fixed assets It represents the total wear and tear on an asset throughout its useful life, with the accumulated depreciation increasing as depreciation costs are recorded over time When an asset is sold or taken out of service, the accumulated depreciation is reversed, removing all related records from the company's balance sheet.
- Circular No 200/2014/TT-BTC dated December 22, 2014, on guidelines for accounting policies for enterprises
Circular No 45/2018/TT-BTC, issued on May 7, 2018, provides essential guidelines for the management and calculation of fixed asset depreciation for agencies, organizations, and units It specifically addresses the treatment of fixed assets transferred to enterprises by the state, emphasizing the exclusion of the state capital portion in these calculations This circular aims to streamline the depreciation process and ensure compliance with financial regulations.
2.1.3 Identifying common risks relating to fixed assets
In business operations, the accurate accounting of fixed assets and depreciation expense is crucial, as these elements significantly influence financial statements For manufacturing companies, fixed assets often represent a substantial portion of the balance sheet, making precise recording essential to avoid errors The audit risks related to fixed assets differ based on asset type, the entity's internal controls, and auditor constraints, with common risks including misstatement and valuation challenges.
- Company can overstate its assets because this leads to increased net income on the income statement Assets are overvalued, either by inflating cost or valuation or by undercharging depreciation
Reported fixed assets may either be nonexistent within the business or have been sold to another entity An inventory of plant assets, which verifies the exercise and ongoing use of each asset, may not be conducted regularly Additionally, there are instances where assets are utilized for personal purposes or are stolen.
Management may seek to influence the depreciation rate of fixed assets, which can be fully depreciated at their original cost However, the enterprise may continue to apply depreciation for tax purposes, allowing deductions when calculating Corporate Income Tax.
2.1.4 Audit objectives of fixed assets
According Article 124, ISA 315 (Revised 2019), fixed assets are reported and presented in the Balance sheet; therefore, audit procedures should be sufficient to address all of the following assertions:
Table 2: Audit objective when auditing fixed assets
“All reported fixed assets must be owned by the business, and finance leases must be under the enterprise's long-term control based on the signed lease arrangement.”
All fixed assets listed in the financial statements must exist at the time of reporting, and the quantities recorded in the fixed assets register should accurately reflect the actual amounts determined during physical stocktaking.
Completeness (C) “All fixed assets or finance leases at the end of the year must be presented in the balance sheet and must not be omitted.”
Fixed assets are recorded at their original cost, and their value is systematically and reasonably allocated over time Impairment of these assets is assessed and documented accurately, adhering to the current financial reporting standards.
“The notes related to the fixed assets in the financial statements must be presented correctly in accordance with current regulations.”
2.1.5 Audit procedure and control testing for fixed assets
During the audit, the auditors need to collect evidence to prove that the assertions related to the fixed assets are true and fair
To ensure that the entity has rights and obligations over the assets acquired and the assets recognized at the end of the financial year, the auditors need:
- Check title-deed and land registration certificates to verify ownership of land and buildings
- Collect documents from the bank to show that the property is not mortgaged or pledged
- Check the registration certificate for vehicles that the business is keeping and in the name of the business
- Confirm fixed assets for production and business activities
- Review lease agreements to ensure the business has fulfilled the terms of the contract
To ensure that assets actually exist in the business, the auditor needs to:
- Observe the stock-count of fixed assets to confirm that the assets in the asset register all exist in reality
- When counting, focus on high-value assets and additional purchases during the year, and check the tag, serial number, and condition of the asset
To ensure that fixed assets acquired or disposed of during the year are fully recorded in the accounting books, the auditor should:
- Collect a detailed list of fixed assets, which can show book value, accumulated depreciation, carrying amount and then compare with opening balance
- Reconcile fixed assets in ledger with fixed assets register and find out differences (if any)
When examining the valuation assertion, the auditor should:
- Check the accuracy, suitability, and consistency of the policies on determining the cost of fixed assets applied by the enterprise
- Compare the corresponding amount on the invoices with the amount on the contract and related documents
- Review repaired and maintained costs whether it is currently correctly classified
- Review the reasonableness of depreciation rate, useful life, depreciation calculation, accumulate depreciation calculation on depreciation schedule, which is performed by accountant
General audit procedure for fixed assets at Ernst & Young Vietnam
2.2.1.1 General understanding of client entity
The audit process begins with the Partner in Charge (PIC) and Manager in Charge (MIC) evaluating client entity information before EY accepts the audit and signs the contract Next, the Senior in Charge (SIC) researches fundamental details about the client to understand their business activities and assess the effectiveness of their internal control system This allows the SIC to perform an initial evaluation of risk and materiality.
The auditor begins by comparing the total fixed assets of the current year to those of the previous year, assessing any significant fluctuations and determining if these changes align with the business plan.
SIC evaluates the appropriateness of the fixed assets to total assets ratio in relation to the current business environment Additionally, the auditor must conduct interviews with the client regarding control processes, management and control policies, and the accounting methods used for fixed assets within the company, which will inform the assessment of control risk.
2.2.1.2 Evaluate combined risks and set materiality
- Risk assessment for fixed assets
EY notes that while fixed assets typically hold substantial value on an enterprise's balance sheet, their balances tend to remain stable across accounting periods Any fluctuations that do occur are generally predictable and backed by relevant evidence.
EY evaluates Combined risk assessment (CRA) through risks controlled by entity, specifically Inherent risk (IR) and Control risk (CR)
CRA = IR x CR Figure 6: Combined risk assessment method
Inherent risks are mainly assessed based on the client entity's business characteristics, the previous year's audit results, and the management and accounting policies for fixed assets
In assessing control risk, auditors primarily rely on their understanding of the effectiveness of the internal control system, which is informed by management interviews and direct observations A weak control environment significantly increases the risk of undetected misstatements, whereas a well-designed and logical framework for managing fixed assets leads to a lower assessment of control risk.
The SIC assesses the materiality of an enterprise's financial statements based on available information and the auditor's professional judgment This concept of materiality is crucial as it guides auditors in developing a targeted plan for gathering audit evidence, as noted by EY.
GAM, EY applies the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit, and in forming audit opinion
As EY develops its audit strategy, EY determines materiality at both:
The overall level for the financial statements as a whole - planning materiality (PM)
The individual account or balance level - tolerable error (TE)
Figure 7: Diagram of basis selection for determining materiality
Figure 8: The factors determined the appropriate point for calculating PM
(Source: EY GAM) Figure 9: The scale range used to calculate the planned materiality
The SIC needs to base on figures 6; 7; 8 and 9, which are provided by EY GAM, to create a suitable materiality level
The auditor conducts a combined-risk assessment of fixed assets during the audit planning stage to determine the reliability of the internal control system This evaluation helps the auditor decide whether to place reliance on the controls in place.
A robust internal control system allows auditors to perform control tests to gather evidence regarding the effectiveness of both the internal control and accounting system designs.
- Preparing questionnaires for the interview about fixed assets internal control system;
- Observation inventory of fixed assets
Substantive testing is a compulsory audit procedure designed to obtain audit evidence to detect material misstatements of the financial statements at the assertion level
The auditor reviews a summary of fixed assets, reconciling opening balances, increases, decreases, and ending balances for each item with the fixed assets register, general ledger, and trial balance to ensure consistency across all documents.
Auditors assess changes in fixed assets by reviewing relevant documents such as Acceptance Certificates, Handover Minutes, Contracts, and Invoices to verify that the historical costs are accurately reflected in the accounting records In companies with numerous asset fluctuations, auditors select samples to support detailed testing, ensuring proper recognition and existence of assets Their evaluation is guided by risk levels, which determine the thresholds for conducting detailed tests and analytical procedures.
34 assessment table provided by EY Atlas to calculate theshold, then proceed to select the key, and the representative samples
Figure 10: Evaluating thresholds for performing detailed tests and analytical procedures based on the level of risk assessment table
To ensure compliance with Circular 45/2013/TT-BTC, auditors must verify that the fixed asset depreciation method is consistently applied This involves recalculating the depreciation for fixed assets and reviewing the allocation of depreciation expenses.
Fixed assets represent a significant portion of financial statements, and the associated risk varies based on the specific characteristics of each business Consequently, auditors must adapt their audit procedures to align with the unique nature of the client entity.
2.2.3 The end of the audit
After auditing fixed assets, the auditor must review the data and identify any material misstatements that require adjustment They will document these findings and communicate with the accountant to determine if the client should implement the necessary adjustments Additionally, the Management Information Committee (MIC) and the Partner in Charge (PIC) must evaluate the fixed asset items to ensure the reliability of the fixed asset amounts reported in the financial statements.
Illustrating the audit process of fixed assets conducted by EY Vietnam on XYZ
(*) Information is restricted due to being out of internship scope and obtained by exchanged with MIC
In accordance with paragraph 27 of Quality Control Standard #1, before accepting new client, the audit firm need to obtain necessary information in each specific situation VSA
According to Section 220, MIC should prioritize key factors when considering an engagement, including the integrity of principal shareholders and key Board of Directors members, the professional competence of the firm, and its capacity in terms of resources such as time, staff, and technical expertise Additionally, it is essential for the firm to adhere to relevant ethical standards and regulations.
To ensure effective coordination of client and engagement acceptance activities in line with global and service line standards, MIC utilizes the intranet-based Procedure for Acceptance of Clients and Engagements (PACE) Annually, PIC and MIC review the relationship between EY and its audit clients to determine the appropriateness of continuation MIC must evaluate the integrity of management and assess any potential pressure from the audit client's management on the engagement team to accept questionable accounting, auditing, and reporting practices that could compromise quality.
As a new client of EY Vietnam, XYZ Company underwent a meticulous engagement acceptance process This involved MIC acquiring the business registration certificate, individual passports, and citizen identification to verify the legitimacy of the current key officers, directors, and significant stakeholders of the company.
Figure 11: Current Chairman, Managing Directors and Deputy General Manager of XYZ
MIC evaluates a client's integrity and reputation through discussions with key management and analysis of financial statements, highlighting the influence of management's tone on the internal control environment and overall company operations EY also conducts inquiries with third parties, including bankers and attorneys, to gather insights about the entity and its governance, focusing on key management team members like the CEO, CFO, and chief accountant The inquiry results indicate that XYZ Company maintains a positive reputation, free from public disclosures or allegations of unethical business practices, financial difficulties, illegal activities, or criminal proceedings, as detailed in Table 3.
Table 3 : Risk assessment related to Intergrity and reputation of XYZ Company
- “Issues regarding the client's corporate governance” ☐ ☒
- “Concerns about the management's track record in this or other business undertakings”
- “Concerns about the integrity or reputation of the client or its management”
- “Concerns about illegal or unethical activities of the client” ☐ ☒
- “Significant disputes among or between owners/shareholders and management or employees”
- “Concerns about the client's ability to pay our fees” ☐ ☒
- “The client has a history of legal disputes or involvement in court actions”
- “The client has a known current or past claim, or known threatened claim, against any Member Firm”
- “The client has previously been discontinued or rejected by EY” ☐ ☒
- “Other risks relating to the client's industry(ies), business, purpose and reputation”
MIC request XYZ company’s permission to contact the predecessor auditor With consent of XYZ Company, EY’s audit team liaises predecessor auditor to disclose fully relevant information as table 4 below:
Table 4: Risk factors relating to management attitude obtained from predecessor auditor
Risk factors relating to management attitude Yes No
- “Whether there were any disagreements between the predecessor auditor and management regarding any matter related to accounting principles; procedures; financial statement disclosure; or auditing scope.”
- “Management has historically not recorded all proposed audit adjustments in the year identified or the subsequent period for reasons other than late identification.”
- “Management enters into significant transactions without sufficient business purpose and/or places undue emphasis on achieving key
KPIs to stakeholders, earnings per share forecasts or in maintaining market value of capital stock”
Based on the above inquiries, MIC concluded that there are no matters, circumstances, or acts or comments by management that raise questions or concerns about management's attitude
As regards EY Vietnam, the firm ensure that they have adequate resources (time, staff and specialist knowledge and skills) and comply with relevant regulations to performed work properly
To protect customer confidentiality, this section outlines the fixed asset audit process conducted by EY Vietnam, using XYZ Co., Ltd's financial statement audit for the year ending December as a case study.
Founded in 1985 in Singapore, XYZ Asia Group specializes in manufacturing and processing ventilation equipment, repairing machinery, and managing the import and export of ventilation fans and accessories for various infrastructures, including buildings, factories, tunnels, and subways The company expanded its operations into the Vietnamese market in 2006, and by 2009, it established XYZ Vietnam Co., Ltd, with a factory situated in Trang Bang, Tay Ninh.
XYZ (Vietnam) Co., Ltd is a one-member limited liability company established under Vietnam's Law on Enterprise It received its initial Investment Registration Certificate (IRC) No 452043000139 on December 31, 2009, from the Tay Ninh Economic Zone Authority, with subsequent amendments.
The Company’s registered head office is located at Lot A7 2-4, C2 Road, Thanh Thanh Cong IZ, Trang Bang District, Tay Ninh Province, Vietnam
XYZ Co., Ltd leverages extensive experience and cutting-edge technology to create value for customers by deeply understanding their needs The company offers high-quality products that are competitively priced and meet international standards.
XYZ has established a robust presence in Vietnam's ventilation and air conditioning sector, thanks to its skilled engineers and exceptional customer service The company's high-quality products, featuring diverse designs, coupled with a locally situated factory, enable it to steadily capture the high-end market segment.
The Company's financial statements, expressed in Vietnam dong ("VND"), are prepared in compliance with the Vietnamese Enterprise Accounting System and Vietnamese Accounting Standards promulgated by the Ministry of Finance
The applied accounting documentation system is the General Journal
The fiscal year applicable for the preparation of its financial statements starts on 1 January and ends on 31 December
The financial statements are prepared in VND which is also the accounting currency of entity
2.3.2.3 Summary accounting policies for fixed assets
Fixed assets are recorded at cost minus accumulated depreciation
The cost of tangible fixed assets includes the purchase price and expenses directly attributable to bringing the fixed asset to its intended working condition
Expenditures for additions, improvements, and renewals are added to the carrying amount of the assets, and expenditures for maintenance and repairs are charged to the income statement as incurred
The expenditure of additions, improvements, and renewals is added to the carrying value of the assets, whereas the cost of maintenance and repairs is recorded on the income statement
Gains or losses from the sale or retirement of fixed assets are reflected in the income statement, calculated as the difference between the net disposal proceeds and the carrying amount.
Depreciation of tangible fixed assets and amortization of intangible fixed assets are calculated on a straight-line basis over the estimated useful life of each asset as follows:
(*) Information is restricted due to being out of internship scope and obtained by exchanged with MIC
Following the evaluation of the client's acceptability, the engagement team—comprising the Engagement Partner, Engagement Manager, and Engagement Senior—must assess the complexity of the audit scope and choose the suitable staff for the engagement.
EY Vietnam will engage in preliminary discussions with XYZ Co., Ltd regarding essential terms of the auditing contract, including the audit's objectives and scope, the responsibilities of both the client's Board of Directors and the auditors, the timeline for the audit, and the associated fees and payment methods Following these discussions, an audit contract will be formalized between EY Vietnam and XYZ Co., Ltd.
EY has been contracted to conduct a comprehensive engagement on the component reporting package of XYZ Co., Ltd for the fiscal year ending December 31, 2022, in accordance with the Group audit instructions Additionally, EY is responsible for the statutory audit of the Company for the same year.
An effective audit plan must outline the materiality for each section, specify the audit procedures to be executed, allocate time for their completion, and designate the responsible personnel for these tasks The Senior in Charge (SIC) assigns specific sections to team members based on their technical competence, ensuring that each audit procedure is performed by the most qualified staff.
Figure 12: Work Allocation cho XYZ Co., Ltd (see appendix 1)
(Source: Working papers perform by EY audit team)
Each team member will examine the prior year's audit report, supplied by the previous auditor, to identify any unusual account activity Subsequently, the auditor will formulate interview questions for the client to gain insights into the business's nature and enhance professional judgment.
- General ledger, fixed assets register (FAR)
- Invoice; contract; handover/ liquidation minutes
- Breakdown account related to fixed assets
- Listing project for account construction in progress
2.3.4.1 Evaluation of XYZ's internal control system
(*) Information about fixed assets management is obtained by inquiry XYZ’s accountant
COMMENTS AND REVIEW ON THE PROCESS OF FIXED ASSETS
Commentary on the general audit process at Ernst & Young Vietnam Limited
at EY is actually quite similar to the theories learned at the school; VAS; Vietnamese Auditing Standards (VSA); related regulations; and International Accounting Standards (IAS)
EY, one of the largest audit service firms globally, is highly regarded by clients in Vietnam for its exceptional audit quality The firm serves a diverse range of industries, including technology, manufacturing, services, and real estate, which enhances its market position EY's leadership prioritizes creating a professional work environment that enables auditors to reach their full potential and fosters effective teamwork The firm believes that a positive workplace cultivates talent, contributing to its continued growth and success.
3.1.1.1 On the stage of audit planning
EY has meticulously developed a comprehensive plan from the outset, ensuring each task plays a crucial role in assessing the client's condition The tasks are executed with care and tailored flexibility, leading to consistently high results and reliability In the customer understanding phase, EY diligently gathers data to grasp the operational status of the business, fostering strong client relationships while identifying potential risks that may arise.
EY employs highly experienced auditors at every stage of the audit process, ensuring a swift understanding of clients' business nature and efficient information capture regarding their accounting and business cycles This commitment to professionalism guarantees the quality of EY's services.
3.1.1.2 On the stage of auditing
Thanks to CAATs, EY is leading of incorporating information technology into the audit process
The support of EY GAM – a program system built by experts, thus creating a unified, secure system network that can be applied in different business models with different sizes of operations
The EY Canvas electronic library streamlines access to audit data, making it quick and convenient for auditors Through the Client Portal, auditors can review prior work papers to gather essential client information before fieldwork and request necessary documents from the entity Additionally, EY Canvas features advanced software tools like EY Smart Sampling and EY Random, designed to enhance reliability and mitigate risks in the sampling process These tools significantly improve the objectivity and reliability of audit engagements.
3.1.1.3 On the end of auditing
EY utilizes the EY Canvas software to maintain a systematic and organized approach to its work processes Each task is deemed complete only after undergoing rigorous scrutiny and evaluation by both the MIC and PIC.
EY faces significant workload challenges due to a limited number of auditors and assistant auditors, resulting in increased pressure on employees and potentially compromising the quality of audit engagements.
Each year, the assistant auditor assigned to client companies changes, requiring the current auditor to quickly reacquaint themselves with the business's operations This frequent turnover can create time-consuming challenges for both the auditor and the client.
Comment on the audit procedures for fixed assets at Ernst & Young Vietnam
Many enterprises collaborating with EY are well-established in the Vietnamese market, leading to a higher willingness to share information and a lower risk of fraud, which enhances the reliability of their financial statements At XYZ Co., Ltd, chief accountants are open to inquiries about fixed assets and allow for firsthand observation of these assets, as well as an introduction to the factory's production process.
EY GAM is essential in assisting auditors with fixed asset audits by reviewing controls related to asset valuation and depreciation expenses, as well as conducting analytical procedures and detailed tests.
The auditing process for fixed assets at EY was conducted efficiently, successfully meeting audit objectives The assessments and conclusions provided a high level of assurance, instilling confidence in client entities and other information users.
Before the draft audit report is released, all working papers and evidence undergo thorough review and approval by the SIC, MIC, and PIC This meticulous audit process at EY highlights their professionalism and reliability, ensuring that businesses can trust their cooperation with the firm.
During a fixed asset audit, auditors primarily utilize general analytical procedures, comparing current year balances to prior year figures to identify and explain significant changes, while also estimating depreciation expenses for comparison with the client's actual amounts If discrepancies arise, auditors may recommend adjusted entries However, additional analysis methods, such as ratio analysis and comparisons with industry averages, are seldom employed, potentially leaving unusual business issues unaddressed.
Following the internship, the author observed that the audit team encountered significant challenges in gathering essential documents such as invoices, payment requests, and contracts This struggle hindered their progress and overall work efficiency Given that document verification is a crucial aspect of the auditing process, it is imperative to establish a clear plan for the timely collection of necessary data and documents This proactive approach will help prevent delays, save time, and enhance productivity in audit operations.
SIC can create a data request list for accountants to ensure timely submissions Meanwhile, the audit team members focus on summarization and monitoring to quickly remind clients as needed.
Experience during the internship program
I am grateful to EY Vietnam for the opportunity to intern in a professional environment Over the past three months, I have applied my university knowledge in real-world scenarios, gaining a deeper understanding of accounting standards, practices, and industry requirements.
Through the internship program, the author developed essential skills such as communication, Excel proficiency, and time management Among these, communication emerged as the most crucial skill, honed by collaborating with accountants at client entities The author demonstrates a strong willingness to learn and grasps the fundamental tasks required by SIC, while actively engaging with clients to clarify any uncertainties.
After a period of internship at EY Vietnam, the author has learned many useful lessons through the asset accounting process at some businesses, the author found that the topic
"THE AUDIT PROCESS OF FIXED ASSETS AT ERNST & YOUNG VIETNAM LIMITED” helps the author visualize the reality of audit work at an enterprise
The 3-month internship at Ernst and Young Vietnam is a very valuable experience for final- year students to apply the knowledge learned at school in practice, constantly improve and learn to develop experiences day by day At EY, the author has the opportunity to meet new friends, expand relationships, and work with many businesses in various industries especially
Despite the report's limitations stemming from a lack of practical experience and time constraints, the invaluable guidance from faculty members in the Accounting - Auditing department and support from colleagues has enabled me to achieve a high-quality outcome.
The author sincerely thanks instructor Duong Trong Nhan, all teachers in the Faculty of Accounting and Auditing at the University of Economics and Law as well as colleagues at
EY Vietnam because of guiding and helping author to complete this thesis
Wish you are always healthy and successful in your life!
1 EY Canvas: https://eycanvas.ey.com/
3 Website: https://www.ey.com/vi_vn
4 Ministry of finance, 2014 Circular No 200/2014/TT-BTC dated December 22,
2014, on guidelines for accounting policies for enterprises
5 Ministry of finance, 2018 Circular No 45/2018/TT-BTC dated May 07, 2018, on guidelines for the regime for managing and calculating depreciation of fixed assets of agencies, organizations, or units and fixed assets handed to enterprises by the state without calculation of the state capital portion of such enterprises
6 Ministry of finance, 2016 Circular 147/2016/TT-BTC dated October 13, 2016, guiding the management, use and depreciation of fixed assets
7 ISA 315 (Revised), Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment
8 VSA 330 - The Auditor’s Responses to Assessed Risks Summary
9 Quality Control Standard #1 - Quality control of firms performing audits, reviews of financial statements, assurance and other related services (VSQC1) issued together with Circular No 214/2012/TT-BTC dated December 6, 2012 of the Ministry of Finance
10 VSA 220 - Quality control of financial statement audits issued together with Circular
No 214/2012/TT-BTC dated December 6, 2012 of the Ministry of Finance
1 Figure: Work Allocation cho XYZ Co., Ltd (back to main content)
2 Figure: Ranges apply when determine PM for XYZ Co., Ltd (back to main content)
3 Figure: EY test count minutes for XYZ Co., Ltd (back to main content)
4 Figure: K.101 – Leaddsheet for XYZ Co., Ltd (back to main content)
5 Figure: Fixed assets register (FAR) (back to main content)
6 Figure: K.B01 – Construction in progress (back to main content)
7 Figure: Test of details additional and Disposal fixed assets (back to main content)
8 Figure: K.D01 - Depreciation schedule (back to main content)
9 Figure: K.D01 - Recalculated depreciation worksheet per EY (back to main content)