Complete the audit planning of financial statements audit

Dr Nguyễn Thị Mỹ Auditing Project TABLE OF CONTENTS INTRODUCTION 3 LIST OF DIAGRAMS 4 CHAPTER 1 THE THEORETICAL OF PLANNING THE AUDIT OF FINANCIAL STATEMENTS 5 1 1 Overview of financial audit 5 1 1 1[.]

TABLE OF CONTENTS

INTRODUCTION 3

LIST OF DIAGRAMS 4

CHAPTER 1: THE THEORETICAL OF PLANNING THE AUDIT OF FINANCIAL STATEMENTS 5

1.1 Overview of financial audit 5

1.1.1 Concepts, common statement and objectives of financial statement audit 5

1.1.2 Audit methods in financial statement audit 6

1.1.3 The order in financial statement audit 7

1.2 Planning the audit in financial statement audit 8

1.2.1 Roles and the order of planning audit 8

1.2.2 Strategic planning 9

1.2.3 Overall planning 10

1.2.4 Establish the audit program 22

CHAPTER 2: ANALYZING CURRENT OF PLANNING OF FINANCIAL STATEMENT AUDIT 26

2.1 Overview of FSA in Vietnam 25

2.2 Current of planning the … 25

CHAPTER 3: SOLUTIONS TO IMPROVE THE QUALITY IN PLANNING OF FINANCIAL STATEMENT AUDIT 26

3.1 Overall assessments 26

3.1.1 Advantages 26

3.1.2 Disadvantages 27

3.2 Solution to improve the quality in planning of financial statement audit 28

3.2.1 The small audit firms should focus more on assessing customer acceptance and understanding of customers 28

3.2.2 Improving the quality of staffs 28

3.2.3 Completing the planning stages overall 28

CONCLUSIONS 32 REFERENCES 33

Auditing activity is an independent operation, in the process of the audit, auditorsshould always respect the principles of honesty, objectivity, legal compliance andprofessional standards Therefore, all activities of the audit should be institutionalizedpromised by the legal documents or be legally recognized Any public audits are carriedout according to unity procedures in which audit plan is the first step of the audit process.Audit plan including job content audited by the method of audit in accordance with thecost of material, time and number of auditors needed

Correct audit plan is the basis for auditor collecting evidence valuable contribution

to make accurate comments on the status of audit activities, maintain and enhance thereputation audit company image for customers Therefore, the study of theoretical andpractical understanding of planning the audit to find out the existing problems and offerways to overcome is a necessity

Foreseeing this problem, I chose the subject of the project was the subject:

"Complete The audit planning of financial statements audit".

In addition to the foreword and conclusion, the scheme consists of three chapters:

Chapter 1: The theoretical of planning the audit of financial statements

Chapter 2: Analyzing current of planning of financial statement audit

Chapter 3: Solutions to improve the quality in planning of financial statement

audit

CHAPTER 1: THE THEORETICAL OF PLANNING THE AUDIT OF

FINANCIAL STATEMENTS 1.1 Overview of financial audit

1.1.1 Concepts, common statement and objectives of financial statement audit

Financial audit is the most characteristic activities of audit and audit system ingeneral

As defined by the International Federation of Accountants (IFAC) "Auditing is theindependent auditors examine and present their opinion on the financial statements"

And in view of modern auditing is wider: "Auditing is verified and expressedopinions on the status of activities to be audited by the system engineering method ofauditing documents and auditing documents outside issued by the auditors have adequateprofessional qualifications made on the basis of the legal system in effect"

Financial audits contained sufficient "shades audit" since its inception as well as inthe development process The basic features of the financial audit is derived from theaudited financial objects and relations from the subject - object auditing The financialaudit is unique within the general statement of the audit objectives, functions, objects,methods to audit organizations According to the Wikipedia encyclopedia "The financialstatements will provide information about the financial position, business performanceand cash flows of the business to meet the demand for our users in making economicdecisions "In addition, financial report table also includes the declaration of personalproperty, assets declaration in particular, the declaration at the request of investors, thebalance sheet works

The subject of the audit of the audited financial statements are audited state(SAV), an independent audit and internal audit Auditor's audit unit must have adequateprofessional capacity and professional ethics to conduct verification activities and expressopinions about the truthfulness of the information reasonably presented on the financialdisclosure table in terms of critical and compliance with rules and standards in thepreparation of financial statements in order to achieve control objectives audit Objective

of financial audit is to help auditors and audit firms express an opinion confirming thatthe financial statements have been prepared on the basis of standards and currentaccounting regime complies with relevant legislation and give a true and fair view, in allmaterial respects or not The objective of the audit was to help finance unit auditedobvious shortcomings and flaws to fix and improve the quality of financial information ofthe unit

The objective of the financial audit consists of two types of goals: goals andspecific objectives The overall audit objective was divided into two categories namelygeneral rationality and other targets The objective statement are determined on the basis

of common objectives and statement of each item or part accompanied by tracking themreflected in the accounting system and internal control system According to a commongoal to have at least one specific audit objectives

1.1.2 Audit methods in financial statement audit

Financial audit is the most characteristic activities of the audit because it containsthe full nuance "audit" since its inception as well as in the development process Thebasic features of the financial audit which is derived from the audited financial objectsand relations from the subject - object auditing Like any other type of audit, to performfunctional verification and express opinions, financial audit also use the auditmethodology documents (audited balance, direct compare and comparison logic ) andexternal audit documentation (inventories, investigation, quizzes) However, becauseeach type of audit have different specific functions, different specific objects andrelations between subject and object should be different, so in the financial audit, thebasic method also there are specific points Considering the general functions of audit,financial audit aims to express the opinion on the basis of the audit evidence, to obtainthis evidence, financial audits need to implement the basic method in each particularsituation, known as methods for collecting audit evidence From the perspective of theprocess of recording processing, control of economic transactions arising to reflect on thefinancial statements, divided into two kinds of auditing method that is basic auditingmethod and compliance auditing method

 Basic auditing method (Substantive test):

Basic test is pivotal trials and in all financial audits but we are not done with everyitem in every relationship In fact, the relationship makes it possible to minimize the basictest Furthermore, if the test shows the information on the financial statements arecredible, then not required to perform a large number of basic tests

 Compliance auditing method (Test of control):

Test of control audit method is designed and used to collect evidence about theappropriateness and effectiveness of the internal control system The basic features of thisapproach is that all analytical testing, evaluation and inspection are based on theregulation of business internal control system Therefore, the conditions applicable to thismethod is internal control system must exist and be evaluated as effective operation.Compliance audit methods include technical inspection system and testing details for

control In implementation process audit, the auditor always incorporates two methods.When internal control system exists and is considered effective operation, the basic test insmall quantities remain to be done In the opposite case, the system can audit internalcontrol system customer does not exist or is considered invalid operation, the financialaudit to audit compliance Meanwhile, the basic test will be enhanced with a large enoughscale to ensure the reliability of the audit conclusions.

1.1.3 The order in financial statement audit

To ensure the efficiency, economy and effectiveness of each audit, as well as tocollect sufficient audit evidence and valuable as a basis for conclusions of auditors aboutthe truthfulness and reasonable data on the financial statements, the audit was conducted

in accordance with a three-stage process

 Phase 1: Planning and design auditing method:

From invitations letter, auditors understand the customer for the purpose offorming a common plan or contract for audit Next, auditors collect information ofcustomers, understanding and evaluation internal control system of audit object to build aspecific plan and audit program for each part, and prepare the vehicle and force to assistthe deployment plan and audit program was developed

 Phase 2: Perform the audit plan:

This is the process of using the test to verify the information forming and reflected

on financial statement Sequence combines this test firstly depend on the results of theevaluation system in step 1 If internal control system is considered not effective, then thetests will be carried out in large numbers Conversely, if the internal control system isconsidered effective, then firstly satisfactory test is used to determine the irregularitiesand that the strong test is applied to verify the error may have If the tests givesatisfactory results internal control system is not available, the strong test will again inlarge numbers

 Phase 3: Complete audited and published audit report:

Results of these tests must be considered reasonable in relation to general andtested in relation to the anomaly, the transactions occurring after the date of the financialstatement Only on this basis, the new offering is final and audit reports

1.2 Planning the audit in financial statement audit

1.2.1 Roles and the order of planning audit

1.2.1.1 Concept

Planning the audit is the first stage that the auditors should perform an audit ofeach to create the legal conditions as well as the conditions necessary for the audit.Planning the audit not only from the requirements of the audit to prepare the basicconditions for the audit , but also the basic principles of audit work has been defined asthe standard plays important role to govern the quality and overall effectiveness of theentire audit

1.2.1.2 The role of the audit plan

Considering the importance of an audit in the economy may have noticed thebiggest role of the audit plan is to help auditors collect sufficient audit evidence, in effect

to draw conclusions about financial statements, from which auditors can help minimizeerrors, reduce liability, while also improving the efficiency of work and hold professionalreputation with customers

It can be seen , the audit plan also allows auditors to coordinate effectively witheach other and related parts such as internal auditors , and external experts Also,through which auditors may conduct audits program was established in accordance withthe cost and time at a reasonable level , strengthening the competitiveness of thecompany audit and keep credibility with the customer relationship is a long-termeconomic period fiercely competitive world , companies are audited more and reputation

is key to strengthening the company's auditor

Moreover, upon closer inspection, appropriate audit plan will be the basis forauditing company avoid disagreements with customers and is testament to assert auditswere conducted with and effective management based audit plan was established auditorsagreed with the customer for the content of the work performed, the time of the audit, aswell as the responsibilities of each party

In addition, based on the audit plan has been established auditors can control andassess the quality of audit work has been done to contribute to improving the quality andeffectiveness of the audit On the other hand, the scope of the audit plan may varydepending on the size of the client , the complexity of the audit , the experience and theknowledge of the technicians of the unit and the unit's activities audited

1.2.1.3 These types of plans in financial audit

Audit plan consists of three parts: the Strategic Plan, the overall audit plan, auditprogram.

 Strategic Planning:

The strategic plan must be set for the audits of large -scale, complexity, largearea or audited financial statements for many years However , at the request of itsmanagement, auditing company can establish a strategic plan for the audit does not havethe above statement The strategic plan must be made by the person in charge andestablish an audit director or head of the company auditor approved

 Overall Planning:

The overall audit plan must be established for all audits, which describes theexpected range and how to conduct the audit The overall audit plan to fully detail thebasis for the audit program The form and content of the overall audit plan will varyaccording to the size of the client , the complexity of the audit, methods and techniquesspecific audit by auditors use

 Design audit programs:

Because each audit is located, different statement to the scope and type of auditalso lead to different number and order of the steps from the beginning to the end of theaudit and building audit process for each transaction The audit is expected to detail theaudit to perform , completion time, the division of labor between the auditors as well asexpected on the materials and information related to use and collect The focus of theaudit program is the audit procedures to perform for each item or department audited

1.2.2 Strategic planning

1.2.2.1 Role of strategic planning

Strategic planning is the first step that auditors and auditing company to performthe audits strategic plan includes the basic orientation, content focus and the generalapproach of the audit level by directing outlined based on knowledge about the businessoperations and business environment of the application audited It must be set for theaudits of large scale, complexity, large area or audited financial statements for manyyears Strategic planning plays a fundamental role in the process of planning the audit

Strategic planning can be a general understanding of the audited entity, as abasis for decision audit, then the audit team leader plans to perform specific audit, theallocation organization, group audit clearly facilitate the audit as well as directing theaudit team leader

Through it, the task performance audit will be carried out as expected in anorderly and scope is defined, time-saving.

Furthermore, strategic planning methodology, audit techniques appropriate foreach type of work has been planned in advance

And finally, a strategic plan to help determine the timing and number oftechnicians to perform the entire audit

1.2.2.2 The contents of strategic planning

Through synthetic materials can be roughly divided contents and working steps

of the strategic plan include:

 Step 1: Find out about its business customers ( aggregate information about areas

of operation, type of business, type of ownership, production technology,organizational structure and management practices of units ), with special attention

to the main content such as competitive dynamics, analysis of extremes businessenterprises as well as the elements of the product, markets, pricing and operationalsupport after sales support

 Step 2: Identify the issues related to financial reporting, such as accounting

regulations, applicable accounting standards, financial reporting requirements andpowers established by the Company

 Step 3: Identify the key risks of the business and its impact to the financial

statements

 Step 4: Evaluate system of internal control.

 Step 5: Determine the audit objectives focus and approach to auditing.

 Step 6: Determine the need for support from the experts : legal consultant, internal

auditors, auditors and other professionals, such as civil engineers, agriculturalengineers

 Step 7: Expected leader and execution time.

 Step 8: Directors and announced a strategic plan for the group audit Based on the

strategic plan has been approved, the audit team leader to plan the overall auditand audit program

1.2.3 Overall planning

The overall audit plan is the specific reality of strategic planning and detailedapproach to content, schedule and expected range of audit procedures The objective ofplanning the overall audit is to be conducted our audit in an efficient manner and inaccordance with the scheduled time.

The overall audit plan can often be implemented through the steps detailedbelow

Diagram 1: The steps of the process of planning the audit of financial statements

(Source: Curriculum financial audit - NEU)

1.2.3.1 Prepare audit plan

Prepare audit plan is the first step of a job audit process to create the basicconditions to conduct an audit Therefore preparation is very important and crucial step iseffective, quality and performance of an audit

 Assess the acceptability of audit:

The auditor must assess whether to accept or continue a client can increase therisk for the operation of auditors or harm the reputation and image of the audit firm ornot? To clarify that, auditors need to conduct the work as follows:

Prepare audit planCollect basic information

Collect legal information of clients and perform analytical procedures

Assessing the risks and materials of auditLearn the system of internal control and audit risk assessment

Audit planning and drafting comprehensive audit program

Firstly, auditors conduct a review of the quality control system to evaluate theacceptability of the audit One in five parts of the system of quality control is defined asthe set of policies and procedures for the ability to accept and keep customers well andcontinue to accept the audit contract Policies and procedures must ensure that adequateability to accept a client management lacks integrity is minimal.

Next, the auditors should conduct a review of the integrity of the company board

of directors customers: in many cases, the integrity of the board is a key component ofthe control environment, this is the foundation for all other components of internalcontrol systems Therefore, the integrity of the board is important for auditing processbecause Moderators may reflect the wrong profession or concealing information leading

to material misstatements in the financial statements

Finally, auditors should contact auditors predecessor For the potential customer

if the customer has previously been audited by an auditor other new technicians toproactively communicate with old auditors This is the first source of information toassess customer Auditing standards require auditors to contact successor predecessorauditors on matters related to the auditors successor has accepted the audit contract(Including information about the integrity of the board, disagreements between the boardwith auditors) In addition, auditors can review audit records of auditors predecessor tosupport the successor auditors in planning the audit For those customers that have notpreviously been public audit firms auditing public for information about the client, theauditors may collect this information through the study of books, journals, examinationthe inside information on upcoming clients such as banks, legal advice maybe even hire

a professional investigator to investigate other matters necessary For existing customers,auditors annual update customer information and assess whether there is any risk thatauditors must stop providing audit services for them or not

 Identify the reasons for the company's audit clients:

The essence of identifying the reason for the audit of the company 's customers

to determine the use and purpose financial statement reporting their use For that, auditorscan live interview clients or the board of directors based on the experience of the audithas been done before The determination of financial statement users and uses theirreports are the two main factors affecting the amount of evidence to be collected and theaccuracy of the opinion that the auditors made in the audit report Specifically, if thefinancial statements should be widely used, the level of honesty and reasonableness of theinformation on the financial statements are required and therefore the higher the amount

of audit evidence to be collected as well as the size and complexity variety of audits willincrease

 Choosing staff audit:

Choosing staff auditor for the audit appropriately directed not only to theeffectiveness of the audit but also comply with the auditing standards generally accepted(GAAS) Therefore, when assigning auditors, audit company should comply with theabove requirements Also, for longtime customers, company auditor should limit theconstantly changing auditors to help them master the peculiarities of the business,maintaining the relationship between the two parties On the other hand, the auditor musthave policies to prevent the rotation of auditors familiar with customers easily lead toboredom and a control path, or loss of objectivity, independence

 Contract Auditing:

Contract Auditing is a formal agreement between the auditor and the client onthe implementation of audit and other related services In fact , the audit contract includessome major contents:

The first is the purpose and scope of the audit: The objective of the audit was toreach the destination at the same time is a measure of the results of each specific audit Inaddition, the audit scope was limited to the space and time of the audit object, usuallyidentified with the determination of the audit objectives

The second is the responsibility of the board of directors and corporate auditorscustomers; The Board of Directors is responsible for the preparation and presentation ofinformation in the financial statements honest, technicians are responsible for givingindependent opinion on the financial report based on our audit

Third, notice form audit: audit results are usually expressed as a specific auditreport

Fourth, the time of the audit (The time taken preliminary audit, audit official, theend of the audit report and release)

Fifth, the basis for calculating the cost of audit fees and payments auditedfinancial statements are usually determined on the basis of some time working the auditordifferent levels of audit

Finally, determine that the auditors are not responsible for errors due to thenature and inherent limitations of the accounting system, internal control and audit

1.2.3.2 Collect basic information

 Learn about careers and business customers:

To perform audited financial statements, auditors must be knowledgeable aboutthe business situation and aware enough to determine the facts, professional and practical

operation of the unit audited by the auditor's assessment has may affect critical tofinancial reporting, to the examination of auditors or auditor to report This is necessarywhen an auditor to audit professional with proper caution Each branch has its ownaccounting system and apply the specific accounting principles In addition, theimportance of each accounting principles change with the customer's business Theunderstanding of the business including the common understanding of the economy, theactivities of auditors Auditors also have to understand the unique aspects of a particularorganization such as; organizational structure, chain and manufacturing services.Auditors can obtain this understanding in many ways, but the method most commonlyused is exchanged with the auditors, the audit was conducted for the last year or clientsaudited for other clients in the same industry.

 Considering the results of previous audits and audit records common:

The previous record year usually contain a lot of customer information, forbusiness, organizational structure, charter companies, financial accounting In addition,the majority of audits are the only company maintain regular audit record for eachcustomer Thereby auditor will find useful information about the business of thecustomer The update and review the books of the Company is required to identify themanager's decision is consistent with the law, with the current policies of the Company ornot but help auditors understand nature of the data and their volatility on financialstatements audited

 Visit the warehouse:

The facility tours, direct observation of production and business activities(Business) customers would give auditor remarks directly to the customer's businessprocesses and thereby give an overview auditor for business customers How realisticview of the physical means to help understand the protection of property and facilitatingthe disclosures of accounting data, detecting issues of concern such as stagnantproduction, product stagnant, backward or machines are not promoting capacity also,auditor also be identified early on management style of management, systematicarrangement, organization of work

 Identify the stakeholders:

Parties are considered to be related if one party has the ability to control orsignificantly influence the other party in making financial decisions and activities Underaccounting principles generally accepted nature of the relationship between the partiesconcerned must be disclosed on the books, and the last report described the economictransactions including the amount and the amount of the debt or debt partners involved.Therefore, auditors should identify stakeholders and preliminary assessment of this

relationship even in the planning stage through the interview board of directors,shareholders view the tracking customer tracking window then initially anticipateproblems that may arise between the parties concerned to be able to plan an audit planaccordingly.

 Experts predict demand outside:

The term "expert" means a person or an office capable of understanding in aparticular field outside the field of accounting and auditing If the auditor of the Companythat none of the audit team with expertise or capable in the field with which to performthe audit procedures necessary given the audit firm may decide to use expert externalauditors should consider the relationship between professionals and clients , these factorscould affect the objectivity of this expert

1.2.3.3 Collect legal information of clients and perform analytical procedures

If the basis of information collected on help technicians understand the business

of the customer to collect information on the legal obligations of the customer to helpauditors understand the nature of the legal process has affect the operation of thisbusiness There are three kinds of information related to legal responsibility of theaudited units:

The first information is information about the presence and legal provisions forthe business unit's audited

The second is that the provisions of the charter regulations of the unit operation

is not contrary to the current legislation

And finally, the statement concerning the merger of the member units of theaudited units

Usually the text above was collected during exposure to senior managementcompany specific customer covers the following: establishment license and chartercompany; Minutes of the meeting of shareholders, the board and the board of directors;The financial statements, accounting reports , the inspection records of the current year or

a few years ago; the contract and important commitments

1.2.3.4 Perform analytical procedures

Procedures for analysis is the analysis of data and information, the rate of whichfind important trends and find out what relationship there is a conflict with the relevantinformation or have significant differences compared with expected value Auditors

should apply analytical procedures in the audit planning process to understand thesituation of the business units and identify possible areas of risk The analyticalprocedures are used by auditors include two basic types:

First, the horizontal analysis (Trend analysis) is based on the analysis ofcomparative values of the same indicators on the financial statements The horizontalanalysis criteria used include: comparing this data with data period prior period orbetween periods together, compare actual data to estimate figures or estimates ofauditors, compared compare the data of the company 's customer data with industry

Next is the longitudinal analysis (Analysis of rate) is analyzed based on thecomparison of the proportion of the target and the various items on the financialstatements The rate is often used in longitudinal analysis are: the ratio of solvency short-term debt, the ratio of profitability

1.2.3.5 Assessing the risks and materials of audit

 Original estimates for the key to the entire financial statements:

Initial estimates of the level of materiality and the maximum amount at auditorsbelieve that the financial statements may be misleading, but not affect the decisions ofusers of financial information The original estimate for the critical help auditor collectappropriate audit evidence Specifically, if the auditors estimate the lower key, theamount of evidence gathered as much, and vice versa Initial estimate of materiality is notfixed but can change during the period

If auditor audit found that the initial estimate is too high or too low, or one of thefactors used to determine the initial estimates for the key change

When building the initial estimate of materiality, auditor need to note the factorsaffecting factors First, materiality is a relative concept than an absolute object, associated

with the size of the client company A scale irregularities can be significant given thecompany a small but not significant for a large company Therefore, the identificationand value guide a specific level of cash for the initial estimate of materiality applies to allcustomers is not possible Next to take into account the quantitative materiality: Scaleerrors is a critical factor to consider whether there are significant irregularities or not.However, the critical nature of relativity should be the basis for deciding whether thescale of the offense has had significant or not is essential In addition, one should alsoconsider the factors shaping the key: In fact to determine a violation is significant or notauditors have reviewed, evaluated in terms of both scale and nature of the error A fraudhas always been considered to be essential regardless of the scale of it is.

However, auditors should consider the factors related to the nature of theviolations should be considered when conducting the initial estimate of materiality:

The first is that the fraud is often seen as more important than the errors with thesame scale currency by fraud often do people think of the truthfulness and reliability ofthe board of directors or the relevant

Secondly errors with small but repeated or causes domino effect adversely affectthe information on the financial statements are considered misstatement, because this isthe systematic errors

And finally irregularities affecting income is always misstatement

Allocation of initial estimates for the key to the items on the financialstatements

After auditor had originally estimated for the key to the whole

Financial statements, auditors should allocate the estimates for each item in thefinancial statements That was the wrong number may be acceptable for each item Thepurpose of this allocation is to help technicians determine the number of appropriate auditevidence to be collected for each item at the lowest possible cost while ensuring sum oferrors on the financial statements do not exceed excessive initial estimate of materiality

Because most of the audit procedures focus on balance sheet accounts onaccounting auditors should normally distributed estimator for the account on the BalanceSheet accounts instead of on the income statement The allocation is done in bothdirections, but the errors can occur: the state -declarations (Data on a larger bookactually) and declared lower (Data on smaller books on reality) Basis for allocation iscarried out: the nature of the item, potential risks and risk control is a preliminaryassessment of the experience of auditor items and audit costs for each item In fact, it isdifficult to predict the likelihood of errors and audit costs for each item so this work is