BÁO CÁO KIỂM TOÁN AUDIT PROJECT AUDITING PROCESS FOR THE REVERNUE CYCLE OF DELOITTE AT PHU NHUAN JEWELRY (PNJ) JOINT STOCK COMPANY

Quy trình kiểm toán chu kỳ doanh thu của Deloitte tại Công ty cổ phần Vàng bạc Đá quý Phú Nhuận (PNJ)Deloitte Vietnam Auditing Company is one of the best in the trend of integration and development of Vietnam auditing. The main reason for the volume of revenue collected in the financial statement auditing was the selection of the subject: Auditing process for the revenue cycle of Deloitte at Phu Nhuan Jewelry (PNJ) Joint stock company as a research topic

NATIONAL ECONOMICS UNIVERSITY EXCELLENT EDUCATION PROGRAM

AUDIT PROJECT

AUDITING PROCESS FOR THE REVERNUE CYCLE OF DELOITTE AT PHU NHUAN JEWELRY (PNJ)

JOINT STOCK COMPANY

Members: Tran Ngoc Mai Nguyen Van Tuan

Nguyen Hai Phuc Nguyen Trung Hieu Ngo Ngoc Linh

Trinh Viet Dung

Hanoi 15/11/2017

CONTENTS LIST OF TABLES

PREFACE 4

PART I : CHARACTERISTICS OF AUDITING REVENUE CYCLE OF DELOITTE 6

1.1 INTRODUCTION 6

1.1.1 Overall about Deloitte 6

1.1.2 Overall about Phu Nhuan Jewelry Joint Stock Company 6

1.2 CHACRACTERISTICS OF REVENUES CYCLE 7

1.2.1 Definition 7

1.2.2 Classification of revenue 7

1.2.3 Conditions for recording revenue 8

1.3 CHARACTERISTICS OF AUDITING REVENUE CYLE AT DELOITTE 9

1.3.1 Audit Objectives 9

1.3.2 Audit process for revenue cyle 13

PART II : APPLYING AUDIT PROCESS TO AUDITING REVENUE CYLE AT PNJ 21

2.1 PLANNING THE AUDIT 21

2.1.1 Overall plan 21

2.1.2 Performing detail plan 28

2.2 PERFORMING THE AUDIT 28

2.2.1 Test of controls 29

2.2.2 Analytical procedures 30

2.2.3 Substantive test of transactions 31

2.2.4 Complete the audit 40

PART III : RECOMMENDATION 48

CONCLUSION 50

REFERENCES 51

LIST OF TABLES

Table 2.1 Bảng phân tích Sff bộ Báo cáo kết quả kinh doanh của Công ty ABC 24Table 2.2: Bảng hướng dẫn ước lượng tính trọng yếu của Deloitte Việt Nam 25

Table 2.3: Bảng tính mức trọng yếu với Công ty điện tử ABC. 26

Table 2.4: Bảng câu hỏi đánh giá ban đầu về tính hiêụ lực của hệ thống

INTERNAL CONTROL đối với khoản mục doanh thu của Công ty điện tử ABC

28

Table 2.6: analysis of changes in price and volume 30

Table 2.10: Bảng kiểm tra việc ghi nhận đúng kỳ 37

Today, with the trend of integration and development, enterprises that want to survive anddevelop must undergo fierce competition Every business needs to build trust for interestedparties by providing accurate and reliable financial information This is one of the importantfactors decisive to the success of enterprises in the market, the auditing latitude birth is anurgent requirement for businesses Auditing serves the needs of those who want to understandthe credible financial information Although late and relatively new industry compared withmany other industries, but with a staff of qualified, trained, experienced and quiteknowledgeable about auditing in Vietnam, the audit industry of our country is growing strongerand integrating strongly with international auditing in recent years

Deloitte Vietnam Auditing Company is one of the best in the trend of integration anddevelopment of Vietnam auditing Deloitte Vietnam is the result of the merger of Vaco AuditCompany, the oldest Vietnamese auditing firm into a joint venture of one of the four major auditfirms in the world In the process of auditing the financial statements, revenue is a veryimportant part and Deloitte paid much attention to the fact that revenue in the business is themost frequent and contributes to the survival and development of the Company In addition, therevenue department also contains risks that may cause fraud and error, it has a closerelationship with other parts of the business The main reason for the volume of revenue

collected in the financial statement auditing was the selection of the subject: "Auditing process

for the revenue cycle of Deloitte at Phu Nhuan Jewelry (PNJ) Joint stock company "as a

research topic

In our article, we divided into three parts:

PART I: CHARACTERISTICS OF AUDITING REVENUE CYCLE OF DELOITTE

PART II: APPLYING AUDIT PROCESS TO AUDITING REVENUE CYCLE AT PNJ

PART III: RECOMMENDATION

Despite our best effort and effort, due to limited knowledge and experience, our subject matter

is inevitably lacking We look forward to receiving your comments so that you can furtherimprove this project

Thank you sincerely!

PART I: CHARACTERISTICS OF AUDITING REVENUE CYCLE OF DELOITTE

1.1 INTRODUCTION

1.1.1 Overall about Deloitte

Deloitte has more than 263,900 professionals at member firms delivering services in audit &assurance, tax, consulting, financial advisory, risk advisory, and related services in more than 150countries and territories Revenues for fiscal year 2017 were US$38.8 billion

Deloitte Vietnam is the first auditing company in the independent auditing market in Vietnam.The establishment and development of Deloitte Vietnam is closely linked to the formation anddevelopment of independent auditing Deloitte Vietnam has the advantage of being stronglysupported by the parent company as well as other Deloitte members in Southeast Asia in terms

of human resources, experience as well as advanced modern audit procedures This has made asignificant contribution to the success of Deloitte Vietnam in the market and captures theconfidence of businesses and people of interest

1.1.2 Overall about Phu Nhuan Jewelry Joint Stock Company

 Main business sectors:

 Producing and trading jewelry of gold, silver, precious stones, fashion accessories,souvenirs Trading watches and buying gold bars

 Diamond, precious stones and precious metal inspection services

 Trading in real estate

Integrity - Responsibility - Quality - Innovation – Mounting

1.2 CHARACTERISTICS OF REVENUES CYCLE

1.2.1 Definition

Revenue is a very important item in financial statement because it is the basis for users toreview about the business situation and the scale of the enterprise Therefore, anyone who

interested in in the efficiency of the enterprise should read this item in financial statement.Particularly for accountants, AUDITORS, revenues also have to be considered in terms ofreceiving revenues, revenues classification, the time revenues are recorded and evaluation ofthis item on accounting documents, reports, etc… In addition, revenue is related to other itemand cycle such as: Selling procedure, account receivable, cash, capital, inventory, thereforeAUDITORS of Deloitte at PNJ JSC focus on this item and consider it as one of the most importantitem in financial statement.

According to International accounting standard 18 : “Revenue is the gross inflow of economicbenefits during the period arising in the course of the ordinary activities of an entity when thoseinflows result in increases in equity, other than increases relating to contributions from equityparticipants.” Every company with different business activities will have different characteristics

of revenues item Revenue includes only the total value of profits that enterprises have obtained

or will obtain The amount that’s collected from the third party is not profit; it does not increasethe equity of the company so it will not be considered as revenue Capital contributions of theshareholders will increase owner equity but will not increase the profits of the enterprisetherefore it is not revenue

1.2.2 Classification of revenue

 Sales revenue and revenue from providing services: revenue that’s earned from the sales

of products , providing services is the main and regularly revenue from company’sbusiness activities

 Financial revenue: revenues from financial activities of the company such as : loans,purchase and sale of foreign currency, selling copyright and other financial investmentactivities such as buying securities, investments in subsidiaries, … There’recorresponding financial revenues such as interest from loans or deposits, discounts,dividends, exchange rate differences

 Other revenue: revenues from the unusual activity such as revenues from liquidation offixed assets, revenue after partner broke the contract: donation, inheritance or aid.Note:

 Revenue from sales and service providers is not only just revenue from sales and serviceproviders but also deductible loss and net sales: including deductions revenues includetrade discounts, discount selling price, goods were returned

 Sales revenues and sale from providing services are the value of goods and services sold

or provided during accounting period For company is liable for VAT (Value Added Tax) ,under the deduction method, this revenue does not include VAT

 Commercial discounts is the amount that company discount for customers who buylarge quantities at once or after many times

 Discount selling price is a deduction for the buyer who bought inferior quality goods,incorrect specifications or backward tastes

 Value of returned goods sold is the value of sales volume that already bought bycustomers but customers refused to pay and return to company

 Net revenue is sales revenue and sales from providing service without deduction such astrade discount, rebate, value of returned goods sold, SCT (Special Consumption Tax) orExport Tax on the turnover (if there is any) Particularly for company is liable for VATfollow the direct method, output VAT is calculated on the sales revenue but it will beincluded in deductions to eliminate from revenue later to get net revenue

1.2.3 Conditions for recording revenue

With each business type, characteristics of business activities are different, because each type ofrevenue has different characteristics about products, ownership as well as the method ofcalculating and specific guidelines However, the recording revenues still follow one generalprinciple which is increasing profit and increasing owner equity

There are 5 conditions to apply for sales revenue:

 Company has transferred substantially all risks and rewards associated with ownership ofthe goods to the buyer

 Company no longer holds jurisdiction of goods as cargo owners or control over the goods

 Revenue is determined relatively sure

 Company has obtained or will obtain profit from sales transaction

 Identify all costs that related to sales transactions

There are 4 conditions to apply for revenue from providing services:

 Revenue is determined relatively sure

 Company has ability to collect profit from the transaction that provide service

 Determine the percentage of work completed at the date of the Balance Sheet

 Identify all costs related to the transaction and the costs to complete the transaction toprovide that service

1.3 CHARACTERISTICS OF AUDITING REVENUE CYCLE AT DELOITTE

1.3.1 Audit Objectives

1.3.1.1 Transaction-related audit objectives

The auditorS’s transaction-related audit objectives follow and are closely related tomanagement’s assertions about classes of transactions There is a difference between generaltransaction-related audit objectives and specific transaction-related audit objectives for each

class of transactions The six general transaction-related audit objectives discussed here areapplicable to every class of transactions and are stated in broad terms Specific transaction-related audit objectives are also applied to each class of transactions but are stated in termstailored to a specific class of transactions, such as sales transactions Once the auditorSestablishes general transaction-related audit objectives, they can be used to develop specifictransaction-related audit objectives for each class of transactions being audited.

 General Transaction-related Audit Objectives :

Occurrence—Recorded Transactions Exist This objective deals with whether recorded

transactions have actually occurred Inclusion of a sale in the sales journal when no saleoccurred violates the occurrence objective This objective is the auditorS’s counterpart to themanagement assertion of occurrence for classes of transactions

Completeness—Existing Transactions Are Recorded This objective deals with whether all

transactions that should be included in the journals have actually been included Failure toinclude a sale in the sales journal and general ledger when a sale occurred violates thecompleteness objective This objective is the counterpart to the management assertion ofcompleteness for classes of transactions The occurrence and completeness objectivesemphasize opposite audit concerns Occurrence deals with potential overstatement;completeness with unrecorded transactions (understatement)

Accuracy—Recorded Transactions Are Stated at the Correct Amounts This objective addresses

the accuracy of information for accounting transactions and is one part of the accuracy assertionfor classes of transactions For sales transactions, this objective is violated if the quantity ofgoods shipped was different from the quantity billed, the wrong selling price was used for billing,extension or adding errors occurred in billing, or the wrong amount was included in the salesjournal It is important to distinguish between accuracy and occurrence or completeness

Posting and Summarization—Recorded Transactions Are Properly Included in the Master Files and Are Correctly Summarized This objective deals with the accuracy of the transfer of

information from recorded transactions in journals to subsidiary records and the general ledger

It is part of the accuracy assertion for classes of transactions

Classification—Transactions Included in the Client’s Journals Are Properly Classified This

objective addresses whether transactions are included in the appropriate accounts, and is theauditorS’s counterpart to management’s classification assertion for classes of transactions

Timing—Transactions Are Recorded on the Correct Dates The timing objective for transactions

is the auditorS’s counterpart to management’s cutoff assertion A timing error occurs if atransaction is not recorded on the day it took place

 Specific transaction-related audit objectives :

After the general transrelated audit objectives are determined, specific trans- related audit objectives for each material class of transactions can be developed Such classes oftransactions typically include sales, cash receipts, acquisitions of goods and services, payroll, and

action-so on At least one specific transaction-related audit objective should be included for eachgeneral transaction-related audit objective unless the auditorS believes that the generaltransaction-related audit objective is not relevant or is unimportant in the circumstances

1.3.1.2 Balanced-related audit objectives

Balance-related audit objectives are similar to the transaction-related audit objectives justdiscussed They also follow from management assertions and they provide a frame- work to helpthe auditorS accumulate sufficient appropriate evidence related to account balances There arealso both general and specific balance-related audit objectives

 General Balance-Related Audit Objectives

Existence—Amounts Included Exist This objective deals with whether the amounts included inthe financial statements should actually be included This objective is the auditorS’s counterpart

to the management assertion of existence for account balances

Completeness—Existing Amounts Are Included This objective deals with whether all amounts

that should be included have actually been included Failure to include an account receivablefrom a customer in the accounts receivable trial balance when a receivable exists violates thecompleteness objective This objective is the counterpart to the management assertion ofcompleteness for account balances The existence and completeness objectives emphasizeopposite audit concerns Existence deals with potential overstatement; completeness deals withunrecorded amounts (understatement)

Accuracy—Amounts Included Are Stated at the Correct Amounts The accuracy objective refers

to amounts being included at the correct amount Accuracy is one part of the valuation andallocation assertion for account balances

Classification—Amounts Included in the Client’s Listing are Properly Classified Classification

involves determining whether items included on a client’s listing are included in the correctgeneral ledger accounts Classification is also part of the valuation and allocation assertion Theclassification balance-related audit objective is closely related to the presentation anddisclosure-related audit objectives, but relates to how balances are classified in general ledgeraccounts so they can be appropriately presented and disclosed in the financial statements

Cutoff—Transactions Near the Balance Sheet Date Are Recorded in the Proper Period In testing

for cutoff of account balances, the auditorS’s objective is to determine whether transactions arerecorded and included in account balances in the proper period An account balance is likely to

be misstated by those transactions recorded near the end of the accounting period For an

annual audit this is as of the balance sheet date Cutoff tests can be thought of as a part ofverifying either the balance sheet accounts or the related transactions, but for convenience,AUDITORS usually perform them as a part of auditing balance sheet accounts For this reason,

we also include cutoff as a balance-related audit objective related to the valuation and allocationassertion for account balances The timing objective for transactions deals with the propertiming of recording transactions throughout the year, whereas the cutoff objective for balance-related audit objectives relates only to transactions near year-end

Detail Tie-In—Details in the Account Balance Agree with Related Master File Amounts, Foot to the Total in the Account Balance, and Agree with the Total in the General Ledger Account

balances on financial statements are supported by details in master files and schedules prepared

by clients The detail tie-in objective is concerned that the details on lists are accuratelyprepared, correctly added, and agree with the general ledger

Realizable Value—Assets Are Included at the Amounts Estimated to Be Realized This objective

concerns whether an account balance has been reduced for declines from historical cost to netrealizable value or when accounting standards require fair market value accounting treatment

Rights and Obligations In addition to existing, most assets must be owned before it is acceptable

to include them in the financial statements Similarly, liabilities must belong to the entity Rightsare always associated with assets and obligations with liabilities This objective is the auditorS’scounterpart to the management assertion of rights and obligations for account balances

 Specific Balance-Related Audit Objectives

The same as for transaction related-audit objectives, after the general balance-related auditobjectives are determined, specific balance-related audit objectives for each account balance onthe financial statements can be developed At least one specific balance-related audit objectiveshould be included for each general balance-related audit objective unless the auditorS believesthat the general balance-related audit objective is not relevant or is unimportant for the accountbalance being considered There may be more than one specific balance-related audit objectivefor a general balance-related audit objective

1.3.2 Audit process for revenue cycle

1.3.2.1 Strategic planning design and risk assessment

 Identify the main types of transactions

The auditorS determines the types of transactions or processes that affect the importantaccounts and related documents identified above

 Understand the business transactions that have arisen and processed, identifying potential misstatements and the corresponding control procedures of the customer.

The auditorS considers the process of economic transactions to be handled from the time itarises, through the process of circulating the documents, until they are accounted in theaccounting books and financial reports In business, there are three types of transactions:regular, extraordinary and accounting estimates Misstatements should be identified forappropriate audit procedures, and the auditorS considers the client has control procedures Is itappropriate to prevent and detect these offenses, so that the audit takes place more centrally.

 Walk through

This is a procedure to confirm the Company's understanding of the business transactions, andpotential misstatements could occur This procedure is accomplished by selecting severaltransactions, following it from start to finish, through interviewing techniques, observation,document checking to record or use flowchart to depict the cycle of business operations

In the case of using a service that has not met the requirements, it is possible to select additionaloperations for the first and last review

 Verify control procedures

Because audits are performed based on the customer's internal control system, it is necessary toselect the customer's control procedures for verification This option can be a sampling of anumber of operations or a whole selection, depending on the characteristics of each audit

 Understanding and evaluating customer information systems

In terms of the application of information technology, control procedures for each type ofbusiness are divided into three categories: manual procedures; IT-Dependent Manual Controlwith the support of machinery, for example, using accounting software to reconcile withcustomers ; Application Controls, such as card swiping machines, control the working time ofemployees Control procedures are used to prevent and detect possible violations Controlprocedures for general information technology applications, ITGCs are procedures that areapplicable to all types of businesses, such as information security procedures by usingencryption, managing employee access to corporate databases by ID and password Therefore,only authorized persons can access and change information These procedures can beautomatic or semi-automatic, increasingly support the control of customer Therefore,AUDITORS must have depth understanding

 Combined risk assessment

Based on the assessment of inherent risk and control risk, the auditorS determines thecombination risk, high, moderate, low or minimal

Table 1.1 Combined risk assessment

Control risk (CR)

Effective control procedures Ineffective control

procedures

Inherent risk

(IR)

If the combined risk is assessed to be at the highest level, high potential of misstatements couldoccur so the auditorS need to carry out more tests Conversely, when the combined risk rating islow, moderate and minimal, the likelihood of a lower error is lower, the auditorS will minimizetests

• Design of tests of control

In this step, there are four questions to be answered by the group or auditorS team: Do weperform tests of control, sample size, timing and items to select

Deloitte can rely on client’s internal control or use substantive tesing

The internal control system of the customer is designed for four purposes: to ensure thetruthfulness of information, protect property, ensure compliance with the provisions of law,ensure efficiency and effectiveness in the operation of the business Therefore, in the event thatthis internal control system is effective, the auditorS can rely on the system to reduce thebaseline tests, thereby saving time and costs

Accordingly, the first strategy is to be implemented when the control risk is assessed to beminimal or moderate, and the control tests will be conducted in a sufficient or limited manner.Under conditions of ineffective customer control, Deloitte will not carry out control tests that godirectly to the basic test

Normally, control tests are usually performed at the mid-term audit, which reduces theworkload of the end-of-period audit, especially for accounts with multiple trades, if there is notest support control, the number of samples selected for detailed testing will be very large,increasing the cost of the audit For all businesses, all items, the number of samples selected toperform this test are 25 samples

1.3.2.2 Performance the audit process

The auditorS examines a number of operations to assess the compliance with internal controlprocedures, namely:

 Synchronization of bookkeeping: The test is based on the customer's record of therecorded book order to compare with the practice of the customer For example, anenterprise requires that the second invoice of the sales invoice be accompanied by adelivery order in order to avoid omissions of the goods shipped

 Evaluating the order of vouchers: Select one continuous instruction of 20 differentvouchers from the second of the sales invoices recorded in the sales diary to detectmissed or repeated items

 Make a balance sheet of payment and send it to the buyer: If the company has a balancesheet for the customer, choose a balance sheet to consider making this balance Howeffective or not, whether the buyer responds to the balance sheets or not

 Approve sales operations: check whether the sale is approved by the responsible person

or not, the sale price is approved properly or not

 Full separation of tasks in the financial accounting organization: the auditorS considersthe assignment in the accounting work, the actual observation of the accounting work,for example, Accountability between the invoicing and the bookkeeper

 The independence of the tester - control in the performance of sales operations Forexample: choose a continuous series of sales invoices to review collated salestransactions with vouchers to confirm the authenticity of recording business

More specifically, the auditorS implements procedures to ensure audit objectives for revenueitems:

Table 1.2 Tests of control

Audit objectives Tests of control

Recorded revenue actually

exists

Select sequentially the sales invoices reconcile the itemsrecorded with each invoice and review the sales vouchers.Sales operations have been

properly approved

Examine the list or detailed book of sales and receipts ofeach buyer in comparison with the sales order, theshipping documents allow for sale on the approvedinvoices and vouchers and compare with the right to termthe responsibility of the approver

All sales are recorded Select a continuous series of shipping invoices or sales

invoices and consider recording them in the accountingbook

The number of items sold is Comparing prices of goods on each invoice with the

valued prescribed price list or approving prices for each sale

Sale of goods is recorded in

a) Perform analytical procedures

 Comparison of sales and service revenue this period and the previous period, comparedwith the planning period

 Compare the net interest income to the net revenue between accounting periods toassess the profitability of the sales of service products through accounting periods

 Make a breakdown of sales by type of sales and consider abnormal fluctuations

 Analysis of turnover fluctuations through months, quarter

 Monthly gross margin and determine the cause of abnormal fluctuations

 Compare the unrealized revenue of the period compared to the previous period, takinginto account the abnormal fluctuations

 Carry out revenue recognition procedures For example, interviewing sales staff forunusual or similar operations, reviewing terms related to sales

b) Detailed balance checking procedures

Detailed testing procedures are performed based on key items and repurchase items Theimportant items are usually items of great value or unusual nature The value of these items isusually greater than the level that the auditorS estimates from the time of the planning phase.Random items are usually items that have a small value If the sum of the errors generated onthese items can be materialized, there are likely to be significant differences These items areusually selected by software Based on the selected samples, auditorS conducts a check on therealities of sales and service provision:

 Explain whether the company's revenue recognition policies are consistent with currentaccounting policies and regulations, consistent with the previous accounting year

 Comparing the sales and service operations recorded in the accounting books, the salesdiary with the relevant original documents such as orders, economic contracts, salesorders, delivery bills, bills of lading , sales invoice combined review and check paymentprocess

 Examine the sample of a large-scale sales operation and compare the money transactionssuch as receipts, bank statements, other related documents

 Checking the completeness of sales turnover: Comparing the original documents into theaccounting books to check the recording of the sales and service operations in the detailbook, the sales log is full or not .

 Check the classification and presentation of sales and service provision

 Check the accounting of turnover on accounting books to ensure that the turnover isaccounted for correctly

 To examine the classification of turnover, such as the difference between revenue fromsale and sale, turnover from immediate payment, barter turnover, turnover from sale ofgoods and provision of services with other incomes, In relation to each type of tax rate,different products

 Check whether the statement of revenue on financial statements is correct for thecurrent accounting year

 Accurately check the amount of sales revenue

 Check quantity, unit price and calculation on sales invoice and service delivery

 Check the exchange rate for sales and service

 Compare the bill of lading, orders, sales orders, to determine the type and quantity ofgoods

 Compare the data on the sales invoice with the detail book and the general ledger

 Comparing the unit's price policy to determine the unit price of goods

 Consider whether discounted sales prices are in line with the applicable accountingpolicies and the current accounting regime

 Check the accuracy of sales

 Check the documents of some turnover arising before and after the closing of accountingbooks for a number of days to determine whether the turnover was wrongly accountedfor the accounting period The auditorS shall perform by comparing the date inscribed onthe invoice with the date inscribed on the accounting book

 Inspection of some ex-warehousing bills on a number of days immediately before andafter the closing of accounting books to ensure that the revenue is recognized when thegoods are delivered to customers This inspection is very necessary if the auditorS findsout that the goods have not been delivered to customers but the customers have not yetaccepted the payment

1.3.2.3 Completing the audit

Ending the audit is the final step in the process of auditing financial statements in general andaudit of revenue in particular AUDITORS and AUDITORS must review and evaluate theconclusions drawn from the evidence gathered and use these conclusions as a basis for theiropinion on the financial audit report Therefore, in order to ensure that the financial informationsubmitted to the user is reliable and reasonable, the auditorS and audit firm should perform thefollowing tasks:

 Carry out an analytical procedure for an overview of revenue items in the statement ofincome

 Review the evidence collected in relation to the item of revenue is complete to be able tomake an audit conclusion

 Evaluate the auditorS's work to see if it is fully compliant with the auditing guidelines

 Ask the customer to provide a manager's letter of account for the revenue item

 Review the information of the item of revenue in relation to the items on the financialstatements to uncover the unreasonable

 The accredited auditorS also performs additional procedures, such as reviewing eventsoccurring after the end of the year, reviewing business hypotheses

After performing the above steps, the auditorS shall make an audit conclusion for the revenueitem The auditorS figures out the weaknesses of the internal control system with items ofrevenue that will be reported to the management at the end of the audit The list of adjustingentries as well as the difference of balance will also be discussed by the auditorS with thecustomer to adjust the audit Basing themselves on the viewpoints and treatment on differencesdetected in the course of auditing of the enterprise's turnover items, the AUDITORS give theiropinions on the revenue items on the released reports

PART II: APPLYING AUDIT PROCESS TO AUDITING

REVENUE CYCLE AT PNJ

2.1 PLANNING THE AUDIT

2.1.1 Overall plan

 Understanding the client

Phu Nhuan Jewelry Joint stock Company is a joint stock company established in accordance withthe Business Registration Certificate No 0300521758 dated 02 January 2004 issued by theDepartment of Planning and Investment and Ho Chi Minh City Investment and the amendedBusiness Registration Certificate

The parent company is listed on Ho Chi Minh City Stock Exchange (HOSE) on March 23, 2016under Decision No 129 / DKK, signed by General Director of Ho Chi Minh City Stock Exchange.December 2008 Stock code is PNJ

The total number of employees of the parent company as at 31 December 2016 is 3,951 (31December 2015: 3,443)

Main business lines and activities

The business and operations of the company in the current year are trading in wines, silver,jewelry and gems, and importing and exporting gold, silver and gemstone jewelry

As at 31 December 2016, subsidiaries of the parent company include:

- CAO Fashion One-Member Limited Liability Company ("CFC") is a one-member limited liabilitycompany established under the Law on Enterprises of Vietnam pursuant to Business RegistrationCertificate No 0309279212 issued by the Ministry of Planning and Investment Ho Chi Minh CityInvestment on August 14, 2016 CFC's registered office is located at 170E Phan Dang Luu Street,Phu Nhuan District, Ho Chi Minh City, Vietnam CFC's principal activity is the production andtrading of gold, silver and silver jewelry, art and craft products, and CFC's chartered capital of

VND 10,000,000,000 The voting rights of Parent Company as at 31 December 2016 are 100% (as

at 31 December 2015: the same)

- PNJ One Member Limited Liability Company ("PLC") is a one member limited liability companyincorporated under the Law on Enterprises of Vietnam pursuant to the Business RegistrationCertificate 50 0310521330 issued by the Department of Planning and Investment Investment in

Ho Chi Minh City on 1G December 2010 PLC is headquartered in the business of building blocks

at 205 Phan Dang Luu Street, Phu Nhuan District, Ho Chi Minh City, Vietnam PLC's main activity

is providing inspection and accounting services related to gold, silver and precious metals thePLC's tenure is 10,000,000,000 VND The voting rights of the Parent Company as at 31 December

2016 are 100% (as at 31 December 2015: the same)

As at 31 December 2016, the parent company has 43 branches located in different provincesand cities in Vietnam In particular, some branches include:

- Branch of Phu Nhuan Gold Jewelery Joint Stock Company - PN Branch Bien Hoa

- Branch of Phu Nhuan Gold Jewelery Joint Stock Company - PNJ Hue Branch

- Branch of Phu Nhuan Precious Stone Joint Stock Company - PNJ Vinh Long Branch

- Branch of Phu Nhuan Gold Jewelery Joint Stock Company - PNJ Nha Trang Branch

- Branch of Phu Nhuan Jewelry Joint Stock Company - PNJ Da Nang Branch

- Branch of Phu Nhuan Jewelry Joint Stock Company - PNJ Hanoi Branch

 Accounting systems, policies

Financial Statements of PNJ are presented in USD currency, in accordance with the historicalcost principle and in accordance with Vietnamese Accounting Standards, Vietnamese AccountingSystem and other current regulations in Vietnam

The financial year of the Company commences on 1 January and ends on 31 December annually

 Revenue recognition

Revenue is recognized when all five (5) below are satisfied:

(a) The Company has transferred substantially all risks and rewards of ownership of the goods ormerchandise to the buyer;

(b) The Company no longer holds the right to manage the goods as the owner of the goods orthe control of the goods;

(c) The Revenue can be measured reliably;

(d) It is probable that the economic benefits associated with the transaction will flow to theCompany

(e) Determining the costs associated with the sale

 Internal control in revenue cycle

For non-parent customers, PNJ Company sets a credit limit for each customer After receivingorders from customers, sales staff will move into the "management system" of the company.The system will check the status of orders for pricing, quantity, and credit limits of customers.Sales staff will enter the price of the goods into the system for each period based on thecompany's goals and pricing policy This price must be approved by the Sales Manager and theDirector Once approved, the price will be transferred to the "management system" Once theclient's meeting is approved, the sales staff will enter the name of the product, the label, thecustomer name, the management system will automatically set the price of the product for theclient's meeting If there is a change in pricing policy for customers, the process must berepeated in the order of the steps above

After receipt of the order, the accounting department will check the validity and issue anautomatic invoice from the company's system, then the goods will be shipped to the customer

on the same day as the date the invoice is issued PNJ recognized revenue when the goodshave been delivered to the buyer's warehouse In practice, sales to non-parent companies areless frequent

Based on the initial assessment of AUDITORS about the approval of the sale of goods and therecognition of revenue from PNJ Company is reliable

 Perform preliminary analytical procedures

The preliminary analysis of business operations on customers' financial reports helps AUDITORS

to have more general views on customers, but on the other hand, it helps AUDITORS to firstdelineate the items or accounts that have Unusual fluctuations to scrutinize by these items oraccounts contain a great deal of risk of misstatements