UNIVERSITY OF ECONOMIC AND LAWS FACULTY OF ACCOUNTING AND AUDITING GRADUATION THESIS SALARY AUDIT PROCESS AND SALARY DEDUCTIONS IN THE AUDIT OF FINANCIAL STATEMENTS PERFORMED BY KPMG
Reasons for choosing this topic
In today's rapidly evolving global economy, particularly in Vietnam, competition among domestic and foreign enterprises is intensifying As Vietnam engages in Free Trade Agreements like FTA and RCEP, local businesses face not only internal competition but also increased challenges from international firms To thrive in this competitive landscape, companies must focus on building their brand and reputation by ensuring transparency in financial information, which is crucial for gaining the trust of customers, investors, and other stakeholders.
The audit service plays a crucial role in enhancing business efficiency and ensuring transparency in Vietnam's financial market By improving management practices and consolidating accounting rules, auditing fosters a healthy business environment Financial statements serve as a key source of complex financial information, primarily centered around accounting cycles A significant focus of financial statement audits is on labor costs, which greatly influence other financial data such as revenue and corporate income tax The salary cycle and related deductions are particularly critical, making them a primary area of attention for auditors during the financial statement audit process.
Wages serve as both income and motivation for employees, playing a crucial role in production and business operations while also constituting a significant portion of overall costs In many businesses, payroll expenses account for a large share of total expenditures, and violations of wage regulations are common Ineffective management or fraudulent activities can lead to wasted payroll funds, resulting in inaccuracies that impact product costs and overall enterprise performance These discrepancies can also distort financial statements, hindering informed economic decision-making by users of that information Recognizing the critical nature of payroll and salary deductions during my internship at KPMG Vietnam Co., Ltd., I chose to explore the topic: “Salary Audit Process and Salary Deductions in the Audit of Financial Statements Performed by KPMG Vietnam Co., Ltd” for my thesis research.
Research objectives
Find out the policies and regulations on the audit of the payroll and salary deductions performed by KPMG Vietnam Co., Ltd
Find out the current status of the audit process of the payroll and salary deductions at XYZ Co., Ltd
Comments and evaluation of the audit process of payroll and salary deductions performed by KPMG Vietnam Co., Ltd
Provide solutions to improve the audit process of the payroll and salary deductions.
Subject and scope of the research
The audit of payroll and salary deductions for XYZ Co., Ltd is currently underway, conducted by KPMG Vietnam Co., Ltd This process aims to identify any discrepancies and develop corrective solutions to enhance the overall audit efficiency By focusing on these critical areas, the audit seeks to ensure compliance with financial regulations and improve the accuracy of financial statements.
Audited data at XYZ Company Limited for the fiscal year ending December 31,
KPMG Vietnam Co., Ltd places a strong emphasis on customer information security, resulting in the data and documents presented in this report being intended for reference purposes only Consequently, this limitation may impact the overall practicality of the subject matter discussed.
Research method
To gain a comprehensive understanding of the salary audit process, the writer interviews auditors at KPMG Vietnam Co., Ltd This research aims to provide a realistic view of the salary audit procedures and deductions implemented in practice, supported by relevant data Each method and procedure is clearly outlined, and the writer conducts thorough analysis to contribute to enhancing the overall effectiveness of the salary audit process.
Analyzing audit records and observing the practices of fellow auditors and assistants at the company provide valuable insights into effective auditing techniques This includes gathering audit evidence, employing analytical methods, and enhancing presentation skills in working papers.
Conduct data collection of research subjects and observe the implementation process; Interview the auditors to better understand the collected data.
Theme layout
In addition to the introductory chapter, the course includes 5 main chapters as follows: Chapter 1: General introduction about KPMG Vietnam Co., Ltd
Chapter 2: Theoretical basis of the salary audit process and salary advances in audit of financial statements
Chapter 3:Audit of payroll and salary deductions in the audit of financial statements at KPMG Vietnam Co., Ltd
Chapter 4.Comments and solutions to improve the audit process of the payroll and employees in the audit of financial statements performed by KPMG Co., Ltd.
GENERAL INTRODUCTION ABOUT KPMG VIETNAM CO., LTD
The process of formation and development
Short name: KPMG Limited Company (KPMG Co Ltd)
Head office: Burgemeester Rijnderslaan 20 - 1185 MC Amstelveen – The Netherlands Slogan: Cutting through complexity
Email: http://www.kpmg.com
KPMG, headquartered in Amstelveen, Netherlands, is a leading global professional services firm and a member of the Big Four audit companies, alongside PricewaterhouseCoopers (PwC), Ernst & Young (E&Y), and Deloitte Touche Tohmatsu (Deloitte).
In 1917, Piet Klynveld established an accounting firm in Amsterdam, which later merged with Kraayenhof to become Klynveld Kraayenhof & Co In 1979, this firm joined forces with Thomson McLintock from the USA and Deutsche Treuhandgesellschaft from Germany to create KMG (Klynveld Main Goerdeler), an international professional organization based in Europe The accounting industry saw a landmark merger in 1987 when KMG combined with Peat Marwick, resulting in the formation of KPMG.
1991 it was renamed KPMG Peat Marwick McClintock; in 1995, it returned to the old name KPMG
KPMG delivers high-quality services and expertise to clients across 152 countries and territories Serving one-quarter of the world's largest corporations, KPMG caters to a diverse clientele, including multinational firms, domestic organizations, and both governmental and non-governmental entities.
To effectively address customer needs, KPMG has built an extensive network across the Asia Pacific, staffed by a team of qualified and specialized professionals As a leading provider of financial services, KPMG operates in key markets including Hong Kong, Thailand, Singapore, Malaysia, Taiwan, China, the Philippines, Indonesia, Australia, Cambodia, Laos, and Vietnam.
During its operation, KPMG has achieved outstanding achievements:
In 2011, KPMG UK maintained its position among the top consulting services globally and was recognized as one of the 25 best companies to work for in the UK The firm boasted a substantial partnership of 7,677 capital partners and employed over 207,000 individuals worldwide.
- KPMG Vietnam has just been awarded the Top "Best Place to Work in Asia 2021" award by HR Asia Magazine - the prestigious leading magazine on human resources in Asia
- Voted by Anphabe and Nielsen as one of the "Best Places to Work" in Vietnam in the 2017 survey
- 2016: Honored to be recognized by Novaland Group as a strategic partner who accompanied and contributed to the Group's development in 2015
Recognized as a leading M&A consultant in Vietnam, we have consistently been honored for our exemplary contributions to the industry From 2010 to 2016, we received nominations for notable M&A deals, awarded by the Ministry of Planning and Investment of Vietnam, Investment Newspaper, and AVM Vietnam.
In 2017, KPMG UK was recognized as one of the top 25 best companies to work for, and it secured the top position among the BIG4 firms in Fortune's list of the 100 most valuable companies to work for, outperforming competitors Deloitte, PwC, and E&Y.
- KPMG won the Golden Dragon Award for positive contributions to society This business pays many taxes to the state, creates jobs, and always improves its responsibility to the community
KPMG Vietnam, a member of KPMG Global, received approval from the State to establish a representative office in 1992 and officially formed KPMG Limited Liability Company in 1994 under Investment License No 863/GP issued by the Ministry of Planning and Investment This company operates with 100% foreign investment, starting with an initial capital of 1 million USD and a 20-year business license In April 1998, the investment capital was increased to 4 million USD to support business expansion in Vietnam.
Type and company scale
KPMG Co., Ltd is a limited liability company based in Vietnam and operates as a member firm within the KPMG International network, which consists of independent companies affiliated with KPMG International, a legal entity established under Swiss law.
As one of the four largest auditing service providers globally, KPMG Global operates in 152 countries and territories with a staff of about 207,000 people and 9,200 partners
KPMG established its presence in Vietnam in 1994, opening offices in Hanoi and Ho Chi Minh City, with a new office launched in Da Nang on December 17, 2015 Over the years, KPMG has emerged as a top auditing service provider, earning recognition from the Ministry of Finance and VACPA for its significant revenue and extensive client base.
✓ General Director: Mr Warrick Antony Cleine
✓ Total revenue for the year ended September 30, 2021: VND 580,450 million
✓ There are 38 Accepted Practicing Auditors.
Main markets and customers
KPMG Vietnam is solidifying its position in the market by serving over 2,000 clients both locally and internationally, offering a diverse range of services as its operations continue to expand.
- KPMG Vietnam's customers are very diverse, with many industries and fields difference:
Banking – Finance (Vietcombank, Eximbank, Citibank, Standard Chartered, MUFG, AAA Insurance, etc.)
- Real estate business and construction (Song Da Jurong, First Real, etc.)
- Hotel and restaurant business (Hanoi Tower, Harbor View)
- Manufacture of automobiles and motorcycles, companies that produce parts for cars and motorcycles (Toyota, Honda, Yamaha)
- Producing beverages: beer, soft drinks (Sabeco, etc.)
- Production of cooking oil (Miwon Vietnam)
- Producing and processing food - food (CJ Cau Tre, Loc Troi, Massan, etc.)
- Manufacture of garments (Vinatex, etc.)
- Producing animal feed (Cargill, Pro Con Co, etc.)
The management structure of the company
KPMG Vietnam provides a wide range of services in the following areas:
KPMG provides independent audit services designed to help clients enhance the truthfulness and reliability of financial information, including:
International Financial Reporting Standards (IFRS)
KPMG collaborates with clients to develop effective tax policies and procedures, ensuring tax compliance responsibilities are met and planning opportunities are effectively implemented They also focus on fostering strong relationships with market participants and state regulatory agencies.
Dispute and Dispute Resolution Service
Corporate Income Tax & International Corporate Tax Service
Personal Income Tax & International Executive Service
Legal services include copyright services, market penetration, restructuring, and M&A-related legal services
KPMG's Consulting Services Department offers organizations a dependable source of guidance from a team of diverse experts with significant experience They focus on delivering support to clients swiftly and accurately, ensuring the successful implementation of strategies and maximizing value throughout the process.
• Business buying and selling consulting
Organizational structure
Including the Executive Board and departments: human resources, IT, finance, audit, tax, consulting
At KPMG Vietnam, every department plays a vital role in the company's overall success While the audit and consulting divisions generate direct revenue, other departments like administration, IT, and human resources also make significant contributions The Human Resources Department focuses on recruitment, ensuring that qualified candidates align well with the company's culture and environment.
Figure 1.1: Organizational and management structure at KPMG Vietnam
The Executive Board, composed of the General Director and executive partners, is tasked with evaluating audit risks, determining audit contract engagements, conducting final reviews of audit files, and representing the Company in signing and issuing Audit reports and Management letters to clients.
Particularly for the audit department, is divided into four sub-departments:
Audit 1: specializes in auditing projects and non-governmental organization
Audit 2, 4: specializing in auditing manufacturing enterprises
Audit 3: specializes in auditing banking and financial companies
To effectively address fluctuating customer demands, departments can collaborate and provide mutual support Additionally, the audit department is structured into various levels to enhance practical efficiency and service delivery.
Other departments IT and HR
Administrative offices work according to the hierarchy from high to low:
Mission, vision, and core values
Company mission: to convert knowledge into value for the benefit of customers and capital markets
Company vision: to be the leaders in all the markets the Company participates in
KPMG's core values play a crucial role in attracting and retaining top talent, fostering strong customer relationships, and enhancing the company's reputation By integrating these values into interactions with clients and colleagues, KPMG ensures that its employees reflect these principles in their daily work and relationships, ultimately strengthening the organization's impact and commitment to excellence.
The Company leads by example
The Company works on team spirit
The Company respects each individual
The Company learns the truth and understands the nature
The Company is open and honest in communication
The Company is committed to the community
Most importantly, the Company acts with integrity
THEORETICAL BASIS OF THE SALARY AUDIT PROCESS AND
General issues about salary and salary extracts
In a market economy, the production process relies on three key factors: human labor power, labor objects, and means of labor Among these, human labor is the most crucial element, as it transforms otherwise useless objects and tools into valuable products.
To ensure continuous human production and business activities, it is crucial to maintain the reproduction of labor power, meaning that workers must receive specific wages to compensate for their consumption needs Marx noted that while "labor creates the value of a commodity," it itself does not possess intrinsic value; rather, what is referred to as "labor value" is actually "labor-power value." Consequently, labor remuneration, represented as wages, reflects the price of labor-power—essentially the amount employers pay employees based on market dynamics and governed by labor laws and contracts.
There are many different definitions of salary, but the current definition of the State on salary is as follows:
Wages refer to the monetary compensation agreed upon between an employer and an employee, or dictated by national laws and employer regulations This income is paid to workers under an employment contract for work already completed or to be completed in the future.
Wages represent the price of labor, shaped by the dynamics of supply and demand within the economy Their primary purpose is to compensate individuals for their labor while addressing essential living and consumption needs, such as food, shelter, clothing, education, and healthcare However, the minimum wage often only fulfills the basic requirements for employees and their families, leaving out crucial aspects like security, hygiene, and social contributions from its financial framework.
2.1.2 Meaning and role of salary and salary deductions
Business management tools play a crucial role in payroll management, which is essential for overseeing production and business processes These tools enable enterprises to monitor employee performance in line with organizational plans through salary payments By effectively managing wages, businesses can maintain order, motivate employees to boost productivity, and ensure adherence to labor discipline.
The reproduction of labor power is fundamentally linked to the payment of wages, which provides workers with the necessary resources to sustain and enhance their ability to work By earning a fair wage, workers can maintain their living standards, recharge their energy, and invest in their personal development This process not only allows them to gain experience and improve their qualifications but also enhances their labor skills and overall quality of work.
Economic leverage plays a crucial role in enhancing labor productivity by ensuring fair salaries for employees When workers receive appropriate compensation, they are motivated to increase their productivity, which in turn fosters the growth of production and business processes Proper remuneration not only encourages enthusiasm among employees but also strengthens their commitment to the organization's goals, aligning their responsibilities with the enterprise's interests.
Proper compensation is essential for motivating employees to work hard and continuously enhance their skills Inadequate pay can lead to negative outcomes for businesses, including strikes that may result in political and social unrest A well-structured wage and salary system fosters productivity, quality, and efficiency, ensuring that employees feel fairly rewarded based on their performance.
Wages are crucial for both employees and businesses, serving as compensation for labor and a motivator for job performance When employees receive adequate wages to meet their living expenses, they are more likely to engage fully in their work Additionally, salary has become a key indicator of skill level and career advancement, leading workers to take pride in their earnings and seek raises, despite wages often being just a fraction of their overall income.
Wages are a crucial component of production costs for businesses, representing an investment in development Additionally, salaries serve as a key driver for enhancing enterprise performance Implementing a fair and equitable salary structure is essential for attracting, retaining, and nurturing a skilled workforce within the organization.
To effectively manage and account for the diverse workforce within enterprises, it is essential to categorize wages into distinct groups Various salary classifications exist to streamline this process.
Classification by form of payment: salary by time, product salary, package salary
Classification by salary object: direct salary and indirect salary
Salaries can be classified into two categories based on the accounting method: primary salary and supplementary salary The primary salary is the main compensation an employee receives for their core responsibilities, which includes their position-based salary and any additional allowances In contrast, supplementary salary refers to the earnings an employee is entitled to during approved leaves, such as vacations and public holidays, as well as during the completion of other assigned tasks, including meetings and outings.
The division of main salary and supplementary salary has an important meaning for analyzing salary costs in costing and accounting
2.1.4 Types of salary payment and calculation:
A salary payment system that calculates compensation based on actual working hours, salary coefficients, and the unit price of labor is defined as a time-based payment method This approach ensures that employee earnings are directly linked to their working time and technical expertise, reflecting their contribution to the organization.
Monthly salary = Minimum salary x (HS salary + HS allowance)
Monthly salary = (Minimum wage)/(Number of working days in a month) x Actual number of working days in a month
Daily salary = (Monthly salary)/(Number of working days in a month)
Overtime pay = Hourly wage x HS calculated x number of overtime hours
Applying according to the provisions of Clauses 1, 2, 3, Article 98 of the Labor Code 2019 on overtime wages, working at night:
Employees who work overtime are paid according to the salary unit price or the actual salary paid according to the work they are doing as follows:
On weekly rest days, at least 200%;
On public holidays, New Year's Day, paid rest days, at least equal to 300%, excluding the salary for holidays, Tet, and paid holidays for employees who receive a daily salary
Night shift employees are entitled to a minimum pay of 30% above their regular salary, based on either the salary unit price or the actual earnings for a typical working day.
Employees working night overtime are entitled to their regular wages as outlined in Clauses 1 and 2, plus an additional 20% of their salary This extra compensation is calculated based on their daytime wage rate for normal working days, weekly rest days, public holidays, or New Year's Day.
Overview of salary accounting and salary deductions
2.2.1 Duties of the accountant of salary and deductions according to salary
Stemming from the meaning and importance of wage labor, the salary accountant has a significant position and has the following duties:
To effectively manage labor and salary payments, enterprises must meticulously organize their accounting systems and accurately track the quantity, time, and operational results for each employee and labor unit This requires a thorough understanding and application of the State's labor and salary regulations, tailored to meet the specific management needs of various activities within the organization.
Correctness, complete and timely payment of wages and related deductions to employees by the State's regime, and following the regulations of enterprises
Calculating the distribution of salary expenses and deductions according to salary accurately and reasonably
Regularly assess labor management and utilization, set salary budget targets, and create an effective salary payment plan Additionally, supply essential economic data to departments involved in labor management and salary adjustments.
2.2.2 Overview of the salary cycle and salary deductions
The wage and deduction cycle starts with the hiring of employees and concludes with the payment of wages and other obligations to government entities Grasping the stages of this cycle is crucial for auditors, as it guides them in identifying the necessary documents to review, highlighting those that are essential and may pose risks The salary cycle encompasses several key stages.
The human resources department is responsible for the recruitment and hiring of employees, ensuring that all qualified candidates are documented in reports approved by management These reports detail personal information, assigned positions, job responsibilities, basic salaries, benefits, and approved deductions Two copies of each report are created: one is retained by the human resources department, while the other is forwarded to the salary accountant for salary calculation purposes.
Changes to salary, salary grade, bonuses, and benefits are common during salary increases, employee promotions, job transfers, or skill upgrades Before these adjustments are documented in the personnel records, they must receive approval from an authorized individual or the human resources department.
Effectively tracking and calculating labor time, workload, and finished products is crucial for accurate management within a company Each employee and production unit plays a vital role in labor and wage management, serving as the foundation for determining salaries, bonuses, and additional employee benefits.
Calculating salaries and managing payroll involves tracking working hours, performance results, and related documents The salary accountant verifies these documents to compute salaries, bonuses, and allowances, which are then compiled in the Salary and Bonus Payment Table as per the current Accounting System Additionally, the salary accountant is responsible for preparing and reporting payable amounts to state agencies, including taxes and deductions, ensuring compliance with payment obligations to these entities.
Effective record keeping is essential for managing employee wages and bonuses The accountant must regularly update the Salary Ledger using payment tables and original documents Alongside these entries, the salary accountant prepares the salary payment table and generates payslips and bonus documents for the cashier, ensuring that all payments are made only after receiving approval from the authorized personnel.
The treasurer verifies the payslip against the salary and bonus payment table to ensure accuracy before processing payments Once confirmed, the cashier disburses the salary, requiring the employee's signature on the payment slip as proof of receipt Additionally, any unpaid wages are meticulously documented in the accounting records.
Figure 2.1: Salary cycle diagram and salary deductions workers
2.2.3 Bookkeeping system for salary accounting and salary deductions
Employee logbook: track work start date, personal profile, salary, approved
- Set the number of personnel
Time tracking function, completed workload
- Time attendance tracking labor time
- Calculating salary, bonus and making payment table of salary, bonus and other payables and payables
- Accounting records deductions, work evaluation and contract end date
Timesheets (Form 01A-LDTL) is the most critical initial document to record working time in enterprises Timesheets track data on actual working time, leave, and employees' absences
Accountants utilize various initial documents to record labor results in enterprises, tailored to the specific production types and characteristics of each business Commonly used documents include the Certificate of Product or Work Completion (Form 05-LDTL) and the delivery contract (Form 08-LDTL).
Based on the above documents, the accountant will make a salary payment table (Form 02-LDTL), a bonus payment table (Form 03-LDTL)
Documents about social insurance such as Social Insurance Payment Table (Form C70a-HD), List of deductions and payments according to salary (Form 10-LDTL)
Salary accountants use Account 334 and Account 338 v2 related accounts to record salary and salary deductions
This account tracks the liabilities related to employee compensation, including salaries, wages, bonuses, social insurance, and other payments owed to workers by the enterprise.
Salaries, wages, bonuses of salary nature, social insurance, and other payments already paid, paid, or advanced to employees;
Deductions from wages and salaries of employees
Salaries, wages, bonuses of salary nature, social insurance, and other payable and payable to employees
Credit balance: salaries, wages, bonuses of salary nature, and other amounts still payable to employees
Account 334 may have a Debit balance The debit balance of Account 334 is unique
- if any, it reflects the amount paid that is larger than the amount due to pay salaries, wages, bonuses, and other payments to employees
Account 334 - Payables to employees, has 2 tier 2 accounts:
Account 3341 - Payables to Employees encompasses the obligations related to employee compensation, including salaries, bonuses, social insurance, and additional benefits This account also includes other payables tied to employee income.
Account 3348 - Payables to Other Employees represents the financial obligations related to wages and bonuses owed to employees who are not directly employed by the enterprise This account captures the status of these payables, highlighting the nature of wages and other payments that contribute to the employee's overall income.
Account 338 – Other payables and payables
Content: This account is used to record the payment of payables and payables in addition to the contents reflected in other accounts of account group 33 (from account
Account 337 is utilized to record advance revenue for services rendered to customers, adjustments in asset revaluation for joint venture contributions, and price variances in rental agreements It distinguishes between finance leases and operating leases for property management.
Social insurance payable to employees;
Consolidation expenditures at the unit;
The number of social insurance, health insurance, unemployment insurance, and CPC has been submitted to the fund management agency of social insurance, health insurance, and CPC
Other paid and paid amounts
Deducting social insurance, health insurance, unemployment insurance, and labor insurance into production and business expenses;
Deducting social insurance, health insurance, and unemployment insurance from the employee's salary;
Social insurance number paid to employees when paid by the social insurance agency;
Credit balance: reflects the amount remaining to be paid and other payables
This account may show a debit balance, indicating that payments made exceed the amount due or payable It can also represent unpaid social insurance contributions for employees and unrefunded excess union dues.
Account 338 – Other payables and payables has 8 level 2 accounts, including accounts related to salary deductions as follows:
Account 3382 - Union funds: Recording the deduction and payment of trade union fees at the unit
Account 3383 - Social insurance: Recording the deduction and payment of social insurance of the unit
Account 3384 - Health insurance: Recording the deduction and payment of health insurance as prescribed
Internal control system of the wage cycle
Determining the appropriate salary for each employee (legal, valid, reasonable) is also the most crucial goal of this cycle
Ensure that every employee's salary is entirely, accurately, and timely calculated
Division of responsibilities among different functions
To mitigate the risk of fraud, it is essential to separate functions among different individuals or departments, as concentrating multiple roles in one person can lead to potential abuse Consequently, the organization should structure its staff into distinct departments for better oversight and accountability.
Human Resources Department: recruiting, signing labor contracts, and managing labor records
Employee department: labor management and timekeeping
Payroll department: calculate salary and related deductions, prepare salary payment table to closely monitor fluctuations in salary costs
Payroll department: distribute wages to employees and strictly control unreceived wages
Objects inside: Each employee using the software must have his/her own password and only be allowed to access his/her operating part
External users: Set a password so that they cannot access or access the information system and this cycle
Enter data as soon as possible
Backup data for unexpected backup
Controlling the validity and legality of documents
Check the approval on the documents
Check to make sure the required data areas are full of information
Check to ensure accuracy in entering customer code, necessary information about customers, and data
Sequential numbering of the seals before use
Apply for all stamps used, e.g., cheques, cash orders… Forms should be legible, numbered, and referenced for checking when necessary
To ensure accurate salary calculations, it is essential that initial documents like timesheets, night tables, and overtime records, along with salary spreadsheets, receive approval from competent authorities Furthermore, a clear policy regarding recruitment, promotion, rewards, and disciplinary actions must outline the individuals responsible for granting this approval.
Independent testing of the implementation
The unit head should regularly review departmental activities, including the recruitment process, labor contract signing, timekeeping, salary calculations, and payments This oversight is essential for promptly identifying violations and enhancing departmental discipline.
Analyze, review, or evaluate the reasonableness of salary costs
This control procedure helps managers promptly detect unusual fluctuations in salary costs without having to go into too much detail in each case
The main principles when formulating a salary policy are:
The contribution level is determined based on assessing the ability to contribute (for new employees) or contribute (for old employees) to the unit
Based on the labor market:
To establish a fair salary policy, it is essential to consider various factors, including entities within the same industry, whether they are private, public, or foreign Additionally, the analysis should encompass units operating in similar geographical areas and those with comparable conditions, such as years of experience in the industry and similarities in management culture.
Based on the business situation and financial capacity of the unit
When a business is thriving and has strong financial resources, it can offer salaries that exceed market rates This approach ensures that as the company grows, employees reap greater rewards, creating a mutually beneficial relationship.
Based on fairness between employees in the same department and between departments in the same unit
Build the volume budget (total salary fund) in the unit's budget
Develop salary fund for each department/activity of the unit
Build salary scale for each level and each job nature in the unit
Develop a salary bracket for each position/title in the unit
Based on the material value that the unit gives to the employee and the spiritual value that the employee receives from the unit
Good working environment, such as co-worker relationships, physical facilities, etc
Conditions for learning and improving professional knowledge
The reputation of the entity
Welfare regimes for housing, tourism, health care, capital inertness, right to buy shares
According to the current law on salary, wages, bonuses, social insurance, health insurance, unemployment insurance, labor union, and unit regulations
Control the process of preparing timesheets and related documents for payroll
Prepare initial documents as the basis for salary calculation
Before initiating the payroll cycle, it's crucial to pre-design and sequentially number all necessary documents, as errors at this initial stage can lead to significant repercussions throughout the entire process Each department is responsible for creating original documents, which must then be approved by the respective Head of the department.
Check the completeness of the original salary documents
The payroll officer checks the completeness of the original salary documentation, which needs to be compared with the unit's current List of employees
Check the contents of the original salary voucher
The payroll officer checks the completeness of the initial salary documents and is signed by the department head This is to avoid overstating the number of overtime hours
Employees responsible for payroll must review any recorded hours of leave, including sick leave and unpaid leave, on the timesheet It is essential to ensure the accuracy and reasonableness of these entries by verifying them with the Head of the respective department.
Control the payroll and deductions process
At this stage, there are significant risks associated with payroll management, including the potential for incorrect calculations for employees who are no longer with the company, as well as miscalculations that do not align with the organization's policies To mitigate these risks, it is essential to adhere to established standard procedures.
Any personnel changes are regularly updated
Assign a person with authority to approve changes in the payroll program
Assign a person competent to approve payroll
Payroll and salary payment vouchers must be fully and promptly transferred to accountants for recording
Periodically, the manager compares the actual salary cost with the planned salary budget
According to the salary payment table, payroll employees are required to complete a salary request form and submit it to the appropriate authority for approval Upon receiving their salary, employees must sign the payment receipt to confirm the transaction.
The salary payment sheet will be transferred to the accounting department to be recorded in the salary detail book and then recorded in the general ledger
Control the process of paying personal income tax and deductions to the State
The critical control procedures to be performed are:
Must be approved before paying salary
Periodic general analysis of the reasonableness of the salary fund
Employees must sign to receive salary directly or pay directly through a bank account.
Audit the wage cycle and salary pieces of pieces of pieces of advices in
2.4.1 Roles and objectives of payroll and deductions audits
The role of audit of the pay cycle and payroll deductions
Audit of the salary cycle and salary deductions plays an important role in the audit of financial statements due to the following reasons:
Salaries and salary deductions are expenses that account for a large proportion of an enterprise's production and business costs related to the cost of products, services, or services
Salary and salary deductions have a significant influence on inventory valuation
The wage cycle is a cycle prone to forms of fraud that make businesses lose or use labor ineffectively
The objective of the audit of the pay cycle and payroll deductions
The audit objective is crucial as it ensures that financial statements are prepared in accordance with current accounting standards and relevant laws, providing a true and fair view in all material respects While the overarching objectives remain consistent across audits, the evidence gathered varies based on the unique circumstances of each audit By applying a common audit objective to all items, the audit process is effectively organized, with specific objectives tailored for each operational segment derived from the general audit goals.
Table 2.1: Salary cycle audit objectives and salary deductions
General audit objective Specific audit objective
Existence The payroll transactions recorded on the books are genuine, and the documents are valid and accurate
Rights and obligations Ensure that the wages and salary deductions that employees are entitled to accurately reflect the organization's obligations to employees
Completeness Salary payments and salary deductions arising during the period are fully accounted for and recorded
Rating and Attribution Employees' accounting and payment of wages are made according to the pre-determined unit prices, grades, contracts, and pre-determined rates
Wage expenses and salary deductions payable to employees are appropriately classified according to different classification criteria and properly grouped into detailed accounts
Arithmetic Accuracy Calculation and payment to employees of wages and salary deductions are calculated correctly
2.4.2 Process of auditing the salary cycle and payroll deductions
This is the first and most important stage of the audit According to ISA 300 (Audit Planning): "A suitable audit plan will benefit the audit of the financial statements as follows:
Assist the auditor in giving due attention to the significant parts of the audit;
Assist the auditor in identifying and resolving issues that may arise promptly;
Assist the auditor in organizing and managing the audit appropriately to ensure that the audit is conducted effectively;
Assist in the selection of engagement team members with appropriate expertise and ability to handle the expected risks and appropriate work assignments for each member;
Facilitate the direction and supervision of the engagement team and review its work;
Assist in coordinating work carried out by component auditors and experts, as necessary."
Planning an audit consists of the following six steps:
When initiating client services, the audit firm should reach out to the predecessor auditor to explore the potential for offering audit services Key preparatory tasks for effective audit planning include gathering relevant information and understanding the client's prior audit history.
Review the quality control system
The integrity of Client Management
Identify the client's audit rationale
After the contract is signed, the auditor initiates the general audit planning process by gathering background information to understand the client's business This involves interviewing the board of directors and employees, as well as consulting with the predecessor auditor During this phase, the auditor evaluates the risk of material misstatement, conducts an initial materiality assessment, and performs analytical procedures to estimate the time required for the audit and to determine the scope of additional audit procedures.
Understanding the industry and business activities of the client
Review of previous audit results and audit records
Anticipated need for external experts
Collect information about clients' legal obligations
This phase enables the auditor to understand the legal framework impacting the client's business operations Through interactions with the client's management, the auditor gathers essential information regarding the legal processes involved.
Business license and investment license of the company
Financial statements, audit, inspection, or test reports for the current year or several previous years
Minutes of shareholder meetings, the board of directors, and the board of directors
Following the gathering of background information and the audit client's legal obligations, the auditor will conduct analytical procedures to aid in the planning of the audit regarding its timing and scope Audit procedures will then be implemented to collect necessary audit evidence The primary objectives of this phase include ensuring a thorough and effective audit process.
Gain an understanding of the contents of the financial statements and significant changes in the client's accounting and business operations that have occurred since the previous audit
Enhances the auditor's understanding of the client's business and helps the auditor identify ongoing issues
Assess the presence of possible errors in the financial statements of enterprises
Analytical procedures used by auditors include horizontal and vertical analytical procedures
Assessment of materiality and audit risk:
The previous stages focus solely on the customer, allowing the auditor to evaluate and provide insights based on the gathered data, which is essential for developing a comprehensive audit plan.
The auditor is responsible for assessing materiality to estimate the permissible level of misstatement in financial statements, which influences the audit's scope and timing This evaluation helps determine the significance of misstatements on the financial statements Additionally, the auditor should assess the overall materiality of the financial statements and distribute that assessment across each individual item.
The initial estimate of materiality:
The maximum salary threshold identified by the auditor indicates the point at which the financial statements may be misleading without significantly impacting the decisions of financial information users Essentially, this means that certain errors within the overall financial statement are deemed acceptable.
Preliminary estimation and distribution of materiality for operating components:
An initial estimate of materiality is crucial for auditors to effectively plan their evidence collection Since evidence is typically gathered on a partial basis rather than for the entire financial statements, establishing a specific materiality level for each action is essential This tailored materiality level guides auditors in focusing their efforts, ensuring that they collect a reasonable amount of evidence for each aspect of the audit.
Audit risk refers to the possibility that an auditor may issue an incorrect opinion on financial statements that contain significant misstatements Due to constraints such as limited sample selection and the challenges in uncovering concealed fraud, auditors cannot identify all material misstatements Consequently, audit risk persists, even when auditors adhere to established auditing standards.
Audit risk and materiality are inversely related; as materiality increases, audit risk decreases, and vice versa This relationship influences the volume of evidence auditors must gather: higher materiality estimates and lower audit risk result in less evidence collection, while lower materiality and higher audit risk necessitate more extensive evidence.
Understand internal control systems and assess control risk
Evaluating the client's internal control system and assessing control risk is crucial in the auditing process As outlined in Vietnamese Auditing Standard 400, auditors must possess a comprehensive understanding of the client's accounting and internal control systems to develop a robust overall audit plan and an effective audit program.
Assessing control risk is crucial for auditors as it influences every stage of the audit process, from planning to report preparation A proper evaluation of control risk dictates the timing, scope, and methods of the audit, impacting the overall amount of work required Underestimating control risk can lead auditors to place undue confidence in an enterprise's internal control system, allowing for a reduction in substantive testing Conversely, an accurate understanding of the internal control system and control risk assessment is essential for effective auditing.
It helps to identify the types of material misstatements that may occur in the financial statements
Help to consider the factors that influence the likelihood of material misstatement
Help design appropriate audit methodology
The assessment of control risk follows the following steps:
Initial assessment of control risk
Design and implementation of tests of controls
Reassess control risk and redesign substantive testing
An audit program is a comprehensive plan that outlines the expected completion time, the scope of the audit tasks, and the distribution of responsibilities among auditors, along with an estimate of necessary documents and information to be gathered A well-structured audit program not only aids auditors in maintaining timelines and ensuring audit quality but also serves as a tool for audit leaders to effectively manage and oversee the audit process.
The audit program is generally designed into three parts: job test, analytical test, and direct balance test
Auditing Procedures: Generally, the design of audit procedures follows the following steps:
Specify the internal control objectives for the items under investigation
Identify specific internal control processes that reduce control risk for each internal control objective
Design tests of controls for each of the above control processes
Design job tests according to control objectives
Selection sample size: The attribute sampling method is often used to estimate the proportion of elements in the population with an attribute of interest
Selected items: after determining the sample size, the auditor must identify individual elements that are highly representative of the population
Design multiple-choice analysis to assess the general reasonableness of the accounts being audited During this phase, the auditor performs the following steps:
Identify account balances and potential errors that need to be checked
Calculate the estimated value of the accounts to be checked
Determine the acceptable difference value
Determine the number of material differences to be examined
Design of a direct test of balance
Evaluating control risk in salary accounts and payroll deductions is critical, as initial estimates of material toxicity levels can lead auditors to make incorrect determinations regarding acceptable thresholds for each item A higher acceptable margin of error results in less available audit evidence, which consequently limits the scope of direct balance tests and overall audit procedures.
Auditing process of financial statements performed by KPMG Vietnam Co., Ltd
Auditing financial statements is a complex process that requires adherence to KPMG's KAM manual To ensure a smooth audit with high-quality implementation at every stage, KPMG has developed and integrated various tools to support auditors throughout the audit program.
The KPMG Audit Manual (KAM) serves as a comprehensive guide for auditors, incorporating the International Standards on Auditing (ISA) requirements and guidelines Developed from years of expertise, KAM is regularly updated to align with global accounting and auditing standards and adapt to economic fluctuations This manual ensures that auditors at KPMG Vietnam adhere to consistent audit procedures, reflecting both local and global practices.
EAudit software offers customizable electronic workflows tailored to various business types, enhancing audit design flexibility for corporate contracts It provides a comprehensive overview of the audit process, detailing all necessary procedures and methods Auditors can efficiently conduct audits by entering specific client unit information and following the pre-installed steps within the software.
- Email: Each KPMG employee has his or her email (Example:
Uyenknguyen@kpmg.com.vn) to exchange information internally as well as with customers of KPMG
3.1.2 Financial statements audit process BCTC
KPMG Co., Ltd utilizes a four-stage financial statement audit planning process, which is effectively managed through their eAudit software Auditors input business type information and create a dedicated directory for each entity The software comes with pre-installed audit processes tailored for different business types Once all relevant information is entered, auditors proceed with the specified steps in the audit process.
Initially, the KTV gathers customer information, while the operating auditor oversees this monitoring phase to finalize the audit contract During this process, the auditor assesses the management's skills, perceptions, and attitudes toward control activities, as well as their ethical standards, organizational structure, personnel practices, decentralization, and accounting systems.
The auditor considers the following issues:
Integrity of the Board of Directors, the owner of the unit
Audit team capabilities, time, and resources
Compliance with the requirements of professional, ethical standards
Cases of contract refusal when there are material risks
The auditor should consider the following issues:
Changes in the customer's business activities (if any)
Integrity of the Board of Directors, the owner of the unit
Changes that reduce the independence of the audit team
Customers still owe audit fees, there is pressure to reduce fees or limit audit scope
Through the initial view as well as a basic understanding of the customer's operation situation, the KTV will decide whether to sign the contract or not
Upon initiating an audit contract, the auditor gathers the audit report to gain insights into the client's operations and business environment through unit visits, observations, and interviews with key individuals, ensuring the collection of essential information.
General situation of the economy
Fluctuations in introductory interest rates
Foreign exchange rate and inflation
Changes in the market in which the enterprise is doing business
Issues and industry trends that businesses do business with:
Industry business characteristics (continuous or seasonal)
Changes in technology for production and trading of main products
The downsizing or expansion of the business
Industry input supply and prices
Minutes of the General Meeting of Shareholders, Board of Directors (Board of members and Board of Directors)
A copy of the seal sample registration and signature of the person responsible before the law
The charter of the enterprise
Main business activities and situation:
The nature of the revenue sources
Describe the main types of products or services the business offers
Suppliers of important goods and services
Each industry will have different business operating environments, influenced by the economy and external factors Through, learn, and research
The aforementioned factors provide auditors with a comprehensive understanding of the business environment, enabling them to make initial assessments regarding the potential impact of external influences on the organization's performance Consequently, this insight allows auditors to tailor their audit programs to align with the specific needs of various industries.
In this phase, we define the scope of work, timeline, and human resources required for the project, tailoring the scope to meet the specific needs of the client Additionally, we meticulously calculate and allocate the necessary time and personnel based on the unique characteristics of each audit component.
Significant accounts and disclosures in the Notes to the Financial Statements
The auditor will evaluate the business and its environment by examining various elements, including the industry landscape, external legal factors, operational conditions, ownership and management structures, accounting policies, development objectives, financial health, affiliated organizations, ongoing disputes or litigation, and the effectiveness of IT systems.
Stage 3: Implementation of the audit plan (basic testing):
Testing the effectiveness of the internal control system
Substantive testing encompasses a variety of methods, including substantive analytical procedures, detailed tests, and the application of three sampling techniques utilized by KPMG: population sampling, featured samples, and traditional sampling Additionally, it involves substantive testing of items deemed immaterial.
After completing the audit procedures, the auditor will collect and assess audit evidence, re-evaluating materiality and adjusting for any changes in risk assessment This culminates in a comprehensive analysis that includes the manager's perspective, insights on related parties, significant findings, and a summary of risks, including audit misstatements, ineffective controls, and minor accounts Additionally, the auditor will consider disputes, litigation, and expert judgment in their overall assessment.
In addition to the previous steps, a directory is essential as it consolidates all audit evidence collected by the auditor, linked to the numbers in the auditor's working records This allows the auditor to easily access and review the audit evidence gathered throughout the enterprise audit process.
Figure 3.1:Description of the entire audit process at KPMG Vietnam
Actual status of the audit process of salary and salary deductions in the
of financial statements performed by KPMG VietNam Co., Ltd
3.2.1 Objectives of auditing the salary cycle and salary deductions
The salary component is crucial for businesses as it influences financial statements and serves as a foundation for calculating various costs, including production, administrative, and selling expenses Consequently, auditors not only review the balances of accounts linked to the payroll cycle and deductions but also analyze the detailed transactions of these accounts, with a particular focus on cost allocation.
The primary goal of this audit cycle is to gather sufficient and appropriate evidence to validate the accuracy and fairness of salary and salary deduction transactions Additionally, it ensures that all significant financial statements related to the salary cycle comply with current accounting standards and regulations.
Exist Balance of salary account and actual salary deductions
Recorded transactions must accurately reflect actual events, ensuring that obligations such as salaries payable to employees and other liabilities to the state—like social insurance, health insurance, accident insurance, and union fees—are genuinely recognized in the financial statements It is essential that all transactions are completely documented to maintain the integrity of financial reporting.
All salaries and deductions are properly recorded
Accurate recording Detailed data of salary and salary deductions match the ledger
Calculations related to salary accounts and payroll deductions are numerically correct
Presentation and explanation The salaries and deductions according to salary are presented and classified properly
Rating and Attribution Decreases in the salary account and salary deductions are appropriately evaluated and recorded
In the fourth quarter, the company's performance was hindered by legal factors and contractual risks, leading to a comprehensive assessment of its business activities Additionally, the audit contract was finalized at the beginning of the quarter, impacting overall operations.
Information gathering and risk confirmation
Due to its status as a quarterly audited company, ABC experienced a significant reduction in the need for customer information during the fourth quarter 2021 audit Auditors primarily relied on research findings from previous years and quarters, while also assessing factors impacting the client's business to identify potential risks.
ABC Company Limited, established on June 25, 2004, is a wholly foreign-owned limited liability company registered under the investment license from the Department of Planning and Investment of Dong Nai province The company specializes in the manufacturing and trading of chemicals specifically for the textile industry.
Number of employees: 50 people and 8 foreign workers
Accounting policies to be applied
Accounting year: starts from January 1 and ends on December 31 of each year
Accounting regime: The Company applies the Accounting Law, Accounting Standards, Vietnamese accounting regime according to Circular 200/2014/TT-BTC and circulars amending and supplementing the Corporate Accounting Regime
Applicable accounting form: Computer-based vouchers
How to calculate salary: Calculate salary according to working time
The standard working time for office employees is 8 hours per day, with a typical work month consisting of 26 days The payroll for the month is submitted to the salary accountant, who is responsible for monitoring and categorizing the payroll data.
Basic salary: based on contract For employees who terminate employment, wages are paid until the end of employment
Each month, employee salaries are meticulously calculated using an Excel sheet, which includes the basic salary, overtime pay, social insurance, health insurance, accident insurance, and various allowances Both formal and informal payments are determined based on hours worked, as recorded on timesheets, and all salaries are disbursed directly via bank transfer.
Unemployment Insurance and Employment Allowance
According to Circular No TT28/2015/TT-BLDTBXH issued on July 31, 2015, by the Ministry of Labor, War Invalids, and Social Affairs, the unemployment insurance fund is primarily funded by contributions from both employees and employers Employees are required to contribute 1% of their monthly salary to the fund, while employers must match this with an additional 1% based on the monthly salaries of their employees enrolled in unemployment insurance.
13th month salary is calculated by 2 months salary and bonus at the beginning of the month of the following year
Annual visit allowance: For those with over 10 years of seniority and depending on the position, they will be entitled to a minimum allowance of 1,000,000 VND/person
The company adheres to a comprehensive overtime pay policy in line with Labor Law regulations For weekday overtime, employees earn 1.5 times their contracted salary for hours worked before 10 hours, and 1.8 times for hours exceeding 10 On weekends, the pay is doubled, equating to 2 times the contracted salary, while holiday work is compensated at triple the contracted rate, ensuring fair remuneration for all additional hours worked.
Social insurance, health insurance, unemployment insurance: calculated on the basic salary and position salary (equivalent to the salary on the contract) but not exceeding 14 million VND
PIT: PIT is calculated on a per employee basis
Tax rate x ([contract salary + overtime salary] + [ allowance + salary adjustment (if any) + annual leave salary] - deductions (due to absence + 10.5% of salary deductions)] )
Each year, the human resources department compiles a list of salary deductions from the time sheets and submits it to the general accountant, who then processes the individual salaries for payroll.
Research and evaluate internal control system
ABC Company has a longstanding relationship with KPMG Vietnam Co., Ltd., which has led to prior evaluations of its internal control system during previous audits Consequently, in the recent quarterly audit, the auditor did not reassess the internal control system but instead referenced last year's findings to identify any changes The auditor's role was limited to observation and evaluation, utilizing professional judgment to form an initial assessment and direction regarding the quality of the evidence gathered.
The auditor gathers customer information to gain insights into the payroll process and identify potential errors in adherence to established policies and procedures Additionally, the auditor evaluates the risk associated with ABC Company based on three key criteria.
Method of calculating wages and paying wages to employees
Record the allocation of wages to expenses
The auditor noted that there were no adjustments to the company's salary item, nor any changes in the salary and personnel policies within the board of directors and accounting department As a result, the auditor made an initial observation on the system, stating that ABC Company's internal control system is relatively strong, with a low control risk and a medium level of detailed testing applied.
Key accounts involved in the cycle and risks to the financial statements associated with these accounts:
Payable related to salary: must pay to state agencies social insurance, health insurance, unemployment insurance, payable to employees
Errors in calculating salary costs can result in misclassification of salary, social insurance, and health insurance expenses within a company's financial records This misrepresentation can create an inaccurate portrayal of the company's obligations to both employees and social insurance agencies.
Comprehensive audit planning and audit program establishment
End of audit
3.3.1 Consideration of events after the balance sheet date
Following the audit, the auditor determined that there were no significant issues, such as disputes involving employees or client companies, or conflicts with insurance providers, after the balance sheet date As a result, the auditor confidently concludes that the salary and deductions are complete, accurate, accessible, and well-presented, with no material misstatements Therefore, the initial assessment indicates that the risk associated with the salary cycle and deductions at Company ABC is relatively low.
3.3.2 Reviewing the auditor's working paper
Upon finalizing the audit procedures outlined in the audit program, auditors conduct a thorough examination of salary performance and deductions They meticulously review their working papers, assess the adequacy and relevance of the audit evidence, and, if necessary, gather additional evidence to ensure a comprehensive evaluation.
The senior in charge summarizes the working papers of the auditors, considers and requests the auditor's explanation or performs additional audit procedures (if necessary)
The audit process for salary administration and deductions at Company ABC has been thoroughly conducted, providing a robust foundation for the auditor's conclusions.
Upon completing the audit, the senior auditor presented a summary of the adjusted entries and the draft management letter Prior to finalizing the audit report and management letter, KPMG Vietnam's manager convened a meeting with the client company to discuss and confirm the audit findings During this meeting, auditors were required to clarify any identified errors, provide supporting evidence, and ensure that the preparation of the client company's financial statements was conducted with complete honesty and material accuracy.
Following the completion of the financial statement audit, KPMG will hold a meeting with ABC Company to discuss the audit findings, including any irregularities identified and outstanding tasks Additionally, during this meeting, the client will express their satisfaction with the services rendered by KPMG.
For company ABC, the audit report is sent to the board of directors of ABC company with the opinion fully accepted
COMMENTS AND RECOMMENDATIONS ON THE PROCESS OF
Comments on the current state of the wage cycle audit and the amounts
KPMG Vietnam, a prominent member of the Big Four auditing firms globally, employs a scientific and adaptable audit process that enhances the efficiency and convenience of its auditors.
Through the process of researching and observing the audit of the salary cycle and salary deductions at ABC company, I have some comments as follows:
Information gathering and risk identification
At KPMG Vietnam Co., Ltd., the planning and risk identification process is managed by a dedicated manager, ensuring high-quality information is gathered This critical information provides the manager with a comprehensive overview to assess the risk cycle and identify key items and accounts within the client's organization Such insights form the foundation for auditors to choose suitable audit tests and procedures, enhancing the overall effectiveness of the audit process.
ABC Company provides valuable insights into its business operations and salary policy regulations, enabling auditors to select appropriate methods and assess the materiality of salary-related issues This streamlined approach enhances auditors' efficiency, allowing them to complete their tasks more effectively and reduce the time spent with clients.
At Vietnam KPMG Business Ltd., the data collected during this phase is essential for effective planning and risk assessment This information provides managers with a comprehensive understanding of the risk cycle and key accounts within the client organization, forming the basis for technology selection and auditing processes.
Salary and wage audit software provides valuable insights into company policies and operational lines, allowing tech professionals to identify challenges and opportunities for improvement This not only enhances the efficiency of their work but also increases productivity by minimizing the time spent on customer interactions.
Before finalizing an audit contract, the manager or director, along with the senior in charge, will analyze the client's financial data and assess any industry-specific changes This evaluation allows the senior in charge to estimate the personnel needed for the audit and outline the audit process effectively.
Analyzing the volatility between last year's and this year's customer data enables auditors to identify significant items that may be prone to errors Prior to the audit, the senior auditor prepares a Master Leadsheet summarizing the financial statement items, comparing audited data from the previous year with the unaudited data of the current year, and calculating percentage changes to provide an overview of the business's performance.
To ensure effective execution of financial statement items, the senior auditor will assign tasks based on the team members' skills and experience Prior to the client audit, the senior auditor will provide a list of necessary information for the client to supply, facilitating a smooth and timely audit process.
Effective support of information technology
KPMG offers a unique advantage with its Sentinel system, an advanced automated tracking tool that enables project teams to effectively monitor, approve, and verify service relationships with global business entities This mandatory system, utilized by customer service teams, ensures full compliance with relevant regulations When KPMG members identify potential new customers, partners assess them using data and criteria established by KPMG Global within Sentinel Upon entering the necessary information, the system generates a Sentinel Approval Number (SAN) for the new customer, which is subject to annual updates as partners re-evaluate the relationship.
Human resources of high quality
KPMG is committed to fostering a highly skilled workforce by enabling employees to continuously update their knowledge and enhance their professional confidence through its dedicated training department, KPMG School (KBS) KBS offers a diverse and comprehensive training program tailored by KPMG's global experts to meet the evolving needs of economic, financial, accounting, and auditing standards This training equips auditors to identify flaws and limitations within clients' KSNB systems, allowing them to make necessary adjustments, conduct thorough reviews, and provide actionable recommendations to improve these systems effectively.
The great support of information and technology
The Idea software is the most commonly utilized digital tool for selecting samples during document checks, significantly enhancing efficiency and accuracy through its pre-installed algorithms While tech typically selects a large percentage of the total for relevant document testing, the presence of numerous small transactions can extend the documentation inspection process Nevertheless, Idea software effectively improves the document testing model while minimizing the risk of major errors.
KPMG's strength in this phase lies in its ability to manage internal audits through a bottom-up decentralization approach, alongside a thorough re-evaluation of high-risk customer contributors Additionally, KPMG maintains quality control externally, leveraging the support of KPMG Global and the CPA Association.
Internal quality control involves a comprehensive audit process where audit team members update working dossiers and salary deductions for pre-audited units, focusing on the accuracy of financial statements and wage deductions The chief auditor reviews these areas and engages with responsible personnel to clarify any issues and implement necessary procedures to prevent significant errors Following this, management provides feedback, and the onion section along with pro-tech comments regarding salaries is subjected to approval by a partner or manager This evaluation process is crucial for maintaining the integrity of salary and wage deductions, especially for high-risk contracts, which require oversight from partners to ensure audit quality (EQCR) Additionally, complex client issues undergo scrutiny from partners (QPR) to assess audit results and risks effectively.
KPMG implements a robust quality control system that mandates all members to undergo independent audits by certified Vietnamese auditors Annually, a contract is selected for audit, and failure to meet quality standards results in the member being unable to operate under the KPMG brand Additionally, an independent customer service evaluation unit assesses KPMG's client relationships, gathering feedback on service excellence This process enables KPMG to gauge customer satisfaction, identify areas for improvement, and enhance the overall quality of its audit services.
KPMG Ltd Vietnam has developed a scientifically sound and reasonable audit program applicable to all audits, particularly for salary cycles and wage deductions This flexible program provides auditors with clear guidance to maintain high-quality audits However, my observations during the actual auditing process of salary cycles and deductions have revealed several important insights.
Solutions to complete the salary audit process and wage deductions.76
The auditor should keep records of the process of information collection, risk assessment, and materiality determination so that the compilation and review of audit records can be performed better
Following the evaluation of control risk, auditors must document their assessment and any modifications to the substantive test coverage This documentation is crucial for facilitating the audit process and for future record reviews.
Auditors should analyze salary expenses and deductions by comparing this year's salary data to previous years to gain a clearer understanding of salary cost fluctuations A thorough examination of monthly expenses over the past two to three years enables auditors to more accurately assess the reasonableness of salary costs.
Analytical techniques play a crucial role in the audit process by assisting auditors in identifying business-specific risks and effectively allocating time for subsequent tasks During the planning stage, these techniques help determine the nature, content, and scope of audit procedures, while in the audit phase, they enable the detection of unusual fluctuations throughout the year To enhance the application of analytical techniques in audits, KPMG should incorporate this content into employee training programs, emphasizing their significance and the specific ratios to be calculated during each audit period By regularly organizing in-person and online courses, the company can ensure that auditors stay updated on the latest analytical techniques in the field.
Understanding and applying various analytical techniques enables auditors to identify the correlation between component proportions and the audit firm's capacity This analytical approach allows for a more precise evaluation of fluctuations and potential errors, ultimately saving time and minimizing mistakes in the collection of audit evidence.
When I did an internship at KPMG and had time to work with clients, I personally found that accounting staff would enthusiastically help auditor if they had good interviewing skills, asked the right questions, didn't wander and did not repeat the question asked before
Here are some recommendations of the author to improve interviewing skills of auditor:
During the audit at the client unit, it is essential for the auditor to allocate sufficient time to formulate questions regarding any concerns or issues that require clarification.
Secondly, the auditor should mark which questions have been explained or given additional information to avoid causing discomfort to the customer
Inexperienced auditors should consult with their supervising seniors to clarify any uncertainties about the client's business characteristics before approaching the client directly.
To enhance the onboarding process, senior management should facilitate opportunities for new employees to engage directly with customers By guiding them on effective questioning techniques, management can ensure that new hires gather essential information during these interactions.
Auditors must enhance their problem-solving skills to effectively communicate with clients Misunderstandings or discomfort caused by the auditor's wording can hinder their ability to grasp the business's accounting processes and collect essential audit evidence.
KPMG's Business School (KBS) is enhancing its training program for new employees by incorporating soft skills courses This innovative approach aims to develop not only technical expertise but also essential interpersonal skills As a result, new hires can adapt more swiftly to customer interactions, minimizing discomfort and positively influencing customer perceptions of KPMG's auditing capabilities.
Auditing, particularly financial statement auditing, has become an integral part of Vietnam's economy Since its introduction, auditing activities have demonstrated their essential role in enhancing economic transparency Vietnam's auditing practices are progressively evolving and have made notable strides; however, they still face significant challenges These include the absence of a comprehensive legal framework, a shortage of highly qualified auditors, and a need for stronger regulatory oversight.
KPMG's audit program is comprehensive, aligning with both the general requirements of the Vietnamese audit industry and international auditing standards Notably, their approach to "auditing wages and salary deductions in financial statement audits" is meticulously tailored to the realities of Vietnamese enterprises, ensuring full compliance with established auditing standards.
During my nearly three-month internship at KPMG Co., Ltd., I actively participated in the customer audit process, which significantly enriched my practical experience and reinforced my academic knowledge This opportunity also allowed me to develop a professional, dynamic, and continuously evolving work ethic.
I hope that the insights and recommendations I gathered during my internship at the Company will serve as a valuable reference for you, aimed at enhancing audit quality and fostering a better working environment Acknowledging the constraints of my professional knowledge and limited practical experience, I recognize that my thesis may have its shortcomings Therefore, I welcome constructive feedback and enthusiastic guidance from the instructors and auditors at KPMG.
Sincere thanks to the instructor - Master Bui Anh Thanh and the auditors in KPMG Vietnam Co., Ltd for their help and support during the internship.