BANKING ACADEMY FACULTY OF ACCOUNTING AND AUDITING ******* GRADUATION THESIS TITLE: COMPLETING THE AUDIT PROCESS OF PAYROLL AND PAYROLL DEDUCTIONS IN AUDIT OF FINANCIAL STATEMENTS CONDUCTED BY KPMG COMPANY LIMITED Student name: Do Ngoc Anh Student ID: 23A4020034 Class: K23CLC-KTA Academic year: 2020 - 2024 Instructor: PhD. Nguyen Bich Ngoc BANKING ACADEMY FACULTY OF ACCOUNTING AND AUDITING ******* GRADUATION THESIS TITLE: COMPLETING THE AUDIT PROCESS OF PAYROLL AND PAYROLL DEDUCTIONS IN AUDIT OF FINANCIAL STATEMENTS CONDUCTED BY KPMG COMPANY LIMITED Student name: Do Ngoc Anh Student ID: 23A4020034 Class: K23CLC-KTA Academic year: 2020 - 2024 Instructor: PhD. Nguyen Bich Ngoc ACKNOWLEDGMENT The graduation thesis titled “Completing the audit process of payroll and payroll deductions in audit of financial statements conducted by KPMG Company Limited” is my original work, conducted under the guidance of PhD. Nguyen Bich Ngoc.
Any use of reference materials has been clearly indicated in the references. The data presented in the thesis is accurate and objective and is based on the actual situation of the internship unit. I have adhered to the principles of research ethics throughout the research process, refraining from plagiarism, copying, or unauthorized use of others' research findings. I take full responsibility for the content of this declaration.
Date: Hanoi, 8 May 2024 Declarant Do Ngoc Anh 1 APPRECIATION First and foremost, I would like to express my sincere gratitude to the lecturers of the Accounting and Auditing Faculty, as well as the lecturers of other faculties at the Banking Academy, who have directly taught and imparted valuable knowledge to me throughout the past four years of study. This will be the fundamental foundation and invaluable asset for me to embark on my future career. I would also like to extend my deepest appreciation to PhD. Nguyen Bich Ngoc, my thesis supervisor, for her unwavering guidance and support throughout my studies, internship, and completion of my graduation thesis.
I am immensely grateful to the Board of Directors and my colleagues at KPMG Vietnam for providing me with the opportunity and assistance during my internship. The invaluable experience I gained during my time at the company has been instrumental in my professional development. Due to the limited time allotted for my internship and my own practical experience, I acknowledge that this thesis may contain shortcomings. I humbly welcome any feedback or suggestions from my professors so that I may further improve my work.
Thank you sincerely. 2 TABLE OF CONTENTS ACKNOWLEDGMENT. 2 TABLE OF CONTENTS. 3 LIST OF ABBREVIATIONS.
8 LIST OF DIAGRAMS. 11 LIST OF TABLES. Rationale of the study. The objectives of the thesis.
Subjects and scope of study. Methodology of the study. Structure of the thesis. 16 CHAPTER 1: THEORETICAL BASE FOR STAFF COST AND AUDIT PROCESS OF ACTUAL STAFF COST ITEMS CONDUCTED BY INDEPENDENT AUDITOR.
Overall about payroll and payroll deductions.1 Concepts of payroll and payroll deductions. Salaries, wages, and allowances payable to employees. Payroll deductions and personal income tax. Other benefits for employees are paid by the enterprise.
Accounting for labor costs and presentation on financial statements. Payroll cycle at the companies. Accounting vouchers and books. Accounting for payroll and payroll deductions in the business.
Common risks and errors in payroll and payroll deductions. Internal control over the payroll and payroll deductions. Audit procedures of the payroll cycle and payroll deductions.1 The role and objectives of auditing the payroll cycle and payroll deductions.2 Audit process of salary cycle and payroll deductions. Planning the audit.
Implementing the audit. Completing the audit. 51 CHAPTER 2: THE CURRENT SITUATION OF PAYROLL AND PAYROLL DEDUCTIONS AUDIT PROCESS IN THE AUDIT OF FINANCIAL STATEMENT CONDUCTED BY KPMG LIMITED. General overview of KPMG Company Limited.
The process of formation and development. KPMG International Limited. Functions, responsibilities, and business areas. Organizational Management Model.
Audit methodology and audit platform of KPMG Co. General process of auditing financial statements. Auditing quality control of KPMG Co. Financial statement audit process by KPMG Co.
Planning the audit. Implementing the audit. Completing the audit. The reality of the audit of payroll and payroll deductions in financial statement auditing performed by KPMG Co.
Planning the audit. Implementing the audit. Completing the audit. Assessment of the reality of the payroll and payroll deductions audit process at KPMG Co.
Planning the audit. Implementing the audit. Completing the audit. Planning the audit.
Implementing the audit. Completing the audit. 101 CHAPTER 3: RECOMMENDATION FOR IMPROVING THE AUDIT OF PAYROLL AND PAYROLL DEDUCTIONS IN FINANCIAL STATEMENTS CONDUCTED BY KPMG COMPANY LIMITED. The direction of development and the requirement of completing the auditing process of payroll and payroll deductions in audit of the financial statements at KPMG Co.
The direction of development of KPMG Co. The necessary of completing the Audit process of payroll and payroll. deductions in Audit of the financial statement performed by KPMG. Improvement principles and requirements for the payroll and payroll deductions item audit process in KPMG Vietnam Co., Ltd FS audit.
Principles for completing the payroll and payroll deductions audit process and in auditing financial statements performed by KPMG Vietnam Co. Requirements for completing the payroll and payroll deductions audit process and in auditing financial statements performed by KPMG Vietnam Co. Solution for the process on the current status of the payroll and payroll deductions audit process in the audit of financial statements performed by KPMG Co. Planning the audit.
Implementing the audit. Completing the audit. Recommendation to improve the payroll and payroll deductions audit process in the audit of financial statements performed by KPMG Co. Regarding government management agencies and associations.
For State management agencies. For professional associations. Regarding KPMG Co., Ltd and auditors. For KPMG Co.
For audited entities. Regarding training institutions and students. For training institutions. Salary deduction rate in 2023.
Regional minimum wage in 2023. Maximum salary for various types of insurance in 2023. Personal income tax rates for progressive method. Personal income tax rate table according to the shortened method.
Engagement Evaluation Detail Report (KPMG’s WP). Determination of Materiality (KPMG’s WP). Breakdown of Salary expenses (KPMG’s WP). Check payroll match GL working paper.
Recalculate payroll, payroll deductions and PIT (KPMG’s WP). 137 ASSESSMENT OF THE THESIS BY THE SUPERVISOR. 141 7 LIST OF ABBREVIATIONS BOD Board of directors IT Information Technology IFRS International Financial Reporting Standards AR Audit risk KAM KPMG Audit Methodology ISA International Standards of Auditing KAEG KPMG Audit Execution Guide EQC Engagement quality control ICS Internal Control System FS Financial Statement M Materiality PM Performance Materiality AMPT Tolerable Misstatement Threshold KCw KPMG Clara workflow 8 VAS Vietnamese Accounting Standards PIT Personal income tax TOD Test of detailed TOC Test of control HR Human resources GL General Ledger EQC Engagement quality control MLS Master Leadsheet ACCA Association of Chartered Certified Accountants PBTCO Profit Before Tax from Continuing Operations EBITDA Earnings Before Interest, Tax, Depreciation and Amortization mil Million 9 VND Vietnam dong Co., Ltd Company Limited WP Working paper 10 LIST OF DIAGRAMS Diagram 1-1. Payroll-Employee Cycle in an Enterprise.
Organizational Management Model of KPMG Company Limited 58 Diagram 2-2. Human resource organization model of the Audit Department at KPMG Company Limited. Audit process of financial statements of KPMG Company Limited. 63 LIST OF TABLES Table 1-1.
Labor and salary accounting voucher form. Percentage Framework for Determining Materiality .Financial information of KPMG Limited Company during 2021-2023. Error! Bookmark not defined. Model for Fraud Risk Assessment.
Criteria for calculating overall materiality according to the field of operation of the audited unit. The ratio determines the overall materiality level. Preliminary analysis of ABC Company's payroll and payroll deductions. M, PM and AMPT Applied to ABC Company.
Audit program for ABC Company. Rationale of the study. Currently, with the development of the market economy, the annual Financial Statements (Balance Sheet, Statement of income, Cash Flow statement,.) prepared by businesses have become the focus of interest for various individuals such as: business owners, shareholders, fellow businesses, banks, investors, regulatory agencies, and the general public in society. While each stakeholder interested in a company's financial statements approaches it from different perspectives and with distinct purposes, they all require the financial statements to contain highly reliable, truthful, and reasonable information.
Inaccurate financial information can lead to inappropriate decisions for the users. One of the effective measures to mitigate the risk of the information presented in a company's financial statements is to have these statements examined by independent auditors from professional audit firms. The independent audit in Vietnam has affirmed its indispensable role in the economy and has become an integral part of the macroeconomic management tool system, actively serving socio-economic development. Independent audit activities have become a necessary requirement for the transparency of financial information, serving the interests of enterprises, domestic and foreign investors, the interests of capital owners, creditors, as well as the interests and requirements of the government.
KPMG Company Limited is one of the world's four leading companies in the field of auditing and financial consulting. Appearing in Vietnam since 1994, KPMG Vietnam auditing company has made great strides and become one of the leading auditing companies in Vietnam. Audit activities include auditing revenue, capital, assets. and especially costs.
Payroll is both income and motivation for workers in production and business, and is also one of the costs that make up product prices; goods; services and is an important lever to improve the production and business efficiency of enterprises. In businesses, payroll costs account for a large part of the total costs of the business. Therefore, the inaccuracy in payroll costs can significantly impact the production cost, thus affecting 12 the efficiency of the company's operations, leading to the presentation of unreliable and unreasonable information in the company's financial reports, which affects the economic decisions of the users of the information in the financial reports. Realizing the meaning and importance of payroll and payroll deductions through the internship at KPMG Co., Ltd, I decided to choose the topic: “ Completing the audit process of payroll and payroll deductions in audit of financial statements conducted by KPMG Company Limited” 2.
There is a significant amount of research in the field of auditing, especially those related to auditing the payroll and personnel cycle in financial statement auditing. Regardless of the perspective, it shows that auditing the payroll and personnel cycle is an important factor that significantly affects the audit results of an audit. After researching, I have selected several research papers with the same topic as my research topic. Topic: ‘Completing the audit of payroll and payroll deductions in the audit of financial statements performed by Deloitte Vietnam Co., Ltd’ by Ly Thi Hong Loan, 2018.
This thesis delves into the current state of payroll auditing practices at Deloitte Vietnam. Through a meticulous examination of Deloitte's payroll and payroll deductions auditing process, the author meticulously identifies both the strengths and weaknesses of the existing methodology. This in-depth analysis sheds light on the underlying causes of these strengths and weaknesses, enabling a comprehensive understanding of the current auditing framework. Building upon this foundation, the author proposes a set of actionable recommendations aimed at refining Deloitte's payroll and payroll deductions auditing process.
These recommendations are carefully tailored to address the identified shortcomings and leverage the existing strengths, ultimately enhancing the effectiveness and efficiency of Deloitte's payroll and payroll deductions auditing practices. Because the author's article has been written for a long time and the continuous development of society, the law has been updated and changed 13 a lot to suit the current economy, so the solution mentioned in the study may not suit solve problems in the current situation. Topic: "Completing the audit of payroll and payroll deductions in the audit of financial statements performed by PWC Vietnam Co.," by Nguyen Yen Nhi, 2020. The author presents and analyzes the current state of the audit process for payroll and payroll deductions, highlighting the advantages and disadvantages of the process.