Giới thiệu về doanh nghiệp đầy đủ, thể hiện sự am hiểu về ngành nghề, lĩnh vực hoạt động và cơ cấu của doanh nghiệp lý thuyết cơ bản của vấn đề nghiên cứu hoặc trình bày không có sự
Research reason
In commercial and manufacturing businesses, inventory typically represents a significant portion of total assets, making its accurate valuation crucial The complexity of inventory arises from various types, qualities, and preservation methods, each with differing prices Effective inventory management is essential for determining precise inventory values, which involves careful oversight of pricing, tracking imports and exports, and proper classification Additionally, the intricate nature of inventory operations makes them susceptible to fraud and misstatements, which can adversely impact key financial indicators such as liabilities, taxes, cost of goods sold, and production costs.
The graduation thesis titled “Audit Procedures for Inventories by Grant Thornton (Vietnam) Limited at ABC Company” focuses on the significance of inventory accounts in practical applications versus theoretical frameworks It aims to analyze and discuss the audit procedures related to inventory at the internship unit, highlighting the essential role of inventory management in enterprise operations.
Research objectives
- Describe the audit procedures at Grant Thornton (Vietnam) Limited
- Describe the audit procedures of inventories at Grant Thornton (Vietnam) Limited for the ABC client
- Comments and recommendations on the audit procedure of inventories at Grant Thornton (Vietnam) Limited.
Research methodologies
To enhance understanding of Grant Thornton (Vietnam) Limited's audit procedures for inventories, it is essential to gather and review comprehensive information from various sources, including accounting standards such as VAS and IFRS, as well as relevant documents and regulations.
During the audit procedure, data from ABC Company was processed, supplemented by the collection of relevant documents and direct customer interviews Collaborative discussions with experienced auditors, including senior and assistant managers, as well as instructors, were conducted to address any challenges encountered.
Research scope and limitations
This article focuses on the audit procedures for inventories specifically during the audit phase with clients of Grant Thornton As an intern, the author is limited to participating in certain phases and aspects of these procedures Additionally, the data and information presented are intended for illustrative and reference purposes only, as Grant Thornton prioritizes the information security of its clients.
- Because of time constraints during the internship period, as well as limitations on both knowledge and the author's expertise, the research has not yet been into reality deeply.
Research structure
In addition to the overview chapter, there are three major chapters as follows:
- Chapter 1: Introduction about Grant Thornton (Vietnam) Limited
- Chapter 2: Audit procedures for inventories at Grant Thornton (Vietnam) Limited
INTRODUCTION ABOUT GRANT THORNTON (VIETNAM)
General information about Grant Thornton (Vietnam) Limited
Figure 1: Logo Grant Thornton (Vietnam) Limited Source: https://www.grantthornton.com.vn/
- The Company’s name was accepted: Grant Thornton (Vietnam) Limited
- Type of business: Limited Liability Company with two members or more
- Email: Grant.Thornton@vn.gt.com
- Website: https://www.grantthornton.com.vn/
Head office of Grant Thornton (Vietnam) Limited
Address: 18th floor, Hoa Binh International Tower, 106 Hoang Quoc Viet, Nghia Ward Do, Cau Giay District, Hanoi City
Legal representative: Mr Nguyen Chi Trung - General Director
Ms Nguyen Thi Vinh Ha - Deputy General Director
Branch office of Grant Thornton (Vietnam) Limited
Address: 14 th floor, Pearl Plaza Building, 561A Dien Bien Phu, Ward 25, District Binh Thanh, Ho Chi Minh City
Legal representative: Mr Nguy Quoc Tuan - Deputy General Director
History and development of Grant Thornton (Vietnam) Limited
Grant Thornton Vietnam, established in 1993 as an independent member of Grant Thornton International, began as a joint venture with Concetti In 1997, it transitioned to a fully foreign-invested company and subsequently opened a branch in Ho Chi Minh City.
- Grant Thornton International accepted Grant Thornton Vietnam as a full member in
1998 In 1999, the firm changed its name to Grant Thornton (Vietnam) Limited
- In 2007, Grant Thornton Vietnam was recognized as an independent auditing firm for listed enterprises
- Another year has come to an end, and 2014 has been a watershed moment Grant Thornton Vietnam Ltd and Nexia ACPA Auditing & Consulting Co Ltd ("ACPA") officially merged on July 1, 2014
Services of Grant Thornton (Vietnam) Limited
Audit and assurance services encompass a range of critical financial evaluations, including statutory audits, IFRS services, and reviews of financial statements and information These services also involve the role of a reporting accountant, the compilation of financial data, and specialized audits such as cross-border audits and US GAAP audits Additionally, agreed-upon procedures are conducted to ensure compliance and accuracy in financial reporting.
Our comprehensive tax services encompass licensing assistance, international and expatriate tax planning, expert tax advisory, and compliance services We also offer tax health checks, transfer pricing solutions, and thorough tax due diligence Additionally, we provide guidance on customs and international trade, support for M&A transactions, and strategic advice on selecting the ideal location in industrial zones for your business Our team is dedicated to delivering robust tax audit support to ensure your compliance and optimize your tax strategy.
- Advisory Services: business risk services, transaction advisory services, valuation, business consulting services
Our business process solutions encompass a range of services designed to enhance operational efficiency, including comprehensive accounting services, tax compliance through outsourcing, and secondment or loan staff solutions We specialize in compiling both financial and non-financial information, conducting thorough reviews and improvements of accounting systems, and providing initial setup for accounting and tax frameworks Additionally, we offer management accounting and analysis to support informed decision-making.
- DigiTech Innovation: technology consulting and solutions, digital advisory
- International Corporate Structuring Services: offshore company establishment service and private trust advisory
Grant Thornton (Vietnam) Limited developed six basic principles, known as CLEARR values, in addition to a distinct worldwide culture
Collaboration: ask for help, give help – we work well together
Leadership: have courage and inspire others – we challenge each other to be the best we can be
Excellence: find a better way every time – we never get complacent
Agility: think broadly, act quickly – we thrive in change
Respect: listen and understand, be forthright – we create honest relationships
Responsibility: use influence wisely – we own our actions
Grant Thornton (Vietnam) Limited embraces diversity, enabling the company to effectively respond to the demands of a fast-evolving global landscape Committed to inclusivity, Grant Thornton does not discriminate based on ethnicity, race, religion, gender, sexual orientation, gender reassignment, pregnancy, marital status, age, or disability, fostering a workplace that values every individual's unique contributions.
Grant Thornton is dedicated to community engagement through its initiative, "Growing Together in the Community," which is founded on six guiding principles This program emphasizes the significant positive influence individuals can have by actively participating in their communities Numerous inspiring team members from Grant Thornton live and work globally, offering innovative, generous, and resourceful services that enhance their local areas.
Organizational structure of Grant Thornton (Vietnam) Limited
Grant Thornton Vietnam's main office is located in Hanoi, complemented by a branch in Ho Chi Minh City Each department operates independently while offering mutual support during their activities This compact organizational structure aligns with the company's management standards, fostering a professional and efficient working environment.
Share Owner: Mr Kenneth Atkinson
The Branch Director oversees all operations within the branches, ensuring effective management and coordination Mr Nguyen Chi Trung serves as the Director of the Hanoi branch, while Mr Nguyen Quoc Tuan holds the position of Deputy Director at the Ho Chi Minh City branch.
Departments: audit and assurance, tax advisory, outsourcing, Digitech, and management (including supporting and IT)
Figure 2: Organizational structure of Grant Thornton (Vietnam) Limited
Audit and Assurance Department in Ho Chi Minh City Branch
Figure 3: Organizational structure of Audit and Assurance Department
Partner/DirectorSenior ManagerManagerAssistant ManagerSeniorAssociateInternee
The position of the Internees
This year, the company is hosting 20 interns, with plans to retain approximately 15 high-performing individuals as official employees after the internship period Interns will collaborate with experienced auditors, gaining valuable insights and support throughout their training The manager oversees the assignment of client companies for each intern, ensuring a structured learning experience.
During the internship, participants will develop essential soft skills, including document printing, scanning, and handling confirmation letters and contracts Once they acclimate to their roles, interns will transition to official employees, collaborating directly with client companies alongside experienced staff This hands-on experience will immerse interns in the real-world auditing environment, allowing them to observe the auditing process closely Consequently, interns will significantly enhance their teamwork and communication skills throughout this experience.
- First-year internees will perform operations such as cash, fixed assets, equity, and expense items on the income statement.
Technological applications
Voyager is a comprehensive software solution designed to streamline the entire audit process by connecting all auditors on a single platform It tailors audits to align with the specific characteristics and risks associated with each client, ensuring a more efficient and effective auditing experience.
- TBEAM: assists auditors in automatically creating a digital balance sheet arising from customers’ data, creating a steering chart, making audit adjustments, and creating a unified working paper, connected with Voyager software
IDEA is a widely-used data query software licensed by Grant Thornton that enhances auditors' efficiency by saving time and enabling more thorough analyses This tool reduces the reliance on IT specialists and increases procedural stability Key functionalities of IDEA include data extraction, table of contents creation, sorting, data aggregation, file comparison, field statistics, sampling, calculations, and outputting information from other programs, all of which streamline the auditing process and facilitate account selection for checks.
AUDIT PROCEDURES FOR INVENTORIES AT GRANT
The general audit procedures for financial statements at Grant Thornton (Vietnam) Limited
2.1.1 The general audit procedures for financial statements at Grant Thornton (Vietnam) Limited
Figure 4: The general audit procedure for FSs at Grant Thornton (Vietnam)
• Obtain an understanding of customer company's operations, control environment, accounting and financial reporting systems.
• Agree on a timetable for service delivery.
• Manager and senior are responsible for this stage.
• Use Grant Thornton's understanding to identify financial statement risks.
• Customise Grant Thornton's audit approach to focus our efforts on the financial statement risks identified.
• Manager and senior are responsible for this stage.
• Evaluate whether significant accounting applications and financial reporting systems are well-controlled and whether such controls are effective.
• Based on the result of this evaluation, design appropriate audit tests.
• Manager and senior are responsible for this stage.
• Use IDEA to peform testing and analyse financial data files.
• Audit prorams call for the use of IDEA, which help teams thoroughly and quickly execute tests.
• Senior is responsible for this stage.
• Bring together all the work performed by the audit team.
• Confirm that the financial statements make sense and ensure the delivery of a high-quality audit, based on the most experienced team members' understanding of customer company.
• Senior is responsible for this stage.
2.2.2 Comparison between Vietnamese and International Accounting Standards for inventory items
VAS 02 (2001) and IAS 02 (2003) provide essential guidelines for inventory accounting, focusing on the definition of inventory, the principles of applying inventory accounting, and the methods for determining and calculating the value of inventory These standards serve as a foundation for accurate bookkeeping and the preparation of financial statements.
Both IAS 02 and VAS 02 state that inventories are assets that:
Held for sale in the ordinary course of business (finished good),
In the process of production for such sale (work in process – WIP),
Raw materials are essential inputs in the production process or service delivery, and effective inventory accounting relies on key principles such as Matching, Prudence, and Consistency Accurate measurement of inventory is crucial for maintaining financial integrity and operational efficiency.
Both IAS and VAS require that the net realizable value of inventories is measured at the original cost They have the same formula for calculating Net Realizable Value (NRV):
NRV= expected selling price – cost incurred to make them ready for sales – estimated selling cost
Cost of inventory = costs of purchase + costs of conversion + other costs
When calculating the costs of inventory purchases, it is essential to consider the total purchase price along with non-refundable taxes, shipping, handling, and storage expenses Additionally, any costs directly related to inventory purchases, such as trade discounts and merchandise discounts due to improper purchases or quality issues, should be deducted from the overall purchase cost, in accordance with IAS 02 Clause 11 and VAS 02 Clause 06.
Costs of conversion: Cost directly related to the unit of production; fixed and variable production heads that are incurred in converting materials into finished goods, allocated on a systematic basis
Other costs: any other costs should only be recognized if they are incurred in bringing the inventories to their present location and condition d) Disclosure on the financial statement
IAS 02 clause 36 and VAS 02 Clause 27 all stipulate financial statements main, the enterprise must present:
Applicable accounting policies in inventory valuation, including inventory valuation method;
Original cost of total inventory and the original cost of each type of inventory classification suitable for enterprises;
Provision value for goods price reduction inventory;
Decreased provisional reversal value inventory prices;
Cases or events lead to additional deductions or refunds provision for devaluation of inventories;
Carrying value of inventory (Original cost - provision for devaluation of inventory warehouse) has been used for mortgage, security pledge guarantee for payables
The influence of foreign exchange rates does not affect inventory
VAS 02 does not mention inventory including land and other assets held for sale (according to IAS 02 – clause 10 and VAS – clause 3)
IAS 02 (clause 10) mentions that inventory including land and other assets held for sale
Inventory should be recorded at historical cost; however, if the Net Realizable Value (NRV) falls below this cost, the inventory must be stated at NRV In such cases, a provision for the devaluation of inventories is necessary, reflecting the difference between the cost and the NRV.
Inventories should be reported at the lower of cost or net realizable value (NRV), as outlined in IAS 02 This standard emphasizes that if the net realizable value is lower than the cost, a reduction in inventory value should be recorded This approach aligns with the principle of recognizing assets at a value that does not exceed the estimated realizable amount from their sale or use, ensuring accurate financial reporting.
VAS 02 introduces four methods of inventories costing with equal ranking:
In IAS 02, only three methods are mentioned Prohibition of Last - in, first - out as a cost formula
The object of provision establishment
All kinds of materials, products, and goods in stock The difference between the book price and the buying or selling price Conditions: Ensure the business does not suffer losses
Inventory items for sale primarily consist of finished goods and production materials Finished goods are valued based on the difference between their realizable value and book value, while inventories designated for production are assessed by the difference between their replacement cost and book price Production inventories are only released when the market demand for finished products declines.
Disclosure on the financial statement
The financial statements must reflect the difference between the value of inventories presented in the balance sheet and the value of ending inventories calculated using four different methods
Present the cost of inventory on the income statement cost classification by function
The revised International Accounting Standard IAS 2 has eliminated the LIFO method of calculating the cost of inventories
Table 1: Differences between VAS 02 and IAS 02
The audit procedures for inventories at Grant Thornton (Vietnam) Limited 28
Figure 5: The audit procedure for inventories (source: Grant Thornton)
Audit risk assessment Materiality establishment
Research about the customer and the customer's operating environment
Identify risks of material misstatement
Determine a reasonable percentage Assess the likelihood that risks at the assertion level could cause a material misstatement
Analytical test Purchasing test Costing test Pricing test
Net realizable value checking and provision establishment for inventories devaluation
Ending of the audit work
Research about the internal control system
2.2.1 Planning phase a) Audit risk assessment
At Grant Thornton (Vietnam) Limited, the risk assessment process adheres to ISA 315 and VSA 315 standards, necessitating auditors to identify and evaluate risks of material misstatement at both the overall financial statement level and for specific transaction types, account balances, and disclosures, considering potential errors or fraud Additionally, establishing materiality is a crucial component of this assessment.
In the audit planning phase, the engagement team must establish the planned materiality for the financial statements, which includes overall Materiality, Performance Materiality, and Trivial Amount This process enables the auditor to define the scope and nature of risk assessment procedures, identify and evaluate the risks of material misstatement in the financial statements, and determine the appropriate nature, timing, and extent of audit procedures.
The auditor assesses the effectiveness of the client's internal control system by gathering evidence, which informs the decision on the appropriate number of tests for controls and substantive tests concerning inventory items.
The auditor evaluates the current year's inventory fluctuations against the previous year's data, focusing on key metrics like sales, cost of goods sold, and inventory turnover This analysis helps determine if inventory movement aligns with expected ratios Consequently, the auditor gains a comprehensive understanding of the business's inventory status, enabling a more effective testing approach.
2.2.2.2.2 Test of details procedure a) Inventory observation test
Witnessing the inventory is an extremely important procedure that helps auditors determine the quantity and part of inventories quality as follows:
- Step 1: Prepare to witness inventories
- Step 2: Conduct to witness inventory which includes witnessing based on the inventory list and checking, and comparing with inventory data
- Step 3: Process data, make inventory records, and report to superiors b) Purchasing test
After verifying the inventory records against the customer's trial balance, the auditor examines purchase transactions This involves interviewing the accountant to ensure that purchase vouchers are sequentially numbered and filtering inventory transactions that have increased during the period Subsequently, the auditor utilizes IDEA to run samples for testing, allowing for a thorough examination of the relevant purchases.
The auditor requests the accountant to gather purchase documents for selected samples and reviews invoices and contracts For imported items, the auditor also verifies the bill of lading to confirm both departure and arrival dates.
To establish the opening balance of the work-in-progress account, it is essential to refer to the audited figures from the previous year, in accordance with ISA 510, which governs the audit of the opening balance for the fiscal year Additionally, conducting a costing test is a crucial step in this process.
The auditor reviews the client's cost calculation file and examines the method used for determining the inventory costs By recalculating and comparing these figures with the client's results, the auditor identifies any discrepancies and assesses their impact on the cost of finished products stored in the warehouse This analysis enables the auditor to make necessary adjustments to ensure accurate pricing.
Circular 200/2014/TT-BTC outlines three inventory cost calculation methods: weighted average, specific identification, and first-in first-out Auditors will interview clients to determine the method used for inventory issuance and verify that purchase documents are consecutively numbered This process helps auditors decide which recent purchase documents to inspect, ensuring an effective cut-off test for accurate inventory assessment.
The auditor interviews key personnel to verify the sequential numbering of purchase documents, ensuring accurate tracking of the first and last documents This process helps confirm that this year's inventory is correctly accounted for in the following year, and that next year's inventory is appropriately planned for the current year, thereby maintaining the integrity of financial records.
The auditor's assessment of inventory timeliness is crucial for determining the value of goods in transit, utilizing professional judgment while reviewing invoices, contracts, or bills of lading for imports Additionally, the auditor verifies the net realizable value and establishes provisions for inventory devaluation.
The auditor assesses how the client manages obsolete and damaged goods, ensuring provisions are made for such inventories For normal inventories, they analyze the current and next year's income statements to identify price differences and estimate the selling costs, typically around 5% of the total cost of sales This evaluation includes a discussion with accounting to confirm inventory valuation Finally, the auditor reviews the client's provisioning practices and makes necessary adjustments in compliance with circular 48/2019/TT-BCTC.
2.2.3 Ending of the audit work
The procedures that the audit team leader does to complete the audit are:
The inventories procedures of Grant Thornton (Vietnam) Limited at ABC Company
2.3.1 General information of ABC Company a) Listed information
ABC Company Limited is a sole member limited company operating in the Socialist Republic of Vietnam, authorized under Investment Registration Certificate No 3254831900, issued on May 15, 2018, by the Management Board of Industrial Zones of Dong Nai Province The company is also registered under Business Registration Certificate No 3603132192, issued on September 27, 2017, by the Planning and Investment Department of Dong Nai Province, along with subsequent amendments, collectively referred to as the "Investment Certificate," which supersedes the initial Investment Registration Certificate.
472043001074 dated 18 December 2013 and its amendments issued by the Management Board of Industrial Zones of Dong Nai Province
- The main activities of the Company are to perform export and import authority, wholesaling, and retailing distribution for glues and emulsions
- The Company's authorised investment and charter capitals as in investment certificate, are VND659892,200,000 (equivalent to 30,300,000 United States Dollars ("USD")) and VND237,862,870,000 (equivalent to USD10,868,000), respectively
Figure 6: Trial Balance of inventory from 01/01/2021 to 31/12/2021 (source: ABC
Company) b) Fiscal year and accounting currency of ABC Company
- The fiscal year of the Company is from 1 January to 31 December
- The financial statements of the Company are prepared in Vietnamese Dong (“VND”) c) Accounting policy for inventories at ABC Company
Inventories, including work-in-process, are valued at the lower of cost or net realizable value, where cost encompasses direct materials, direct labor, and applicable overheads incurred to bring the inventories to their current state The cost is primarily calculated using the weighted average method and includes fixed and variable overhead allocations for processed inventories based on normal operating capacity Net realizable value is determined by the selling price in the ordinary course of business, minus costs for completion, marketing, and distribution, while accounting for damaged, obsolete, and slow-moving items A provision for inventories is established to estimate losses from impairment of raw materials, finished goods, and other inventories, based on evidence of impairment available at the balance sheet date.
- The Company applies the perpetual method of accounting for inventories
2.3.2 The inventories procedures at ABC Company
Risk assessment serves as the cornerstone of the audit process By gaining a comprehensive understanding of the customer and their internal control systems, the audit team conducts a thorough risk assessment This enables them to design and implement targeted procedures to effectively address the identified risks.
During the internship, the author gained insights into various companies and received valuable support from audit assistants, ultimately selecting a production company, ABC client, to demonstrate the audit procedures for inventory.
The detailed information about ABC company is presented in the working paper:
“Understanding the Entity and its environment” (Appendix 1)
- After researching ABC company’s operating environment as well as its inventory accounting method, the auditor has risk assessments that the company should pay attention to as follow:
Economic: ABC Company is affected by lacking profitability or quality earnings and a poor economic outlook (inflation, unemployment, or unstable economic conditions)
External: ABC Company needs to concentrate on markets, products, services, customers, or suppliers
Going concern: ABC Company has to face liquidity problems existing or negative cash flows from operations
Nature of transactions: ABC Company has significant and/or complex related party transactions
Operating: ABC Company is subject to foreign exchange risk
Source: Extracted from Risk Indicators Summary (Appendix 2)
Incorporating VSA 320 "Materiality in Audit Planning" into the Grant Thornton (Vietnam) Audit Manual necessitates that the audit team exercises professional judgment while evaluating materiality, taking into account the requirements of the financial statements Auditors are tasked with gathering documentation to confirm that the financial statements are free from material misstatements Consequently, the audit process is structured to detect potential misstatements in significant items or groups of items.
- During the audit, the auditor must identify performance materiality to assess the risks of material misstatement and to determine the nature, timing, and scope of additional audit procedures
- Selection benchmark: Earnings Before Tax (EBT)
Grant Thornton (Vietnam) Limited selects EBT as the ideal benchmark due to the company's consistent profitability and the assessment of its business operations as normal, making EBT a significant indicator for evaluation.
The benchmark was established at 10% due to the auditor's industry experience and a history of no material misstatements or risks in prior audits Additionally, the company's internal control system is considered to be relatively effective.
Overall Materiality (OM) - Materiality for the financial statement as a whole: 4,274,656,000 VND
Performance Materiality (PM) - Acceptable error level (75% of Overall Materiality): 3,205,992,000 VND
Trivial Amount (TA) - Ignoreable error level (5% of Overall Materiality): 213,733,000 VND
Adjustment entries are necessary when discrepancies arise between the auditor's findings and the customer's reported figures In such cases, the auditor will implement adjustments to reconcile the differences identified during the audit process.
An adjustment journal entry should be made when the difference between the total amount (TA) and the permissible margin (PM) falls within a specific range However, if the cumulative effect of any omitted entries surpasses the permissible margin, the auditor must evaluate whether the adjusted entry should be acknowledged.
Difference > PM: adjust AJE (Adjustment Journal Entry)
- In addition, RAJE (Reclassify Adjustment Journal Entry) is an entry that reclassifies arising transactions into the correct nature of each account
2.3.2.3 Test of control procedure for inventories items
The auditor evaluates the client's internal control system to ensure its proper functioning, which influences the number of required control and substantive tests This assessment is shaped by the management and employees of the organization and aims to achieve three key objectives: ensuring efficient and effective operations, maintaining reliable financial reporting, and ensuring compliance with laws and regulations.
ABC Company has been a long-standing client of Grant Thornton (Vietnam), which conducted initial audit tests and found the internal control system to be effective In subsequent years, the auditor has maintained trust in this system, opting to conduct interviews to identify any changes in controls, responsible personnel, or approval processes If no changes are detected, the auditor relies on interviews for control testing and proceeds directly to substantive testing without redoing the control tests.
- The following will research the internal control system for inventory from order creation to purchasing raw materials to receiving goods into the warehouse, paying with suppliers, and managing inventory
Figure 7: Inventory memo (Excerpt from Grant Thornton's working paper)
Objective: To ensure Control over Purchase process was designed and implemented properly
Satge Works Responsibility Authorised by Output documents Remark
Related Department Draft Purchase Request
- Tranfer to Board of Director for approval
- Board of Director will review and approve PR BOD N/A Approved Purchase Request
- Make Purchase Order ("PO") Draft Purchase Order
- Trasnfer to BOD for approved PO Approved Purchase Order
- Confirm PO with supplier and make contract Contract
- Payable Accountant review and match information between PR, PO, GRN, contract and Invoice before signing PAR and transfering for Chief Accoutant's approval
Warehouse Staff Warehouse Manager Goods Receipt Note Security
- Purchasing department has reponsibility for record all information in documents Purchasing Purchasing Supervisor N/A
GT select a transaction below to perform walkthrough test
Ngày ghi sổ, ngày lập chứng từ, mã chứng từ, số chứng từ, mã khách hàng, tên khách hàng, tên tài khoản, diễn giải, tài khoản đối ứng, net, vụ việc, mã chứng từ là các thông tin quan trọng cần ghi chép trong quản lý tài chính và kế toán.
14/07/2021 14/07/2021 PN M21-07-022 22500910 Công ty TNHH Hóa Chất Công Nghệ Samsung Việt Nam Nguyên liệu, vật liệu chính Dung môi Vinyl Acetate Monomer HĐ 8643/ Vinyl Acetate Monomer chemical Inv 8643 1521 331111 869,816,160 PNA
To Công ty TNHH Hóa Chất Công Nghệ Samsung Việt Nam
The Head of the Sales Department generates a Purchase Request (PR) based on sales planning and sales reports, ensuring that purchasing needs and stock levels are carefully evaluated to adjust the quantity of goods purchased appropriately.
-When receiving approved PR, purchasing department contact with suppliers to negotiate about price, trading term, payment term …
- Purchase department make Payment Request ("PAR") when received Invoice from clients and transfer to Payable Accountant for making payment
All payment require "GD" signature
The purchasing department notifies the warehousing team about the expected delivery time Upon receipt of goods from suppliers, the warehouse clerk inspects the seal, code, quantity, and quality of the items, ensuring they match the Packing List before processing the goods.
Receipt Note ("GRN") which will be reviewed by Warehouse keeper
Walkthrough INV.pdf Payment.pdf
Process Description Risk Risk controlling
The supplier's representative receives information from ABC Company and prepares a quote that outlines the transaction terms Subsequently, the Director collaborates with the representative to negotiate these terms and assess the supplier's details.
COMMENTS AND RECOMMENDATIONS
General comments about the audit procedures for inventories at Grant
- For each different type of business, the auditor flexibly applies the process audit for each specific customer
- Before each inventory or audit, the audit team leader always has a "kick-off" meeting to provide necessary information about the nature and characteristics of the inventory
Grant Thornton outlines essential steps for managing inventory closures, emphasizing the importance of internal controls for auditors They employ detailed testing methods, including "sheet to floor" and "floor to sheet," to verify the accuracy and completeness of inventory records This dual approach ensures that auditors can confirm both the availability and adequacy of inventory, providing a reliable assessment of the client's stock management practices.
Grant Thornton employs a stringent and cautious inventory audit method, recognizing inventory as a significant asset for the company Their rigorous test procedures include not only witnessing the physical inventory but also necessitating auditors to perform an additional "Roll up" procedure for inventory dates prior to the balance sheet date This approach ensures the accuracy of the inventory balance reflected in the financial statements, demonstrating the firm's commitment to caution and professional responsibility.
Audit procedures for inventory verification, such as cost of inventory checks, net value assessments, and cut-off tests, provide reliable audit evidence for the ending inventory balance These procedures are specifically designed to focus on key inventory assertions, including existence, completeness, valuation, accuracy, rights, and obligations, ensuring a comprehensive audit process.
Inventory procedures adhere strictly to regulations and audit standards, allowing auditors to significantly reduce time and costs through the use of advanced audit software.
The company ensures strict adherence to audit quality reviews, particularly concerning inventory procedures, starting from the planning phase Auditors maintain quality control consistently throughout the entire audit process, rather than only at the conclusion of the audit.
- If there are problems in the implementation process of the above control levels, appropriate advice will be given to help the audit team
- Furthermore, working papers are designed concisely and systematically, ensuring that all procedures are followed
Inventory management varies significantly across different industries, making it challenging to apply a standardized audit process tailored to each specific business The effectiveness of the audit largely depends on the auditors' experience and their understanding of the particular business sector This often results in a mechanical approach to testing, which may not align with the unique characteristics of the industry, ultimately wasting time and hindering the achievement of inventory objectives.
- The audit process is applied according to the sample audit program (Audit Manual), which is built in a general way, so it does not cover all issues that arise
- In addition, the company's Audit Manual is set up entirely in English and contains some relatively difficult terms, making it challenging for auditors to understand.
Experience learning from the internship period
I would like to express my gratitude to Grant Thornton for the invaluable opportunity to intern here, which has greatly enriched my understanding of the auditing profession Throughout my internship, I gained insights into the audit cycle of financial statements and learned about auditing various components such as cash, expenses, and fixed assets, along with essential procedures like sending confirmation letters and conducting client interviews I also developed a strong adherence to company regulations and a commitment to supporting my colleagues Maintaining a professional demeanor when interacting with clients was emphasized, and my Excel skills improved significantly, allowing me to complete tasks more efficiently and effectively manage numerical data.
Recommendations
At Grant Thornton, auditors are facing an increasing workload during audit season, which is creating pressure on audit teams and leading to inefficiencies in staff performance This high-pressure environment often drives auditors to consider switching to industry roles To address this issue, it is suggested that Grant Thornton not only focus on training and coaching employees but also implement strategies to retain experienced staff and attract new talent to the company.
- The company should regularly organize training sessions to improve the knowledge of the staff Thus, the auditor can limit errors that may occur when conducting procedures
3.3.2 Recommendations about inventories procedures at Grant Thornton (Vietnam) Limited
Inventory is a crucial current asset, making it essential to maintain a solid existence base The primary risk lies in conducting inventory observations, prompting the author to offer several recommendations for enhancing the quality of inventory monitoring.
- For old customers: auditors interview relevant people and must show on working papers the results and content of the interview
Before conducting an inventory audit, the auditor must thoroughly comprehend the nature of the inventory, the warehouse layout, and the storage processes at the client's facility It is essential for the auditor to gather information from various sources, including books, specialized magazines, and online resources, while also directly observing the client's operations to ensure that the inventory data collected is accurate and objective.
During warehouse audits, it is crucial for auditors to carefully observe their surroundings, including the facial expressions and attitudes of individuals present They should also assess the physical inventory for any unusual odors or discrepancies that may indicate irregularities.
Inventory varies in nature and characteristics across different enterprises, making it essential for auditors to develop tailored inventory guidelines for each customer unit During the inventory counting process, it is crucial to assess both the quantity and quality of the inventory Additionally, inexperienced staff should always be accompanied by seasoned professionals to ensure accurate and effective inventory management.
After completing over three months of internship at Grant Thornton (Vietnam) Limited, the author gained valuable hands-on experience in auditing while adapting to the company's professional and friendly culture This internship has proven to be an essential practical lesson, significantly shaping the author's future career as an auditor.
The author gained a comprehensive understanding of audit procedures, particularly regarding fixed assets, by studying company documentation, conducting interviews, and participating in actual audits Through hands-on experience at client companies, the author observed the complete audit process, enhancing their practical knowledge Additionally, this experience provided valuable insights from colleagues in a dynamic and professional working environment.
The graduation thesis may contain errors due to constraints related to time, qualifications, and practical experience The author welcomes constructive feedback from lecturers and senior auditors to improve the work.
Sincerely thank Ms Truong Thi Hanh Dung and colleagues in Grant Thornton for their dedicated help and support during the internship period
1 Grant Thornton (Vietnam) Limited Audit Manual
2 Website: https://www.grantthornton.com.vn/vi/
3 Customer ABC's data provided in the fiscal year 2021
4 System of Vietnamese accounting standards, standard No 02, 2001, Inventory
5 The Ministry of Finance, Circular 48/2019/TT-BCTC, Instructions for installation and handling of properties, goods, services, constructions and products, goods, services, and constructions warranty
6 Ministry of Finance (2014), Circular 200/2014/TT-BTC, Guidance on corporate accounting regime, Hanoi
7 System of Vietnamese auditing standards, standard No 315, 2012, Identify and assess the risks of material misstatement through an understanding of the entity and its environment
8 System of Vietnamese auditing standards, standard No 320, 2012, Audit Evidence
9 System of Vietnamese auditing standards, standard No 500, 2012, Materiality in audit planning
10 Vietnam Association of Certified Public Accountants (VACPA), Model Audit Program 2019, Hanoi.
Understanding the Entity and its environment
Appendix 1: Understanding the Entity and its environment
Information regarding the entity’s industry
General situation of the economy
In the third quarter of 2021, Vietnam's Gross Domestic Product (GDP) saw a significant decline of 6.17% compared to the same period in the previous year, marking the largest drop since the quarterly GDP calculations began Overall, for the first nine months of 2021, GDP growth was limited to just 1.42% year-on-year, largely due to the severe impact of the Covid-19 pandemic, which forced many key economic regions to enforce prolonged social distancing measures to curb the spread of the virus.
In the third quarter of 2021, GDP indicators showed a 2.83% decline in final consumption compared to the previous year, while accumulated assets rose by 1.61% Additionally, exports of goods and services experienced a 2.51% increase, whereas imports surged by 10.75%.
- CPI: Consumer price index (CPI) in September 2021 decreased by 0.62% compared to the previous month, increased by 1.88% compared to December 2020 and compared to the same period last year, CPI in
In September 2021, the Consumer Price Index (CPI) rose by 2.06% During the third quarter of 2021, the CPI saw an increase of 0.93% from the previous quarter and a notable 2.51% compared to the same period in 2020 Over the first nine months of 2021, the CPI recorded an overall increase of 1.82% compared to the same timeframe last year.
In September 2021, core inflation experienced a month-over-month decrease of 0.26%, while it rose by 0.74% compared to the same month last year Throughout the first nine months of 2021, the average core inflation rate increased by 0.88% compared to the same period in 2020.
- US dollar price indexes: Domestically, the gold price index in September 2021 remained stable compared to the previous month; down 1.64% compared to December 2020 and down 2.7% over the same period in 2020
In September 2021, the US dollar price index fell by 0.48% from the previous month, marking a 1.14% decrease since December 2020 and a 1.35% decline compared to the same period in 2020, largely attributed to reduced demand for foreign currency trading amid ongoing social distancing measures.
In the first nine months of 2021, several key service industries experienced negative growth, significantly impacting the overall growth of the service sector and the economy The wholesale and retail sector saw a decline of 3.1%, contributing to a 0.3 percentage point drop in the total economic growth rate Similarly, the transportation and warehousing industry decreased by 7.79%, lowering growth by 0.47 percentage points, while the accommodation and foodservice sector faced a substantial decline of 23.18%, resulting in a 0.57 percentage point reduction Conversely, the health sector and social assistance activities achieved notable growth of 21.15%, adding 0.26 percentage points, and the financial, banking, and insurance sectors grew by 8.37%, contributing 0.45 percentage points Additionally, the information and communication sector increased by 5.24%, contributing 0.32 percentage points to the overall economy.
Sources: https://www.gso.gov.vn/en/data-and-statistics/2021/10/socio-economic-situation-in-the-third-quarter-and-nine- months-of-2021/
Laws and regulations that have a direct effect on financial statements
The Company’s operation subject to Vietnamese Enterprise Law, Vietnamese Tax Laws, Labour Laws and other laws such as Protected Environment Law
The Company prepares financial statement in accordance with Vietnamese Accounting Standards and System and in compliance with relevant statutory requirements on preparation and presentation of the financial statements
The Company’s fiscal year is from 1 Jan to 31 Dec
The financial statements are prepared in Vietnamese Dong (“VND”).
Other laws and regulations that affect the entity
Please refer to work paper “Summary of changes in laws; regulations and accounting+auditing standards- VAS” in section 2(b)
External factors impacting the entity
COVID-19 pandemic have been impacting to all of the world’s aspects from the social to economic,…
The operations of the entity
The Company’s principal activities are to perform export and import authority, wholesaling and retailing distribution for products code HS 2916, 2929, 3209, 3506, 3905, 2504, 2505, 2507, 2508, 2803, 2814, 2815,
3906, 3907, 3908, 3909,3910, 3911, 3912, 3914, 3919, 3923, 3924, 5603, 6307, 9603 in accordance with law and regulation in Vietnam Generally, the Company’s main activity is produce kinds of glue and emulsion
The Company’s head office is located at Long Duc Industrial Park, Long Duc Village, Long Thanh District, Dong Nai Province, Vietnam
Koatsu Gas Kyogo Vietnam Co., Ltd is a limited liability company established in Vietnam under Investment Certificate No 472043001074, issued on December 18, 2013, with subsequent amendments on December 18, 2018, and additional Investment Certificates No 3254831900 issued on September 22, 2017, and May 15, 2018, by Dong Nai.
Industrial Zones Authority (together refer to as “the Investment Certificate”)
The Company’s Investment Certificate is valid for 50 years from 18 December 2013
The Company’s authorised investment and charter capitals as stipulated in Investment Certificate are
VND659,892,000,000 (equivalent to 30,300,000 United States Dollars (“USD”)) and VND237,862,870,000 (equivalent to USD10,868,000), respectively
The ownership and governance structures of the entity
Investor: The Company’s authorised charter capital has been fully contributed by KOATSU GAS KYOGO
CO., LTD, the investor which is incorporated in Japan
Koatsu Gas Kyogo Co.,Ltd Investor
Cryo Gas Co., Ltd (no transaction incur during this year) Under common group
Mr Kazuhiro Setsuda General Director
Mr Katsurashima Eiichi Deputy General Director
Mr Kenji Okamoto - Deputy General Director
Types of investments that the entity is making and plans to make, including investments in special-purpose entities
The Company only has held-to-maturity investments (fixed term deposit) at banks with term of 6 months The Company has no plan to make investments in other entity
The way the entity is structured
Organizational and operational structure include:
How the entity is financed
The company was financed by capital contribution, loan from banks If necessary, the Company can finance support from the parent company
The entity’s objectives and strategies, and those related business risks
The company’s objectives and strategies are to:
The Company faces with the following business risks:
- Economic risk due to COVID-19 pandemic,
- Compliance risk due to an abundance of laws and regulations to comply with,
The Company has many customers, but there is only one main customer – Koyo Sangyo Vietnam Co.,Ltd, which has about 72% of the total Sales
The Company has just started operation for few years with the difficulties in product’s kind and cost that made its customers and orders are still limit
Risk: Koyo Sangyo Vietnam Co.,Ltd was the key client who could effected the stable in sales
Mainly purchase from: Samsung Chemical Technology Vina Co.,Ltd, Cuu Tuong Co Ltd and related party: Koatsu Gas Kyogo Co.,Ltd (Japan)
The measurement and review of the entity's financial performance
The management evaluates the Company’s performance by the budget which were built by the management at the beginning of calendar year
Financial performance for recent 3 years as below (extract key information only: revenue, gross profit, operating profit, net profit):
Financial position for recent 3 years (extract key information only)
Selection, application, and appropriateness of accounting policies
Accounting department structure and roles by person
Mr Katsurashima Eiichi Deputy General Director Financial reporting and management accounting
Ms Pham Thi Hue Chief Accountant Financial reporting and management accounting
Ms Le Thi Khanh Ly Accounting Staff Accounting
Ms Pham Thi Hoa Accounting Staff Accounting
Basis of preparation of financial statements
The financial statements have been prepared in accordance with Vietnamese Accounting Standards,
Vietnamese Corporate Accounting System and statutory regulations applicable to the preparation and presentation of financial statements
The financial statements provided are not designed to reflect the financial position, operational results, or cash flows in accordance with accounting principles generally accepted outside of Vietnam It's important to note that the accounting practices employed in Vietnam may vary from those accepted in other countries and jurisdictions.
Accounting system and form of records
The Company uses the general journal method to record its transactions
Management selects and applies accounting policies in accordance with Vietnamese Accounting Standards and System and statutory regulations applicable
There is no unusual transactions need to be selected separate accounting policies
New or changed accounting policies, including reasons
Inquiries of management and others within the entity
Financial data and analytical procedures
Observations while visiting the entity’s premises and facilities
Risk Indications Summary
Significant and/or complex related party transactions
The entity enters into complex transactions or business relationships
Material accounts based on subjective judgments or estimates (e.g., fair value measurements)
Difficult to audit transactions or balances
Products or services subject to obsolescence
Plans to significantly curtail or liquidate operations
Subject to foreign exchange risk Operating factors may indicate impairment or loss
Heavy concentration of personal wealth in the business
Personal guarantees of debts of the entity
Lifestyle of key individuals inconsistent with apparent means
Compensation contingent upon achieving performance targets
Management exerts pressure to meet performance targets
Pressure to meet expectations of analysts, creditors, or others
Pressure to obtain additional debt or equity financing
Owners are contemplating the sale of business or significant changes in share holdings
Lack of appropriate corrective action in response to violations of policies and procedures
Unreasonable deadlines imposed on personnel
Entity directly or through agents or representatives enters into sales agreements or material transactions with foreign governnments, government-owned entities, or other officials
Entity has operations in higher-risk geographies
Operations conducted in higher-risk industries (e.g energy, defense, pharmaceuticals, medical devices, telecommunications) in higher-risk geographies
The entity's competitors, partners, suppliers, agents or customers recently charged or being investigated for bribery or corruption violations
Indications of possible bribery or corruption violations by employees, agents, contractors or other affiliates
Weak or ineffective anti-bribery and anti-corruption compliance programs
The entity uses third-party agents, consultants or intermediaries when performing business in other countries