TRƯỜNG ĐẠI HỌC KINH TẾ - LUẬT CỘNG HÒA XÃ HỘI CHỦ NGHĨA VIỆT NAM PHIẾU CHẤM ĐIỂM Tên đề tài: Audit procedures for fixed assets at FPF auditing & consultantcy Nội dung chương mở đầu khô
The necessity of the study
Since the onset of the Covid-19 pandemic in early 2020, the world has experienced extensive and unpredictable changes in political and economic landscapes, significantly impacting Vietnam's integration into the global economy The Vietnamese economy has faced considerable challenges, exacerbated by climate change, which has intensified natural disasters Amidst these difficulties, both domestic and foreign investors are under pressure to find optimal solutions that minimize costs Despite the global economic downturn, Vietnam has shown resilience, achieving positive economic growth, particularly in key sectors such as processing, manufacturing, and trade in services, which grew by 8.3% and 6.1% respectively compared to the previous year In this context, the role of auditors has become increasingly vital, as they provide clarity, enhance business performance, and contribute significantly to economic recovery Consequently, audit quality has emerged as a top priority for auditing firms, with heightened expectations for auditor responsibility.
In today's rapidly evolving technological landscape, fixed assets have become crucial for the sustainability and growth of enterprises, often representing a significant portion of total assets Although fixed asset transactions are less frequent than other transactions, they hold substantial value and can greatly influence financial statements This complexity and associated risks are particularly pronounced for early-stage construction and operation businesses To thoroughly investigate these challenges and gain insights from real-world scenarios, the author has selected the topic "Audit Procedures for Fixed Assets at FPF Auditing & Consultancy Services Co., Ltd."
Research objectives
- Find out and describe about the audit procedures for fixed assets applied at FPF auditing
- Illustrate in detail the audit procedures for fixed assets applied at FPF auditing & consultancy services Co., Ltd for customer XYZ
- Review, evaluate the audit procedures for fixed assets applied at FPF auditing & consultancy services Co., Ltd and propose recommendations and solutions.
Research Subjects
- Research method from theory to practice, from observing how auditors conduct in the company to directly participating in the audit procedures at a specific customer
- Collecting documents, data, interviewing customers during the audit procedures at the client company
- Method of interviewing, exchanging with the auditor in the professional section about fixed assets
- Refer to accounting standards, auditing and other related documents.
Scope and limitations of topic
This article examines the audit procedures for fixed assets and depreciation costs utilized by FPF Auditing & Consultancy Services Co., Ltd It aims to identify the strengths and weaknesses of the current processes in place within the company, providing valuable insights into the effectiveness of their auditing practices.
- Due to the limited practice time, limited knowledge and experience of the writer, the internship report will inevitably contain errors
- In addition, due to the confidentiality of the auditing firms, the illustrative figures have been revised and are for reference only.
LITERATURE REVIEW
Auditing, particularly fixed asset auditing, plays a crucial role in enhancing economic growth for enterprises and countries, as evidenced by numerous global studies Research has highlighted the significance of fixed assets in financial statements and their impact on production and business activities In Vietnam, investigations into fixed asset audit procedures have revealed a comprehensive audit process characterized by reliability and accuracy, despite inherent audit risks Errors in this area can significantly affect a business's financial statements, making accurate audit conclusions essential Consequently, the meticulous implementation of audit procedures remains a primary concern for auditors, driving ongoing research in the field.
The audit procedure for fixed assets often faces challenges during peak audit seasons due to a surge in client demands, resulting in increased pressure on auditors and assistants This high workload can lead to subjective decision-making, where auditors may rely on familiar processes and overlook strict controls, ultimately reducing the effectiveness of their audits Consequently, this may result in the inability to identify all non-material errors, highlighting a significant research gap that requires attention These challenges have equipped the author with essential insights and knowledge, fostering a deeper understanding of the complexities involved in auditing fixed assets.
"Auditing procedures for fixed assets at FPF auditing and consultancy services Co., Ltd”.
THE DIFFERENCE BETWEEN VIETNAMESE ACCOUNTING
Accounting standards
Accounting Standards are essential regulations that govern the preparation and interpretation of financial statements In Vietnam, these standards are established and enforced by the Ministry of Finance, ensuring consistency and reliability in financial reporting.
Vietnamese Accounting Standards (VAS) and International Financial
Accounting Standards are essential regulations that guide the preparation and interpretation of financial statements In Vietnam, these standards are developed and enforced by the Ministry of Finance, ensuring consistency and transparency in financial reporting.
2 Vietnamese Accounting Standards (VAS) and International Financial Reporting Standards (IAS / IFRS)
The Vietnamese Accounting Standards system consists of 26 standards issued by the Ministry of Finance With 5 Decisions and 6 specific Circulars updated through 5 different times
- Phase 1 of the Ministry of Finance updated accounting standards No 2, 3, 4, 14 related to inventory, tangible fixed assets, intangible assets, revenue and other income
- Phase 2 update accounting standards No 1, 6,10,15,16,24 including general standards, lease of assets, effects of exchange rate changes, construction contracts, borrowing costs and statements of cash flows
Phase 3 encompasses several key accounting standards, including Accounting Standard No 05 on Investment Real Estate, No 07 on Investments in Associates, No 08 concerning Financial Information about Venture Capital Contributions, No 21 on the Presentation of Financial Statements, No 25 regarding Consolidated Financial Statements and Accounting for Investments in Subsidiaries, and No 26 related to Information about Related Parties.
The Phase 4 update to Accounting Standards No 17 addresses Corporate Income Tax, while Accounting Standard No 2 focuses on the additional presentation of financial statements for banks and similar financial institutions Furthermore, VAS 23 covers events occurring after the balance sheet date, and VAS 27 provides further guidelines to enhance financial reporting accuracy and compliance.
Interim financial statements, VAS 28: Segment reports, VAS 29: Changes to accounting policies, accounting estimates and errors
- Phase 5 includes Accounting Standards No 11, 18, 19, 30 on Business Combinations, Provisions, contingent assets and liabilities, Insurance contracts, Earnings per share (DINH, 2014)
2.2 International Financial Reporting Standards (IAS / IFRS)
International accounting standards are rules and guidelines on accounting principles and methods with a common foundation for countries in recording and presenting financial reporting systems
A comprehensive system of international accounting standards has been established, encompassing International Accounting Standards (IAS) for the private sector, International Public Sector Accounting Standards (IPSAS), and International Financial Reporting Standards (IFRS) at the national level.
The difference between Vietnamese Accounting Standards (VAS) and
International accounting standards were established to provide a "common language" for accounting practices across different countries Despite this standardization, the application and interpretation of accounting information still reflect the unique social and economic characteristics inherent to each nation, resulting in diverse accounting practices worldwide.
The international accounting standards system is widely accepted in many countries around the world and has become a common accounting language for countries with developed and developing market economies (DINH, 2014)
3 The difference between Vietnamese Accounting Standards (VAS) and International Financial Reporting Standards (IFRS)
The Ministry of Finance of Vietnam has established 26 Vietnamese Accounting Standards (VAS) that effectively support enterprises in preparing financial statements However, as foreign investment continues to grow, multinational corporations operating in Vietnam increasingly demand that their branches and subsidiaries adhere to International Financial Reporting Standards (IFRS) for financial statement presentation.
Therefore, enterprises need to have an understanding of both Vietnamese Accounting Standards and International Accounting Standards
Unlike the Vietnamese Accounting Standards (VAS), the International Accounting Standards (IAS) do not mandate specific forms for the account system, reporting formats, or accounting books Most IAS/IFRS guidelines allow businesses the flexibility to choose accounting structures that best fit their unique characteristics For instance, while companies adhering to VAS are required to use a designated account number, such as 111 for cash, those following IAS/IFRS have the liberty to assign any number to their accounts.
The International Accounting Standards (IAS) offer a clear and cohesive conceptual framework, ensuring consistency among various standards In contrast, the Vietnamese Accounting Standards (VAS) face numerous ambiguities, lacking a well-defined framework and consistency across accounting standards.
IAS/IFRS primarily governs the structure of financial statements as outlined in IAS 1, without dictating the specific accounting account system to be used This allows businesses the flexibility to develop their own accounting account systems, ensuring they align with both financial statement requirements and management reporting needs.
The implementation of the account system by enterprises in Vietnam can pose challenges for foreign companies, as they often face difficulties during the transition process This can lead to inconsistencies among companies within the same group, impacting overall operational efficiency.
There are many opinions that the account system in Vietnam should only be business oriented instead of mandatory as at present
Currently, VAS lacks regulations permitting the revaluation of assets and liabilities at their fair values during reporting, which undermines the accuracy and reliability of financial statements This deficiency in standards is inconsistent with IAS/IFRS guidelines.
VAS 21 and IAS 01 differ in their requirements for financial statements, particularly regarding the reporting of changes in equity Under IAS 01, financial statements include five key components: the Statement of Financial Position, Statement of Comprehensive Income, Statement of Cash Flow, Statement of Changes in Equity, and Notes to Financial Statements In contrast, VAS comprises four components, with the Statement of Changes in Equity being incorporated into the financial statement disclosures.
VAS 03 permits the reassessment of fixed assets, including real estate, factories, and equipment, only when mandated by the State for purposes such as capital contributions to joint ventures, or during enterprise mergers and divisions, and does not acknowledge annual asset loss In contrast, IAS 16 allows businesses to re-evaluate their assets at market value and to recognize annual asset losses, ensuring compliance with its regulations.
According to VAS 11, goodwill must be amortized over a maximum period of 10 years from the acquisition date in a business combination In contrast, IFRS 03 requires companies to evaluate any impairment in the value of goodwill.
The Vietnamese Accounting Standards (VAS) are developed in alignment with the International Accounting Standards (IAS/IFRS) framework; however, VAS comprises only 26 standards compared to 41 IAS and 16 IFRS standards Consequently, VAS lacks equivalent accounting standards to those found in IAS/IFRS.
INTRODUCTION OF FPF AUDITING & CONSULTANCY
Overview of FPF auditing & consultancy services Co.,Ltd
Company name: FPF auditing & consultancy services Company limited (FPF auditing
Address: Floor 7, Win Home Building, 25A Mai Thi Luu, Dakao Ward, Dist 1, HCM
History of formation and development of the company
FPF Auditing and Consulting Services Co., Ltd, established in 2014, provides professional audit, accounting, and tax advisory services Officially operational since March 10, 2014, the company has been functioning for five years under business license No 0312681516 Its head office is situated at 25A, Mai Thi Luu, Dakao Ward, District 1, Ho Chi Minh City, with CEO Vo Thi Xuan Mai serving as the legal representative.
Founded by experienced auditors and consultants with extensive education both in Vietnam and internationally, FPF has years of expertise in auditing and consulting for multinational organizations and large domestic entities The company boasts a skilled workforce capable of delivering high-quality services that align with both Vietnamese characteristics and international standards.
FPF Company envisions a future where they accompany their customers towards success Their commitment to providing exceptional services brings joy to the organization, as dedicated staff work tirelessly to deliver tailored solutions that meet each business's unique needs Ultimately, the pride of FPF Company lies in the achievements of their customers.
Although FPF Company has just been established in a short time, it has reliance and is trusted by many businesses of different sizes.
Operation fields
FPF auditing & consultancy services Co., Ltd provides a wide range of finance & accounting, auditing, tax advisory, and training
Auditing plays a crucial role in both domestic and international operations of a company FPF is committed to upholding the highest standards of professional and technical quality in its audit practices, while also addressing practical issues that assist clients in enhancing their business performance.
FPF specializes in providing tax services and related tax to meet all the needs of customers
The finance and accounting department at FPF excels in helping clients create and manage accounting books, ledgers, and financial statements, ensuring compliance with Vietnamese accounting standards and meeting specific customer requests.
FPF assists your team in establishing an efficient accounting system that meets organizational goals while adhering to management regulations This system is designed to support customer management effectively and is adaptable to various business activities Additionally, it is essential for the system to be regularly updated to comply with relevant government statutory requirements.
Business organization structure
Diagram 1 Business organization structure of FPF auditing & consultancy services Co.,
Ltd Business organization structure is a very important part of the success or failure of a Company In order to fulfill the immediate and long-term business goals and strategies well,
AUDIT OF FINANCIAL STATEMENTS DEPARTMENT
AUDIT OF BASIC CONSTRUCTION FINALIZATION DEPARTMENT
OFFICE FOR ORGANIZATION MANAGER EXECUTIVE
To enhance operational efficiency and foster high-quality human resources, the company must establish a robust and well-structured organizational framework for its advisory and accounting service staff.
The FPF is structured into specialized departments overseen by the Board of Directors, who are accountable for daily operations and legal responsibilities Below the Board are department managers, including those responsible for auditing financial statements, finalizing construction audits, organizational management, and accounting and consulting services.
The Financial Statements and Construction Finalization Audit Department is led by a manager and comprises two audit groups, each consisting of 3-4 auditors Each group is overseen by a team leader who is responsible for planning audits for specific clients, providing support to team members, and ensuring accountability for the audit report.
The office of organization is led by a manager and supported by two executive staff members This department is responsible for establishing professional and effective recruitment criteria, managing salaries, and overseeing job positions within the company Additionally, it consistently strategizes to identify and recruit new talent.
The Accounting and Consulting Services Department is structured into two key divisions: the Accounting Department and the Consulting Service Department The Accounting Department, comprised of three professionals, focuses on updating documents, reconciling books, and addressing accounting issues as they arise Additionally, they cater to client needs by importing invoices and delivery notes into the SmartPro accounting software Meanwhile, the Consulting Service Department, also consisting of three team members, specializes in delivering tax advisory and customer consulting services.
Company mission, vision and Core values
FPF expresses desirousness to accompany with our customers for prosperous future Therefore, company’s mission statement:
"COMPETENT SERVICE WITH HIGH ETHIC STANDARDS"
FPF genuinely cares for the customers' business and relationship Therefore, their vision is “YOUR SUCCESS WOULD BE OUR PROSPEROUS FUTURE”
“TREAT OUR CLIENTS WITH RESPECT AND FAITH” is the core values that FPF are in front of mind when the customers have the need.
Main customers of the company
FPF primarily serves companies in commerce, manufacturing, industry, and construction, including foreign-invested enterprises, business partnerships, and both domestic and international social organizations operating in Vietnam.
AUDIT PROCEDURES FOR FIXED ASSETS AT FPF
Theoretical basis of the fixed asset audit
1.1 Overview of the fixed asset item
Fixed assets are presented on the balance sheet in part B, long-term assets, item 2: Fixed assets, mainly tangible fixed assets, intangible fixed assets and leased fixed assets
Tangible fixed assets: are assets of a physical form held by an enterprise to use for production and business activities in accordance with the recognition standards of tangible fixed assets
Tangible fixed assets recognition standards: Assets recorded as tangible fixed assets must satisfy all four recognition standards as follows:
- Certainly get economic benefits in the future
- Historical cost of assets must be determined reliably
- Estimated usage time is over 1 year
- Having enough value criteria according to current regulations
Tangible fixed assets are categorized based on their similar nature and intended use within an enterprise's production and business activities This classification includes buildings and structures, machinery and equipment, transportation vehicles, transmission tools, management devices, as well as perennial gardens and livestock that contribute to productivity Additionally, other types of tangible fixed assets are also encompassed in this classification.
Intangible fixed assets are non-physical assets that hold value and are utilized by businesses in production, services, or leased to other entities, in accordance with the recognition standards for intangible fixed assets.
Intangible fixed assets recognition standards: An intangible asset recognized as an intangible fixed asset must satisfy the following:
- Definition of intangible fixed assets
- The following four recognized standards:
+ Getting economic benefits in the future brought about by that property
+ Historical cost of assets must be determined reliably
+ Estimated usage time is over 1 year
+ Having sufficient value criteria according to current regulations
Intangible fixed assets are categorized based on their nature and purpose within a business, encompassing various groups such as land use rights, trademarks, software licenses, and copyrights This classification includes assets like patents, recipes, preparation methods, models, designs, and prototypes, as well as intangible assets that are still in development.
Leased fixed assets refer to fixed assets that the lessor transfers to the lessee, granting them most of the benefits and risks associated with ownership Despite not being owned by the lessee, these characteristics allow the leased asset to be recognized as the property of the lessee.
Leasing involves both depreciation and financial costs during each accounting period It is essential that the depreciation policy for leased assets aligns with that of similar assets owned by the lessee If there is uncertainty about the lessee acquiring the property after the lease term, the depreciation of the financial lease asset should be calculated based on the shorter duration of either the lease term or its useful life.
Work in progress refers to the capital costs associated with construction investment projects, encompassing expenses for acquiring fixed assets, new constructions, repairs, renovations, expansions, or upgrades of public technology These investment costs consist of construction and installation expenses, equipment purchases, and various other related costs.
Fixed assets must be reported in financial statements based on their net residual value, but accounting standards also require the disclosure of their historical cost and accumulated depreciation Consequently, the asset audit process is closely linked to the examination of depreciation costs.
Fixed asset depreciation: is the calculation and systematic allocation of historical cost of fixed assets to production and business costs during the useful life of fixed assets
Accumulated depreciation of fixed assets: is the total depreciation that has been deducted from business costs over the business periods of fixed assets up to the determination date
There are three primary methods for calculating asset depreciation: the straight-line method, the declining balance method, and the units of production method Businesses can select the most appropriate depreciation method based on their specific operational needs and asset characteristics.
- Existence: Fixed assets reported on the balance sheet really exist at the reporting date
- Completeness: Fixed assets recorded include all relevant transactions that have taken place during the accounting period
- Rights and obligations: The company has ownership rights for the assets as of the reporting date
- Valuation: The recorded balances of fixed assets truly reflect their actual economic value
The balance of fixed assets will be presented in the non-current section of the balance sheet, with sufficient disclosure provided in the accompanying notes to the financial statements.
Audit procedures are essential for auditors to assess the quality of financial information provided by clients, ultimately leading to the formulation of an auditor’s opinion These procedures are tailored to each client, reflecting the specific nature of their business and the audit assertions that auditors aim to validate.
Risk assessment is the determination and analysis of relevant risks that affect the operation of an enterprise
To identify and analyze risks, administrators should:
+ Setting the organization's goals, on the basis of defining the identified objectives, the administrator will conduct analysis, identified and managed risk during the implementation process
+ Risk identification: Risk can be affected at the level of the whole unit or affect some parts of the unit
At the unit level, the risk factors can be: technical innovation, product innovation of competitors, changing customer needs, changing government policies and so on
The auditor must conduct risk assessment procedures to identify and evaluate the risks of material misstatement at both the financial statement and assertion levels However, relying solely on these procedures does not provide adequate audit evidence for the auditor to form a comprehensive opinion.
Risk assessment procedures must include the following steps:
Engaging with management and key personnel within the organization is crucial for auditors, as their insights are essential in assessing the risk of material misstatements arising from fraud or errors.
Analytical procedures involve assessing financial information by examining the logical relationships between financial and non-financial data These procedures also encompass the investigation of any fluctuations or relationships that appear inconsistent with other pertinent information, as well as significant deviations from estimated values.
When conducting substantive analytical procedures, whether independently or alongside detailed checks like substantive tests, auditors must adhere to Vietnam Standard on Auditing No 330.
- Determination of the suitability of substantive analytical procedures for management assertions, included the assessed risk of material misstatement and test of details (if any) to these management assertions;
Evaluating the reliability of data utilized by auditors to estimate recorded figures and rates involves examining the origin, comparability, content, and appropriateness of the available information, as well as the controls in place for information creation.
Customer research
FPF will reach out to existing customers to request the signing of audit contracts for the current year The auditor will gather essential information, including organizational structure and any changes in business operations compared to the previous year This data will enable the auditor to adjust the audit plan and program to align with the current year's requirements.
For new customers: After receiving the customer's audit request, the auditor should first learn about the following aspects:
- The impacts on economy, society, law, etc on the business activities of the enterprise
- Accounting standard applied in enterprises
When analyzing the accounting method for fixed assets within an enterprise, senior auditors may possess a foundational understanding; however, it is essential for them to delve deeper into the specific responsibilities assigned to each auditor to ensure thorough comprehension and accurate reporting.
Besides, auditors need to learn about the specifics and risks in business, in the organizational structure of the business, as well as learn about the internal control system
This study provides auditors with a comprehensive understanding of the client's fixed asset accounting practices, enabling the development of an effective audit program that streamlines the audit process and reduces time spent on audits.
Research and evaluate the internal control system
Evaluation of internal control system is an important step in an audit program, it helps the auditor to shorten the audit time but still achieve the audit objectives
At FPF, the company has developed comprehensive samples to aid in researching the internal control system, specifically for fixed assets Despite this, auditors typically do not assess the internal control system for fixed assets in isolation; instead, they conduct a general evaluation that includes customer interviews and an examination of the processes for recording fixed assets and depreciation expenses This approach helps auditors gain a deeper understanding of the regulations and policies governing fixed asset management.
During an audit, the performance of tests of control is essential for assessing control risk, particularly when conducting tests of details For instance, while reviewing documents for detailed checks, auditors evaluate the approval processes for asset purchases and the controls in place for asset disposals to determine the presence and effectiveness of internal controls over fixed assets.
Due to the lack of assessment of the internal control system, the materiality for this item was derived from the overall materiality level based on the income statement Furthermore, the auditor was unable to obtain information regarding the recording and write-off processes for fixed assets related to certain customers.
Substantive tests
Audit that the accounting policy was applied consistently with the previous year and in the applicable financial reporting framework
In case of changing accounting policies, whether the unit comply with the instructions of [Accounting Standards No 29]
Collect a summary of tangible fixed assets and compare the general ledger
1 Prepare a summary sheet of figures based on current period's balance sheet and audited previous period figures with detailed information on tangible fixed assets increased, disposal or transfer, credit recorded, converted, depreciated, accumulated depreciation Compare the opening balance with the previous period's financial statements and check the arithmetic accuracy of the data summary sheet
2 Collect a list of increased tangible fixed assets in the period (if any), including details of tangible fixed assets purchased and classification of tangible fixed assets, date of purchase, historical cost, etc Reconciling tangible fixed assets increased with the register of fixed assets tangible and the above data summary table
3 Collect a list of tangible fixed assets disposal or transfer or credit during the period (if any), detailing the items transferred, historical cost, accumulated depreciation and residual value at the transfer date If the property is sold, detail the proceeds and the calculation of the profit or loss resulting from the disposal of tangible fixed assets Compare the liquidated assets with the tangible fixed asset register and the above data summary sheet
4 When auditors use lists, books or documents prepared by the board of director for audit purposes, auditors must implement procedures to ensure that lists, books or documents are accurate and complete
Perform the following analytical procedures:
Analyzing the current period's account balance in relation to the previous period reveals significant insights into the changes in tangible fixed assets and their depreciation This assessment highlights how variations in these assets impact the entity's operational efficiency and overall business performance Understanding these fluctuations is crucial for evaluating financial health and strategic decision-making.
Reviewing items that are greater than performance material, or unusual items, find out the cause and perform the corresponding test; and
Compare the average rate of depreciation for groups of assets with the previous period and request an explanation if there is any change
5 Scan the general ledger to identify unusual items and operations, find out the cause and perform the corresponding test (if necessary)
6 Examine whether there are specific risks identified from performing analytical procedures that lead to tangible fixed assets balances containing material misstatement
The auditor will assess the total accumulated depreciation and depreciation expenses by comparing the general ledger with the trial balance, as well as the trial balance with the enterprise's fixed assets depreciation table Additionally, they will analyze depreciation expenses across related cost categories, including general operation costs, selling expenses, and general and administrative expenses To identify any unusual transactions, auditors may review the general ledger or utilize Excel Pivot Tables If they encounter transactions with unclear explanations, the auditor will seek clarification from the accountant to determine the validity of the reasons provided.
The auditor will create a depreciation cost estimate table and compare it with the enterprise's existing depreciation table Any discrepancies will prompt an investigation into their causes, a review of the accounting depreciation formula, and the necessary adjustment entries Additionally, the auditor will assess whether the monthly increases in depreciation expense throughout the fiscal year align with the growth in fixed assets during the same period.
Comparing the period time of depreciation of each type of asset with the time frame of depreciation of types of fixed assets according to Circular 45/2013 / TT-BTC on April 24,
In 2013, it is essential for the Minister of Finance to ensure that the application of the depreciation method remains consistent with both the previous year and across the months within the current year Any changes made to this method must be accompanied by a reasonable explanation from the accountant.
Audit results of fixed assets
After conducting the substantive tests, the auditor compiles the audit findings, which involves seeking explanations for any discrepancies, discussing necessary adjustment entries, and addressing reclassifications with the enterprise The auditor then reports these results to the team leader, who synthesizes the information and communicates it to the clients.
The auditor or assistant auditor prepares the working paper for fixed assets and depreciation expenses, ensuring a comprehensive description is reflected in the financial statements Upon the official issuance of the auditor's report, they compare the data from the working paper with the report to identify any discrepancies Additionally, the manager reviews the working paper to assess the findings from the audit process.
To ensure thorough documentation during the audit process, working papers and audit vouchers are printed as essential evidence An auditor or their assistant will record the relevant references and securely save them in the audit file of FPF Auditing & Consultancy Services Co., Ltd.
Working papers of the fixed asset portion are arranged as follows:
The D710 steering schedule outlines the closing balance following last year's audit, as well as the ending balances before and after the current year's audit It also includes an analysis of fixed asset fluctuations, comparing this year’s figures to those of the previous year.
➢ D720 - Error summary: This working paper is used to synthesize the adjustment entries of the fixed asset portion after auditing if it has detected errors
➢ D730 - Auditing procedure: A working paper used to confirm the person performing the audit procedures for the portion of fixed assets
Starting from D740, distinct working papers are available for various asset categories, including tangible fixed assets, intangible fixed assets, financial lease fixed assets, work in progress, and depreciation of fixed assets Additionally, these papers encompass the total audit evidence gathered throughout the audit process.
Audit procedures for fixed assets at FPF auditing & consultancy services Co.,
3.1.1 Some features of the company's activities
XYZ Company is a 100% Foreign Invested Enterprise established in Vietnam on the 5th of October, 2019
- Business name: XYZ Co., Ltd
- Address: My Xuan Ward, Phu My Town, Ba Ria - Vung Tau
- Duration of operation: 1 years from the date of issuance of the Investment Registration Certificate
- Business areas: Producing other metal products like: Manufacturing condenser for manufacturing, processing and assembling vacuum cleaner
3.1.2 Characteristics and accounting methods of fixed assets
XYZ Company primarily invests in fixed assets essential for manufacturing metal products, including equipment like electronic component dryers, electronic washing machines, nitrogen generators, metal lathes, milling machines, and compressors Additionally, the company utilizes fixed assets for business operations, such as computers, to enhance productivity and efficiency.
Fixed assets are recorded at their historical cost minus accumulated amortization, which encompasses the purchase price and any costs directly related to the asset's expected operation Expenses associated with the acquisition, upgrading, and renewal of these capitalized fixed assets, as well as maintenance and repair costs, are recognized as expenses in the period incurred without aggregation or accrual.
Depreciation of fixed assets is computed on a straight-line basis over their estimated useful lives: Plants and structures (5-10 years); machinery (7 years); office equipment (3 years)
3.2 Research and evaluate the internal control system of fixed assets
In its inaugural year of auditing XYZ Co., Ltd, FPF Co., Ltd meticulously gathered all relevant audit documents and evidence pertaining to the internal control system established for the customer.
In the past year, discussions with customers have revealed insights into company XYZ's policies regarding the management of fixed assets The auditor has gained an understanding of the processes for recording fluctuations in fixed assets, including procurement and liquidation practices, useful life assessments, depreciation methods, and repair costs associated with these assets.
Overall, XYZ Limited is fully evaluated, accurate and efficient
The auditor analyzes the indexes related to the fixed assets of XYZ Co., Ltd in 2020 to determine which items are most likely to have the highest risk
Table 1 Proportion of fixed asset items of company XYZ
Tangible fixed asset/Total fixed assets 100%
Leased fixed asset/Total fixed assets 0%
Buildings and structures/Total tangible fixed assets 64%
Machinery and equipment/Total tangible fixed assets 36%
Transportation and transmission vehicles/ Total tangible fixed assets
Office equipment/ Total tangible fixed assets 0%
Fixed assets account for 53% of the total assets of the business, this proportion is quite high, so the item of fixed assets is a key item
Tangible fixed assets, particularly Machinery and Equipment as well as Buildings and Structures, constitute a significant portion of a company's assets It is essential to closely monitor the fluctuations in these fixed assets and their associated depreciation to ensure accurate financial management and reporting.
We also have the following fixed asset notes:
Audit objectives: Fixed assets are fully present, classified correctly, recorded accurately and transferred appropriately
Data from: Report on the inventory of fixed assets, Balance sheet, ledger, subsidiary ledger of fixed assets provided by the enterprise
Works to be done: Comparing the ending balance between the arising balance sheet and the ledger and subsidiary ledger
Overall comparison with details of each type of fixed asset
Figure 2 Checking fixed assets & investment properties
Customer name: XYZ Co.,Ltd Performer: X 7/2/2021
Content: Fixed assets,work in progress, and investment properties Reviewer 2: X
Ref C/B before audit Ref Adjustment C/B after audit Ref
Depreciation of tangible fixed assets B510 1.916.827.546 D720 20.675.134 1.937.502.680 -
212 Historical cost of leased fixed assets
2142 Depreciation of leased fixed assets B510
217 Historical cost of investment properties
2411 Work in progress complete fixed assets
2413 Overhaul of fixed assets α β α Match the figures on Trial Balance and General Ledger β Match with previous year's audit report
B PRESENTATION BY ITEMS ON FINANCIAL STATEMENTS
Details are as shown in work ing sheet D752_ Note of fixed assets
The data summary table indicates that both the opening and closing balances align with the ledger, confirming accuracy in the financial records The auditor conducted a thorough comparison of detailed figures for each category of fixed assets, including tangible assets and financial leases, all of which corresponded with the company’s fixed asset list Overall, the presentation of fixed assets adheres to Vietnamese accounting standards, reflecting honesty and reasonableness.
This year has seen a significant increase in tangible fixed assets due to the company's recent commencement of operations The newly acquired machinery and equipment are in excellent condition, resulting in minimal depreciation at this stage.
Because of the many new arises, auditors need to carefully examine the increase in fixed assets
Figure 4 Checking up arrival of fixed assets & investment properties
Auditors meticulously examine the ledger for any irregularities, such as unusual accounting practices or misinterpretations, to guarantee precise recording objectives FPF Auditing and Consultancy Services Co., Ltd frequently utilizes the Pivot Table tool in Excel to streamline and enhance their auditing processes.
Using the Excel Pivot Table tool to filter the General Journal and General Ledger helps identify unusual reciprocal accounts and abnormal accounting interpretations Upon reviewing the data, no unusual transactions were found, prompting the auditor to examine the original documents related to fixed assets for further verification.
Normally, the auditor will check 100% of original documents for transactions arising from increase or decrease of fixed assets
In 2020, XYZ Co., Ltd imports and purchases many new tangible fixed assets, classified into machinery and equipment The auditor and audit assistant checked the complete documentation, including:
During the document verification process, the auditor identified inaccuracies in the historical cost of certain fixed assets recorded in September, leading to miscalculations in accumulated depreciation and residual value in subsequent months.
Therefore, the auditor discussed with the accountant about the issue of recording and have some adjustment entries
Figure 6 Summary of errors and adjustment entries
In September, an auditor identified that an accountant had inaccurately recorded the historical cost of certain fixed assets, leading to errors in accumulated depreciation and residual values in subsequent months Consequently, the auditor documented the necessary adjustments, as illustrated in Figure 7.
Figure 7 Explain the reason for the adjustment
Discuss with customers about the rate of depreciation and the time of depreciation and prepare a table to recalculate the depreciation cost (test depreciation)
Figure 8 Examination of depreciation/ investment properties
Conclusion: The accountant has adjusted the depreciation table according to the adjusted accounting at test of detail no.4
3.4 Evaluate audit results of fixed assets
Following the completion of the fixed asset audit at XYZ Co., Ltd, the auditor confirmed that all audit procedures were thoroughly executed and that management assertions were satisfied The auditor concluded that the fixed asset items are accurately recorded and presented in a fair and transparent manner.
The auditor conducted a thorough examination of the fixed asset item following the company's established procedures Despite time constraints, the auditor adhered to all specified audit steps, ensuring that the audited fixed asset item is both reasonable and reliable.
Upon finalizing the audit for XYZ Co., Ltd, the auditor and audit assistant will compile findings, create adjustment journals, and report to the team leader The team leader will then summarize the results and engage in discussions with the client Additionally, the auditor or assistant auditor will finalize the working papers related to fixed assets and depreciation expenses, ensuring comprehensive disclosures are presented.
Upon the official issuance of the XYZ Co., Ltd audit report, the auditor and their assistant meticulously compare data from the working papers with the audit report to ensure consistency Additionally, the Chief of Operations conducts a thorough review of the findings documented during the audit process.
REVIEWS AND RECOMMENDATION
Reviews
1.1 Review on the audit organization at the FPF auditing & consultancy services
At FPF Auditing & Consultancy Services Co., Ltd, division managers consistently keep employees informed about the latest regulations, guidelines, and circulars issued by the Ministry of Finance, ensuring that all staff stay updated on important changes.
FPF Auditing & Consultancy Services Co., Ltd utilizes an audit program based on the VACPA (Vietnam Association of Certified Public Accountants) standard, ensuring a user-friendly approach that allows new staff to adapt quickly and comfortably.
FPF Auditing & Consultancy Services Co., Ltd prioritizes the strategic organization and allocation of its audit team Ensuring an optimal team size facilitates the effective distribution of tasks, allowing members to efficiently identify and address errors during the auditing process.
The manager of the professional department consistently monitors and supports auditors, ensuring they receive thorough evaluations and guidance This practice encourages auditors and audit assistants to produce more comprehensive working papers, ultimately enhancing their experience and skill set in the auditing field.
Before delivering audit reports to clients, it is essential to conduct a comprehensive inspection and review process involving the auditor, the professional department manager, and the Board of Directors This ensures that the audit report is prepared and presented with honesty and accuracy.
FPF Auditing & Consultancy Services Co., Ltd meticulously archives all audit records, including financial statements, board of directors' reports, working papers, and partial audit evidence These records are organized systematically, ensuring a clear overview and detailed insights into the audit program By employing logical symbols and references, the archive facilitates easy searching and reviewing, ultimately enhancing audit quality and providing a valuable reference for future audit seasons.
During the busy audit season, companies often face a significant increase in customer volume, resulting in a manpower shortage and heightened workload for auditors and audit assistants This pressure can lead to auditors becoming complacent with familiar processes, potentially compromising control measures and reducing essential procedures, which may result in the oversight of non-material errors.
1.2 Review on the Audit procedures for fixed assets at FPF auditing & consultancy services Co., Ltd
Effective audit procedures for fixed assets are strategically designed by company management to optimize resource allocation and reduce audit costs This approach enables auditors to manage their time efficiently while still delivering high-quality performance.
The manager of the professional department introduced the working papers for the Fixed Assets section in line with the VACPA standard audit program This initiative facilitates easier access to audit procedures related to fixed assets for both auditors and audit assistants.
At the conclusion of the Fixed Assets audit, the auditor and assistant auditor will collaborate with the team leader to address any issues identified during the substantive tests, ensuring necessary adjustment entries are made and discussing these matters with the client.
- During the discussion, the team leader and the auditor will exchange experience with the audit assistants to help improve the expertise and professional qualifications for the entire audit team
Many clients lack a comprehensive understanding of the audit profession, which can complicate the audit process Auditors play a crucial role in assisting businesses with their accounting practices while identifying weaknesses and providing solutions This often leads to challenges in obtaining necessary documents and information from clients Additionally, there are instances where accountants note the auditor's recommendations for corrections but fail to update the company's records, creating further complications for auditors in subsequent years.
Limited audit conditions in client companies often lead auditors or audit assistants to extend their office hours to ensure the completion of all necessary audit procedures.
Recommendation
2.1 Recommendations on the audit at the FPF Auditing and consultancy services
To enhance work quality and alleviate stress during the audit season, FPF Auditing & Consultancy Services Co., Ltd should consider increasing its recruitment of auditors and audit assistants This strategic move will help distribute the workload more evenly, ensuring that the team can perform at its best.
FPF Auditing & Consultancy Services Co., Ltd should develop tailored audit programs for various business types, including production, trade, service, and construction Each business type possesses unique characteristics and management styles, making specialized audit programs essential By implementing these targeted programs, auditors and assistants can work more efficiently, reduce time spent on audits, and gather comprehensive audit evidence effectively.
2.2 Recommendations on the Audit procedures for fixed assets at FPF auditing & consultancy services Co., Ltd
To enhance audit reliability, auditors should broaden the scope of sample selection at the end of the accounting year and provide clear justification for their choices, considering factors such as potential fraud and high-value elements.
FPF Auditing & Consultancy Services Co., Ltd offers a well-structured audit program along with comprehensive basic procedures that facilitate the work of auditors and audit assistants However, it is essential for the company to enhance its audit programs by tailoring them to meet the specific needs of different types of businesses.
Auditing fixed assets is crucial in the financial statement audit process, as these assets represent a significant portion of a business's total assets, impacting both its overall capital and financial health The depreciation expense associated with fixed assets also constitutes a major component of the company's costs, influencing its profitability Consequently, auditors must possess a strong understanding of the relevant expertise and follow detailed procedures in substantive testing to minimize the risk of errors that could materially affect the financial statements.
This internship report delves into the fundamentals of the fixed asset audit process and the intricacies of depreciation costs, combining theoretical research with an analysis of real data to gain a comprehensive understanding of these essential financial concepts.
Finally, I have made some recommendations to complete the audit process in general and the fixed asset audit process and depreciation expense in particular
Because I still have limited professional knowledge and practical experience, my report will not avoid its shortcomings I hope that all of teacher and colleagues at FPF Auditing & Consultancy services Co., Ltd supported me and give some advices
I would like to sincerely thank the teachers and auditors of FPF Auditing & Consultancy services Co., Ltd for their support so that I can smoothly complete the internship report
1 Company’s website: http://www.fpfconsultancy.vn/
2 Audit subjects at University of Economics and Law Ho Chi Minh City (2014), Auditing, Economic Publishing House, Ho Chi Minh City
3 Circular No 45/2013 / TT-BTC Guiding the regime management, use and depreciation of fixed assets, issued on April 25, 2013 by the Ministry of Finance
4 Circular No 200/2014 / QD-BTC Regulation on the corporate accounting regime, the Minister of Finance, issued on December 22, 2014
5 Circular No 214/2012 / TT-BTC Vietnam Standards on Auditing No.315 issued on December 6, 2012 by the Ministry of Finance
6 Circular No 214/2012 / TT-BTC Vietnam Standards on Auditing No.330 issued on December 6, 2012 by the Ministry of Finance
7 DINH, T N T., 2014 International Accounting Standards/International Financial Reporting Standards versus Vietnamese Accounting Standards
1 Appendix 1: NHẬT KÝ THỰC TẬP
Họ và tên sinh viên: Trần Vũ Hoài Thu Lớp: K17405CA
Giáo viên hướng dẫn: PGS.TS Phan Đức Dũng
Công ty TNHH Dịch vụ tư vấn & Kiểm toán FPF, tọa lạc tại tầng 07, tòa nhà Win Home, 25A Mai Thị Lựu, phường Đa Kao, quận 1, TP.HCM, là đơn vị thực tập lý tưởng cho sinh viên ngành kiểm toán và tư vấn.
Phòng/Bộ phận thực tập: Kiểm toán
Cán bộ hướng dẫn thực tập tại doanh nghiệp: Giám đốc điều hành Võ Thị Xuân Mai
Vị trí thực tập: Thực tập sinh Kiểm toán
Lịch thực tập: chính thức bắt đầu từ ngày 25/12/2020 và kết thúc ngày 31/03/2021
Nội dung Nhật ký thực tập
Stt Tuần Nội dung thực tập Đánh giá của SV về kết quả của công việc thực tập
Tham gia các buổi training hướng dẫn quy trình kiểm toán của công ty
Công ty cung cấp hướng dẫn chi tiết về các bước thực hiện quy trình kiểm toán, giúp bạn hiểu rõ và nắm bắt những vấn đề quan trọng liên quan đến quy trình này.
Thực hiện kiểm toán công ty khách hàng
Việc thực hành công việc cụ thể thực tế giúp em nắm rõ được các bước thực hiện quy trình kiểm toán của công ty
Tham gia kiểm kê tại các công ty khách hàng giúp xác minh tính hiện hữu của tài sản và so sánh số liệu thực tế với số liệu sổ sách mà khách hàng cung cấp.
Thực hiện kiểm toán công ty khách hàng
Làm việc thực tế số liệu khách hàng trên
WP (working paper) giúp em hiểu được rõ quy trình kiểm toán của công ty
Thực hiện kiểm toán công ty khách hàng
Dựa trên công việc cụ thể khi làm việc tại công ty khách hàng giúp em kiểm tra kĩ hơn tính xác thực của các dữ liệu
Thực hiện kiểm toán công ty khách hàng
Qua quá trình làm việc thực tế tại công ty giúp em hiểu rõ và hoàn thành công việc một cách chính xác
Thực hiện kiểm toán công ty khách hàng
Quá trình học hỏi cùng sự nhiệt tình của cán bộ hướng dẫn đã giúp em phát triển bản thân và hoàn thành công việc tốt hơn
Thực hiện kiểm toán công ty khách hàng
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Thực hiện kiểm toán công ty khách hàng
Những công việc và trải nghiệm thực tế giúp em hoàn thành công việc đầy đủ và chính xác
Thực hiện kiểm toán công ty khách hàng
Dưới sự hướng dẫn của cán bộ, tôi đã học hỏi được nhiều kiến thức về phương pháp làm việc và cách giải quyết các vấn đề mà bản thân tôi cũng như các kiểm toán viên khác thường gặp phải.
Nhập dữ liệu kế toán giúp tôi rèn luyện tính cẩn thận và chính xác trong công việc Qua quá trình này, tôi có thể hoàn thành nhiệm vụ một cách hiệu quả hơn.