characteristics-of-audit-of-cash-and-cash-equivale-494887 (2)

TABLE OF CONTENTS LIST OF DIAGRAMS AND FIGURES Diagrams and Figures Diagram 1.1: Accounting cash Diagram 1.2: Accounting Bank deposit Figure 1.1: Audit objectives for Cash and Cash equivalents Figure 1.2: Procedures of tests of detailed for cash Figure 1.3: Procedures of tests of detailed for bank deposit Figure 2.1: Working paper 4110 Figure 2.2 :Table of determining materiality Figure 2.3 : Table of assessing audit risk Figure 2.4: Working paper 4115 Figure 2.5: Working paper 4130 Figure 2.6: Working paper 4120 Figure 2.7: Working paper 4140 Figure 2.8: Working paper 4131 Figure 2.9: Working paper 4132 Page 11 17 27 29 35 37 37 38 39 43 45 48 50 Page | Figure 2.10: Working paper 4141-111 Figure 2.11: Working paper 4150-112 Figure 2.12: Working paper 4143 Figure 2.13: Working paper 4142 Figure 2.14: Confirmation letter to Vietinbank Figure 2.15: Working paper 4151 Figure 2.16: Summary of audit results Figure 2.17: Audit conclusions for Cash and cash equivalents 53 54 56 58 60 62 63 65 STATUTORY DECLARATION I herewith formally declare that I myself have written the submitted Barchelor’s Thesis independently I did not use any outside support except for the quoted literature and other sources mentioned at the end of this paper Hanoi, May 19th, 2020 Vu Duc Viet Page | INTRODUCTION In recent years, with the development of a market economy, audit activities have been established and rapidly developed in Vietnam Auditing has become an indispensable need for business activities and contributing to improving the quality of business management Auditing activities through financial statement audits have been actively involved in testing, evaluating and confirming the reliability of financial information, significantly contributing to renovation activities, equitizing enterprises and attracting foreign investment activities, which create favorable conditions for the country's economic development Therefore, the demand for auditing on financial statements is currently very large, requiring the increasing quality of audit Nowadays, the independent audit shows an important role as a tool in the macroeconomic management of the country's economy The independent audit serves practical benefits for owners, investors, contributes valuable things to the prevention of financial misstatements, help the government control economic activities and stabilize the stock market In order to integrate and develop the stock market, one of the measures is to enhance the quality control of independent audit operations Cash and cash equivalents is always a very important item, because it is related to the solvency of the business Through many operations, we can assume that cash is involved in almost all accounting processes such as purchases, sales, employee salaries, etc… On the other hand, due to the characteristics of cash are compact, easily-transported, so this item has a high potential of risks of embezzlement and fraud Therefore, in all audits of financial statements, cash is always considered as an important item This Thesis consists of three chapters: Page | Chapter 1: Characteristics of audit of cash and cash equivalents in financial audit conducted by UHY Co Ltd Chapter 2: Practice of audit of cash and cash equivalents in financial audit conducted by UHY Co Ltd Chapter 3: Assessments and recommendations for completing and improving the situation of auditing cash and cash equivalents in UHY Co Ltd During the internship and completion of the Thesis, I received enthusiastic guidance and guidance from PhD Nguyen Thi Lan Anh as well as the members of UHY Co Ltd However, due to the limitations of knowledge and practical experience, my Thesis will inevitably lack I look forward to the contributions of Mrs Lan Anh as well as UHY’s employees to improve my Thesis Sincerely! Page | CHAPTER 1: CHARACTERISTICS OF AUDIT OF CASH AND CASH EQUIVALENTS IN FINANCIAL AUDIT CONDUCTED BY UHY CO LTD 1.1 Characteristics of cash and cash equivalents of clients affecting financial audit 1.1.1 Overall of Cash and Cash equivalents a) Difinitions of Cash and Cash equivalents Cash and cash equivalents refers to the line item on the balance sheet that reports the value of a company's assets that are cash or can be converted into cash immediately Cash equivalents include bank accounts and marketable securities, which are debt securities with maturities of less than 90 days However, oftentimes cash equivalents not include equity or stock holdings because they can fluctuate in value Examples of cash equivalents include commercial paper, treasury bills, and short-term government bonds with a maturity date of three months or less Marketable securities and money market holdings are considered cash equivalents because they are liquid and not subject to material fluctuations in value Cash and cash equivalents are a group of assets owned by a company For simplicity, the total value of cash on hand includes items with a similar nature to cash If a company has cash or cash equivalents, the aggregate of these assets is always shown on the top line of the balance sheet This is because cash and cash equivalents are current assets, meaning they're the most liquid of short-term assets Page | Types of Cash and Cash equivalents Cash and cash equivalents help companies with their working capital needs since these liquid assets are used to pay off current liabilities, which are short-term debts and bills Cash: Cash is money in the form of currency, which includes all bills, coins, and currency notes A demand deposit is a type of account from which funds may be withdrawn at any time without having to notify the institution Examples of demand deposit accounts include checking accounts and savings accounts All demand account balances as of the date of the financial statements are included in cash totals Bank deposits: Bank deposits consist of money placed into banking institutions for safekeeping These deposits are made to deposit accounts such as savings accounts, checking accounts and money market accounts The account holder has the right to withdraw deposited funds, as set forth in the terms and conditions governing the account agreement Cash-in-transit: Cash-in-transit is a term that is used to describe situations in which actual cash money is in the process of being moved from one status to another Similar to cash valuables in transit, cash-in-transit may involve the physical cash being moved from one location to another, such as cash being removed from a bank vault and delivered to a business customer in an armored car More frequently today, the term is used to describe the status of deposits or money transfers as the funds are moved from one account to another Foreign currency: Companies holding more than one currency can experience currency exchange risk Currency from foreign countries must be translated to the reporting currency for financial reporting purposes The conversion should provide results comparable to those that would have Page | occurred if the business had completed operations using only one currency Translation losses from the devaluation of foreign currency are not reported with cash and cash equivalents These losses are reported in the financial reporting account called "accumulated other comprehensive income." Cash equivalent: Cash equivalents are investments that can readily be converted into cash The investment must be short term, usually with a maximum investment duration of three months or less If an investment matures in more than three months, it should be classified in the account named "other investments." Cash equivalents should be highly liquid and easily sold on the market The buyers of these investments should be easily accessible The dollar amounts of cash equivalents must be known Therefore, all cash equivalents must have a known market price and should not be subject to price fluctuations The value of the cash equivalents must not be expected to change significantly before redemption or maturity Certificates of deposit may be considered a cash equivalent depending on the maturity date Preferred shares of equity may be considered a cash equivalent if they are purchased shortly before the redemption date and not expected to experience material fluctuation in value Cash and Cash equivalents not include There are some exceptions to short-term assets and current assets being classified as cash and cash equivalents Credit collateral: Exceptions can exist for short-term debt instruments such as treasury bills if they're being used as collateral for an outstanding loan or line of credit Restricted T-bills must be reported separately In other words, Page | there can be no restrictions on converting any of the securities listed as cash and cash equivalents Inventory: Inventory that a company has in stock is not considered a cash equivalent because it might not be readily converted to cash Also, the value of inventory is not guaranteed, meaning there's no certainty in the amount that'll be received for liquidating the inventory b) Characteristics of Cash and Cash equivalents Cash and cash equivalents often play an important role in the analysis of the firm's quick solvency If the cash balance is too low, it proves that there are many difficulties in instant payment; conversely, if the cash balance is too high, it shows that the enterprise's use of cash in capital turnover is inefficient Cash transactions arise frequently with different scales Cash has many advantages in payment activities, including in the process of storage and use, but it is this also leads to very high inherent risk, so when implementing the audit, the auditors need to pay attention Cash and cash equivalents are an important item but also are prone to misrepresentation, potential loss, significant fraud In any financial statement audit, the audit of cash and cash equivalent are always an important content even though the balance of the cash item may not be significant Presenting the test of details of balances of cash as well as related transactions in auditing cash is extremely important and the auditor must focus more than any other procedure Cash and cash equivalents are items that have a great impact on many other important items on the financial statements such as: payables, receivables, expenses, revenue, etc… Therefore, the misstatements stemming from such a item will affect many indicators on the financial statements Cash and cash equivalents are an indispensable factor in the operation of the business so it significantly affects financial statements and audit reports If Page | the internal control is not effective and the collection and payment of cash don’t follow a strict procedure, this will create a loophole for making a false declaration of the amount of money spent as well as withdrawing money from public funds c) Roles of Cash and Cash equivalents The amount of cash and cash equivalents a company holds is very important and is a large component of a company's overall operating strategy For instance, companies with high amounts of cash and cash equivalents are better able to get through hard times when sales are low or expenses are particularly high High cash reserves can also signal that the company is "saving up" to make some significant acquisition However, companies with a lot of cash on hand are often takeover targets because their excess cash essentially helps buyers finance their purchase High cash reserves can also indicate that management has not figured out how to best deploy the cash It is important to note that there is an opportunity cost to holding cash, that cost is the return on equity that company could have earned by investing the cash in a new product or expanding business Many theories exist about how much cash certain kinds of companies should hold The current ratio and the quick ratio help investors and analysts compare company cash levels in relation to certain expenses 1.1.2 Accounting for Cash and Cash equivalents 1.1.2.1 Accounting Cash Accountants reflect the actual amounts of cash, foreign currencies and monetary gold which are actually imported, exported or left in the fund When cashing in or out, there must be a receipt and payment and they must be Page | signed by the recipient, deliverer and competent person for permission to enter and leave the fund in accordance with the regulations on accounting vouchers In some special cases, there must be an order for fund entry and exit The cash accountant must be responsible for opening the cash book, making daily records continuously in the order in which cash operations are made and calculates the existing fund amounts The cashier is responsible for managing, importing and exporting cash funds Every day, the cashier must take an inventory of the actual cash fund balance, compare with the data of cash book and cash accounting book If there are any discrepancies, the accountant and the cashier must check again to determine the cause and propose solutions to the difference Page | 10