Audit procedure for revenue and collection cycle by pwc r nvietnam at company tt

UNIVERSITY OF ECONOMICS AND LAW FACULTY OF ACCOUNTING AND AUDITING GRADUATION THESIS AUDIT PROCEDURE FOR REVENUE AND COLLECTION CYCLE BY PWC VIETNAM AT COMPANY TT... 10 3.1 GENERAL AUD

R EPORT RATIONALE

Revenue is a critical component of financial statements, particularly for manufacturing companies, as it helps users assess business performance, estimate potential profits, and make informed investment decisions The revenue cycle involves numerous transactions over time, increasing the risk of fraud and errors, whether subjective or objective Additionally, revenue is linked to tax obligations, necessitating minimal discrepancies Therefore, this article focuses on the "Audit Procedure for Sales and Collection Cycle by PwC Vietnam at Company TT," aiming to provide readers with valuable insights into practical audit procedures for the sales and collection cycle.

R EPORT OBJECTIVES

- Describe audit procedures for sales and collection cycle at PwC Vietnam

- Illustrate audit process for revenue at Company TT (client)

- Analyze and assess for the audit procedure for revenue at PwC Vietnam

- Clarify the extent of compliance with Vietnamese Standards on Auditing in the audit procedures.

R EPORT METHODS

- Observe and perform practically the engagement, then simulate the process by numerical information

- Get specific insight by making inquiry from associate and senior staff, who have experiences in the audit

- Reference from the archived engagement and the thesis in the previous period.

R EPORT SCOPE AND LIMITATIONS

- Scope: Audit procedure for sales an collection cycle of PwC Vietnam at Company TT

The sales and collection cycle presents unique challenges that vary significantly across different industries and client types, particularly in terms of payment terms and operational nature This article specifically addresses manufacturers, highlighting that their risk in this area is generally lower compared to sectors like finance, banking, and construction.

R EPORT STRUCTURE

The structure of this report is as follows:

Chapter 1: Introduction to PwC Vietnam

Chapter 3: Audit procedure for Sales and Collection cycle

INTRODUCTION TO PWC VIETNAM

I NTRODUCTION TO P W C G LOBAL

Founded in 1984, William Cooper was the precursor to PwC Global, which underwent seven name changes before becoming Cooper Brothers, primarily serving the business industry In 1998, the merger of Price, Holy Land, and Waterhouse created the largest auditing firm in history, leading to the rebranding of Cooper Brothers as PriceWaterHouseCoopers, commonly referred to as PwC.

I NTRODUCTION TO P W C V IETNAM

PricewaterhouseCoopers (PwC) established its presence in Vietnam in 1994 and was rebranded as PricewaterhouseCoopers (Vietnam) Co., Ltd on May 30, 2017 Operating within a global network headquartered in the United Kingdom, PwC Vietnam collaborates closely with its regional counterparts, including PwC Thailand, PwC Cambodia, PwC Laos, and PwC Malaysia.

Over the past two decades, PwC Vietnam has successfully expanded its customer network to all 63 provinces and cities nationwide, establishing strong relationships with key officials across various industries and financial institutions This growing trust from both domestic and foreign organizations has solidified PwC Vietnam's reputation as a reliable partner for a diverse range of clients.

S ERVICES OF P W C V IETNAM

PwC Vietnam provides high-quality, industry-focused services to clients by creating and cultivating strong interpersonal relationships to truly understand their client

PwC Vietnam offers a range of specialized services, including Deals and Consulting, tailored to meet the needs of specific client groups such as private firms and enterprises from Japan, Korea, China, and Taiwan, while also providing similar services to those of PwC Global.

O RGANIZATIONAL STRUCTURE OF P W C V IETNAM

The structure consists of six department as figure 1:

The Assurance line enhances the financial performance and operational integrity of businesses by ensuring compliance with various reporting standards This department aids organizations in refining their external financial reporting and adapting to evolving regulatory requirements, including the Vietnamese Accounting System, Vietnamese Accounting Standards, and International Financial Reporting Standards (IFRS).

Consulting line provides a wide range of service:

- Deals Strategy: Corporate Strategy Business, Market Entry Strategy, Merger & Acquisition Strategy

PwC Legal Vietnam’s services provide an unrivalled level of support to clients, in fields:

- Corporate compliance / entity governance compliance

Accounting department manages the company's cash flow including receipts and expenses such as administrative expenses, travel expenses

IT department manages employees’ electronic devices and solves technical issue raised by staff via support center site

HR department is responsible for planning projects, allocating human resources to job and calculate salary monthly.

LITERATURE REVIEW

A UDIT

Assurance services, as defined by Arens, Elder, and Beasley (2012), are independent professional services that enhance the quality of financial statement information for users These services are highly valued due to the perceived independence and objectivity of the assurance provider regarding the examined information Business decision-makers seek assurance services to increase the reliability and relevance of the information that underpins their decisions.

In a financial statement audit, management claims that the statements are accurately presented in line with relevant U.S or international accounting standards This audit serves as an attestation service where the auditor provides a written report expressing their opinion on the fairness of the financial statements in accordance with the applicable standards Audits are the most prevalent assurance services offered by CPA firms.

Auditing involves gathering and assessing evidence to evaluate the alignment of information with established criteria, and it must be conducted by a qualified, independent auditor For an effective audit, the information must be verifiable, and specific standards must be in place for evaluation The criteria used can differ based on the type of information being audited; for instance, CPA firms may use U.S generally accepted accounting principles (GAAP) or International Financial Reporting Standards (IFRS) when auditing historical financial statements.

Auditors play a crucial role in examining accounting data to ensure that the recorded information accurately represents the economic events of the accounting period To effectively evaluate this information, auditors must have a comprehensive understanding of U.S and international accounting standards, which serve as the benchmarks for proper recording practices.

S ALES AND COLLECTION CYCLE

Audits involve breaking down financial statements into smaller components, making the process more manageable and allowing for task delegation among audit team members Each segment is audited individually, while still considering its interrelationships with other segments Once all segments are audited, the results are consolidated to form a comprehensive conclusion about the overall financial statements.

A common way to divide an audit is to keep closely related types (or classes) of transactions and account balances in the same segment This is called the cycle approach

Figure 2: Accounts in the Sales and Collection cycle Source: Arens, Elder and Beasley (2012)

The sales and collection cycle involves the flow of accounting information through various accounts, as illustrated in Figure 2 This cycle comprises five distinct classes of transactions that facilitate the management of sales and collections efficiently.

1 Sales (sales cash and sales on account)

4 Write-off of uncollectible accounts

5 Estimate of bad debt expense

Sales represent the total economic benefits an enterprise gains during an accounting period from its regular production and business activities, ultimately contributing to the growth of the owner's capital.

According to Vietnam Accounting Standard 14 (200

According to the matching principle, turnover and associated costs from the same transaction must be recognized simultaneously Costs, including those arising after the delivery date, like warranty expenses, are typically determined when the conditions for turnover recognition are satisfied Additionally, any advance payments made by customers should be recorded as payable debt rather than turnover at the time of receipt.

Accounts receivable represent the amounts owed to your business by customers for products or services that have been billed This total is recorded as current assets on the balance sheet and encompasses invoices related to goods or services provided on credit.

R ISK

2.3.1 Risk of material misstatement of Revenue

Revenue from goods sold and services rendered is a critical component of financial statements, serving as a key indicator for users to assess a company's operational performance and business scale Consequently, this revenue item is exposed to significant risks, which can lead to potentially misleading financial statements.

- In many cases, determining the appropriate time and amount to recognize revenue requires judgements, for example, with regard to multi-year construction or service contract revenue

- Revenue is closely related to profit and loss results Therefore, misstatements on revenue directly result in dishonest and unfair profit

- Revenue is also the basis for evaluating results or achievements, so they are likely to be overstated

- Revenue is closely related to tax, it is also likely to be underreported to evade taxes and tax avoidance

2.3.2 Risk of material misstatement of Accounts Receivable

Accounts receivable from customers is an asset class that is quite sensitive to frauds such as fraud appropriation or embezzlement

Accounts receivable from customers is an item that correlate to revenue, so it subject to the use of tricks to inflate the sales and profits of the business

Receivables must be reported at their net realizable value, but the estimation of bad debt provisions by management can lead to significant inaccuracies and auditing challenges.

A UDIT OBJECTIVE

Auditors often face challenges in obtaining complete assurance regarding the accuracy of each transaction class, which leads to uncertainty about the final accounts receivable balance To enhance overall assurance, it is common practice to audit the ending balance of accounts receivable Generally, auditors have discovered that a combination of assurance for each transaction class, along with the ending balance in related accounts, is the most efficient and effective approach for conducting audits.

The occurrence assertion in financial statements verifies that recorded transactions and accounts genuinely took place during the accounting period For instance, management claims that the documented sales transactions reflect actual exchanges of goods or services that occurred.

Completeness in financial statements ensures that all transactions and amounts that should be reported are accurately included For instance, management asserts that every sale of goods and services is recorded and reflected in the financial statements.

The completeness assertion focuses on the risk of omitting transactions and accounts that should be recorded, contrasting with the occurrence assertion, which addresses the inclusion of transactions and accounts that should not be recorded Violations of the occurrence assertion lead to account overstatements, while violations of the completeness assertion result in account understatements For instance, recording a sale that did not happen violates the occurrence assertion, whereas failing to record a legitimate sale constitutes a breach of the completeness assertion.

The accuracy assertion ensures that transactions are recorded at their correct amounts, highlighting the importance of precise pricing in sales transactions Errors such as using incorrect prices or miscalculating the total of price times quantity can lead to significant violations of this assertion.

Classification: The classification assertion addresses whether transactions are recorded in the appropriate accounts Recording administrative salaries in cost of sales is one example of a violation of the classification assertion

The cutoff assertion ensures that transactions are recorded in the correct accounting period For instance, recording a sales transaction in December when the goods are actually shipped in January would breach this important principle.

The valuation and allocation assertion ensures that assets, liabilities, and equity interests are accurately reflected in financial statements at appropriate amounts, including necessary adjustments for fair value or net realizable value For instance, management claims that property is recorded at historical cost, which is then allocated to relevant accounting periods through depreciation Additionally, it is asserted that trade accounts receivable on the balance sheet are presented at net realizable value.

The assertion of rights and obligations examines if the assets belong to the entity and if the liabilities represent its obligations at a specific date For instance, management claims that the company owns its assets, and that the amounts recorded for leases on the balance sheet reflect the costs associated with the entity's rights to leased properties, while the related lease liability signifies the entity's obligations.

AUDIT PROCEDURE FOR SALES AND COLLECTION

G ENERAL AUDIT PROCEDURES FOR SALES AND COLLECTION CYCLE AT P W C

During the audit process, the audit team evaluates the client's provided documents, regulatory compliance, and the overall operational discipline of the enterprise to gain insights into its accounting practices They assess the client's internal control system through targeted questionnaires, inquiries, face-to-face interviews, and by gathering relevant documentation, including diagrams and flowcharts A thorough understanding of these elements is essential for the audit team's assessment.

- Client's business environment and industry

- Accounting standards, model and other rules applied or held by the Company that affects the enterprise’s activities

- Specific accounting policies of the enterprise

- The company's operational goals, strategies and business risks

- Assess the department's business situation and financial capabilities

- Consider important contracts and new provisions or major changes to contracts in identifying the risk of material misstatement

Auditors must exercise professional judgment to uncover potential weaknesses in a client's operating system and procedures, as customers often hide these issues This critical assessment enables auditors to gather essential information and provide an informed opinion on the accuracy and fairness of the financial statements.

In order to get understanding of client, the auditor must collect information as follows:

- Gather information for risk assessment by interviewing managers and employees about the possibility of fraud

- Visiting production and business facilities, offices to approach and observe about design and operation of the internal control system

- Collect and learn internal company documents such as Meeting Minutes, Board of Directors, Organizational structure chart, Company Discipline

- Share information among the auditors in the group and consult from the preceding auditors

3.1.2 Evaluation of the internal control system for sales and collection cycle a The following contents should be checked when evaluating the internal control system:

- Consider the organizational structure, responsibilities, and manager attitude toward business management

- Examine the manager's operating style, attitude toward staff, integrity, and ethics

- Examine the division of responsibility and authority, as well as the ability to detect and prevent fraud

Regulations must be strictly adhered to during material control activities to ensure compliance It is essential to analyze key operational processes and enhance understanding of process controls Additionally, assessing the influence of information and communication, especially regarding data, is crucial for optimizing accounting work organization Key considerations include the integration of these factors for improved efficiency and effectiveness.

- Is the company's computer software designed to ensure that data is processed correctly?

- Are transactions entered manually or automatically transferred to the book?

- Is the accounting system consistently applied in entities of the company?

To gather sufficient audit evidence regarding a client's internal control system, auditors must engage with management to review the information collected Additionally, auditors should identify any weaknesses in the control system and provide guidance to the company on improving these controls, ultimately aiding in the detection and prevention of fraud.

An audit program and a guidance for the auditor's performance are designed based on the understanding of the client and the client's internal control system

3.1.4 Conduct audits of sales and collection cycle

- Select and view documents and invoices that are approved by the right person in charge and made in accordance with regulations

- Interview and discuss with responsible people to see if the internal control program is fully complied with, the departments have assigned responsibilities, compare, contrast, check each other

- Check signature for credit approval

- Consider, total each type of goods invoice, compare with the price list to ensure that the invoice has the correct price for each item

To ensure accuracy in shipping and invoicing, select a sample of shipping documents and related invoices for comparison This process involves verifying the continuity of orders, shipping documents, and sales invoices to identify instances where goods have been dispatched but not officially received.

3.1.4.2 Perform substantive test on Revenue a Prepare Lead Schedule:

From the balance sheet, after it has been reconciled to the General Ledger and the Income Statement, the auditor prepares a Revenue’s lead schedule sheet

The auditors should carry out the following step:

- Check the mathematical correctness of the total amount

- Compare the figure on the comparative year with the previous year's audit work b Perform analytical procedures

- Analytical procedures are performed as follows:

Step 1: The auditors create report of the company's sales for the period based on relevant and reliable data

Information that is frequently used:

- Outside information: about the company's production and operation industry, competitors, relevant socio-political economic situation

- Information gleaned from within the organization

- Information from previous auditors and group auditors

Step 2: Subtract the current year's figure from the previous year's figure

Step 3: Conduct an investigation to determine the source of the discrepancies

To analyze sales performance, compile a comprehensive list of each item's revenue for the specified period Calculate key financial ratios and benchmark them against industry standards and competitors to identify any unusual fluctuations in revenue.

- An examination of the revenue development trend

- Using objective documents, calculate total sales revenue and compare it to total recorded revenue to determine the period's revenue's reasonableness

- Analyze trends by comparing sales of individual products or product groups in the month before and after the balance sheet date

Analyze the trend of returned goods and their impact on selling prices relative to total revenue over time, as well as the average revenue across different periods Additionally, assess the recorded revenue to gain insights into overall performance.

Audit objective: Completeness, Existence/Occurrence, Accuracy

The auditors select the items that have been recognized in the revenue account and follow the steps below:

- Verify that all sales invoices have been issued and the customer code associated with those sales has been recorded correctly

- Consider the occurrence of transactions in the period when choosing samples on general ledger and request the company to provide sales invoices for these transactions

- Select samples based on the invoice population and compare them to the general ledger to determine whether the company recognizes those sales This step ensures completeness assertion

- Confirm that the sales invoice is mathematically correct

Auditors should verify the unit price on the invoice against the approved price list to ensure accuracy It's essential to confirm that any special terms, including sales discounts and other agreed-upon concessions, have been authorized by the relevant departments.

Choose documents related to delivery of goods (bills of lading, commercial contracts, etc.) and proceed as follows:

- Compare the above documents to the sales invoice regarding type, specification, quantity and so on

- Check that the terms of foreign trade contracts (FOB, CTF ) are properly implemented, particularly during revenue recognition d Examine for returned goods:

The audit objective is to identify sales returns recognized in the period they occurred, ensuring that all returns are thoroughly documented and accurately recorded.

Pay a special attention to Sales Returns with abnormally high value and carry out as follows:

- Verify the mathematical accuracy of the returned sales invoices

- Confirm the price calculation by comparing it to the original sales invoice

- Ensure that the returned sales invoice was signed and received by an authorized individual

Select Credit Notes to obtain reasonable assurance by following the steps below:

To ensure accurate financial records, compare the total number of returned goods with the corresponding Credit Notes, and reconcile the documentation for these returns with the Credit Notes issued It is essential to verify that all selected Credit Notes are accurately reflected in the General Ledger.

- If the Credit Notes is numbered continuously, the auditor must take note of number of the invoice when checking details e Check out the special offers

Audit objective: Existence/Occurrence, Completeness and Accuracy

When recording sales discounts in the ledger, choose the relevant entries carefully If discounts are directly deducted from sales, ensure they are reflected in the debit column of the sales revenue account or associated accounts.

Check the selected journal entries:

- Ensure that the discount is signed and received by authorized individuals in accordance with regulations

- Investigate whether the discount is due to damaged or faulty goods or services

- Determine whether discounts and rebates issued after the balance sheet date may be included in the period's discount or rebate

3.1.4.3 Conducting substantive testing on customer receivables a Perform analytical procedure

Audit objective: accuracy, existence, completeness

Step 2: Establish the maximum acceptable deviation

Step 3: Determine the difference between the auditor's prediction and the company's actual number

Step 4: Investigate and determine the source of the differences

- The auditors perform a volatility analysis on the accounts receivable

- Request Accounts Receivable Trial Balance showing the balance of accounts receivable, including balances from new customers this year and customers with large balances from the previous year

Auditors analyze financial ratios by comparing them to competitors and industry benchmarks Key metrics include the turnover of receivables, calculated as average accounts receivable divided by net sales, and the average collection period, which is determined by dividing the receivables balance at year-end by total revenue and multiplying by 360.

Comparing financial ratios enables auditors to enhance their understanding of a company's operations and assess the likelihood of discrepancies in financial statements These indicators have evolved due to various factors.

- A shift in the company's credit policy, such as a reduction or expansion

- The possibility of a accumulated bad debt in the company's accounts receivable, which is related to making provision for bad debts

- Human errors and frauds: duplicate or omitted accounts receivable from customers b Accounts Receivable Confirmation

Auditors send confirmation letters directly to third parties; however, if management declines to send a letter to a specific third party, the auditor must investigate the reasons behind this refusal It is essential to thoroughly review all evidence supporting management's explanation and to implement alternative procedures as necessary.

Determine the percentage of total receivables from customers that have been mailed by confirmation as of the balance sheet date

After receiving the confirmation letter:

- Reconcile the balance on the confirmation letter with the balance on the detail sheet

- Calculate the difference between the confirmation mail and detail table balances c Test translation for Foreign Accounts Receivable

Auditors verify that the ending balances of Accounts Receivable comply with accounting standards by ensuring they are adjusted according to the exchange rate on the cut-off date Specifically, it is essential that adjustment entries are accurately recorded in the appropriate accounts.

Auditors carry out the following tasks:

- Request client to provide detail listing of Foreign Accounts Receivable at the cut-off date, which illustrate the balances of customers in foreign currency and accounting- based currency

- Auditors recalculate the profit or loss from exchange rate

- Collect the exchange rate provided by Bank and Sampling on list of unpaid invoices to verify how clients imply the exchange rate

- Reconcile the figure of the profit or loss from exchange rate to the related accounts such as financial income and financial expense d Analysis of bad debt expenses

G ENERAL INFORMATION ABOUT C OMPANY TT

Registered name (Official name): TT Company Limited

Equity: According to the Company’s Investment Certificate, the Company’s investment and charter capital is VND2,168,846,431,822 (Equivalent USD100,000,000)

Location: Nhon Trach II Industrial Zone, Phu Hoi Commune, Nhon Trach District, Dong Nai Province, Vietnam

The Company primarily engages in the production of diverse yarn types and the weaving of fabrics, excluding dyeing processes, while also managing import and export operations.

Input: Cotton bale (Raw material)

Fiscal year: From 1 st January 2021 to 31 st December 2021

U NDERSTANDING OF REVENUE CYCLE AT TT

TT (Vietnam) Ltd is a manufacturer of cotton fiber (yarn) The Company is a subsidiary of TS Corporation At TT, the customers that are traded are all chosen and introduced by

All customers have been found and approved by the TS and uploaded into the Company System to share with TT

Sales staffs in charge in TS perform all suitable procedures with customers, then send a copy of Purchase Order to Ms Thao and Ms Thanh to start sale activities

Sales orders are then created in the TT’s system, which only allows a selection of customers that is approved by TS for TT to create the Sales orders for

The sales order is submitted to TS for review and approval, requiring signatures from the head of the operations department, Mr Yang, and the preparer Upon approval, the confirmation is forwarded to TT for execution, either via Delivery Truck or Email.

3.3.2 Price List & Sales Return Policy

Price for individual product code is determined separately under each sales report which approved by general director, sales director, production manager

There is no pricelist for the whole product code, and the price is set out, reviewed and approved by Mr Chien - GD on the sales order

There is no official or specific return policy The term of return or delay payment is depending on relationship with specific customers

For goods to be delivered out of the warehouse, appropriate and sufficient documents must be given to the warehouse manager before goods are permitted to leave

The documents required for goods discharged are different regarding the type of sale

When goods are dispatched from the warehouse, a Goods Dispatch Note (GDN) is generated and printed from the system The products are then loaded onto the truck, which subsequently arrives at the security gate for a final inspection, including weight verification and quantity confirmation.

Upon completing the delivery process, the Goods Delivery Note (GDN) must accurately reflect the actual quantity delivered and must be signed by the Note Preparer Additionally, the Warehouse Manager's signature, along with the stamp and signature of the Security Guard, is required for verification.

A full set of documents including approved GDN, invoice, good delivery confirm must be submitted to security staff for passing security gate

For local sales, the typical payment term is T/T, requiring a partial payment of the sales value before the goods are released from the warehouse Generally, customers visit the office to complete their payment prior to picking up their merchandise.

Once money is received, a "Cash Receipt" document is created and signed to verify receipt by Mr Yang (Head of Operations Department) and Mr Chen (Head of Treasury Department)

After completing the necessary stages, the essential documents, including the approved sales order and the signed cash receipt, will be forwarded to the warehouse for the discharge of goods.

Export sales typically involve payment terms based on a Letter of Credit (LC), wherein the customer's bank makes payment promptly upon the arrival of goods at the customer's port.

For this procedure, the LC is required to be received before the sales order could be sent to the warehouse for goods discharge

A Letter of Credit (LC) serves as a secure guarantee issued by a customer's bank and managed by the bank of the beneficiary, significantly reducing the risk of non-payment Once the LC documents are received and verified by the staff, the payment process is initiated with confidence.

LC document and approved sales order could be sent directly to the warehouse for goods discharge without the verification of the head of operation departments

In exceptional cases where goods are released from the warehouse without advance payment for TT, typically for special clients with a close business relationship with TT & TS, Ms Thanh must document the situation and provide an explanation in the system Additionally, she is required to prepare an approval slip to obtain TS's consent before the goods are dispatched from the warehouse.

The GDN was established within the system after the SO and delivery notice were secured Subsequently, invoices are generated by Ms Thao, the local sales administrator, and Ms Thanh, the export sales administrator.

Upon the issuance of the Goods Delivery Note (GDN), the warehouse manager will notify Ms Thao or Ms Thanh, the sales admin, to generate invoices for customers These invoices can be delivered directly through the driver or a designated individual responsible for the customer, or alternatively, they can be sent indirectly via Skype as a scanned copy.

All necessary documentation, including the packing slip and commercial invoice, has been prepared by the team in TS at Bien Hoa and submitted to Mr Chien, the General Director, for review and approval.

Ms Thanh, an export sales staff member at TT, will receive a confirmation phone call from TS, after which she will access the system to print the export control list and send it to the supply chain team to initiate the export process Additionally, TS is responsible for processing the Custom Declaration and Bill of Lading.

Then, AR accountants receive invoices from sales staff and GDN from warehouse to perform 2-way matching to verify the information before recording revenue into system

AR accountants do not verify sales orders, as the parent company's guidelines mandate only a 2-way matching process between invoices and Goods Delivery Notes (GDN) They clarified that both the GDN and invoice are generated from the details of the approved sales order, making any additional verification redundant.

Before such recording, AR accountants perform 2 ways matching: cross check the quantity between invoice and GDN, and then recording process

Daily, cash accountants print out bank statement or credit advice then send to AR accountant to update cash receipt timely

At the end of the day, cash accountant performs bank reconciliation to identify any missing record but not in formal written form, just only scanning by eyes

Cash receipt recorded timely based on informing of cash accountant upon receiving payment from customer

Cash count is performed daily but not in formal form to make sure that all cash receipt and payment recorded completely and accurately

Payment slip made by receiver, checked by Operation Manager based on bank statement Journal voucher is made by preparer and approved by CA

AR accountants record individual transactions for each pending invoice as follow:

Cr VAT Output (For Local Sales Only)

AR accountants manage local and export sales by utilizing a list of pending invoices within the system to accurately record sales transactions This list comprises all invoices generated by the sales department that have not yet been recognized as revenue Once an invoice is recorded in the sales ledger, it is automatically removed from the pending invoices list, effectively preventing any potential double recording of sales.

AR accountants meticulously monitor the pending list and ensure all invoices are accurately recorded daily The system mandates that revenue recognition aligns with the invoice date Once the entries are posted, AR accountants generate a revenue report accompanied by supporting documents, including the invoice and Goods Delivery Note (GDN), for the Chief Accountant's review and approval.

E STABLISH MATERIALITY

The PwC Vietnam has 3 main materiality levels:

Overall materiality refers to the maximum misstatement in financial statements that could influence an investor's decisions This metric is influenced by several factors, particularly the effectiveness of the internal control systems in place.

Performance materiality is set below overall materiality to reduce the risk of errors to an acceptable level, ensuring that the total impact of both uncorrected and identified misstatements remains within the bounds of overall materiality.

The de minimis level (SUM) refers to the smallest amount of misstatement that necessitates an adjustment entry, signifying the threshold at which an adjustment is deemed material and significant In certain instances, a misstatement may fall within the SUM range yet still be considered material, prompting auditors to engage in discussions with the client and issue necessary adjustment entries.

The entity has a long-standing operational history, with non-current assets primarily consisting of depreciated machinery, while revenue has remained consistent over the years Consequently, auditors establish materiality based on a target percentage of profit before tax from operations for the overall financial statements.

In particular, TT Company’s materiality levels are determined as follow:

Overall Materiality (OM) is equal to 10% of earning before tax and interest (EBIT), and equivalent to VND20,000,000,000

Performance Materiality (PM) is equal to 75% of OM, and equivalent to VND15,000,000,000

SUM is equal to 10% of OM and equivalent to VND2,000,000,000

Work sheet was illustrated on the planning document (see Appendix 1).

A UDIT APPROACH

The Test of Controls (ToC) is performed within the sales and collection cycle, beginning with an assessment during the planning phase This process helps auditors gain a comprehensive understanding of customer interactions, ensuring a solid foundation of confidence in the effectiveness of internal controls.

- Substantive test is checking documents and nature of the entries on revenue, accounts receivable and related accounts

The Analytical Procedure is a method used to reconcile total revenue with transactions and entries within a financial year This process involves analyzing variations throughout the year and comparing them to a prior year for context Employing this approach during audits is recommended as it helps minimize the need for extensive testing, ultimately saving time and effort.

T EST OF CONTROLS

PwC audit guide has given the number of samples needed for test of controls as follows:

Figure 5: Audit guide for sampling in Test of Controls Source PwC

In regard to PwC audit guide, we selected 25 samples for test of controls for the entire sales cycle based on the initial understanding in the planning phase

- Check whether Sale Orders are approved and signed (see Figure 6)

Per sales report < Control over sales quantity (1.1) ->

Sample No Date Account Description Customer Original amt VND equivalent Sales Order

Approve by head of sales dept

3 1/22/21 5112.01 DOANH THU:0003998 GLOBAL(VN) 784,365,120 784,365,120 LKY200080 Y

5 3/16/21 5112.02 DOANH THU:0000273 TOP STAR 65,631.38 1,508,865,426 QHF200087 Y

7 6/25/21 5112.02 DOANH THU:0000959 CHINA CTEXIC 69,850.00 1,599,574,389 QJV210027 Y

10 9/30/21 5112.02 DOANH THU:0001395 TOP STAR 34,077.00 771,835,217 QHF210043 Y

11 7/26/21 5112.02 DOANH THU:0001140 DI DONG IL 82,498.04 1,890,030,096 QGY210033 Y

13 8/24/21 5112.02 DOANH THU:0001270 HANSOLL TEX 73,698.39 1,674,795,913 QTU210009 Y

15 10/23/21 5112.02 DOANH THU:0001462 CHINA CTEXIC 69,850.41 1,582,111,786 QJV210041 Y

17 7/10/21 5112.01 DOANH THU:0001059 SEWANG VN 1,054,512,043 1,054,512,043 LTU210069 Y

- Check whether GDN is well managed and reviewed (see Figure 7)

- Two-way matching: AR accountants check the quantity per invoice and per GDN If such information matched, then recording process (see Figure 8)

GDN No GDN date Verified by

Invoice No Invoice date Amount

Sign off by AR accountant &

- Check cash collection: Daily cash receipt reconciliation checked by Operation manager, cash receipt transactions are reviewed and approved by CA (see Figure 9)

- Revenue Recording Approval: check whether revenue recording in the system attached with supporting documents (invoice and GDN) for Chief accountant's review and approval (see Figure 10)

Payment slip agreed with bank statement

Payment slip approved by Operation Manager

Journal voucher approved by CA

NA NA NA NA not yet receipt NA

NA NA NA NA not yet receipt Y

NA NA NA NA not yet receipt NA

The test of controls has yielded results that uphold the planned confidence level of the audit, while also indicating that the number of samples required for testing remains relatively low.

A NALYTICAL PROCEDURE

During the client understanding phase, the auditor identified that the customer improperly classified sales of scraps as other income, leading to inconsistencies with the Vietnamese accounting system and an understatement of both revenue and expenses Consequently, an adjustment was made to rectify these discrepancies.

Cr Revenue from sales of scraps 158,717,273,916

Objective: Analyze and detect exceptional variance in revenue (see Figure 12)

- Auditors collect the figures for opening balance and ending balance as follows:

Opening balance was rolled from the signed Financial Statements from the previous period

Ending balance was collected from current data that was reconcile between general ledger, trial balance and subsidiary ledger

Unadj Current Period 01.01.2021 - 31.12.2021 Adjustments Adj Current Period

FS, TB, GL PwC Cal PwC Cal Cal

- Auditors calculate the variance and conduct inquiry to investigate the nature of the variance

Over the past two years, both domestic and export sales have remained relatively stable, largely influenced by government policies aimed at controlling COVID-19 However, a notable decline in sales occurred starting in August 2021 due to lockdown measures, with a subsequent recovery observed in November 2021.

Objective: Analyze the correlation between revenue and cost of sales

- Gather the data for revenue and cost of sales by month

- Calculate gross margin over the months

The gross margin has significantly risen from 5% to 14.7% compared to the previous year, likely attributed to a modest revenue increase in the first half of 2021 driven by higher prices and market demand, while the cost of sales remained consistent with last year.

The COVID-19 pandemic has led to a nationwide lockdown since August 2021, causing gross margins to plummet to negative figures of -3.1%, -4.4%, and -15.8% in August, September, and October, respectively According to the chief accountant, the primary reason for this decline was the rising cost of sales, which included expenses for COVID-19 testing for workers and associated costs for maintaining three-site production The peak decline of -15.8% in October was largely due to decreased revenue as workers returned to their hometowns following an extended lockdown period.

S UBSTANTIVE TEST ON SALES

3.8.1 Test revenue transactions for completeness

- We obtained list of sales invoices in the year and performed review sequential number of invoices number

- The first invoice number of 2021 is 3859 and checked to the last of 2020 which is 3858

- For missing invoice in the year, we performed inquiry to client which are incorrect invoice due to typing mistake of quantity of warehouse staff

From this, we ensure the completeness of invoice in the year:

Upon reviewing the list, we identified several duplicate invoice numbers This occurrence is attributed to sales reports documenting each line item on invoices that encompass various types within a single invoice No exceptions were noted in these instances.

For those cases that the invoice number is not sequential:

- We inquired Mr Gary – CA for the list of incorrect invoces during the year to verify (see Figure 14)

We obtained the list of canceled invoices from MS Tu - GA and reconciled it with the tax return submitted to the tax authorities Since the tax return is an external source, we can trust this data No exceptions were noted in these cases.

To ensure the completeness and appropriateness of sales in figure:

- We reconciled with FS, GL

- We also performed accept - reject testing: we check to invoice for ensure the quantity out and unit price recorded is accuracy

We tested 55 samples because we set the risk level significant (see Appendix 10)

Result: there is no difference in quantity and unit price between sales report and invoices

No Invoice missing per slae sreport Check to report BC26/AC Listed in the report Reason for Cancellation Preparer BC26/AC Approver BC26/AC Exception noted?

1 0000027 Quarter 1 Yes Delete Nguyen Thi Kieu Wu Chung Yao No

The objective of test sale transactions is to ensure assertions: Accuracy, Existence/Occurrence

We conducted control tests to achieve a moderate level of assurance regarding the occurrence assertion Consequently, we executed sales transactions and tested payments for these transactions throughout the period to ensure adequate coverage.

Total population : 1,694,325,704,596 Number of items : 4,508

Figure 15: Summary for test revenue transaction Source: PwC

Each sample would be compared to specific documents as follow:

- Commercial invoice: commercial invoice number, invoice date, invoice amount

- VAT invoice: VAT invoice number, invoice date, invoice amount

- Bill of lading: Document reference, term of sales, risk and reward transferred date

- Cash receipt: Document reference, document date, amount

Figure 16: Template for test revenue transaction

Thanks to the support of the sampling system, this section was tested on 204 samples (see Figure 16) Based on the documents, the samples must address requirements:

- All associated costs of sale have been incurred or can be measured reliably (e.g warranty costs)

- No remaining involvement or effective control of the goods (e.g non-standard post sale conditions such as significant installation of goods)

- Based on evidence obtained, entity's conclusion regarding probable transfer of benefits appears reasonable

- Revenue recognized in accordance with accounting policy and in correct period

Result: There is variance between recalculated number and sale report, which is below PM level, so it could be passed, and auditors did not required any further procedures

Returned goods at Company TT are below the SUM figure in 2021, so auditors did not carry out any procedure To be prudent, auditors requested the client to provide Credit

Notes after a reporting period to make sure that there were no returned goods in 2022 relating to Revenue in 2021

Understanding: cut-off risk is at significant level as described

Objective: to ensure sales was recorded in the correct period

Due to the factors mentioned and restrictions on movement caused by COVID-19, shipping times will be longer than usual To ensure prudence, we will allocate a total of 21 days for testing sales exports and 3 days for local sales, excluding Sundays.

1 5112.02 銷貨收入-製成品-外銷 doanh thu bán các thành phẩm-xuất khẩu 2101165501 TAIHAN 1/16/2021 USD 74,800 1,718,906,068 Y Y Y Y Y

5 5112.02 銷貨收入-製成品-外銷 doanh thu bán các thành phẩm-xuất khẩu 2101075501 ILSHIN 1/7/2021 USD 66,490 1,529,938,121 Y Y Y Y Y

6 5112.02 銷貨收入-製成品-外銷 doanh thu bán các thành phẩm-xuất khẩu 2101125501 TOP STAR 1/12/2021 USD 66,146 1,520,029,794 Y Y Y Y Y

7 5112.02 銷貨收入-製成品-外銷 doanh thu bán các thành phẩm-xuất khẩu 2101165504 DAENONG 1/16/2021 USD 65,761 1,511,183,644 Y Y Y Y Y

8 5112.02 銷貨收入-製成品-外銷 doanh thu bán các thành phẩm-xuất khẩu 2102205503 RAMATEX 2/20/2021 USD 65,727 1,506,125,956 Y Y Y Y Y

9 5112.02 銷貨收入-製成品-外銷 doanh thu bán các thành phẩm-xuất khẩu 2102055505 DAENONG TEX 2/5/2021 USD 63,825 1,463,503,352 Y Y Y Y Y

10 5112.01 銷貨收入-製成品-內銷 doanh thu bán các thành phẩm-nội địa 2101305501 PANGRIM 1/30/2021 VND 988,938,720 988,938,720 Y Y Y Y Y

11 5112.01 銷貨收入-製成品-內銷 doanh thu bán các thành phẩm-nội địa 2101275506 GLOBAL(VN) 1/27/2021 VND 784,365,120 784,365,120 Y Y Y Y Y

18 5112.01 銷貨收入-製成品-內銷 doanh thu bán các thành phẩm-nội địa 2101205503 NAMTEX 1/20/2021 VND 626,444,280 626,444,280 Y Y Y Y Y

19 5112.01 銷貨收入-製成品-內銷 doanh thu bán các thành phẩm-nội địa 2102235510 V.K 2/23/2021 VND 390,277,440 390,277,440 Y Y Y Y Y

22 5112.01 銷貨收入-製成品-內銷 doanh thu bán các thành phẩm-nội địa 2102235508 TEXTILES 2/23/2021 VND 294,490,728 294,490,728 Y Y Y Y Y

23 5112.01 銷貨收入-製成品-內銷 doanh thu bán các thành phẩm-nội địa 2102235507 LEADER 2/23/2021 VND 267,261,120 267,261,120 Y Y Y Y Y

32 5112.01 銷貨收入-製成品-內銷 doanh thu bán các thành phẩm-nội địa 2101295509 POLYTEX 1/29/2021 VND 177,829,344 177,829,344 Y Y Y Y Y

33 5112.01 銷貨收入-製成品-內銷 doanh thu bán các thành phẩm-nội địa 2102225501 TUONG PHAT 2/22/2021 VND 173,093,760 173,093,760 Y Y Y Y Y

34 5112.02 銷貨收入-製成品-外銷 doanh thu bán các thành phẩm-xuất khẩu 2103175506 ZENSHIN 3/17/2021 USD 29,484.00 677,542,320 Y Y Y Y Y

Transaction date per detailed listing Currency

Transaction amount per detailed listing in denominated currency

Transaction amount per detailed listing equivalent to VND

All associated costs of sale have been incurred or can be measured reliably (e.g warranty costs) (Y/ N)

No remaining involvement or effective control of the goods (e.g non-standard post sale conditions such as significant installation of goods) (Y/ N)

Based on evidence obtained, entity's conclusion regarding probable transfer of benefits appears reasonable (Y/ N)

Revenue recognized in accordance with accounting policy and recorded in correct period (Y/ N)

Figure 17: Working paper for test revenue transaction

Testing Method: Targeted until untested amount below PM

Cut-off date : 31 st December 2021 Total population : VND96,931,185,798

Sample unit : Each line of items

Desired level of evidence : High

Figure 18: Summary for cut-off test Source PwC

Result: Two sales on 27 th December was recorded as revenue in 2021 whose risk and rewards were transferred in early 2022 (See figure 19)

We raise SUM adjustment to address cut-off error as below:

Figure 19: Working paper for cut-off test

S UBSTANTIVE TEST ON A CCOUNTS R ECEIVABLE

We performed calculation for the AR turnover for 2021 and compare it with 2020 to have a view on the company's business operation (see Figure 21)

AR turnover days decreased 5 days, which was compared to 31.12.2020

AR turnover ratio increased compared to the same period This ratio shows that TT managed its receivables better, and it is reasonable because Covid-19 situation has improved

As at 31.12.2021, accounts receivable balance decreased significantly by 25%

This balance maintained at a very low level because TT only sold goods for customers who made payment in advance

AR turn over ratio e= d/c 8.2 6.7 Period days 180.0 180.0

FSLI/accounts Adj Balance as at

Receivables from customers 103,582,393,934 138,880,546,092 (35,298,152,158) -25% Intercompany receivables 2,827,501,600 - 2,827,501,600 0% Provision for doubtful debt - - - 0%

Lead schedule - GROUP DOCUMENTATION OF ACCOUNTS

Figure 20: Lead Schedule - Accounts Receivable

Detail listing for Account Receivables is demonstrated by nature in Figure 22 and detailly in Appendix 5 (Page 51)

The local balances represent a minimal portion of the total, approximately 1% and below the SUM, leading auditors to determine that this item does not require testing Consequently, the audit of accounts receivable (AR) was focused solely on foreign customers.

Audit objective: Existence, Accuracy, Right and Obligations

Data source: detail listing of Accounts Receivable

Auditors focus on customers with account balances exceeding the predetermined materiality threshold, selecting a sample from the remaining accounts receivable They then engage in direct email communication with these customers to confirm their account balances The findings of this process are illustrated in Figure 23.

The total amount of confirmed balances: VND91,963,215,185

The proportion of confirmed balances: 88.78%

1 ZENSHIN 20110258 USD 2,249,762.08 Yes Confirming party's website 2,249,762 Original (via postal delivery) No

2 KAMHING.MA 20080003 USD 700,697.53 Yes Confirming party's website 700,698 Original (via postal delivery) No

3 WINTEX 20040132 USD 437,088.95 Yes Confirming party's website 437,089 Original (via postal delivery) No

4 SEWANG 20100146 USD 264,504.40 Yes Confirming party's website 264,504 Original (via postal delivery) No

5 TOYOSHIMA 20030195 USD 113,234.89 Yes Confirming party's website 113,234.89 - N/A Original (via postal delivery) No

6 DAENONG 20060073 USD 162,750.60 Yes Confirming party's website 162,751 Original (via postal delivery) No

7 SAMKANG 20200004 USD 78,372.21 Yes Confirming party's website 78,372 Original (via postal delivery) No

8 YAKJIN 20100173 USD 25,599.73 Yes Confirming party's website 25,600 Original (via postal delivery) No

Irrespective of the format of receipt, were there any indications that the confirmation response may not be reliable?

(Yes/No - If Yes, provide details)

Sample item Customer name per detailed listing

Customer reference number per detailed listing (customer number, invoice number etc.)

Currency Customer amount (balance, invoice) per detailed listing to be confirmed Confirmation requests sent - Testing validity of addresses Confirmation response is received

Difference between amount per confirmation and amount per detailed listing

Follow up of additional confirming party comments on confirmation (details, or N/A)

Format of receipt (mailed original, email, fax, etc)

Due to the geographical constraints posed by foreign customers, auditors were unable to receive the confirmation letter on time As a result, they conducted alternative testing by gathering outstanding invoices, totaling them, and comparing the sum with the balances recorded in the ledger.

Alternative procedures d) Supporting documentation examined (supplier statement, subsequent payment, invoice, etc) d) Supporting documentation invoive number d) Supporting documentation reference number d) Supporting documentation amount

DOCUMENTATION OF SAMPLE Sample number G/L account number

Customer name per detailed listing

Customer number per detailed listing

Currency d) Difference between amount selected for testing and amount per supporting documentation

2 1312 Account Receivable KAMHING.MA 20080003 USD

136,399.70 Invoice 2111265504 TN/21P 0001623 136,399.70 - 204,599.55 Invoice 2112085503 TN/21P 0001669 204,599.55 - 69,299.56 Invoice 2112085503 TN/21P 0001670 69,299.56 - 75,899.80 Invoice 2112145504 TN/21P 0001691 75,899.80 - 69,299.56 Invoice 2112175502 TN/21P 0001703 69,299.56 - 145,199.36 Invoice 2112275503 TN/21P 0001750 145,199.36 -

87,417.79 Invoice 2112215501 TN/21P 0001716 87,417.79 - 87,417.79 Invoice 2112215501 TN/21P 0001717 87,417.79 - 87,417.79 Invoice 2112215501 TN/21P 0001718 87,417.79 - 87,417.79 Invoice 2112215501 TN/21P 0001722 87,417.79 - 87,417.79 Invoice 2112275501 TN/21P 0001748 87,417.79 -

124,085.36 Invoice 2112205504 TN/21P 0001707 124,085.36 - 24,609.52 Invoice 2112205504 TN/21P 0001708 24,609.52 - 115,809.52 Invoice 2112295502 TN/21P 0001754 115,809.52 -

The Doubtful Debt Age Report for Accounts Receivable is generated automatically, allowing auditors to easily select customers from the report They then verify the invoice dates to ensure accurate assessment and classification of the debt age.

Currency Balance Not overdue From 6 to 12 months Over 1 year Uncollectible

Customer code Customer name Date Ref.no Invoice no Note Currency Balance Not overdue From 6 to 12 months Over 1 year Uncollectible

20200052 CHINA CTEXIC 10/12/21 2112105502 TN/21P 0001682 Phải thu tiền sợi $ 139,700.82 USD 3,199,148,778 3,199,148,778 - - -

20160019 chintex 05/11/21 2111055506 0001322 Chênh lệch tỷ giá 0001322 USD 3,192,218 3,192,218 - - -

20060073 DAENONG 23/12/21 2112235502 TN/21P 0001725 Phải thu tiền sợi $ 81,375.30 USD 1,857,798,099 1,857,798,099 - - -

20060073 DAENONG 23/12/21 2112235502 TN/21P 0001726 Phải thu tiền sợi $ 81,375.30 USD 1,857,798,099 1,857,798,099 - - -

20070178 JOY YE 16/12/21 2112165502 TN/21P 0001698 Phải thu tiền sợi $ 81,218.99 USD 1,860,727,061 1,860,727,061 - - -

20080003 KAMHING.MA 26/11/21 2111265504 TN/21P 0001623 Phải thu tiền sợi $ 136,399.70 USD 3,079,223,228 3,079,223,228 - - -

20170009 POLYTEX 03/12/21 2112035504 TN/21P 0001649 Phải thu tiền sợi VND 401,466,958 401,466,958 - - -

20170009 POLYTEX 14/12/21 2112145505 TN/21P 0001693 Phải thu tiền sợi VND 1,063,280,268 1,063,280,268 - - -

20170009 POLYTEX 28/12/21 2112285502 TN/21P 0001752 Phải thu tiền sợi VND 536,382,000 536,382,000 - - -

20200004 SAMKANG 24/12/21 2112245505 TN/21P 0001740 Phải thu tiền sợi $ 78,372.21 USD 1,788,061,971 1,788,061,971 - - -

20210033 SAMSUNG VIỆT 17/12/21 2112175503 TN/21P 0001704 Phải thu bán thứ phẩm VND 696,507,000 696,507,000 - - -

20100146 SEWANG 20/12/21 2112205504 TN/21P 0001707 Phải thu tiền sợi $ 124,085.36 USD 2,832,868,769 2,832,868,769 - - -

20100146 SEWANG 20/12/21 2112205504 TN/21P 0001708 Phải thu tiền sợi $ 24,609.52 USD 561,835,342 561,835,342 - - -

20100146 SEWANG 29/12/21 2112295502 TN/21P 0001754 Phải thu tiền sợi $ 115,809.52 USD 2,628,876,104 2,628,876,104 - - -

20210026 TEXCOPE 10/12/21 2112105503 TN/21P 0001683 Phải thu tiền sợi $ 100,018.80 USD 2,290,430,520 2,290,430,520 - - -

20040159 TOP STAR 19/02/21 2102195002 (blank) 預收貨款Thu trước tiền sợi $ 307,776.53 USD (5,119,898) - (5,119,898) - -

20040159 TOP STAR 21/12/21 2112215502 TN/21P 0001715 Phải thu tiền sợi $ 69,026.61 USD 1,573,116,442 1,573,116,442 - - -

20030195 TOYOSHIMA 23/12/21 2112235501 TN/21P 0001727 Phải thu tiền sợi $ 76,874.31 USD 1,755,040,497 1,755,040,497 - - -

20030195 TOYOSHIMA 23/12/21 2112235501 TN/21P 0001728 Phải thu tiền sợi $ 36,360.58 USD 830,112,041 830,112,041 - - -

20040132 WINTEX 21/12/21 2112215501 TN/21P 0001716 Phải thu tiền sợi $ 87,417.79 USD 1,992,251,434 1,992,251,434 - - -

20100173 YAKJIN 21/12/21 2112215503 TN/21P 0001721 Phải thu tiền sợi $ 25,599.73 USD 583,417,847 583,417,847 - - -

20110258 ZENSHIN 28/04/21 2104285504 TN/21P 0000582 Phải thu tiền sợi $ 52,617.60 USD 333,824,736 - 333,824,736 - -

20110258 ZENSHIN 22/06/21 2106225505 TN/21P 0000936 Phải thu tiền sợi $ 1,279.61 USD 904,723 - 904,723 - -

20110258 ZENSHIN 29/06/21 2106295506 TN/21P 0000984 Phải thu tiền sợi $ 357.44 USD 277,014 - 277,014 - -

20110258 ZENSHIN 20/07/21 2107205504 TN/21P 0001105 Phải thu tiền sợi $ 46,403.28 USD 74,435,033 - - - -

20110258 ZENSHIN 04/10/21 2110045502 TN/21P 0001403 Phải thu tiền sợi $ 700.36 USD 550,815 - - - -

20110258 ZENSHIN 16/10/21 2110165501 TN/21P 0001435 Phải thu tiền sợi $ 42,850.68 USD 33,494,226 33,494,226 - - -

20110258 ZENSHIN 08/11/21 2111085505 TN/21P 0001523 Phải thu tiền sợi $ 18,438.84 USD 138,129 138,129 - - -

20110258 ZENSHIN 01/12/21 2112015501 TN/21P 0001644 Phải thu tiền sợi $ 6,060.10 USD 136,897,659.00 136,897,659 - - -

20110258 ZENSHIN 04/12/21 2112045502 TN/21P 0001654 Phải thu tiền sợi $ 67,193.58 USD 1,520,926,683 1,520,926,683 - - -

20110258 ZENSHIN 09/12/21 2112095504 TN/21P 0001681 Phải thu tiền sợi $ 69,854.40 USD 1,593,378,864.00 1,593,378,864 - - -

Under Circular 48 (2019), accounts receivable overdue for six months or more require monitoring and provisioning However, due to TT's sales policy, which mandates advance payments from most customers, the company has not recorded any overdue balances exceeding six months Consequently, auditors did not perform additional procedures related to provisioning.

Auditors have asked the client to supply a detailed listing of Accounts Receivable in the original currency and to gather foreign currency price data from the bank where the customer conducts significant transactions It is essential to revalue Accounts Receivable in foreign currency at the bank's purchase price on the reporting date.

Result: the difference is below the SUM, so the auditors decided not to proceed further

Account balance in reporting currency per client

Account balance in foreign currency per client

Foreign currency Amount converted per external source Notes

PER DETAILED LISTING DOCUMENTATION OF TESTING

C OMMENT ON THE AUDIT PROCEDURES FOR REVENUE AT P W C V IETNAM

During the planning phase, PwC gained a foundational understanding of the internal control system governing the revenue cycle by conducting an initial assessment of the customer All auditors meticulously gathered, documented, and detailed their insights regarding customer policies and controls related to the sales cycle in the audit file.

Working papers are designed in a clear, concise, and systematic manner to ensure that all procedures are carried out

The process of audit procedures for revenue fully complies with applicable laws and audit regulations

The company ensures strict implementation of overall audit quality, particularly focusing on revenue, starting from the planning stage Auditors conduct quality control not just at the conclusion of the audit, but consistently throughout the entire auditing process.

PwC employs flexible auditing procedures tailored to the specific circumstances of each engagement, ensuring that their audit strategies remain efficient and relevant over time.

There is not an assignment of audit groups according to their specialization for each type of enterprise, field of business activities to increase the quality of the audit

The complexity of the working paper system leads to an audit engagement involving hundreds of tasks, resulting in significant time wastage for auditors who must mark completed tasks and for managers who review them individually.

T HE STRENGTHS AND WEAKNESSES OF THE THESIS

The author undertook an internship relevant to their major, benefiting from thorough preparation, foundational knowledge, and up-to-date legal regulations provided by university lecturers.

Information that is supported by evidence and documents in practice, which gives readers better insight into the process

Revenue is a complex area, and this article draws on limited experiences and insights from a senior auditor In the manufacturing industry, revenue poses a lower risk compared to other economic sectors, which means this report may not fully represent the overall quality of PwC's audit process.

Revenue auditing demands significant expertise and experience, making it unsuitable for trainee auditors Consequently, the resulting report reflects the indirect insights of the seasoned auditor.

During my internship at PwC Vietnam, I gained valuable insights into the audit process and corporate culture As a member of the audit team, I actively participated in various audit sections, enhancing my knowledge and skills while learning from experienced team members This hands-on experience was instrumental in preparing me for my future career By applying practical knowledge from the audit process and comparing it with my academic learning and insights from other large companies, I developed a comprehensive understanding of the revenue and collection cycle in financial statement audits.

The report contains errors due to time constraints and limited knowledge The writer seeks advice and guidance from lecturers and mentors to enhance the quality and completeness of the article.

With deep gratitude, the writer sincerely thanks MintA Bui Anh Thanh, Faculty of Accounting - Auditing, University of Economics - Law and PwC Vietnam for their help Warm Regards,

Arens, A., Elder, R., & Beasley, M (2012) Auditing and Assurance Services (12th ed.) Pearson

Ministry of Finance (2001), Decision 149/2001/QD-BTC, Decision on the promulgation and announcement of four (4) accounting standards of Vietnam (phase 1)

PwC (2021a) Planned risk assessment [Table] Understand Entity and Environment

PwC (2021b) PwC’s assessment on internal control [Table] Risk Assessment Analytics

PwC (2022c) Summary for cut-off test [Illustration] Test Sales Cut-Off

PwC (2022d) Summary for test revenue transaction [Illustration] Summary for Test Revenue

Vietnam Accounting Standard 14 (2001) Ministry of Finance

Transaction Description IPO FS assertions Frequency of control P or

1 Winning Customers and Sales Ordering x Validation!A1

1.1 Sales Order is Signed and Approved Local Sales: When a Sales order from a customer is made for TT, the sales order is first sent to TS for review and approval, The sales order must contain the Signatures of the head of department and the preparer

Export Sales: When these documents are created, it will then be sent to the head of Sales department,

Mr Yang, at TS for confirmation and approval, The sales order must contain the Signatures of the head of department and the preparer

We examined one Sample for each type of Sales as follow,

Sales Order: QJV210027 Date: 2 June 2021 Customer: CHINA CTEXIC GDN: S12 -2106-125 Signed by preparer Ms Yen and Approved by Mr Yang (Head of Operation)

On June 2, 2021, CHINA CTEXIC placed Order No QJV210027, with payment terms set at a letter of credit (LC) due in 30 days The delivery term is cost, insurance, and freight (CIF), and the bill of lading reference is OOLU4052028940 The order was prepared by Mr Wang and approved by Mr Yang, the Head of Operations.

3.1 Receipt of Cash payment from Customer is verified

Once money is received, a "Phieu Nop Tien" will be created and then signed to verify receipt by Mr

Yang (Head of Operations Department) and Mr Fang (Head of Treasury Department).

Phieu Nop Tien Number: 907DITF210220366 Customer: GLOBAL(VN) Amount paid: VND 784,365,120 Bank: CTBC Bank Date: 22 Jan 2021 Signed by Preparer and approved by Mr.Yang, checked to Bank Statement.

3.2 LC Documents are received for goods to be delivered.

The LC document and Approved Sales order can be sent directly to the warehouse for goods to be discharged without the verification of the head of departments.

LC Number: QJV0000322 Customer: TOP STAR Bank received: CTBC Bank Date of Issue: 15 Oct 2021 Amount: USD34,077 Official and formal Printed FCY Demand Account Statement from CTBC Bank

3.3 GDN is well managed and reviewed When goods leave the warehouse, a "Goods Delivery Note" will be created and printed from the system,prenumberred and goods are loaded on to the truck

The truck will then arrive at the security gate for the final check on weighting and actual quantity

At the conclusion of the delivery process, the Goods Delivery Note must accurately reflect the delivered quantity and be signed by the Note Preparer, the Warehouse Keeper, and include the stamp and signature of the Security Guard for verification.

GDN no.: S11 -2102-067 Customer: GLOBAL (VN) Date: 22 Feb 2021 Product: CMW30'S/1W Signed by Preparer, Warehouse supervisor (expat) and Security Guard and Driver.

GDN no.: S12 -2106-081 dated 18.06.2021 BOL - KMTCSGN3801368 Customer: Wintex Date: 24 Sep 2021 Product: CVCV26'S/1W Signed by Preparer Ms.Yen, Warehousekeeper and Security Guard.

4.1 Two-way matching AR accountant perform 2 ways matching : cross check the quantity per invoice and per GDN If such information matched, then recording process.

Checked to Sales Order LKY210040 and Commericial Invoice No 0000785 dated 28 May 2021 and GDN No S12 -2105-148 dated 28-05-2021 and all quantity, unit price, and total amount reconciles with each other

The sales order ZENSHIN No QBA21008, along with Invoice No T21120493A dated December 23, 2021, and Bill of Lading No KMTCSGN4026941, has been thoroughly checked, confirming that the quantities, unit prices, and total amounts are consistent and reconciled across all documents.

5.1 Daily cash receipt reconciliation, checked by

Operation manager, cash receipt transactions are reviewed and approved vy

AR accountant perform 2 ways matching : cross check the quantity per invoice and per GDN If such information matched, then recording process.

We checked to cash receipt transaction dated 18/8/2021 with bank advice ref

907ESCC212210016 dated 18/8/2021 paid for invoice no T21070350 dated 26 Jul 2021, approved by CA Y

6.1 Revenue Recording Approval After posting to the system, AR accountant will print out revenue recording in the system attached with supporting documents ( invoice and GDN) for Chief accountant's review and approval.

On July 30, 2021, we reviewed accounting voucher reference BCU-796-213467, which documented sales to SHENZHEN SM totaling USD 69,850 The voucher is accompanied by a red invoice and Goods Delivery Notes (GDNs), with all details, including amount, types of goods sold, and dates, accurately matched.

The accounting voucher sign signed by preparer - Thao, and reviewed by CA - Mr Su Yen Chang

8.1 Business Performance Review Periodically, Tainan textile will have performance meetings to revise the actual progress with the planned progress and comment on solutions/Improvements V

Reviewed the monthly meeting minutes of Business performance meeting and signed by the management N

9.1 Segregation of duties Sufficient amount of different personnel carrying out different tasks and reviewed and approved by a different party that has higher authority.

R EO Multiple times per day P M

Segregation of duties are highly seen throughout the walkthrough process.

Appendix 1: Understanding of internal control

Appendix 2: Work sheet - set materiality

31 2021 6 07 F-成品外銷 0845 20040159 TOP STAR CM30 CM30 7257.6 USD 3.78 628,700,802 CM30 7,257.60 3.78 No

34 2021 7 12 F-成品內銷 0000987 20170034 SEWANG VN BMCW40 BMCW40 -4536 VND 105,671 -20,904 BMCW40 -25 105,671 No

35 2021 7 2 F-成品內銷 0001018 20030303 NAMTEX CVCV40 CVC40 1361 VND 94,600 5,619 CVCV40 7.5 94,600 No

36 2021 7 5 F-成品外銷 0001026 20110258 ZENSHIN CMV-C30 CM30 2268 USD 3 7,076 CMV-C30 12.5 3 No

37 2021 7 7 F-成品外銷 0001040 20210024 ASIA BEST CMV30 CM30 45 USD 4 189 CMV30 0.25 4 No

38 2021 7 12 F-成品內銷 0001066 20170034 SEWANG VN BMCW40 BMCW40 9979 VND 105671 46,049 BMCW40 55 105,671 No

39 2021 8 11 F-成品外銷 0001222 20110258 ZENSHIN CVCV-C30 CVC30 9072 USD 3 30,936 CVCV-C30 50 3 No

40 2021 8 13 F-成品外銷 0001235 20060114 JUNGWOO CVCVB26 CVCVB26 2268 USD 4 8,000 CVCVB26 12.5 4 No

41 2021 8 30 F-成品外銷 0001291 20110258 ZENSHIN CMV-C25 CM25 2268 USD 4 9,117 CMV-C25 12.5 4 No

42 2021 8 31 F-成品內銷 0001302 20170046 DUCKSAN CVCV30 CVC30 9162.72 VND 78250 31,613 CVCV30 50.5 78,250 No

43 2021 9 6 F-成品外銷 0001306 20100146 SEWANG BMCW30 BMCW30 2722 USD 4 11,175 BMCW30 15 4 No

44 2021 9 7 F-成品外銷 0001313 20140088 GUNZE LIMITECMV40 CM40 4763 USD 4 20,671 CMV40 26.25 4 No

45 2021 9 20 F-成品外銷 0001350 20110258 ZENSHIN CMV-C30 CM30 907 USD 4 3,493 CMV-C30 5 4 No

46 2021 9 28 F-成品外銷 0001382 20110258 ZENSHIN CMV-C20 CM20 2676.24 USD 4 10,651 CMV-C20 14.75 4 No

47 2021 10 4 F-成品外銷 0001404 20050186 GLOBAL(VN) CVCVB30 CVCVB30 9,979 USD 72,900 800,232,048 BMCW30 9,979 72,900 No

48 2021 10 4 F-成品外銷 0001401 20180042 NEW WIDE CMV-C20 CM20 1,452 USD 4 5,835 BMCW30 1,452 4 No

49 2021 10 1 F-成品外銷 0001397 20060114 JUNGWOO CVCVB26 CVCVB26 8,346 USD 4 29,440 CVCVB26 8,346 4 No

50 2021 11 1 F-成品外銷 0001488 20110258 ZENSHIN CMV-C20 CM20 7,257.60 USD 3 25,365 CM20 7,257.60 3 No

51 2021 11 1 F-成品外銷 0001488 20110258 ZENSHIN CMV-C25 CM25 11,793.60 USD 4 42,846 CM25 11,793.60 4 No

52 2021 11 1 F-成品外銷 0001489 20060114 JUNGWOO CVCVB26 CVCVB26 7,257.60 USD 4 25,600 CVCVB26 7,257.60 4 No

53 2021 12 10 F-成品外銷 0001683 20210026 TEXCOPE CMV40 CM40 19,051.20 USD 5.25 2,290,430,520 CMV40 19,051.20 5.25 No

54 2021 12 20 F-成品外銷 0001706 20040132 WINTEX CVCVB30 CVCVB30 19,958.40 USD 3.75 1,708,688,520 CVCVB30 19,958.40 3.75 No

55 2021 12 3 F-成品內銷 20211203 2112035504 POLYTEX CMIV32 CM32 3,220.56 VND 113,325.00 364,969,962 CM32 3,220.56 113,325.00 No

Number Year Months Days Code Export/ local Invoice Customer code Customer Variety Category Quantity Curr Unit price Amount of VND Category Quantity Unit price Exception

1 2021 01 02 F2 01 成品外銷 3859 20170052 RISE SUN CMV16 CM16 12,882.24 USD 3.47 1,029,171,491 CM16 12,882.24 3.47 No

2 2021 01 02 F2 01 成品外銷 3860 20110258 ZEN SHIN CMV20 CM20 19,051.20 USD 2.48 1,087,153,010 CM20 19,051.20 2.48 No

3 2021 01 02 F2 01 成品外銷 3861 20200018 HANSOLL CVCVY26 CVCVY26 19958.4 USD 3.25 1,493,365,797 CVCVY26 19958.4 3.25 No

4 2021 2 19 F-成品外銷 0124 20200038 C&D LOGISTICCVCV30 CVC30 59,875.20 USD 2.54 3,478,533,435 CVC30 59,875.20 2.54 No

5 2021 2 23 F-成品內銷 0147 20030303 NAMTEX CMV30 CM30 3,084.48 VND 95,900.00 325,381,795 CM30 3,084.48 95,900.00 No

6 2021 2 23 F-成品外銷 0153 20040132 WINTEX CVCVB30 CVCVB30 19,958.40 USD 3.11 1,423,900,023 CVCVB30 19,958.40 3.11 No

7 2021 2 25 F-成品外銷 0162 20100173 YAKJIN CVCV30 CVC30 10,024.56 USD 2.70 620,768,527 CVC30 10,024.56 2.70 No

8 2021 2 25 F-成品外銷 0168 20200038 C&D LOGISTICCVCV30 CVC30 79,833.60 USD 2.54 4,641,080,841 CVC30 79,833.60 2.54 No

9 2021 3 16 F-成品外銷 0276 20210010 GUANG CVCV40 CVC40 3,628.80 USD 4.08 340,253,379 CVC40 3,628.80 4.08 No

10 2021 3 18 F-成品內銷 0297 20150003 TEXTILES CVCV20 CVC20 3,265.92 VND 80,200.00 288,119,462 CVC20 3,265.92 80,200.00 No

11 2021 3 20 F-成品外銷 0312 20210004 C&D (GUANGZH CVCV30 CVC30 19,958.40 USD 3.31 1,516,689,881 CVC30 19,958.40 3.31 No

12 2021 3 23 F-成品外銷 0332 20110204 GUNZE VN CMV30 CM30 4989.6 USD 3.49 400,340,963 CM30 4,989.60 3.49 No

13 2021 4 02 F-成品外銷 0431 20110258 ZEN SHIN CVC30 CVC30 1315.44 USD 3.25 98,243,636 CVC30 1,315.44 3.25 No

15 2021 4 02 F-成品外銷 0435 20060114 JUNGWOO CVC40 CVC40 14,968.80 USD 3.91 1,346,039,942 CVC40 14,968.80 3.91 No

16 2021 4 05 F-成品外銷 0445 20210004 C&D (GUANGZH CVC32 CVC32 3583.44 USD 3.36 276,852,239 CVC32 3,583.44 3.36 No

17 2021 4 05 F-成品外銷 0445 20210004 C&D (GUANGZH CVC32 CVC32 2766.96 USD 3.36 213,771,910 CVC32 2,766.96 3.36 No

18 2021 4 05 F-成品外銷 0445 20210004 C&D (GUANGZH CVC32 CVC32 10,614.24 USD 3.36 820,042,908 CVC32 10,614.24 3.36 No

19 2021 4 15 F-成品外銷 0502 20210004 C&D (GUANGZH CVC26 CVC26 6,804.00 USD 3.28 512,738,033 CVC26 6,804.00 3.28 No

20 2021 5 03 F-成品內銷 0600 20150013 TAHTONG CVC20 CVC20 226.8 VND 80,600.00 18,280,080 CVC20 226.80 80,600.00 No

21 2021 5 06 F-成品外銷 0620 20040159 TOP STAR CM30 CM30 1,406.16 USD 3.78 121,943,595 CM30 1,406.16 3.78 No

23 2021 5 11 F-成品外銷 0648 20110258 ZEN SHIN CM30 CM30 3175.2 USD 3.12 227,555,292 CM30 3,175.20 3.12 No

27 2021 6 03 F-成品外銷 0824 20140088 GUNZE LIMITECM30 CM30 13154.4 USD 3.89 1,173,854,023 CM30 13,154.40 3.89 No

28 2021 6 03 F-成品外銷 0824 20140088 GUNZE LIMITECM30 CM30 2721.6 USD 3.89 242,866,239 CM30 2,721.60 3.89 No

29 2021 6 03 F-成品外銷 0824 20140088 GUNZE LIMITECM40 CM40 14061.6 USD 4.30 1,387,064,347 CM40 14,061.60 4.30 No

30 2021 6 04 F-成品外銷 0834 20200049 TRILLION CVC32 CVC32 8663.76 USD 3.62 719,577,743 CVC32 8,663.76 3.62 No

Per sale report Per Invoice

Appendix 3: Test completeness for Revenue

Appendix 2: Target and Sample Template for sampling

Tiêu đề	Audit Procedure for Revenue and Collection Cycle by PwC Vietnam at Company TT
Tác giả	Vo Minh Truong
Người hướng dẫn	MIntA. Bui Anh Thanh
Trường học	University of Economics and Law
Chuyên ngành	Accounting and Auditing
Thể loại	Graduation Thesis
Năm xuất bản	2022
Thành phố	Ho Chi Minh City

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