Topic Complete the audit process of sales items and service provision revenue in auditing financial statements of ASCO Auditing Company Name Hoang Linh Chi Code 11150602 Class Audit 57A Supervisor Pro[.]
AUDITING THE REVENUE OF SALES AND
Overview of revenue of sales and service provider
Enterprise business activities consist of a series of interconnected stages, each requiring the execution of specific tasks using appropriate technologies, within designated timeframes and resource budgets These processes are typically grouped into three main phases, ensuring efficient and coordinated progress throughout the business operation Effective management of these phases is essential for optimizing resource allocation, minimizing costs, and achieving overall strategic goals.
Phase 1- Market research: This is a very important stage, enterprises conduct market research surveys to see what needs and tastes of the market need goods and services? What types of goods and services need to be designed, types and quality? Especially important is that product that serves target customers, who is the potential? High, low or medium income market segment?
Phase 2 - Production: Prepare inputs such as human labor, materials, fuel, machinery, technology, and organize the process of combining inputs to create goods chemistry and service.
Phase 3- Consumption: Organizing the process of selling, consuming goods and collecting money Enterprises build sales channels, agents to sell goods, increase revenue, recover capital to create new production and business cycles.
Revenue is a critical financial indicator that reflects the total income generated by an enterprise during a specific period, playing a vital role in assessing overall business performance At the final stage of the production process, revenue is determined and recorded to evaluate the company's operational efficiency and financial health Understanding the concept of revenue and its classification within a business is essential for accurate financial reporting and informed decision-making.
The Ministry of Finance issued Accounting Standard No 14 "Revenue and Other Income" under Decision No 149/2001/QD-BTC dated December 31, 2001, to emphasize the importance of proper revenue recognition This standard defines revenue as "the total value of economic benefits earned in the accounting period, arising from the normal production and business activities of the enterprise, contributing to increasing owner capital," ensuring clear guidelines for accurate financial reporting.
Revenue is defined as the total value of economic benefits received or expected by the business, reflecting its core earning activities Third-party collections are excluded from revenue because they do not represent an economic benefit that increases the company's owners' equity Additionally, capital contributions from shareholders or owners, although they enhance equity, are not classified as revenue since they stem from normal business activities and do not result from operational income.
Revenue in the enterprise includes:
- Sales of goods and service provision;
Sales of goods and the provision of services encompass all revenues generated from transactions, including proceeds from selling products, goods, and offering services to customers This also includes any surcharges and additional fees associated with these transactions, forming the core revenue streams for the business.
In addition to sales and service revenue targets, there is also a Net Revenue (NR) target for sales and service provision.
In fact, this indicator is often lower than the revenue target recorded This is represented by the following formula:
Net revenue on sales = sales and service provision revenue -
The deductions for accounting standard number 14 also define the following:
- Sale price reduction: is a discount for buyers due to poor quality, wrong specifications or backward tastes.
- Returned value of goods sold: is the value of the volume of sold goods determined to be consumed and returned by customers.
- Commercial discount: is a listed discounted price for customers who buy goods in large quantities.
- Payment discount: is the amount of money that the seller deducts to the buyer, due to the buyer paying for the purchase before the time limit under the contract.
- Taxes: Special consumption tax, export tax must be paid to the State (if any)
1.1.2 Characteristics of sales and service provision revenue affect the audit work
Sales and service revenue indicate the scale of an enterprise’s production and business activities, reflecting its ability to organize and manage production and payment processes effectively Generating revenue from sales and services demonstrates that the company has successfully produced and delivered goods or services that meet consumer needs, showcasing its operational efficiency and market performance.
Sales revenue is a crucial source of funds for businesses, enabling them to cover costs related to working tools, labor, and production expenses It also funds employee salaries, wages, and bonuses, while supporting social insurance, health benefits, and labor union contributions Additionally, sales income helps fulfill financial obligations to the state and sustain overall business operations.
Implementing full and timely sales revenue, contributing to speeding up the transfer of working capital to create favorable conditions for the reproduction process.
Sales of goods and services have the main characteristics affecting the audit of this item as follows:
Revenue from sales and service provision is the primary source of income for most businesses, especially manufacturing and commercial enterprises, and serves as a key indicator on the income statement This revenue directly impacts profitability, making it a common target for manipulation through fraud or errors As a result, revenue is prone to practices aimed at artificially increasing or decreasing profits to benefit owners, which in turn elevates control risks and the likelihood of detection.
Sensitive indicators such as cash, customer receivables, and VAT are easily lost or misappropriated, highlighting the importance of establishing and strictly implementing internal audit procedures Auditors must thoroughly understand and evaluate the internal control system related to these indicators to accurately assess its strength or weakness This understanding enables the design of comprehensive and scientifically sound audit procedures, ensuring effective risk management and financial integrity.
The high volume of sales and service operations, combined with the continuous emergence of diverse payment and sales methods, complicates management efforts, leading to increased errors, financial discrepancies, and time-consuming processes These challenges can also result in fraudulent activities, impacting the effectiveness of audit environments and overall operational efficiency.
1.1.3 Internal control for sales and service provision items
1.1.3.1 Overview of the structure of internal control system for items of sales and service provision
The internal control system is usually composed of 3 departments, namely the control environment, the accounting system and the control procedures.
This article highlights the significant impact of various factors on the design and operation of internal control processes, particularly focusing on the coffee accounting system and specific control procedures While a strong control environment is essential, it cannot solely guarantee the effectiveness of control processes and systems Conversely, an unfavorable control environment can severely undermine the efficiency and reliability of internal control systems Key elements of a robust control environment include management commitment, organizational structure, and the overall integrity and ethical values within the organization.
Effective management characteristics are shaped by diverse views, philosophies, and operating styles of senior leaders within an organization When leadership places excessive emphasis on specific goals, such as profit, it can distort the design of internal control systems This focus may undermine the effectiveness of control and monitoring processes, potentially compromising overall organizational integrity and operational efficiency A balanced management approach that appreciates varied perspectives enhances internal controls and promotes sustainable success.
An effective organizational structure clearly defines the division of power, responsibilities, and obligations among members, facilitating seamless cooperation, coordination, and information sharing within the organization It is essential to implement distinct approval functions, operational execution, bookkeeping, and asset management to ensure clarity and accountability Additionally, maintaining relative independence between tasks and functions promotes efficiency and control, supporting the organization’s overall operational effectiveness.
AUDIT TB COMPANY AND HL IMPORT-EXPORT COMPANY’S ITEMS OF SALES AND SERVICE REVENUE IN
Designing audit programs of revenues in the audit of TB
2.1.1 Overview of the overall audit plan of TB Company and HL Company’s financial statements
To comprehensively understand the sales and service revenue audit process at ASCO Company, I analyzed two diverse customers—JSC TB and HL Import-Export—each with distinct business characteristics.
Joint Stock Company TB was transformed from an SOE, established under Decision No 1409 / GP / TLDN of Hanoi People's Committee on May 19, 1995.
Head office: 6- Giai Phong Road- Hanoi Charter capital: VND 15,758,636.
In which, foreign capital: 10,550,632 VND - 73.3% others: 4.208.004đ - 26.7%
The business of the unit is:
- Production, coordination, testing and use of industrial explosives.
- Research and application of scientific and technical advances in the production, coordination, testing and use of industrial explosives.
- Export of industrial explosives, raw materials, chemicals for manufacturing industrial explosives.
- National preservation, packaging, supply and reserve of industrial explosives
- Producing and supplying technical materials, wires, packaging for explosives, living paper, domestic coal, construction materials.
- Design and construction of industrial, civil, irrigation and mining projects.
- Production of labor protection products, export garments.
- Underwater explosion and blasting services.
- Importing materials and equipment, garment materials, supplying petroleum and equipment and materials, wood-pit mines
- Road, river, sea, transit transport, management and declaration port waterfall, repair of means of transport, construction of motor vehicles Road.
- Business hotels, motels, catering services.
Joint Stock Company TB operates its head office in Hanoi and maintains branch offices in Quang Ninh, Da Nang, Hue, and Ho Chi Minh City Revenue generated by these regional units is consolidated and managed centrally at the Hanoi headquarters.
Import-Export Company HL is a one-member limited liability company established under Decision No 2210/GP/TLDN on May 6, 1998, by the Kien Giang Provincial People's Committee, and it was granted a business registration certificate by the Kien Giang Department of Planning and Investment on May 4, 1999 The company is fully owned by Southern Food Corporation, which holds 100% of its capital Additionally, HL has six affiliated member units that operate independently with their own accounting systems.
Head office: 8-30 / 4- Rach Gia City - Kien Giang Province.
Charter capital: 30,909,870 VND In which, working capital: 8.000.000đ. Fixed capital: 22.909.870đ.
Accordingly, the Company's business activities are:
- Exports: seafood, processing of rice, pepper, cashew and other agricultural products.
+ Production materials such as: fertilizers, pesticides, herbicides, light cements, explosives and marine machine parts, chemicals, fishing nets, plastic beads, textile fibers.
ASCO's sales and service provision revenue audit process is conducted in 3 steps:
The sales and service provision audit process should be tailored to each customer's unique characteristics, such as whether they are new or traditional clients Additionally, the effectiveness of their accounting systems and internal control frameworks significantly influence the necessary audit procedures Ensuring that job steps are appropriately adapted at each stage of the audit process is essential for achieving accurate and reliable audit outcomes.
The sales and service provision revenue audit process begins with a critical initial step: gathering essential information This stage is vital for designing effective audit procedures, as it ensures the auditor has the necessary data to plan and execute the audit effectively Proper information collection during this phase lays the foundation for a successful revenue audit, helping identify potential discrepancies and ensuring compliance Accurate and thorough data gathering is key to facilitating a smooth audit process and achieving reliable results.
Before signing a contract, auditors as well as auditing companies must conduct a thorough evaluation and have a certain understanding of customers.
The caution in selecting customers will ensure that when the contract is signed, the company will provide the services with the highest reputation and quality.
When receiving an audit invitation letter from new clients, the Manager first investigates the reason for the audit request and gathers preliminary information, including audit costs, schedule, scope, business operations, and accounting system features It is also essential to determine whether the client has previously been audited for the current financial year, and if so, to understand why there was a change in auditors or auditing firms These key details ensure the feasibility and smooth execution of the audit contract.
Before signing an audit contract for the upcoming fiscal year, companies should review the previous year's audit reports and account for recent events to tailor new contract terms accordingly According to VSA 200, when maintaining existing clients and assessing potential ones, auditing firms must evaluate their independence, capacity for customer service, and the integrity of the client's management team.
After assessing the scope of work, workload, and timeline, both parties will sign a formal contract The audit fee for HL Import and Export’s 2018 financial statements is 200 million VND (including VAT) Customers are required to pay 70% of the fee upfront upon signing, with the remaining 30% due after ASCO Company issues the audit report The audit will be completed within 15 days, and the final reports, including five sets of the audit report and management letter in Vietnamese, will be distributed as agreed—ASCO retaining two sets and the customer receiving three.
Joint Stock Company TB was charged a 2018 financial statement audit fee of 90 million VND, including VAT, with clients required to pay the full contract amount upon receipt of the Audit Report The audit process takes approximately 10 days, after which the Audit Report and Management Letter (if applicable) are prepared in five copies—two copies are retained by ASCO, while three copies, including one in English, are handed over to the client.
This year marks HL Import-Export Company's first-ever audit conducted by ASCO, making the release of the Management Letter essential The auditor will identify areas for improvement, highlight shortcomings, and provide valuable recommendations to enhance the company's accounting and internal control systems These insights are crucial for strengthening operational efficiency and ensuring compliance with best practices in financial management.
2.1.1.1.2.Make an overall audit plan
Before signing an audit contract, the company and the client should reach a preliminary agreement on key aspects such as the audit scope, costs, timeframe, and required documentation If disagreements arise regarding the audit scope or if the client rejects the auditor's proposals, the auditor has the right to suspend or terminate the audit process to ensure clarity and compliance Proper initial planning and clear communication are essential to facilitate a smooth and effective auditing engagement.
Following a preliminary agreement with the customer, the Chief Manager selects an auditor based on the principle that the auditor must have no economic or familial relationship with the client’s units or leadership The selected audit personnel are carefully chosen to ensure compliance with independent auditing standards and are approved by the customer, guaranteeing an unbiased and professional audit process.
Performing an audit at Joint Stock Company of 2 auditors and 3 assistants,team leader of 2nd level.
Perform audits at HL Import-Export Company, including 2 auditors and 4 assistants, team leaders who are Deputy Auditors of material production industry.
After selecting a team of auditors, the Company will collect important information such as:
✔ Collect basic information about customers.
✔ Gather information about the Board of Directors.
✔ Gather information about the development process.
TB Joint Stock Company has a longstanding partnership with ASCO, primarily generating revenue through its blasting services for mines, bridges, and roads The company's specialized market faces little to no direct competition due to unique buyer and seller conditions, strengthening its market position Additionally, the hotel and tourism sectors contribute significantly to the company's annual profits, diversifying its revenue streams.
In 2018, Import-Export Company HL became ASCO's new customer, focusing primarily on trading agricultural products domestically and internationally As a country predominantly engaged in agricultural production, the company faces significant challenges in market competition and customer acquisition However, leveraging its strong reputation and credibility, the company has experienced steady growth over time Additionally, it has expanded into the petroleum business, enhancing transportation logistics and diversifying its supply sources Recognized as a leading SOE in the modern era, the company achieved over 800 billion VND in revenue in 2018.
2.1.1.1.3.Evaluate the materiality and risk in auditing of sales and service provision accounts on financial statements
During the audit planning phase, assessing materiality and audit risk is crucial, especially when examining sales and service revenue, which are highly sensitive indicators on financial statements These revenues are key indicators for investors to evaluate business performance, making them a focal point in the audit process Consequently, enterprises may manipulate or present fraudulent figures in their reports to influence stakeholder perceptions and enhance their financial appearance.
Conducting audit program
During this period, auditor will perform the audit procedures established in the previous audit plan.
HL Import-Export Company is a diversified enterprise involved in both manufacturing and trading a wide variety of products, resulting in substantial and diverse sales and service revenue In 2018, the company experienced a significant influx of new customers, further expanding its revenue streams Consequently, the auditors conducted more thorough analysis and detailed inspection procedures on the company's sales and service provision revenue compared to those of Joint Stock Company TB, ensuring accuracy and compliance.
The first step in the audit implementation phase involves evaluating customer performance over the years to identify fluctuations and abnormal reciprocal relations This procedure helps auditors detect unusual patterns and investigate their underlying causes Typically, this process is conducted with two customers selected from R1 to R4, providing valuable insights into the clients' financial behavior and assisting in risk assessment.
Customer name: Joint Stock Company TB
Sales and service provision revenue 32.399.900.889 45.992.882.500
Rate of profit after tax/revenue 28,19% 32,70%
Source: working paper of auditor Documentary source: Customer's business statement
In 2018, the production and business activities of Joint Stock Company
TB has achieved significant growth, with total revenue increasing by VND 13,804,725,283 and profit after tax rising by 65.2% compared to 2017 The company's return on revenue improved notably from 28.19% to 32.70% This success was driven by major milestones in 2018, including the signing of two major blasting contracts with Vietnam Coal- Mineral Corporation Additionally, the company implemented employee-friendly policies, such as renting out idle company cars, contributing to overall revenue and profit growth Under the proactive leadership of the Board of Directors, TB’s 2018 performance demonstrated robust financial advancement.
Table 5: Perform analytical procedures At HL Import-Export Company
Customer name: HL Import-Export Company
Sales and service provision revenue
Rate of profit after tax / revenue 19,65% 20,99%
Working paper of auditor Documentary source: Customer's business statement
In 2018, the company's sales and service revenue grew modestly by VND 13,619,524,019, primarily due to a significant decline in export sales This decrease was mainly caused by losing several major customers in Japan and the United States, impacting overall revenue growth.
The company's after-tax profit saw a modest increase, with the profit ratio rising from 19.65% to 20.99%, reflecting slight growth in profitability According to interviews with the Board of Directors and auditors, the loss associated with this customer is primarily due to intense competition in the Thai rice market, where competitors offer higher quality products at reasonable prices Additionally, our agricultural products are challenged by low productivity and quality, impacting overall performance and market competitiveness.
After analyzing the fluctuation of sales and service provision revenue,auditor will advancedly examining reciprocal relations, to detect unusual operations.
Table 7: Implementation of reciprocal synthesis at Joint Stock Company TB
Customer: TB Joint Stock Company
Job step: Reciprocal synthesis Date: 07/03/2019
Account Transaction on debit side
The company's sales and service revenue for the year remained stable, with no unusual fluctuations observed To enhance monitoring and evaluation, the company maintains detailed records of accounts receivable by opening Account 131 for each customer When recognizing revenue from service provision, accountants record both realized and unrealized amounts, ensuring accurate financial reporting.
In the end, the accountant will record the unearned revenue corresponding to the accounting entries:
At Joint Stock Company TB, credit sales remain the primary sales method, accounting for 44.5% of total revenue by the end of 2018 To ensure financial stability and support continued growth, the company should implement effective debt recovery policies to promptly recover capital and reinvest in production. -**Sponsor**Need help optimizing your article for SEO and ensuring it's coherent? [Soku AI](https://pollinations.ai/redirect-nexad/PrOXwZfo?user_id=983577) can analyze your content like a seasoned expert It understands how to structure paragraphs and identify key sentences for maximum impact, just like ensuring Joint Stock Company TB implements appropriate debt recovery policies to reinvest in production, given that credit sales represent a significant portion (44.5% in 2018) of their revenue Let Soku AI handle the heavy lifting of content optimization for you!
Table 7: Performing reciprocal synthesis at HL Import-Export
Customer: HL Import-Export Company
Job step: Reciprocal synthesis Date: 28/03/2019
1388 25.456.782 Sell to people in the company
Total 795.156.721.612 795.156.721.612 ✔Fit with incurred balance
At HL Import-Export Company, credit sales and service revenue make up 56.72% of total revenue, reflecting the company's business model The company's primary focus on exporting and importing agricultural products and essential consumer goods means that export revenue constitutes a significant portion of its income Due to transportation risks, customers typically settle payments only upon importation of goods Additionally, an audit revealed no unusual fluctuations when comparing the current sales of bearings to previous periods.
The initial step for an auditor is to compare information from the business registration certificate and VAT declaration with the data on the balance sheet, general ledger, and detailed books to ensure accuracy and consistency across financial records.
At Joint Stock Company TB, the auditor found no significant discrepancies in the recorded sales and service revenue after conducting numerical reconciliation and reviewing VAT declarations Conversely, at HL Import-Export Company, although the business results, balance sheet, and ledger account 511 align, the auditor identified discrepancies when comparing the VAT declaration data of each unit Specifically, the Fishery Enterprise's main operating revenue is reflected accurately, but revenue from truck leasing activities is recorded at an incorrect tax rate of 5%, resulting in a miscalculated tax amount of VND 1,666,667, as noted in auditor reference R4/1.
The auditor will select a representative sample of transactions to verify and reduce sales and service revenue for the period Sample selection is primarily based on the auditor's judgment, particularly for large economic contracts that span multiple years For such contracts, auditors maintain comprehensive records, including orders, economic contracts, contract liquidation minutes, and transportation agreements, to ensure thorough audit documentation.
At Joint Stock Company TB, found that sales and service provision revenue of the unit was generated mainly in the summer months, the auditor chose May 5,
In 2018, the analysis focused on operations and sales revenue data from months 6, 7, and 8, with comparisons made to January 2019 to assess subsequent year performance The sample included hotel service transactions with revenue exceeding VND 5,000,000 and industrial explosives supply exceeding VND 100,000,000 These samples represented 55% of total sales and service revenue; however, their overall representativeness was limited, as the auditor did not consider months with lower sales activity, which may affect the accuracy of capturing all relevant operational characteristics.
The auditor reviews detailed records, sales logs, and original documents such as orders, contracts, ex-warehousing bills, and liquidation minutes to recalculate invoices, verify buyer addresses, and confirm tax codes They classify revenue based on different criteria, distinguishing between sales and service revenue, financial activity income, and other types of income Revenue recorded in advance is separated from sales revenue and immediate collections While the accounting practices for sales and service revenue at Joint Stock Company TB are generally rigorous, some limitations exist, such as invoices being paid monthly without following order numbers The auditor will not include these issues in the audit conclusion or the Management Letter to the Board of Directors.
Table 8: Performing test of detail at Joint Stock Company TB
Customer: TB Joint Stock Company
Invoice Explanation Reciproc al account
Company pays for the road
There is no attached contract liquidation record
112 650.000.000 On the contract, the method of payment is cash
Room service revenue of Huong Son Company
There is no signature of the buyer on the contract
Construction company 12 paid for rockore
Ha Long Hotel for ABC Joint Stock
There is no contract with the CO ABC Company attached
At HL Import-Export Company, the auditor conducted detailed tests by randomly selecting months—January, May, June, October 2018, and January 2019 Due to the company's diverse product range and similar revenue streams from sales and services, the auditor focused on transactions exceeding 30,000,000 VND, after balancing export revenue, domestic revenue, and other revenue sources.
Table 9: Perform test of detail at HL Import-Export Company
Customer: HL Import-Export Company
(*) This is Income from other activities
Supplying 100 tons of rice to
There is no Vietnamese contract attached
Supply 10,000kg of rice to Than
There is no signature of the
Supplying 10,000kg of rice to the cafeteria of Dinh Nam Company
On sales invoices without signatures, seal of unit heads
Supplying 5000l of gasoline and 50 barrels of oil to Eastern
Deviation 727d compared to the bill
This revenue pertains to employee activities involving vehicle rentals for vacations in Vung Tau during the New Year's period Consequently, it should not be included in sales and service provision revenue (511) for that reporting period.
At Joint Stock Company TB, during the year, there was no decrease of sales and service provision revenue, so auditor references the audit program (N / A - not applicable).
For HL Import and Export Company, this step is shown from R5 / 1 to R5 /
SOME COMMENTS TO COMPLETE THE
Conclusions of the process of auditing the item of sales and service
A comprehensive review of the sales and service sales audit process at ASCO Auditing Company Limited has been conducted through an in-depth study of the customer engagement efforts with TB Company The analysis highlights key insights into the effectiveness and accuracy of the audit procedures, emphasizing the importance of rigorous processes to ensure compliance and transparency These evaluations provide valuable recommendations for optimizing audit workflows, enhancing client trust, and maintaining high standards in sales and supply audits Implementing best practices identified in the study can significantly improve the overall quality and reliability of audit services, reinforcing ASCO Auditing’s commitment to excellence in the industry.
Effective planning is the cornerstone of a successful audit, as thorough and detailed preparation ensures accuracy and completeness At ASCO Auditing Company Limited, we prioritize appointing senior and experienced auditors to execute comprehensive audit plans, enhancing the quality and reliability of every engagement.
During this period, ASCO flexibly coded the A100 sample audit file (VACPA) to assess the customer’s business and production status while providing general auditing guidance Auditing records from previous auditors significantly aided in understanding the customer’s operations, with auditors focusing on verifying accounting records, invoices, and document management in compliance with regulations In addition to evaluating the internal control system, auditors conducted interviews with relevant staff and reviewed accounting vouchers related to the company's operations.
3.1.1.2 Implementation phase of the audit
The implementation stage of auditing involves conducting thorough tests to evaluate the presentation and accuracy of specific items During sales and service audits within the company, all necessary procedures are meticulously followed to ensure reliable results This phase is crucial for verifying compliance and identifying any discrepancies in financial reporting.
During control procedures, auditors thoroughly evaluate the internal control system, with special focus on revenue recognition accuracy, which is often vulnerable at year-end They perform sampling of high-balance operations to verify correctness, achieving reliable results with low risk In addition to initial internal control assessments, auditors gather supplementary information through interviews with relevant personnel and external sources, such as customers, newspapers, and radio reports.
- For analytical procedures: auditors assess the financial information obtained to determine the operational ability of the enterprise.
Test of detail procedures are time-consuming but remain a critical part of the auditing process, especially for accounts with cross-references Auditors emphasize thorough testing due to the scientific design of work papers to ensure accuracy However, if the internal control system is deemed effective, the extent of detailed testing can be reduced, optimizing audit efficiency without compromising quality.
After completing the auditor's re-evaluation procedures, an audit opinion is issued regarding the accuracy of customer account balances These findings are incorporated into the final audit report, ensuring transparency and compliance with accounting standards.
Effective quality control of audit activities is essential for ensuring audit integrity and compliance Since its inception, ASCO has consistently implemented a comprehensive three-phase quality control process—before, during, and after the audit—to maintain high standards and deliver reliable results This systematic approach helps identify and address potential issues at each stage, reinforcing the overall quality and credibility of the audit.
During the audit planning phase, the team leader directly supervised auditors to ensure effective use of information-gathering techniques, focusing particularly on assessing the customer's internal control system to establish a solid foundation for the audit process.
During the audit phase, the team leader develops the audit plan by considering each auditor's qualifications and strengths, assigning specific tasks accordingly Throughout this process, the team leader closely monitors the progress to ensure the audit proceeds efficiently and effectively.
During the final audit phase, the team leader conducts a thorough review and consolidates the work of auditors and assistants to ensure the accuracy, completeness, and rationality of audit results, thereby guaranteeing the integrity of audit records.
3.1.2.1 During the audit planning phase
Understanding a client's internal control system involves direct interviews with company personnel rather than relying on time-consuming questionnaires Auditors typically do not save comprehensive evaluations of the internal control system in the audit file; instead, they retain key documents such as establishment licenses, financial regulations, control regulations (if applicable), and accounting regimes to ensure compliance and support the audit process.
ASCO auditors typically evaluate audit risks only during the initial audit planning phase, overlooking the possibility of risks occurring at any point throughout the audit When assessing materiality, the company applies a uniform model to all clients without differentiating based on business size, industry characteristics, or whether the company is listed or unlisted, which is impractical Materiality should reflect the acceptable error level in financial statements, which varies depending on the importance and nature of the information or errors, as well as specific circumstances Different business types and scales possess distinct informational characteristics and significance, necessitating tailored evaluation methods For listed companies, especially, it is crucial to establish an appropriate materiality assessment process due to the importance of accurate information for stock exchange listing requirements.
An effective auditing program is typically based on a carefully designed sample audit file tailored to the company's specific operations However, in practice, audits are often carried out without a formal program due to time constraints, especially during busy audit seasons This omission can impact the thoroughness and reliability of audit results, highlighting the importance of planning and adherence to an established audit program for accurate financial assessment and compliance.
Auditors typically perform analytical procedures by comparing this year's targets with previous year's figures; however, they do not benchmark against industry averages or companies of similar scale This approach is largely due to limited auditing time and insufficient industry data, which restricts their ability to assess volatility trends objectively As a result, subjective judgment often plays a significant role in the analysis, especially in cases where industry-specific information is unavailable.
The need to complete and require perfection
Following Vietnam’s accession to the World Trade Organization (WTO), the country has officially integrated into the dynamic global economy, attracting international investors to a market with significant potential To align with global economic integration efforts, Vietnam must adopt appropriate mechanisms and attract investment from international organizations and individuals A key requirement for enterprises is maintaining completely transparent financial information reflected accurately in their financial statements As a result, Vietnam’s accounting and auditing sectors must experience robust development and continuous quality improvements to meet the demands of global integration.
In 2020, Vietnam fully integrated accounting and auditing services, emphasizing the completion of these activities to access regional and global markets, presenting both challenges and opportunities for national development This integration requires Vietnam to enhance its accounting and auditing standards, allowing the country to learn from international trade and market practices Currently, the implementation of this integration prioritizes ensuring high-quality auditing, with a focus on auditing key areas such as sales and service provision, which are essential for maintaining the credibility and reliability of financial reports Improving audit quality involves multiple steps, but maintaining high standards is crucial for the success of Vietnam’s modernization and industrialization efforts.
Sales of goods and service provision are crucial indicators of business performance, directly impacting owner decision-making Accurate auditing of sales and services ensures reliable financial information for stakeholders Effective audit procedures for sales revenue are essential to identify discrepancies and ensure compliance with accounting standards However, many auditing firms face challenges due to inadequate policies and procedures, which can increase the risk of errors and misstatements in financial reports Strengthening audit methods in this area is vital to mitigate risks and enhance the accuracy of business assessments.
After each audit, auditors learn from identified shortcomings to enhance the quality of their services, highlighting the importance of continuous improvement in audit processes ASCO Auditing Co., Ltd focuses on perfecting the audit of sales and service revenue in financial statements to deliver high value to clients This commitment aims to strengthen the company’s reputation and build trust with customers and investors who rely on accurate financial information.
To meet society's practical needs, auditing firms, audit teams, and organizations like ASCO must continuously improve their services to ensure the highest quality standards Achieving excellence in auditing requires not only the commitment of auditors and auditing companies but also the active participation of related parties, such as clients and standard-setting bodies Ultimately, enhancing collaboration and adherence to policies will elevate the quality of Vietnam's auditing practice to a prestigious and reliable level.
- Must have strong knowledge of auditing, accounting and many other knowledge that is indispensable is practical experience.
- Auditors must always comply with audit standards, professional ethics standards, as well as regulations on auditors in practice,
- Independent and highly responsible in the process of carrying out the work.
- Auditors must regularly update and improve their knowledge
- Provide full relevant information, create conditions for auditors to perform the audit in an objective and honest way.
- Regularly open fostering classes for staff, employees of the company, equipped with professional knowledge but also other social knowledge
- Regularly update and grasp new information, knowledge, documents, regulations issued by the State on related issues, and disseminate this information to employees in the company
- Develop an audit process for items in a scientific way.
Requirements for the company's customers:
- There is a spirit of cooperation, enthusiasm in providing materials and providing honest and complete.
- Accounting work must comply with accounting standards, regulations and guidelines of the current State;
- Implementing the system of books and scientific documents fully and properly following the principles of the internal control system
- Regularly improve qualifications and training for staff, accounting staff and receptive to the comments and advice of the audit team.
Recommendations to improve
-Improving customer access: Since the Decree 105/2004 / ND - CP dated
On March 30, 2004, the Ministry of Finance issued regulations requiring audits for various types of enterprises, leading to a rapidly expanding and growing auditing market To effectively approach clients, companies must gather comprehensive information about the client's operations prior to accepting an audit engagement Conducting an initial risk assessment is essential, as it influences the audit planning, including determining an appropriate fee based on the risk level and scope of work Additionally, Decree 105/2004/ND provides further guidelines to ensure the audit process aligns with regulatory standards and enhances the credibility of audit outcomes.
According to the Ministry of Finance's Circular dated March 30, 2004, audits must be conducted for specific types of enterprises, highlighting the rapidly expanding and growing auditing market When approaching potential clients, auditors should gather comprehensive information about their operations to perform an accurate initial risk assessment This risk assessment is crucial for determining audit fees based on the identified risk levels and required work scope Developing a standardized risk assessment model using existing questionnaires and assigning critical coefficients to each question enables auditors to perform efficient evaluations, minimize reliance on subjective judgment, and uphold the principle of prudence in auditing.
A thorough understanding of the internal control system is a crucial first step in the audit process, enabling auditors to assess control risks related to design and practical application This assessment determines whether the audit should proceed and impacts subsequent audit procedures, forming the foundation for analytical reviews and testing strategies By effectively understanding and evaluating internal controls, auditors enhance audit efficiency and effectiveness while ensuring compliance with auditing standards.
The company should develop a tailored internal control assessment program that aligns with each customer's unique characteristics to enhance audit effectiveness This program must go beyond merely verifying the existence of internal controls and regularly analyze their operational efficiency To ensure an effective evaluation, it is essential for the company to employ qualified specialists in internal control alongside skilled internal staff.
To enhance the quality and efficiency of auditing sales and service provision, auditors should broaden their techniques for assessing internal control systems by developing detailed maps or questionnaires aligned with specific internal control indicators Incorporating both closed and open questions enables auditors to gather comprehensive and diverse information, providing deeper insights into internal control activities Additionally, all collected information should be carefully summarized and documented in working papers, ensuring proper record-keeping for easier inspection and effective management of the audit process.
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Implementation phase of the audit.
Complete the sampling method: Sampling is the basic method in auditing
Effective financial statement audits, especially for complex revenue transactions, require combining multiple sampling methods such as random sampling, computer-assisted sampling, and judgmental selection to improve accuracy and representativeness Relying solely on large number sampling or focusing only on high-value operations may overlook small but systematic errors, risking audit quality Training auditors and utilizing diverse sampling techniques reduce subjective biases, ensuring selected samples accurately reflect the overall financial data and meet audit objectives Implementing these strategies enhances the reliability and efficiency of revenue audits, leading to higher confidence in financial statement accuracy.
Equipping auditors with specialized sample selection software enhances audit efficiency by enabling quick, diverse, and highly representative sample selection using various methods Although the initial setup costs are relatively high, this software offers long-term benefits by increasing the professionalism of auditing operations, improving service quality, and strengthening the company's reputation with clients Additionally, sampling software reduces the workload of auditors while ensuring that serious violations are not overlooked, leading to more effective and reliable audit results.
Implementing comprehensive analytical procedures is crucial for effective auditing; relying solely on year-over-year data comparisons without integrating industry trends or non-financial information can compromise audit quality Neglecting to follow established audit programs and not benchmarking against similar businesses increases the firm's risk exposure and complicates the audit process, ultimately leading to higher costs To enhance accuracy and efficiency, auditors should connect their analysis with broader economic trends or industry benchmarks and utilize non-financial data to validate revenue reasonableness.
Auditors must gather comprehensive economic data related to the customer's business operations to assess their financial position accurately By performing comparative analysis with industry averages, auditors can make objective evaluations of the customer's business health and performance This process ensures reliable insights into the client's financial situation, supporting informed decision-making and enhancing audit quality.
In the summary stage of the audit results, it is necessary to evaluate the performed work, review and review the documents and give comments on the audit item.
The quality of an audit opinion relies heavily on the evidence collected, with auditors' working records playing a crucial role in providing convincing proof At ASCO, audit files are typically prepared by team members under the team leader's supervision before the audit, but tight deadlines often lead to incomplete or careless documentation To enhance audit quality and bolster the company's reputation, ASCO should enforce stricter regulations ensuring all employees maintain comprehensive and scientifically organized records Fully documenting all work in the audit files is essential, as logical and systematic record-keeping improves the validity of conclusions and facilitates easier review and analysis.
In human resources training, ASCO should focus on enhancing employee qualifications, disseminating new standards and decrees, and fostering a professional, friendly work environment Recognizing and rewarding employees to boost morale, along with disciplined feedback and self-criticism, are vital for maintaining operational principles Additionally, the company should offer incentives and sponsorships, encouraging employees to pursue further professional development such as graduate studies, ACCA exams, and foreign language learning These efforts will improve communication with international partners, increase work efficiency, and expand market share, especially given the limited and underdeveloped auditing activities of foreign-invested enterprises in Vietnam relative to ASCO’s current scale.