BANKING ACADEMY OF VIETNAM FACULTY OF ACCOUNTING AND AUDITING ---o0o--- GRADUATION THESIS TOPIC: Improving Operating Expenses Audit Procedures in Financial Statements Audits by AASC Auditing Firm Company Limited Conducted by student: Nguyen Thanh Vinh Class: K23CLC-KTA Academic programme: 2020 - 2024 Student ID code: 23A4020444 Advisor lecturer: Dr. Phan Thi Anh Dao Hanoi, April 2024 ACKNOWLEDGEMENT Within my journey of completion the graduation thesis on "Improving Operating Expenses Audit Procedures in Financial Statements Audits by AASC Auditing Firm Company Limited" I would like to show my throughout appreciation for every entity and person who involved in. Firstly, I extend my acknowledgement to the Faculty of Accounting and Auditing of Banking Academy, providing me with foundation of knowledge and skills. Secondly, I show a special gratitude for Dr.
Phan Thi Anh Dao, whose guidance has played a pivotal role in this graduation thesis. Her expertise in the field of auditing and auditing, along with her insightful feedback, has significantly shaped my study. Finally, I would also like to express my deep appreciation to the AASC Auditing Firm. The firm has given me access to their knowledge and resources which are crucial element of my research.
i LETTER OF DECLARATION I hereby declare that the Graduation thesis "Improving Operating Expenses Audit Procedures in Financial Statements Audits by AASC Auditing Firm Company Limited" is the result of my research and has never been published in any work of others. During the implementation process of this thesis, I have seriously taken research ethics; all findings of this thesis are the results of my research; all references in this thesis are clearly cited clearly according to regulations. I bear full responsibility for the fidelity of the number and data and other content of my Graduation thesis. ii TABLE OF CONTENTS INTRODUCTION.
The rationale of the study. Objectives of the study. Research subject and scope .4 CHAPTER 1: THEORETICAL FOUNDATIONS OF AUDIT PROCEDURES FOR OPERATING EXPENSES IN FINANCIAL STATEMENT AUDITS. Characteristics of operating expenses in financial statement audit.
Definition and nature of operating expenses in financial statement audit. Accounting for operating expenses. Common misstatements and risks relating to operating expenses accounting. Internal control relating to operating expenses.
Operating expenses audit procedures for the financial statement audit. Audit objectives for operating expense. Audit procedures for operating expenses .29 CHAPTER 2: CURRENT PRACTICE OF OPERATING EXPENSES AUDIT PROCEDURES IMPLEMENTED BY AASC AUDITING FIRM COMPANY LIMITED IN FINANCIAL STATEMENT AUDITS. Introduction of AASC Auditing Firm Company Limited.
The process of formation and development. Services rendered of AASC. Organisational structure of AASC. General audit procedures conducted by AASC Auditing Firm Company Limited.
Current practice of operating expenses audit procedures implemented by AASC auditing firm company limited in financial statement audits. Operating expenses audit under financial statements audit methodology by AASC, case study at BCA Company. Assessment of the Current Audit Process for Operating Expense Accounts in Financial Statement Audits Conducted by AASC Auditing Firm Company Limited .3 Reasons for the limitations of audit procedure in AASC .71 CHAPTER 3: SOLUTIONS AND RECOMMENDATIONS FOR IMPROVING THE AUDIT PROCEDURES OF OPERATING EXPENSES IN FINANCIAL STATEMENT AUDITS CONDUCTED BY AASC. Development strategy of the company.
Human resource development. Service development at AASC. Solutions for improving the audit procedures of operating expenses in financial statement audits by AASC. Solutions for planning.
Solutions for implementing. Conclusion and reporting. Recommendations for improving the audit procedures of operating expenses in financial statement audits by AASC. Proposal to the government and relevant authorities.
Recommendations for Professional Associations in Accounting and Auditing. Recommendations for AASC Auditing Firm. Recommendations for the auditors. Recommendations for the Banking Academy .87 Appendix 01: Understanding the entity of BCA company .89 Appendix 02: Internal control for the purchase cycle .95 iv ABBREVIATIONS LIST Abbreviation Meaning AASC AASC Auditing Firm Company Limited v TABLES LIST Table Page Table 1.
Audit objectives of Operating expenses 19 Table 1.2: The matrix of detection risk 26 Table 2. Brief Statement of Profit or Loss of AASC 34 in three recent years Table 2. Primarily analysing of statement of profit or 47 loss of BCA Company Table 2.3: Lists of proposed adjusting entries 65 ILLUSTRATIONS LIST Illustration Page Illustration 1.1: Accounting for selling expenses 10 Illustration 1.2: Accounting for administrative 11 expenses Illustration 2.1: Organisational structure of AASC 36 Illustration 2.2: Audit methodology of AASC 39 Illustration 2.3: Determining materiality level for the 49 planning of the audit Illustration 2.4: Administrative expenses lead schedule 52 vi Illustration 2.5: Selling expenses lead schedule 52 Illustration 2.6: Analytical procedures for 53 administrative expenses Illustration 2.7: Analytical procedures for selling 55 expenses Illustration 2.8: Analysing administrative expenses 57 per months Illustration 2.9: Analysing selling expenses per 58 months Illustration 2.10: Cut-off testing 60 Illustration 2.11: Analysing unusual corresponding 61 entries vii INTRODUCTION 1. The rationale of the study In the evolving big picture of financial statement audit, operating expense auditing is a crucial aspect in every audit.
The audit performed for the accounting items ensures that financial statements reflect a true and fair view of a company's operational status. AASC Auditing Firm Company Limited is considered as the Vietnamese leader in providing financial audit services. The company has developed and completed a thorough audit methodology for this accounting sector. However, accounting expenses audit also faces several challenges, including the variety of expenses, the potential for subjective judgement, the risks of not recording the expenses in the right accounting period, or recording the expenses that are not suitable.
These challenges require a demand of continually enhancing audit procedures to guarantee the audits are free from frauds and errors arising from the operating expenses sector. The necessity for this study arises from the above challenges in the existing operating expense auditing practices at AASC. This graduation thesis is aimed to contribute modest acknowledgement for enhancing AASC's audit quality and for improving knowledge about the area in general. The relevance of this study relates to several stakeholders, who are AASC Auditing Firm with benefits from an enhanced audit procedure and financial statement users with benefits from comprehensive and transparent financial information.
As for above reasons, it can be seen that operating expenses audit plays an important role in audit practice of financial statement. In recognising the importance of the subject and its impact to the audit methodology of AASC Auditing Firm, I decided to choose the research topic: "Improving Operating Expenses Audit Procedures in Financial Statements Audits by AASC Auditing Firm Company Limited" as my graduation thesis. Objectives of the study This graduation thesis aims to develop a comprehensive understanding of the existing challenges within AASC's operating expense auditing processes and to devise and test effective strategies for improvement. Specific objectives include: First, investigate principal theories with regards to the operating expense accounts audit procedures in the financial statement audit conducted by independent audit firms.
Second, conduct an examination of the actual conditions at the client entity audited by AASC concerning the aspect of operating expenses. Third, propose several solutions and suggestions aimed at enhancing the auditing procedures for operating expenses at AASC. Theoretically, this study enriches the academic field of auditing with practical evidence and insights into the challenges and solutions for the study and implementation of operating expense auditing. Practically, the research offers AASC solutions for enhancing its auditing practices, as well as offers recommendations for those who involved.
By documenting the journey from problem identification to solution implementation and evaluation, this study provides a valuable template for similar auditing firms seeking to improve their operations. Research subject and scope Research subject: The research subject of this thesis is operating expenses (including selling expenses and administrative expenses) audit procedure in the audit of financial statements conducted by AASC. Scope of the research: Research and assess the current state of the audit process for selling expenses and administrative expenses in the financial statement audit at specific clients conducted by AASC for the fiscal year ended 31/12/2023. Research questions 2 Based on the three research objectives outlined above, this study proposes three corresponding research questions: First, “What are the audit procedures for operating expenses in the financial statement audit detailed in Vietnamese Standards on Auditing? How about legal regulation concerning the subject?” Second, “How does AASC perform audit procedures for operating expenses with regards to a specific client? What are the strengths and weaknesses of those procedures in practice?” Third, “What are the solutions and recommendations to refine operating expenses audit procedures performed by AASC Auditing Firm Company Limited.
Research methodology The research methodology employed in this graduation thesis is qualitative method, specifically: Document research: This is the primary method utilised in the study, concerning the examination of current accounting standards, auditing standards applicable in Vietnam, sample audit programs, and related regulations i. Circular 200/2014/TT-BTC, and tax regulations related to selling expenses and administrative expenses. - Data sources: Primary data sources include all records, documents, and working papers collected by the author in the course of participating in the audit at the client unit. Secondary data consists of available documents such as the client unit's policies, regulations, and sample audit files corresponding to each specific operational segment.
Field research: 3 - Conducting actual surveys at the client unit during the audit process and surveying the audit participants. - Interview auditor and assistants of the audit team to gain general understanding of audit procedures for operating expenses. - Interview clients’ accountants to understand the accounting cycles and internal control of the entity. - Analytical, synthetic, and comparative method: Analysing, synthesising, and comparing data between the previous and current year, by each detailed expense item, each month.
From this, identify discrepancies, suspicions, and proceed with detailed examination of the documents. Research structure Besides the introduction and conclusion, this graduation thesis was presented in three main segments as follows: Chapter 1: Theoretical foundations of audit procedures for operating expenses in financial statement audits Chapter 2: Current practice of operating expenses audit procedures implemented by AASC Auditing Firm in financial statement audits Chapter 3: Solutions and recommendations for improving the audit procedures of operating expenses in financial statement audits conducted by AASC Auditing Firm 4 CHAPTER 1: THEORETICAL FOUNDATIONS OF AUDIT PROCEDURES FOR OPERATING EXPENSES IN FINANCIAL STATEMENT AUDITS 1. Characteristics of operating expenses in financial statement audit 1. Definition and nature of operating expenses in financial statement audit 1.
Definition According to paragraph 4.69 of the Conceptual Framework for Financial Reporting (revised in 2018) by the International Accounting Standards Board, an expense is defined as decreases in assets, or increases in liabilities, that result in decreases in equity, other than those relating to distribution to holders of equity claims. Expenses under IFRS are recognised in the income statement and can be categorised in several ways, including by nature (such as cost of goods sold, labour costs, depreciation charges, …) or by function (such as cost of selling, administrative expenses). The recognition of expenses follows the matching principles, where expenses are recognised in the period in which the related revenue is earned. Expenses are a critical component of the financial statements.
As they directly impact the profit or loss of a company. So, proper classification, measurement and recognition of expenses are essential for the accurate presentation of the financial statements in accordance with IFRS. According to Vietnamese Accounting Standard No. 01 'General Standards', Article 31, Point b, expenses have them same definition as that of IFRS, which are defined as the total value of items that reduce economic benefits during the accounting period in the form of cash outflows, asset deductions, or the incurrence of liabilities leading to a decrease in owner's equity, excluding distributions to shareholders or owners.
Operating expenses are costs that arise during the normal business operations of a company, representing indirect costs not directly associated with the process of producing the company's products. 5 Operating expenses include selling expenses and administrative expenses.