TABLE OF CONTENTSINTRODUCTION...1 CHAPTER 1: CHARACTERISTICS OF AUDIT OF CASH AND CASH EQUIVALENTS IN FINANCIAL AUDITS CONDUCTED BY RUSSEL BEDFORD KTC AUDIT FIRM...3 1.1 Characteristics
CHARACTERISTICS OF AUDIT OF CASH AND CASH
Characteristics of cash and cash equivalents of clients affecting financial audits
On the balance sheet, cash and cash equivalents are shown under assets as the company’s most liquid assets, reflecting their ready-to-use nature Depending on how these funds are stored, cash and cash equivalents are typically classified into three categories, illustrating their differing liquidity profiles and how they contribute to the enterprise’s overall financial position.
Cash: This is the amount stored in the safe of the enterprise, cash can be VND and foreign currency of all kinds.
Cash in bank: This is the amount stored at the bank Cash in bank can include VND and foreign currency of all kinds.
Cash in transit: This is the amount of cash that the business is in the process of processing such as transferring to the bank, treasury, transferring it to customers, paying customers, via bank or post office but the enterprise has not received the bank's notice or the post office's notice of the completion of the business The cash being transferred can also be VND can also be foreign currencies of all kinds.
Each currency has different characteristics, and this affects the management characteristics for them as well as the process of control and comparison within the unit.
In the process of production and business, the currencies are used to meet the need to pay the debts of the enterprise or the purchase of supplies and goods for production and business as a result of the purchase and collection of debts
Auditing cash and cash equivalents hinges on management characteristics, especially the reliability of cash recording, which significantly influences the choice of audit methods By selecting an appropriate audit approach, the auditor can obtain sufficient and appropriate audit evidence to establish both the quantity and the quality of cash balances.
1.1.2 Accounting for cash and cash equivalents
Cash in the business often fluctuates due to the daily collection and expenditure operations Cash operations often involve many accounting accounts in many different cycles For example:
+ Account no 511 - Sales revenue in sales activities collected directly in cash.
+ Account no 131 - Must collect customers in sales activities when collecting debts or buyers pre-order goods during the period
+ Account no 112 - Cash in bank in the operation of withdrawing cash in bank to cash funds to prepare for spending.
+ Other accounts in the types of operations of recovering short-term investment capital, long-term investment, recovering advance cash, receiving capital contributed by other parties,
Cash expenditures are often associated with:
+ Inventory accounts, fixed assets in the business of buying and paying immediately in cash.
+ Accounts of payment of liabilities in the business of paying purchases, paying wages to employees, or paying other liabilities arising during the period.
+ Expense accounts in cash expenditure activities related to production and business activities and financial activities.
+ Other accounts in cash expenditures in terms of short-term, long-term financial investments and other investments.
Because cash operations span a wide range of business cycles and involve diverse processes, auditors must be engaged throughout the cash audit Cash audits require careful attention to the considerations tied to the audit of the relevant cycles, including the effectiveness of controls, the accuracy of transactions, and compliance with applicable standards across all stages of the cash operation.
Cash in bank is a form of cash and typically accounts for a large portion of the "cash and cash equivalents" line on the balance sheet In daily production and business activities, cash in bank participates in a broad range of economic transactions and shares many similarities with cash itself—encompassing purchases, sales, payments, and investments—while also reflecting the ongoing flow of deposits and withdrawals These dynamics illustrate how a unit manages liquidity, as bank cash can be deposited, withdrawn, or transferred to meet short-term obligations and optimize working capital In practice, the movements of cash in bank mirror overall cash flows and shape the organization’s financial flexibility.
+ Account no 111 - Cash in the business of depositing cash into the bank or withdrawing cash in bank to enter the cash fund.
+ Revenue accounts in the operations of collecting groin sales, revenue from financial activities or revenue from other activities (account no 711)
+ Accounts no 131, 331: in the group of operations related to payment relationships with buyers and suppliers such as: customers repaying debts or applying, repaying debts or advance to sellers.
+ Accounts of financial investment in the business of financial investment expenditure or recovery of financial investment capital.
+ Accounts of inventory when enterprises buy supplies and goods for production and business activities.
+ Loan accounts, obligations to the state, payment of employees, or other debts when the unit makes payments.
+ Equity accounts when receiving capital or paying capital to the owner.
+ Expense accounts in bank deposit expenditure activities for production and business activities, sales, or financial activities.
Cash in transit occurs when a business is making payments to customers or has transferred cash to the bank without receiving confirmation Although the related activities are smaller than cash on hand or cash deposited in the bank, cash in transit is a common item that arises regularly and directly ties into the deposits and the ongoing financial relationship between the business and its bank.
From the characteristics, functions and frequently arising properties of currencies, the accounting of receipts and expenditures, and the preservation of cash must ensure:
- Every day, cash accounting reflects the situation of cash collection and cash fund Regularly collate actual cash with books, detect and promptly handle errors in the management and use of cash.
Deposit accounting monitors changes in the bank cash balance—recording increases, decreases, and the daily cash position—while ensuring compliance with the non-cash payment regime It also captures cash transfers, enabling rapid detection of the causes of transfer bottlenecks so the business can take appropriate measures to promptly release funds and maintain liquidity.
1.1.3 Common misstatements related to cash and cash equivalents
Cash and cash equivalents are a critical component of liquidity analysis because cash balances directly affect a company’s ability to meet immediate obligations and gauge solvency A too-low cash balance indicates difficulties in making instantaneous payments, while an excessively high balance suggests inefficient use of capital and weaker working-capital management Cash operations occur regularly in large quantities and across a range of sizes, providing convenience for payments but also increasing the risk of errors or misappropriation Although cash offers advantages in preservation and usability, these same traits raise the likelihood of wrongdoing and control weaknesses in cash handling The cash cycle ties into multiple business cycles, so misstatements or violations in cash can have ripple effects on related items and the overall economic activities Common issues observed with cash and cash equivalents include improper cash handling, reconciliation gaps, and weak internal controls.
Cash fraud in accounting occurs when the cash recorded in the books does not exist, typically driven by collusion among the accountant, the treasurer, and the person responsible for payments who falsifies receipts; schemes include spending cash to cover other losses or deliberately reducing revenues to siphon cash from the enterprise A lack of synchronization between cash collection, disbursement, and bookkeeping leads to misstatements in cash balances and receipts, with checks handled improperly and foreign currency accounting principles applied incorrectly, all of which enable embezzlement.
Cash in bank schemes arise when collusion occurs between employees and those conducting routine bank transactions, enabling the embezzlement of cash held in bank accounts Such bank fraud often involves noting insufficient interest on idle cash and the misrepresentation of funds as they move between accounts to conceal theft In many cases, funds are improperly documented as transfers between bank accounts, masking the true cash loss and allowing fraud to continue until controls catch up For organizations, detecting and preventing this type of fraud requires strong internal controls, strict separation of duties, regular bank reconciliations, and ongoing monitoring of interbank transfers and interest accruals to spot irregular patterns.
- Cash in transit: transferring cash at the wrong payment address; writing the wrong amount of deposit to the bank;
- Cash equivalents: misrepresent cash equivalents into financial investments on financial statements;
Cash and cash equivalents are essential assets but can be easily misrepresented, with risks of loss and fraud making the cash audit a critical component of any financial review regardless of the apparent materiality of the balance Consequently, a cash audit must involve rigorous verification of the details of cash items, thorough examination of related incurred operations, and tracing of cash transactions from source documents to the general ledger Auditors should apply a higher level of scrutiny to cash procedures than to other areas to ensure the accuracy, completeness, and integrity of the cash balance and related disclosures in the financial statements.
1.1.4 Internal controls over cash and cash equivalents
Effective cash management in a company starts with separating custody of cash from its recording, ensuring that the preservation of capital is distinct from bookkeeping activities The business should assign staff to record transactions and have another employee verify the work, creating a checks-and-balances system that deters errors and fraud This division of duties helps prevent embezzlement and strengthens overall internal controls Key steps for internal management of cash and cash equivalents include proper segregation of duties, independent reconciliation of cash balances, timely and accurate recording of transactions, and ongoing oversight of cash handling processes.
1 Separating the task of keeping cash from the scraping of accounting books – cash employees are not received with the accounting books and accountants are not allowed to keep cash, promulgate inventory regimes, funds, clearly stipulate personal responsibility in the management of cash at the fund;
2 Make a list of cash collection invoices at the time and receive cash;
3 Make payments by cheque, only cash should be used for petty expenses, not paid cash instead of paying cheques;
4 Before issuing a check for payment, the quantity and value of expenditures must be checked to avoid issuing checks beyond the balance; and
5 Separate the approval of payment function.
Audit objectives of auditing cash and cash equivalents in financial audits
At KTC, the most general audit objective set when auditing a client is the goal of the general rationality of all information on the financial statements is reasonable The general audit objective for cash and cash equivalents is that auditors must collect all appropriate audit evidence to affirm the honesty and reasonableness of the operations of cash and cash equivalents In order to give its opinion on the honesty, legality and reasonableness of the cash and the equivalents of auditors, it is necessary to verify the information in the financial statements on this item; assess the compliance with the standards and accounting regimes, accepted principles, applied accounting methods, important estimates and judgments of the Director as well as the general presentation of these indicators From that, auditors define the common objectives for the financial statement and its constituent parts The general audit objectives for the amount of cash at KTC Company are determined in the audit program of this item: The fund is available and the enterprise is indeed capable of fulfilling its economic obligations; the acquisition is done correctly for fund entries as well as for fund released; Funds of all kinds must be properly priced according to the principles specified in the accounting of cash, the balance of the cash account must be calculated, booked and transferred accurately (existence, accuracy) The amount of cash and cash equivalents on the financial statements of the enterprise must be prepared and presented honestly in accordance with the standards
The overall objectives of the audit when entering into each specific action section will be concretized into specific objectives For each part of the action or item on the financial statements, there are many specific objectives that are expressed in many different aspects and apply the audit procedures are also different Factors that primarily affect the determination of audit objectives specific to cash and cash equivalents:
- Characteristics of the components of the cash and the cash equivalents of items in the enterprise may include: cash, cash in bank, cash in transit, short-term financial investments For the operational characteristics of each enterprise, each business only exists cash and cash in bank, or the full range of the above-mentioned currencies. Therefore, the specific audit objectives for the cash item in these businesses is different.
Audit objectives differ according to the characteristics of the accounting system and the control environment for each client When a unit uses computer-based accounting, auditors' objectives are driven by the reliability of the computerized system and the effectiveness of other control methods For units using manual accounting, auditors place greater emphasis on the arithmetic accuracy of cash and cash equivalents.
Specific objectives for auditing cash and cash equivalents in the audit of financial statements at KTC include the following objectives:
Completeness means that every cash-related activity—both inflows and outflows—has been fully captured in the unit’s documentation system and accounting books By recording all arising cash transactions in the established records, the organization ensures that the cash balance reflects every operation, supporting accurate liquidity tracking This approach guarantees that no cash activity is overlooked, and the cash item in the financial statements accurately represents all cash transactions.
Existence: All cash-related amounts, including cash on hand, bank deposits, and cash in transit, are supported by verifiable documentation and accurately recorded in the company’s books, confirming that these are real assets with reasonable grounds.
Rights and obligations: The funds shown on the business’s financial statements belong to the unit, reflecting the cash the company currently holds These figures indicate ownership of the cash resources and the enterprise’s responsibility for managing those funds.
Realizable Value—Assets are included at the amounts estimated to be realized:
Funds and cash equivalents are accounted for in accordance with cash accounting principles, ensuring accurate measurement of cash receipts, payments, and cash balances However, the value of cash transactions can be recorded incorrectly due to various factors For businesses operating with foreign currencies, foreign currency price determination is often prone to errors In particular, import and export companies engaging with international markets frequently experience miscalculations in foreign currency transactions.
Financial accuracy requires every amount to be stated at the correct figure, with the cash balance and cash claims calculated, booked, transferred, and reported precisely These errors are common in businesses that rely on manual data entry or on Excel alone, without a supported accounting software solution.
Classification- Amounts included in the client’s listing are properly classified:
Currencies must be properly categorized in the right accounts, and cash and cash equivalents should be clearly presented on the financial statements, including cash on hand, cash in bank, cash in transit, and other cash equivalents, all interpreted and disclosed in accordance with applicable financial regulations to ensure full transparency A common mistake is misclassifying or presenting cash-equivalent items separately, which can distort liquidity For accurate reporting, identify and reconcile every component of cash and cash equivalents, apply a clear policy for in-transit funds, and provide full disclosure in the financial statements and notes.
PRACTICE OF AUDIT OF CASH AND CASH EQUIVALENTS
Planning the audit
2.1.1 Learn information and evaluate customers
Global Construction and Service Joint Stock Company (GCS) has become a new client of KTC, and after GCS accepted the offer letter, its head of department and audit assistants conducted an audit acceptance survey to evaluate the quality of the internal control system and to collect information about GCS.
Table 2 1: General information about GCS
Type of business Joint Stock Company
Business registration certificates and adjusted business registration certificates, with the most recent adjustment being the 8th time on May 28, 2021, issued by the Hanoi Department of Planning and Investment for a period of 5 years from the date of the first Enterprise Registration Certificate.
Main operations Completion of construction works
Lease machinery, equipment and other tangible supplies; Details: leasing construction machinery and equipment
Mechanical processing, metal treatment and coating
Production of concrete and products from cement and gypsum
Head office: 9th Floor Multipurpose Activity Building, No 169 Nguyen Ngoc Vu Street, Trung Hoa Ward, Cau Giay District, Hanoi City, Vietnam.
Source: GCS’s document Accounting work at GCS
- Accounting period, currency used in accounting
The accounting year begins on January 1 and ends on December 31 each year.
2 Currency units used in accounting records
The currency used in accounting records is the Vietnamese dong (VND).
- Applicable accounting standards and regimes
The company applies the Corporate Accounting Regime promulgated under the circular No 200/2014/TT-BTC dated December 22, 2014, of the Minister of Finance and circular No 53/2016/TT-BTC dated March 21, 2016, of the Minister of Finance guiding amendments to the corporate accounting regime
Preparing financial statements in accordance with Vietnamese Accounting Standards requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the reporting date, and the amounts recorded for revenues and expenses during the period While these estimates reflect management’s best judgment about current events and actions, actual results may differ from the estimates.
The Company uses accounting software to record its transactions
- Accounting policies mainly apply to cash:
1 Principles of recognition of funds and cash equivalents
Cash comprises cash on hand, cash at banks and cash in transit
Transactions in currencies other than Vietnamese dong (VND) during the period were translated into VND at the actual exchange rates prevailing on the transaction dates The actual exchange rates applied to foreign currency transactions are determined as follows.
• Exchange rate applied to buying or selling foreign currency is the exchange rate stipulated in the currency exchange contract between the Company and the bank.
The exchange rate applied to a capital contribution transaction is the foreign currency buying rate on the transaction date, as quoted by the bank through which the investor transfers funds This buying rate, published by the bank handling the investor’s transfer, determines the converted value of the capital contribution and governs the FX calculation used in settling the contribution.
To recognize trade and other receivables, the company uses the foreign currency buying rate on the transaction date, as quoted by the bank through which it receives funds from customers or counterparties.
The exchange rate used to recognize trade and other payables is the foreign currency selling rate quoted by the bank through which the Company intends to make payment on the transaction date.
• For asset acquisitions or expenses that are settled with immediate payment, the exchange rate applied is the foreign currency buying rate at the transaction date quoted by the bank through which the Company makes payment
Revenue is recognized at the fair value of the consideration received or receivable, net of trade discounts, rebates, and sales returns The Company recognizes revenue when the amount can be reliably measured, when it is probable that future economic benefits will flow to the Company, and when the specific criteria for each of the Company’s activities have been met, as described below.
Revenue recognition for services occurs in the income statement as the service is rendered, using a percentage-of-completion approach that measures the actual service delivered as a proportion of the total services to be provided under the contract.
Revenue recognition for processing services occurs in the income statement only after the goods have been processed and accepted by the customer When there are significant uncertainties about the collectability of the consideration for the processing services, no revenue is recognized until those uncertainties are resolved.
Expenses recorded in financial expenses include:
- Expenses or losses related to financial activities;
- Expenses for loans and loans; and
- Losses due to changes in the exchange rate of transactions arising related to foreign currencies.
By understanding the general information about GCS as stated above, combined with interview and investigation methods, auditors offer a survey of GCS
CLIENT ASSESSMENT SURVEY Client: GCS
1 Services provided: Audit of 2021 financial statements
II General information about customers
4 Type of business: Joint Stock Company
5 Head office: 9th Floor Multipurpose Activity Building, No 169 Nguyen Ngoc
Vu Street, Trung Hoa Ward, Cau Giay District, Hanoi City, Vietnam.
6 Legal representative: Mr Chu The Hung
III Organizational structure of operations
8 Group structure:Joint stock company model
9 Key manager: Not change from last year.
11 Market and competition: The market is widely covered throughout the country, especially in the North, high competitiveness.
12 Suppliers have significant influence: No
13 Business risks: covid 19 causes a shortage of workers, leading to a delay in construction
14 The pressures on the current business: Thestrength of profitability
15 Advantages and difficulties due to the impact of the environment
- Inside the business: Put into new operation of the huge construction
- Outside the business: great competition, slowing investment demand
16 Strategic objectives of the company in the future:Growth and development
17 Information from other sources about the company's operations: No
V Internal control system and accounting system
18 The attitude of the management towards the internal control system:Serious
19 The existence of internal control procedures:Comply with financial regulations
20 Form of accounting: General ledger
21 Performing accounting work:Using supporting accounting software
22 Rotation and storage of documents: General storage at the accounting department
23 Financial reporting process: software support
24 The previous year's financial statements were audited or not:Audited by
25 Separate regulations on finance and accounting for the field of client's operations: No
VI AUDITORS's assessment of customer acceptance
27 Complex /specific properties in the operation of thyme: No
29 Personnel estimate and audit time: 2 staffs, 1 assistant, 1 senior, expected time of 5 days
2.1.2 Signing audit contracts, personnel arrangements and auditing time
Based on the initial understanding of GCS, auditors provide their assessments, and they deem the risk assessment for GCS clients acceptable, in line with the agreed audit fee The audit contract is signed by both parties, detailing the terms and stipulations of the engagement.
- (Service content) KTC company receives auditing services for the year ended December 31, 2021
- Audit report: After performing an audit, B (KTC) provides to A (GCS): 2 audit report in Vietnamese and English and 2 management letters in Vietnamese and English (if any)
- Service charges and payment methods: xxx dong – transfer through bank
Both parties are committed to fulfilling the contract terms If any issues arise during performance, they must promptly notify the other party to collaboratively identify and implement appropriate solutions.
Based on the time of release of the report and the workload, auditors directly made an estimate of time and personnel for the job.
Table 2.2: Auditor's Independence Assessment Questionnaire (Appendix 2)
2.1.3 Planning and designing audit programs
Auditors is assigned to perform the audit contract, carry out the detailed planning and design of the audit program.
Understanding the client's internal control system is conducted by the audit director or a member of the board of directors, together with senior staff, and is performed in accordance with KTC's template working document form This approach ensures a consistent, thorough assessment aligned with established standards and facilitates clear documentation for audit supervision and reporting.
Table 2.3: Auditor’s Assessment Questionnaire (Appendix 3)
Implementing the audit
2.2.1 Performing tests of controls with cash and cash equivalents
Auditors uses the "Questionnaire on internal control of cash" to conduct interviews: cash accountant, cashier, bank deposit accountant.
Table 2.6: Internal control Assessment Questionnaire with cash at GCS
1 Is the job of treasurer and cash accountant being handled by the same person?
2 Does the company have a regulation on the maximum amount of cash available funds? The legal level (if any) is ,
3 Are the expenditures planned for the Director's approval in advance?
4 Does the cash accountant compare monthly with the treasurer?
5 Is there any document between the accountant and the treasurer written?
6 Are cash funds counted every month
7 Is there a rule that the cash must be immediately deposited in the bank at the end of the day?
8 Is the comparison with the bank done monthly?
9 Are the differences between the data on the accounting book and the bank statement recorded to find the cause and solve it?
10 Are foreign currency-based deposits tracked separately?
11 Are the receipts/payment slips numbered in order according to incure/spend cash?
12 Are all documents required to have the director's approval before spending? Otherwise, are checks signed daily, weekly or monthly?
13 Is there a regulation on the authorization of the
Yes No N/A deputy director or chief accountant to sign the expenditure approval in case the director goes on a business trip?
14 Are the checks and payment slips stamped “paid” to avoid duplicate payments?
15 Do canceled receipts and checks show signs of cancellation to avoid reuse?
16 Does the person assigned to manage the check regularly monitor the total number of cheques, the number of checks issued, the number that has been cancelled, the number of unused checks? Are unreleased checks strictly controlled?
17 Are there any controls for cash in transit?
18 Does management require monthly periodic cash flow reports to monitor cash flows?
19 Did management conduct an unusual cash audit?
22 If any, does the unit make a record of the fund audit and keep it in the accounting documents?
Conclusion: Internal control system for collection, expenditure and preservation of cash is average.
The accountant proceeds to take the data on the balance sheet to fill out the leadsheet Then, the auditor compares the data on the balance sheet to general ledger, the cash details book and the cash in bank details book of the unit.
Client: Toan Cau Prepared by
Year end 31.12.2021 Reviewed by Date
Subject: Cash & Cash equivalents - Leadsheet Reviewed by Date
Acc No Acc Name Pre 31.12.2021 Adj 1 Adj 2 Total
11217 SHB Tay Ha Noi -Xuan
GCSis a new client, the balance at the end of 2020 is audited by Auditing Company A, so first of all, auditors must consider the previous year balances that have been reflected under the accounting regime applied.
After reconciling the records, compare the data in the cash details book, the cash in bank details book, and the financial statements The auditor conducts an analysis and calculates the year-over-year difference to identify variances between periods If the year-over-year difference exceeds 10% of OM, the auditor must drill down into the detailed book for the corresponding account and provide a reasonable explanation.
Client: Toan Cau Prepared by NDL Date 08-Thg3-22
Year end 31.12.2021 Reviewed by Date
Subject: Cash & Cash equivalents - OAR Reviewed by Date
Acc No Acc Name Pre 31.12.2021 Audited 31.12.2020Variance % Note
11217 SHB Tay Ha Noi – Xuan Thuy Branch 7,145,955,694 - 7,145,955,694 100% N4
In general, the significant increase in cash balance is due to the increase in revenue this year and a significant decrease in account receivables.
Most of the revenue was from the completion of construction works
The main account often used to withdraw cash is MB account
N2 Increase due to raising capital contribution
The balance decreases because of payment of assets, signed contract and salary to employees
New account opened in 2021 so there is no balance in the previous period
Balance increased mainly due to internal money transfer from Viettinbank, advance collection and revenue
New account opened in 2021 so there is no balance in the previous period mainly used for contract payment, oil purchase and advance
Auditors perform a cash count and prepare audit minutes at the closing date of the books or during the audit, then compare the cash count data with the accounting records and explain any differences or variances observed.
Table 2 9: Auditor's calculation of the different in cash
Reconcile cash in hand balance between book and cash count sheet
IObtain client's cash count minute and reconcile to accounting book
Balance per cash count minute as at
Total credit and credit after cash count date 1 ,002 ,607 ,250 201.328.042
Balance per cash after adding transactions after cash count date 1,682,935,736
Balance per accounting book as at
Diff (875,586,921) the payment slips and receipts are recorded in accounting book at the time of cash count day, but its disappear at the end of the year when checking.
For cash in bank, auditors collect bank confirmations as of 31/12/2021 and compares with the data on the accounting books, explaining the differences if any
Table 2.10: Reconciliation bank balances between book and bank statement
Acc No Bank Balance per Balance per Dif book bank statement
SHB Tay Ha Noi – Xuan
Select a sample during the period to check the details:
To identify unusual cash activity, auditors select a representative sample of transactions involving large cash amounts They scrutinize each transaction’s description and verify it against the accompanying receipts, payment slips, and other original supporting documents to confirm accuracy, completeness, and compliance with internal controls.
+ Select the sample transactions arising during the period and compare the documents with the accounting book Some common mistakes when checking the details of the cash item as follow:
- Documents recorded in the wrong form or improperly recorded, missing information in the document form, lack of signatures of the individuals involved.
Receipts and payment slips are not numbered continuously throughout the year, which reduces traceability and auditability of transactions Many receipts and payment slips also lack signatures from relevant individuals, with the most important checks being the recipient's signature and the treasurer's signature to confirm authorization These issues weaken internal controls, compromise record accuracy, and complicate financial reconciliation and auditing.
- The accompanying original documents do not ensure reasonableness and validity.
- Large expenditures without invoices need to be excluded from reasonable expenses valid when calculating taxes such as:
Payment of transport has only a sign list, no invoice attached.
The cost of booking hotel room does not have any invoice although this is the actual cost of the business.
Payment of expenses via Mastercard card is accompanied only by bank statements, no original documents attached.
The cost of water, telephone cash, unmarked financial invoices, company tax identification numbers.
- The date on the original document is not consistent
The date on the invoice before the date of writing the Submission
The date stated on the acceptance record is earlier than the date stated in the contract
- The original documents attached do not guarantee the completeness
Some voucher errors at GCS
Payments for monthly customer reception expenses that do not specify the object of reception
Several accounting documents show missing signatures and undated invoices Specifically, payment slip 21.12.29 lacks the chief accountant's signature and the attached payment request is unsigned by the director; payment slip 21.12.120 relates to office rent but the attached invoice does not specify a date; payment slip 21.02.25 also lacks the chief accountant's signature.
The documents attached to the payment slips appear illogical and inconsistent, including the payment for reception costs and the purchase of office supplies, along with payment offer No 21.08.16, and two retail invoices dated August 26 and August 28, which do not align with the described transactions.
Payment slips for phone bills and Internet charges should enforce stricter regulations requiring itemized charges for each service, ensuring charges are clearly attributed to the correct account and preventing improper tax deductions during collection Detailed, service-level invoicing improves tax compliance, reduces billing errors, and enhances transparency for consumers, while helping regulators monitor revenue and promote fair billing practices.
Certificate of payment of work expenses not attached to the road paper (Payment slips no 21.08.93; Payment of work fee in August, with the content of the request for payment: Go to Work Nghe An & receive guests - not attached to the travel paper)
+ Combining detailed check of cash with other items: Combining detailed check of cash with items such as Salary, Expenses, revenue, Advance payment Normally, auditors perform items such as Salary, revenue, expenses, advance will choose the sample of detailed inspection operations for the auditor’s assistants to perform detailed test
Customer errors in the amount of money that KTC performs the adjustment:
Table 2.11: Transactions which should be adjusted
Date Voucher’s date Voucher’s no Description Accoun t
31/12/2021 31/12/2021 PC 21.12.30 Payment to Hung Loc XD
31/12/2021 31/12/2021 PC 21.12.128 Payment of VP Hanoi rent in November 2021 111 6428 - 50,000,000
Payment of VP Saigon rent in November 2021 111 6428 - 21,000,000
These transactions arise after the auditor witnesses the cash count activity.Therefore, there is a big difference between the customer's cash details book and the cash count minus When the auditor conducts procedures to check the transparency of these transactions, the client replies that these documents have been lost
Some examples of Work Paper on detailed checks for cash:
Receipts Bank statement date no amount notes dif date bank amount dif
Tran Van Tuan pays capital contributions
Chu The Hung pays capital contributions
Nguyen Hai Luu pays capital contributions
Le Anh Tung pays capital contributions
Le Huu Phuc pays capital contributions
Receipts Bank statement date no amount notes dif date bank amount dif pays capital contributions signatur e Thuy
Tran Van Tuan pays capital contributions
Le Huu Phuc pays capital contributions
Tran Van Tuan pays capital contributions
Le Anh Tung pays capital contributions
The receipts have great value, made by the accountant, only signed by the accountant After checking the bank statements, the auditor found that these funds were transferred to the company's bank account The company withdraws cash to enter the cash fund and make a receipt However, the payer and the director were not there to sign the receipt.
+ Select a sample to check for abnormal reciprocals, arising with large amounts of cash.
+ Check the validity of the documents: consider whether the content on the UNT, UNC is reasonable and whether the regime is correct or not.
+ Check the collection mandate, payment order and original documents attached, is reasonable
Auditors select samples of transactions that occur before and after the balance sheet date, mirroring the process used for the cash at bank section They collect supporting documents for cash-in-bank activities arising around the closing of the accounting books and the reporting period The auditors then examine these documents and compare the dates on receipts and checks with the dates on the original sources attached to the period This date verification ensures proper cutoff and accurate financial reporting in the balance sheet.
Completing the audit
Review findings and prepare adjustment entries, and discuss these adjustments with customers Because cash and cash equivalents are closely connected to all other items on the financial statements, auditors must consider how the adjusted cash entries affect expenses, revenues, and interest After auditing cash and cash equivalents, the auditor did not adjust the cash-in-bank item but recorded an adjustment to the cash account as follows:
After observing the cash count, the auditor notes a significant discrepancy between the customer's cash details book and the cash count results In conducting procedures to test the transparency of these transactions, the client claims that the supporting documents have been lost The auditor infers that the unit may have removed these checks to avoid rejection by tax authorities Nevertheless, the auditor records this adjustment entry in the representation letter to the Board of Directors.
Finally, the auditor will complete the following steps:
Setting up the audit conclusion page begins with agreeing with the client on the adjustment entries and reviewing events after the accounting year’s closing date; once these steps are completed, auditors prepare the audit conclusion page specifically for the cash item, delivering a clear, supported summary of conclusions and any related disclosures.
- Reviewing the working papers of the cash item: during the audit process, after completing certain stages, the auditor and the audit assistant are reviewed by senior of the audit team After completing the audit work at the unit, the audit file will continue to be reviewed by the audit director before the release of the audit report
- Summary of audit work and establish the audit reports: auditors gather all the audit evidence collected during the audit process to give its audit opinion.After that, auditors made an audit record and discussed the customer about the issues that arose.
CHAPTER 3: ASSESSMENTS AND RECOMMENDATIONS FOR IMPROVING THE AUDIT OF CASH AND CASH EQUIVALENTS IN FINANCIAL AUDITS CONDUCTED BY
RUSSEL BEDFORD KTC AUDIT FIRM
Assessments of the audit of cash and cash equivalents in financial audits
KTC has built a broad customer base across diverse sectors—from manufacturing and trade to construction and financial services, including banking, finance, and insurance With a commitment to professionalism, KTC delivers high-quality accounting, auditing, and consulting services that earn and sustain the trust of clients.
KTC's success stems from building a reasonable, rigorous, and highly effective audit process that is grounded in audit theory and aligned with Vietnamese audit standards, international audit standards, and additional Ministry of Finance regulations Throughout the engagement, KTC auditors emphasize the practical application of auditing standards, tailoring their use to the client’s actual business context By studying the standards and applying them in a way that reflects the client’s auditing practices, KTC delivers thorough, compliant audits that meet both local and international expectations.
About the management organization and personnel arrangement for the Audit:
KTC Company maintains a team of experienced leaders and auditors who approach every audit with discipline and enthusiasm The audit workflow begins with understanding client information, signing the audit contract, and meticulous planning It then identifies risks and critical areas, designs a risk-based audit program aligned with sample programs and risk assessment, and organizes the right personnel and coordination among auditors for effective fieldwork After fieldwork, all findings are synthesized into a comprehensive Audit Report At each stage, the work is reviewed at three levels—the senior auditor on the team, the senior manager of the audit department, and the audit director—substantially reducing detection risk and ensuring high audit quality.
About the audit process and the organization of audit records:
KTC's audit process is very strict, complies with Vietnamese auditing standards and increasingly has access to the international audit process.
Auditing approach: The company adopts an itemized method that is simple to implement and well-suited to Vietnam’s current legal and economic environment, as well as to the company’s personnel and technical qualifications This approach ensures clear, efficient auditing processes that align with practical compliance and operational realities in the Vietnamese market.
Stages of the audit : The company has strictly complied with Vietnamese audit standards on the audit process from customer outreach, signing audit contracts, audit planning:
- designing the audit program based on the sample audit program;
- arrange personnel for the audit and coordinate among the auditors during the audit conducting phase; and
- synthesize all the work done during the audit to produce the audit report
Besides, the three-level review of the audit creates a strict control to ensure the quality of the financial institution.
KTC Company uses a standardized audit program that is applied uniformly across the organization, creating a consistent audit process and enabling smooth coordination among auditors The program prescribes procedures for each stage of the audit and for every audit item, ensuring effective detection of errors in financial statements Its uniform implementation supports collaboration, enhances audit efficiency, and serves as a vital resource for training auditors and cultivating high-quality audit assistants.
Audit files keeping: The Company's work paper is scientifically designed to be convenient in presentation and recording, with both pre-printed work paper and computerized work paper samples The way of keeping audit records has been strictly and clearly regulated by the Company to facilitate the control and re-study later when necessary The work papers are presented and arranged in sequence from general to detailed, from conclusions to specific audit evidence In each audit file, the introduction page is always in the first place, then the conclusion page, followed by the audit program paper, then other working papers detailing by the auditor At last part, the documents collected from the customer are included All papers are arranged in the order of the onion section, fully referenced, fully recorded information about the customer, the time of implementation, the executor to facilitate the review and monitoring Paperwork arrangement allows the user to immediately see the auditor's conclusions and the basis for making that conclusion
Customer-related working documents are stored on Google Drive. Although the working documents are stored on the internet platform, it still ensures security because the company has paid for Google’s storage service At the end of an audit, the working papers and audit evidence will be printed out and closed into the audit file which was illustrated above These audit records will be placed in the company's database and locked.
KTC maintains a comprehensive quality-control system that covers both company-wide standards and quality control for each audit contract Management acts to reflect promptly and detect problems and errors in the delivery of audit services to client units The company consistently supports auditors in evaluating the audit evidence collected and provides the necessary facilities to issue audit opinions that inform users This approach has helped improve the quality of the company's audit reports and build the capabilities of its employees, thereby enhancing the company's competitiveness in the audit market.
The advantages of the cash item audit process at KTC Company:
During the audit process for customers, auditors apply the general audit process mentioned above the Company to each specific item.
Cash is an important item on the Balance Sheet Because this is a short-term asset class that manifests itself directly in the form of value Therefore, it is prone to fraud and errors in preservation cash can be embezzled, misused In addition, cash is also an item that has a relationship with all other items on the financial statements and income statement such as: receivable, payable, inventory, revenue, expenses The flow of the business’s cash is reflected in a separate financial statement which is the cash flow statement Due to the importance, cash is often evaluated by KTC's auditors as important in each audit.
During the audit planning phase, auditors collect essential client information, including the business sector and the accounting policy framework adopted by the enterprise For cash-item accounting, they assess the characteristics of cash at the client and review the governing principles and methods used to collect and safeguard cash This foundational understanding of cash treatment within the entity helps auditors identify potential cash-related risks and, together with other critical data, informs their decision on whether to accept the audit engagement.
After accepting the audit engagement, the auditors begin planning by collecting detailed information on the enterprise's accounting policy regime and its management control system They perform preliminary analytical procedures on the financial statements, study the enterprise's internal control framework, and conduct a critical assessment of the overall financial statements and their individual items This work helps them identify potential audit risks and shape the audit plan to address those risks.
After evaluating the internal control system, auditors determine materiality for the overall audit and for each item; for cash, the critical level is always set at a low level, indicating that KTC recognizes the potential impact of this item on other accounts and the financial statements.
During planning, auditors identify audit risks, including potential risks, control risks, and detection risks, which determine the appropriate sample size and the audit procedures to be performed This risk-based approach guides how large the sample should be and which tests are needed to obtain sufficient evidence For KTC Company, the audit risk assessment is thorough, helping to keep overall audit risk at the desired level and enhancing the reliability of the audit opinion.
The final stage of the planning phase is the development of the audit program, KTC company often uses the sample audit program applied to the specific customer audit program The use of the sample audit program offers the advantages as shown above For the cash item as well, the sample audit program for the cash item is built in detail, helping auditors detect possible frauds and errors with this item.
During the audit period: auditors is assigned to audit the cash item which usually strictly complies with the audit procedures in the audit program:
Control testing in auditing involves using structured questionnaires and conducting interviews and investigations to assess the internal control system for cash Yes/no questions are designed to be highly reusable, enabling efficient and consistent evaluation of cash-related controls This approach helps auditors identify weaknesses in cash handling, custody, and reconciliation, while ensuring documentation and evidence support the assessment of the internal control environment.
Recommendations for improving the audit of cash and cash equivalents in
Firstly, to ensure the quality of the audit and the performance of auditors.
To conduct high-quality audits, allocate sufficient time and qualified personnel for each engagement The company should be guided by its customer base rather than revenue alone, prioritizing audit quality over short-term earnings As the customer base grows, KTC can recruit additional auditors and support staff from external sources To sustain this capacity, develop a long-term development strategy focused on continuously improving audit quality.
Increasingly, the number of customers coming to the auditing firm is increasing.Therefore, the company should expand the scale, recruit more personnel so that the work does not stagnate When hiring more staff, the remaining auditors are also less pressured.From there, the quality of the audit is guaranteed and stable.
To stay aligned with international audit trends, improve audit quality, and reduce costs, the company should implement a cyclical audit program While dividing by item is simple, it can separate related items across locations; a cycle-based division groups processes by the relationships that form a complete financial activity cycle Each cycle contains many interrelated processes, so auditing around these cycles captures the full web of relationships and provides more comprehensive coverage and coherence This approach enhances risk assessment, streamlines controls, and enables efficient data collection and cross-location collaboration, delivering stronger assurance and cost savings over time.
Thirdly, the company should complete the drafting of the sample audit program which can be added to the application of the sample audit program with different types of enterprises
Fourthly, the company should carry out the procedure of witnessing the cash count of the client's cash fund at the end of the year in full According to Vietnamese audit standard no.500 – A31: Audit evidence:
(1) The reliability of audit evidence increases when audit evidence is collected from independent sources outside the entity;
(2) The reliability of audit evidence generated within the entity increases when the relevant controls, including those for the creation and storage of such evidence, are effectively implemented;
Evidence collected directly by the auditor—such as observations of how a control is applied—tends to be more reliable than evidence gathered indirectly or by inference, like interviews about the operation of a control Direct evidence provides first-hand, verifiable information, while indirect methods rely on memory or judgment and can introduce bias Consequently, auditors give greater weight to directly obtained evidence when evaluating control effectiveness and forming conclusions.
(4) Written audit evidence, be it on paper, electronically, or otherwise, is more reliable than evidence collected in words (for example, meeting minutes recorded simultaneously during the course of the meeting are more reliable than subsequent verbal presentations of the issues discussed during the meeting); and
(5) Audit evidence means that original documents are more reliable than audit evidence that are copies, faxes or documents filmed, digitized or converted into electronic copies whose reliability may depend on controls on the creation and storage of documents, information
In case, the company cannot participate in witnessing the cash count at the end of period, auditors should perform an extraordinary cash count during the audit period (after the end of period) for the client's fund
For best results, KTC should make an appointment in advance for customers on the time to conduct a cash tally and ask customers to cooperate The auditor should arrive on the afternoon of December 31 to ensure that the entire transaction related to the annual cash during the accounting period is recorded and counted.
To reliably verify end-of-year cash balances, auditors should intensify the use of bank confirmation letters For clients with multiple accounts across several banks, auditors can issue standardized confirmation forms to each bank to consolidate balances and obtain the most accurate evidence of the customer’s cash position at year-end When requesting confirmation of bank deposits, auditors should verify that the original confirmations match the photographed copies stored in the working papers, ensuring consistency and traceability.
To comply with Vietnamese Audit Standard No 300, KTC should draft its own audit program for each engagement based on a sample program, and as the audit proceeds, document any additional procedures in writing to guide the auditor and facilitate multi-level review of the audit dossier The audit plan must be prepared for every audit and designed to cover all key aspects, to detect fraud and risks, and to ensure the audit is completed on time The scope of the audit plan will vary with the client’s size, the complexity of the audit work, the experience of the auditors, and their understanding of the entity and its operations.
At KTC, auditors primarily select samples using a large denominator aligned with career assessments, which reduces the sample size and helps auditors focus on key items However, this sampling approach can raise audit risk because many unselected items may still contain material errors To limit audit risk, auditors should adopt a probability-based sampling method using a random-number table (random-number plate) This method is straightforward to implement and yields a highly representative sample, improving coverage of material items while maintaining efficiency.
The expanding economy need a transparent financial and economic information environment that allows investors, microeconomic and macroeconomic managers, and others to make well-informed decisions decision
Auditing practices are becoming more sophisticated to quickly meet the information needs of interested parties In line with this trend, Russel Bedford KTC Auditing Firm has steadily improved and grown into one of the country’s best and most recognized auditing firms, making significant contributions to the economy.
My internship at Russel Bedford KTC Auditing Firm gave me real-world exposure to a professional auditing environment and the chance to assist with audits It complemented my university learning by providing practical knowledge and hands-on experience that I could apply directly in the field This experience also offered valuable career insights into the auditing industry, helping me clarify potential paths and develop relevant skills.
Time and experience constraints have led to some omissions in this essay, and I welcome your feedback to help complete and strengthen my thesis I would also like to extend my sincere thanks to Associate Professor Dr Tran Trung Tuan and the managers at Russel Bedford KTC Auditing Firm for their enthusiastic and valuable support.
(n.d.) Retrieved from Vietnam government audit digital information portal: https://www.sav.gov.vn/Pages/chuan-muc-kt.aspx
(n.d.) Retrieved from International Auditing and Assurance Standards Board: https://www.iaasb.org/
Alvin A.Arens, Randal J Elder, Mark S Beasley, Chris E Hogan (2016) Auditing and
(n.d.) Russel Bedford KTC's working paper
Appendix 1 Table 1.4: General audit program applicable at KTC
1 Determine the suitability of particular substantive analytical procedures for given assertions, taking into account the assessed risks of material misstatement and tests of details, if any, for these assertions.
2 Evaluate the reliability of the source data for analytical procedures taking into account source, comparability, and nature and relevance of information available, and controls over preparation.
3 Consider whether the results of analytical procedures are expected to be sufficiently precise to identify material misstatement.
4 Determine the amount of any difference of recorded amounts from expected values that is acceptable without further investigation.
5 Carry out extensive analytical review procedures if:
(b) this may, where appropriate, reduce the extent of detailed testing; and
(c) necessary to provide additional audit evidence, where the audit trail is otherwise incomplete.