BANKING ACADEMY FACULTY OF ACCOUNTING - AUDITING GRADUATION THESIS TOPIC: AUDIT OF FIXED ASSETS IN FINANCIAL AUDITING IMPLEMENTED BY KPMG VIETNAM COMPANY LIMITED Performer : Pham Thuy Hang Class : K23CLC-KTA Course : 2020 - 2024 Student ID : 23A4020118 Supervisor : Dr. Nguyen Thi Phuong Thao Hanoi, May 2024 STATUTORY DECLARATION I herewith formally declare that I 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. I clearly marked and separately listed all the literature and all other sources that I employed in producing this academic work, either literally or in content.
Hanoi, May 2024 Signature Pham Thuy Hang i ACKNOWLEDGEMENT Throughout the completion of my bachelor's thesis, I have been fortunate to receive generous support, guidance, and encouragement from dedicated lecturers during my four years at the Banking Academy. Additionally, I am grateful for the invaluable advice provided by mentors and colleagues during my three-month internship at KPMG Vietnam Company Limited. First and foremost, I extend my sincere gratitude to my supervisor, Dr. Nguyen Thi Phuong Thao, whose insightful suggestions have shaped the direction of my study and facilitated the timely completion of my essay.
Thao's valuable feedback and corrections have greatly contributed to the refinement of my paper. I would also like to express my appreciation to all lecturers in the Faculty of Accounting and Auditing for their informative lectures across various courses, which have significantly enriched my understanding of accounting and auditing, thereby aiding me in the completion of this thesis. Lastly, I am thankful to my friends and seniors who have consistently offered their encouragement and assistance throughout the process of completing this bachelor's thesis. While I acknowledge that my thesis may contain certain errors due to limited capacity and time constraints, I eagerly await feedback from lecturers on how to enhance the quality of this topic.
Thank you sincerely for your support! Hanoi, May 2024 Signature Pham Thuy Hang ii TABLE OF CONTENTS LIST OF ABBREVIATIONS. v LIST OF DIAGRAMS .vi LIST OF TABLES AND FIGURES. 1 CHAPTER 1: THEORETICAL BASIS FOR THE AUDIT PROCESS OF FIXED ASSETS IN THE FINANCIAL AUDITING. Characteristics of fixed assets affecting the audit of financial statements.
Features of fixed assets on financial statements. Accounting for fixed assets. Common misstatements related to fixed assets. Internal control over fixed assets.
The process of audit of fixed assets in auditing financial statement. Objectives and assertions for auditing fixed asset items. Planning the audit. Implementing the audit.
Completing the audit. 29 CHAPTER 2: AUDIT OF FIXED ASSETS IN THE PROCESS OF AUDITING FINANCIAL STATEMENTS IMPLEMENTED BY KPMG VIETNAM COMPANY LIMITED. Introduction to KPMG Vietnam Company Limited. The process of formation and development.
Functions, duties, and main business lines. Mechanism of organization structure. Audit procedures of financial statements conducted by KPMG Vietnam Company Limited. Audit of fixed assets in financial auditing performed by KPMG Vietnam Company Limited.
Overview of the process of auditing fixed assets in financial auditing conducted by KPMG Vietnam Company Limited. Audit of fixed assets in financial auditing performed by KPMG Vietnam Company Limited at a specific client. Comments and evaluations on the audit of fixed assets in financial auditing conducted by KPMG Vietnam Company Limited. Limitations and causes.
77 CHAPTER 3: RECOMMENDATIONS FOR IMPROVING THE AUDIT OF FIXED ASSETS IN FINANCIAL AUDITING IMPLEMENTED BY KPMG VIETNAM COMPANY LIMITED. The oriented development of KPMG Vietnam Company Limited. The need for improving the audit of fixed assets in the financial auditing implemented by KPMG Vietnam Company Limited. Solutions to improve the audit of fixed assets in the financial auditing implemented by KPMG Vietnam Company Limited.
Planning the audit. Implementing the audit. Completing the audit. Recommendation to complete the audit process of fixed assets performed by KPMG Vietnam Company Limited.
Regarding government and associations. Regarding KPMG Vietnam Company Limited. Regarding client organizations. 92 iv LIST OF ABBREVIATIONS Abbreviations Original meaning A1, A2 Assistant 1, Assistant 2 AM Assistant Manager AMPT Audit Misstatement Posting Threshold BOD Board of Directors EQCR Engagement Quality Control Risk FA Fixed assets FSAs Financial statement audits GL General Ledger IAS International Accounting Standard IC Internal control ISA International Standard of Auditing KAEG KPMG Audit Execution Guide KAM KPMG Audit Manual MIC Manager in charge OM Overall Materiality PIC Partner in charge PM Performance Materiality SIC Senior in charge VACPA Vietnam Association of Certified Public Accountants VAS Vietnamese Accounting Standard VSA Vietnamese Standards on Auditing WPs Working papers v LIST OF DIAGRAMS Diagram Page Diagram 2.1: Departmental organizational structure of KPMG Vietnam 37 Company Limited Diagram 2.2: Financial statement audit procedure at KPMG Vietnam 39 Company Limited Diagram 2.3: Quality control process at KPMG Vietnam Company 42 Limited vi LIST OF TABLES AND FIGURES Table Page Table 1.1: Internal control of the operation of fixed assets 14 Table 1.2: Table of Estimated Materiality Thresholds 22 Table 1.3: Test of control 24 Table 2.1: Financial information of KPMG Vietnam Company Limited 34 during the period from 2021 to 2023 Table 2.2: Materiality benchmark used by KPMG 47 Table 2.3: Job allocation for the audit team 55 Table 2.4: Test of control for new fixed assets at SDV in 2023 61 Table 2.5: Detailed depreciation of Rectangular Conference Table - 16 62 Pax Table 2.6: Reconcile useful life of fixed assets between SDV and 74 Circular 45 Figure Page Figure 1.1: Process of preparing and transferring documents of fixed 11 assets Figure 2.1: Preliminary analysis of fixed assets at SDV Company 57 Figure 2.2: Evaluating Materiality of SDV 59 Figure 2.3: Leadsheet of fixed assets working paper of SDV 65 Figure 2.4: Movements of tangible fixed assets of SDV in 2023 67 Figure 2.5: Movements of intangible fixed assets of SDV in 2023 67 Figure 2.6: Addition of fixed assets of SDV in 2023 70 Figure 2.7: Recalculation of depreciation 72 vii INTRODUCTION 1.
The rationale Alongside the process of global economic integration and the development of the market economy in Vietnam, as it stands today, the demand for financial information is increasingly rising. Independent auditing has emerged as a necessity, playing a crucial role in providing reliability and transparency of financial information. Financial statement audits (FSAs) are among the primary types of auditing services provided by independent audit firms. Financial statement audits are vital documents that provide information about the financial position and business performance results of an entity.
Fixed assets (FA) have always been a concern for every entity as they are crucial in transforming inputs into outputs and serving the operations of a business. Recording fixed assets and determining depreciation expenses require accurate and proper documentation and calculations. Furthermore, fixed asset items on the balance sheet often constitute a significant proportion, and transactions related to fixed assets are prone to fraud or errors. Each instance of fraud or error related to this item typically has a significant impact on the entity's financial statements.
Therefore, auditing fixed asset items plays an extremely important role in financial statement audits. For an independent audit firm, effectively completing the fixed asset auditing process equates to enhancing the efficiency and quality of financial statement audits. For client entities, the results of fixed asset audits provide reliable information to identify inconsistencies in fixed asset accounting and management practices, thereby addressing lingering issues, strengthening fixed asset management, and improving business operations efficiency. Recognizing the importance of financial statement audits in general and fixed asset audits in particular, as a student majoring in auditing equipped with knowledge from academic institutions and practical experience gained through an internship at KPMG Vietnam, I have chosen the topic "Audit of Fixed assets in financial auditing 1 implemented by KPMG Vietnam Company Limited" for my graduation thesis research.
Literature review Fixed assets represent a significant proportion of the total assets, reflecting the financial capacity of a company most clearly, and they tend to harbor many irregularities. Each irregularity associated with fixed asset items often correlates with discrepancies in other specific items, such as those in the income statement (depreciation expenses) and the balance sheet items like long-term borrowings, equity, etc. This can affect the accuracy and fairness of the financial statements. Therefore, there are many research topics related to auditing fixed asset items in financial statement audits from various perspectives.
Recognizing the significance of fixed asset management, numerous domestic and international dissertations have extensively explored and proposed solutions to enhance the auditing process of this asset category., and their colleagues conducted a study titled "Development of an audit system for managing fixed assets as a means to enhance the efficiency of enterprise social activities."; the aim was to offer practical recommendations for improving the audit system for fixed assets to enhance overall corporate performance. By gathering audit evidence, documents, and audit working opinions, the authors identified fixed asset metrics impacting the enterprise's regular operations. However, their study applied analytical procedures in theory without delving into specific audit practices. In Vietnam, research on the audit of fixed assets has become increasingly common in recent years.
As a student at the Banking Academy, I can readily access theses and research papers focusing on fixed assets. Notable examples include: "Enhancing the audit of tangible fixed assets in financial statement audits conducted by An Viet Auditing Co." (2018) by Chu Thi Hoa; "Enhancing the auditing process of fixed assets in financial statement audits conducted by AASC Auditing Firm Co." (2022) by Nguyen Thi Quynh, and others. While these theses share commonalities, each one elucidates theoretical foundations related to fixed assets, 2 analyzes the current state of fixed asset audits in various companies, and proposes recommendations and solutions. Research on auditing fixed asset items in financial statement audits conducted by KPMG in recent years has also produced some notable works.
The thesis "Enhancing the fixed asset audit process in financial statement audits conducted by KPMG Vietnam Limited Liability Company" by Nguyen Thi Thao Dan (2019) compares the differences in fixed asset audit processes between annual and first-year audit clients at KPMG. However, this study relied on the outdated eAudit audit software of the company, thus lacking updateability. In 2022, the thesis "Auditing fixed asset items in the financial statement audit process conducted by KPMG Vietnam Limited Liability Company" by Tran Thu Ha provided a general overview of the fixed asset audit process. From there, the study identified the current situation of the fixed asset audit process and proposed solutions to overcome fixed asset audits in the context of the economy facing challenges due to the COVID-19 pandemic.
The study was based on the old KPMG Audit Methodology (KAM) audit guide and only assessed the strengths and weaknesses of the entire financial statement audit process without specific recommendations for fixed asset audits. Therefore, I chose the topic "Audit of Fixed assets in financial auditing implemented by KPMG Vietnam Company Limited" for my graduation thesis research, with the hope of inheriting previous research and finding solutions to the limitations in fixed asset audits according to KPMG's new audit guidance in the context of the rapidly recovering economy after the COVID-19 pandemic. Research objectives - Systematically summarize the theoretical understanding of the audit procedure of fixed assets in the financial statements according to the existing accounting standards applied in Vietnam (VAS, IFRS, Circular 200.) - Illustrate the application of fixed assets audit method in a specific case at KPMG Vietnam Limited to point out strengths, weaknesses, and the difference between the theory and practice of the researched topic. - From the result of the research, propose some analysis and recommendations for improvement of audit quality in each stage of an audit.
Research subject and scope - Research subject: Auditing procedures of fixed assets implemented by KPMG Vietnam Company Limited.