Salary audit process in financial statements audit in deloitte vietnam audit company

MINISTRY OF EDUCATION AND STATE BANK OF VIETNAM TRAINING HO CHI MINH CITY UNIVERSITY OF BANKING THESIS OUTLINE FACULTY: ACCOUNTING - AUDIT SALARY AUDIT PROCESS IN FINANCIAL STATEMENTS AUDIT IN DELOITTE VIETNAM AUDIT COMPANY Instructor : Ph.D Duong Nguyen Thanh Tam Student : Nguyen Le Duc Anh Student ID : 030805170392 Ho Chi Minh, November 2021 ASSURANCES I assure you that this is my work which has never been published in any document or journal, except for the clearly and appropriately cited content The metrics used in the article are compiled by the team themselves and handled accurately and honestly If there are any issues relating to the truthfulness and accuracy of the study, I accept responsibility and be subject to the judgment of the Council APPRECIATION The graduation thesis course is an important part of the academic performance at the University and also a form of applied management in practice Over time, accessing and understanding the market has more or less helped me improve my knowledge during my year at banking university With the knowledge I was taught by the teachers, and the dedication of the teachers helped me complete the graduation report The time I had access to real work compared to the process I attended was short Although I have tried to learn and study more, due to the limited capacity in terms of practical experience as well as knowledge, this course of thesis will not avoid shortcomings So I look forward to receiving comments from the instructors and the teachers in banking university Surely, it will be a valuable experience that helps me complete my knowledge and is a solid foundation for the career of the latter I would like to sincerely thank all the teachers of banking university and especially, Dr Duong Nguyen Thanh Tam who directly and enthusiastically guided me throughout the time of my rescue and completion of this internship report Thank you for following and accompanying me throughout the research I would also like to acknowledge that the teachers on the Board have spent time listening and commenting on our articles TABLE OF CONTENT APPRECIATION CHAPTER 1: INTRODUCTION 1.1 Regarding the rationale of the thesis: 1.2 Objectives of the thesis .7 1.3 Study Question .7 1.4 Subjects and scope of study 1.5 Research methodology CHAPTER 2: THEORETICAL BASIS OF SALARY AUDIT 2.1 Overall about salary 2.1.1 Features of salary in audit 2.1.2 Meaning of salary 2.1.3 Salary category & Salary calculation 2.2 Overall of salary accounting cycle 13 2.2.1 Duties of salary accountant 13 2.2.2 Overview of the salary cycle 14 2.2.3 Salary accounting documents 18 2.3 Regarding Control objectives 22 2.3.1 Common control objectives .22 2.3.2 Detail control objectives 24 2.4 Salary audit process 25 2.4.1 The role and objectives of the salary audit 25 2.4.2 Salary audit process 26 CHAPTER 3: SALARY AUDIT PROCESS IN FINANCIAL STATEMENT AUDIT IN DELOITTE VIETNAM AUDIT COMPANY 34 3.1 Overall about Deloitte Audit Company 34 3.1.1 Company formation and development .34 3.1.2 Operation Orientation 37 3.1.3 Types of services .37 3.1.4 Organizational structure 41 3.2 Salary audit process conducted by Deloitte Vietnam Audit Company 44 3.2.1 Pre-audit plan 44 3.2.2 When the audit process is conducting .6 3.2.3 After complete the audit 12 3.3 The current status of the salary audit process in the audit of financial statements at ABC company 13 3.3.1 Objectives of salary audit 13 3.3.2 Pre-planning Process .15 3.3.3 Audit planning process 19 3.3.4 Conducting audit 19 3.3.5 Finishing audit 33 3.4 Comments for current status of salary audit process of Deloitte Vietnam Audit Company 34 3.4.1 Advantages in practice .34 3.4.2 Disadvantages in audit process in Deloitte Vietnam Limited Company 37 CHAPTER 4: SOLUTIONS TO IMPROVE THE PROCESS ON THE CURRENT STATUS OF THE SALARY AUDIT PROCESS IN THE AUDIT OF FINANCIAL STATEMENTS PERFORMED BY THE COMPANY 38 4.1 Solution for the process on the current status of the salary audit process in the audit of financial statements performed by the company .38 4.1.1 Solution to leverage the advantage 38 4.1.2 Solution to limit drawbacks .40 4.2 Recommendation to improve the salary audit process in the audit of financial statements performed by Deloitte Vietnam 42 4.2.1 Assign work and responsibilities 42 4.2.2 Recruitment & training 43 CONSLUSION 44 REFERENCE 45 APPENDIX 46 APPENDIX II 50 CHAPTER 1: INTRODUCTION 1.1 Regarding the rationale of the thesis: Along with the strong development of Vietnam's economy is the increasing competition among businesses However, in the future, when domestic enterprises have to compete not only with each other but also with foreign enterprises, especially after Vietnam signed a series of trade agreements Many difficult articles of businesses when they want to survive and develop in the market To this, administrators must build their brand and reputation with customers, investors and other stakeholders through the transparency of financial information The audit industry was born to help businesses achieve that goal In the current period, the audit industry is increasingly asserting its important role in improving management efficiency, helping the information system in the financial market to be honest and transparent, and making the environment healthier for enterprises in particular and Vietnam's financial system in general Through the financial statements, we can know the financial health information of the business The information that is traded around is quite diverse and complex Among them, salary play an important role in influencing the information presented on the financial statements Therefore, this is an important part that auditors always focus on in the audit of financial statements In businesses, salary make up a large part of the total costs of the business Moreover, the inaccuracy in salary costs can greatly affect the cost of products, thereby affecting the information presented in the financial statements of enterprises which were not honest and reasonable, affecting the economic decision-making by users of the financial statements Realizing the meaning and importance of salary audit through my internship at Deloitte Vietnam, I decided to choose the topic: “Salary audit process in financial statements audit in Deloitte Vietnam audit company” 1.2 Objectives of the thesis Objectives of the thesis include: • Find out about salary audit process in XYZ company conducted by Deloitte Vietnam audit company • Recommend solutions to improve the salary audit process in Deloitte Vietnam audit company 1.3 Study Question • How salary audit is conducted by Deloitte Vietnam audit company? • What are the solutions to improve current audit process in Deloitte Vietnam audit company? 1.4 Subjects and scope of study The subjects and scope of study includes these: • The subject of study is studying the salary audit process in audit the financial statements conducted by Deloitte Vietnam audit company • The study was carried out according to the salary cycle audit process and account citation during the audit of the XYZ company's financial statements performed by Deloitte Vietnam • Audit performance data at company XYZ for the financial year ended December 31, 2020 The figures and examples are for illustrative purposes only and are based on hypothetical data to ensure the confidentiality of information for clients • Total time for studying this case is months in 2021 1.5 Research methodology • To successfully complete this thesis, I use interview method when I was working at the company to understand and have a realistic view of the research topic Based on Deloitte Vietnam's salary audit process, I will describe the salary audit process applied in practice along with data to illustrate each method or procedure specifically mentioned Accordingly, the writer conducts research and analysis to make a small contribution to improve the process • Studying audit records, observing, learning experiences and working methods of senior auditors Collect audit evidence, audit methods, presentations on working papers Proceed to collect data of research subjects and observe the implementation process, interview company employees to better understand the collected data CHAPTER 2: THEORETICAL BASIS OF SALARY AUDIT 2.1 Overall about salary 2.1.1 Features of salary in audit Salary is the payment or monetary income that the employer must pay to the employee through contractual agreements in accordance with the law by purchasing labor power Salary includes salary according to job or title, salary allowance and other supplements 2.1.2 Meaning of salary Salary are the monetary expression of the price of labor power, so salary are an economic category associated with labor, money, and commodity production On the other hand, in terms of the existence of the production of goods and money, salary are an element of production and business costs that constitute the cost of products, services and services In addition, salary are also an important economic lever to improve production and business efficiency, increase labor productivity, and have the effect of encouraging the spirit of enthusiasm, stimulating and creating interest of employees on their work results In other words, salary are a factor that promotes labor productivity 2.1.3 Salary category & Salary calculation 2.1.3.1 Forms of salary category: Paying depend on time: It is the payment of salary according to the working time of employees Time can be in hours, days, weeks, months In fact, businesses have two most basic salary calculation methods: Method 1: Monthly salary = Salary + allowances (if any)/standard working day X Number of actual working days 36 At this step, the auditor performs work steps that are generally the same for all clients However, for each specific job, techniques and methods are different With the effective help of AS/2 audit software, auditors when facing difficulties in the working process can completely refer to the standard audit program of AS/2 The working process is highly effective because the qualifications of the auditors performing the salary are usually stable The assignment of tasks to select people is done very well Auditors support each other, using references to link the work done by other auditors, saving time and effort as well as helping those who may not understand anything about accounting or auditing When looking at working papers presented clearly, easy to understand and understand An issue that is also always appreciated by auditors is the presentation of working papers With the practice part, how to proceed, what to is shown very well as we have seen in the two examples above Another point is that the work carried out is reviewed by the higher-level auditors This is a very important point This represents a very good audit quality control The comments and suggestions of senior auditors help the auditors to make corrections and supplements to working papers, complete with the highest accuracy Those are also the points the auditors draw after each audit into valuable experience for themselves Therefore, every audit season, the auditors mature in both knowledge and skills Deloitte Vietnam also focuses on new auditors For clients where the salary part is not too difficult, it can be assigned to the 1st year assistant auditor Monitoring, review, guidance still stay focused Salary is not an easy, if not complicated, part of the job for beginners But with a very good teamwork spirit, the auditors of Deloitte Vietnam always complete the work well and on time In the process, it is very important to select the sample in the detailed examination Choosing whether the sample is typical or not will greatly affect For this stage, the auditor often selects special and highpaid individuals, often members of the board of directors or management The results are usually very accurate Final step of work: End of audit: At the end, the audit team leader collects and synthesizes working papers, passes them on to higher levels for review after the team leaders themselves have reviewed and commented, Get 37 feedback from the salary and employee cycle auditors After it is ok, the issues that need to be consulted for customers will be included in the management letter The management letter will help customers to upgrade and repair the existing weaknesses in the accounting and control system This is not only meaningful to the client, but also helps the auditors to reduce the effort next year when the client has corrected the shortcomings 3.4.2 Disadvantages in audit process in Deloitte Vietnam Limited Company For the step of finding out general information and information about the salary and employee cycle: Usually, for old customers, the auditor only pays attention to the new information that appears during the year, and the old information often omitted This can cause subjectivity when conducting work In addition, the pressure of work during the busy season makes auditors often ignore general information due to insufficient time The salary audit is usually done by senior audit, so the backlog of work causes confusion at work The performance of analytical procedures in the payroll and employee cycle audits performed by the company Analytical procedure is a very important procedure used in financial statement audit in general and salary audit in particular ISA 520 states: “The auditor should perform an analytical process when planning the audit and during the overall review phase of the audit Analytical procedures are also performed at other stages in the audit process During the payroll cycle audit, analytical procedure is an important procedure performed by the auditor in all three stages of the audit, but I have found that the analysis is progressed by the auditors The new practice only focuses on some financial ratios and compares salary costs between months, quarters and years, but does not compare this target of customers with the norm of the industry or other companies in the same industry to see more clearly the performance and management capacity, development trends of customers 38 Sampling method for audit, the sample selected must be highly representative, usually there are two sampling methods: probability sampling and non-probability sampling In the sampling method of Deloitte Vietnam, the company often uses software to obtain a sample or uses the auditor's professional judgment which is monetary unit sampling In some cases, due to the large sample population, auditors often choose samples with large values, so small elements are rarely examined and considered With such a sampling method, the risk of sampling is very high because small elements may contain systematic frauds and errors The evaluation of the internal control system, the evaluation of the internal control system is a very important job that the auditors right from the time of planning the audit However, in the salary and employee cycle, the intrinsic risk of the cycle is underestimated, so the implementation of control procedures in this cycle has not been focused Interview questions, control procedures are carried out relatively sketchy CHAPTER 4: SOLUTIONS TO IMPROVE THE PROCESS ON THE CURRENT STATUS OF THE SALARY AUDIT PROCESS IN THE AUDIT OF FINANCIAL STATEMENTS PERFORMED BY THE COMPANY 4.1 Solution for the process on the current status of the salary audit process in the audit of financial statements performed by the company 4.1.1 Solution to leverage the advantage In general, for the general cycle, Deloitte Vietnam has applied the standard and no changes are necessary However, for old customers, when collecting information, the auditor should still mention the basic information more fully, to help the auditors understand the client in detail Continue to improve and update audit support systems At the same time, provide solutions to improve in the process of preparing for the audit process Introduce a policy to support new employees in accessing and 39 practicing payroll audit Analytical procedures used in the salary and employee life cycle are mainly applied in estimating salary and deductions and comparing them with customer records, or theoretically analytical procedures horizontal ie check the correct record of the customer After the re-estimation, calculate the difference If this difference is large, the auditor must find out the reason and explain it in his working papers If it's small, you can skip it The horizontal analysis in a broader direction such as comparison with other units in the same industry, comparison with the whole industry indicator is not available This will prevent people who need information from the report to see the development of customers' contributions to the manufacturing industry, what is the customer's position compared to other units? In other words, it provides more limited data for decision making The reason is also due to the limitation of audit time for customers It is hoped that in the coming time, auditors should try harder to find out information about the whole industry and conduct comparison and analysis Thus, it helps not only the customer company but also those interested to see where the customer's position is at the moment Understanding and evaluating the internal control system is always carried out from the very beginning when conducting an audit An accurate assessment will help the auditor to reduce time and effort if the system is effective or vice versa, the auditor must increase the inspection if the control system is weak Either way, however, no system is perfect Auditors cannot fully trust this system Describing the control system in a way that is easy to understand and simple will make it easier to detect weak links In Deloitte Vietnam, narrative and questionnaire are mainly used, while these two methods can limit the understanding of the system's weaknesses due to the dishonest attitude of the respondents The method of drawing flowcharts with the strength of showing the cycle image of the system made by the auditor's own observations has not been applied in parallel with the other two methods This is a shortcoming that Deloitte Vietnam should consider In the practice part, Deloitte Vietnam Company combines both methods of questionnaire and report for assessment These two tables are presented on a separate 40 working document, usually 1500, including the following sections: hiring, terminating a contract, tracking labor time, calculating salary, paying salary, how customers keep records … As in the two example companies above, the auditors clearly stated these parts in each company, thereby assessing how well the internal control system is In the future, the company should use more diagrams and symbols in the description to make it easier to learn 4.1.2 Solution to limit drawbacks For statistical sampling, auditors determine materiality, reliability and apply the above formulas as presented This is the most commonly used method for Deloitte Vietnam This method quickly calculates the number of samples to choose, without the need for sophisticated and complicated calculations With this method, the auditor can only calculate the number of samples to be selected It doesn't specify which model it is The specific selection of the remaining sample is left to the professional judgment of the auditor There are cases where the auditor chooses the largest sample, the largest value There are cases where the auditor chooses samples larger than 2% MP and samples less than 2% MP Depending on the experience and situation of the business, the auditor explains his or her choice of samples With this sampling method, all samples can be selected, regardless This method is applied in cases where the material errors are not concentrated, evenly distributed in the population For examples in companies above, this method is applied by the auditor to the selected sample, which is usually foreign employees These are the subjects that often have large salaries and are prone to mistakes because they often hold key positions in the company Auditors, thus giving them special attention Samples belonging to Vietnamese employees were mostly ignored This can be seen in both enterprises, the reliability of the internal control system is quite high, so the auditors believe in this internal control For the non-statistical sampling method, the auditor only applies it in the case of block- 41 distributed material misstatements The auditor must have a deep understanding of the client to be able to assess which parts of the client are at fault In fact, this method is somewhat subjective on the part of the auditor, right at the beginning of the evaluation So rarely applied by auditors during the process In summary, in general, the auditor depends on each client, depending on the circumstances, depending on his own judgment, to offer an appropriate sampling method The auditor can choose one of the two, statistical or non-statistical, or both As long as the auditor completes the work with the highest accuracy of information, the quality of the working papers is good At best, no material misstatement or fraud should be overlooked because the sample is unrepresentative Through the fact that the company's two customers, the company has not designed a common control procedure for all audits, so the company should come up with a common control procedure implementation plan so that the auditor can apply it flexible to each specific customer with different sizes and activities To gain an understanding of customers and control procedures, companies need to devise evidence-gathering techniques and how to most effectively apply them, such as: - Observing, interviewing: regulations on interviewing attitude are both polite and courteous but also hard to achieve long-term relationships with customers and find the most useful information - Questionnaire: along with the attitude and working style, the company can set up a table of the most realistic questions to help the auditors work effectively and not waste the customer's time Questions can be made closed and with notes next to them to maximize the amount of information gained and not cause problems for the client 42 4.2 Recommendation to improve the salary audit process in the audit of financial statements performed by Deloitte Vietnam 4.2.1 Assign work and responsibilities While conducting an audit, the step of selecting the personnel and assigning them responsibility for completing the audit item plays an important role Usually, a team leader who has 3.4 years of experience or more will select his team and assign work to each person before going to meet the client and perform the audit Thus, the auditors had an initial grasp of the work carried out The reasonable assignment, in accordance with professional capacity, on the one hand helps to avoid errors and delays in work, on the other hand, does not affect the client and individual auditors in evaluating the auditor's performance that accountant in the month, year If the audit team leader sees that someone's work is nearing completion, he or she should ask that person to support others in the team Avoiding inexperienced people doing the heavy work and better people doing the work easier and more leisurely will help audit quality as well as avoid conflicts Small jobs such as checking details can be transferred to new auditors to avoid work pressure 43 4.2.2 Recruitment & training During the years of operation, from Vaco to now Deloitte Vietnam, the Company has always received the most support and favorable conditions from state agencies and professional associations Deloitte Vietnam also contributed a lot to the drafting of regulations, laws, accounting and auditing regimes of the Ministry of Finance as well as of the Association of practicing auditors of Vietnam A company that survives and grows always needs these support and help However, due to the nascent development of the Vietnamese audit industry, in addition to the strong and long-standing development of the world audit industry, we still face many difficulties and challenges due to the regime's The standards of our country still have many shortcomings and are not suitable with the general situation of the world Auditing with payroll is still a difficult problem for fresh graduates and interns The company should come up with a more methodical training process for new graduates Therefore, in the coming time, it is hoped that state agencies and professional associations should have guidelines, supplement and amend laws, accounting and auditing regimes to suit the domestic situation and international integration to make it easier for audit firms to conduct audits as well as to link and learn from other auditing firms in the region as well as in the international arena Avoid the setting of standards, regimes that overlap, duplicate and contradict, causing difficulties and embarrassment for the auditors in their work 44 CONSLUSION During nearly twenty years of existence and development, Deloitte Vietnam Co., Ltd has built for itself an efficient working system, wide customer network and a reputation that is hard to build a one afternoon early The company deserves to be the leader in the auditing industry in Vietnam Salary and employee cycle audits play an extremely important role in an audit It not only affects the interests of customers but also affects the social interests of the employees working at the client company Deloitte Vietnam Co., Ltd., with its advantages and advantages compared to other companies, has conducted the audit according to a reasonable process, suitable for each object, demonstrating the professionalism of one of the four large accounting firm Deloitte Vietnam is increasingly asserting its role in the Vietnamese economy and deserves to be an active contributor to the success of Deloitte Asia Pacific in particular and Deloitte globally in general Through the internship, I have gained valuable knowledge about the Company as well as audited the salary and employee cycle Once again, I would like to sincerely thank Dr Duong Nguyen Thanh Tam and colleagues in Deloitte Vietnam Company for guiding and helping me complete this graduation thesis Despite many efforts, the thesis can not avoid errors I look forward to receiving suggestions from teachers, brothers and sisters in Deloitte Vietnam, friends and interested people 45 REFERENCE Trai, D.T.N (2010) Auditing of salary in the financial statements audit by AAC accounting and auditing company limited (Economic Thesis, University of Economics, Da Nang) TACA (2020) Answers to the CPA exam in auditing – Illustrated topic Xuan, T.T.T (2017) Process of salary audit and depreciation expenses at A Chau Auditing Co., Ltd (Audit Thesis, Tay Do University, Can Tho) Viet, C.T (2020) Hai Ha Confectionery Joint Stock Company - Financial report has been audited PhD N.T.Dong (1999) Theory of Accounting - National Economics University PhD N.T.D (1999) Textbook of Public Accounting in Public Administration Units - National Economics University PhD N.D.Do (1999) Accounting Textbook for Production Enterprises University of Finance and Accounting Ministry of Planning and Investment, (1997) Current regulations on accounting and auditing: Thematic information Tp Ho Chi Minh Audit (2019) Internal circulation / Vu Duc Phuc Part 1: Outline 10 Alvin A Arens, James K Loebbecke, W Morley Lemon Scaborough: Prenticehall canada Ine (1987) Auditing: an integrated approach/ 11 Giang Thị Xuyến, Mai Ngọc Anh (2013) Auditing and investigation 46 APPENDIX SURVEY TABLE: RESEARCH AT DELOITTE VIETNAM COMPANY LIMITED FOR COMMENT ON AUDIT PROCESS Hello Sir/Madam! I am working on the topic “The Process of Collecting External Confirmation Evidence: Research at DELOITTE Vietnam Co., Ltd.” To complete the thesis, I look forward to receiving your cooperation in providing information and I assure you that this information will be kept confidential and only for research purposes I look forward to your cooperation so that I can successfully complete this research I sincerely thank! Part 1: Your personal information a) Name: b) Gender: c) Department: d) Position: e) Years of experience: Part 2: Question about the current status of the process of collecting audit reports with external confirmations Strongly disagree = Disagree = Normal = Agree = Strongly agree = 1 The fragmented cooperation between the personnel involved in the 47 mailing process together (auditors, DDC, reception, .) causes miscommunicati on, leading problems mailing to when is not handled in time time External units (customers, carriers, confirmators, ) not cooperate with personnel related to the process (auditors, DDC, reception, ) making mail processing difficult difficult and prolong the processing by other time procedures than process the 48 The confirmation letter form is also confusing for the confirming party The supervision of the Management Board is not strict because the Management Board has a large amount of work The allocation of personnel is not consistent with the corresponding volume of messages and processing time of the Management Board There is no salary plan, only a salary plan for employees when audit 49 The lack of manpower makes things difficult when salary audit Difficulty for newbies to support senior members when working with software Customers make it difficult perform to salary audit 10 Work in the team has overlapping nature, making it difficult to check and authenticate 11 Others 50 APPENDIX II Question Anwser Sex a Male 42% b Female 58% Team a Audit 1,2,3 54% b Audit 4,5 46% Position a Intern 30% b Consultant/Assistant 22% c Senior 20% d Assistant Manager 15% e Manager 12% f Senior Manager 1% Experience a Less than years exp 33% b 1-5 years exp 42% c 5-10 years exp 25% ... meaning and importance of salary audit through my internship at Deloitte Vietnam, I decided to choose the topic: ? ?Salary audit process in financial statements audit in Deloitte Vietnam audit company? ??... include: • Find out about salary audit process in XYZ company conducted by Deloitte Vietnam audit company • Recommend solutions to improve the salary audit process in Deloitte Vietnam audit company. .. the audited unit CHAPTER 3: SALARY AUDIT PROCESS IN FINANCIAL STATEMENT AUDIT IN DELOITTE VIETNAM AUDIT COMPANY 3.1 Overall about Deloitte Audit Company 3.1.1 Company formation and development Deloitte