THE STATE BANK OF VIETNAM BANKING ACADEMY OF VIETNAM ADVANCED PROGRAM ----------------------- GRADUATION THESIS IMPROVING AUDIT PROCEDURES OF FIXED ASSETS IN AN AUDIT OF FINANCIAL STATEMENTS AT DELOITTE VIETNAM COMPANY LIMITED Student: Nguyễn Thị Thu Thảo Student ID: 19A4020769 Class: K19 CLC KTA Cohort: 2016 - 2020 Faculty: Accounting and Auditing Instructor: Ph.D Lê Thị Thu Hà Hanoi, 2020 STATUTORY DECLARATION I herewith formally declare that I myself have written the submitted Graduation Thesis independently. I did not use any outside support except for the quoted literature, and other sources mentioned at the end of this paper. Hanoi, June 2020 Signature Nguyễn Thị Thu Thảo i ACKNOWLEDGMENT After more than three years studying at Banking Academy, the Author has suggested the topic: “IMPROVING AUDIT PROCEDURES OF FIXED ASSETS IN AN AUDIT OF FINANCIAL STATEMENTS AT DELOITTE VIETNAM COMPANY LIMITED” for her graduation thesis. During her time at Banking Academy, the Author wants to send her warmest thanks to all of the lecturers at The Faculty of Accounting and Auditing, as well as other lecturers who have provided valuable knowledge and practical skills for the Author.
The Author deeply appreciates Ph. Lê Thị Thu Hà for her extraordinary effort in supervising the thesis, regardless of the difficulties of managing her personal matters and doing researches at the same time. Lê Thị Thu Hà has provided detailed instruction, answered the Author’s questions, and provided guidance for her when facing obstacles in completing this thesis. Once again, the Author’s appreciation for her supervisor is beyond words.
Besides, the Author has received the internship program from Deloitte Vietnam Company Limited to obtain information for the thesis. Thanks to the supports of many associates, seniors, and managers, the Author could gain sufficient knowledge to finalize this thesis. Due to limited time and resources, errors and limitations are inevitable. The Author appreciates all recommendations and opinions from lecturers on improving this thesis and her work in the future.
The Author deeply appreciates all the support! Hanoi, June 2020 Student Nguyễn Thị Thu Thảo ii TABLE OF CONTENTS Statutory declaration .ii List of Abbreviations. iii List of Figures .iv List of Tables. The necessity of the topic. Scope of the study.
Structure of the thesis. 4 CHAPTER 1: Theoretical backgrounds on audit procedures of fixed assets in an audit of financial statements. Overview of fixed assets and accounting for fixed assets. Definitions and classification of fixed assets items.
Valuation of fixed assets. Accounting for fixed assets in business organizations. Frauds and errors related to fixed assets. Internal control of fixed assets in business organizations.
Audit of fixed assets in an audit of financial statements. An overview of an audit of financial statements. Objectives and basis for an audit of fixed assets. The audit process for fixed assets.
27 CHAPTER 2: The Practice of audit procedures of fixed asset items in a financial statements audit at Deloitte Vietnam Company Limited. An overview of Deloitte Vietnam Company Limited. The history of Deloitte Vietnam Company Limited. The main business lines, clients and recent business results of Deloitte Vietnam Company Limited.
The organization structure of Deloitte Vietnam Company Limited. Audit Process at Deloitte Vietnam Company Limited. The practice of an audit of fixed assets in an audit of financial statements at Deloitte Vietnam Company Limited. Audit review and finalization.
Assessment of the audit practice of fixed assets in an audit of financial statements at Deloitte Vietnam Company Limited. 79 CHAPTER 3: Recommendations for improvement of audit procedures of fixed assets in an audit of financial Statements at Deloitte Vietnam Company Limited. The necessity of improvements. Principles for the improvement of the audit procedures for fixed assets.
Solutions to improve the audit procedures of fixed asset at Deloitte Vietnam Company Limited. Recommendations for improvements of fixed asset audit at Deloitte Vietnam Company Limited. 90 Graduation Thesis Banking Academy of Vietnam LIST OF ABBREVIATIONS Abbreviation Definition DVN, Deloitte Vietnam Deloitte Vietnam Company Limited FA Fixed assets Circular 200 Circular No. 200/2014/TT-BTC on Guidelines for accounting policies for enterprises dated 22nd December 2014 Circular 45 Circular No.
45/2013/TT-BTC guiding regulation on management, use and depreciation of fixed assets Circular 78 Circular No. 78/2014/TT-BTC guiding the implementation of the government’s decree no 218/2013/ND-CP of 26th December 2013, detailing and guiding the implementation of the law on corporate income tax iii Student: Nguyễn Thị Thu Thảo Class: K19CLCKTA Graduation Thesis Banking Academy of Vietnam LIST OF FIGURES Figure 1.1: Accounting treatment of tangible fixed assets.2: Accounting treatment for intangible fixed assets .3: Accounting treatment of finance-lease fixed assets .4: Fixed assets management cycle .5: The audit process for fixed assets .6: Assessment of materiality and estimated allocation of materiality.1: Audit practice at Deloitte Vietnam .2: The organization structure of ABS Joint Stock Company .3: The fixed asset cycle of ABS Joint Stock Company .4: Working papers – Analytical procedures – Tangible fixed assets .5: Working papers – Analytical procedures – Intangible fixed assets .6: Money Unit Sampling - Analytics Excel Add-in .7: Physical Examination of fixed assets. 70 iv Student: Nguyễn Thị Thu Thảo Class: K19CLCKTA Graduation Thesis Banking Academy of Vietnam LIST OF TABLES Table 1.1: Audit objectives in auditing fixed assets .2: Percentage allocation of materiality .3: Detection risk evaluation model .4: Tests of control of fixed assets account .5: Substantive test for fixed assets increases .1: Summary of Top 4 Audit Companies with the largest revenue in Vietnam44 Table 2.2: Preliminary analysis of fixed asset account as at 31st December 2019 .3: Preliminary analysis of the income statement for the period ended 31 st December 2019 .4: Risks over fixed assets assessment .5: Determination of materiality at ABS Joint Stock Company. 60 v Student: Nguyễn Thị Thu Thảo Class: K19CLCKTA Graduation Thesis Banking Academy of Vietnam INTRODUCTION 1.
The necessity of the topic The external audit industry has experienced exponential growth and expansion in recent years. Investors, owners of businesses and other users of financial information are constantly in heavy needs of transparent and reliable sources of financial information to make important decisions that would have significant impacts in many aspects. The external audit industry helps improving the transparency of information, as well as management efficiency and productivity of businesses. In order to attract investors and other stakeholders, the management of numerous companies has committed fraud and accounting misconducts to dress up financial statements.
Exaggeration and making false statements, deliberately wrong calculation of depreciation are common fraudulent acts relating to fixed assets since they are important resources of a company, which indicates its production capabilities. Having stable fixed assets resources allows businesses to thrive, expand production and increase financial security in case of economic fluctuation. Accounting entries relating to fixed assets account may not be as frequent compared to other accounts, but are of significant value and have major impacts on a business’s resources. On financial statements, fixed assets account for a major part in terms of value, and any error relating to fixed assets account could have material impacts on the accuracy and transparency of financial statements.
Audit of fixed assets accounts is of paramount importance in an audit engagement. Improving the quality of fixed assets audit procedures helps auditors enhance the overall quality of an audit and detect possible accounting misconducts and improve fixed assets management. Having acknowledged the importance of fixed assets to a business’s financial health, the Author has chosen the topic: “IMPROVING AUDIT PROCEDURES OF FIXED ASSETS IN AN AUDIT OF FINANCIAL STATEMENTS AT DELOITTE VIETNAM COMPANY LIMITED” for her graduation thesis, to evaluate the process and provide her recommendations to improve the audit procedures of fixed assets at Deloitte Vietnam Company Limited. 1 Student: Nguyễn Thị Thu Thảo Class: K19CLCKTA Graduation Thesis Banking Academy of Vietnam 2.
Literature review As Deloitte Vietnam Company Limited (DVN) is a prestigious independent audit entity, and fixed assets are a fundamental account of the balance sheet, there are many previous studies about DVN audit procedures and audit of fixed assets in an audit of financial statements at DVN. These articles can be classified into two main groups. The first group comprises studies on the quality of external audits in Vietnam market of the Big 4 Company (Deloitte, PwC, E&Y, KPMG) and some recommendations to improve the assessed qualitative characteristics. The second group includes researches on enhancing audit procedures for a specific account.
In the first group, research worth-mentioning was proposed by Professor NH Tien et al. The article focuses on auditor independence, a vital part of the assurance quality of the auditing services. Based on the performance of the Big 4 Companies in Vietnam market, the study recommends some improvements on the independence of local audit companies. Due to the article, policies and procedures developed by Deloitte Global (Deloitte Touche Tohmatsu Limited) are applied to Deloitte Vietnam as well as all the units all around the world.
These policies and procedures are created based on IESBA’s code of ethics, which is believed to generate more stringent standards than Vietnamese applicable laws and regulations. Therefore, regarding the qualitative characteristic of independence, the quality assurance of auditing service at Deloitte Vietnam is assessed as high quality, guaranteed by international experiences, professionalism, qualified and highly skilled staff member. Moreover, staff in the global network have the chance of global mobility between developed countries and developing countries; hence, the staff quality can be consistent between manifold units. The quality of assurance services at DVN is also stated in an article by Professor Ha, H.
The greatest benefits of becoming a member of international audit organizations, which significantly affect the assurance quality, are updated modern equipment, global technical training program, finalized audit program, consultation - provision of international information, and service quality control program. As being a member of the global network of Deloitte Global, DVN has always been the market leader in Vietnam for nearly 30 years. 2 Student: Nguyễn Thị Thu Thảo Class: K19CLCKTA Graduation Thesis Banking Academy of Vietnam Besides, there are a number of graduation thesis on the audit of specific accounts in an audit of financial statements. At Banking Academy of Vietnam, there were some graduation theses on this topic, especially “Improving audit evidence obtain process in an audit of financial statements at Deloitte Vietnam Limited” by Tien, M.T (2018); “Improving audit procedures of operating expenses in an audit of financial statements at Deloitte Vietnam Limited” by Hau, H.T (2018); “Improving audit procedures of financial income and financial expense in an audit of financial statements at Deloitte Vietnam Limited” by Van, D.L (2018) and “Improving audit procedures of receivables in an audit of financial statements at Deloitte Vietnam Limited” by Quynh, T.
This research assessed the audit of specific accounts in an audit of financial statements by comparing these audits with a theoretical framework to find out recommendations for improving the audit procedures at Deloitte Vietnam. To conclude, there were previous researches about assurance quality at DVN and the audit procedures of specific accounts. However, there were not any studies on assessment of assurance quality based on audit procedures and the audit of fixed assets. Therefore, in this paper, the Author wants to assess the assurance quality at DVN based on the comparison between audit methodology and theoretical framework; thus, point out some recommendations to improve the audit of fixed assets in an audit of financial statements at DVN.
Study Objective The thesis focuses on researching the current audit procedures of fixed assets in a financial statement audit at Deloitte Vietnam. Specific objects of the thesis include: Firstly, the thesis explores theoretical backgrounds on audit procedures of fixed assets in financial statements audit. Secondly, the thesis briefly introduces Deloitte Vietnam and analyses the current audit procedures of fixed assets at Deloitte Vietnam. Based on the analyzed results, the thesis suggests and provides several recommendations for improvements in the audit procedures of fixed assets in financial statement audit at Deloitte Vietnam.