INTRODUCTION Today, auditing activities in Vietnam are constantly growing and becoming more and more popular in economic life. This is an inevitable trend before the strong development of the economy and the wave of foreign direct investment as well as the establishment of joint stock companies. Results of auditing financial reports serve many objects such as shareholders, investors, banks, tax agency. Among the business cycles, sales and collection cycles are one of the main cycles and receive great interest to users of financial statements. Because in the cycle consists of two important account that revenue and account receivable reflect the operational efficiency and financial situation of an enterprise. Therefore, auditors are often very cautious when auditing items in this cycle with the goal of providing users with a financial statement with an accurate view of the operation of an enterprise. In the content of this essay, based on the knowledge learned and during the internship time at RSM Viet Nam Auditing Consulting Ltd Company, I would like to present and complete the auditing of sales and collection cycle at RSM Viet Nam – Central Branch with the title of thesis: Audit of sales and collection cycle at RSM Viet Nam Auditing Consulting Ltd Company”. The content of thesis include three sections as follows: Chapter 1: Theoretical basic about Sales and Collection cycle. Chapter 2: Auditing of Sales and Collection cycle at RSM Viet Nam Auditing Consulting Ltd Company”. Chapter 3: Recommendation on auditing of Sales and Collection cycle at RSM Viet Nam Auditing Consulting Ltd Company.
DA NANG UNIVERSITY OF ECONOMICS FACULTY OF ACCOUNTING GRADUATION THESIS Topic: AUDIT OF SALES AND COLLECTION CYCLE AT RSM VIET NAM AUDITING & CONSULTING LTD COMPANY – CENTRAL BRANCH Da Nang, April 2019 TABLE OF FIGURES Table 1.1 Assess internal control system .8 Table 1.2 Test of control for sales transaction 11 Table 1.3 Test of control for cash collection transactions 12 Table 2.1 Financial capacity of RSM Viet Nam 18 Table 2.2 Preliminary analytical procedure 25 Table 2.3 Lead schedule procedure for revenue 30 Table 2.4 Agreed to GL procedure for revenue 31 Table 2.5 Analytical procedure for revenue – procedure 32 Table 2.6 Analytical procedure for revenue – procedure 33 Table 2.7 Agreed to tax return procedure 33 Table 2.8 Assurance factor .35 Table 2.9 Related party procedure for revenue 37 Table 2.10 Lead schedule procedure for AR 38 Table 2.11 Agreed to GL procedure for AR .39 Table 2.0.12 Analytical procedure for AR – procedure 39 Table 2.13 Analytical procedure for AR – procedure .40 Table 2.14 Analytical procedure for AR – procedure .40 Table 2.15 Analytical procedure for AR – procedure .40 Table 2.16 Analytical procedure for advance from customer 41 Table 2.17 Aging test procedure 41 Table 2.18 Circularization procedure .44 Table 2.19 Final analytical procedure for revenue 45 Table 2.20 Final analytical procedure for AR 46 TABLE OF CONTENT INTRODUCTION CHAPTER 1: THEORETICAL BASIC ABOUT SALES AND COLLECTION CYCLE .2 1.1 Overview of sales and collection cycle 1.1.1 Definition 1.1.2 Main functions in the cycle 1.1.3 Overview about revenue .4 1.1.4 Overview about trade receivables account 1.2 Internal control for sales and collection cycle 1.3 Auditing of sales and collection cycle 1.3.1 The planning phase of auditing of sales and collection cycle 1.3.2 The implementation of auditing sales and collection cycle .10 1.3.3 The completion phase 16 CHAPTER 2: AUDITING OF SALES AND COLLECTION CYCLE AT RSM VIET NAM AUDITING & CONSULTING LTD COMPANY – CENTRAL BRANCH 17 2.1 Introduction about RSM Viet Nam Auditing & Consulting Ltd Company – Central Branch 17 2.1.1 Strategic direction and mission of RSM Vietnam .17 2.1.2 Human resource of RSM Vietnam 18 2.1.3 Financial capacity of RSM Viet Nam 18 2.1.4 Personal chart of RSM Vietnam - Central Branch .19 2.1.5 Services of RSM Viet Nam 19 2.2 Auditing of the Sales - Collection cycle is conducted by RSM Viet Nam Auditing & Consulting Ltd Company - Central Branch 21 2.2.1 Client acceptance & Re – valuation stage 21 2.2.2 Pre – Planning stage 22 2.2.3 Planning phase 28 2.2.4 Implementation phase 30 2.2.5 Completion and Reporting Phase 45 CHAPTER 3: SOME RECOMMENDATIONS ON AUDIT OF SALES AND COLLECTION CYCLE AT RSM VIET NAM AUDITING & CONSULTING COMPANY Ltd – CENTRAL BRANCH 47 3.1 Recommendation on auditing of sales and collection cycle at RSM Viet Nam – Central Branch .47 3.2 Some limitations and solutions 48 CONCLUSION 54 REFERENCES 55 LIST OF ACRONYMS GL General ledger AP Analytical procedure AR Account receivables INTRODUCTION Today, auditing activities in Vietnam are constantly growing and becoming more and more popular in economic life This is an inevitable trend before the strong development of the economy and the wave of foreign direct investment as well as the establishment of joint stock companies Results of auditing financial reports serve many objects such as shareholders, investors, banks, tax agency Among the business cycles, sales and collection cycles are one of the main cycles and receive great interest to users of financial statements Because in the cycle consists of two important account that revenue and account receivable reflect the operational efficiency and financial situation of an enterprise Therefore, auditors are often very cautious when auditing items in this cycle with the goal of providing users with a financial statement with an accurate view of the operation of an enterprise In the content of this essay, based on the knowledge learned and during the internship time at RSM Viet Nam Auditing & Consulting Ltd Company, I would like to present and complete the auditing of sales and collection cycle at RSM Viet Nam – Central Branch with the title of thesis: " Audit of sales and collection cycle at RSM Viet Nam Auditing & Consulting Ltd Company” The content of thesis include three sections as follows: Chapter 1: Theoretical basic about Sales and Collection cycle Chapter 2: Auditing of Sales and Collection cycle at RSM Viet Nam Auditing & Consulting Ltd Company” Chapter 3: Recommendation on auditing of Sales and Collection cycle at RSM Viet Nam Auditing & Consulting Ltd Company CHAPTER 1: THEORETICAL BASIC ABOUT SALES AND COLLECTION CYCLE 1.1 Overview of sales and collection cycle 1.1.1 Definition The sales and collection cycle is one of the main cycles and plays an important role in the operation of a business Revenue from sales activities is the main activity creating cash flow for businesses “The sales and collection cycle involves the decisions and process necessary for the transfer of the ownership of goods and services to customers after they are made available for sale It begins with a request by a customer and ends with the conversion of material or service into an account receivable, and ultimately into cash.”(Arens, et al 2015) 1.1.2 Main functions in the cycle Before assessing the internal control system as well as design audit procedures for test of control and substantives test, auditors need to understand the functions in the sales cycle In Auditing & Assurance Services, 15 th Edition, the sales and collection cycle include eight following main functions: Processing customer orders: A customer’s request for goods initiates the entire cycle Legally, customer order is an offer to purchase goods under specified terms The receipt of a customer order often results in the immediate creation of a sales order In this function, Customer Order and Sales Order are documents used, in which, customer order is a request of customer for goods and sales order is often used to indicate credit approval and authorization for shipment Granting Credit: Before goods are shipped to customer, credit for sales on account must be approval by an appropriate authorized person Weakness in credit approval is one of the reasons that result in excessive bad debt and account receivables cannot be recovered Credit approval on the sales order is an indication often serves as the approval to ship the goods Shipping Goods: Most enterprises recognize sales when goods are shipped A shipping document is prepared to initiate shipment of the goods, showing the description of the merchandise, the quantity shipped, and other relevant data Bill of lading is a one type of shipping document, which is a written contract between the buyer and the seller of shipment of goods and the receipts The bill of lading is often transmitted electronically, once goods have been shipped, and automatically generates the related sales invoice as well as the entry in the sales journal Billing Customers and Recording Sales: The most vital aspects of billing are: - All shipments made have been billed ( Assertion: Completeness) - No shipment has been billed more than once ( Assertion : Occurrence) - Each one is billed for the proper amount (Assertion : Accuracy) In this function, there are related documents as follows: - Sales Invoice: A sales invoice is a document or electronic record indicating the description and quantity of goods sold, the price, freight charges, insurance, terms, and relevant data The sales invoice is the method of indicating to the customer the amount of a sale and the payment due date - Sales Transaction File: This is a computer – generated file that consists all sales transactions processed by the accounting system for a period, which could be a day, week, or month - Sales Journal: This is a report generated from the sales transaction file that consists of the customer name, amount, date and account classification or classifications for each transaction - Account Receivable Master File: This is a computer file used to record cash receipts, sales returns and allowances and individual sales for each customer and to maintain account balances of customer The sales, sales returns and allowances, and cash receipts will be updated on account receivable master file - Account Receivable Trial Balance: This list or report indicates the amount receivable from customers at a point in time It is prepared directly from the accounts receivable master file and is usually an aged trial balance - Monthly Statement: This is a document sent by mail or electronically to each customer indicating the beginning balance of their accounts receivable, the amount and date of each sales, cash payments received, credit memos issued, and the ending balance due Processing and Recording Cash Receipts: This function includes receiving, depositing, and recording cash It is important that all cash receipts are deposited in the bank at the proper amount on a timely basic and recorded in the cash receipts transaction file This file is used to prepare the cash receipts journal and update the accounts receivable and general ledger master files Cash receipts transaction file and Cash receipts journal or listing are related document in this function Cash receipts transaction file consist of cash receipts transaction processed by the accounting system for a period While, cash receipts journal or listing is generated from the cash receipts transaction file and includes all transactions for a time period Processing and Recording Sales Returns and Allowances: The seller often accepts the return of the goods or grants a reduction in the charges when a customer is dissatisfied with the goods The enterprise will prepares a receiving report for returned goods and returns them to warehouse Returns and allowances are recorded in the sales returns and allowances transaction file, as well as the accounts receivable master file Writing Off Uncollectible Account Receivable: The enterprise must write off if an amount cannot collect Typically, this occurs after a customer files for bankruptcy or the account is turned over to a collection agency Providing for Bad Debts: Normally, sales transactions are carried out on account, so bad debts will arise For the amount that enterprise not expect to collect, accounting principles require them to record bad debt expense 1.1.3 Overview about revenue 1.1.3.1 Definition According to VAS 14, “revenue means the total value of economic benefits gained by an enterprise in an accounting period, which arise from the enterprise’s normal production and business operations, contributing to increasing the owner’s capital.” 1.1.3.2 Time of revenue recognition according to VAS 14 The enterprise has transferred the majority of risks and benefits associated with the right to own the products or goods to the buyer Enterprises must clearly determine when to transfer most of the risks and economic benefits of the product, usually this time coincides with the time when the enterprise transfers ownership to customer The enterprise no longer holds the right to manage the goods as the goods owner, or the right to control the goods In case the enterprise still holds the right to manage goods, whether or not the goods are transferred to customer, it is not recognized as a revenue of the enterprise Revenue has been determined with relative certainty The enterprise has gained or will gain economic benefits from the good sale transaction The revenue recorded may be a benefit received by the business (money collected immediately or via bank transfer) or not received (a receivables from customers) but make sure that it is the amount that the enterprise certainly receive in the future It is possible to determine the costs related to the goods sale transaction Revenue and expenses related to the transaction must be recorded simultaneously according to the matching principle 1.1.3.3 Audit objectives for sales transaction Occurrence: Sales transaction are recognized by the enterprise and actually occur in the accounting period as well as belongs to the enterprise Completeness: All sales transaction must be fully recorded in the accounting books Valuation: Revenue is reflected the correct amount Accuracy: Sales is calculated and recorded accurately for the amount taking note of date of invoice After that, ascertain whether trade receivables are aged according to the invoice date/invoice due date After the inspection, the auditor made the following findings: Excerpt the working paper sheet 5350 of the auditor as follows: Step Trade receivable Company C Company D Client Code Invoice No Invoice Date Step Amount B0618 SI 000585 SI A, SI 21/12/2017 653.520.000 B0262 000586 24/12/2017 561.850.000 000589 27/12/2017 473.700.000 1.689.070.000 Aged correctly Step Invoices is accurate ? Yes Yes Table 2.20 Aging test procedure Conclusion of auditor: The ageing of accounts receivables is correctly determined Audit objectives achieved Procedure for checking provision for doubtful debts This procedure is performed to review the adequacy of provision for doubtful debts In order to conduct this procedure, auditor will discuss with management key assumptions used in preparing the allowance and document procedures followed by management to determine allowance for doubtful accounts Afterwards, auditor will select account balances with past due balances which have not been paid at the date subsequent receipts were verified, discuss account status with the credit manager and determine if an allowance should be made on each of these account balances In addition, auditor will agree bad debt expenses and related bad debt write-offs to supporting documentation (e.g., letter from trustees in bankruptcy) and ensure proper approval of write-offs (e.g., board of directors’ minutes) During the inspection, auditor discussed with the chief accountant of the client and made the following findings: Excerpts of the working paper sheet 5351 of the auditor as follows: A: Client’s procedures for determining provision for doubtful debts: A1: The client has determined provision for doubtful debts based on the following basis: Balances < months Balances: months - years Balances: years – years : 0% : 30% : 50% 42 Balances: years – years Balances > years : 70% : 100% B: Enquired as to whether there are any: Amounts known to be uncollectable Amounts in dispute/disagreement Amounts under credit insurance : No : No : No After that, auditor will check and recalculate the amount of each client's specific provision based on the provision that the client is applying as well as compare with figures of client Excerpts the working paper sheet 5353 of auditor: (Refer to Appendix 11) Conclusion of auditor: Provision for bad debt is fully and accurately set up Circularization procedure: This procedure is performed to ensure the existence and accuracy of trade receivables by performing trade receivables circularization (Assertion Accuracy and Existence of trade receivables) In order to confirm trade accounts receivable, auditor will perform as follow: Auditor need obtain from client all necessary information in order to perform selection of accounts to be confirmed After that, auditor will select balances to be confirmed and mailing confirmations with postage paid return envelope and retain control over mailing process Confirmations must be mailed and received directly by RSM DTL Auditor will send necessary second requests after a reasonable period has passed since first mailing was done For confirmations received: Auditor will reconcile the amounts confirmed to the client’s accounting records and forward copies of all confirmations indicating differences to the client to reconcile On the other hand, auditor perform alternative procedures for invoices/customers that client does not want us to confirm and on confirmations not returned or those that are unsatisfactory For Trade Receivables: Auditor agree subsequent receipts to duplicate deposit slips; Reconcile to shipping records and sales invoices and examine other supporting documentation For Advances by customers: Auditor agree subsequent goods receipts to duplicate GRN (Goods Receipt Note) or Invoice; Agree to purchasing records or examine other supporting documentation, such as contracts, agreement In order to determine amount sent, auditor perform sampling procedure on working paper sheet 520.20.1 (Refer to Appendix 12) as follows: - Selection method: Monetary method - The assessed risk for the items subject to sampling is LOW so assurance factor is 1,9 43 Population subject to sampling (a) 23.286.267.536 Tolerable misstatement used for this 11.582.265.563 sample (b) Expected error (c) 579.113.279 Assurance factor (d) 1,9 Sample interval (e = (b – c)/d) 5.791.132.781 Sample size (f = a / e) After determining the sample size, the auditor will select customer to send This procedure is performed on working paper sheet 5361 as follow: For trade receivable: (Refer to Appendix 13) For advance by customers :( Refer to Appendix 14) After that, auditor will follow the feedback of customers and during the audit only one customer responded with amount confirmed agreed to amount sent This procedure is illustrated on working paper as follows: Accounts Trade Receivables Rate Balance 23.286.267.536 Advance from Customers Rate 231.320.250 Amount Amount Sent Confirmed 653.520.00 14.285.617.101 61% 3% Remains 13.632.097.101 59% 231.320.25 231.320.250 100% 100% 0% Table 2.21 Circularization procedure Finding of auditor: Amount confirmed agreed to amount sent and and with the remaining balance of the customer not responding, the auditor will conclude that balance based on the confirmation letter created by the client Computation of unrealized forex gain / (loss) procedure This procedure is performed for objective to to determine the balance at the end of the year is determined correctly (Assertion valuation of trade receivable) Auditor will select all balances dominated in foreign currency from trade 44 receivables listing at year end in foreign currency After that, auditor will retranslate the outstanding balance as at year end at the closing rate and making adjustment to the financial statements if the unrealized gain/loss is material Auditor only re-calculate the exchange rate for trade receivable, for advance by customer, auditor consider that: According to Circular 200, advances by customer is non- monetary account not revaluating exchange differences at the year – end The closing rate is defined as the buying rate on December 31, 2017 at the bank where the company deals with customers For client XYZ, transactions with foreign customers are done through Vietcombank After that, the auditor will recalculate and compare to General Ledger as well as find out the cause of the difference This procedure is illustrated on working paper sheet 5370 of auditor as follow: (Refer to Appendix 15) Conclusion of auditor: The balance of accounts receivable in foreign currencies is consistent with the figures of the client Procedure about related parties: This procedure is performed for objective to obtain reasonableness assurance on the Completeness, Accuracy, Existence and Presentation of transactions and balances with related parties Auditor will select all balances of related parties from receivables listing as 31/12/2017 and perform work steps as follow: (1) Enquire of management whether all related party transactions were appropriately identified (e.g major cancelable contract or transact a significant volume of business with a sole customer) and recorded (2) Document transactions and ending balances with related parties and ensure they are disclosed in the financial statements (3) For inter-entity accounts, assess and document collectible by examining the other entity's financial statements and discussing with a responsible official (4) Verify that inter-entity accounts are in agreement if we are the auditors of both entities; if not, obtain written confirmation Finding: Excerpts working paper sheet 5380 of the auditor (Refer to Appendix 16) Similar to revenue, after performing the audit procedures, the auditor will summary the key misstatement and related adjustment entries For trade receivables at client XYZ, the auditor did not detect any material misstatement 2.2.5 Completion and Reporting Phase For Sales and collection cycle, auditors perform related procedures as follow: Final analytical procedure: Analytical review should be done by the audit manager using the final set of financial statements to ensure initial expectations 45 did not differ significantly with final audit results This can be used when preparing for the year-end meeting For revenue: Auditor use horizontal analysis method (trend analysis) to compare revenue over three year Auditors analyze fluctuations in revenue combined with fluctuations in cost of goods sold Sales Net revenue Current year (2017) 809.237.007.315 Previous year (2016) 877.628.490.97 Previous year (2015) 690.227.314.19 809.237.007.315 877.628.490.97 690.227.314.19 761.459.884 079 842.029.587 071 47.777.123.2 36 35.598.903 899 COGS Gross margin 628.062.338.53 Change (VND) % (68.391.483.655) -7,8 (68.391.483.655) -7,8 (80.569.702.99 2) -9,6 12.178.219.33 34,2 Table 2.22 Final analytical procedure for revenue Significant Variance Explanation of auditor: Revenue and cost of goods sold decrease, while gross margin increase, because this year's shrimp export volume decreased but the average selling price was higher than the previous year For trade receivable: Auditor also use horizontal analysis method (trend analysis) to compare trade receivables over three year Auditor analyze fluctuations in trade receivables combined with fluctuations in provision for doubtful debts Current trade receivables Number of days in receivables Provision for doubtful debt Current year (2017) Previous year (2016) Previous year (2015) Change (VND) % 15.021.733.80 47.559.596.518 26.678.636.792 (32.537.862.718 ) -68,4 14 15 -1 -8,6 (239.375.000) (239.375.000) - - - 46 Table 2.23 Final analytical procedure for AR Conclusion of auditor: Initial expectations did not differ significantly with final audit results After performing analytical procedures, the auditor will complete the review of subsequent event related to sales transaction and trade receivables Finally, auditor summary of issues to discuss with partner to support issue audit report Summary chapter 2: Chapter has an overview of RSM Viet Nam Auditing & Consulting Ltd Company as well as a description of the actual audit of the sales and collection cycle performed by RSM Viet Nam Through the presentation and explanation of working paper sheets, readers can visualize how the audit process actually works for the sales and collection cycle More importantly, the content of chapter helps readers have a basis to compare with the theoretical basis indicated in chapter with the actual audit CHAPTER 3: SOME RECOMMENDATIONS ON AUDIT OF SALES AND COLLECTION CYCLE AT RSM VIET NAM AUDITING & CONSULTING COMPANY LTD – CENTRAL BRANCH 3.1 Recommendation on auditing of sales and collection cycle at RSM Viet Nam – Central Branch During the internship, RSM Viet Nam Auditing and Consulting Company Ltd – Central Branch has created the best conditions for me to participate directly in audits Through the process of contact with reality, I have partly reinforced the knowledge and accumulated valuable experience I would also like to have some comments: About audit process The audit process is designed in a clear, detailed and logical Each procedure in each stage is fully implemented to support the audit to achieve the goal Besides, the audit process is always monitored by the control board to limit possible risks and support the audit team during the implementation process About audit procedures 47 Depending on the characteristics of each enterprise, auditors have designed appropriate audit procedures For auditing of sales and collection cycle performed at client XYZ, the audit team has completed the basic procedures and closely follow the designed audit program The audit procedures are logically linked to help the audit team perform more conveniently In particular, the procedure to understand the sales cycle is carried out very specifically and in detail by the auditor to provide an appropriate approach to auditing Compared to the theoretical basis stated in Chapter 1, almost the audit procedures for revenue and trade receivables are similar to the theory About the quality of the audit The audit was conducted with high professional quality and audit team experience The audit procedures are assigned to the members and are closely followed by the team leader to be adjusted if there are mistakes For the sales and collection cycle, two key items are revenue and account receivables conducted by the team leader and assisted by the assistant The team leader will focus on the key issues and communicate with customers to serve the most effective evidence collection About the work profile The auditor's working paper sheet is designed and streamlined to facilitate the work process Recorded paper work with reference to help auditors have a basis to compare, coordinate with each other, and create independent work at work The working paper of the members of the audit team is written and presented fully and clearly to help reviewers understand and understand the content transmitted in working paper sheet 3.2 Some limitations and recommendation Complete procedures for assessing internal control systems for sales and collection cycle Understanding the internal control system is a very important procedure for auditor to have an overall view and identify the audit approach for auditee However, due to time constraints, usually RSM Vietnam - Central Branch only investigates the internal control system for the sales and collection cycle in large corporations and have good control system Therefore, based on the auditor's judgment, the control system is often ineffective and does not perform test of control Auditors only perform substantive tests for the audit of sales and collection cycle Moreover, auditors have not shown an assessment of the control system as well as audit approach on working paper sheet Except for the previous auditor, this makes it difficult for the new assistant auditor to grasp the process of 48 evaluating the internal control system at the auditee This is a limitation that the company needs to overcome Recommendation: Auditors can use questionnaires to assess the internal control system for the sales cycle determine the control risk as well as the appropriate audit approach to the sales cycle Based on the program designed by RSM Vietnam - Central branch, the questionnaire is presented as follows: Risk Applicable Y or N Key? Sufficient controls in place to cover risk Y or N (Y / N / NA) Control How they ensure that all goods shipped/services performed have been invoiced and all returns have been credited? How they ensure that all revenues are correctly and completely recorded in the accounts? (i.e cash sales) How they ensure that all sales are valid? How they ensure that goods shipped/services provided are not made to companies representing a bad credit risk? How they ensure that all shipments/services have been recorded in the proper period? How they ensure that all related party transactions have been identified? How they ensure that the revenue recognition policies have been followed? How they ensure that receipts (cash/checks/transfers) are deposited/ recorded appropriately? How they ensure that all receipts are recorded and credited to the proper customer or account (fraud-(lapping) or error)? 49 How they ensure that all overdue receivables are followed up on a timely basis? How they ensure that receipts are recorded in correct period? How they ensure that an allowance is recorded for doubtful or uncollectible balances? For each risk, the auditor describes control over whether the client applies and considers that control when implemented to reduce the control risk After that, auditor will design test of control (such as transaction control; inquiry or monitoring control) in order to assess whether controls applied by client are designed and operated effectively Conclusion: With the above proposal, along with the auditor's judgment, this procedure can help the auditors have a basis to assess the internal control system for the sales cycle with certainty Besides, conducting test of control can help auditor reduce the volume of substantive test Some limitations and solutions in the audit procedures for revenue (1) Improve analytical procedure Although the analytical procedures are designed by auditors in great detail, almost in the procedures, auditors have not shown the volatility analysis as well as the associated risks This makes it difficult for review committee audits as well as reading auditing records for new auditors' assistants Recommendation: In general, for analytical procedures, auditors mostly use horizontal analysis (trend analysis) and vertical analysis (ratio analysis) methods to analyze fluctuations However, in addition to comparing with the previous year, the auditors can analyze with industry average figures From there, auditors can assess risks with a more general view For example, for the client XYZ operating in the fisheries sector, the 2017 average industry figures (according to www.cophieu68.vn) compared to the figures of clients as follow: 2017 2016 Change % Industry average (41.460.180.22 Revenue 767.776.827.086 809.237.007.315 9) -5 4% 50 Conclusion: From this procedure, auditor can see that revenue rate of client is lower than industry average Since then, auditor can be based on this basis to provide relevant risks as well as design appropriate audit procedures (2) Improve agreed to other independent sources procedure In this procedure, auditors can perform additional procedures to compare sales reports to ensure that revenue is fully and accurately recorded From sales reports, auditors can analyze the number and corresponding revenue in each month After that, make a comparison with the general ledger and find out the reason for the difference, if any On the other hand, to save time, auditors can refer to working documents in the Inventory section and provide appropriate analysis The procedure is described under the following table: Month Sales report Quantity Amount GL Quantity Amount Diff quantity Diff amount 10 11 12 Total 51 Conclusion: This procedure helps auditors to gather more evidence to confirm whether revenue of the client is fully recorded (3) Complete procedure for cut – off test Although there is a restriction in providing documents after the cut-off date to check cut - off, the auditor can take a samples of sales transaction near December 31, 2017 to check whether the client has recognized the correct sales transaction period or not Furthermore, in order to save the audit time, auditors can perform this procedure in conjunction with the procedure of testing the completeness of the sales transactions Recommendation: Because in the test of completeness of sales transactions, the auditor has chosen the sales transaction of some customers close to December 31, 2017 In this procedure, the auditor check the shipping documents, sales invoices and consider the date of voucher as well as amount Therefore, auditors can conclude on the cut - off of the sales transaction before cut – off date recorded by the client The procedure is described below: In which, SI: Sales invoice sighted DO/BOL: Delivery order sighted or Bill of Lading GL, SYS: Checked to client accounting system / records Conclusion: This procedure can help auditors ensure the correct period of sales before the cut-off date and save the audit time Some limitations and solutions in audit procedures for account receivables (1) Improve analytical procedure 52 Similar to revenue, auditors can also apply comparative figures of client to industry average For accounts receivable, auditors can compare account receivable turnover against account receivable turnover of industry average Specifically, auditors can collect account receivable turnover of average account receivable on www Stockbiz.vn The procedure is described below: AR turnover 2017 XYZ 40 Average industry 12 Change 28 Conclusion: From this procedure, auditor can see that account receivable turnover of client is faster than industry average Since then, auditor can be based on this basis to provide relevant risks as well as design appropriate audit procedures (2) Complete circularization procedure In the procedure of sending confirmation to customers, for customers who have not yet responded to the confirmation of the balance, the company did not perform alternative tests and concluded the balance based on the confirmation letter established by the client Although the confirmation letter established by the client is an audit evidence that ensures the existence of the account receivables balance, the reliability of this evidence is not higher than the evidence established and collected by auditor Recommendation: For customers who have not confirmed the balance, the auditor can send a confirmation letter for the second or even the third time On the other hand, according to the fact, the customers who are sent to confirm are mainly foreign customers, so it is difficult to respond that audit period is limited, in which case the auditor should perform the alternative tests to increase the reliability of audit evidence In order to perform this procedure, auditor needs to examine the subsequent receipts after the closing date of the accounting books and check balance formation through bank statements On the other hand, if subsequent receipts are not applicable, auditor can vouch to sales invoices The procedure is described below: 53 Conclusion: This proposal can help auditors increase the reliability of evidence to confirm account receivable balances actually exist (3) Complete computation of unrealized forex gain procedure In this procedure, the company only checks and re-evaluates the final exchange rate of the foreign currency-based account receivables However, the company has not designed and carried out procedures to re-evaluate exchange rates arising in the accounting period of client This procedure needs to be done because the exchange rate revaluation in the period affects the recognition of financial expense as well as financial income Meanwhile, the exchange rate check has not been carried out in the financial expenses and financial income section Recommendation: Because the time limit as well as the audit cost and the number of foreign customers is relatively high, auditors can choose from to customers with large balances to check In the sub ledger of each customer, the auditor will recalculate the exchange rate incurred in each customer at the mobile average exchange rate Then, auditor reconcile the balance at the end of the recalculated against the balance of the client to implement the relevant adjustment accounting Conclusion: This procedure helps auditors complete the exchange rate assessment procedures in the period as well as ensure the objective of account receivables balance of foreign currencies is assessed appropriately and accurately Other recommendation RSM Vietnam Auditing and Consulting Company - Central Branch is one of the most reputable and leading auditing companies in Vietnam so the number of customers is relatively large In particular, auditing of sales and collection cycle is one of the most important cycle and materiality, so it requires a great deal of audit work Therefore, when in the audit season, the staff encounter many problems of work pressure, health, time so many procedures have not been implemented or implemented yet 54 Recommendation: Management can consider reducing the pressure in the audit season by increasing the number of members in each audit group, increasing the audit time, or for large companies, auditing into several rounds to minimize the amount of cumulative work Since then, the audit team can thoroughly check the documents, fully implement the procedures and complete the report on time Summary chapter 3: The above are some comments as well as your comments to improve the auditing of Sales and collection cycle at RSM Viet Nam Auditing & Consulting Ltd Company CONCLUSION The above is all my record of the process of Auditing the sales and collection cycle audited by RSM Viet Nam Auditing and Consulting Ltd Company from the planning stage to the completion stage It can be said that the company has built a program of auditing the sales and collection cycle fully with detailed inspection procedures However, when applied to the actual audit, due to time pressure, some procedures were omitted Auditors often focus on substantive tests, such as: assessing the internal control system, analytical procedures are often done sketchily and rarely save on working paper sheets With the understanding of the theoretical basic of auditing the sales and collection cycle in auditing financial statements, as well as access to reality, I have a better understanding of accounting as well as auditing the sales and collection cycle and give some solutions to complete auditing sales and collection cycle Because knowledge is still limited and practical experience is not much, my topic cannot avoid errors I look forward to receiving the contributions from 55 teachers as well as auditor and assistant auditor in RSM Viet Nam – Central Branch so that I can improve my topic I sincerely thank the help of: - Master Đỗ Nguyệt Ánh - Board of Directors as well as auditors and assistants auditor of RSM Viet Nam – Central Branch Dedicated to help, guide me to complete this thesis REFERENCES Alvin A Arens, Randal J.Elder, Mark S.Beasley, Chris E Hogan (2015) Auditing and Assurance Service Fifteenth Edition Christine Jubb, Larry E Rittenberg, Audrey A.Gramling, Stephen Topple, Karla M Johnstone, Peter Schelluch Auditing and Assurance: A Business Risk Approach Circular No 200/2014/BTC Circular No 219/2013/BTC Ministry of Finance, Turnover and Other incomes, Vietnamese Accounting Standard No 14/2001 56 ... Collection cycle Chapter 2: Auditing of Sales and Collection cycle at RSM Viet Nam Auditing & Consulting Ltd Company? ?? Chapter 3: Recommendation on auditing of Sales and Collection cycle at RSM Viet Nam. .. CONSULTING LTD COMPANY – CENTRAL BRANCH 2.1 Introduction about RSM Viet Nam Auditing & Consulting Ltd Company – Central Branch RSM Viet Nam Auditing & Consulting Ltd Company ( "RSM Vietnam") is one of. .. internship time at RSM Viet Nam Auditing & Consulting Ltd Company, I would like to present and complete the auditing of sales and collection cycle at RSM Viet Nam – Central Branch with the title of thesis: