Case 1: Having been granted the Certificate of Business Registration by the Department of Planning and Investment, Company A officially came into operation in October 2015 with the business line of wholesale petroleum and related products.
The company uses Fast Accounting Offline (FAO) accounting software to easily manage transactions arising during the year. FAO with 1 system subsystem and 13 business subsystems, fully meet the accounting and tax requirements for businesses. Chief accountants can do accounting with complex models such as many subordinate units, many accounting departments, and many types of foreign currencies,... and especially always be updated with circulars on accounting and tax of the Ministry of Finance and General Department of Taxation, prepare financial statements and accounting books by regulations. Carry out collection and expenditure, payment related to cash, deposit, or loan in a strict and detailed manner according to the right object, according to the invoice, according to the contract, and according to the charge item. Prevent negative spending. With just one click, chief accountants can view a quick report of the cash balance in the fund, deposits, and loans at each bank. The sales-collection cycle can be done on the software from order creation to delivery and collection, helping to receive full orders, on-time delivery, and timely collection of money. The purchase - payment cycle can be done on the software from ordering to receiving goods and paying suppliers. Reports on inventory status, sales orders, support timely ordering, and optimal inventory. Debts are tracked in detail according to the payment due date of each invoice, helping to pay on time and build a good relationship with suppliers. Allows accountant to choose to calculate inventory prices by business requirements: monthly average, moving average, or first-in, first-out. Extremely fast pricing, even with thousands of material listings and a large number of import and export coupons. Along with other
diverse features, FAO has greatly supported the accounting operations at Company A as required by management.
Before conducting report analysis, the auditor will ask the chief accountant to output data (including general journal, liabilities, fixed assets, inventory, balance sheet,...) from accounting software that the company uses. In order to reveal any unusual changes from previous year, the auditor obtained data of trial balance (in Excel) from the client and performed some data cleaning procedures to convert data into the appropriate format for analytics. The following table show the calculation of changes of all G/L accounts relating to the Balance sheet of the client.
(In million VND) N
o. G/L Account
Beginning balance (Dec 31, 2020)
Ending balance (Dec 31, 2021)
% Change
1 1111 - Tiền Việt Nam 1146.0 1648.0 4
3.8
3 1121 - Tiền Việt Nam 795.0 1019.0 2
8.2
4 131 - Phải thu của khách hàng 247.0 709.0 1
87.0
8 1388 - Phải thu khác 4269.0 4264.0 -
0.1
9 141 - Tạm ứng 12.0 10.0 -
16.7 1
1 1561 - Giá mua hàng hóa 4106.0 7628.0 8
5.8 1
3 2111 - Nhà cửa; vật kiến trúc 16115.0 16115.0 0
.0 1
4 2112 - Máy móc; thiết bị -1056.0 -1056.0 -
0.0 1
6 2131 - Quyền sử dụng đất 19305.0 19305.0 0
.0
N
o. G/L Account
Beginning balance (Dec 31, 2020)
Ending balance (Dec 31, 2021)
% Change 1
8 2141 - Hao mòn TSCĐ hữu hình 0.0 0.0 N
aN 1
9 2143 - Hao mòn TSCĐ vô hình 0.0 0.0 N
aN 2
0 2147 - Hao mòn bất động sản đầu tư 0.0 0.0 N
aN 2
1 217 - Bất động sản đầu tư 51725.0 51725.0 0
.0 2
3 2411 - Mua sắm TSCĐ 9330.0 9364.0 0
.4 2
5 2422 - Chi phí trả trước dài hạn 5983.0 5940.0 -
0.7 2
6
244 - Cầm cố; thế chấp; ký quỹ; ký
cược 330.0 0.0 -
100.0 2
7 331 - Phải trả cho người bán 10124.0 14457.0 4
2.8 2
9 3331 - Thuế giá trị gia tăng phải nộp 0.0 38.0 i
nf 3
0 3335 - Thuế thu nhập cá nhân 11.0 6.0 -
45.5 3
1 3337 - Thuế nhà đất; tiền thuê đất 0.0 0.0 N
aN 3
2
3338 - Thuế bảo vệ môi trường và
các loại thuế... 7244.0 3416.0 -
52.8 3
5 3341 - Phải trả công nhân viên 472.0 722.0 5
3.0 4
0 3388 - Phải trả; phải nộp khác 13864.0 13864.0 0
.0 4
2 4111 - Vốn góp của chủ sở hữu 60000.0 60000.0 0
.0
N
o. G/L Account
Beginning balance (Dec 31, 2020)
Ending balance (Dec 31, 2021)
% Change 4
4
4211 - Lợi nhuận sau thuế chưa
phân phối năm t... 3002.0 3002.0 0
.0 4
5
4212 - Lợi nhuận sau thuế chưa
phân phối năm nay 4337.0 4850.0 1
1.8 Table 1: The Balance sheet of company A between 2020 and 20212
Based on the above table, the auditor drew the two bar charts for the purpose of visualization of the unusual changes in account balances. However, with the first chart below, the auditor did not recognize anything unusual due to the similarity of
the bars.
Figure 2: Ending G/L account balances as of 2021 compared to 2020 (in million VND)3
2 Source: Audit files from AASC company
3 Source: Audit files from AASC company
Then, the auditor did some more calculations and prepared the second chart as in the picture below.
Figure 3: Changes in ending G/L account balances as of 2021 compared to 2020 (%)4 According to the policy of materiality benchmark of the firm, all changes of account balances that exceed 20% (both directions, in red lines) are considered unusual. So, the auditor noted the list of G/L accounts below for further investigation:
- Cash account (G/L number 1111): ending balance increases by 43,8% in comparison with the beginning of the year.
- Bank account (G/L number 1121): ending balance increases by 26,2% in comparison with the beginning of the year.
- Account receivables (G/L number 131): ending balance increases by 187%
in comparison with the beginning of the year.
Given the largest (unusual) change of account receivables, the auditor paid attention to the risk of material misstatement of provision for bad debts.
4 Source: Audit files from AASC company
For further understandings about the above unusual change of accounts receivable in 2021, the auditor made a comparison of debit amount of A/R between the two consecutive years 2020, 2021.
Figure 4: Monthly Debit amount of A/R in 2020, 2021 (in million VND)5
From the chart, the auditor found a significant increase in debit amounts for accounts receivable from the last month of the year 2021 (between two vertical red lines). This finding suggested the auditor obtain an explanation from the client‟s management whether it was unusual or not. To sum up, all the above data analytics of the company showed a potential risk of material misstatement of occurrence of revenue in 2021.
Case 2: With the concept of "Health comes first", Company B entered the market in July 1998 with the business lines of manufacturing drugs, pharmaceutical chemicals and herbal ingredients (in detail, production of herbal medicines:
traditional medicine drugs that have been granted a registration book by the Ministry of Health.)
In contrast to Company A, Company B chooses Misa software to support its accounting operations. Misa software supports the calculation of revenue and expenditure, salary, profit, and bonus for employees and departments automatically as well as controlling debt and sales, saving a lot of time compared to other methods
5 Source: Audit files from AASC company
crafts of the past. To bring about such great benefits, the software has been developed with features in many different businesses and fields to bring optimal productivity to many businesses. The software has a mechanism to automatically detect errors on reports, books, and financial documents to easily check and offer solutions. Misa accounting software allows the creation of multiple databases, which means that each unit of many branches or departments can work on an independent database. Support from the software as well as the homepage of the Misa software system helps to update continuously and quickly on new laws, circulars, and new economic decrees of the state that businesses need to pay attention to and ensure during business operation.
To achieve the objectives of chapter 1 above, the auditor gathered 100% of transactions in 2020 and 2021 of the company. Then, the auditor prepared charts for the purpose of comparison in volume and number of transactions over the two years.
Figure 5: Monthly transactions in 2020, 20216
Figure 6: Monthly total amount of transactions in 2020, 2021 (in million VND)7 From the above two charts, the auditor drew some remarks:
- In general, monthly volume of transactions in 2021 tend to be lower than the same of 2020. This may be the consequence of COVID-19 pandemic in Vietnam in 2021.
- Total amount of transactions occurred in Jan 2021 is somewhat high unexpectedly in comparison of the same period of previous year. This may reveal
6 Source: Audit files from AASC company
7 Source: Audit files from AASC company
the risk of subsequent adjusting entries for latest accounting entries of previous year.
To find if there is (are) an outlier(s) of transaction amounts in 2021, the
auditor prepares a boxplot of transaction amount by month of the year as following.
Figure 7: Outliers of transaction amounts by month in 20218
From the above boxplot chart, the auditor recognized that there were some outlier transactions (in red circle) occurred in July 2021. Then, the auditor prepared a listing of ten largest transactions in July 2021 for further investigation.
N o.
Date Vouch er No.
Amount (in VND) 1 2021
-07-30
TNH07 -0026
75000000 00 2 2021
-07-26
CNH0 7-0019
40000000 00 3 2021
-07-29
CNH0 7-0021
30000000 00 4 2021
-07-20
CNH0 7-0010
20000000 00
8 Source: Audit files from AASC company
N o.
Date Vouch er No.
Amount (in VND) 5 2021
-07-14
TNH07 -0004
20000000 00 6 2021
-07-29
TNH07 -0022
10000000 00 7 2021
-07-20
CNH0 7-0008
10000000 00 8 2021
-07-26
TNH07 -0015
10000000 00 9 2021
-07-26
TNH07 -0016
10000000 00 1
0
2021 -07-26
TNH07 -0017
10000000 00 Table 2: Ten largest transactions in July 2021 of Company B9
For the purpose of identifying the risk of fraudulent transactions, the auditor summarized the number of transactions by weekdays and created a heat maps of the number of transactions that occurred per week days and month. The auditor then filtered out a list of transactions with a date of Sunday for further investigation.
9 Source: Audit files from AASC company
Figure 8: Number of transactions by week day and month in 202110
For both the cases analyzed above and when interviewing with experts, we can see the benefits that DA brings: auditors check 100% of transactions and accounts by clients provided. In addition, auditors gain deeper insights into key client activities. That results in higher audit efficiency than before.
Both companies A and company B mentioned above, when receiving data from customers, the auditor will compare the data changes between 2 years, which new transactions arise or the amount that is much different from the previous year, analyze financial ratios and identify trends or unusual signs in the business's operations, thereby assessing risks and locating risks of material misstatement.