UNIVERSITY OF ECONOMICS AND LAW FACULTY OF ACCOUNTING – AUDITING ——————————— THESIS THE AUDIT OF FINANCIAL STATEMENTS FOR ABC CO., LTD INSTRUCTOR : PhD LA XUAN DAO STUDENT NAME : HA VU DINH KHANH STUDENT ID : K134091071 CLASS : K13409 HO CHI MINH CITY, JUNE 2017 ACKNOWLEDGMENTS First of all, I would like to send my sincere gratitude to all the teachers at University of Economics and Law - Vietnam National University - Ho Chi Minh City, who has been with me throughout these years. In particular, I would like to express my deep gratitude to Ms. La Xuan Dao - who has always tried her best to help me complete this thesis. Next, I would like to thank all of you PricewaterhouseCoopers Vietnam Limited for their enthusiastic support during my time at the company.
At the same time, I would also like to thank my friends for helping me overcome the difficulties in life as well as in learning during my time at school. Lastly, I would like to express my sincere gratitude to my relatives who are always with me and give me more confidence and energy so that I can overcome the difficulties on the road pursuing and conquering my dreams dream. Last word, I would like to wish my teachers, friends, colleagues and family the best wishes. NOTES FROM THE INSTRUCTOR.
1 CHAPTER 1: INTRODUCTION OF PRICEWATERHOUSECOOPERS VIETNAM LIMITED. History and Development. PwC on global scale. PwC on local scale (Vietnam).
Field of operation and operational objectives. Services provided by PwC Vietnam. Organizational structure at PwC. 5 CHAPTER 2: THE AUDIT OF FINANCIAL STATEMENTS OF A.
Initial Engagement Procedures.1 Conduct Independence Review. Independence of the engagement team. Independence of the firm and network .2 Perform Engagement Acceptance/Continuance. Understand the Entity and Its Environment.
Understand the Entity and its Environment (Regulatory, Industry, etc. Understand and Evaluate Internal Control and Identify Relevant Controls. Information and Communication. Monitoring of control.
Understand and Evaluate the IT Environment. Risk and Response. Conduct Initial Risk Assessment Analytics. Conduct Fraud Risk Assessment.
Other risk assessment procedures. Determine Audit Strategy. Determine Nature, Timing and Extent of the audit engagement. Accruals, provision and other liabilities.
Update Preliminary Assessments, Changes to Plan and Subsequent Events. Conclude on Possibility of Fraud or Illegal Acts. Conclude on Entity’s Ability to Continue as a Going Concern. Perform Subsequent Events Review.
Financial Statement Disclosure Checklists. Perform Overall Conclusion Analytics. Other Completion Activities. 83 CHAPTER 3: OVERALL COMMENTS.
Overall comments over audit procedures carried out by PwC at A. Notions for improving the procedures. Organizational structure at PwC Vietnam. Unaudited Financial Statements.
Understand the Entity and its Environment (Regulatory, Industry, etc. Information and Communication. Conduct Initial Analytical Procedure. Detailed listing of Accruals Account.
Advertising and Marketing. Discount and allowances accruals. PwC’s Calculation of VPC. PwC's Calculation of VMC and FMC.
Detailed listing of Specific provision. Sales by Products Breakdown. Sales by Seasons Breakdown. Sale Deductions Breakdown.
Breakdown of CDA and D&A Year End. Conclude on Entity’s Ability to Continue as a Going Concern. Subsequent Analytical Procedure. Subsequent Event Email.
Perform Overall Conclusion Analysis. clxxi Thesis a Instructor: PhD. La Xuan Dao ABBREVIATIONS A&C Acceptance & Continuance A&M Advertising and Marketing A&P Advertising and Promotion AP Accounts Payable BOD Board of Directors BOM Board of Management CA Chief Accountant CAKE Cumulative Audit Knowledge and Experience CAPEX Capital Expenditure CDA Customer Development Agreement CFO Chief Financial Officer CIP Construction in Progress CIT Corporation Income Tax CoC Code of Conduct COGs Cost of Goods Sold COL Cases on Loan COSO The Committee of Sponsoring Organizations CSD Carbonate Soft Drinks EGA Evidence Gather Aura EL Engagement Leader ExCom Executive Committee or Board of Directors FA Fixed assets FC Financial Controller FD Financial Director FGs Finished Goods FIFO First In First Out FM Financial Manager Student: Ha Vu Dinh Khanh The audit of financial statements of ABC Co. Ltd Thesis b Instructor: PhD.
La Xuan Dao FMC Fixed Manufacturing Cost FMCG Fast-moving consumer goods FS Financial statements FSLI Financial statements line item GAAP Generally Accepted Accounting Principles GAAS Generally Accepted Auditing Standards GD General Director GL General Ledger FTS Floor to Sheet HPC Higher Profile Client IFRS International Financial Reporting Standards Imm Immaterial ISA International Standards on Auditing IT Information technology JE Journal Entries KPI Key Performance Indicators LoS Line of Services OEC Order Entry Clerk OM Overall Materiality PIE Public Interest Entity PIT Personal Income Tax PM Performance Materiality PMAC Period Moving Average Cost PO Purchase Order PPE Property, Plant and Equipment PSP Promotion Scheme Proposal PwCIL PricewaterhouseCoopers International Limited QPR Quality Partner Review RMC Risk Management and Compliance Department Student: Ha Vu Dinh Khanh The audit of financial statements of ABC Co. Ltd Thesis c Instructor: PhD. La Xuan Dao RMs Raw Materials SO Sale Order SOA Schedule of Authority SOD Segregation of Duties SP Sales Planner STF Sheet to Floor SUM Summary of Uncorrected Misstatements TB Trial Balance TM Team Manager ToC Test of Controls ToD Test of Detail UoM Unit of Measurement VSA Vietnamese Standards on Auditing VAS Vietnamese Accounting Standards VAT Value Added Tax VMC Variable Manufacturing Cost VPC Variable Production Cost WH Warehouse WHT Withholding Tax YE Year End Student: Ha Vu Dinh Khanh The audit of financial statements of ABC Co. Ltd Thesis d Instructor: PhD.
La Xuan Dao TABLES Table 1. Rotation of engagement team. Initial Materiality Calculation. Audit approach for Accruals.
CDA accruals testing template. CDA testing results. Freight - tested samples. Freight - Testing results.
Discount and allowances accruals result testing. Breakdown of inventory. Inventory stock count – Criterial for sample size selection. Detailed of locations.
Trace test count - Accept-Reject sample size. Inventory - Raw materials - Total population. Summary of Raw materials information. Inventory - Summary of Threshold.
Breakdown of unit cost of Finish goods. Testing samples of Finished goods. VPC per Unit of testing samples - Finished goods. VMC & FMC calculation result.
Breakdown of goods in transit. Provision policy for Inventory. Breakdown of Provision for inventory. Summary of General provision testing.
Sales deductions - Detailed negative figures. Breakdown of D&A by booking type. Reassess Materiality Calculation. Unaudited Balance Sheet.
Unaudited Income Statement. Brief on financial indices. AR Provision policy. Control Matrix - Revenue and Receivables.
xxxiii Student: Ha Vu Dinh Khanh The audit of financial statements of ABC Co. Ltd Thesis e Instructor: PhD. La Xuan Dao Table 32. Purchase Requisition - Authorization.
Contract or Purchase Order & Invoice payment – Authorization Right (SOA). Purchasing and Payables - Authority - SOA. Status of Finished Goods Report. Inventory - Control Matrix & Validate.
Design of Testing of Operating Effectiveness. Components of cost of FG produced. Details of VMC and FMC. Balance of Inventory - Quantity - at the month end.
Balance of Inventory - Value - at the month end. Calculation of Closing balance value for the month end. Finalising COGS and inventory revaluation of Client. Finished goods process by co-packer.
Proportion of FMC. FMC obtained from accounting department (applied form Sep). Calculation for samples of FMC. Proportion of FMC.
Standard file set for September onward from Planning Department. Provision Minutes sent for making Consolidation. Balance Sheet - Initial Analytical Procedure. Income Statement - Initial Analytical Procedure.
Detailed listing of Accruals Account. Summary of Reclassifying Accruals. Subsequent Statement of Financial Position. Subsequent Income Statement.
Subsequent Email Questions. Overall Analytical Procedure - Income Statement. Overall Analytical Procedure - Balance Sheet .clxviii Student: Ha Vu Dinh Khanh The audit of financial statements of ABC Co. Ltd Thesis 1 Instructor: PhD.
La Xuan Dao THESIS STATEMENT 1. The necessity of the topic Although ABC Co. is one of the largest beverage manufacturing company in Vietnam with the market share that could be assessed as enormous. In the year full of surprises, both in Vietnam and on Global Scale, each investor, shareholder has been more careful in deciding investment portfolio.
The stock market reversal just in one day from the morning to the evening after Brexit, which has scared many of investors (both individuals and companies), has been a persuasive proof for the sensitivity of information users to the market. It raises not only the need for the accuracy of financial analysis but also the need for the accuracy of information sources. However, without accurate and reliable corporate disclosures and financial statements - and competent auditors to audit them - competitive free market system could not function properly. When the auditors play their role as an agent for expressing opinions on those sources, users of financial statements can make appropriate decision.
Objectives Since at PwC, clients have been critical assessed before being accepted or continued for the next year. Following with various procedures to ensure that the financial statements have been properly audited to provide reasonable assurance to the users of that financial statements. Therefore, the objectives of the thesis are to: - Present the acceptance and continuance for the client ABC Co. - Present the audit procedures for the financial statements of client ABC Co.
- And to have a general view on the whole engagement carried out by PwC Vietnam as well as PwC global. Gathering information methodology - Analyze the audit files from last year of ABC Co. - Perform communicating verbally with employees and employers of the Client. - Communicate with staff that has performed the audit engagement in the year 2016 both the half year review and the final audit at the year end.
Student: Ha Vu Dinh Khanh The audit of financial statements of ABC Co. Ltd Thesis 2 Instructor: PhD. La Xuan Dao 4. Scope and limitation Scope: - The thesis has cover almost all of the audit engagement from planning for the audit, including continuance of Client to define audit strategy to completion of the audit file, final procedures for the Client.
Limitation: - The writer has not joined all the procedures carried out due to the position in the firm with the lack of experience, which led to the limited understand about the audit engagement. - Since the limitation of time, only key sections that have adjustments for explanation are presented in the thesis. - Therefore, not all the audit procedures have been explained completely. Student: Ha Vu Dinh Khanh The audit of financial statements of ABC Co.
Ltd Thesis 3 Instructor: PhD. La Xuan Dao CHAPTER 1: INTRODUCTION OF PRICEWATERHOUSECOOPERS VIETNAM LIMITED 1. History and Development 1. PwC on global scale PricewaterhouseCoopers (PwC) is one of the biggest professional firms, of which the principal activities are to provide professional services included assurance, advisory, taxation and legal.
PwC has been commenced publicly the first time after the merger between PricewaterHouse Ltd. and Coopers & Lybrand Ltd. has been founded by Mr. Samuel Lowell Price - an accountant - in 1849.
- Meanwhile, Coopers & Lybrand Co. was the result of another merger of Coopers Brothers & Co. and Lybrand, Ross Bros & Montgomery. At the present, PwC network comprises the Head Office at London and more than 740 other offices spreading over 157 countries with approximately 223,000 employees.
Due to the requirements for a professional firm, each of the office over each country is one separate entity. PwC on local scale (Vietnam) PwC Vietnam is a one member company limited, licensed by National Committee for Investment Cooperation to operate and provide independent auditing and other consultancy services. It is wholly owned by PwC Indochina Holdings Inc. which was established in 1992 in British Virgin Islands.