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Client 1’ s background
Client 1 is a joint stock company based in Vietnam, primarily engaged in the production of a variety of food products, including canned, dried, frozen, salted, and pickled agricultural and aquatic items Additionally, the company manufactures biscuits, snack foods, carbonated fruit juices, and bottled filtered water, as well as PET bottles Their operations also include the production of packaging solutions for food and beverage industries.
The Company's fiscal year starts on 1 January and ends on 31 December
Overall analysis of financial statements
The data of Client 1 used for analysis purposes include:
- Balance sheet: balance as at compared 30 June 2020 with the balance as at 31 December 2019
- Financial Performance: balance as at 30 June 2020 with the balance as at 30 June
Accounts receivable – trade 36,547,087 21,357,201 (15,189,886) -42% Prepayment to suppliers 4,579,446 3,915,521 (663,925) -14%
Intercompany receivables 104,673,603 94,538,907 (10,134,696) -10% Provision for bad debts (2,045,468) (2,045,468) - 0%
Tools and supplies 10,882,858 12,559,583 1,676,725 15% Work in process 13,602,577 12,225,222 (1,377,355) -10% Finished goods 106,065,556 107,105,826 1,040,270 1% Provision for inventories (3,435,021) (4,873,823) (1,438,802) 42%
Other current assets 1,764,383 1,116,011 (648,372) -37% Current assets 436,227,293 374,850,380 (61,376,913) -14%
Tangible Fixed asset – Cost 383,245,792 383,892,334 646,542 0% Tangible Fixed asset - Acc
Intangible Fixed asset – Cost 10,815,193 10,815,193 - 0% Intangible Fixed asset - Acc
Construction in progress 1,435,765 3,764,429 2,328,664 100% Long-term prepayment 2,537,743 3,129,281 591,538 23%
Other long-term investment 24,993,600 24,993,600 - 0% Investments in subsidiary 94,145,809 94,145,809 - 0%
Table 3-1 Client 1’s Balance Sheet at 30 June 2020
Through the analysis of the Balance Sheet, we draw the following initial comments
In general, cash significantly reduced at 36%, equivalent to VND39 billion It is mainly related to the reduction of cash in banks
During this period, the company experienced a cash inflow of approximately VND 15 billion from collections and borrowed VND 32 billion However, cash outflows exceeded inflows, with VND 35 million allocated for supplier payments and VND 4 billion for asset purchases and construction in progress (CIP) Additionally, operational expenses further contributed to the cash outflow.
The balance of accounts receivable has significantly decreased by 42% compared to last year, amounting to approximately VND 15 billion During this period, the client successfully collected around VND 17 billion, which includes full payments from VND 13 billion and partial payments of VND 4 billion from various customers However, there remains a due amount of VND 2 billion from new customers, contributing to the overall reduction in the balance.
The inter-companies’ receivables include the loans receivables from related parties and the interest incurred
Under the loan contract, the balance of loan and interest receivables from related parties would be offset with the processing fee payables to related parties
The balance of intercompany receivables decreased due to the processing fees owed to related parties exceeding the amount of loans granted and the interest income generated, leading to a reduction in this account's balance.
As of June 30, 2020, the inventory saw a 3% increase, amounting to VND 4.9 million, compared to December 31, 2019 This growth is primarily attributed to a 10% rise in raw materials, alongside a significant 42% increase in provisions made during the period.
The increase in raw material (RM) demand is primarily driven by fluctuations in unit prices and a rise in customer sales orders Notably, sales in January 2020 surpassed those of the previous period by 7%, highlighting the growing need for purchasing raw materials.
The increase in tools and supplies is closely linked to fluctuations in unit prices and a rise in quantity According to Mr Phong (CA), the rise in quantity is specifically intended to meet production needs.
The increase and decrease in FGs and WIP seems the same due to some products in the packaging stage considered to FGs this period
Allowance for inventory also increased due to some products has selling price lower than unit cost
Fixed assets represent NBV of tangible and intangible fixed assets
As of June 30, 2020, the cost of fixed assets remained relatively stable compared to the previous year, with additional assets transferred from construction in progress totaling VND 1.7 billion and purchases amounting to VND 800 million However, the write-off of certain machinery valued at VND 2 billion contributed to the overall stability in tangible fixed asset costs Despite this, accumulated depreciation increased by 4% from the prior year, reflecting the depreciation expenses incurred during the period.
Intangible FA with no addition therefore the NBV was decreased slightly 7% explained by depreciation charged during the period
The long-term prepayment is related to renovation expenses, tools and supplies, insurance fee and others
The increase of the balance is due to the client transferring office rental of Q2/20 from short to long term, insurance fee
This balance represented the long-term loan receivable from the related party - the subsidiary, there was no movement of the amount during the period
This balance will be collected in 2022
This balance represented the investment in a related party - the subsidiary with ownership of 90.4% of this company's share, there was no movement of the amount during the period
Table 3-2 Client 1’s Balance Sheet at 30 June 2020
During the period, short term borrowing significantly increased by VND 38 billion (~15%) It was the Company borrowing an additional amount from the parent At 30 June 2020, the balance is increased accordingly
As compared to last year, the balance of AP reduced at 42% (~VND40 billion) It was due to the client making payment to suppliers during the period
As of June 30, 2020, the employee payable balance remained stable at 1% compared to the previous year, reflecting the salaries for June 2020 that the client is set to disburse to employees.
As of June 30, 2020, the balance has decreased significantly by 38% compared to the previous year, primarily due to a 93% reduction in other accruals (VND 22 billion), a 46% decrease in the 13th month salary (VND 3 billion), a 58% decline in interest expenses (VND 1.2 billion), and a substantial 103% drop in secondment fees (VND 4 billion) Conversely, there has been a 20% increase in transportation fees (VND 1.5 billion) and advertising expenses totaling VND 5.6 billion.
As of June 30, 2020, the accrued expenses related to the year-end "TET program," advertising fees, and other costs decreased by 93%, amounting to VND 22 billion compared to December 31, 2019 This significant reduction was primarily due to various year-end programs implemented for the TET holiday, which included accrued expenses such as VND 5 billion for display and accumulation, VND 2.8 billion for payments to key account shops, VND 655 million in yearly rewards for distributors, VND 845 million in loyalty fees, VND 950 million for sales activities, VND 909 million in advertising expenses, and 50% of the promotion program costs.
In 2020, the client allocated VND 980 million for special programs aimed at their distributor and sales team, totaling VND 10 billion by year-end However, during the year, the client reversed these accrued expenses and recorded the actual payments Additionally, sales during the first half of 2020 fell short of targets, prompting a policy change to raise standards for achieving sales incentives Consequently, the balance as of June 30, 2020, was decreased.
In 2020, the financial balance primarily involved transportation accruals The client established a new code to document a marketing fee totaling VND 5 billion, which was previously recorded under account 33510900 last year.
As of June 30, 2020, the secondment fee decreased by VND 4 billion Although the client did not receive an invoice for this fee from January to June 2020, they still transferred the amount to accounts payable and taxes, resulting in a reduced balance compared to the previous year.
Transportation costs increased in June compared to December by 20% equivalent 1.5 billion mainly due to the following reasons:
1 The fuel price increase compared to December last year
2 Customers conduct durability testing of cans by shipping out repeatedly to Nha Trang By doing so, transportation costs have increased significantly around 1 billion VND
- Accrued interest expense reduced at 58% (~VND 1.2 billion) as compared 31 Dec 2019 Last year, there were lots of borrowing amounts during the year Hence, accrued interest expense last year was higher
The 13th bonus for this year was lower than last year's due to a reduction in the accumulated account used for calculating the year-end bonus As this period covered only six months, the resulting balance reflected approximately half of the previous year's amount.
The balance primarily consisted of dividends payable carried over from the previous year and social insurance (SI) payable Compared to last year, this balance saw an increase of VND 1.7 billion, largely attributed to the rise in SI payable.
(a) The Board of Management of the Company on 28 July 2019 resolved to increase the Company’s share capital This amount represented the proceeds from a shareholder
The Company is on the progress to get the approval from Authority and amend the investment license for the increment in share capital
(b) This amount was reclassified from Share capital as above documentation
Table 3-3 Client 1’s Income Statement at 30 June 2020
Client 2’ s background
Client 2 operates as a hypermarket and supercenter under the X group, positioning itself as a leading modern retail business globally With over 200,000 employees, it runs more than 11,000 stores across countries including Vietnam, Thailand, Argentina, Uruguay, Brazil, Colombia, France, Madagascar, and Mauritius Currently, Client 2 has established a presence in Vietnam with a total of 24 stores.
Client 2 proudly presents a modern shopping experience for consumers nationwide, featuring over 5,000 dedicated members Our stores offer a spacious and comfortable environment, showcasing a diverse range of quality goods at reasonable prices Additionally, we prioritize effective customer service, ensuring a convenient shopping experience in all our locations across the country.
Overall analysis of financial statements
The data of Client 2 used for analysis purposes include:
- Balance sheet: balance as at compared 30 Sep 20 with the balance as at 31 Dec
- Income Statement: balance as at 30 Sep 19 with the balance as at 31 Dec 19
Cash and cash equivalents 48,839,534,298 109,904,999,644 (61,065,465,346) -56% Short-term investment 185,185,087,604 566,343,714,423 (381,158,626,819) -67% Accounts receivable 122,225,013,862 123,400,917,969 (1,175,904,107) -1%
Other receivables 14,521,514,686 93,472,559,307 (78,951,044,621) -84% Other current assets 1,790,471,886 2,455,988,677 (665,516,791) -27%
Tangible fixed assets – net 100,508,312,540 104,943,827,163 (4,435,514,623) -4% Intangible fixed assets – net 10,967,559,794 10,686,505,123 281,054,671 3% Construction in progress 857,236,000 1,336,500,000 (479,264,000) -36% Investment property – net 21,927,644,787 14,920,782,654 7,006,862,133 47% Other long-term receivables 22,880,998,000 22,896,658,000 (15,660,000) 0% Other non-current assets 4,797,045,580 4,552,494,493 244,551,087 5%
Accounts payable – trade 78,593,648,436 171,590,157,730 (92,996,509,294) -54% Advance from customers 88,675,450 1,271,805,900 (1,183,130,450) -93%
Table 3-4 Client 2’s Balance Sheet at 30 Sep 2020
Through the analysis of the Balance Sheet, we draw the following initial comments
— Cash and Cash equivalent and Short-term deposit
As of December 31, 2020, the account experienced a significant decline of VND 442 billion compared to the balance on September 30, 2020, primarily due to Client 2's dividend payment of approximately VND 480 billion to its parent company This payment notably decreased the total assets, liabilities, and equity overall.
As we know, cash mainly generated from sales of merchandise, provides services and rental income
The significant reduction in the balance of other payables related to dividend payments to the parent company of Client 2 is primarily attributed to the company's settlement of this payment in 2020.
The balance as at 30 Sep 2020 has decreased slightly by 1% compared to the balance as at 31 Dec 2019
Inventory includes many types of merchandise products As at 30 Sep 2020, the balance of inventory has reduced substantially compared to balance as at 31 Dec 2019 which is due to 2 main reasons:
+ Due to the shut-down of HVT Supermarket, the inventory storage at HVT will also be cut-off and reduce the total balance as a whole
+ Due to the changes in inventory management as the inventory storage balance in other Group also reduced substantially
As of September 30, 2020, other receivables, which encompass purchase discounts from suppliers, interest receivables, and amounts owed by employees, have significantly decreased compared to December 31, 2019 This decline is primarily attributed to the reclassification of receivables from a parent company from trade receivables to other receivables, reflecting adjustments made in the prior year Moving forward, we will also examine whether the outstanding amount due from X company, related to capital assignment tax payable on behalf of the parent company, continues to be reflected in the balance of trade receivables.
Other current assets included short-term prepaid expenses and deductible VAT amount
As of September 30, 2020, short-term prepaid expenses have decreased significantly by 80%, primarily attributed to a reduction in the number of supermarkets Additionally, the balance of deductible VAT is nil, as the Company has offset the deductible VAT against its VAT payables.
Included in fixed assets are tangible fixed assets, intangible fixed assets
The net tangible assets experienced a slight decline of VND 4.4 billion compared to the previous year, attributed to minimal additions of fixed assets and ongoing depreciation throughout the year.
The net value of intangible assets has increased slightly compared to last year, reaching approximately VND 281 million This rise is attributed to ongoing depreciation of intangible assets throughout the year, as well as the full depreciation of certain assets.
As of September 30, 2020, the balance decreased significantly by VND 479 million, or 36%, primarily due to the completion of renovation projects that were reclassified as investment property during the year.
Investment property includes land use rights, building and structures and fittings - store equipment The Company's investment property is property held by the Company to earn rental income
Investment property net increased significantly by 47%, amounting to VND 7 billion, primarily due to transfers from the CIP renovation project, while other investment properties continued to depreciate throughout the year.
As of September 30, 2020, the trade payables balance saw a significant decrease from VND 171 billion to VND 78 billion This decline is primarily attributed to the typical trend where the balance at the end of September is lower than that at the end of December, as supermarkets tend to increase their inventory purchases in preparation for the New Year's Eve and Tet Holiday.
The total payables for CIT, VAT, PIT, and other taxes saw a slight increase of VND 663 million compared to the previous year, primarily driven by a rise in the CIT payable balance and a modest increase in the VAT payable balance.
The company's payable accounts, which include amounts owed to related parties, saw a significant decrease of 100%, amounting to VND480 billion, primarily due to the settlement of dividend payments to its parent company, Y Limited Additionally, no dividend payable has been announced for the current year's operations, resulting in a remaining balance of only VND383 million in other payables.
Non-current liabilities consist of other long-term payables and provision
Long-term payables include customer deposits from supermarket rentals and goods purchases, which do not accrue interest and can be used to offset financial obligations upon contract liquidation The closure of one supermarket during the year resulted in a decrease in both rental contracts and customer deposits.
+Provision for severance allowance increased slightly by VND3.5 million
Description 30 Sep 20 31 Dec 19 Fluctuation extrapolate vs 2019
Selling expenses 123,152,510,629 153,069,322,421 11,134,025,084 7% G&A expenses 10,215,119,620 17,820,565,446 (4,200,405,953) -24% Other operating income 2,227,002,280 3,011,304,319 (41,967,946) -1% Other operating expense 499,962,220 5,112,722,143 (4,446,105,850) -87%
Income from financial activities 17,196,595,140 38,904,165,212 (15,975,371,692) -41% Expense from financial activities 91,597,722 195,416,629 (73,286,333) -38%
Net income/(loss) before tax 53,175,934,096 92,450,704,743 (21,549,459,282) -23%
Income tax expenses – current 9,570,141,442 18,923,805,521 (6,163,616,932) -33% Income tax expenses – deferred - (1,065,045,378) 1,065,045,378 -100%
Net income/(loss) after tax 43,605,792,654 74,591,944,600 (16,450,887,728) -22%
Table 3-5 Client 2’s Income Statement at 30 Sep 2020
Client 2's operating performance has declined compared to previous years, with a net profit after tax of VND 74.5 billion last year, which is significantly lower than the VND 43.6 billion earned in the first nine months of 2018 The extrapolated net income after tax has decreased by 22% compared to the previous year, indicating ongoing financial challenges Further analysis of the Income Statement reveals additional insights into these trends.
Revenue of the Company comes from 3 sources:
Compared to the prior year, extrapolated sales increased slightly by VND 53.2 billion or 4% compared to the previous period Details of this improvement was shown as below:
Sales of merchandise 906,827,499,878 1,155,967,409,601 53,135,923,570 5% Provision for service 65,892,270,584 89,241,945,622 (1,385,584,843) -2% Rental income 20,709,428,526 26,169,472,022 1,443,099,346 6% Other revenue 5,630,426,758 7,466,246,837 40,988,840 1%
Table 3-6 Table shows fluctuation of Sales of Client 2 in 2020
Supermarket sales, inclusive of VAT, reflect revenue generated from both goods sold within the Group and those sold outside the VLP system, including disposed goods This year, extrapolated merchandise sales saw a modest increase of 5% compared to the previous year, following the closure of the HVT supermarket in February 2019.
These revenues are related to:
(1) Trade commitment such as: support for new launch, catalogue, discount and other service
(2) Percentage on revenue which Client 2 sold for each supplier,
(3) Estimate of the revenue from service for suppliers
On the other hand, the extrapolated sales from service decreased slightly by 2% compared to previous year
The revenue generated from both long-term and short-term rental income, including tenants such as Shanghai Bank, CGV, and Loterria, has seen a modest increase of 6% in extrapolated sales compared to the previous year.
Client’s 3 background
Client 3 is a joint stock company based in Vietnam, specializing in the production of a diverse range of agricultural and aquatic products, including canned, dried, frozen, salted, and pickled items Additionally, the company manufactures biscuits, snack foods, carbonated fruit juices, and bottled filtered water, as well as beverages containing 5% alcohol Furthermore, Client 3 is involved in creating packaging solutions for food and beverage products.
The Company's fiscal year starts on 1 January and ends on 31 December.
Overall analysis of sales
We extract sale each month by category from Sale Listing Invoice Report as follows:
Month 2019 - Net sales 2020 - Net sales Fluctuation %
Jan 119.884.174 88.278.443 (31.605.731) -11% Feb 87.619.694 106.635.618 19.015.924 1% Mar 155.271.037 109.589.695 (45.681.342) -29% Apr 144.913.347 71.437.579 (73.475.768) -51% May 140.536.873 143.070.305 2.533.432 2% Jun 132.240.922 136.837.258 4.596.336 3% Jul 116.055.260 120.269.196 4.213.936 4% Aug 132.928.418 102.470.768 (30.457.650) -23% Sep 139.580.660 139.403.305 (177.355) 0% Oct 142.971.941 117.433.195 (25.538.746) -18% Nov 152.038.858 112.515.066 (39.523.792) -26% Dec 170.696.939 145.635.765 (25.061.174) -15%
Table 3-7 Client 3’s net sales in 2019 and 2020
Figure 3-2 Client 3’s sales trend in 2020 - 2019
Excluding the effects of Covid on sales in April and August, we observed a decline in January and February due to the Tet holiday, during which distributors, supermarkets, and sales personnel were on public holiday leave and had already completed their stockpiling.
In March, sales experienced a modest increase, primarily driven by the drinks category This uptick was also influenced by distributors depleting their stockpiles due to heightened demand during the Tet holiday However, the overall growth was limited in 2020 due to the onset of Covid-19, which began affecting the market in late February.
- In Apr, sales decreased significantly caused by the Covid-19 consequence caused in the first quarter
Sales peaked in May and June, largely due to Client 3's new promotional strategy, which included increased sales discounts This surge in sales coincided with the summer holiday season in Vietnam, where the hot weather significantly boosted the demand for beverages.
In July, net sales experienced a significant decline, primarily attributed to a lack of demand as distributors had built up their inventory in the previous quarter This downturn was further exacerbated in August, largely due to the ongoing effects of Covid-19.
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
- In Sep, sales have an upward trend which is the same with this period in 2019, particularly sales of drinks thanks to the promotion programs relating to drinks
Net sales in October and November experienced a decline similar to that of July, primarily due to distributors accumulating stock from September orders This stockpiling resulted in reduced orders for the months of October and November.
- However, in Dec shown the highest sales amount in the year, due to the demand serving for Holiday (Christmas and New Year Eve)
Net sales COGS Net sales COGS
Table 3-8 Client 3’s GPM Analysis 2020 vs 2019
- In comparison with last year, GPM in 2020 decreased by 19% due to the decrement in sales (by 17%) caused by the impact of epidemiologic
- The unit cost FG do not fluctuate much compared to last period, but since
Covid-19, sales impacted so that the production was reducing, which leads to the decrement in COGs (by 15%) compared to same period, not likely in line with sales (by 17%)
- Moreover, the Company continues the policy which covert free goods discount into cash discount at the lower discount rate
This explained the COGS of this year decrease compared to last year but the Sale reduction do not fluctuate much in 12 months 2020
Figure 3-3 Client 3’s GPM trend 2020 and 2019
- As can be seen from the graph, the GPM was fairly stable throughout the 12 months of 2020 (between 37% - 40%), peak was in Dec which GPM hit the highest point to 48%
From January to April, the Gross Profit Margin (GPM) remained relatively stable, ranging from 38% to 40% Excluding the effects of COVID-19, which impacted sales in April and August, these months typically experience the lowest sales figures of the year This decline is attributed to the exhaustion of sales promotions utilized in December to boost year-end sales, coupled with distributors and supermarkets depleting their stockpiles in preparation for the Tet holiday activities.
In April, the Gross Profit Margin (GPM) peaked at 40%, despite a significant decline in sales, which dropped by 51% compared to the previous year due to the severe impact of Covid-19 Additionally, Client 3 reduced the processing fee for Kirin during the lockdown in April, contributing to the increased GPM.
In May and July, the Gross Profit Margin (GPM) fell to 37%, despite achieving the highest sales figures in the first nine months This decline indicates that to boost sales in the second quarter, the total value of special discounts, including monthly and quarterly sales promotions, surged to VND 24.4 billion during these two months.
In June, August, and September, the gross profit margin (GPM) rebounded to 40%, indicating a slight market recovery from the impacts of Covid-19 This period coincided with the summer holidays and the hot season in Vietnam, resulting in an increased demand for beverages and contributing to the overall growth in gross profit.
GPM 2020 GPM 2019 sales For more, Client 3 showed efficient cost control, continued conversion of goods discount, reflected in increasing sales deduction over these 3 months
- GPM in Quarter 4.2020 shown good sign, keep stable at 38% in Oct-Nov and peak at Dec to 48%, due to the great demand from the market after recovering Covid-
19 during the year, and also from the demand which serving for Holiday, Christmas and New Year Eve
- Overall, this year's performance does not show good results from the impact of epidemiologic situation
- In comparison to target operating plans, actual sales amount was only reached 79%
- Per discussed with Mr Phong (CA), selling price is fixed due to company's policy, to push sales and meet target, they launched and applied promotion programs
- Base on effort to push business situation of client, GPM increased which give a good sign that the GPM is continue to be in uptrend
In the audit process, the auditor examined the revenue trends of the current period against the previous one, providing insights into any fluctuations They employed ratio analysis to calculate the gross profit margin on sales, taking into account various factors influencing sales revenue, such as pricing and cost of goods sold However, due to the limited availability of industry data in Vietnam, the auditor did not utilize industry ratios for comparison.
Client 4’s background
Client 4 is a wholly foreign-owned company established in Vietnam in 1998 under investment plan No 016 / GP-KCN-VS, with an operating period of 48 years from the licensing date The company has a charter capital of $500,000 and a working capital of $1,500,000, primarily engaged in the processing, distribution, and trading of food and beverage products.
The Company's fiscal year starts on 1 January and ends on 31 December
The auditor establishes the materiality as follows:
Description Audited Unaudited Adj Audited2 Fluctuation
Table 3-9 Client 4’s Selling expenses and G&A expenses
Analytical procedure applied in selling expenses
Compared to last year, selling expenses increased by 123 billion VND ~ 13% while sales revenue increased 49% For the following main reasons:
In 2012, salary expenses surged by 44.8 billion VND, reflecting a 43% increase due to higher salaries and enhanced sales management bonuses In addition to utilizing distribution channels like supermarkets, the company has deployed sales personnel to effectively distribute products across the Western and Central provinces.
Promotion and advertising expenses rose by VND 179.3 billion, approximately 27%, primarily driven by a VND 86.9 billion increase in trade promotion fees, which surged by 48% This growth is attributed to rising revenue and the addition of four new sales agencies.
Client 4 invests in numerous promotional campaigns throughout the year to encourage both consumers and supermarkets to purchase products that significantly contribute to the company's revenue.
Space rental refers to the fees charged to retailers for product display and booth rentals This year's shelf rental costs have doubled compared to last year, significantly impacting retailers, particularly at supermarkets like Coop Mart and Maximax Additionally, Client 4 has invested heavily in social activities and employee rewards, further influencing overall expenses in the retail sector.
3.2.3.3 Analytical procedure applied in G&A expenses
Administrative expenses rose by 18%, approximately 17 billion VND, primarily due to increases in basic salaries, bonuses, and insurance costs Additionally, a significant rise in factory staff numbers contributed to higher management costs.
The costs for foreign employees have risen sharply, with significant increases in housing rentals, car expenses, and IT fees, which surged by 31% year-on-year This rise reflects the expenses incurred by the information technology team in Thailand that supports the software systems used in Vietnam.
Unusual fluctuations from the breakdown of the structure of selling expenses and administration expenses will be made in detailed testing and comparison with other procedures
The auditor conducted a comparative analysis of this year's selling and administrative expenses against the previous year, taking into account revenue fluctuations and changes in operational scale This involved examining the structure of incurred expense items and gathering explanations for any differences observed.
Client 5’s background
Client 5 was established in 2003, is a wholly Japanese subsidiary
Our primary product is inks, which serve as the foundation for a diverse array of related offerings, including industrial printing equipment, information systems, distribution channels, electromagnetic materials, and printed board materials.
The Company's fiscal year starts on 1 January and ends on 31 December
The auditor establishes the materiality as follows:
Table 3-10 Client 3’s Staff Costs at 31-12-20
Note: α Audited Financial Statements @ 31.12.2019 β Matching Unaudited Financial Statements @ 31.12.2020
Analytical procedures for staff costs
Determine key factors and relationships
The employee's salary is calculated by Ms Quyen - Human Resources
The company's salary structure encompasses the main office salaries in Binh Duong, along with those in branches located in Bac Ninh and Can Tho Additionally, sales commissions that are part of the salary are classified as selling expenses.
Client 3 pays gross salary for local employees and net salary (net salary) for expats Salary is transferred to the bank account in 25 th monthly except for the apprentice
As of 31/12/2019 the total number of employees is 106 people, including 102 employees local and 4 foreign employees
Salary for staff includes the following items: basic salary, allowance, overtime, bonuses, insurance benefits and 13th month salary
Salary increases and bonuses are influenced by individual employee performance In January, the company implemented a general salary increase and bonuses for all employees, while in July, only select staff members received adjustments to their base salaries and bonuses.
The company controls employees' working hours through timesheets prepared in every department Every month, Ms Quyen HR department will gather the timesheets in all departments
When working overtime, employees will be charged 150% for working days (from Monday to Friday), 200% for Saturday and Sunday, 300% for holidays
Employee bonuses are determined by individual performance and departmental criteria, with oversight from the company director following an auditor's review Each month, departments are required to complete an Assessment Sheet and submit it to the HR department for evaluation.
Ms Quyen will rely on these evaluations to make a rewarding and bonus decision received on the payroll
13th month salary = Basic December salary x Number of months worked in the year / 12 + bonus (if any)
Social insurance, health insurance, unemployment insurance is deducted at the rate of 20% for the company and 8.5% of the basic salary for the home
Each month, Ms Quyen from the HR department calculates the salaries for both expatriates and local staff, creating a detailed salary analysis sheet This payroll is then submitted to the Director and Chief Accountant for review The Chief Accountant uses this payroll to accurately record salary expenses in the ledger.
Month Basic Salary Allowance SHUI Total
Table 3-11 Salary of employees by month (VND)
Figure 3-4 Salary fluctuation chart over months of 2019 (VND)
Overall, the number of employees and total salary costs increased slightly throughout the year
In March, salaries saw a significant increase due to the addition of five foreign employees, including a new transfer from Japan This transition required the former employee to hand over responsibilities to the new hire Additionally, the number of print technicians has also risen since March, contributing to the overall growth in the workforce.
In October, salaries for employees increased This stems from the sum of bonus for print technicians increased in October
Auditors rely on payroll data from May, September, and October to formulate their estimates During January and February, there was no significant increase in the number of employees, resulting in minimal changes to salaries.
+ In March, the salary increased significantly because of the 5 foreign employees and the increase in printing technicians
+ From April to September there is no change in the number of employees, so the salary is stable
In October, the company addresses the concerns of its printing technicians by providing an additional bonus, responding to their complaints regarding a payment that should have been received from the parent company.
The auditor recommends analyzing the insurance in two phases—February and September—due to a rise in employee numbers in March However, since these new employees had not signed contracts by then, the company did not incur expenses for social, health, or unemployment insurance, resulting in a higher basic salary for March without a corresponding increase in insurance premiums Additionally, bonuses awarded to the printing technician in October did not influence the fluctuations in these insurance categories.
SI, HI, UI from April to September are more stable compared to the remaining months
Auditors get the payroll of May, September and October to:
+ Check the basis of payroll
+ Recalculate each item on the payroll
+ Check if they are checked and approved by authorized person
+ Check payment slip to make sure salary has been paid
Basic salary + overtime salary + Sales commission
Extrapolate for 3m 3.695.107.290 Total by KPMG 12.001.642.917
Total expat and local by KPMG
The difference in discrepancies are acceptable
Social insurance, health insurance, unemployment insurance
Extrapolate for 12m 1,366,932,000 Total per KPMG 1,366,932,000 Total per Client 1,319,787,083 Diff (47,144,917)
Since April, the trainee has officially become an employee of the company, resulting in the signing of a contract that mandates the company to pay Social Insurance (SI), Health Insurance (HI), and Unemployment Insurance (UI) for them This change has led to an increase in these insurance contributions from April to October, as the amounts for the January to March period were lower Consequently, this has created a difference between the client and KPMG, although this difference remains within acceptable thresholds.
Allowance: includes lunch allowance and protective equipment Allowance for employees in Bac Ninh and Can Tho are included in the basic salary
Auditor choose August to analyse lunch allowance:
The difference is within an acceptable threshold Auditor concludes staff cost is recorded fully and accurately by client
The auditor examined monthly salary fluctuations, providing a clear rationale for the observed trends By evaluating the relationship between employee salaries, workforce size, and company policies, the auditor assessed the reasonableness of staff costs Additionally, an estimate of salary expenses was constructed to facilitate a comparison with the customer base.
Completion stage of the audit (KAM 24.0000)
At the completion stage of the audit, clients must prepare the final version of the financial statements, incorporating any adjustments for misstatements proposed by the auditor These statements should be reviewed in accordance with ISA 520, which outlines the use of analytical procedures A key objective for auditors under ISA 520 is to design and execute analytical procedures toward the end of the audit, aiding in forming a comprehensive conclusion about the consistency of the financial statements with the auditor's understanding of the entity.
During the final stage of the audit, the analytical procedures mirror those conducted during the planning phase, including ratio analysis and comparisons with previous financial statements These techniques help confirm expected trends and identify unusual transactions that may signal a risk of misstatement Ultimately, the auditor must gather enough evidence to address the issues raised by these analytical procedures, enabling a conclusion on the overall reasonableness of the financial statements.
If the auditor finds that the changes are adequately explained and identifies no material misstatement, further investigation is unnecessary However, if analytical procedures reveal inconsistencies or significant deviations from expected values, the auditor must investigate these discrepancies.
- Interview with Management and obtain appropriate relevant audit evidence
- Perform other audit procedures if necessary
In this article, the author will utilize the profile of Client 1, as outlined in the planning phase, to demonstrate the final stage of the audit analysis While the analytical procedures at this stage closely resemble those from the planning phase, the author will primarily highlight the key differences and additional elements involved in the process.
The data of Client 1 company used for analysis purposes include:
- Balance sheet: balance as at 31/12/2019 compared with the current balance as of December 31, 2020
- Income statement: data of the last 12 months 31/12/2019 compared with the number of the year ended on 31/12/2020
Allowance for diminution in the value of long-term financial investments
Table 3-12 Client 1’s Balance Sheet at 31 Dec 2020
As at 31 Dec 2020, there is significant fluctuation in financial position with the increase of total assets by VND126 bil ~ 13% and decrease of VND16 billion ~8% in total liabilies
The total assets experienced fluctuations primarily due to a VND130 billion increase in current assets, while non-current assets decreased by VND4.82 billion Compared to the previous year, current assets rose by VND130.562 billion, largely driven by a VND203 billion increase in cash However, accounts receivable and inventory saw declines of approximately VND69 billion (about 62%) and VND1.8 billion (around 7%), respectively.
Non-current asset decreased VND4.82 billion which mainly caused by the increase in accumulated depreciation and investments in subsidiary was nil When as June 2020, Client 1 merged Avafood
Comment on the process of implementing analytical procedures
Advantages
At KPMG VN, analytical procedures are meticulously applied throughout all stages of the audit process, ensuring a balance between rigor and flexibility For small and medium-sized clients, KPMG often relies on minimal analytical procedures due to the simplicity of their data, opting for detailed testing that can be more time-efficient, cost-effective, and reliable.
At KPMG, auditors are categorized into specialized departments focusing on either manufacturing and service enterprises or commercial banks, funds, and projects This specialization offers numerous advantages for auditors However, during peak audit seasons, this division may become less distinct due to the high volume of clients and varying operational demands across sectors.
KPMG Vietnam leverages the KAM audit program, developed by a global team of experts at the KPMG Center, ensuring it remains up-to-date with evolving accounting and auditing regulations each year Since 2010, KPMG has implemented e-Audit software, streamlining the organization and retrieval of audit-related documents while facilitating efficient and scientific analysis procedures.
Disadvantages
Auditors must exercise flexible judgment during analysis procedures; however, the increasing number of clients relative to the limited number of auditors results in constrained audit time Consequently, auditors face a substantial workload, leaving insufficient time to thoroughly analyze each financial statement indicator or gather the essential data for comprehensive analysis.
Understanding the internal control system and audit risk is primarily the responsibility of team leaders, which often leaves lower-level auditor assistants with limited involvement This lack of participation can hinder their ability to gather essential information necessary for conducting effective analytical procedures.
The current analysis procedures are inadequate, primarily relying on comparisons between current and prior period data, as well as actual figures against auditor estimates The regression method is often overlooked due to its complexity and the time it requires compared to simpler alternatives.
Financial ratios are infrequently utilized due to their reliance on the auditors' expertise and subjective judgment in the financial domain Additionally, the lack of comprehensive data from state agencies, such as the General Statistics Office and the Ministry of Finance, hinders effective analysis of these ratios, as average figures for various sectors and regions are not fully published.
The use of analytical procedures among auditors varies significantly based on individual practices, with many auditors preferring detailed testing over these methods.
Recommendations
Recommendations to KPMG
The KAM audit program is still a general guide; it is necessary to have specific instructions for each industry and type of business
Developing specialized audit software enhances the efficiency of financial analysis by rapidly calculating key financial ratios during both the audit planning and completion phases This innovative tool allows auditors to quickly obtain results by simply inputting data from the balance sheet and income statement, streamlining the audit process.
To enhance performance evaluation, companies should diversify their analysis methods by incorporating ratio analysis and benchmarking against industry averages or similarly sized businesses With advancements in information technology and the increasing trend of equitization and stock exchange listings, accessing industry average data has become more convenient through various stock market platforms.
Many KPMG clients show limited interest in the Cash Flow Statement, primarily due to a lack of awareness regarding its significance in delivering crucial management information Additionally, the complexity involved in preparing cash flow statements contributes to this disinterest.
KPMG auditors play a crucial role in assisting clients with their financial reporting, particularly in the preparation of cash flow statements However, these statements, often generated from the entity's accounting software, frequently contain numerous errors Consequently, during the audit planning phase, KPMG auditors do not analyze the cash flow statements prepared by the entity as part of their preliminary financial statement review.
Recommendations to authorities
It is necessary to build a public and complete database of financial indicators about the industry This is also a necessary condition to attract domestic and foreign investment
During my three-month internship at KPMG Vietnam Auditing Company, guided by Ms Mai Thi Phuong Thao and the KPMG auditors, I gained valuable insights into the significance, methodology, and practical application of analytical procedures in auditing financial statements.
In the competitive Vietnamese audit market, companies must enhance audit quality while optimizing time and costs Analytical procedures offer a modern and scientific approach that effectively reduces both time and audit risks, making them a compelling yet complex topic However, during my brief internship, I faced challenges due to my limited experience and knowledge in conducting Analytical Procedures in Auditing Financial Statements As a result, my understanding and practical skills were not fully developed, leading to inevitable mistakes in this Internship Report despite my best efforts.
I would like to receive comments and recommendations from the teachers to improve my writing
I hope to have conditions to study more deeply this topic and hope that analytical procedures will be applied closely to improve the quality of the audits
Phụ lục 5b2 – PHIẾU ĐÁNH GIÁ KHÓA LUẬN TỐT NGHIỆP – GVHD – Đề tài: KIỂM TOÁN Điểm từng phần
Không đạt yêu cầu Cần cải thiện Đạt yêu cầu Xuất sắc Tổng điểm
Chương mở đầu của khóa luận chưa đầy đủ, thiếu rõ ràng về mục tiêu nghiên cứu, đối tượng nghiên cứu và phạm vi nghiên cứu.
Chương mở đầu của khóa luận đã trình bày đầy đủ nội dung, xác định rõ mục tiêu, đối tượng và phạm vi nghiên cứu Những góp ý từ giáo viên hướng dẫn đã được cải thiện phần lớn, tuy nhiên vẫn còn một số điểm trình bày chưa logic.
Chương mở đầu của khóa luận được trình bày rõ ràng và mạch lạc, xác định một cách thuyết phục mục tiêu nghiên cứu, đối tượng nghiên cứu và phạm vi nghiên cứu.
Cơ sở lý thuyết không chỉ đơn thuần trình bày các vấn đề lý thuyết cơ bản của nghiên cứu mà còn cần có sự tổng hợp và chọn lọc thông tin để đảm bảo tính nhất quán và sâu sắc.
Trình bày cơ sở lý thuyết có chọn lọc, phù hợp với đề tài nghiên cứu
Có sự tổng hợp, phân tích phù hợp
Tuy nhiên, một vài điểm chưa có sự kết nối tốt Còn một vài lỗi sai trong nội dung
Trình bày cơ sở lý thuyết có chọn lọc, phù hợp với đề tài nghiên cứu
Bài viết này tổng hợp và phân tích các nội dung nghiên cứu một cách chi tiết, đồng thời so sánh với các thông tin liên quan để làm rõ những điểm tương đồng và khác biệt Ngoài ra, bài viết còn đảm bảo sự kết nối mạch lạc giữa các vấn đề được trình bày, giúp người đọc dễ dàng theo dõi và hiểu rõ hơn về chủ đề.
Rất ít lỗi sai nội dung
Bài viết cần trình bày đầy đủ các vấn đề liên quan đến nội dung nghiên cứu, đồng thời thực hiện phân tích sâu sắc Cần có sự tổng hợp, so sánh và phân tích hợp lý, đảm bảo tính thuyết phục cao trong các luận điểm được đưa ra.
Thực tế tại doanh nghiệp Chỉ sao chép giấy làm việc Không có quan sát, diễn giải của người viết
Bài viết trình bày các thủ tục kiểm toán nhưng thiếu tính đầy đủ và logic Chưa có sự liên kết rõ ràng giữa mục tiêu kiểm toán, các thủ tục thực hiện và kết quả đạt được Hơn nữa, không có giấy làm việc minh họa để hỗ trợ cho quá trình kiểm toán.
Bài viết trình bày một cách tương đối đầy đủ các thủ tục kiểm toán, đồng thời liên hệ với mục tiêu kiểm toán và các nội dung lý thuyết đã được đề cập Tuy nhiên, một số điểm vẫn còn thiếu tính logic, cần được cải thiện để tăng cường sự mạch lạc của nội dung.
Các thủ tục kiểm toán trình bày chưa mang tính đặc trưng, điển hình cho nội dung minh họa
Không giải thích được tại sao KTV thực hiện/ hoặc không thực
Để thực hiện kiểm toán hiệu quả, cần trình bày đầy đủ các thủ tục kiểm toán, liên hệ chặt chẽ với mục tiêu kiểm toán và các nội dung lý thuyết đã được đề cập Các thủ tục này không chỉ mang tính đặc trưng mà còn thể hiện rõ những điểm nhấn quan trọng trong lý thuyết Đồng thời, cần giải thích lý do tại sao kiểm toán viên (KTV) quyết định thực hiện hoặc không thực hiện một thủ tục cụ thể, cũng như cách thức trình bày các thủ tục kiểm toán.
Để đảm bảo tính toàn diện trong quá trình kiểm toán, cần trình bày chi tiết các thủ tục kiểm toán, đồng thời liên hệ chặt chẽ với mục tiêu kiểm toán và kết nối với những nội dung lý thuyết đã được đề cập trước đó.
Các thủ tục kiểm toán cần được trình bày một cách rõ ràng và logic, với nhiều ví dụ minh họa cho các tình huống phân tích sâu Cần tránh việc trình bày thủ tục kiểm toán thay thế nếu kết quả không đạt yêu cầu Một số giấy tờ và số liệu cần được minh họa đầy đủ, tuy nhiên vẫn còn một số điểm chưa hợp lý và một vài số liệu có thể thừa, thiếu hoặc không khớp Cần cải thiện nội dung theo yêu cầu của giảng viên hướng dẫn và giải thích rõ lý do cho các vấn đề còn tồn tại.
KTV cần giải thích rõ lý do thực hiện hoặc không thực hiện một thủ tục kiểm toán, đồng thời trình bày các thủ tục kiểm toán thay thế khi kết quả không đạt được mục tiêu kiểm toán, với sự độc lập trong việc đưa ra quyết định và ít phụ thuộc vào sự hỗ trợ của giảng viên.
Giấy làm việc và số liệu được minh họa đầy đủ, logic, phù hợp với nội dung trình bày
Nhận xét và kiến nghị cần phải liên quan trực tiếp đến vấn đề nghiên cứu, tránh những ý kiến chung chung hoặc không cụ thể Việc đưa ra nhận xét không liên quan sẽ làm giảm giá trị của nghiên cứu và không đóng góp vào sự phát triển của lĩnh vực này.